January–February 2023

The Best Way to Name a New Product

When an established consumer-packaged-goods (CPG) company introduces a new product, it faces a potentially make-or-break decision: how to brand it. Tying it to an existing brand (as was the case for Cherry Coke and Avon Hand Lotion) is tempting. Customers are more likely to try a new product with a familiar association, and companies have to expend fewer marketing resources to launch it. But the strategy has risks, too: Weak or failed brand extensions can harm the parent company. When the maker of Coors beer introduced a nonalcoholic beverage, Coors Rocky Mountain Spring Water, customers were confused, with some wondering about the alcohol content of the beverage. Sales of both water and beer suffered, and the new product was ultimately discontinued. A new study can help companies make the right branding decision—and shows that those who do will be rewarded with higher returns.

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When the Groundhog Predicts an Early Spring, Investors Get Optimistic

The stock market isn’t always rational; often it’s swayed by superstitions. A case in point is the bump the market gets when Punxsutawney Phil doesn’t see his shadow.

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Marico’s Chairman on Innovating Across Every Part of the Business

When the author launched what would become Marico as a division within his family’s business, Bombay Oil, it was with product innovation: Instead of selling edible oils in bulk to other businesses, it would sell in smaller, branded packages directly to consumers. Eventually the division became a separate entity, which is now one of India’s largest homegrown CPG companies. Its growth has depended on constant innovation—around not just products, packaging, and pricing but also supply chain, talent management, and business models. Over the past decade Marico has branched out into services with its Kaya skin-care spas, pioneered the use of premium hair oils, and added savory oats to Indian diets. Through the Marico Innovation Foundation, Mariwala also promotes innovative thinking outside the company, supporting small businesses and entrepreneurs in their efforts to scale up new ideas. The key to doing that well, he says, is to be ever curious about customer needs, to create a flat hierarchy that rewards risk-taking, to learn from every failure, and to constantly prototype, experiment, refine, and retest.

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How Financial Accounting Screws Up HR

Many HR practices in the United States are bad for companies, employees, and shareholders. Firms skimp on training and development, for instance, and tightly limit head count even when they’re understaffed. They increasingly move work to nonemployees, like leased workers, and replace pensions with more-expensive 401(k) plans. They do such counterproductive things because U.S. financial reporting standards treat employees and investments in them as expenses or liabilities, which make companies look less valuable to investors. This situation can be remedied, however, with some modest additions to reporting requirements. Though small, these changes could have a big positive impact.

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Rethink Your Employee Value Proposition

A lot of leaders believe that the formula for attracting and keeping talent is simple: Just ask people what they want and give it to them. The problem is, that approach tends to address only the material aspects of jobs that are top of employees’ minds at the moment, like pay or flexibility. And those offerings are easy for rivals to imitate and have the least enduring impact on retention. Companies instead should focus on what workers need to thrive over the long term, balancing material offerings with opportunities to grow, connection and community, and meaning and purpose.

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Designing Jobs Right

It’s a given of human nature that whenever people get an assignment that they can’t or don’t want to do, they’ll make up a different one and do that instead. If a job is unchallenging, they’ll redefine it to be more interesting, and if it’s not doable, they’ll turn it into something that they can accomplish. Sometimes that works out, but mostly it doesn’t, because the job doesn’t fulfill its intended function.

Managers will be far more effective if they take time to sit down regularly with employees and explore what their job preferences are and how their tasks can be both achievable and engaging. But it’s a two-way street: Subordinates must also help design the tasks their bosses will do. If those responsibilities aren’t interesting or value-adding, the bosses will make up their own tasks—with results the subordinates may not like.

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The Overlooked Key to a Successful Scale-Up

Many start-ups experience enormous popularity and runaway growth, but only a few go on to become stable giants. What separates them from the pack? They all go through a developmental stage called extrapolation, say three business school professors.

