Workplace Flexibility is Strategic Imperative: Bring Work-Life into Better Alignment or Look in Mirror and Make a Choice…

Workplace flexibility leads to increased worker commitment and engagement and ultimately business profitability ~Corporate Voices

A strong economy demands a productive and engaged workforce. Workplace flexibility offers a means of achiev­ing this outcome while benefiting both employers, workers.  Workers of all ages, professions, and income levels need workplace flexibility to meet the often competing demands of work and personal life.

A significant number of workers report that they do not have the flexibility they need to succeed at work and still fulfill their personal obligations, whether those are care-giving obligations for a child, spouse partner, parent; volunteering in the community; attending religious services; or obtaining advanced training. Older workers, who often can provide expertise and experience, may require workplace flexibility to remain active in the workforce.

Many employers recognize the pressing need for workplace flexibility and are implementing effective policies and practices to suc­ceed in a competitive economy. But too many others follow dated policies and practices that limit workplace flexibility and do not serve the interests of employers and workers. Flexible work arrangements give workers a fair chance to juggle competing demands of personal life and work successfully, particularly when older workers need to work longer to secure retirement and women’s labor force is on the rise.

In both private and public sector today, we need to deploy the best talent management tools possible– and flexible work arrangements represent one of these tools. Employers and workers must openly discuss mat­ters and develop flexible work arrangements that best meet their respective and mutual needs. 

Also, it’s critical to include creative public policy ideas for flexible work arrangements, as part of a broader economic recovery conversation, so that the new economy will not suffer from the same structural mismatch as old one. Helping to modify our work­places so that flexible work arrangements become part of the norm will advance everyone’s interests…

In the article The Business Case for Workplace Flexibility by abetterbalance.org writes:  Employers who provide flexibility to their workers with regard to where and how the work gets done, can gain a tremendous financial benefit and competitive advantage in today’s economy. Workplace flexibility is a powerful tool for recruiting and retaining workers. A few statistics:

  • Nearly a third of U.S. workers consider work-life balance and flexibility to be the most important factor in considering job offers.
  • A survey of two hundred human resource managers found that two-thirds identified family supportive policies as the single most important factor in attracting and retaining workers.
  • Nearly 80% of the managers surveyed said that workplace flexibility enhances their ability to recruit workers.
  • Flexible work practices reduce stress, the leading cause of unscheduled absences and a factor in high turnover, which costs U.S. employers about $300 billion per year in lost productivity and increased healthcare and replacement expenditures.
  • A study suggests that telecommuting workers find it easier to balance work and family life. Telecommuting alone cuts absenteeism by nearly 60%.
  • In a survey of 150 senior-level corporate executives, 90% said that flexible workplace strategies help organizations to meet business goals.
  • In a two-year study of 1,400 workers; 70% of managers and 87% of workers reported that workplace flexibility increased productivity.

In the article Flexible Work Arrangements: Win-Win for Organizations and Workers by Bridgespan Group writes: Balancing work and personal life is pressing challenge in society today, and the ability to develop work schedules that accommodate the challenge is an extremely attractive proposition for potential workers. Once thought of as solely domain of working mothers, flexible work arrangements are increasingly important to other groups as well, for example; older workers who are considering options for post-retirement work.

According to the American Association of Retired Persons (AARP), 80% of older workers approaching the traditional retirement age expect to continue to work, and a recent survey by Merrill Lynch found that while most older workers want to continue to work, only six percent want to work as full-time workers. According to Laurie Young; flexible work time means thinking about desired outputs rather than face-time. It means opening up options rather than setting limitations.

It’s about strategic hiring, and that might mean; part-time schedules, telecommuting to avoid the inefficiency and stress of a long commute, seasonal contract work, job sharing, compressed work week, or simply flexible full-time work. But, for flexible work arrangements, you don’t think about the structure first; you think about what you want this person or position to accomplish, and then you think creatively about the schedule or structure that will get you the results…

In the article Employers See Benefits of Workplace Flexibility by Ruth Mantell writes: Workplace flexibility, e.g., telecommuting, flexible hours, other worker arrangements– is an idea growing on employers who are trying to grow their companies out of the recession. While the idea of workplace flexibility is familiar, e.g., companies have been working for years on strategies to enable workers to have some say over when, where they work– it becomes, however, more appealing for firms looking to retain workers stressed by higher productivity demands, and attract those searching for a better spot…

Workers are maxed out, says Kyra Cavanaugh. Companies just can’t get anymore productivity out of workers coming out of the recession, and they are starting to leave their workplace. People are fed up. Market forces are making flexibility a more strategic alternative to some of the other ways that companies used to manage growth. Longer-term trends may also push firms to adopt more flexible policies.

Women continue to obtain high levels of education, incentivizing them to remain in the workforce, and creating demand from families for increased flexibility. Also, there’s evidence that younger workers, who will make up a large chunk of the workforce as baby boomers retire, place more emphasis on the work product, rather than hours spent in a cubicle.

According to a 2010 report; benefits of flexible work arrangements are; less absentee and turnover, improved worker health and productivity– can outweigh costs. Coming out of the recession, Cavanaugh says; she is seeing companies shifting to more structured policies about the flexible workplace, and away from one-off arrangements for individuals. The key with flexibility from cost and function perspective for workers and managers is to make sure it works for both parties…

Workplace flexibility is a strategic business tool that benefits both employers and workers. Some of the best workers are leaving business because of ‘rigid rules’; changes are needed to help workers reduce stress and stay engaged while still meeting and exceeding their goals.

According to Ellen Galinsky; it’s a results-based work environment that says; you can work whenever and wherever you want, and when you’re most productive and most engaged, and we will adjust the culture; but what really matters are results. Oftentimes, flexibility is viewed as a benefit that only professional or high-salaried workers receive. This need-not be the case; hourly or shift-based workers are often the people who need workplace flexibility, most. Just like flexibility can benefit businesses with large numbers of salaried workers flexibility can also benefit businesses that depend on hourly workers…

According to a Hudson survey; nearly a third (29%) of U.S. workers considers work-life balance and flexibility to be most important factor in considering job offers. Compensation matters, of course, but it finished second (23%) behind lifestyle when workers were asked to name the primary reason they accepted their current positions. Money will always be important to people, but in this age of Internet powered remote access where there are so many virtual options, workers place a much higher premium on flexible work arrangements, says Robert Morgan.

As the pool of qualified candidates shrinks, it seems that employers can compete more effectively for talent if they can offer work-life balance to go along with the competitive pay…

According to Laurie Young; workplace flexibility is important to many different groups. Working mothers remain the most prominent group when we talk about part-time and flexible arrangements, but fathers are also becoming more likely to want some flexibility, as are both men and women with elder care issues… The economy has changed– it’s much more global, companies no longer operate only 9-to-5, the costs of commuting are high, and technology makes it easy to be productive anywhere, anytime.

Meanwhile, the labor market is getting tighter again, especially the skilled labor market. So the combination of individual needs and economic realities leads to greater willingness to pursue and accept a variety of flexible arrangements. Clearly, workers benefit from flexible arrangements, but what are the benefits for employers? This is a huge win-win situation for employers; especially in this economy as labor market tightens and skilled labor pool shrinks– who need to think about how best to attract and retain talented workers.

We know workers in flexible arrangements are happier, more productive, and more loyal to employers. For employers, flexible work is about output rather than face-time and performance rather than an  arbitrary 9-to-5 block of time.

Employers must realize that this is a strategic way to attract talented, experienced, committed workers; conversely to lose them, if they are not willing to be flexible… Those who embrace workplace flexibility will have significant competitive advantage over those who do not…

There is no such thing as work-life balance… there are only work-life choices and you make them; but, they also have consequences… ~Jack Welch

Stay Ahead of the Curve– Shape Future of Your Business..: Convergence of Visionary Ideas and Creative Discomfort…

Stay ahead of the curve: When playing by the rules– one does the best they can; whereas when making the rules– one stays ahead of the curve… or game, or pack… and, others do the best they can…  

There’s a saying: Stay ahead of the curve. Translation? Keep your eyes open for change before it happens – such that you’ve already thought through how you’re going to make critical adjustments before it’s too late. Similar to ‘ahead of the pack’ or ‘ahead of the game’– ahead of the curve means being able to anticipate or initiate the latest innovations in your field; e.g., technology, markets, industries, global… so that you establish a position of leadership.

