Our Guide to the Spring 2022 Issue
These summaries will help you navigate our spring 2022 lineup.
Topics
AI Can Change How You Measure — and How You Manage
David Kiron
Key Insight: Data-driven leaders are using machine learning tools to surface new key performance indicators.
Top Takeaways: More organizations are recognizing that benchmarking and executive expertise don’t always determine the best key performance indicators. These data-driven companies employ predictive analytics such as machine learning, along with leadership acumen, to identify and refine key strategic measures. More finely tuned measures lead to better alignment of behaviors with strategic objectives. Business leaders taking this approach are asking their teams: Do our metrics fully capture what drives value creation in our business? How can we use technology to improve our system of measurement — that is, how we create, assess, and use our metrics — to better discern these drivers and identify better KPIs? They are rethinking their approaches to measuring success, developing metrics, and building organizational alignment.
The Quest for a Killer KPI
Omri Morgenshtern, Robert Rosenstein, and Peter L. Allen
Key Insight: Streamlined metrics can get people moving in the same direction and improve business performance.
Top Takeaways: The authors recount how Agoda, a subsidiary of the Booking Holdings online travel group, made its way to a single “KPI + constraint” that helps run a good bit of the business. The effort involved much experimentation, and the KPIs that were developed and tested along the way promoted both positive and counterproductive behaviors and outcomes. But the business found its guiding principles, implemented them, improved performance, and fostered learning and cooperation in the process. The authors advise that leaders define a primary metric or set of metrics that will gauge success at the outset of every project, and assign a KPI to every project. They also suggest looking for a KPI that is relevant across teams and then seeking to break that KPI repeatedly by asking, “How would it be possible to achieve this KPI but fail to meet business goals?”
How the Wrong KPIs Doom Digital Transformation
Michael Schrage, Vansh Muttreja, and Anne Kwan
Key Insight: Successful digital transformations require leaders to frame performance targets around data-defined business objectives rather than technological capabilities.
Top Takeaways: Executives must begin digital transformation efforts by recognizing digital strategy not as an end but as a means to achieving measurably better business outcomes. They design digital plans around strategic objectives and identify a portfolio of enterprise KPIs to track progress and drive employee behaviors toward those goals. This requires probing for tangible goals, such as “diversify sales channels” or “improve customer experience.” By identifying the key inputs and actions corresponding to each tangible goal, leaders can home in on metrics aligned with strategy.
How Well-Designed Work Makes Us Smarter
Sharon K. Parker and Gwenith G. Fisher
Key Insight: Work that permits autonomy and demands problem-solving can bolster employees’ cognitive skills and ongoing learning.
Top Takeaways: Organizations and managers can use good work design to strengthen employees’ cognitive ability — and their adaptiveness to new processes, tools, and roles. These findings are important, given both the fast pace of change in the workplace, and the increasing numbers of aging employees in the workforce who must maintain high levels of cognitive functioning. Organizations need to develop and train managers who understand how to create high-quality work, and they need to develop work policies and culture to align with enriched work design.
When Losing Money Is Strategic — and When It Isn’t
Ramon Casadesus-Masanell, Dóra Horváth, and S. Ramakrishna Velamuri
Key Insight: A simple but often overlooked analysis of unit economics can help growth-focused entrepreneurs know early on whether their losses are sustainable or unhealthy.
Top Takeaways: Many new ventures focus on growth in the early years. Often, that means the venture will lose money, but the key question is whether these losses are healthy or unhealthy. If the business model is fundamentally flawed and fails to capture a part of the value it creates for stakeholders, then scale is not going to convert the losses into profit. Managers must understand unit economics, which is the expected revenue of the unit minus the costs the company incurs from offering that unit. It may seem like an obvious assessment, but it’s not typically considered in many new business ventures, which are often focused on growth in user numbers, the number of app downloads, revenues, or unique daily visitors. Clarifying the profitability of a business at the unit level can provide crucial insights into whether, when, and how to scale.
