Eric Schmidt on disruptive technologies

McKinsey (free when you register) has posted an interesting interview with Eric Schmidt, Executive Chairman of Google, on disruptive technologies - those "likely to have the greatest impact on economies, business models, and people." (You can also read a transcript if you prefer.)

Schmidt points out that the main issue is the explosion in knowledge technology:

We’re going, in a single lifetime, from a small elite having access to information to essentially everyone in the world having access to all of the world’s information. That has huge implications for privacy, communications, security, the way people behave, the way information is spread, censorship, how governments behave, and so forth.

The McKinsey editors focus on four areas of Schmidt's discussion:

1. Biology is going digital - in the past few years, much of what was analog in biology, like how proteins are folded or how DNA works, can now be modeled. Proteins are one example - proteins have complex structures that are hard to predict. (If you haven't seen it, the website foldit challenges users to find the best way to fold different structures and predict the most like structure of a particular protein.) Digital tools in biology should improve health care, though medical care is likely to continue its rapid change.

2. New materials, new ways of manufacture - Schmidt points out that new materials can now be manufactured at a large scale, and new means of production, like 3-D printers, are rapidly becoming available. He's not making specific predictions, but the general statement he makes is compelling:

So that revolution, plus the arrival of three-dimensional printing, where you can essentially build your own thing, means that—during the rest of our lifetimes, anyway—it’ll be possible to build very interesting things from very interesting, new materials, which have all sorts of new properties.

This might be both good and bad - there have been reports recently of guns made using 3-D printers - but it is worth thinking about.

3. Using computers to support decision-making. We can think about using computers in all sorts of ways beyond gaming and communicating. Schmidt talks about different interfaces (Siri, anyone?) but captures the essence when he says this:

And the ultimate model is that the computer does what it does well, which is these complicated, analytical needle-in-a-haystack problems, and has perfect memory. And humans do what we do well, which is judgment, and having fun, and thinking about things. The relationship is symbiotic. The computer is making suggestions that are pretty good, they’re pretty helpful, but you’re ultimately in charge.

4. Education is important - machines are taking over what low-wage workers once did - Schmidt's example is supermarket checkouts. That leaves plenty of formerly low-wage workers without jobs. They need better education, Schmidt argues. He follows that with a pitch for more immigration of high-skilled workers. "'[Y]ou want an unfair share of highly educated people."

It's an interesting interview and a great starting point for thinking about the issues Schmidt raises. What do you think of his points? My examples?

Creating conditions for innovation

McKinsey Quarterly's (free after you register) interview with Brad Bird, Oscar-winning director of The Incredibles and Ratatouille, has some interesting insights into creating an atmosphere that brings out the creativity in people.

For example:

* Learning about what others do

The Quarterly: Is there anything else you’d highlight that contributes to creativity around here?
Brad Bird: One thing Pixar does—which is a knockoff of old-school, Walt-era 1940s Disney—is to have all kinds of optional classes. They call it “PU,” or Pixar University. If you work in lighting but you want to learn how to animate, there’s a class to show you animation. There are classes in story structure, in Photoshop, even in Krav Maga, the Israeli self-defense system. Pixar basically encourages people to learn outside of their areas, which makes them more complete. Sometimes, people even move from one area to another.

* Improving morale

Brad Bird: In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.

The context is making movies; the content is widely applicable - read the full interview!

More from McKinsey on Women in the Workplace

Last spring I wrote a post about a new report from McKinsey about its research on the advancement of women in the workplace, particularly large corporations. The McKinsey Quarterly (free once you register) has now followed that with a further report that suggest approaches for increasing the number of women at the higher levels of corporations, government, and academia. As usual with McKinsey, the insights apply to not-for-profits as well.

The conclusion? Well, progress has been made, but structural problems remain:

Firmly entrenched barriers continue to hinder the progress of high-potential women: many of those who start out with high ambitions, for instance, leave for greener pastures, settle for less demanding staff roles, or simply opt out of the workforce. . . And everywhere we look, despite numerous gender diversity initiatives, too few women reach the executive committee, and too few boards have more than a token number of women.

So what is to be done? McKinsey offers four strategies for committed leaders to follow:

1. Treat gender diversity like any other strategic business initiative - ie, set a goal and monitor it regularly. Expect the process to take some time, possibly years. Keep asking about it.

2. Ask for--and talk about--the data - in particular, think about the points where women exit. Why do they leave then? How many women are in the pipeline? Oh, and hold everyone in senior management accountable for those numbers.

3. Establish a culture of sponsorship - everyone, men and women, should sponsor, mentor, support two or three future leaders. And the current CEO/ED should spend time with them on visits.

