Strategy in the media

Citation

Henry, C. (2010), "Strategy in the media", Strategy & Leadership, Vol. 38 No. 2. https://doi.org/10.1108/sl.2010.26138baf.001

Strategy in the media

Article Type: CEO advisory From: Strategy & Leadership, Volume 38, Issue 2

Craig HenryStrategy & Leadership’s intrepid media explorer, collected these sightings of strategic management in the news. A marketing and strategy consultant based in Carlisle, Pennsylvania, he welcomes your contributions and suggestions (Craighenry@aol.com).

Critical skills of the entrepreneur

We were intrigued to learn that at most companies, top executives do not feel personally responsible for coming up with strategic innovations. Rather, they feel responsible for facilitating the innovation process. In stark contrast, senior executives of the most innovative companies – a mere 15% in our study – don’t delegate creative work. They do it themselves.

But how do they do it? Our research led us to identify five “discovery skills” that distinguish the most creative executives: associating, questioning, observing, experimenting, and networking. We found that innovative entrepreneurs (who are also CEOs) spend 50% more time on these discovery activities than do CEOs with no track record for innovation. Together, these skills make up what we call the innovator’s DNA. And the good news is, if you’re not born with it, you can cultivate it …

Discovery skill 1: Associating. Associating, or the ability to successfully connect seemingly unrelated questions, problems, or ideas from different fields, is central to the innovator’s DNA. Entrepreneur Frans Johansson described this phenomenon as the “Medici effect,” referring to the creative explosion in Florence when the Medici family brought together people from a wide range of disciplines – sculptors, scientists, poets, philosophers, painters, and architects. As these individuals connected, new ideas blossomed at the intersections of their respective fields, thereby spawning the Renaissance, one of the most inventive eras in history.

Discovery Skill 2: Questioning. More than 50 years ago, Peter Drucker described the power of provocative questions. “The important and difficult job is never to find the right answers, it is to find the right question,” he wrote. Innovators constantly ask questions that challenge common wisdom

Discovery Skill 3: Observing. Discovery-driven executives produce uncommon business ideas by scrutinizing common phenomena, particularly the behavior of potential customers. In observing others, they act like anthropologists and social scientists.

Discovery Skill 4: Experimenting. When we think of experiments, we think of scientists in white coats or of great inventors like Thomas Edison. Like scientists, innovative entrepreneurs actively try out new ideas by creating prototypes and launching pilots. (As Edison said, “I haven’t failed. I’ve simply found 10,000 ways that do not work.”) The world is their laboratory.

Discovery Skill 5: Networking. Devoting time and energy to finding and testing ideas through a network of diverse individuals gives innovators a radically different perspective. Unlike most executives – who network to access resources, to sell themselves or their companies, or to boost their careers – innovative entrepreneurs go out of their way to meet people with different kinds of ideas and perspectives to extend their own knowledge domains.

Jeffrey H. Dyer, Hal B. Gregersen, and Clayton M. Christensen, "The innovator's DNA," Harvard Business Review, December 2009.

The long-term consequences of the 2008 financial crash

The two most significant structural consequences of the recent financial debacle are the massive deficits and debts of the US and the shift of economic power from west to east. There is only one effective way for governments to address the combined impact of both: press for a sea change in currency relationships, especially a permanently and greatly weakened dollar …

Washington will therefore have little choice but to take the time-honored course for big-time debtors: print more dollars, devalue the currency and service debt in ever cheaper greenbacks. In other words, the US will have to camouflage a slow-motion default because politically it is the easiest way out.

There is another factor pushing America towards a weaker dollar: lacking the domestic consumer demand that came with the unrestrained credit of the past 15 years, the US is desperate to find buyers abroad, especially in emerging markets where the middle class is growing and infrastructure requirements are soaring. A cheaper dollar could make US products and services more competitive.

Meanwhile, in the coming decade, the big emerging markets of Asia will be growing twice as fast as the US and three times faster than the European Union. By 2020, China, India, Indonesia, Korea and Vietnam together could generate more wealth than the US, Japan and the EU combined. China, India, and South Korea have all been amassing dollar reserves and will be looking to reduce them. While imports into leading industrial countries have slowed, intra-Asian trade is booming and need not be financed only in dollars. The bottom line: Asian currencies are likely to strengthen against the dollar.

