Photograph of Kay Plantes

Kay Plantes is an MIT-trained economist, business strategy consultant, columnist and author. Business model innovation, strategic leadership and smart economic policies are her professional passions. A former Madison, WI resident, Kay now resides in San Diego, CA. The views on her blog are not those of her employer, IBM.

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April 6, 2015, 7:10 pm

The power of teamwork. The peril of presumptuousness.

The Badgers not only produce wins, but also leadership lessons. (Photo from Beacherreport.com)

The Badgers not only produce wins, but also leadership lessons.
(Photo from Beacherreport.com)

Excuse me for wanting to stretch Wisconsin’s glorious victory over Kentucky in the NCAA Basketball Final Four into another day. But I can’t resist. There are business leadership lessons for us to learn.

Kentucky is mostly a one-and-done school when it comes to basketball. Coach Calipari recruits young men ready for the pros to spend their requisite waiting-year in college. According to the coach’s website, “Since the 2008 draft, 24 of Coach Cal’s players have been taken in the NBA Draft, including 17 first-rounders.” For seven straight drafts, he’s produced a top-10 pick, something no other school has accomplished.

Bo Ryan, the coach of the Wisconsin Badgers, has had some future pro players but for the most part grooms the less talented in whom he sees terrific potential and a willingness to play Badger basketball. As a freshman, Frank Kaminsky looked nothing like the Big Ten and AP player-of the year he is today. By focusing on getting the little things right, in basketball and life, Ryan leads players to realize potential they did not know they had.

Two methods. Two terrific teams. Kentucky, some argued, more so this year as they entered their repeat match-up against Wisconsin with a truly rare 38-0 record. They also had five returning starters (an oddity for them).

Watching the game, it was clear the Badgers were the stronger team. They held large leads and regained any they lost. Why? I can’t dissect the game strategy, but I can explore this question as a strategic leadership coach who helps CEOs build winning businesses.

Confidence in your strategy and teammates ignites individual resolution. Who loses his confidence first when a ball keeps falling short of the basket? A player who is part of a team whose methods have been proven, with teammates who have had each others’ backs for years, each one able to rebuild momentum when needed? Or a player on a team built from and largely focused on individual talents?

Yes, individual talent matters. But a system’s success depends most on the alignment of parts not the talents of the separate parts. Give me a sales team that understands and executes a business’ strategy any day over a team of the “best” salespeople.

Agility is an valuable competency. Ryan trains his players to play in different positions. Cross training provided the flexibility his team needed to knock off giants en route to the Final Four. In business, a winning business model strategy is necessary but not sufficient. You also need agility in how to execute as market terrains change unexpectedly. And the more leaders understand each other’s roles, the more collaborative the team.

Culture matters. The Badgers have fun. It’s only a game after all (according to Sam Decker) and their looseness enhances their flexibility on court. Yes, they’re driven to be a national champion, but they want to win with teamwork, not individual talents. It’s why Kaminsky is such a generous player and why he returned for his senior year.

In business, your culture is how your employees experience their work. When it is uncivil, political, uninventive, and all about work with no play or profits at the expense of people, you get the lost opportunities you deserve.

Being presumptuous sets you up for failure. Individual confidence is an empowering force. It encourages you to take shots and to believe, when you lose the lead as Wisconsin did 6 minutes out, that you will regain it. But a few short steps removed from confidence lies presumptuousness.

Presumptuousness fuels arrogance, creating a mindset that makes you blind to your weaknesses. And it would not be hard to apply the adjective to the Kentucky team based on post-game observations of the team and the student body. (But perhaps we should excuse Kentucky freshmen starters whose memory of losing went back to high school.) Without accepting your weaknesses and closing strategic gaps, others can easily disrupt you. Which is what Kentucky defense did to teams all year and what Wisconsin’s offense did to Kentucky – found and exploited the weaknesses in the opponent’s game. For example, Kentucky switches guards. Badgers scored during the switches.

Enron, Tyco, Kodak, Blockbuster, Lehman Brothers, Citibank. These were presumptuous companies. Their leaders (and sadly employees) paid the price. Walker, Christie, Cruz, and Clinton are presumptuous leaders whom I suspect will experience their Kentucky moment.

What leadership lessons did you extract from (at least for Badger fans) such a joyous outcome? What can we learn tonight from Duke versus Wisconsin?

© Plantes Company, 2015


April 2, 2015, 8:13 pm

50 ways to lose your customers

Are customers cheering to adopt or dump your brand?

Are customers cheering to adopt or dump your brand?

Singer-composer Paul Simon’s classic song “50 Ways To Leave Your Lover” is about an emotionally torn man who “struggles to be free” of his wife. He learns, from his mistress, “The answer is easy if you take it logically.” Her advice? “You just slip out the back, Jack. Make a new plan, Stan. You don’t need to be coy, Roy. Just get yourself free.”

Companies usually don’t want to slip out the back, leaving their customers feeling dumped. But companies can unconsciously induce their customers to say goodbye to the company’s brands – in ways as swift and sure as the song’s recommendations.

