Sunday, September 28, 2008

We’ll Fill This Space, but First a Nap

Published: NYT, September 27, 2008

Some of you may feel that Bob Cooper has lost his mind in posting this article on the importance of sleep but we are talking about innovation and creativity as the underpinning of growth. Stressing the importance of people getting the right amount of sleep versus the macho “work until we drop” syndrome often found in corporate cultures can be important.

“WASTE not life,” wrote Benjamin Franklin, patron saint of American entrepreneurs. “In the grave will be sleeping enough.”

Centuries later, the attitude toward sleep in America — and in American business, in particular — has scarcely changed. Corporate culture reveres the e-mail message sent at 3 a.m., the executive who rushes directly into a meeting from a red-eye flight. Bumper stickers offer an updated version of Franklin’s dictum: “I’ll sleep when I’m dead.”
“There is a cultural bias against sleep that sees it as akin to shutting down, or even to death,” explains Dr. Jeffrey Ellenbogen, a neurologist at Harvard Medical School and director of the Sleep Laboratory at Massachusetts General Hospital.

Most people, Dr. Ellenbogen says, think of the sleeping brain as similar to a computer that has “gone to sleep” — it does nothing productive. Wrong. Sleep enhances performance, learning and memory. Most unappreciated of all, sleep improves creative ability to generate aha! moments and to uncover novel connections among seemingly unrelated ideas.
Steven P. Jobs, the chief executive of Apple, once defined creativity as “just connecting things.” Sleep assists the brain in flagging unrelated ideas and memories, forging connections among them that increase the odds that a creative idea or insight will surface.
While traditional stories about sleep and creativity emphasize vivid dreams hastily transcribed upon waking, recent research highlights the importance of letting ideas marinate and percolate.
“Sleep makes a unique contribution,” explains Mark Jung-Beeman, a psychologist at Northwestern University who studies the neural bases of insight and creative cognition.
Some sort of incubation period, in which a person leaves an idea for a while, is crucial to creativity. During the incubation period, sleep may help the brain process a problem.
“When you think you’re not thinking about something, you probably are,” says Dr. Jung-Beeman, who has a doctorate in experimental psychology.

Another theory is that typical approaches to problem-solving may decay or weaken during sleep, enabling the brain to switch to more innovative alternatives. A classic switching story, recounted in “A Popular History of American Invention” in 1924, involves Elias Howe’s invention of the automated sewing machine: after much frustration with his original model, which used a needle with an eye in the middle, Howe dreamed that he was being attacked by painted warriors brandishing spears with holes in the sharp end. He patented a new design based on the dream spears; by the time the patent expired in 1867, he had earned more than $2 million in royalties.
Spear-wielding savages make for compelling stories, but creative insights directly induced by dreams are rare.

In general, people are unaware of sleep’s effects on their performance.
Dr. Ellenbogen’s research at Harvard indicates that if an incubation period includes sleep, people are 33 percent more likely to infer connections among distantly related ideas, and yet, as he puts it, these performance enhancements exist “completely beneath the radar screen.”
In other words, people are more creative after sleep, but they don’t know it.
This lack of awareness makes it hard to identify specific aha! insights that have been prompted by sleep.

“It’s more that sleep brings a change of approach,” explains Mark Holmes, an art director at Pixar Animation Studios who worked on the film “Wall-E.” “You can get tunnel vision when you’re hammering away at a problem. You keep going down this same path, again and again, just tweaking, making incremental changes at best. ” He continues: “Sleep erases that. It resets you. You wake up and realize — wait a minute! — there is another way to do this.”

Business attitudes toward sleep may be starting to shift. Claire Stapleton, a spokeswoman for Google, says “grassroots” interest in sleep led to an on-campus talk by Sara C. Mednick a napping expert. Google also installed EnergyPods, leather recliners with egglike hoods that block noise and light, for employees to take naps at work.

Other companies that have installed EnergyPods include Cisco Systems and Procter & Gamble.
Vinayak Sudame, an engineer at the Research Triangle Park campus of Cisco, says he uses an EnergyPod to “shut my eyes and shut myself off for 10 or 15 minutes” when he is working on a problem or needs some quiet time. More than a walk or a coffee break, he says, this type of “total mental rest” helps him return to work with what he calls a “reorganized” perspective.
Alertness Solutions, a sleep consulting company in Cupertino, Calif., provided consultations and recommendations to a number of United States Olympic teams before the Beijing games and also works with corporate clients. Bob Agostino, vice president of operations at L. J. Aviation, in Latrobe, Pa., worked with Alertness Solutions at a previous employer and says that employees learned specific strategies to improve performance. These included when and how long to nap, how to determine the amount of sleep one needs, and how to recognize signs of fatigue and symptoms of sleep disorders.

Acting on this knowledge, Mr. Agostino says, “gives you an edge.”
In general, West Coast companies are more concerned about sleep issues than their East Coast counterparts, says Arshad Chowdhury, co-founder and chief executive of MetroNaps, which developed the EnergyPods.

“Particularly in New York, where financial services play such a big role, people are consistently sleep-deprived and consistently in denial,” he says.