Top Performers Have a Superpower: Happiness
Paul B. Lester, Ed Diener, and Martin Seligman
Key Insight: A study of nearly 1 million U.S. Army service members found that those with the highest measures of well-being when joining sigificantly outperformed those with the lowest measures of happiness.
Top Takeaways: Which comes first, succeeding and then being happy,
or being happy and then succeeding? An initial, base sense of happiness counts for a lot in both current but future performance. A study by the authors followed U.S. service members over five years and found that four times as many awards were earned by the initially happiest soldiers compared with those who were unhappiest initially — a huge difference in performance. This underscores the importance of leaders actively working to shape the workplace to foster greater well-being among employees.
Leading in an Age of Employee Activism
Megan Reitz and John Higgins
Key Insight: Employees are demanding that managers engage on topics from climate change to racial equity, and it’s risky for leaders to ignore these increased expectations.
Top Takeaways: Activist employees are upending our assumptions about power within organizations. Over half of the 1,500 employees surveyed by the authors reported speaking up to influence organizational action on wider societal or environmental issues. Employees have also shown that they are willing to leave their jobs when organizational stances do not reflect their values. Leaders need a plan to respond, because unskilled reactions can have poor consequences for themselves and their organizations.
A Little Rudeness Goes a Long Way
Shannon G. Taylor and Lauren R. Locklear
Key Insight: Workplace rudeness can’t be solved by screening out the jerks, because uncivil behavior is driven not just by personality but also by the unique relationship an employee has with each colleague.
Top Takeaways: How can you stop incivility from spreading in your organization? Research found that incivility is rooted in dysfunctional employee relationships, not just personal characteristics. Organizational norms influence whether rude, uncivil, and disrespectful conduct persists. An employee’s position in the organization and other characteristics are also major factors in how much rudeness they experience — with women mistreated more often than men, and newer employees mistreated more than people with a longer tenure. Managers who set a civil tone can make a difference; so, too, can targeted training for teams that are struggling.
When Gradual Change Beats Radical Transformation
Ivanka Visnjic, Julian Birkinshaw, and Carsten Linz
Key Insight: Evolution, not revolution, can be the most successful approach to digital initiatives.
Top Takeaways: Not every business needs to set up a dedicated digital unit that “disrupts” the business and drives change from the top on a grand scale. Industrial companies offer an alternative model. They explore use cases for new technologies in small pilot studies and scale them up cautiously. Many take a largely decentralized approach, with a view to building digital capability in the heart of the business rather than in a specialized or separate unit. This approach to transformation doesn’t need to be limited to industrial companies: Companies in any sector should carefully consider whether to follow the revolutionary model taken by consumer-facing companies or an evolutionary one exemplified by industrial companies.
Think Globally, Innovate Locally
Satish Nambisan and Yadong Luo
Key Insight: Multinational companies must vary their approaches to innovation in overseas subsidiaries based on a nuanced understanding of political and cultural contexts.
Top Takeaways: While digital globalization is transforming innovation in multinationals, these companies face opposing localization forces, such as trade restrictions and nationalism. These forces limit the portability of digital assets (such as data, content, product components, tools, and processes) and raise innovation uncertainty and risk. Depending on the balance of globalization and localization forces within a given market, companies can pursue one of two approaches: digital innovation partnerships or digital innovation hubs. Both can generate innovation in offerings, business models, and operations that suit specific country markets.
Open Up Your Strategy
Christian Stadler, Julia Hautz, Kurt Matzler, and Stephan Friedrich von den Eichen
Key Insight: When strategy-making involves people from outside both the C-suite and the company, fresher ideas and better plans emerge.
Top Takeaways: Between 50% and 90% of strategies don’t work — despite the billions of dollars paid to consultants and the amount of time CEOs dedicate to the strategic planning process. One problem is that companies too often limit strategy deliberations to a small group of senior executives, even when disruptions are coming from all directions. Opening up these conversations requires a new approach. One process is a technique called the Nightmare Competitor Challenge, where diverse teams brainstorm fictitious new competitors and disruptive future trends. These tactics have been adopted by companies such as Telefónica, Adidas, and Lufthansa.