Strategy. Innovation. Brand.
Crowd Sourcing Your Mail
You’ve got chain mail.
Let’s say you want to send a package to my personal trainer, Alison. If you know two facts about me, you can have the package delivered for free. Fact 1: the local dairy delivers milk to my front door very early each Thursday morning. Fact 2: I see Alison every Thursday morning (after the milk is delivered).
So, if you could get the package to the dairy, the milkman could deliver it with my weekly supplies (without going out of his way). I could pick up the package (without going out of my way) and deliver it to Alison. Everybody is happy, nobody has gone beyond his or her normal routines, and the package is delivered quickly, efficiently, and cheaply.
How would you know those two facts about me? By following my Twitter feed. Yep, Twitter. By analyzing where my Twitter feeds come from, a system could conceivably track my whereabouts and predict where I might be at a given time. Theoretically, it could do this for thousands of people and plot an efficient series of hand-offs from one person to another. (I probably don’t tweet enough for this to work, but lots of people do).
The concept is known as TwedEx. It’s not here yet but it might soon be – you can read more about it here.
Here’s the creepy part, in my opinion. If a system can predict my movements based on my tweets, what can the government figure out based on the PRISM program?
Fran and Grover in Hawaii
Today would be my parent’s 72nd wedding anniversary. That they got married on June 8, 1941 was something of an accident.
Fran and Grover grew up in small towns in southeastern Texas. Fran’s father died when she was nine and Fran grew up very close to the poverty line. Grover was a bit better off; his father was involved in local politics and small businesses.
Grover could afford to go to the local college, Texas A&M. At the time, A&M was an all-male, military school. Every student was in the “Corps” (ROTC), received extensive military training, and a commission as a 2nd lieutenant upon graduation. Graduates served a minimum of two years in the military.
Fran worked as a secretary at A&M. They met and dated for several years. Ultimately, Grover asked her to marry him. She turned him down, saying that she didn’t want to be a military wife. She did leave an opening though, suggesting that Grover go off, do his tour of duty and then come back home to see if she were still available.
Grover graduated as en electrical engineer but wasn’t deployed immediately. Finally, in late May 1941 he got his orders – he was being deployed to Hawaii. He went back to Fran and said, in essence, “Marry me now and I’ll take you to Hawaii.” Fran said, “Well… if that’s the way you put it … OK.”
They had to quickly organize a wedding; Grover had to ship out shortly. The church happened to be available on June 8, so they took the slot. Apparently they didn’t have time to arrange a photographer; I’ve never seen a picture of their wedding. They spent their honeymoon driving from Bryan, Texas to San Francisco where they shipped out (on the S.S. Lurleen) to Hawaii.
And that’s how they both wound up at Pearl Harbor.
Slaying a Dragon
Ooops … you missed a spot.
I’ve always worked for challenger companies; we were second or third or fifth in our market segments. We were punching upward, trying to slay the dragon at the top.
I don’t know why I never worked for a category leader like IBM or SAP. It would have been good experience. I did notice, however, that executives who came to my companies from category leaders were never very successful. They were supposed to show us how big companies worked. But they didn’t understand how challenger companies worked. They knew how to punch downward but not upward.
So, how do you punch upward? The best answer comes from classical literature. Here are four examples:
David and Goliath – David was outgunned and outmuscled. All he had was a rock so he had to find a place – a small place – where a rock would be effective. It turns out the place was right in the middle of Goliath’s forehead.
Achilles – Thetis, Achilles’ Mom, bathed him in a secret sauce that made him invulnerable. When she dipped him, however, she held him by the heel so no sauce touched him there. Where did his enemies aim?
Siegfried – The hero of the Nibelungs, a German tribe, Siegfried killed a dragon and bathed in its blood. As you may know, bathing in a dragon’s blood makes you invulnerable. Unfortunately, a leaf fell from a tree and settled in the small of his back. No dragon’s blood touched him there. Guess what happened to Siegfried.
The Death Star in Star Wars – ok…it’s not classical literature but the Death Star is invulnerable. Well … there’s this one small spot … which Luke just happens to find.
I was struck that all four epics tell essentially the same story. All giants have a weakness. It’s small but very vulnerable. If you attack anywhere else, you’ll be repelled. If you attack everywhere, you’ll be repelled. Your only chance to win is to find the weak spot, concentrate on it, and don’t get distracted.
That’s just what we tried to do in our challenger companies. In one case, we decided that our competitor’s weakness was the inflexibility of their software. We stressed the supple, flexible nature of our systems. In another case, our competitor was far too complex. We stressed the simplicity of our solution and even invented a cartoon character to tout the difference. In both cases, we had a lot of success though we never actually slew the dragon.
I see many small companies today trying to do far too much. The secret of punching upward – of slaying the dragon – is to do less, not more.
Perverse Incentives
But is it for the right thing?