A much cheaper dollar is a sad development for the US, even though it is inevitable. It will make the US poorer, since Americans will pay higher prices for everything they buy from abroad – clothes, computers, cars, toys, food, you name it. It will make the US military presence abroad more expensive, since the cost of contractors and local suppliers will escalate in dollar terms. It will slow imports, removing competition that is essential to hold down the general price level in America, thereby making inflation more likely. It will send the wrong price signals for a country that prides itself on creating sophisticated, highly valuable products, for a low dollar will encourage producers to compete on price more than quality. It will diminish the political influence and prestige that the US has had while the dollar has been king.

Moreover, the US dollar has been at the heart of the global economy for well over half a century. Its demise, if not smooth and gradual – hardly certain – could lead to an era of competitive devaluations and other mercantilist trade policies.

Jeffrey Garten, “We must get ready for a weak-dollar world,” Financial Times, November 29.

Reversing the web media model

Demand Media has advertising-driven content down to a science. Instead of creating content for the Web and hoping that it generates revenue, the company works backwards by determining how much revenue each piece will generate before anything is produced.

The company uses a series of algorithms to pick through keywords that people are searching for on the Web and aims to create content unique enough to rank highly in those search results. It also determines how much advertisers would pay to be next to that content.

This is much different than simply using analytics to shift stories around on a home page or testing which headline will draw more readers. Demand is all about the dollars.

News organizations looking to create profitable content on the Web can see that Demand Media’s model does make money – although it forgoes editorial judgment and a journalism process. Yet news organizations could apply lessons from Demand’s approach to their own companies, not for standard news operations, but for niche sites that are focused on reader demand and generating revenue.

Demand Media is focused on “service journalism,” said Adam Weinroth, the company’s vice president of strategic marketing. “This is the kind of content that is evergreen, and includes formats like guides, how-to’s and tips.”

Besides the company’s method of choosing stories, the other part of Demand’s strategy is in how it gets its content. Rather than try sell ads to support content that costs a particular amount, the company has dropped the cost of production to make sure it can be supported by what advertisers are willing to pay.

Vadim Lavrusik “How demand media’s business model can be applied to niche sites,” Poynter Online, November 23, 2009, http://www.poynter.org/column.asp?id=31&aid=173972

Understanding indirect risks

The financial crisis has reminded us of the valuable lesson that risks gone bad in one part of the economy can set off chain reactions in areas that may seem completely unrelated. In fact, risk managers and other executives fail to anticipate the effects, both negative and positive, of events that occur routinely throughout the business cycle. Their impact can be substantial – often, much more substantial than it seems initially.

At first glance, for instance, a thunderstorm in a distant place wouldn’t seem like cause for alarm. Yet in 2000, when a lightning strike from such a storm set off a fire at a microchip plant in New Mexico, it damaged millions of chips slated for use in mobile phones from a number of manufacturers. Some of them quickly shifted their sourcing to different US and Japanese suppliers, but others couldn’t and lost hundreds of millions of dollars in sales. More recently, though few companies felt threatened by severe acute respiratory syndrome (SARS), its combined effects are reported to have decreased the GDPs of East Asian nations by 2 percent in the second quarter of 2003.

What can companies do to prepare themselves? True, there’s no easy formula for anticipating the way risk cascades through a company or an economy. But we’ve found that executives who systematically examine the way risks propagate across the whole value chain – including competitors, suppliers, distribution channels, and customers – can foresee and prepare for second-order effects more successfully …

Competitors. Often the most important area to investigate is the way risks might change a company’s cost position versus its competitors or substitute products. Companies are particularly vulnerable to this type of risk cascade when their currency exposures, supply bases, or cost structures differ from those of their rivals. In fact, all differences in business models create the potential for a competitive risk exposure …

Supply chains. Classic cascading effects linked to supply chains include disruptions in the availability of parts or raw materials, changes in the cost structures of suppliers, and shifts in logistics costs. When the price of oil reached $150 a barrel in 2008, for example, many offshore suppliers became substantially less cost competitive in the US market …

Distribution channels. Indirect risks can also lurk in distribution channels: typical cascading effects may include an inability to reach end customers, changed distribution costs, or even radically redefined business models, such as those recently engendered in the music-recording industry by the rise of broadband Internet access.