4. Raise awareness of what a diverse work environment looks like - talk about your efforts; celebrate and publicize success.

And if you're in the US and still reading on November 6, don't forget to vote!

More on Strategy, from McKinsey

Being alert to opportunity, perceiving and responding to threats, and making timely decisions: these three strategy components make up part of any executive's job, argue researchers in the McKinsey Quarterly, available here (free once you have registered). How do you do this? McKinsey offers some tips. (As usual with McKinsey, the context is for-profit business. As usual, the tips apply equally well to not-for-profit management jobs.)

First, the researchers say, understand what strategy means within the context of your sector. And, they add, don't save the work for the time of a strategic planning process.

Because strategy is a journey, executives need to study, understand, and internalize the economics, psychology, and laws of their industries, so that context can guide them continually.

In practice, this means thinking about your sector or agency as part of a larger system. If you provide mental health services, how do you related to hospitals? Referring sites? Single points of contact or assessment centers? Thinking of your services as part of a matrix of services lets you think more broadly about your strategy.

Second, learn to identify potential disruptive changes when they are far away. Expand the strategic group to gain a broader perspective. But there are other options as well. The authors offer the example of technology executives who check in on what technologies their younger colleagues, or even their children, are using. In the public sector, another way to think of potential disrupters is to look at large reimbursement areas. Large reimbursement areas for not-for-profits are large cost areas, which might be the source of large savings, for government agencies. For years, people in the foster care industry knew that Medicaid - to pay for medical services for children in foster care - was a large-budget item, and for years, governments have proposed different ways to reduce it. Most recently, there have been proposals to eliminate it entirely. For all those years, the Medicaid payment for children in foster care was a potential disruptive change.

Third, improve communications, or, as the researchers put it, "make strategic insights cut through the day-to-day morass of information." They suggest using experiential exercises, and making backup data easily available. "Executives hoping to become more strategic should look for opportunities to innovate in their communication of data, while prodding their organizations to institutionalize such capabilities." They also cite several examples of interactive data visualization efforts such as those of the New York Times, like this one showing restaurant cleanliness, and Hans Rosling's 200 years of changing life expectancies video, available here.

Cognitive biases and strategic decision-making

Daniel Kahneman's book "Thinking, Fast and Slow" synthesizes a great deal of research over the past several decades about the brain's thinking and decision-making processes. It's a great book, well worth reading. But it's pretty long. This article from McKinsey classics, "Hidden Flaws in Strategy," is nearly 10 years old, but is worth reading for its still-valid insights. (It's free after registration.) The article looks at common cognitive biases in decision making and suggests ways to avoid them.

1. Overconfidence/overoptimism - we tend to look at the bright side, and wildly overestimate our abilities to predict. To counter this tendency, the authors advise testing strategies under a wide range of scenarios, taking the most pessimistic scenario and making it worse, and ensuring that you have the capacity to be flexible as uncertainties resolve.

2. Mental accounting - we all put some spending into categories that saves us from having to look at it too closely. The authors recommend adherence to "a basic rule: that every . . . dollar . . . is worth exactly that, whatever the category. In this way, you will make sure that all investments are judged on consistent criteria . . . "

3. Don't be too wedded to the status quo, but be prepared to stick with it when it's the better choice. How to tell? The authors recommend two approaches: a) Take a radical view of your entire portfolio of programs and consider closing or changing all of them; and then b) Analyze your status quo options the same way you would change options. "Most strategists are good at identifying the risks of new strategies but less good at seeing the risks of failing to change."

4. Anchoring - Our brains tend to stick with, or anchor, to a suggested number, whether it is relevant to whatever we've been asked about or not. Sellers might use the tendency to their advantage during negotiations or advertising. But the tendency can impair decisions. Put comparisons in a larger context: 20-30 years, for example.

5. The sunk-cost fallacy - loss aversion and anchoring often lead us to continue an investment even after it has turned sour. To avoid it, the authors say, look at each incremental investment separately, with a fully analysis. Be ready to end experiments early. And condition further funds on meeting certain targets.

6. Know when to follow the herd - and when to go your own way. Good strategies often break away from a trend, the authors say. Combined with the principle of ending experiments early, it's can be smart to disregard the received wisdom.

7. Know when to get excited. OK, the authors don't quite put it this way, but a wise woman I once worked for did. Sometimes waiting and seeing is the best policy.