I won’t bore you with fifty ways, but here are seven sure-fire mistakes leaders make that lead their customers to “slip out the back” or “make a new plan.”

1. Placing profits before people and customer experiences. Financial outcomes are a result – a lagging indicator – of making the right decisions on behalf of customers and the employees who serve them. Nevertheless, too many companies make profits the end-all and be-all. And they pay a price, eventually. Subscribers are exiting in droves as cable companies lose their monopoly status to disruptors like Hulu, Apple, Amazon, and Netflix. Had cable companies invested in terrific customer experiences, they would have retained more customers.

Customers today care about how a company behaves. Yes, people got angry about Starbuck’s suggesting a conversation over coffee about race. But they love that Starbucks’ CFO said the company would gladly give up profits to honor its belief that sexual orientation is not a basis for discrimination in marriage or customer service. Costco customers value Costco’s core values, especially in contrast to Sam’s Club.

2. Ignoring your fans. I am a United Airlines fan. (Don’t ask me to explain. I am.) I regularly give feedback to them and don’t shop for other fares. But when my miles went down last year, United dismissed all my past loyalty (700,000 miles worth) and lowered my privileges. They should have instead offered me inducements to fly more (versus use free miles) this year.

3. Losing your relevancy. Trying to milk an aging business model doomed Kodak, Blackberry, and Blockbuster. Their products and services simply are not relevant to a sufficient number of customers to sustain a business. The Internet of Things will create yet more shake-ups.

4. Offering too much choice. I saw so many versions of Crest toothpaste on the drug store shelf that I finally said, “Goodbye.” I’m feeling the same way about Charmin toilet paper. Nine types? Really? I’ve often wondered if customers select store brands in part because the choices are fewer, saving precious brainpower!

5. Presenting a tired image. Outdated visual imagery and an absence of social media presence in today’s world can suggest your company is not keeping up with the times. You give a new entrant an opportunity to look more vibrant, even if its underlying technology or service offering is not.

6. Changing the sizing. It’s OK for cars and kitchen appliances, even computers, to develop new models. But when my favorite running shoe, hosiery, and bra brands change sizing, it makes me scream. How often do you regret you did not buy two versions of something so that when the first wore out, you had another in your closet?

7. Losing your differentiating value promise. What was once a differentiating brand promise becomes a customer expectation because competitors copy what works. Product quality for example was once  differentiating, and now it’s a requirement to be considered. Amazon-like customer experience is quickly becoming an expectation. I purchased Chubb Group insurance as I now live in the land of earthquakes and wanted the best coverage. I was disappointed when my website experience was anything but best-in-class. (My agent said Chubb plans to close the gap, soon I hope.)

The lesson here is that if you are not regularly evolving your business model to deliver more value to customers, you are running the risk of being commoditized. And only one company wins in a commodity-like market, and that is the one with the lowest cost structure.

There are times when you should dump a customer.

The pitfall of the customer-centric thinking is that not all customers deserve your loving care and investments. You must choose which customers to invest in or not. Choosing is strategy, as Richard Rumelt states in my all-time favorite strategy book, Good Strategy Bad Strategy. Everything else is aspiration.

So here’s my advice when your company is emotionally torn about a customer:

“Hop on the bus” and leave behind crazy-making customers who steal spirit from your staff.

“You don’t need to discuss much” with consistently unprofitable customers. Raise their prices and they will exit voluntarily.

Tell customers in non-strategic target markets that demand things you cannot leverage in your strategic markets to “Just drop off the key.” Find them a better partner than you will ever be.

“And get yourself free.”

© Plantes Company, 2015


March 26, 2015, 10:14 pm

Disrupting the workplace

Twp technologies made working from home feasible in 1989.

Fax technology and FedEx made working from home feasible in 1989.

In 1989, the CEO of my global employer allowed me to work from home rather than demand I move halfway across the US to be near corporate headquarters. Two technologies made his decision possible: Overnight delivery and an early fax machine. I was the first distributed worker other than our sales and product service representatives.

Flash forward to 2013. I worked for IBM where 45% of its global workforce (and growing) worked from home offices. Those of us already virtual referred to IBM as “I’m By Myself.” We used a shared on-line knowledge base so poorly structured that we often entered the IBM site pretending to be a customer—it was the fastest way to find the information that we needed to complete a pitch deck. Many a day, I thought I was working for a computer, not a company.

Distributed work is an unstoppable trend. But are we ready? My IBM experience suggested not. A recent MIT Enterprise Forum panel I facilitated provided some needed tips on how to deal with this trend.

The panel included three people: Lars Helgeson, CEO of GreenRope (#247 on the Inc 500 2014 list), an international Customer Relationship Management and marketing automation software firm. It has over one thousand clients in 20 countries, served by 18 employees and still no office. Lisa King, Director of HR Operations and PMO for CareFusion, has been involved in virtual teams throughout her long career and within the last ten years exclusively global, virtual teams. The third panelist was Morgan Tracy, the Director of HR at Mitchell International, a leading provider of property & casualty claims technology solutions. She supports a team of one thousand, over half of which work remotely from four countries.