According to Peter Schwartz; the objectives of getting ahead of the curve are threefold: take advantage of opportunities that might otherwise be missed, prevent disasters if you can, and be better prepared if you can’t. In this highly interconnected and crisis-prone world, the job of intelligence is increasingly; anticipation, recognition, and preparation. No decision maker, especially in the transparent world of modern business, wants to be seen as a victim of events, having to improvise and stumble from one action to the next. The job of management is to be a master of events by getting and staying–ahead of the curve…

In the article Changing; Ahead of the Curve by Tim Breene, Walter E. Shill, Paul F. Nunes write: Many companies wait too long to attempt transformations, and they do so only when signs of trouble become obvious, which is inevitably too late. High performers, by contrast, change before they must, knowing that the best way to transform is from position of strength.

According to Fujio Cho; a company not willing to take the risk of reinventing itself is doomed… the world today is changing much too fast. Simply put, today’s success is no guarantee of tomorrow’s success. Yet, many companies wait too long until they are already facing big problems. Former Intel Corporation CEO Andy Grove popularized the business admonition that ‘only the paranoid survive.

Although clinical illness may not be a real necessity, there is no denying that high performing companies sense the need for market changes early, and act accordingly. In these companies, the culture fosters a kind of practical balance between- fear and excitement– that comes from success in overcoming constant challenge. One way companies create readiness for challenges is by introducing a steady stream of capability-building and performance-improving initiatives; creating the expectation that change is constant.

In his book ‘Jack: Straight from the Gut’, Jack Welch describes; these initiatives as something that grabs everyone— they are large enough, broad enough and generic enough to have a major impact on the company. To be sure, initiatives are not transformations; they are more akin to an athlete’s weight training: They give companies strength and preparedness to take on transformation. In the end, what high performers achieve through a kind of– creative discomfort– is better agility and reflexes to constantly rebalance themselves; more akin to the nimble responsiveness and fierce thrust of fighter jet, rather than the stable and predictable flight of a jumbo jet.

When change initiatives fail, they can often be traced to lack of management; alignment, buy-in, and active support. To overcome risk of derailment by management team issues, high performing companies create management teams that drive successful change, early, by assembling and empowering the right team for the right challenge.

This consists of three activities: ‘putting right people on the team; supporting them with right resources; and ensuring that everyone on the team is pulling in same direction’. Selecting the right people requires delicately balancing for both today’s and tomorrow’s agendas. It demands promoting next generation leaders early, and putting them into pivotal roles that change the future of the company…

In the article How To Stay Ahead Of The Curve And Be Successful by Annie Mueller writes:  The secret of being more successful than everybody else is not quitting when everybody else does. That’s how you go from mildly successful to wildly successful, and that’s how you dominate your field no matter what it is: You get a great product that is something different, or you find a new method that is better, or you take an idea further, or you come-up with a business plan that is the opposite of the mass movement, and you start making waves.

The key is to keep making those waves; the bigger the better… People notice and keep noticing waves; that’s how business becomes a powerhouse of– new, original, different, trend-setting, value-producing business moves… Dominate by putting out one idea after another, after another… Dominate by not quitting. Dominate by trying, failing, trying again… Dominate means: No self-doubts, no delusions, no indecision, no hesitation… Take your good ideas, and make them better, take them further, build them higher, show everybody how it’s done… get ahead the curve and stay ahead of the curve…

In the article Stay Ahead of Curve and Change the World by Gary Hamel writes: Business schools must alter their status quo or become obsolete. Business schools are not producing the kind of new business models and best practice that will change way management and business operate in the digital age. They are operating under traditional, unchallenged assumptions about what the mission of business should be, what a leader is, and what the relationships between a business school and marketplace should be.

They have capitulated by just adapting to the changes in the market; rather than leading it. The business schools must change, lead and become catalysts for business management innovation in the digital age… they must get ahead of the curve and shape the future. They must educate leaders and managers on how to build organizations where ‘responsibility for change’ is woven throughout the woof and warp of the organization. They must question the assumptions on which current management practice is based-on and reengineer them for the future.

They must prepare management to mediate between corporate interests and social interests. They must extend the reach of business education to serve all people, globally, which will require significant change on how business schools are structured and do business; restructuring fees, new delivery models, create business partnerships... It’s an imperative that business schools get ahead of the curve and become the change agents and innovators for management in the digital age…

In the article Staying Ahead of Competitors by Scottie Claiborne writes: There has never been an industry that moves as fast as the Internet. The ease of creating websites and web applications has made the competitive edge of being first, with something exciting and original, a brief fleeting moment in the sun. If your business depends on the Internet, you can’t rest. You’ve got to keep searching for something extra that will brand your business as leader and make it stand out from the rest.

It’s critical to know competition, but don’t follow their every move or duplicate everything they try. Trust your instincts. Be original. Be different. Be creative. Do your own research, try new strategies and new offerings that you believe in. While studying competitors can be shortcut to learning what works, it can also be a red herring and a waste of time. What’s working today for you will probably be imitated tomorrow and lose its effectiveness, but it’s critical that you continue to innovate, invent, think out-of-the-box, and stay ahead of the curve…

In the article Healthy Business: Staying Ahead of the Game by Joseph R. Byrd writes: In business, you always want to be ahead. You want to be ahead of the competition. You also want to be ahead of the trend. The companies that are out in front of the ideas are usually out in front of the pack, as well.  Despite the wording of that phrase, staying ahead of the competition rarely means worrying about what they are doing. You may be ahead of them in the proverbial race, but you are doing things within your own business to move forward rather than engaging them in any sort of struggle.  

In order to win, you have to take care of your own company. A big part of taking care of your business is taking care of those that keep it running: People. People are the core of business and staying ahead of the game or curve is more about taking good care of people than anything else. Think about it this way: Business health is dependent on employees’ health; the financial connection is undeniable: Business health improves with employee health. 

Unfortunately, there is often disconnect; the companies that realize how closely this dependence is linked are the ones leading the pack. They are the industry leaders. They are the ones that other companies try to imitate. They are the ones that everyone wants to work for. People are smart. There is reason that good workers continue to flock to good companies… To get ahead of the curve– you need good people; to stay ahead of the game or curve– you need to take good care of them.

Think quickly and react decisively is critical to success of business, and its hallmark for staying ahead of the curve… The willingness to think out-of-the-box and an openness to try new things… According to Sherri Edwards; the ability to stay ahead of the curve when dealing with change is an asset that cannot be replaced. Studies show that businesses must be agile and flexible, both in terms of thinking and organization process; i.e., aware of the world around you, alertness, mental sensitivity and agility, constant questioning…

These are all fine, but they are completely useless unless you also have the ability to deploy and redeploy resources, fast. This includes the ability to invest, divest, manage, and build infrastructure. The ability to get new business up and running, quickly; and if necessary, withdraw and redirect the business at limited cost.

According to Steve Jobs; innovation is the distinction between a leader that stays ahead of the curve (or pack, or game…), and followers. Having the visionary ideas to keep ahead of competition, and the willingness to take risks and go in directions that others have not even realized are available until it’s too late.

Innovation has little to do with the amount of investment and capital available to finance new research and development: It’s not about money. It’s about the people you have, how there are led, and how much you get it; says Jobs.

The key is having best and brightest people, and being able to turn really interesting ideas and fledgling technologies into a successful business that will continue to innovate, year after year… well ahead of the curve…

Debt in Business, Government… Game of Hot Potato: Drop It, Hold It, Sell It, Ignore It..: Pass the Debt or Shuffle the Risk…

Debt is a double-edged sword, capable of doing a lot of good, but also capable of destroying your business (or, the nation). Handle that sword with the utmost care and deliberation, not with a flippant attitude.

Do you remember the game that we used to play when we were kids? We’d sit in a circle and then we would take a potato and pass it from one kid to the next kid in a circle until the music stopped or until somebody said stop. The person holding the potato was out of the game.

According to Joel Block; some business, financial, government… debt issues work a lot like the kids’ game but, unfortunately, it’s more like a ‘hot potato’ game. In this economy, where mortgage debacles are taking down some of the big financial institutions that exist in the country, it’s all related to the concept of a ‘hot potato’. When banks make mortgage loans to consumers, they accumulate the paper that secures the mortgage money that’s been loaned.

They package it up and they sell it to larger organizations that, in turn, accumulate a portfolio for many financial institutions into giant bundles. These bundles, in turn, are sold to other investors. These investors either hold the paper or sell the paper to someone else. The paper keeps moving around and around in circles among giant investor groups. When the music stops, and loans start going bad, some investors are going to get stuck holding the bag full of potatoes.