Mr. Chowdhury — who says the idea for EnergyPods came to him in a nap — recalls a seminar in which one banker responded to a survey question with a note saying she knew she had no fatigue-related problems at work because the only time she fell asleep was when she sat still. Mr. Chowdhury laughs a bit ruefully: “Maybe we could have avoided the crisis we are in now if these people had just gotten proper sleep.”

Saturday, September 13, 2008

Managing Risk in an Unstable World
Ian Bremmer
HBR, June 2005 Issue
Reprint # R0506B

I have often discussed the importance of managing risk in uncertain business environments. This important article published over 3 years ago talks about the specific risk of growing in potentially unstable emerging markets. I strongly suggest ordering the reprint.

With emerging markets like China and politically unstable countries like Saudi Arabia figuring more than ever into companies' investment calculations, business leaders are turning to political risk analysis to measure the impact of politics on potential markets, minimize risks, and make the most of global opportunities. But political risk is more subjective than its economic counterpart. It is influenced by the passage of laws, the foibles of government leaders, and the rise of popular movements. So corporate leaders must grapple not just with broad, easily observable trends but also with nuances of society and even quirks of personality. And those hard-to-quantify factors must constantly be pieced together into an ongoing narrative within historical and regional contexts. As goods, services, information, ideas, and people cross borders today with unprecedented velocity, corporations debating operational or infrastructural investments abroad increasingly need objective, rigorous assessments. One tool for measuring and presenting stability data, for example, incorporates 20 composite indicators of risk in emerging markets and scores risk variables according to both their structural and their temporal components. The indicators are then organized into four equally weighted subcategories whose ratings are aggregated into a single stability score. Companies can buy political risk analyses from consultants or develop them in-house.

Saturday, September 06, 2008

Leading innovation
McKinsey Quarterly, September 4,2008

It is my opinion, sustainable growth -- particularly when current business designs/models must change -- MUST be top down driven. Leaders MUST play an active role as implied by this simple summary from McKinsey Quarterly. In our work with the Market Driven Growth process, leaders must set clear objectives, set the right climate or culture (as highlighted in this article, particularly around constructive risk taking), ensure that all the ideas from inside and outside the company are considered, and they acknowledge an appropriate process to enable the effort. They must continue to play a hands-on role in clearing any internal barriers, legitimizing the effort both inside and outside the company, and ensure full resource allocation even if tough portfolio decisions must be made.

While senior executives cite innovation as an important driver of growth, few of them explicitly lead and manage it. About one-third say that they manage innovation on an ad hoc basis when necessary. Another third manage innovation as part of the senior-leadership team’s agenda. How can something be a top priority if it isn’t an integrated part of a company’s core processes and of the leadership’s strategic agenda and—above all—behavior?

According to 19 percent of the senior executives, neither growth nor innovation is part of the strategic-planning process, which focuses solely on budgeting and forecasting. Just under half indicated that innovation is integrated into the process informally. Only 27 percent said that innovation is fully integrated into it. But these executives feel more confident about their decisions on innovation and say that they have implemented ways to protect it and to ensure that it gets the right talent.

In a separate survey of 600 global business executives, managers, and professionals, the respondents pointed to leadership as the best predictor of innovation performance. Those who described their own organization as more innovative than other companies in its industry rated its leadership capabilities as “strong” or “very strong. Conversely, those who believed that the ability of their own organization to innovate was below average rated its leadership capabilities as significantly lower and, in some cases, as poor.

As with any top-down initiative, the way leaders behave sends strong signals to employees. Innovation is inherently associated with change and takes attention and resources away from efforts to achieve short-term performance goals. More than initiatives for any other purpose, innovation may therefore require leaders to encourage employees in order to win over their hearts and minds. Our sample of 600 managers and professionals indicated that the top two motivators of behavior to promote innovation are strong leaders who encourage and protect it and top executives who spend their time actively managing and driving it. Indeed, senior executives believe that paying lip service to innovation but doing nothing about it is the most common way they inhibit it. The failure of executives to model innovation—encouraging behavior, such as risk taking and openness to new ideas, places second. Rewarding nothing but short-term performance and maintaining a fear of failure also make it to the top of the respondents’ list of inhibitors.

Holding leaders accountable for encouraging innovation makes a big difference. Thirty percent of the senior executives in the survey were accountable for it, through formal targets or metrics, in their performance reviews. They were more likely than the broader group of respondents to view innovation as one of the primary growth drivers, to manage it formally as part of the leadership team or through an innovation council, and to learn from their failures to achieve it.
Our research implies that most senior executives do not actively encourage and model innovative behavior. If they did, they could give employees the support needed to innovate.

They can also take a number of other practical steps to advance innovation

1. Define the kind of innovation that drives growth and helps meet strategic objectives. When senior executives ask for substantial innovation in the gathering of consumer insights, the delivery of services, or the customer experience, for example, they communicate to employees the type of innovation they expect. In the absence of such direction, employees will come back with incremental and often familiar ideas.
2. Add innovation to the formal agenda at regular leadership meetings. We observe this approach among leading innovators. It sends an important signal to employees about the value management attaches to innovation.
3. Set performance metrics and targets for innovation. Leaders should think about two types of metrics: the financial (such as the percentage of total revenue from new products) and the behavioral. What metrics, for example, would have the greatest effect on how people work? One company required that 20 percent of its revenue come from products launched within the past three years. Leaders can also set metrics to change ingrained behavior, such as the “not invented here” syndrome, by requiring 25 percent of all ideas to come from external sources.