Customer response. Often, the most complex knock-on effects are the responses from customers, because those responses may be so diverse and so many factors are involved. One typical cascading effect is a shift in buying patterns, as in the case of the Canadians who went shopping in the United States with their stronger currency.

Eric Lamarre and Martin Pergler, “Risk: seeing around the corners,” McKinsey Quarterly, October 2009.

Why PayPal outran consumer banks

… There’s no doubt that the present way that banks do business in America is broken. They make most if not all of their income from fees which overwhelmingly hit those who can least afford them; the payments system is insanely and anachronistically reliant on paper checks and the postal service; and they’re generally hated by the consumers they nominally serve. There’s got to be a better way – and indeed multi-billion-dollar companies like PayPal have sprung up precisely because America’s banks are so incompetent. “PayPal should not exist,” says Arora – after all, it’s not needed in other developed countries, where people can happily transfer money into anybody else’s bank account without either party paying a massive fee. But in America, the short-sighted desire to keep those transfer fees allowed the banks to concede the field to the dot-com upstart.

“The banks should have done it,” says Arora. “Why didn’t they? Because they weren’t asking consumer-oriented questions.” Today, the banks can’t dream of setting up a rival company to compete with PayPal, because PayPal has a huge directory of signed-up members and they don’t. The only thing they can do is give up their beloved transfer fees, and simply let their customers transfer money for the same cost ($0) as writing a check. After all, processing checks costs the banks much more than processing a wire does. But 80% of the bills paid in the US are still paid by check; next door, in Canada, 80% or so of bills are paid online.

Felix Salmon “Might the consumer banking revolution be coming?”, Sailing the Rough Rude Sea, December 8, 2009, http://blogs.reuters.com/felix-salmon/2009/12/08/might-the-consumer-banking-revolution-be-coming/

What drives product development success

Is your company finding it hard to develop new products? If so, you might try learning from the masters. We found – after surveying more than 300 employees at 28 companies across North America and Europe – that the businesses with the best product-development track records do three things better than their less-successful peers: They create a clear sense of project goals early on, they nurture a strong project culture in their workplace, and they maintain close contact with customers throughout a project’s duration.

Keep it focused. Whenever project requirements were clearly defined and communicated to teams before kickoff, the project had a greater chance of success.

In our survey, 70% of the people working on high-performing projects – those that ranked in the top quarter of a performance index linking best practices to outcomes – said they had a clear view of the project’s scope from the beginning, compared with just one-third of poor performers. We found that not thinking through a project’s scope early on – say an appliance maker asks developers to design a new cooking range in the four-burner category but then later expands the project to include ranges with six burners – can create delays … .

Nurture a project culture. The top-performing companies in our survey also nurtured a strong project culture by making product development a priority. They made more of an effort than the laggards – 39% versus 12% – to minimize staffing disruptions due to external demands and to staff projects adequately. When people with critical skills become overburdened, they often decide on their own which of their many projects is the most important, a decision best made at the management level …

Talk to the customer. The successful innovators in our study kept in close contact with customers throughout the development process.

More than 80% of the top performers said they periodically tested and validated customer preferences during the development process, compared with just 43% of bottom performers. They were also twice as likely as the laggards to research what, exactly, customers wanted. That made them better able to identify and fix design concerns early on, minimizing project delays.

Mike Gordon, Chris Musso, Eric Rebentisch and Nisheeth Gupta, “The path to developing successful new products,” MIT Business Insight, November 30, 2009, http://sloanreview.mit.edu/business-insight/articles/2009/5/5153/the-path-to-developing-successful-new-products/

Can you know too much?

We still spend our days analyzing information and falling into traps. Decisions are destroyed by over-analysis. The brain is not intelligent because of the sheer volume of data it can ingest, but for the way it can quickly discern patterns – and then guess the rest. The more information you pile on, the less likely you are to make educated guesses. But educated guesses spring from wisdom: all of your past experiences, knowledge and knowhow, coupled with the most recent information and analysis. In other words, wisdom comes from your gut.