The panel agreed that underlying economics gave rise to distributed work, and the trend is only getting stronger. Mergers and acquisitions created global companies. The Internet and global logistics services accelerated globalization, including in supply chains. Another trend is technology companies seeking to attract the best talent across the globe and keep development projects running 24-7. And workers increasingly desire work-from-home options to avoid commuting, a waste worsened by our nation’s underinvestment in infrastructure.

Is it any wonder then that tools have emerged to manage the geographic spreading of work? Video conferencing, e-mail, chatting, software solutions that replace in-person IT and HR support, mobile computing, and on-line collaboration tools for meetings and document sharing are now mainstays. Collectively, these tools have created a 24-7 work culture that demands still better tools.

But our new way of working raises many disturbing questions. US productivity growth is slowing considerably, despite the Internet’s promises. Are virtual teams less productive? Employee loyalty is plummeting. Is the virtual nature of the company connection to blame? Has our education about teamwork and management kept up with how we work today? Although CEOs site the need for more creative employees, can we create them? Technology allows (perhaps encourages) workers to put in more hours, but creativity demands time away from work. Finally, are the laws governing our workplace — be they about sexual harassment or IP — designed well enough for virtual and globally distributed teams?

The panel felt overwhelmingly that a distributed workforce is a net positive, but managers must work proactively to avoid its pitfalls. Distributed work can result in a singular focus on outcomes, versus relationships and the trust and openness they create. Communications are too often one-way instead of two-way. In face-to-face conversations, awkward silences are often vital, allowing people time to marshal their thoughts and then speak up. Online, silences are often closed quickly with, “I guess that means there are no comments or questions.” Trust is harder to build, as there is less time spent discussing shared aims and interests over coffee and meeting breaks.

The solution is to use the same kind of motivation-building actions that were so natural in pre-digital work settings. Schedule regular and virtual coffee breaks with each employee. Spend time as a team being off-agenda. Check-ins when a meeting starts help. Find out what motivates each employee. Use webcams as often as possible, so people see faces, not just hear voices. Find new measures of success — leading indicators of results — so you can ID a team in trouble and intervene before results decline. Teach cultural sensitivity. Greet people in their time zone: there’s nothing worse than saying “Good morning everyone” to a worker struggling to keep her eyes open before bedtime. Respect work-life boundaries. Rotate who gets the late night and early morning meeting times. Encourage team members to meet each other online, one-on-one. Finally, invest in in-person gatherings. They are not the “icing” so often deleted from budgets when profits are tight: these meetings are essential.

Helgeson closed the session with a challenge: “This is the new way of working. Jump on the wave and master it, or risk becoming obsolete as a leader or company.”

What best practices can you recommend?

© Plantes Company, 2015


March 19, 2015, 11:20 am

The wisdom of the wonk

Might Martin O’Malley beat Hillary Clinton in the primary?

Amazon CEO Jeff Bezos is a well-known wonk.

Amazon CEO Jeff Bezos is a well-known wonk.

Not according to Washington Post columnist Dana Milbank, who dismissed the declared candidate’s primary chances. Calling the former Baltimore Mayor and Maryland Governor a “wonk,” Milbank’s March 11 column applauded O’Malley’s many real accomplishments but declared him unable to excite the Democratic base.

Milbank quotes O’Malley as saying, “We brought crime down by 43 percent. We reduced the number of children poisoned by lead in our city by 71 percent. We cut in half the number of children placed in foster care. We reduced infant mortality by more than 17 percent. We drove down avoidable hospital re-admissions by more than 10 percent in just the first year of trying.”

You get the picture. Results. Not miles traveled around the globe, or evidence of caring about women since forever. Neither Tea Party rallying cries, nor being unwilling to admit our President loves America. Only no-drama stellar results created by using data to prioritize issues, identify root causes, and enable leaders to focus action and measure progress.

If this is what a wonkish political leader can accomplish, bring them on! Martin excites me. So do all the leaders who realize that an era of data-driven decision-making is here. The black box has been cracked open. Massive data is available. Storage and computing capabilities are cheap. And advanced analytics are affordable, turning outdated mental maps into fresh, actionable insights and gut-feel risky decisions into smart decisons.

I’m seeing more and more wonks in the business world, too, some providing examples at the recent WTN Fusion 2015 conference. These companies are leveraging digital technology and data to transform their organizations.

CDW uses data to identify where to spend marketing dollars and how to personalize marketing messages to drive demand for its products.

SubZero-Wolfe has a brilliant brand, but its three-step distribution channel (showrooms, distributors and retail outlets) creates complexity, especially when the channels act independently. Going forward, the brand will use showrooms to turn the consumer’s vision of her kitchen into purchase intent for SubZero and Wolfe appliances. Distributors and retailers will learn of this intention through digital marketing processes and then work to seal the deal.