Although the original game was played with a real potato, today there are many variations of ‘hot potato’, and no single version is the right way to play. The word ‘hot’ is the operative word in any variation, as players do not want to hold on to their ‘potato’ any longer than is possible. Variations can be created to suit most any theme and any situation…

A debt is an obligation owed by one party (debtor) to a second party (creditor); usually this refers to assets granted by creditor to debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value. Some companies and organizations use debt as a part of their overall corporate finance strategy.

A company uses various kinds of debt to finance its operations. The various types of debt can generally be categorized into: 1) secured and unsecured debt, 2) private and public debt, 3) syndicated and bilateral debt, and 4) other types of debt that display one or more of characteristics noted above.  Debt allows organizations and people to do things that they would otherwise not be able, or allowed, to do.

Commonly, people in industrialized nations use it to purchase houses, cars and many other things too expensive to buy with cash on hand. Companies also use debt in many ways to leverage investment made in their assets, ‘leveraging’ the return on their equity. This leverage, the proportion of debt to equity, is considered important in determining the riskiness of an investment; the more debt per equity, the riskier.

For both companies and individuals, this increased risk can lead to poor results, as the cost of servicing the debt can grow beyond the ability to pay due to either external events (income loss) or internal difficulties (poor management). Excess in debt accumulation have been blamed for exacerbating economic problems… and these debt issues in business, financial, government… become the ‘hot potato’…

In the article Managing Business Debt by Lea Strickland writes: The debt clock is ticking up to over $16 trillion. Student loan debt (which has exceeded $1 trillion) now exceeds credit card debt (approximately $800 billion). Politicians are debating its impact and how to address it. But any way you look at things (right or left), debt is a major issue, whether it’s the national debt, student loan debt, or debt needed to finance businesses and homes.

As the country (and world) struggle to deal with debt, individual business needs access to capital, but face limited availability under tighter lending guidelines, markets. Whether you are entrepreneurs or major corporations you have one thing in common: the need to manage debt. For most organizations, debt is a necessary part of the growth equation, often used to smooth out the temporary fluctuations in cash flow. However, debt is not a solution or a fix for bad business practices, inefficient operations, or overly ambitious plans; neither, ‘build it and they will come’ or ‘spend it and figure out how to repay it later’ are sound business practices…

Debt is not about borrowing as much as you can get. Instead, it’s about wisely borrowing an amount sufficient to meet well-reasoned, planned, and temporary condition in the business… Carrying debt is usually necessary at some point in the life of a business. However, carrying debt and making payments on principal and interest means that you begin to have fewer options the larger the debt obligation becomes.

Debt must be temporary, not a crutch or long-term strategy: If you consistently borrow money against credit cards, equity lines, and on vendor terms, juggle payments and scrape by to meet payroll, then you must take hard look at the business and determine what needs to change.

If you are debt dependent, then you need to understand why. If you don’t know why, you must acknowledge that your profitability is being reduced by cost of borrowing funds. One final point: Growth is not always a good thing: Sacrilege, you say! If you are growing sales and operations, but profitability is not increasing and you are not cash positive (i.e., have cash on hand to meet current demands), then you need to take a breath and stop growing until you raise both profitability and cash flow. Growth in sales that does not include comparable growth in profitability and a move to positive cash flow does not generate adequate return on the investment being made…

In the article How much Business Debt is Appropriate? by DB writes: Some conventional wisdom suggests that businesses should only use enough debt to support growth; and in amounts that can be serviced even if revenues decline, significantly. Businesses should be continually forecasting operating revenues to help them decide the maximum amount of debt that can be carried. Once the debt limit is reached, businesses should look to equity or other types of financing to make up required difference.

Most companies that go bankrupt in tough economic times are ones where revenues and related company values declined below the principal values of the business debt. When a company’s market value declines, and the effective loan to values ratios increases to greater than 1, then that means owners no longer have equity in the company. Once owners are ‘upside-down’ in their loans and no longer have any equity in their business, they have no choice but to relinquish control to the lenders.

Most of these situations occurred because the owners took on too much business debt and could no longer service minimum monthly debt payments. To manage debt correctly, owners should understand terms and legal obligations stated in the loan documents. Terms should be analyzed as part of the company’s cash flow forecasting, and in determining appropriate amount of debt required to support business growth without increasing risk of loan default.

Business should refrain from paying debt haphazardly, and instead make payments as set out by a well crafted debt management strategy.

In the article Does ‘Good’ Debt Really Exist? by Marcia Frellick writes: Does ‘good’ debts exist anymore? Financial experts differ, but many say that in today’s economy, it’s time to reconsider how we look at some common types of debt. Traditional thinking separates debt into ‘good’ and ‘bad’. Mortgages and student loans have been considered good debt because they have fairly low-interest rates and hold the promise of a substantial long-term payoff. Auto loans and credit cards usually rate a bad debt label.

Noted personal finance author David Bach says, no. The recession, he says, taught us that ‘all debt is bad, if you can’t pay it off’. ‘For many Americans today, almost 30 to 50% of their paycheck is going just to interest payments, says Bach,  ‘There’s been a real awakening that debt is bad’. Others say ‘good’ debt still exists, that buying a house is still a sound investment over the long-haul, and borrowing for college education is good risk; if borrowing is kept down and the education is for a profession that can pay it off…

Businesses and debt go hand in hand, particularly when they are new and need funds to get off the ground. The ubiquity of debt in business, though, can make it seem deceptively easy to handle when in fact it can be dangerous. Borrowers should have a plan for money they take, and fully understand payment terms and consequences for failure. Hoping to be able to pay it off later is not the same as knowing how it will happen.

Debt should never be a long-term strategy; ideally, it should be a temporary bridge between cash-out and cash-in. The lending industry has become a huge, nationwide game of ‘hot potato’, which worked well enough in good economic times, but as the economy has faltered we’ve started to see some of the huge problems that exist with a lot of these loans, and the so-called sub-prime mortgage crisis is looking more and more like it’s just the tip of the proverbial iceberg.

The global debt situation is getting even more precarious. The world (i.e.,  governments) has kicked the proverbial can down the road each time debt market threatens to revolt. The problem is that now debt problems are compounding. The global debt bubble is continuing to peak its head through the curtain and remind the world that it’s still here, and that it’s still deflating.

According to Chris Whalen; deflation is like the cancer that is progressively getting worse, and it will continue until debt is repudiated or restructured to be in line with the ability to pay… Intentions are good, but sometimes they  lack common sense: For example, there was a political push by U.S. Congress to increase homeownership among all people, but no one seemed to ask; ‘Wait, what if some people cannot afford a home?’

Apparently, no one cared. Because in the insane grab for more and more volume, you can significantly enlarge pool of borrowers, if there are ‘no standards‘. For example: No down payment? We don’t care. No job? We don’t care. Bad credit? We don’t care. It’s amazing how many borrowers you can find when there are no standards and a ‘we don’t care’, attitude.

There was a widespread belief among the entire lending community that everyone was playing ‘hot potato’ game; and, if you get rid of the loan before it goes bad, it was OK. Ultimately, someone gets stuck with the ‘hot potato’, and that’s what happened; but, it continues to happen and more notably with governments…

Progress Trap– Creating, Escaping, Adapting, Solving– Business Blunders, Unintended Consequences…

Progress Trap: The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. ~George Bernard Shaw  (note: the term ‘progress trap’ is a copyright of Daniel B. O’Leary)

Progress trap is when human ingenuity, in pursuing progress, introduces a problem(s) that it does not have the resources or imagination to solve, preventing further progress. A progress trap embellishes the idea of unintended consequences: Conditions change; ideas are carried to excess, turn sour, maybe even perilous.

According to Daniel B. O’Leary; avoiding the trap is possible, through nurturing and exploiting our talent for creative problem-solving. Resilience, creativity, patience, and sacrifice all factor into the challenge of avoiding progress traps… The term gained attention following Ronald Wright’s 2004 book ‘A Short History of Progress’, in which he sketches world history, as a succession of progress traps.

In Daniel B. O’Leary’s 2006 book ‘Escaping the Progress Trap’ he suggests; civilizations are described in terms of rising and falling, but it’s more accurate to say that they have divergent cycles of: – advancing through necessity or ingenuity; – becoming overdeveloped, losing those natural instincts required for sustained survival; – and reverting (slowly or convulsively) to less developed condition.

According to Daniel C. Dennett; mistakes are not just golden opportunities for learning; they are, in an important sense, the only opportunity for learning something new… Innovation evolution proceeds by a grand, inexorable process of trial and error, and without the errors the trials wouldn’t accomplish anything.