Pile on too much information and you fall victim to one of two phenomena: On the one hand, you might make a decision focused only on what has been analyzed because the abundance of information suppresses even the most relevant past experiences. This “knowledge trap” disregards our decision-making skills (often intentionally), opting instead for the logical decision-making of a computer or calculator. You see this often on Wall Street where quant jocks confidently grind data into machines, only to face an unlikely (but not unexpected) event – or what Nassim Taleb calls a “Black Swan” event. For those on Wall Street, this is often an unfortunate demonstration of the power of wisdom over knowledge. Just look what happened in the hedge fund industry in general or credit default swaps in specific as painful examples.

Or worse, faced with an abundance of information you fall victim to analysis paralysis – unable to make any decisions in the face of so much data. To be frozen by information is perhaps the single biggest risk of knowledge. Ancient Greek philosophers used to warn their children about this ailment and Peter Drucker did a good job of combating it in the business world. But is anyone really listening?

People often become victims of the “knowledge trap” or “analysis paralysis,” thinking they need to weigh every bit of information against all possible outcomes. Those people rarely make it very far. Those who avoid these traps – who realize they’ll never have all the answers no matter how much knowledge they gather – are often the ones who succeed.

Jeff Stibel, “Why wise leaders don’t know too much,” Conversation Starter, December 11, 2009, http://blogs.harvardbusiness.org/cs/2009/12/why_wise_leaders_dont_know.html

Target confronts the post-crash marketplace

The economy imploded, Americans stopped shopping, and [CEO] Steinhafel found himself confronting a different world. “This was a wake-up call,” he says. “We had to do a lot of soul-searching … ”

At Target’s Minneapolis headquarters, Steinhafel turned his airy offices on the 26th floor into a war room. The data pouring in were shocking: Sales at stores open more than a year were falling 3%, then 5%, then 10%. As the stock slid and slid, says Jefferies managing partner Daniel Binder, people were asking: “Is there something wrong here with Target that has changed structurally?”

Target had long emphasized the first part of the “Expect More, Pay Less” equation. Research showed consumers perceived Target as pricier than Wal-Mart, when in fact they were only a few cents apart on most items. Given the state of the economy, stressing “Pay Less” seemed eminently rational. Yet Steinhafel hesitated. If he pushed too hard on price, would he lose what made Target “Tarzhay,” upending a strategy Ulrich spent 20 years perfecting? Would Target – God forbid – start to look like Wal-Mart? “That’s why they were reluctant to do it at first,” says Telsey Research chief Joe Feldman. “They don’t want to be Wal-Mart.”

Steinhafel, however, soon saw that American consumers might never return to their free-spending ways. It was time to start making a big deal about low prices.

With sales in free fall, Steinhafel needed to move fast. Fortunately, Target is a quick executor. In big-box retail circles, the company is legendary for its ability to tear down and rebuild stores in less than nine months. Inside Target, the store rehab process is called Phoenix. Steinhafel needed to pull a Phoenix on marketing …

The Target fashionista was turning into a frugalista. “She wasn’t seeing herself in the shiny, happy people advertising,” he recalls. “It was no longer aligned with what she was dealing with in her life.” The trick was to focus on low prices without making Target’s target customer feel cheap.

Francis and his team hit on a marketing strategy in which Target essentially plays the empathetic personal shopper. In highly produced two-minute Webisodes on Target’s site, Marie Claire fashion director Nina Garcia mentors frayed, broke moms on how they may feel poor but can still look rich. … .

The course correction seems to have helped stop the bleeding. On Nov. 17, Target said net earnings rose 18.4% during its third quarter, the first positive result in eight quarters. It also reported that its gross margins, excluding its credit-card division, rose to 30.8%, from 30.6% in the third quarter of 2008. Meanwhile, Target says its research shows consumers are starting to believe it is indeed competitive with Wal-Mart on price.

“Look who’s stalking Wal-Mart,” Business Week, November 25, 2009.