This stage isn’t part of traditional organizational theory, which holds that businesses begin in exploration mode (testing out hypotheses about how they’ll solve problems and learning whether people will pay for their solutions) and then move into exploitation mode (as growth slows and they fine-tune their business models to sharpen their advantage). But between those two well-known stages is the crucial extrapolation stage. During it, a company both explores and exploits. And most significantly, it works to ensure that each new customer brings in additional revenue while incurring only marginal cost—the secret to lasting, profitable growth.

A new enterprise needs multiple strengths to navigate this phase—such as a proven monetization approach, a strong go-to-market strategy, network and density effects, and capital. It also must systematically identify and remove internal business-model constraints on growth that could prevent it from achieving scale.

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Expand Your Pricing Paradigm

With inflation high, a global recession possible, and consumers spending carefully, many companies are concerned about preserving profit margins. In this article, pricing consultant Rafi Mohammed argues that instead of simply adjusting prices, firms should consider adding new ways to charge customers. He outlines 18 different pricing tactics that can be used for various purposes: to accommodate buyers with different usage needs, to appeal to people on a tight budget, to spur purchases by customers who love a good deal, to achieve favorable prices when the value of an offering is uncertain, and to increase business efficiency.

Mohammed urges companies to think creatively about whether a pricing convention commonly used in other industries might work for their own product or service. For example, Allstate has borrowed the metering model and introduced auto insurance premiums based on actual miles driven. Mammoth Holdings, which owns more than 100 car washes, offers monthly subscriptions for unlimited washes. Some hotels sell day passes to their pools and fitness facilities. By creating a mix of pricing options, companies are likely to please existing customers and attract new ones.

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Employers Can Do More to Advance Health Equity

Covid-19 exposed wide inequities in health in the United States and around the world. But health disparities persisted long before the pandemic.

In this article the authors explain why businesses should help find solutions to health inequities and showcase companies innovating in this space. The article outlines four opportunities for companies. They can optimize benefits and health plan offerings, address social determinants of health, expand primary care and mental health access through virtual care and community partnerships, and make benefits and health care easy to navigate.

To improve health equity among their employees and communities, businesses will need to invest in a multiyear effort and equip themselves with the right leadership, resources, and processes. Key steps for getting started include building a business case for investments, collecting data to understand specific problems, identifying an initial population to focus on, engaging a broad group of stakeholders to design solutions, and measuring progress.

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The Permissionless Corporation

Digital technologies are pushing decision-making ability to the edges of the organization, allowing businesses to adopt structures that are flatter and more reconfigurable than those they have traditionally used. When AI and other software make information transparent to all authorized decision-makers on the front lines, directly and without managerial filters, it unleashes their creative and collaborative potential instead of trapping them in endless reporting and coordination loops. It can help to create, in other words, a “permissionless corporation.”

The authors contend that companies with three or four layers, faster problem-solving, and a permissionless mindset will outcompete traditional players. But making the transformation to such a structure will require companies to completely rethink how people work; it’s not enough to streamline a process here or there or take out one layer of traditional structure.

Using real-world examples, the authors detail how companies need to pay painstaking attention to performance metrics, ensure that information gets to the front line, communicate the context in which decisions are made, and leverage multifunctional teams.

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Managing in the Age of Outrage

Almost every leader in every sector is now dealing with angry stakeholders. Even a revered company like Apple can find itself suddenly managing outrage flashpoints, both with employees and with external groups. Such encounters are nothing new; what sets this time apart is a perfect storm of three forces: (1) Many people feel unhopeful about the future. (2) Many feel, rightly or wrongly, that the game has been rigged against them. (3) Many are being drawn toward ideologies that legitimize an us-versus-them approach. The author offers a five-step framework for dealing with outrage that draws on analytical insights from disciplines as wide-ranging as the science of aggression, managerial economics, organizational behavior, and political philosophy. It forms the basis of a course he teaches at Oxford and has been built inductively through a series of deep-dive case studies on a variety of organizations, including IKEA, the London Metropolitan Police, Nestlé, and Oxford University Hospitals.

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The Power of Options

Facing a crisis or an opportunity, leaders often fall back on the leadership style that has worked for them in the past. But to be effective, they need to rise above their default reactions and generate more options for how to respond in real time.

