Tony Fadell: Why Self-Doubt Isn't Always A Bad Thing and Ignoring Experts Can Be a Good Thing

Thank you to the StrategyProfs.net blog for pointing me to this terrific video from iPod inventor Tony Fadell.

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What Happens When The Former CEO Sticks Around?

Professors Tim Quigley (Lehigh) and Don Hambrick (Penn St.) have published a new study in Strategic Management Journal on the impact when a former CEO stays on as chair of the Board of Directors.  Their results prove quite interesting.  Quigley and Hambrick examined 181 successions in high technology firms.  What did they find?  When a predecessor sticks around as board chair, the firm tends to experience less strategic change.  Resources don't get re-allocated as much to new initiatives or sectors, divestitures are less likely to occur, and executive team members are not replaced as often.   The scholars also found that company financial performance doesn't change much.  As they wrote, "New CEOs who are restricted in their actions are correspondingly restricted in the degree to which they can alter performance."  When the predecessor finally does step down as chair of the board, then strategic and personnel changes begin to occur.  Moreover, performance begins to deviate from the earlier levels. 

Many people advocate separating the chair and the CEO roles in corporations.  These results suggest that we have to think carefully about who occupies those roles.  If the chair position is held by the current CEO's predecessor, we may have a chair who does more than monitor and control the CEO's actions.  That chair may actually restrict the CEO's actions so as to preserve the strategy, structure, and executive team that already had been in place prior to the succession.  In these cases, the governance process may actually inhibit very necessary strategic change at times.

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Design thinking: You must observe well!

The Wall Street Journal has several good articles about design thinking today. The article notes that anthropological observation of customers in their natural setting is a key phase of the design thinking process. What the article doesn't say is that firms have to distinguish between effective and ineffective observation. What must you worry about when conducting observations? First and foremost, you have to protect against confirmation bias. You have to avoid allowing predispositions to cloud your interpretations of what you are seeing. That is why you should not observe alone. Always go in pairs or trios. Then compare notes. In addition, take lots of photos and videos if possible. Then you can show your colleagues back at the office what you saw. They don't see through your filter. They see the raw data. Finally, pick your observation sites carefully. Watch for selection bias. Are you seeing something typical or not. Of course, sometimes we learn from extreme cases, but we must acknowledge and understand that it is an extreme case!

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Are CEOs Spending Too Much Time Outside the Firm?

A new study suggests that some CEOs may be spending far too much time outside the firm.  Oriana Bandiera, Luigi Guiso, Andrea Prat, and Raaella Sadun have written a paper titled, "What Do CEOs Do?"  They examined how 94 CEOs of top-600 Italian firms spent their time.  According to these scholars, "The patterns we observe are consistent with the hypothesis that time spent with outsiders is on average less beneficial to the firm and more beneficial to the CEO and that the CEO spends more time with outsiders when
governance is poor."   The research findings suggest that CEOs perhaps spend too much time dealing with external constituencies at times, and they may overdo their role as the "public face of the firm."   Now one must ask, "Won't it hurt the firm if the CEO isn't out there interfacing with these constituents?"  Perhaps one answer is that the CEO doesn't need to take on this role by himself or herself.   CEOs might consider sharing the responsibility for this outreach more broadly, thereby preserving their time so as to focus appropriately on internal activities. 

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Shouldn't Our Best & Brightest Be Doing Something More Substantial?

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Leadership Development: Why Not Across Levels?

I'm always struck by the fact that most leadership development programs consist of people who work at the same level of the organizational structure.   I understand the rationale for this structure, but I think it has some limitations.  After all, to get work done, people need to lead and work on teams consisting of people from multiple levels of the organization.  To be effective, people must manage up and down.  Nevertheless, formal leadership development programs typically select a cross-section of high performers from one particular level.  I understand why, of course.  The programs seek to foster a cohort of peers who can learn from and network with one another.  Moreover, putting more senior folks in the room can stifle dialogue at times. 

Many programs bring senior executives in to speak to the group, conduct question and answer sessions, and the like.  This senior executive involvement is very important and should definitely take place.  However, I believe a more substantive involvement in the actual programs can be beneficial.   Such cross-level involvement would enable development on key issues such as communication, teamwork, project management, giving and receiving feedback, and the like.   Mentoring becomes a hands-on activity that becomes embedded in such a program too.  Not only can senior folks mentor more junior managers, but reverse mentorship can take place as well.  Younger, talented high potentials can educate and inform senior executives on key social, technological, and market trends.   In sum, leadership development shouldn't be taking place in isolation.  Leaders need to engaging in some development work along with the subordinates and superiors with whom they must cooperate and collaborate to get things done.

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Do Some Global Firms Exhibit Excessive Localization?

Experts frequently criticize large multinationals for failing to customize their products adequately for local markets.  We hear about the fabulous flops, in which firms try to export a popular product developed in the United States or Western Europe, only to experience a huge failure in an emerging market.  I'm quite sure that multinationals do make these mistakes often.  However, I think we hear far less about an equally serious mistake that many firms make.   Some companies have far too many local variations of essentially the same product.  They adapt their goods for every local market around the world, yet perhaps they don't quite need that level of localization. 

These firms don't encounter the same level of criticism. Why?  The economic damage is not as apparent.  After all, these goods may sell very well in each local market.  However, the localization strategy comes with some costs.   By constantly adapting their products for each country, the firms fail to take advantage of potential economies of scale and learning.  As a result, their costs are much higher than they should be.  Moreover, they spend excessive amounts of money building multiple brands in the same product category, rather than investing in the growth of fewer truly global brands.   I'm not saying such a global strategy is ALWAYS better than localization.  Naturally, localization is essential in some products and markets.  However, I do think we fail to levy the same amount of criticism at firms that miss out on key cost savings because of the constant adaptation that they engage in from country to country.

Why does this excessive localization take place in some multinationals?  I would argue that the explanation lies in the organizational structure, not in the minds of those senior executives plotting global strategy.   In many firms, country managers and regional presidents push for localization because it gives them more control and power.  It justifies the existence of larger brand management staffs at the local level, and in general, the country managers control more financial, physical, and human resources.  All else equal, country managers have some personal incentives to push a level of localization that may be higher than optimal.   We often don't hear experts discuss this failure; instead, we hear often about the firm that failed to adapt to a local market.  Yet, both types of mistakes can be equally costly. 

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