Joy Global, Inc. uses data and algorithms to run instrumented and interconnected mining machines from a comfortable and safe room thousands of miles from the mine site, eliminating downtime for shift turnovers.

Solstice Mobile helps its clients differentiate their customer experience by designing mobile platforms that create customer delight at every touch point. Solstice Founder and CEO, J Schwan, argues we need to turn systems of record that merely collect data (for financial reporting and operations) into systems of digital engagement that build customer loyalty.

John Byrnes, Executive Chairman of the Board and President of Mason Wells, said it best. To paraphrase him, “It’s time we put the Chief Financial Officer back in the bottle and elevate the Chief Information Officer to the C-Suite, as there is no business advancement without information technology today.”

The same is true nationally. Many of our compelling issues demand data, analysis and digitally enabled solutions. Identifying children at risk for maltreatment and allocating more resources to prevention strategies. Personalizing education to accelerate K-12 learning. Treating chronic diseases earlier to reduce costs and improve health. Personalizing medicine to get higher returns on drug spending. Advancing cyber-security solutions. Reducing the cost of higher education. Making information about political contributions transparent and widely available to move our nation back towards real democracy versus political leadership for hire. I could go on forever listing opportunities in the public commons for digital transformation.

Accenture’s Mark McDonald was very clear that there is only one right way to capitalize on digital technology. The wrong way is to add digital as jewelry (“eye candy” in his words) onto an existing business. The right way is to “apply technology to increase connectivity and functionality in order to increase avenues of value.” Achieving success with digital transformation requires, according to McDonald, for leaders to choose — to say yes to some things and no to others. That’s as good a definition of strategy as I have heard.

We need insightful leaders who can ask the right questions and encourage others to use data to find answers for our companies and our government. Leaders with wonk-like instincts can help us cut through the Gordian knots that keep us at an impasse as problems continue to worsen — be they in the public space or between different organizational functions or divisions. These kinds of leaders are not stuck in old paradigms. They encourage us to be open-minded thinkers, finding innovative solutions to the real problems.

The future belongs to wonk-like leaders and organizations. Nerdy, objective and creative is the description of the desirable company man/woman. How will you find them or groom them?

© Plantes Company, 2015


March 12, 2015, 7:44 pm

Pulling weeds to improve the customer experience

Grrrrrr…..

Are your customer touch points creating frustration or delight?

Are your customer touch points creating frustration or delight?

How often have you ended up raising your voice with a customer service representative or an automated voice system? It happens to me whenever the specifics of my situation fall outside a company’s “rules” for its software or front-line people.

I for one get frustrated too often, my impatient self is ashamed to admit. Still I am not alone. Companies that reduce these jaw clenching moments can gain a leg up in the race for creating the best customer experience.

My most recent example is a call to my 92-year-old (and getting mentally frail) mother’s bank. The PNC representative refused to turn on a feature that would let me (for mom) direct deposit payments into her caregivers’ banking accounts.  This refusal occurred despite my name being on the account and the bank having a record of my having my mother’s power of attorney. It was also clear from my answers to the teller’s detailed questions – the check numbers, recipients and amount of three recent checks – that I was writing checks for mom. But no, because I was not mom, I could not turn on the feature. Only Mom (who lives 1300 miles away) could turn the feature on by calling into PNC. How, I wondered, do I possibly explain “popmoney” transfers to a 92-year-old?

Rick Davidson, CEO of Cimphoni, shared many parallel stories in his talk at WTN’s Fusion 2015. Cimphoni is a new consultancy that helps companies and IT departments build success through the adoption of new digital technologies and culture change. The company supplies temporary CIO services or leads from behind. (Disclosure: Cimphoni is a client.) Rick compated complexity to weeds in a garden that must be pulled so that the flowers – those things that delight customers – can flourish.

Here are examples of weeds that Davidson described:

  • Requiring you to call a service center during particular business hours versus being able to do transactions on-line – at the time and place of your choosing.
  • Disconnected channels, so when you finally talk to a live representative you have to redo all your prior online work or vice versa.
  • Requiring you to engage in irrational behavior, like ordering online inside a store because only online orders have the sales price.
  • Lengthy protocols so as to protect the company against fraudulent players when there are very few in the market relative to customers. (I have no problem with the tight security of my bank. But should my alumni societies or Ballard Home Furnishings websites be as arduous to connect into if I forget my password?)

What gives rise to the weeds and fuels their growth? For one, a culture that does not trust frontline employees. Adding too much functionality to systems is another; apparently 64% of features are never used. Failing to weed is another, as is letting legal protection against rare events take priority over great customer service for the masses. Rick also commented that change is hard—and changes in IT systems often require changes in human behavior.

Rick’s advice was terrific. If a process cannot fit on an APP, it is too complex. He also recommends that companies adopt a human-centered design approach. Here everyone on the design team must experience what it’s like to work with the company from the viewpoint of a customer.