8. Make sure your consensus, when you have one, is real. False consensus can be reached when a strong leader thinks she has sought and received objective counsel but for whatever reason (they can include pressure to agree, selective recall, confirmation bias, or a biased evaluation) the consensus is a false one. To minimize the risk, the authors say, make sure your culture values challenges and open criticism. In addition, make sure the strong players have checks and balances so that they can't simply dismiss challenges to their proposals without reviewing them. And, as I said yesterday, make sure you search for as many reasons not to do something as you can come up with for a reason to do it.

McKinsey on Strategy in a Changing Environment

Keeping an eye on the big picture - understanding changes in the environment that may be happening more rapidly than the three-year time frame of most strategic plans - is an important element of what not-for-profit and small business executives do, particularly in these challenging times. But it's a task that can easily get lost in day-to-day activities. The newest McKinsey Quarterly, available free here after registration, has an article listing helpful suggestions; as usual these are geared to large corporations but are easily adapted to not-for-profits, small companies, and even government agencies.

McKinsey's recommendations for increasing the time spent on strategy to match the time spent on operating issues are:

     * Have a management group meet regularly, weekly or every other week, and
     * Use the meetings to identify and discuss emerging critical issues,  in order to
     * Position the organization to make timely decisions
The idea is that thinking about the big picture can help prevent crises from developing.

The article then lays out some practical tips to ensure the strategy review process remains under control:

     * Limit the number of issues to be pursued at one time
     * Be consistent and practical about setting priorities among issues as they are identified.

One way is to give each member of the forum a set number of slots on the agenda to bring forth whichever issues for review he or she thinks are most important. A few slots for critical issues . . . can be reserved for the [organization]-wide perspective.

     *  Quality - of background work, of discussion points, of decision-making - is more important that quantity.

Translating the new strategic issue into an operating direction can be a challenge, though there is the advantage that top management is (or should be) behind the new initiative. Having a small pool of uncommitted money available is important, as are regular progress checks. And, of course, checking in with the board of directors or senior staff in the hierarchy is important as well.

If this all sounds too abstract, the article provides an example. It's a large bank example, but, again, with a little imagination, the description can be translated to a smaller (and perhaps more nimble) organization.

McKinsey on Women in the Workplace

McKinsey has recently published its updated research on the advancement of women in the workplace, particularly large for-profit corporations. Among the  key findings are that two types of structures that advance women successfully have emerged in practice: either a lot of women start (more than 50%) and so more are available to move up, or women are retained at the same rate as men, and so are available to move up. In social services work, the first scenario is probably more common than the second, though that may be changing in recent years.

And what happens in the higher echelons? Again, McKinsey is reporting on what its research among large for-profit corporations found: "many women opt to take staff roles, get stuck in middle management, or leave their organization without giving the company a chance to address their concerns."

Sound familiar? It does to me. And in fact the report identified some familiar barriers:

* structural obstacles (ie, few women at the top)
* lifestyle choices (women reported being both the primary caregiver and the primary breadwinner much more often than men did)
* institutional culture and individual behavior (women don't knock on doors asking for advice the way men do; men will assume that a pregnant woman will not want to move to take up a new position)

And the report offers some specific suggestions, including hands-on leadership, diversity leadership with the clot to make things happen, and robust talent management - all of which can (and often are) be done by not-for profits.

It's an interesting look at an important picture. You can get a pdf of the full report here. (McKinsey reports are free if you sign up.)

Update: This post was edited for clarity.

How to be a better listener

Here's a useful article from the McKinsey Quarterly (free once you've registered), on an important skill many of us could do better: listening. The full column is worth reading, as it is illustrated with several helpful examples, but here's the gist:

1. Show respect. Easy to say, right? But harder to do. One way is to show everyone around you that you value their perspective by waiting for them to come out with what they're thinking, rather than helping them to solve a problem. 
2. Keep quiet. Really. Let the other person talk.
3. Challenge assumptions - but be subtle about it. One suggestion the author makes is to alter a single fact or assumption to see if that will alter a team's approach to a problem. It might help bring out facts that contradict what everyone "knows," helping you get to a better solution.

The author doesn't add this, but it's evident that maintaining a sense of humor is useful too. As I said, there are many useful anecdotes in the article, so it's worth reading. I'll quote one:

I was amused when John McLaughlin, the former deputy director of the US Central Intelligence Agency, told me that when he had to make tough decisions he often ended his conversations with colleagues by asking, “Is there anything left that you haven’t told me . . . because I don’t want you to leave this room and go down the hall to your buddy’s office and tell him that I just didn’t get it.” With that question, McLaughlin communicated the expectation that his colleagues should be prepared; he demanded that everything come out on the table; and he signaled genuine respect for what his colleagues had to say.