Senior executives say that the top three ways they spend time making decisions about innovation involve determining what types or strategies to focus on, who gets to work on the resulting projects, and how to commercialize the fruits. Few spend time on targets, metrics, and budgets for innovation. That is telling, since executives whose companies do have such targets and metrics feel the greatest confidence in their decisions.

Tuesday, September 02, 2008

Even the Giants Can Learn to Think Small
Published: NYT, August 3, 2008

Some interesting thoughts.

BACK in the waning days of the 20th century, little start-up companies couldn’t wait to get big. Growth was their entree to the upper echelon, to millions in venture capital and tens of millions more in an initial public offering of stock. Getting big meant taking advantage of economies of scale, putting the company name on a ballpark, creating a global distribution network and hiring the industry’s best to conduct big-picture research.

Size mattered.

It still does, of course, but the tables have begun to turn. After spending decades growing and merging themselves into their behemoth proportions, big businesses are rediscovering the charms — and the innovative side effects — of thinking small. By breaking huge business units into smaller, nimbler teams, companies stand a chance of rekindling the creative spark that got them rolling in the first place. (As discussed below, companies must be ambidextrous –I agree smaller units are more accountable and have a clearer connection between what customers want and internal decision making. There are, however, parts of the corporate operation where scale plays an important role. You need both and must think through issues of centralization and decentralization carefully.)After all, “small is the new big,” as Seth Godin, a prolific blogger and author, puts it in his 2006 book of that name.

It is a point of view shared by a diverse group of business leaders, management consultants and information technology experts. According to Philip Rosedale, founder and chairman of Linden Lab, the company that created and operates the virtual world of Second Life, companies seeking to foster creativity must find ways to break apart the bureaucratic hierarchies now smothering it. Optimizing a company for creativity involves helping individual employees of every rank develop an entrepreneurial spirit. (Although I agree with the intent of this statement, as we discussed in an earlier posting, successful innovation companies must be ambidextrous – the combination of entrepreneurial attitudes and culture as well as being highly disciplined to get the offering out the door. Everyone cannot be an entrepreneur.)In Mr. Rosedale’s view, the most creative work environment is one where every employee, regardless of job title, has enough freedom to develop that sense of personal initiative.
Most companies erroneously focus on competition and on differentiation from their competitors,” he contends. “The business opportunity lies in turning creativity into productivity.”

Decentralizing the hierarchy opens the door to creativity, giving workers the leeway they need to make significant decisions without first jumping through executive management hoops. “The idea,” he says, “is to enable a creative environment where there’s a good degree of experimentation.”

Optimizing a company for creativity also optimizes it for small-group collaboration. And that opens the door to new information technology that lets team members work cooperatively from anywhere on the planet. “That’s the revolution that’s making all of this possible,” Mr. Rosedale says.

Thomas W. Malone, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, agrees that new collaboration technologies are at the heart of the get-small movement. In “The Future of Work,” his 2004 book, he says the transformation will not come directly from the new technologies but from the desire of workers for “noneconomic goals” like freedom, personal satisfaction and fulfillment. “How much energy and creativity might be unlocked if all the members of an organization felt in control?” he writes.

Evidently, quite a bit. At Avocent, an information technology management company based in Huntsville, Ala., customers, product developers and testers had gotten to the point that they rarely interacted. Each group felt that it lost control of a project too early in its progress. So, in March 2007, the company revamped development so that members of all three groups would work on the same team, following a project from start to finish and making changes as needed. With customers, programmers and testers working virtually side by side, Avocent tripled production without adding workers.

By making sure products in development meet customer needs each step of the way, Avocent has been able to avoid spending weeks correcting errors in the final product, says Ben Grimes, chief technology officer. “That is the nirvana of working in global teams,” he says. “It breaks down the walls of isolation and streamlines collaboration. I don’t think innovation can occur without having that diversity in geography and experience.”

That desire for diversity can be part of the motivation for global mergers and acquisitions, which probably won’t abate as industries mature. But as smaller companies join ranks and become corporate behemoths, the merged companies very likely will try to maintain smaller, more creative units. Rather than a monolithic giant, tomorrow’s creative corporation will look more like a collection of smaller companies flying in close formation.

Mr. Rosedale reports that he has already seen similar developments within Second Life’s virtual businesses. In a way, he says, Second Life can be used as “a terrarium for looking at these changes.”

It is time for real-world executives to learn from their virtual counterparts, he says: “They’re going to figure out that they don’t need to control this from the top down. These companies will still get put together, but they’re only going to be connected at the balance sheet and at the level of finance. Information technology levels the playing field.”
Janet Rae-Dupree writes about science and emerging technology in Silicon Valley.