Any CIO, wisely referred to by Rick as the Chief Enablement Officer, is uniquely positioned to identify the weeds and call a team together to pull them. If CIOs start listening to and observing customers, they will know what is broken and become a proactive professional in improving customer experience.  They’ll also play a key role in personalizing the customer experience.

Sounds fun and profitable. If you’re a CIO, what’s holding you back? If you’re another C-Suite leader, talk with your CIO.

© Plantes Company, 2015


March 6, 2015, 12:09 am

A winning membership business model

Costco shareholder value is achieved by a focus on the law, customers, employees and suppliers.

Costco shareholder value is achieved by a focus on the law, customers, employees and suppliers.

The woman wore brown leather hot pants, a beige silk blouse, dangly earrings and over-the-knee black heeled boots. Thankfully, she was thin. Her partner, also in his late 20s, wore grungy jeans and an expensive leather jacket whose collar hit his rock-star-length locks. Next to them was an elderly Hispanic grandmother trying to keep tabs on three grade-schoolers, most likely children of her working daughter or son. An elderly blond women, her face the work of a terrific plastic surgeon, stood comfortably in very high-heeled shoes. Her Channel sunglasses matched the color of her Fendi handbag. Added to the mix was a teenage male covered in tattoos, wearing black flannel Turkish pants and a sleeveless matching top, despite the 72-degree weather. Each shopper’s cart was brimming, all with very different mixes of merchandise and groceries.

Welcome to Costco where you feel you are walking through a yellow page directory. A walk down one warehouse building aisle took me past a Lennox furnace for sale, hanging laundry baskets, snacks and piles of men’s blue jeans, eventually arriving at my destination, top brand wines at great prices. Far to my right, I saw refrigerated grocery store items and to my far left, gardening supplies.

Costco has an admirable set of corporate values, as expressed in its Code of Ethics.

  1. Obey the law
  2. Take care of our members
  3. Take care of our employees
  4. Respect our suppliers.

According to Costco’s Code, “If we do these four things throughout our organization, then we will achieve our ultimate goal, which is to reward our shareholders.”

And it has. The $110B company generates over $2B in profits and Costco stock outperforms the S&P 500. (See chart.) Its store brand, Kirkland, captures Costco’s value promise of great prices for superior products. Impressively, its same-store sales keep growing and each year’s new stores open with higher average sales than earlier cohorts of stores. Unlike Target failing in Canada and Walmart’s bout of bribery in Mexico, Costco’s global expansion has proceeded well. It also has a track record of reducing waste and energy usage due to its commitment to reduce its global footprint. Most admirably, it offers a living wage and hours to all its employees and promotes from within for managerial roles. (Starting salaries are $40k.)

All these attractive traits are achieved through a membership business model.  Consumers from every walk of life have pooled their purchasing power, paying a small membership fee to get better prices for high quality products. Talented corporate resources enable the members’ collective effort. Membership fees total $2.4 B, more than profits, suggesting products are priced close to fully loaded costs.

This “everybody wins” model might seem communist to some. But think again. This type of organization is exactly how corporations started. The public came together to advance the common good by chartering activities that were too expensive or financially risky for individuals to pursue .

Somewhere since this worthy founding of corporations, we’ve allowed them to act in self-interest versus community interest. Employees of Walmart, for example, are over-represented in public health programs. We’ve provided corporations with personhood and an unlimited political voice, but they cannot be shut down for egregious violations of the law. This duality creates a pay-to-play system as witnessed in the large payments for regulatory violations by the largest US banks and pharmaceutical companies among others. And the leaders playing this game are, in general, immune from prosecution, as culture leaves no paper trail.

Our markets have moved from free markets (the kind referenced in the US Constitution) to crony capitalism, one where powerful entities lobby to bend rules in their favor. The most powerful earn what economists call “rents” (versus income generated from value creation).

Costco gives me hope. So do small and medium-sized businesses that capture the spirit of the earlier corporations, generating winning outcomes for employees, owners, customers, and communities. Employee-owned companies, like Colorado’s New Belgium Brewing Company, and social enterprises also fuel my spirit. So do the larger corporations that are making a commitment to the triple bottom line, like Unilever. It uses its supply chain and business models, not just its philanthropy, to advance global health.

We are all in it together – just like the people in the Costco checkout line. We can all work and win together and create a rising tide. Or not. Which path we take depends on our decisions as leaders, employees, consumers, voters, and investors. My observation is that whenever and wherever we pit one group against another, we all get less eventually.

What’s your organization’s version of delivering Costco-like value?


February 25, 2015, 12:59 pm

The Reality TV Show every CEO should envision

For some, today's job market is as challenging as the 1930s Depression was for many.

For some, today’s job market is as challenging as the 1930s Depression was for many. (Picture from The Guardian files.)

You have been imprisoned twice for a total of 8 years for non-violent offenses, both incarcerations related to drug use, drug sales, and property theft. You are off drugs now. You had no legal employment prior to your first imprisonment, but landed a job when you left prison in 2008; unfortunately you were laid off in 2009 as the economy worsened.