Amazon succeeds by leveraging its supply chain

While Amazon’s enhancements to the shopping experience have been important for the company’s success so far, its strength in the future will hinge on its supply chain and fulfillment capabilities, and the continuation of popular pricing strategies, say e-commerce experts. For instance, Zappos, an online footwear company recently acquired by Amazon, is known among its loyal customers for its free two-way shipping policy that enables them to return any items they don’t want at no extra cost. Amazon.co.uk, meanwhile, has also had a free delivery policy in place for some time now, and recently announced that it would continue that policy.

A big advantage for Amazon, however, is that it manages and ships not only its own inventory, but also that of other retailers such as Eddie Bauer and Target, giving it an economy of scale that dwarfs its rivals. As it stands, Amazon can currently ship some 10 million products, compared with Walmart’s 500,000, according to Internet Retailer. “As Amazon offers same-day, second-day and other fulfillment options, it competes with bricks-and-mortar companies more and more,” says Serguei Netessine, professor of operations and information management at Wharton.

Using a technique called “drop shipping,” Amazon also has real-time links to manufacturers, which ship goods directly to consumers on the Internet company’s behalf. “Amazon can offer 10 million products, but may not stock them all. The company forwards an order to a manufacturer, which gets the product to customers. Amazon keeps the most popular products in inventory, but uses a mix of techniques to deliver goods,” Netessine notes.

Fisher adds that Amazon’s supply chain is hard for the likes of Walmart to replicate. For instance, delivering CDs, books and shoes to individual consumers requires different skills than shipping truckloads of goods to stores. “Getting single units sent to a house is a vastly different game than shipping to stores.”

For the most part, many bricks-and-mortar retailers have integrated physical and online supply chains and work with fewer vendors. For them, it’s simply not efficient to deal with as many suppliers as Amazon does. “Amazon’s competitors have decided to manage online inventory like they do in the physical world,” says Netessine. But that could ultimately be to their detriment. “Walmart.com largely has the 500,000 products it sells in the stores. If it continues this way, it will never catch up [with Amazon].” It’s no surprise, then, that Walmart’s online unit recently announced plans to launch a third-party network so other retailers can sell their wares via its website.

“Fit for the holidays: Amazon is shaping up and shipping out,” Knowledge@Wharton, November 11, 2009, http://knowledge.wharton.upenn.edu/article.cfm?articleid= 2382

Reforming health care from the inside

Working Knowledge: What are the drivers of change in health-care delivery?

Dr Richard Bohmer: Several factors are pushing us to change how we deliver care. Perhaps the most important of these is changing expectations. Patients are used to good service from other industries and expect higher performance than they see on the delivery sector. They obviously worry a lot about whether their insurance will cover the medical services they need, but they are also really concerned about the care they get: how accurate, reliable, and fail-safe it is, and how responsive and convenient it is. Employers expect better outcomes, and of course they and patients want fewer errors and fewer patients harmed by care that was intended to cure their disease. Finally, all health care’s constituents expect better value.

Having said that, I think we have to recognize that in the last 10 to 15 years there have been substantial advances. Mortality rates for major procedures and conditions have been trending steadily downward.

A second important driver is the evolution of scientific knowledge and of the technology that goes along with this evolution. Little by little, our uncertainty about the cause of a disease or the optimal therapy for each disease is reducing. As we improve our knowledge of what to do, the object of management attention becomes organizing how we do it. We can focus much more closely on managing the actual care rather than the context in which the care takes place. For most of the 20th century the object was managing the institution that served as the context for care – the “doctor’s workshop.” Over the past 10 to 15 years the object of management attention has widened to include the care itself. With the development of generally accepted standard processes we have become able to design operating systems specifically to support those processes and assess performance through measures of process compliance.

Q: What key innovations are you seeing on the delivery sector?

Dr Bohmer: Some of the most important innovations are not technologic – they are in the way we organize care delivery. As I’ve mentioned, these include disease management programs that target the sickest patients, new venues of care and caregivers, and tools and systems that help and allow patients to be more effectively involved in their own care.

To date, our prevailing model of innovation has been that knowledge flows into medical and nursing practice from funded external research. In this model it is the role of provider organizations to bring knowledge published in the medical and nursing literatures to bear on individual patients by selecting the right therapies and the right way of implementing those therapies: a one-way flow of knowledge from the research community to the delivery community to each individual patient.