In this article two leadership coaches offer an approach, called the “four stances,” to help leaders improve their interpersonal communication:

Lean In. Take an active stance on resolving an issue. Actions in this stance include deciding, directing, guiding, challenging, and confronting.

Lean Back. Take an analytical stance to observe, collect, and understand data. Actions include analyzing, asking questions, and possibly delaying decisions.

Lean With. Take a collaborative stance, focusing on caring and connecting. Actions include empathizing, encouraging, and coaching.

Don’t Lean. Be still and create space for a new solution to bubble up from the subconscious. This stance also serves to calm emotions if they have been triggered. Actions include contemplating, visualizing, and breathing.

Leaders should identify which stance is their default, make a plan for using alternative ones in various situations, and be ready to pivot if an approach is not working.

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Stop Tinkering with AI

AI initiatives at many organizations are too small and too tentative. They never get to the only step that can add economic value—being deployed on a large scale. Testing the waters may deliver valuable insights, but it probably won’t be enough to achieve true transformation. A pilot program or experiment can take you only so far.

The authors have identified 30 companies that have gone all in on AI—and achieved success—as well as 10 actions those companies took to become successful AI adopters: (1) Know what you want to accomplish. (2) Work with an ecosystem of partners. (3) Master analytics. (4) Create a modular, flexible IT architecture. (5) Integrate AI into existing workflows. (6) Build solutions across the organization. (7) Create an AI governance and leadership structure. (8) Develop and staff centers of excellence. (9) Invest continually. (10) Always seek new sources of data.

In other words, you need to be aggressive enough with AI that the technology eventually transforms every aspect of your business.

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How Frank Gehry Delivers On Time and On Budget

A study of some 16,000 major projects—from large buildings to bridges, dams, power stations, rockets, railroads, information technology systems, and even the Olympic Games—reveals a massive project-management problem.

Only 8.5% of those projects were delivered on time and on budget, while a mere 0.5% were completed on time and on budget and produced the expected benefits. In other words, 99.5% of large projects failed to deliver as promised.

Master architect Frank Gehry consistently defies those odds, producing projects of staggering beauty while meeting time and budget targets. This article reveals four lessons, gleaned from interviews with Gehry and his colleagues, for successfully managing big projects.

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Cultivating the Four Kinds of Creativity

In the decades to come, creativity will be key to doing most jobs well. In this article the authors offer a new typology that breaks creative thinking into four types: integration, or showing that two things that appear different are the same; splitting, or seeing how things that look the same are more usefully divided into parts; figure-ground reversal, or realizing that what is crucial is not in the foreground but in the background; and distal thinking, which involves imagining things that are very different from the here and now. Most of us tend to think in just one of those four ways. But we can hone our ability to be creative in other dimensions. Managers need to understand both their own strengths and how to balance the types of thinking across their teams to successfully execute creative projects. And organizations can use this typology to optimize innovation across the workforce.

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Case Study: Should Some Employees Be Allowed to Work Remotely Even If Others Can’t?

More than 3,000 office workers at an oil and gas company in Oklahoma City have been telecommuting since the start of the Covid-19 pandemic. Many of them love the arrangement, and the freedom to work remotely is also a big draw for new hires. But there are downsides: Employees who have to be on-site in the oil fields and on drilling rigs are resentful; collaboration and knowledge transfer are more challenging; costly office space is going unused; and local businesses are suffering because of the emptiness of the downtown core. The company’s CEO must decide: Should we mandate a return to the office for everyone? This fictional case study features expert commentary by Logitech’s Bracken Darrell and Spotify’s Katarina Berg.

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The Power of Everyday Awe

In times of tumult, we need comfort, healing, and inspiration. A good way to find them is by appreciating the vast and wondrous things that transcend us, say several new books.

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Life’s Work: An Interview with Ron Howard

Ron Howard achieved early fame as a child actor on The Andy Griffith Show. Then came a long stint as Richie Cunningham on Happy Days. But from an early age he wanted to direct, and now he has a number of award-winning movies to his credit. He talks about the role of his parents, the arc of his career, and how he gets the most out of his actors.

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