In the article Behavioral Progress Trap by Robert ‘Doc’ Hall writes: Unintended consequences hit suddenly and dramatically… When everything is going hunky-dory, catastrophes in waiting, are hard for us to psychologically anticipate. Progress traps describe business processes too rigid and too specialized to adapt to change. Some famous names zapped by organizational rigidity, include; DEC, Kodak, GM, and IBM (with its PC). These progress traps led to financial shrinkage, but not physical disaster.

However, if our entire industrial society is a big progress trap, developing organizational agility to cope with rapid change would seem wise. But organizing for rapid change requires coping with the most devious of progress traps, our own mental and psychological limits.

Linking a big global goal to local and practical ones is a big stretch. We must learn to better sense the physical consequences of our actions, now and in the future. We must even question whether achievements that we think represent success will continue to do so. Daunting as this seems, the real challenge is to learn how real people, in real work organizations, can learn how to make prudent transitions and escape the progress traps…

In the article Decision-making Problems and Pitfalls by Kourdi writes: The way that people think, both as individuals and collectively within organizations, affects the decisions that they make, in ways that are far from obvious and rarely understood.  Although bad decisions can often be traced back to the way the decisions were made (e.g., alternatives were not clearly defined; the right information was not collected; the costs and benefits were not accurately weighed), the fault sometimes lies not in decision-making process, but in the mind of the decision maker.

The work of the human brain can frequently undermine our choices and decisions, and this is shown in several ways…  Avoiding progress traps requires recognition that they exist, and an understanding of the one(s) that is the likeliest to cause you problems, for example:

  • Anchoring trap; is where we give disproportionate weight to the first piece of information that we receive. This often happens because the initial impact of the first information, our immediate reaction to it, is so significant that it outweighs everything else, drowning our ability to effectively evaluate a situation.
  • Status quo trap; biases us towards maintaining the current situation even when better alternatives exist. This might be caused by inertia, or the potential loss of face if the current position was to change.
  • Sunk-cost trap; inclines us to perpetuate the mistakes of the past, because we have invested so much in this approach/ decision that we cannot abandon it or alter course now.
  • Confirming evidence trap; also known as confirmation bias, is when we seek information to support an existing predilection, and discount opposing information. It can also be shown as a tendency to seek confirming evidence to justify past decisions.
  • Over-confidence trap; makes us overestimate the accuracy of our forecasts. Closely linked to confirming evidence, the over-confidence trap is when a decision-maker has an exaggerated belief in their ability to understand situations and predict the future.
  • Framing trap; is when a problem or situation is incorrectly stated, completely undermining the decision-making process as a result. This is often unintentional, but not always.
  • Recent event trap; leads us to give undue weight to a recent, and quite probably dramatic, event or sequence of events. This is very similar to the anchoring trap, except that it can arise at any time not just at the start and cause a misjudgment.
  • Prudence trap; leads us to be over-cautious when we make estimates about uncertain factors. It is shown by a tendency to be very risk averse, and is particularly likely to occur when there is decision dilemma, i.e, continuing the current approach carries risks, and alternative actions also carries risks.

In the article Four Mistakes Leaders Keep Making by Robert H. Schaffer writes: Deeply rooted in the managerial psyche are basic behavior traps that thwart organization change, particularly its elusive human dimension. The four basic behavior traps are extremely difficult to recognize because they are almost always mechanisms for avoiding anxiety. They serve to protect egos and prevent discomfort:

  • Trap 1: Failing to Set Proper Expectations.
  • Trap 2: Excusing Subordinates from the Pursuit of Overall Goals.
  • Trap 3: Colluding with Staff Experts and Consultants.
  • Trap 4: Waiting While Associates Prepare, Prepare, Prepare.

The behavior trap can sabotage even productive organizations… and, the first (and toughest) step is simple awareness. Push yourself outside your comfort zone and experiment… Small personal experiments tend to be the most liberating. A useful experiment meets three criteria: It rapidly produces tangible; reinforcing results (i.e., it’s not just a preparatory step) and it incurs very little risk of failure; and it’s confined enough to demonstrate a clear, incontrovertible link between the experimental behavior and the outcome.

The reason the behavior trap remain so damaging, despite all we’ve learned about organizations is that, whatever price they extract, they do satisfy certain psychological needs. To escape the trap, managers have to do battle with their own resistance, as they would in trying to change any well-entrenched habit…

In the article Avoid Trap That Hinder Progress by Adrienne Adams writes: One success tip: Stick with it– plain and simple. Whether you’re working on a business venture, technology development, marketing program… stick with it. When you stop working at it, your chances of achieving the results drop down to zero. But, beware of the trap that can very easily keep you from experiencing success:

  • Trap 1: Shiny new things: Are you someone who has a different idea every couple of months? Don’t get distracted. Success comes when you focus on a goal, map out your plan, and go for it.
  • Trap 2: Giving up: It’s not over until you quit. There is no road to success that doesn’t contain a few missteps or perhaps even a tumble or two. Learn from it and keep going. You’re closer to your goal now than you were when you started.
  • Trap 3: Setting yourself up for failure: Make a list of resources that you need. Get rid of things that don’t contribute to your success. Create an environment that will sustain your vision.

In the article The ‘Comparing’ Trap by Thomas J. DeLong writes: ‘Comparing’ is a trap that permeates our lives, especially if we’re high-need-for-achievement professionals. No matter how successful we are and how many goals we achieve, this trap causes us to recalibrate our accomplishments and reset the bar for how we define success.

What we’ve done in the past doesn’t matter; real success or achievement requires something more, e.g., job title we’ve never held, task we’ve never done, company we’ve never worked for… No matter how much we achieve, we are never satisfied with our achievements, when we’re caught in the ‘comparing’ trap. Find your own measure and reminder that you’re on track (or not), and avoid falling into the comparing behavior trap. Consider the following measures:

  • Capstone progress: Chart your progress toward your ideal position, determining if you’re acquiring the experiences and expertise that make you a viable candidate for that position.
  • Satisfaction index: Keep track of how meaningful and fulfilling your work is; create a numerical satisfaction scale that depends on how much you’re enjoying what you do and how purposeful it seems; take a reading regularly.
  • Learning level: Assess the knowledge and skills you acquire and whether you’re becoming an ‘expert’ in an important area…

It’s not that high-need-for-achievement individuals can eliminate their comparing reflex completely, nor should they. Throughout history, our greatest generals, CEOs, lawyers, other professionals have driven themselves to achieve significant objectives by trying to outdo others.

Comparing becomes a trap, however, when people become so consumed by measuring themselves against others that they fail to step back, and see how it’s impacting their actions, and fail to acknowledge and celebrate their own unique successes. When only external factors become our metrics for success, we are setting ourselves up for misery and the progress trap…

Civilization is an experiment, and it has a habit of walking into what I call the progress trap: The human inability to foresee — or to watch out for — long-range consequences that may be inherent to our kind… It may also be little more than a mix of inertia, greed, and foolishness encouraged by the shape of the social pyramid… ~Ronald Wright

 

 

Confronting the Icarus Paradox– Dark Side Of Success and Perils of Excellence: Why Successful Companies Fail…

Icarus Paradox: Successful firms can fail to take full advantage of success. Instead, they often consume their resources through a stream of questionable decisions. ~Fredrickson

The Icarus Paradox is the observed phenomenon of businesses that fail abruptly after a period of apparent success. The term, Icarus Paradox, was coined by Danny Miller in 1992 article, where he noted that some businesses bring about their own downfall through their own success; be this through– over-confidence, exaggeration, complacency. Icarus is a figure in Greek mythology that flew too close to the Sun and melted his own wings: The Icarus Paradox is that the same thing that had made him successful, escape the prison and fly, is what led to his downfall. In his overconfidence he became blinded to dangers of flying too close to the sun.

This is what often happens with very successful companies too; they become very successful, which makes them overconfident and blind to the dangers that threaten their business: Ultimately this may lead to their downfall. Did you know that when you look at the Fortune 100 list of companies from 1966 that 66 of them no longer exist; that’s absolutely stunning. Also, 15 companies still exist but are no longer big enough to make the list and, of the original list, only 19 companies still made the cut in 2009 and even fewer are on the list in 2012. Why?

According to Freek Vermeulen: You could call it arrogance or, more kindly, naiveté but there is a certain blindness at play; blindness to the dangers of continuing a previously successful course of action for too long. Over the years, companies begin to focus just on just the few thing that made them successful (e.g., product, service, production…). Initially, that serves the company well, but according to Hedberg; success builds confidence-in and commitment-to the current course of action and that confidence biases future decision-making. As result, companies gradually slide so far out of touch with reality… that the potentially fatal disaster develops… unforeseen.