“Management’s role in reforming health care: Q&A with: Richard M.J. Bohmer,”, Working Knowledge November 23, 2009, http://hbswk.hbs.edu/item/6202.html

Doonesbury in a new media age

Question: As newspaper readership and circulation declines, does “Doonesbury” have a post-newspaper media plan?

Trudeau: “Doonesbury” has been on the Web for 15 years, and the site actually makes a little money – unheard-of for media sites. But it’s not really a plan, just a presence. I don’t believe there’s anything I can do personally to prepare for a post-newspaper future, other than hope that the large media companies will come to their senses and form a gated Web collective along the lines of cable TV. They need to form a news utility, financed by subscription or micropayments because going it alone has been disastrous for all of them.

The only other model that seems promising is the electronic reader. By the end of the year, Kindle will have lots of competition, and if e-readers become larger, flatter and more newspaperlike, people would conceivably move to them and pay for subscriptions that would cost far less than print subscriptions. We know the Web is probably a lost cause – a whole generation believes everything on it should be free – but we also know from the iPhone that a new platform can set new rules. Look how happily people pay for apps.

Short-term, we’re probably OK. What’s not commonly known is that most print newspapers are getting by. It’s just the big, debt-loaded metros that are sinking fast. There will probably be enough paper clients to keep me going for the foreseeable future. I feel extraordinarily fortunate that I’ve been given the long run I have – if newspapers vanish tomorrow, I’ll have no grounds for complaint.

“A few words with Garry Trudeau,” Greensboro News-Record, October 2, 2009.

Culture: the roots of GM’s downfall

In the old General Motors, employees were evaluated according to a “performance measurement process” that could fill a three-ring binder.

In Terry Woychowski’s case, for example, his job as director of GM’s vehicle engineers was spelled out in exhaustive detail, and evaluated every three months.

But in his new job as vice president – a promotion he was given 20 days after GM emerged from bankruptcy – his performance review will be boiled down to a single page, something he had never seen in his 29 years with the company.

Mr Woychowski said he felt the grip of GM’s legendary bureaucracy start to loosen, something he never imagined possible. Now, such reviews are being scaled down and simplified across the company.

“We measured ourselves ten ways from Sunday,” he said. “But as soon as everything is important, nothing is important.”

For all its financial troubles and shortcomings as an automaker, no aspect of GM has confounded its critics as much as its hidebound, command-and-control corporate culture.

When GM collapsed last year and turned to the government for an emergency bailout, its century-old way of conducting business was laid bare, with all its flaws in plain sight. Decisions were made, if at all, at a glacial pace, bogged down by endless committees, reports and reviews that astonished members of President Obama’s auto task force.

“Everyone knew Detroit’s reputation for insular, slow-moving cultures,” Steven Rattner, head of the task force, wrote recently in Fortune magazine. “Even by that low standard, I was shocked by the stunningly poor management that we found” …

Speed has never been GM’s forte. In 1988, when GM still dominated the United States market, a senior executive named Elmer Johnson wrote a stinging internal memo that summed up the company’s biggest problem.

“We have not achieved the success that we must because of severe limitations on our organization’s ability to execute in a timely manner,” wrote Mr Johnson.

The memo fell on deaf ears, mostly because GM’s top executives prized consensus over debate, and rarely questioned its elaborate planning processes. A former GM executive and consultant, Rob Kleinbaum, said the culture emphasized past glories and current market share, rather than focusing on the future.

“Those values were driven from the top on down,” said Mr Kleinbaum. “And anybody inside who protested that attitude was buried.”

“After bankruptcy, GM struggles to shed a legendary bureaucracy,” New York Times, November 13, 2009.

Nurturing the seeds of innovation

I’ve been thinking a lot lately about “creating a culture of innovation,” which is what a lot of firms suggest they want to do. Of course this is a very lofty goal. Changing a corporate culture doesn’t happen easily, and it certainly doesn’t happen overnight. Yet clearly one of the most significant barriers to innovation is the entrenched culture of effectiveness and efficiency, of risk-avoidance and following rather than leading.