Unemployed, you succumbed to drugs again and committed the same crimes. You got your GED the second time in prison. A few gang-related tattoos are visible above your shirt collar, and there’s a scar on your face, the result of a prison fight that you did not cause. With a young child at home and a woman you love, you are determined to follow a different path this time.  Your body and voice are strong, but your grammar is weak. You have no money for higher education.  And, by the way, you live in Detroit where unemployment remains high. Your girlfriend, who has a low wage retail job, needs her mom’s help with childcare; so leaving Detroit is out of the question. You are 31 and black.

Your task is to find a living wage job to support your family. What steps could you take? (Remember, your Reality TV you lacks the track record, experience and upbringing that makes job searcghes relatively easy for people like me and your real life you.)

The smartest thing you could do is head to a social enterprise, a non-profit largely reliant on earned income, whose purpose is often to serve those facing employment challenges.  Los Angeles Chrysalis is one. (You have to admire a non-profit whose website link is changelives.org!)  It serves 3000 homeless and hard-to-employ people a year. Its philosophy is “a steady job is the single most important step in a person’s transition out of poverty and onto a pathway to long-term self-sufficiency.”  Chrysalis Enterprises, which provides street maintenance, facilities management and temporary staffing, employs some of the Chrysalis participants in “sheltered work.”

Sheltered work environments offer job training and teaches soft jobs skills that enhance participants’ future employment potential. Once graduates are employed outside the sheltered setting, they continue to receive “retention support” from these non-profits.

A recent Mathematica Policy Research analysis shows that Chrysalis and six other social enterprises in the study produce high benefits not just for the participants but also for taxpayers.  (REDF, a California non-profit that funds and provides support services to social enterprises focused on employment, six of whom were in the study, paid for the study.)

In the study, 69% of participants had a criminal record, 29% lacked a GED or HS degree. The average age was 41. Here are some before and after numbers for this population:

  • BEFORE: 25% were never employed; 37% were unemployed in the prior year, and 84% were currently unemployed.
    AFTER: 51% of people in sheltered work programs were employed one year after starting their social enterprise work, a 33-point increase in their employment rate. The comparison group was workers in the Chrysalis labor pool but not in its sheltered work program. Their employment rate was 37%.
  • BEFORE: 71% of participants’ income came from government benefits.
    AFTER: Government support as a share of income dropped to 24% as total monthly income increased from $653 to $1,246, a 91% gain.
  • BEFORE: 85% lacked stable housing in the last 12 months.
    AFTER: Housing stability tripled.

For every $1 the social enterprise spent, society received $2.23 in benefits and $1.31 in taxpayer savings. Retention support programs increased the return.

The lesson for me is that we have models that work — for the participants and for society — to address the crushing situation facing the hard-to-employ. The Mathematica study showed new and smaller social enterprises did not generate the returns of the larger, more established ones, so the key is to scale the successful ones.  Finding capital to accomplish this is, therefore, critical.

An alternative is to offer more sheltered work in established for-profit companies. Here the benefits would include co-workers feeling they were helping people most in need of help. With a growing rate of long-term unemployment, public policy should create stronger incentives for companies to hire those facing employment challenges.

Imagine if Manpower, Adecco or a local staffing agency (like QTI) decided to expand its scope to advance the placement of hard-to-employ people. It could leverage its employer connections and, by collaborating with social service agencies, add wrap-around services to help these workers succeed in landing work and retaining it. What a difference that would make!

We all say we want to help every American have job opportunities. What are you doing as an organizational leader to put action behind your values and hopes?

© Plantes Company, 2015

 

 


February 20, 2015, 2:48 pm

Lessons for leaders from NBC’s newsroom fiasco

Even the mightiest can fall.

Even the mightiest can fall.

Stars and companies fall from grace. Because of the public hanging, the fall is never pretty. And it’s far easier to explain what happened in hindsight than predict with foresight. Still, looking backward is how we learn our lessons. So here’s my take on NBC’s shocking change in fortune.

Breaking your brand promise destroys trust. News anchors must convey the objectivity, rationality, and truthfulness their viewers demand. CBS’s Walter Cronkite is the gold standard. When your chief newsman appears on late night shows and tries to be funny or raises his hand to be Jay Leno’s replacement—as Williams did—you have a potential branding issue to manage proactively.

Restlessness places brand promises at risk. Restlessness emerges when the status quo produces a feeling or reality of stagnation. John Stewart is exiting the Daily Show as he felt his viewers did not deserve a host with the “slightest bit of restlessness,” as he stated on his show. NBC appears to have had a restless anchor on its hands and mistakenly looked past it.

CEOs also get restless. They seek more boards and more public exposure. Boards also get restless for new leadership. Is this wise? If you recall, Good to Great author Jim Collins found great companies have less publicly visible CEOs, and these CEOs usually emerged from within the company. One exception to the external board role is when the board is strategically important to an organization (e.g., a Google senior leader sits on UBER’s board).