Companies, by then, are too late to make the fundamental changes that are required in their evolving business environments, which might include; new competitors, different customer demand, disruptive business models… Some companies recover, but others don’t. However, companies continue to arrogantly assume and proclaim that what they have always done, and what has brought them so much success; should always work just fine, which is the seed of their downfall…

In the article Icarus Paradox in This New Age by Srijayan Iyer writes: The paradox of Icarus, who died after flying too near the sun on wings made of feathers and wax, was that the wings, his greatest asset had led him to his demise. Many successful businesses are hushed into a false sense of security by relying on established beliefs and processes. These beliefs and processes become liabilities in face of environmental change… and, the success that organizations strive to achieve plants the seeds of their possible future decline.

At root of this argument is the belief that sustained success dulls the senses by which managers perceive the need to change. In essence, success builds confidence-in and commitment-to the current course of action and that confidence biases future decision-making. As result, organizations gradually slide out of touch with the realities of their business environment, and that the potential fatal disaster develops, unseen. Icarus perished because he relied too heavily on his existing plan and current abilities.

It possible that the same tendency plagues managers today. Thus, it’s important to realize that organizations may bring about their downfall because of their own success– through a combination of; over-confidence, exaggeration, complacency…

In the article A Sociological Perspective on the Icarus Paradox by Michael L. Barnett writes: One of the more interesting counter-intuitive findings in organizational research is that success breeds failure. This counter-intuitive has been described in terms of core rigidity, core incompetence, and even the Icarus Paradox.

The literature on the topic suggests that success yields over-confidence and myopia in firms and managers, and eventually causes failure. We augment the literature by suggesting that success breeds not only internal pathologies that cause firms to misuse established resources, over-time, but also external pathologies that cause firms to lose access to resources. In particular, success influences stakeholders’ perceptions of firms, causing firms to lose the benefits of under-dog status and gain the problems of over-lord status.

We term this notion that success warps images of the successful and leading to their decline: Helios Paradox… dominant companies must counter the natural tendencies– to stay the course, if they are to remain successful, over time… and not succumb to; Icarus or Helios Paradoxes.

In the article The Icarus Paradox and Why Strategies Fail by Mangudi Avial writes: The Paradox of Icarus was that his skill and technology, which led him to freedom, ultimately led to his death. Danny Miller found, in his research, that the victories and strengths of companies can often be the cause of their future strategic failure. Miller delineated four major causes of strategic failure: leadership traps, monolithic cultures and skills, power and politics, structural memories. These causes emerge while a company is experiencing success; especially, in its strategic initiatives. Further explanation:

LEADERSHIP TRAPS: Success can be a trap in- and -of itself. Miller found that consistent success tends to reinforce leaders’ world views and ties them rigidly to the strategies and processes that brought about past successes. This causes, in turn, these same leaders to become:

  • Overconfident.
  • Prone to excess and neglect.
  • Prone to shape strategies based on their preferences, rather than the changing business circumstances, customers, and technological shifts dictate.
  • Conceited and thrive on adulation from press, subordinates, shareholders, admirers…
  • Obstinate and prone to resent challenges to their way of thinking.
  • Isolated from the reality of the marketplace.

The impact of those tendencies on strategy-making is very negative when strategy is developed from; ego, preconception of what causes success, stubbornness, and old worn conceptual models.

MONOLITHIC CULTURES AND SKILLS AND POWER AND POLITICS: Miller found another reason for strategic failure in organizations that have been successful is due to the fact that these organizations tend to rely on a ‘star’ department and the culture that builds up around them. When certain functions take precedence over others, in an imbalanced manner, other business functions are seen as less important or perhaps, not important to the success of  organization.

Over-time, the evolution of an organization’s culture, in successful companies, usually becomes monolithic, intolerant, and focused on a single goal or very limited goals. In addition, the ‘star’ department attracts the best and the brightest managers away from other departments, such that an imbalance of talent develops within the organization.

Conversely, talented managers outside the ‘star’ department usually leave and join other companies that can appreciate their skills. As a consequence, the ‘star’ department is able to gain significant power, and thus is able to exercise disproportionate amount of leverage on the overall organization…

POWER AND POLITICS: As managers in the ‘star’ departments increase their power, they become less inclined to adjust the way they have always conducted business. Programs, policies, and practices that, in the past, have proven successful and given these managers such high status are loyally adhered to, and the ability to make organizational adjustments becomes limited. The ultimate consequence of this type of power build-up, in a company, is that past/current strategies are perpetuated, often without a careful evaluation of their effectiveness.

STRUCTURAL MEMORIES: Past successful strategies engender policies, routines, systems, and programs in a company and the institutionalization of these processes within a company creates a powerful organizational culture. Managers rely on ingrained habits and reflex actions rather than deliberating and reflecting on new issues.’ In these situations, the past dictates how one sees the present and future, and a powerful force for continually choosing the same, or similar, strategic courses of action, both; within and outside the organization.

The Icarus Paradox is an interesting account of what creates stellar business success, and at the same time, sows the seeds of corporate failure. Companies that were once successful because of their ability to be flexible become increasingly rigid in their internal structure and decision-making process, and unwilling to expand into new markets away from core business. For example; corporate giants like General Motors, 20 years ago was thought to be solid and would last for ever; and then recently it teetered on brink of bankruptcy.

Companies (like people) are always either; getting better or getting worse. Among Bob Dylan’s most pompous of all lyrics, but in this case, I’m afraid it’s appropriate: He who is not busy being born is busy dying. Companies need to push themselves and clients, continually; to be born and re-born every day: Though that’s a difficult proposition in today’s economic climate…

The primary thesis of Danny Miller’s Icarus Paradox is– when taken to excess, the very factors that have previously driven an organization’s success, can actually drive them into decline. Despite the shortcoming, Miller’s Icarus Paradox work is important; since it points out that great companies… even those that once were thought to be impervious to failure can fail.

Just as the fabled Icarus of Greek mythology was able to fly so high, so close to the sun, that his wax wings melted, then plunged into the sea: This same paradox can apply to outstanding companies… that their very success seduces them into the excesses that cause their downfall

Strong performance triggers a defensive mindset, where the focus is on potential for loss. That mindset produces subtle biases in subsequent decision process that sow seeds of future poor decisions.  ~Kahneman

 

Tunnel Vision– Peek-Out From Behind Blinders: Connect with Changing World for Sustained Business Success…

Tunnel vision–You’ve got to think about big things while you’re doing small things, so that all the small things go in the right direction. ~ Alvin Toffler

Literally, tunnel vision is a loss of peripheral vision or vision impairment. Figuratively, it means you are focused on one goal — the implication is that you’re not seeing the big picture around you. Tunnel vision depends on how you view it, for some; tunnel vision is the ability to focus only on issues that are crucial and relevant to solving a particular problem.

In other words, it’s the ability to ignore a distracting lack of knowledge while doing just enough to solve a problem. Tunnel vision enables you focus better, and lack of focus is main reason why most people don’t succeed, i.e., ability to block out everything on the peripheral and focus only on what’s directly in front of them: Your level of success will be in direct correlation to your focus; more focused you are, the greater your level of success! In contrast, other people equate tunnel vision with the adage about not seeing the forest for the trees.

A person with tunnel vision is so zoned-in on one thing he doesn’t see much else. He is distracted from distraction and is isolated in isolation. He is shut off from other facts by fixation on a single fact. As consequence, people with tunnel vision see only the light at the end of the tunnel, disregarding tunnel walls that keep the massive weight of the outside world from caving in on them.

Here is an analogy; thorough-bred race horses are fixed with blinders in order to minimize distractions during a race. They are focused solely on winning while being, at least somewhat, aware of their surroundings. In much the same way, the best business leaders are those who can process information related to their goals without losing sight of peripheral factors that could affect their organization. They do not allow themselves to be distracted by the noise that surrounds their business, but they can still multitask and respond to organizational demands…

In the article Letting Go: When Visionary Becomes Tunnel Vision by Mike Docherty writes: Innovation is, by its nature, full of risk and unknowns. That’s what makes it so interesting, challenging, and yet utterly uncomfortable for many business leaders. While most aspect of effective business management requires and rewards discipline and steady execution against plans, innovation is different. In spite of the risks, management books and corporate folklore are filled with stories of visionary leaders who ignored the data, the customer, and sometimes common sense to pursue new ideas with which they hold a clear passion, and a clear vision of the future possibilities.