Let’s say I’m a successful sales rep at a business-to-business software company that’s trying to improve customer satisfaction. The company wants me to take good care of my customers, tell the truth, and make them feel loved.
At the same time, the company pays me based on how much software I sell each quarter. It’s in my best interest to sell as much as I can even if I have to stretch the truth a bit and promise more than I can deliver. Of course, stretching the truth and failing to deliver often result in lower customer satisfaction. So the company is incenting me to behave in ways that defeat its own objectives.
In Britain, this is known as the principal-agent problem. In this case, the principal is the company. I’m an agent acting on the company’s behalf. The problem is that the agent’s incentive (my commission) is different than the principal’s objective. We’re working at cross-purposes.
Paul Nutt and other American writers generally refer to this situation as a perverse incentive. According to Wikipedia, a perverse incentive”… has an unintended and undesirable result which is contrary to the interests of the incentive makers.”
Examples abound. We may strive for smaller government but we typically pay government managers based on how many employees they have, not on the profits they generate (since they generate no profits). We encourage orphanages to place children with families, but we pay subsidies based on how many children are in the orphanage.
The examples may sound bizarre but perverse incentives are all too easy to create. Nutt gives a particularly perverse example: the company that proclaims, “We will not accept failure.” While that may sound bold and brave, it sets up a perverse incentive.
Every company fails from time to time. When a failure occurs, it’s in the company’s best interest to analyze it, understand it, and use it as a teachable moment. But companies that don’t accept failure will never get a chance to do this. Employees associated with the failure will bury it as deeply as they can. Otherwise, they’ll get fired.
What should you do when you inevitably encounter a perverse incentive? The first thing is to make sure it’s known. Many times executives set lofty goals (“we will never fail”) without realizing just how perverse they are. Calling attention to perversity is a useful first step.
Second, it’s time to discuss alignment. We often think of alignment in terms of focusing on the same goal. That’s good but only if the incentives for achieving that goal are also aligned. A comprehensive and detailed review of incentives will help identify areas of misalignment. This is when a good HR department is worth its weight in gold.
Proving Praise Is Not Productive
This will improve your performance.
Here’s a little experiment for your next staff meeting. All you need is an open space about ten feet long and maybe three feet wide, two coins, and a flip chart.
Once you’ve cleared the space, set a target on the floor at one end of the ten-foot length. The target can be a trashcan, a book, a purse … anything to mark a fixed location on the floor.
On the flip chart, write down four categories:
- P+ — praise works; performance improves
- P- — praise doesn’t work; performance degrades.
- C+ — criticism works; performance improves
- C- — criticism doesn’t work; performance degrades
Now have one of your colleagues stand at the end of the ten-foot space farthest away from the target and facing away from it. Give her the two coins. Ask her to take one coin and throw it over her shoulder, trying to get it as close as possible to the target.
Observe where the coin lands. If it’s close to the target, praise your colleague lavishly: “That’s great. You’re obviously a natural at this. Keep up the good work.” If the coin falls far from the target, criticize her equally lavishly: “That was awful. You’re just lame at this. You better buck up.”
Now have your colleague throw the second coin and observe whether it’s closer or farther away from the target than the first coin. Now you have four conditions:
- You praised after the first coin and performance improved. The second coin was closer. Place a tick in the P+ category.
- You praised after the first coin and performance degraded. The second coin was farther away. Place a tick in the P- category.
- You criticized after the first coin and performance improved. The second coin was closer. Place a tick in the C+ category.
- You criticized after the first coin and performance degraded. The second coin was farther away. Place a tick in the P- category.
Now repeat the process with many colleagues and watch how the tick marks grow. If you’re like most groups, Category 3 (C+) will have the most marks. Conversely, Category 1 (P+) will have the fewest marks.
So, we’ve just proven that criticism is more effective than praise in improving performance, correct? Well, not really.
You may have noticed that throwing a coin over your shoulder is a fairly random act. If the first coin is close, it’s because of chance, not talent. You praise the talent but it’s really just luck. It’s quite likely – again because of chance – that the second coin will be farther away. It’s called regression toward the mean.
Conversely, if the first coin is far away, it’s because of chance. You criticize the poor effort but it’s really just luck. It’s quite likely that the second coin will be closer. Did performance improve? No – we just regressed toward the mean.
What does all this prove? What you tell your colleagues is not the only variable. A lot of other factors – including pure random chance – can influence their behavior. Don’t assume that your coaching is the most important influence.
However, when we do studies that control for other variables, praise is always shown to be more effective at improving performance than criticism. I’ll write more about this soon. Until then, don’t do anything random.
(Note: I adapted this example from Daniel Kahneman’s book, Thinking Fast and Slow. I think Kahneman may have adapted it from Edwards Deming’s experiment involving a fork and different colored balls.)
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