Companies can also get restless in pursuit of revenue growth. When the target for new revenue is consistent with the brand promise, this restlessness is great. Toyota’s move into hybrid engines under the Toyota brand was a great expansion. Toyota leadership was also restless to enter the luxury car market. But it wisely branded its luxury entrant, Lexus, independent of Toyota since the Lexus brand promise and therefore its business model were so different from that of the other car models.

Williams needed to find ways to stretch that were consistent with NBC News’ brand. Just as Toyota could not be luxury and basic, Williams could not be NBC news anchor and protagonist in his embellished stories. Great journalists are usually invisible in the story. Writing scholarly articles, moderating symposiums, etc. would could have challenged Williams and been consistent with a news anchor’s brand.

Address restlessness head-on, before it leaks out in dangerous ways. Often leaders enter periods I call “competent stagnation,” a situation in which they are performing adequately but feel restless, as they have lost their inner drive and spiritual passion. Like a virus, competent stagnation on the part of a leader can infect an entire organization, before an affair, depression or another symptom of underlying distress appears, with considerable organizational damage along the way such as a drop in staff morale or unwanted exits.  Far better to raise your hand and say you are restless and decide proactively on how to manage it, than to act out in ways that may not be consistent with what your role and company need.  We can forgive Williams’ desire to be more than a talking head. But there were many more places for him to grow, consistent with his brand, than moving to late night story telling.

When a crisis hits, control the public messaging from the highest level. Willams’ situation was worsened by his meek initial apology. NBC needed to take control of the situation earlier.

Governance and culture matter. A Washington Post column reveals that newsroom staff regularly raised eyebrows about Williams’ story embellishments. But who in the newsroom would raise his or her hand to complain about Williams when Williams, also serving as head of the newsroom, controlled which stories made it past the cutting room? Too often, companies give too much power to leaders without built-in checks and balances, or without the fluid communication channels that enable workers’ voices of concern to be heard by their bosses’ bosses.

When leaders are also the rainmakers, as Williams was, they can become more important than the organization’s values and brand promises. Stephen Paskoff, CEO of ELI, often writes about his problem. Big Shots, as he calls them, get away with adverse behavior because companies are frightened of losing the revenue they bring in. I admired Williams’ boss who said in announcing Williams’ departure, “We are bigger than any one person.” Any company is. Dismissing Williams sent the right message to the newsroom staff and the public. The statement was step one in rebuilding trust.

Which of these lessons apply to you?

© Mary Kay Plantes, 2015


February 9, 2015, 7:15 pm

Online Marketplace Business Models

Physical markets where buyers and seller convene are giving way to online markets. Who benefits and why?

Physical marketplaces where buyers and seller convene are giving way to online markets. Who benefits and why?

Marketplaces as physical gathering sites have a long and rich tradition in all economies. There, buyers and sellers meet to exchange goods for money. Public Markets are especially noteworthy. Madison’s Farmers Market, The Milwaukee Public Market, Boston’s Haymarket Square, Seattle’s Pike Place Market, and The Brooklyn Flee Market come immediately to mind as current examples. So do the local markets I’ve encountered biking through small European towns.

The Internet, however, has changed our notion of a marketplace. Markets used to require a physical space and, in the case of Public Markets, were created to advance a public good. Walking around Madison’s Capitol Square on Farmers Market Saturdays reinforced the Capitol as the physical heart of Madison and advanced the slow food, local small farming and buy local movements in Madison. Today, online markets pull us away from our communities in the same what way big box stores and malls pulled us away from Main Street.  Online markets have also moved well beyond products to include the trade of services and even ideas.

Online markets benefit buyers in many ways.

  • They make shopping more efficient. About 80% of B2B shopping is now done online before a buyer ever contacts a company representative. Why? It’s much more objective and efficient than speaking with representatives.
  • They lower prices for comparable goods. The Internet has led to greater competition and more price transparency.
  • They open access to sellers who would otherwise be impossible or too costly to reach. Rare book buyers have truly benefited from online used book markets.

On-line markets benefit sellers by expanding the reachable market, selling excess capacity, or lowering the cost of reaching, converting and serving customers. BOP, a Madison woman’s clothing retailer, became a successful online retailer and was eventually acquired by Amazon. BOP now reaches fashionistas around the world. It also recently closed its physical store. Dow Corning, as I have reported on in the past, sells excess capacity through its on-line business for commodity products, Xiameter. Expedia sells unused capacity for travel and restaurants respectively.

The valedictorian for creating an online marketplace is certainly Amazon. True, it had the unfair cost advantage of no sales tax requirements. Even with sales taxes, however, I’d argue that Amazon’s business model still would have won the day. It increased buying and selling efficiency, expanded potential customers for sellers, and improved access to products for buyers. The fact that Borders went out of business largely because of Amazon is proof of the value proposition to both sides of the book market.

Amazon has succeeded in offering its IT platform to other websites, a move consistent with its “marketplace” focus. Acquiring niche marketplaces like Zappos for shoes has also succeeded (at least in terms of revenue growth).