Malcolm Gladwell in his book, ‘Blink’, says; we need to trust our instincts and our sub-conscious minds to make good decisions that we could never realistically evaluate in a conscious rational way — the human mind has an uncanny knack for simplifying the complex and peeling away the irrelevant to reveal the core. Yet for all of the heroic stories of visionary leadership, there are just as many and more frightening stories of vision gone awry.

This leads me to: When does a ‘visionary’ become ‘tunnel vision’ in championing innovation? How can business leaders avoid the ‘false negatives’ of killing potential big ideas too early, while avoiding spending good money after bad in pursuing potentially viable ideas and innovations. How do you know when you’ve gone from ‘visionary’ to ‘tunnel vision’…?

In the article Tunnel Vision – ‘In the End, There is Only Flux’  by Freek Vermeulen writes: Our studies on ‘performance of companies’ suggests; especially for very successful firms, that these companies have trouble staying successful and adapting to changing conditions, more than others: Which we call the success trap, competency traps, or Icarus paradox. Research by Allen Amason, University of Georgia, and Ann Mooney, Stevens Institute of Technology, for example; showed that CEOs from firms that are having very good  success  were significantly more likely to interpret changes in their business environment as threat, in contrast to CEOs of poor performing companies, who often interpreted the changes as a positive thing.

This is understandable: If you are the top performer in your industry, any change looks like a threat, because things can only get worse; you like things just the way they are; thank you very much! In contrast, if you currently look like a loser since you’re the CEO of a company that is not performing very well, in comparison to your peers, then any change is welcome.

‘Amason and Mooney’ showed that, as consequence; top managers of high performing companies were much less aggressive in formulating plans for strategic change; they didn’t spend as much time or effort evaluating potential alternative courses of action. These executives were more passive in their actions for affecting change; they ignore the situation, continue with status-quo, and overall resist change.

However, as the business conditions continue to deteriorate, ignoring them just makes the problems worse. I guess you can call this the old-fashioned tunnel vision: When your company is hugely successful, you don’t want the world to change, however, when you are forced to innovate and implement change; e.g., new technology, or whatever it is that is rocking your world... then, you try to squeeze it into your own version of reality, rather than accept the reality as it actually exists. But, business reality is that one day all industry dominants must change or fail.

According to Heraclitus, centuries ago, he wrote; In the end, everything is in flux, nothing abides, everything flows, nothing stays fixed, everything is constantly changing and nothing stays the same…

In the article Social Media Tunnel Vision by Nora McFarland writes:  We can’t seem to get away from it no matter how much we try, and that is; social media tunnel vision. Humans can be creatures of habit and that means, if you’re using the same tool or medium all the time; you are unlikely to change: Which leads me to my thought about the so-called social media tunnel vision. When we are talking about businesses that invest in social media, we need to think outside of the box.

Don’t get me wrong; I’m not saying that you should be involved with all the social media platforms, because that’s just not realistic (unless you have the man-power to do so). You should, however, concentrate on where your market and the people you want to reach are hanging-out the most. Do consider, though, that your market, over-time, is branching out to other social media platforms and channels. Thus, I suggest, likewise, you should also be branching-out and keeping pace with your market(s),  people, partners… Here are a few questions that you should be considering:

  • Is being on Facebook reaching your target audience?
  • Is LinkedIn better suited for your needs?
  • Is Google + another alternative for your way of networking?
  • Should you consider Geo-locating apps, i.e. FourSquare, FB Places…?
  • Perhaps a blog?
  • Will Twitter help or hinder your social media strategy?

In the article How Marketing is Pursuing Tunnel Vision by Emily R. Coleman writes: Marketing, almost by definition, follows trends. Marketers must be well-informed; know how people’s interests change, know how forms of communication are evolving, know how products and services fit into an economic landscape that is continually rearranging itself. Not to do so is to become irrelevant. But, there is a profound difference between following and understanding trends and becoming trendy.

Marketing, I fear, is taking itself down the path to trendy. Worse, I suspect that its head-long rush to organize and re-organize along current lines of fashion will make it unwieldy and difficult to respond when the fashions change: Fashions always change. For example, we are currently consumed by social media marketing. Certainly, social media platforms and channels are very important element to reach and understand our audience.

But, I question the breathless acceptance  of social media platforms as if they were ‘holy grail’ of marketing. We’ve seen ‘holy grails’ before. We are currently consumed by the need to carve more and more specializations and niches within marketing. For example; customer engagement, mobile marketing, social media management, and there seems to be a driving force toward increased areas of decreased responsibility. Specialization makes communicating to marketplaces, with a singular, coherent voice, and focused message, that much harder.

Also, there is the ever-popular ‘let’s keep current by reading books by others in our field’Yes, it’s important to know what other pros in your business are saying and thinking. But I would suggest that we would be much better marketers, if we are more diversified in our thinking by boarding global knowledge; e.g., read psychology, anthropology, history, and science, and yes (dare say) novels... and less listening to what marketers are saying to other marketers. Wouldn’t we all be much better marketers, if instead of fine-tuning our tunnel vision, we broadened our outlook?

Common sense says ‘don’t put all of your eggs into one basket’. Uncommon sense says ‘put all your eggs into one basket and watch that basket like a hawk’. According to adam; diversification means a division of attention. It means complication. It means complexity. We already have too much complexity in lives. Modern technology has made things busier rather than easier. We don’t need more complexity we need more simplicity.

Tunnel vision equals simplicity. Forget about all the superfluous stuff floating around the edges of your vision: Put blinkers-on. Focus unwaveringly on your ultimate vision, your ultimate goal. Successful people have tunnel vision. They remove the waste and focus only on what they have to focus on. They don’t concern themselves with anything that won’t contribute to their ultimate goal. However, according to frank; tunnel vision can be killer of business.

Tunnel vision is a common metaphor for narrowness of focus that causes failure to see the big picture. Acting with blinders-on is another way of expressing tunnel vision. A manager who operates with tunnel vision or with blinders-on can ruin a company by concentrating on a narrow view of reality, ignoring both risks and opportunities.

Tunnel vision is often combined with the metaphor– the light at the end of a tunnel is an oncoming train. So, managers must be alert to warning signs that tunnel vision is hampering business goals. According to Mark Fallon; we read business books that emphasize focus: Focus on the strengths. Focus on the core business. But what happens if you’re too focused? People may direct so much attention on particular problem that they miss everything else. If you have tunnel vision, you can’t see the big picture. 

The solution is to strike balance between the task at hand, and the environment around you. Maintaining balance isn’t a single action, but constant awareness of your situation. Narrow views can divert attention from the most important issue; the success of the company. Hence, from time-to-time, step back; survey surrounding, gage your bearings, then take the necessary actions to grow and sustain  your business– sometimes with tunnel vision and sometimes with funnel vision…

One of the lessons your management has learned and, unfortunately, sometimes re-learned, is the importance of being in businesses where tailwinds prevail rather than headwinds. ~Warren Buffett

Facing Challenge of HyperCompetition– Fast, Smart, Bold: Traditional Competitive Strategies are Not Sustainable…

Hypercompetition– The world is changing very fast… big will not beat small anymore… it will be the fast beating the slow. ~Rupert Murdoch

Hypercompetition is a key feature of the new global digital economy. Not only is there more competition, there is also tougher and smarter competition. Hypercompetition is a state in which the rate of change in the competitive rules of the game are in such flux that only the most adaptive, fleet, and nimble organizations will survive. Customers want it quicker, cheaper, and they want it their way. The fundamental quantitative, qualitative shift in competition requires organizational change on an unprecedented scale, and the competitive advantages must constantly be reinvented.

Hypercompetition results from the strategic maneuvering and rapid escalation of competition based on changing dynamics of: price quality positioning, protect or invade established markets, deep pockets (financial capital), and creation of even deeper pocketed alliances. In order to compete, and irrespective of the size and scope of your competitive advantage, companies must implement their strategies based on finding and building temporary advantages through market disruption, rather than trying to sustain an unsustainable advantage.

The term hypercompetition was originated by Richard D’Aveni in his book ‘Waking up to New Era of Hypercompetition’, in 1997. The hypercompetitiveness concept was originated by Karen Horney, psychoanalyst, in theories on neurosis, specifically; highly aggressive personality type who needs to compete and win at any cost as a means of maintaining their self-worth.

