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(originally published by Booz & Company)


The Life Cycle of Great Business Ideas

The key idea in my book The Halo Effect is the importance of ensuring the independence of data. If you’re testing a hypothesis and your dependent variable is some notion of performance, you’ve got to make sure that your independent variables are truly independent of that. If you violate that principle, you may have a wonderfully compelling story, but you really won’t know what’s driving those results.

KANNAN: We learn by observation. Recently, one of our large clients had a consultant come to us and say, “At the end of each call, we should ask customers, ‘Is there anything else I can do to help you?’ and then end the call with ‘Have a nice day.’” So we put these rules in place, along with an elaborate measurement mechanism, and agents were dinged if they didn’t comply. Then, at our management meeting where we start off by listening to calls, we quickly realized that this policy wasn’t working. Most customers today want to end the call quickly. The agents, on the other hand, were taking their sweet time, because they knew they were being measured on this. They would say, “Is there anything else I can do to help you?” and before they could say, “Have a nice day,” the customers had hung up.

WHEELER: Sometimes it’s only the long-term comparison in performance that shows you what works. Jim Collins, a high school classmate of mine, wrote the best-selling book Built to Last: Successful Habits of Visionary Companies. If you had taken the 18 companies that were profiled in that book and invested in each of them over the next 10 years, you would have gotten about a 150 percent return. That’s not too bad — until you compare it with an S&P 500 index fund, which would have given you a 250 percent return. And if you’d had the foresight to pick up a copy of Fortune's 100 Best Companies to Work For each year over that same period and just invested in the public companies, you would have gotten a 600 percent return. So one way to build a successful business is to create an environment where people enjoy their jobs and are eager to work — in other words, a “best company to work for.”

E. SEASHORE: These days, we often face the challenge of seeing great ideas start at the top but move down too slowly — and then the person who came up with the ideas leaves the company. The next person comes in with a different set of ideas, and the people in the organization get whipped about, wondering what’s going on.

I have some wonderful ideas for organizations and can easily get the top leadership team excited about them. The real challenge is implementing these ideas before the heretical leader who liked them in the first place leaves the firm. I’ve just begun a set of management courses called Triple Impact Leadership. They’re designed to help leadership teams ingrain key management concepts throughout their organizations. Executives pass on their knowledge by teaching their managers these concepts, and the managers then teach their staff, and so on. But many groups haven’t yet figured out how to garner company-wide acceptance for intelligent new ideas. Take performance appraisals, for example. Most companies use them, and it’s assumed that they are useful tools for measuring employee performance. But they’re time-consuming, cumbersome, and expensive, and feedback comes only once a year. What if, instead, people in the organization could ask for, and receive, candid feedback on their behavior and performance from anyone, whenever they asked for it? That would be truly heretical.

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