Where Amazon’s expansion efforts have failed (e.g., its phones and pads), Amazon has reached past its strategic role as an online marketplace. Shopping mall owners and tenants do not need to own the streets, buses and cars that enable shoppers to reach mall parking spaces. In a similar vein, Amazon does not need to own hardware to secure its customers. No wonder its expansion efforts along these lines failed: these are different businesses.

For the most part, online markets have mostly replaced or complemented physical marketplaces. Far more exciting to me is the trend towards new-to-market online marketplaces. SuiteHop rents unused suites in sports stadiums. Kickstarter campaigns make capital available to start-ups. ScienceExchange connects researchers to labs with excess capacity that can run experiments more efficiently and effectively, lowering the cost of science. Benefunder connects philanthropists to medical researchers.  Airbnb monetizes unused rooms. These are but a few examples among many.

What are the downsides of on-line markets, beyond potential security and privacy issues? Buyers feel overwhelmed by too much access. Sellers complain of the challenge of getting heard amidst so much marketing message clutter.

What online marketplaces are in your future? Does your industry have a need not currently being met? If you are a non-profit leader, how might an on-line market better serve your target client or cause? The winning ideas will be those that reduce unutilized capacity, improve efficiency, open access to better products and services, or provide solutions previously unavailable.

 


January 28, 2015, 4:46 pm

The Law of Unintended Consequences

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The Law of Unintended Consequences often starts with a smug attitude.

The terrorists who attacked the Paris satirical media organization Charlie Hebdo hoped to silence its voice. Instead, 3 million issues were printed following the attack, compared to 60,000 before the attack. Welcome to the Law of Unintended Consequences.

Is this law a reflection of human nature or economics? Is there a mystical comic figure guiding our planet? Or, more likely, do unintended consequences emerge from the reality that every action in a system sets in motion a reaction? What I grasp from observation is that when you push something too far you always generate an unintended and undesired response.

A former Oscar Mayer executive told me that the company’s manufacturing leaders, in trying to pull cost out of its ham deli products, created luncheon meat that tasted more like water than ham. When sales plunged, the product managers regained their power in the corporate hierarchy over product decisions.

In response to a seemingly endless number of ads on TV shows, we now record the shows to avoid the ads.

To attract and retain fans, the national football league created rules and a culture that led to player brain injuries. Today, many rational parents no longer want their children to play football.

Political advertising has become so caustic and uncivil that young people drop out of mid-term voting; few people find the ads believable anymore.

The National Rifle Association protects the right of individuals to own the types of guns whose only purpose is military warfare, creating a backlash against an organization that used to be about protecting hunters’ rights. Protecting abortion rights resulted in Planned Parenthood supporting very late-term abortions. This action reduced support for its cause.

Arkansas’ efforts to lower the cost of Medicaid harmed children’s health and lowered their future earning potential and contribution to Arkansas tax revenues. Unhealthy children also drive up healthcare costs.

Moving to the right to win the GOP primary ensured Romney would not beat Obama.

In designing a healthcare bill that handled every single potential consideration and in believing the public sector could do everything better than the private sector, then First Lady Hillary Clinton created a monstrosity that went nowhere.

As to the future?

Wall Street’s efforts to castrate Dodd-Frank (yes, I do think that is the right verb) may give rise to Elizabeth Warren’s presidency, if not in 2016, then 2020.

Efforts by the Koch brothers and other lobbyists to keep climate change legislation from being enacted will lead to future laws with larger adverse impacts on those fighting climate change solutions today.

And the list can go on and on.

As you contemplate actions in 2015, think more carefully about the consequences. Are you pushing for more market share than is healthy for your industry’s margins? Are you squeezing your people at the expense of their loyalty, engagement and tenure? Have you voted for representatives who are so politically polarized that their legislative body can no longer effectively govern? There are many issues – adequate public infrastructure investment and lowering prison costs and recidivism rates among them – that demand an effective legislative body.

Talented leaders stop pushing before a backlash, or they pick a better strategy for achieving their aim, one with fewer unintended consequences. Below are some tools that will prove helpful for assessing your decisions.

 

Tools to help avoid unintended consequences

  • Scenario-based planning in which you create three different scenarios of the future based on multiple known and unknown future events that will impact whether your planned action works out well or not. Examine the decision in each scenario.
  • “And-then” improvisational storytelling starts with one person stating the planned action. Then each person (in turn) adds to the sequence of events to create an unfolding story. Each “and then” must be a logical reaction, but not necessarily the intended reaction to an action.
  • Imagine the worst possible outcome of an action and conduct a post mortem of how this outcome came about.
  • Experiment before committing in one direction.
  • Identify all the assumptions you have made — explicitly and implicitly — in deciding your chosen path. Also, list all the “facts” supporting the decision. Invite an outsider into your group to decide if your “facts” are actually assumptions. Test the most critical assumptions.

© Mary Kay Plantes, 2015