So, that led me to think about when teams and groups within an organization can be innovative, and what the conditions were when that happened. We regularly lead teams on trend spotting and scenario planning exercises that create some really radical future scenarios, with little resistance, and often lead ideation and brainstorming programs that achieve a large number of disruptive or radical ideas. These small programs demonstrate that innovation can happen in any organization under certain conditions. Let’s first look at what makes these small programs effective.

We find that we can be most effective with these discovery and idea generation programs when we set very clear expectations about our goals and prepare the team carefully for the work, setting out specific rules and expectations. Typically when we go into the work, we’ll close the door and tell the team that anything that happens in the room is fair game, and open for discussion, and we aren’t bound by the “normal” rules. This helps get the team out of the “day to day” thinking and encourage their creative thinking. They know that no one will be allowed to ridicule an idea or submit challenges that will block the consideration of an idea. For those few moments or days, we have created a “micro-climate” for innovation, probably akin to a hothouse in the wintertime.

So, if we can create some assorted micro-climates where teams can spot opportunities and emerging trends, and effectively generate ideas, can we build on the “micro-climate” concept to create more areas where conditions are ripe for innovation? Using the flower analogy, can we move the ideas from one hothouse to another, gradually exposing the ideas to the elements and improving the chances for survival, while we try to change the conditions of the organization at large (change the cultural attitudes to innovation)?

I’d like to suggest the first step may be to create a number of “micro- climates” – safe locations to generate, develop and evaluate ideas that exist specifically to give ideas the necessary environments to grow. Some firms use a designated space for innovation. Perhaps the best way to change the culture is to start small, with several micro-climates that establish conditions for innovation and allow the process to prove its worth.

Jeffrey Phillips, “Conditions that can create an innovation culture,” Innovate on Purpose, December 11, 2009, http://innovateonpurpose.blogspot.com/2009/12/conditions-that-can-create-innovation.html

Why higher education needs new metrics

American colleges grant more than 300,000 bachelor’s degrees in business every year. Whose graduates are most successful in business? There are anecdotes, but no available, comparable data. Nobody really knows. Which teacher education program best prepares candidates to excel in the classroom? Nobody knows. Nearly every college teaches introductory courses like calculus and English. Where are the best calculus and English professors? Who is most successful in preparing students for law and medical schools? Whose graduates make unusual contributions to philanthropy and the arts? Who teaches writing well, given the academic preparation of the students they enroll? Who teaches anything well? Nobody knows.

The near-total lack of useful information about teaching and learning has three main effects, all bad for students. First, it creates distortions in the higher-education market that drive up prices. Second, it gives colleges free rein to ignore their teaching obligations in favor of a mad contest for status and self-gratification. Third, it leaves colleges that serve the most disadvantaged students with the fewest resources.

The information deficit turns college into what economists call a “reputational good.” If you go to the store and buy a shirt, you can learn pretty much everything you need to know before you buy it: the material, where it was made, how to clean it, and so on. College is different. You’re paying up-front for professors you’ve never met and degree programs you probably haven’t even chosen yet. Instead, you rely on what other people think of the college. Of course, some students simply have to go the college that’s nearest to them or least expensive. But if you have the luxury of choosing, in all likelihood, you choose based on reputation.

If college reputations were based on objective, publicly available measures of student learning, that would be okay. But they’re not, because no such measurements exist. Instead, reputations are largely based on wealth, admissions selectivity, price, and a generalized sense of fame that is highly influenced by who’s been around the longest and who produces the most research. Not coincidentally, these are the factors that drive the influential US News & World Report rankings that always rate old, wealthy, renowned institutions like Harvard and Princeton as America’s best colleges.

The influence of reputation is exacerbated by the fact that most colleges are non-profit. For-profit institutions succeed by maximizing the difference between revenues and expenditures. While they have strong incentives to get more money, they also have strong incentives to spend less money, by operating in the most efficient manner possible. Non-profit colleges aren’t profit-maximizing; they are reputation-maximizing. And reputations are expensive to buy.

Kevin Carey, “That old college lie,” Democracy: Journal of Ideas, Winter 2010.