Friday, December 18, 2020

You Want to Control Us? But We Are Your Employees!

Organizations control people and processes – that is how organizations organize. It is unpleasant to some employees and surprising to others, but it is true. A serious concern employees have is that often the forms of control are designed by people who do not understand their work because they are too high up in the organization, as managers often are. If new instructions that control employees do not fit their work, what happens?

This very important question is addressed in research by Jillian Chown published in Administrative Science Quarterly. She looked at an interesting and typical case of control. A new process that improves work has been discovered elsewhere in the organization, executives love the process and its results, and now they are instructing new departments to follow the process. Except that those departments work differently from the ones that initially benefited from it. Everyone knows that people are stuck in their habits and often resist change that is good for them, but they also resist change that is bad for them and the organization. It is important to tell these apart. Chown focused on a work practice used successfully in the inpatient wards of a hospital and then transferred to outpatient clinics. 

Guess what? Outpatient clinics have patients who come and go every day, which makes them very different from inpatient wards. The new process did not work in any of the six clinics, and in response, the staff of the clinics started modifying it to make improvements. This is where things got interesting. Usually, we think of modification as a form of customization. If a meeting in the morning does not help a team schedule processes and assign work and equipment well enough, they may change who attends, what information is brought up, and what kind of decisions are made in the meeting. A team can customize, learn from the customization, customize again, and repeat this until they have a process that works well. Top-level executives and managers further below can see that a customized process is a great way to implement something similar to what they intended, but better. In Chown’s research, customization was an easy and good outcome for half of the clinics. But the other half did not customize. What about them?

In these clinics, the staff saw the new process as completely unfit to the problems they faced and did not see a path toward fixing it through customization. The result was conflicts with the program managers trying to start the process adoption, and these conflicts had interesting outcomes. The clinics were able to halt the process adoption in the original intended form and even the customization of it. But also, the clinics knew that change was needed to improve their workflow, and executives demanded it happen urgently. In response, they started innovating processes. These had some minor resemblance to the original process but were different in form and content, so they were transmutations of it.

Transmutations were not easy to develop because the learning process was harder than with customization and also had less support from the program managers, but all the clinics in question managed to find new processes that improved their work. This is a great testament to how well teams can find new forms of control of their own work. It also brings up a small puzzle: If these improvements were always possible and were so different from what the executives tried to introduce, why had they not happened already? People do resist change, but when they are pushed, they can identify change that works. The specifics of a new form of control may matter less than the effort to enact it.

Chown, Jillian. 2020. "The Unfolding of Control Mechanisms inside Organizations: Pathways of Customization and Transmutation." Administrative Science Quarterly, forthcoming.

Thursday, December 3, 2020

Changing Lenses: Using a Different Theory to Look at Internationalization

Here is a slightly nerdy question for those interested in social science: How attached are theories to fields of investigation? For example, in business schools we have marketing and organization theory. So marketing is about markets, and organization theory is about organizations, right? Not to mention all the subfields within marketing and organization theory, which are dedicated to understanding specific topics. Consumer Behavior in Marketing is about (drumroll…) how consumers behave. But is it so simple?

It is not. Many fields of investigation have been dominated by specific theories, making thinking about them so uniform that much can be learnt from other theories making inroads. To take two examples that I know well: Finance studies financial markets, but organization theory has shown that the status of investment banks affects decisions in those markets, which is against finance scholars’ belief that pricing is pure demand and supply. Organization theory studies organizations, but the entry of economists have increased awareness of how contingent rewards (incentives) can have a big role in organizing.

This means we should look around for opportunities to give established fields of investigation new ideas. That is exactly the purpose of an article by Irina Surdu, Gabriel Benito, and me in Journal of International Business Studies looking at the theory of International Business and arguing that the behavioral theory of the firm, which is an organizational theory, can inform international business studies. Why do we think this will happen? First, addressing a field of investigation with a new theory always brings out something interesting, so it would be surprising if it did not.

Second, who does international business? Firms do. Firms are organizations, and the most man-hours spent studying organizations are logged by organizational theorists, not scholars in international business. Yes, internationalization is a specific action taking by a minority of all firms, but knowing how firms act in general is very useful for understanding any specific action they do.

Behavioral theory is particularly important because it is about how firms learn, and how their managers cope with bounded rationality. This is very important for internationalization because firms that engage in international business repeatedly step into areas of uncertainty that are too great for the boundedly rational manager to make flawless decisions. Instead, they probe, get feedback, adjust, and learn. That is what the behavioral theory of the firm is about.

We do not yet know what will come from an investigation of internationalization through the lens of behavioral theory. That’s part of the beauty, because there are so many ways that this theory can be used, and so many things that can be discovered and can improve our knowledge of international business. In the end, this will feed into how we teach students to manage the complex international world that they are facing. We have now issued an invitation to researchers to change lenses, and we think it will be productive.

Surdu I, Greve HR, Benito GRG. 2020. Back to basics: Behavioral theory and internationalization. Journal of International Business Studies forthcoming.