According to Ms. Horney’s theories, these individuals are likely to turn any activity into a competition, and feel threatened if they find themselves losing. Hypercompetitive individuals generally believe that ‘winning isn’t everything; it’s the only thing’…

In the article The Art of Hypercompetition by Glenn Rifkin writes: Is the idea of sustained competitive advantage dead?  Richard D’Aveni, Dartmouth College, believes it is; and he says; business has entered a new era of hypercompetition, shifting dramatically from slow-moving stable oligopolies to an environment characterized by a quick-strike mentality on the part of companies aimed specifically at disrupting the competitive advantage of market leaders. Also, he says; traditional strategic concepts are making companies weaker, not stronger, and argues that the old competitive advantages are no longer sustainable over the long haul.

Instead, advantages are continually being created, eroded, destroyed and recreated through strategic maneuvering. The old goal, Mr. D’Aveni says, was to increase profitability by legally restraining the level of competition in an industry, segmenting the market, avoiding head-to-head competition, and raise the barriers of entry around their markets. Today, he points out, this strategy is literally impossible. He says driving forces are contributing to new era of hypercompetition: customer changes, including fragmenting tastes; rapid technological change; falling geographic and industry boundaries as markets globalize, and deep pockets among competitors due to the rise of giant global alliances in a raft of industries.

The way to win in today’s market is to obsolete the advantages of the market leaders. The barriers for entry to most markets are weak, and the unconventional player can attack suddenly from outside the market with unexpected methods, often with devastating effect Despite these new parameters, Mr. D’Aveni suggests that long-term dominance of an industry is still possible; It is possible to win in hypercompetition by mastering the art of dynamically repositioning oneself in four key arenas: price/quality, know-how/timing, stronghold creation/ invasion, and deep pockets.

For a company to sustain its success in the hypercompetitive era, Mr. D’Aveni says, it must be willing to take more risks than ever before. The old business model that focused on, such issues as; culture, human resources, structure and infrastructure, objectives, and strategy may now be outmoded, he says. Instead, what is needed is a new set of guidelines that provides a vision for generating the next market disruption.  Mr. D’Aveni labels these as; stakeholder satisfaction, strategic soothsaying, speed, surprise, signals, shifting the rules, and simultaneous or sequential strategic thrusts.

In the article Winner Takes It All: Why We’re Competitive by Kathryn Williams and Divine Caroline write: We’re all hardwired to compete. Evolutionarily speaking, that’s why we’re here– because we’ve competed over resources and mates, and we’ve won. At least our genes have. It’s a dog-eat-dog world, kill or be killed, survival of the fittest, the fight in ‘fight or flight’. But the fact that you have to run faster than the person on the treadmill next to you is not all inborn.

As is becoming increasingly clear in the nature-nurture debate, most personality traits are an organic product of both genetic inheritance and learned behavior. Perhaps our genes are telling us to earn more and produce faster, but competitiveness is also instilled by our individual upbringings and society as a whole.

Competition is healthy when it’s an incentive for improvement. We see this in business all the time. Competition for customers creates healthier, more efficient, more responsive, and more innovative companies. In evolution, competition for resources creates stronger, more robust and smarter species. When winning ‘is at all costs’; it’s hypercompetitiveness.

Karen Horney, psychoanalyst, theorized hypercompetitiveness as a form of neurosis in 1937 and linked the trait to self-worth. Today we see it played out by professional athletes who run their bodies into the ground in the name of the game, or in girls or boys who suffer from eating disorders. The repercussions of hypercompetitiveness are not only economic or emotional, but also social.

Hypercompetitiveness can be interpreted by others as aggression or uncooperativeness, resulting in a loss in trust. Sometimes there are reputation benefits to ‘taking one for the team’. By opting out of competition in the short run, you may benefit in the long. Roughly speaking, you lose the battle to win the war. The next time the inner voice urges you to ‘go, fight, win’; consider what you stand to win and lose.

In the article Winning at All Costs by Rob Spiegel writes: ‘Winning at all costs’ may sound like good business advice, but it’s not. Maybe your business idea just isn’t going to fly and you’d be better off trying something else. Or, maybe lower your prices to beat competition will cut into your profits more than your business can stand. Vince Lombardi, football coach, famously said, ‘winning is the only thing that matters in sport’. Like many sports clichés, the quote gets applied in business as well.

Business is competitive like sports, so clichés about winning transfer naturally to cutthroat entrepreneurialism. Similar quotes about competition take Lombardi’s thoughts even further: ‘Do whatever it takes to win’, and the horrifying; ‘If you’re not willing to cheat, than you don’t want to win bad enough’. While Lombardi’s quote is morally challenging– it may be offensive to the new breed of education experts who shy from playground competition on the grounds that some kids have to lose– when it comes to sports, Lombardi is indeed correct.

But the idea that ‘winning is everything’ is not correct in business.  ‘Win at all costs’ is not good business advice. There are some products and services in business that deserve a quick and tidy death, and the ‘win at all costs’ mentality can keep a hearty entrepreneur hanging on to an idea that isn’t worth the dogged determination implicit in the clichés about winning. Sometimes the entrepreneur needs to let go of a bad idea, and instead consider; ‘If at first you don’t succeed, try and try again.’

In the article HyperCompetition and Differentiation by rplant writes: For a company to stay competitive it must innovative: delivering novel and advanced products and services for which there is little or no equal in the marketplace. But is that enough in our global economy? Absolutely not: Innovations can and do get copied, imitated, and downright stolen; if you create something that you consider truly innovative, it would be wise to keep the champagne bottles corked and the cigars unlit because chances are, you’re not the only one and you can bet you life that you won’t be for long, if you happen to be…

So, what is the true differentiator that enables one company to win over another? One very simple word: Agility. Agility simply means; the ability to create and deliver value faster than the competition. Notice I didn’t say– ‘create and deliver innovation faster than competition’, since innovation does not necessarily equal value. There is a lot of focus in companies to do more with less, to lower the cost of development, factor TCO,  ROI…

Sometimes the focus on cost is so myopic, regardless of how much less it costs to develop innovation, if competition delivers first and can continually improve and advance faster than you, then cost savings don’t hold as much relevance. The true mission of any player in a competitive environment is agility. It is a basic characteristic of life; the agile of the species survive, the less-than-agile die.

Essence of strategy is building competitive advantage, but in a world of hypercompetition, no competitive advantage is sustainable. Hypercompetition is ‘an environment in which advantages are rapidly created or eroded’, says Richard D’Aveni. If you’re the market leader, then in a few years you could become a ‘has-been’. If you’re a challenger facing an entrenched competitor, then there is hope that you can match and overtake your rival.

While a traditional approach to strategy emphases the creation of competitive advantage: Richard D’Aveni takes an alternative view, he says; strategy is about creative destruction of the opponent’s advantage. The presence of one hypercompetitive business in the market is enough to tip entire industry into hypercompetition  because competitors are forced to react to the threats.

According to Paul Simister; much of what Richard D’Aveni  proposes can be seen as a direct challenge to the ideas of Michael Porter on competitive strategy. However, there is a place for both strategies, for example; some industries go through periods of radical change in a very short time-scale– think technology products; e.g., laptops, smartphones, iPads… Other industries slowly evolve; e.g., Coca Cola and Pepsi date back to late 19th century but still dominate the soft drinks industry, globally. Clearly, the same theory of strategy and competition will struggle to fit both market conditions:

Hypercompetition challenges conventional strategic thinking and requires a dramatic shift in traditional strategic planning. To develop a hypercompetition business strategy, a company uses counter-intuitive paradoxical logic. There are two basic types of strategic paradox in hypercompetition business situations; ‘coming together of opposites’ and ‘reversal of opposites’.

Hypercompetition changes the traditional strategic thinking paradigm, requiring a company to act in ways that appear to be in opposition to its self-interest. The golden rule of hypercompetition  would be; do it unto yourself before the competitors do it to you…

The essence of competitiveness is liberated when we make people believe that what they think and do is important, and then get out of their way while they do it. ~ Jack Welch

Big Mac Index– Global Price of Burger Predicts Currencies, Competitiveness..: Burgernomics, Hamburger Economics…

Buy a Big Mac in Norway and it will set you back US$6.81. Treat yourself to the very same culinary delight in China and your bank balance will be only US$2.45 lighter. This rather crude comparison embodies the argument that China, and indeed a whole host of emerging market currencies, are undervalued.  

Big Mac Index: Lighthearted, tongue-in-cheek and half-hearted are just a few descriptions attributed to the Economist’s introduction of the Big Mac Index, in 1986. How serious they were with the index is questionable, but since it was devised, whole cottage industries have been developed by economists, traders, and teachers devoted to the concept… The idea behind Big Mac Index was to measure the percentage of under-or overvaluation between two currencies, in each nation, by comparing prices of a Big Mac hamburger…

The Big Mac hamburger is a standard consumer item sold in over 120 countries, and it is being used as the common  comparison  between nations. One often suggested method for predicting currency exchange rate movements is by comparing a sample of ‘basket of goods and services’ that should cost the same in both currencies. In the Big Mac Index, the ‘basket is a single Big Mac burger’, which enables a comparison between the currency of countries. 

The method for determining the over-or undervaluation of currency pairs is based on ‘purchasing power parity’ (PPP). PPP is an economic theory and a technique used to determine the relative value of currencies, by estimating amount of adjustment needed on the currency exchange-rate between countries, such that; the exchange is equivalent to (or, on par with) each currency’s purchasing power. It asks how much money would be needed to purchase the ‘same goods and services’ in comparing countries, and uses this number to calculate an implicit exchange-rate.

The PPP exchange-rate calculation is controversial because of difficulties for finding ‘comparable baskets of goods’ to compare purchasing power across countries… that’s the rationale behind the Big Mac Index; it’s simple and easy to compare. Essentially, the exchange-rate is percentage of under-or overvaluation of a currency: A lower price means the first currency is undervalued compared to the second currency, while a higher price means the second currency is overvalued, in percent terms, against the first currency.

The basic concept is that prices will eventually equalize, over time. While this simple calculation may serve as a theoretical guide for determining under-or overvaluation of a currency, there are many limitations… Some organizations expanded the Big Mac Index concept, for example; UBS Wealth Management Research included the amount of time that an average worker, in a given country, must work to earn enough money to buy a Big Mac…

This working-time based Big Mac Index can give a more realistic view of purchasing power of average local workers, since it takes into account  local variables, e.g., business costs, local wages… Also, there are several variants on the Big Mac theme; for example in 2004, it showed the ‘Tall Latte Index’, which replaced the Big Mac with Starbucks coffee. Another variation introduced by an Australian bank’s subsidiary, Commonwealth Securities, in 2007; where it adopted the idea behind the Big Mac Index to create an iPod Index. The bank’s theory was that since iPods are made in a single location (China), the value of iPods should be more consistent, globally. Still another variation on the theme is Bloomberg L.P. the Billy Index, where they convert local prices of the Ikea ‘Billy’ bookshelf into U.S. dollars and compares prices.  

While economists widely cite the Big Mac Index as reasonable real-world measure of PPP, the burger theme has many limitations… For over twenty-years, the Economist remained firm on the view that the data they produced was light-hearted and should not be interpreted extensively; that it’s just a simpler way of viewing PPP theory… There is no doubt that popularity of the Big Mac Index stems from its simplicity, but whether it’s capable of predicting future trends– currencies, exchange-rates, competitiveness… is debatable. For many, however, the Big Mac Index is a useful economic theory that helps people to better understand currency fluctuations…

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In the article What is the Big Mac Index? by Justin Kuepper writes: The Big Mac Index was created by The Economist based on the theory of purchasing power parity (PPP). Over the long-term, the PPP theory states that currency exchange rates should equal the price of a basket of goods and services in different countries. And what better basket of goods than McDonald’s Big Mac – or at least its equivalent – in various countries?

In theory, the price of a Big Mac reflects a number of local economic factors, ranging from the cost of the ingredients to the cost of local production and advertising. The resulting PPP metric is therefore considered by many economists to be a reasonable measurement of real world purchasing power. But there are exceptions to the rule: The Big Mac Index is calculated by dividing the price of a Big Mac in one country by price of a Big Mac in another country in their respective local currencies.

The resulting value is compared to official exchange rate, between the two currencies, to determine if either currency is undervalued or overvalued; according to the PPP theory. For example, suppose that a Big Mac in U.S. costs one U.S. dollar and one in eurozone costs two euros. The Big Mac Index valuation for EUR/USD would be 2.0, or two divided by one, which could be compared to the EUR/USD exchange rate. If the exchange rate was 1.5, you could predict that the euro was undervalued by 0.5 euros per U.S. dollar.

In the U. S. there may not be much need for the Big Mac Index, since there are already a number of reputable price indexes available, such as Consumer Price Index (CPI). But the index becomes useful in other countries where reliable indexes aren’t available, such as those that manipulate government statistics or those that don’t publish official data. For example, many economists believed that Argentina had been modifying its official consumer price data to understate its true rate of inflation between 2010 and 2012.

So, the Economist used its Big Mac Index to find that the average annual rate of burger inflation was 19% compared to country’s official 10% rate of inflation, in January 2011. Key takeaway points:

  • The Big Mac Index was created by The Economist based on the theory of purchasing power parity (PPP).
  • The Big Mac Index is calculated by dividing the price of a Big Mac in one country by the price of a Big Mac in another country, in their respective local currencies.
  • The Big Mac Index can be used in many different ways, ranging from determining rates of inflation to comparing currency valuations.

In the article Real or Ridiculous–The Big Mac Index by Laurie Petersen writes: The Big Mac Index measures the relative price of a Big Mac in dozens of currencies. It’s based on the rule of purchasing power parity (PPP), which states that exchange rates should move to make the price of goods the same in each country. So how well does burgernomics work?

The Big Mac Index is useful for travelers, giving a good idea about which countries are expensive, and which are not, says economics professor Robert Barsky, University of Michigan. For example, if you’re traveling to Australia, plan on paying US$4 for the double beef patty sandwich. It’s less clear, however, that a pop-culture index is a good predictor of changes in the exchange rate over time, Barsky adds, because the Big Mac is in large measure, a measure of the non-tradable component of the Consumer Price Index (CPI). There is no strong reason that the prices of non-tradable should be equalized across countries.

While The Economist claims the index has been a pretty good predictor of movements in currency values, there’s no clear benchmark to compare to in order to evaluate how accurate it has been historically, adds Tara Sinclair, George Washington University. One thing we can see from the numbers is that it’s rare for a Big Mac to cost the same in dollars across countries, she says. According to a recent index, the Norwegian krone is one of more overvalued currencies against the dollar. Expect to pay around US$6.81 for a Big Mac in Oslo. The price for a Big Mac in China is US$2.45, or the Chinese yuan is undervalued. The price for a Big Mac in U.S. is about US$4.33…

The Big Mac Index is not perfect, at best; but for some it can be useful. For example, the Big Mac’s price is decided by the McDonald Corporation and it can greatly affect the Big Mac Index. Also, the Big Mac itself differs across the world in– size, ingredients, and availability. That being said, the index is meant to be light-hearted and a good example of purchasing power parity (PPP), and is used by many schools and universities to teach students about PPP. The goal of the Big Mac Index is to make exchange-rate theory a bit more digestible...

Burgernomics, as the Economist dubbed it, invented by one of their writers, Pam Woodall, and the Economist publishes it annually. The Index charts the price of a Big Mac burger for many countries all around the world, for example; the Big Mac is four times more expensive in Switzerland than in India. Comparing the price of a Big Mac in the U.S. with an Indian Maharaja Mac (this is made with chicken, since normal the Big Mac is not sold in mainly Hindu country) researchers found that the rupee is about 60% undervalued; compared to the U.S. Big Mac average of US$4.20. The India equivalent cost is about US$1.62. The currency that can purchase the next most number of Big Macs is the Ukrainian hryvnia, which is about 50% undervalued, according to the Index.

A Big Mac in Ukraine is US$2.11, that’s just one U.S. 1 cent cheaper than in Hong Kong, which was third runner-up for most undervalued currency. Norway’s currency the krone is the most overvalued currency by about 60%. A burger in Norway costs about US$6.81. Next, according to Big Mac Index, is Switzerland’s Swiss franc where a Big Mac burger costs about US$6.79…  However, many economists argue that the Big Mac Index has serious flaws, and that the price of the Big Mac burger price should be adjusted for the relative purchasing power of the country’s local conditions, e.g., economy, worker wage…

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But, according to Jonathan Perraton, University of Sheffield, says; with all of its flaws, the Big Mac Index raises some very important talking points, strategically; for example, are countries like China artificially keeping their currency at a relatively low-level, so they  can price their goods artificially less expensive than most other countries and maintain a significant global competitiveness advantage... Also, Mr. Perraton goes on to say; the Big Mac Index is a good, rough guide for tracking fluctuations between currencies, plus– its fun, easy to explain and understand, and provides a creditable comparison of price, but it does have many limitation… In balance, however, for a back-of-the-envelope– ball park number– it does very well…

In the long run, the exchange rate between two countries should move towards the rate that equalizes the prices of an identical basket of goods and services in each country.