Tuesday, December 1, 2020

Sprinters or Legionnaires? Why Entrepreneurs Benefit from Collaboration

What happens when you put talented and ambitious people together? That is an important question in many contexts, and a currently popular version is accelerators for entrepreneurs. Accelerators select the most promising venture plans from many applicants, giving them a pool of talent and ambition. They have training programs, coaches, and access to industry and funding contacts, and their goal is to help the participating entrepreneurs produce valuable ventures. Importantly, accelerators also house the venture teams together and have them interact in the training program and during their regular work.

But how should we think about their interaction? In sports, talented and ambitious people are brought together because they improve through competition. Sprinters run faster, and gymnasts develop better routines. But people are also brought together because they improve through collaboration. Soccer teams fine-tune their attacks and defenses, and Caesar’s veterans were so coordinated that they could beat other Roman armies in the civil war. Competition and collaboration can both be effective, maybe even simultaneously, but which one is best for entrepreneurs?

Thanks to research by Rekha Krishnan, Karen S. Cook, Rajiv Krishnan Kozhikode, and Oliver Schilke published in Administrative Science Quarterly, we can now answer that question. They had access to an accelerator in Silicon Valley and followed three cohorts of selected ventures, with enough differences in training and other events that it was possible to discern the formula for success. The answer may be a surprise: entrepreneurs are legionnaires, not sprinters. Collaboration with other ventures in the cohort first improved their social connections and then improved their resource access.

How did this happen? The paper has such a rich description that I cannot do justice to it here, but the main events are easy to summarize. The training included exercises that can be described as bonding rituals, such as social or sporting events. Even a simple game such as talking about hobbies or other personal information can be a bonding event. They also included exercises that can be described as tournament rituals, such as reporting of their progress toward many goals, in front of all the others. Bonding rituals and tournament rituals had very different effects. Bonding rituals led to social interactions not organized by the accelerator and generated friendships and openness. This made it easier for the entrepreneurs to ask questions and share important information. Importantly, bonding rituals made entrepreneurs comfortable with giving valuable tips to each other without getting anything back in return.

And the tournament rituals? They became show of strengths, just like a 100-meter sprint is, and they failed to create friendships and social interaction. Even worse, tournament rituals made entrepreneurs think that valuable tips should not be given away for free – they should be traded. But of course, this does not work. Unlike goods, information cannot be priced and traded well, and two people rarely have needs for each other’s information at exactly the same time.

This is where the legionnaire entrepreneurs win. Tightly bonded, they are willing to give without asking for anything in return, but they still get much in return. Not at the same time, and often not even from the same entrepreneur, but they know that in a group that collaborates, everyone is better off. Maybe entrepreneurs are not so different from everyone else after all.

Krishnan, R., K. S. Cook, R. K. Kozhikode, and O. Schilke

2020 "An Interaction Ritual Theory of Social Resource Exchange: Evidence from a Silicon Valley Accelerator." Administrative Science Quarterly: forthcoming.

Tuesday, November 24, 2020

The Art of Improvisation: How to Do True Leadership

Anyone who has risen high enough in an organization knows some important dilemmas and tradeoffs. One is that organizations gain most of their advantages through routines – doing the same thing over and over again, with occasional small variations – but there are situations in which routines are exactly wrong. Instead, improvisation will save the day. Another is that organizations are collaborative enterprises in which people work together to accomplish outcomes, but there is also competition. You want to perform better than the rest, and many others do too.

How to choose between routine and improvisation, and how to balance cooperation and competition? Thanks to research by Pier Vittorio Mannucci, Davide C. Orazi, and Kristine de Valck published in Administrative Science Quarterly, we know much more about these choices than before. Their work tells a fascinating story about how improvisation is done in live-action role playing, but here I will omit the details of their research and focus on their findings, which tell us some new things about leadership skills.

The first thing to know is that what we call improvisation is often just the act of stepping outside the routine way of doing things. Actions do not have to be new and dramatic to be effective, and imitative improvisation is especially good for newcomers, such as recently promoted managers. What is imitative improvisation? It is to pay close attention to what others, more experienced in the same role, are doing and to match their responses to situations you encounter. It is smarter than imitation because it is done selectively, but it looks a lot like imitation.

With experience, you can learn better ways to improvise, but not everyone manages to do so. The next step up is to think of your own reactions to unexpected situations, stepping outside routines again but now without using others’ actions as a guide. This is effective but requires more knowledge than newcomers have. The third is to look for opportunities to improvise to make improvements that others have not thought about. This type of generative improvisation is no longer problem solving because your goal is to take an organization that functions well and make it even better. This is innovative but requires more knowledge and confidence than most managers have.

Not everyone can step up this ladder of increasingly effective improvisation. What do we know about those who can? This is where the research gets even more interesting. Recall that organizations feature both cooperation and competition. It turns out that competitive people get ahead fast, also in improvisation, because they are very situationally aware and quickly learn how to imitate and how to react. Cooperative people are slower. Yes, this matches our intuition that many people who rise quickly in an organization are on the shrewd side, but keep in mind that they are solving problems well when needed.

But then it stops. Cooperative people are better at recognizing opportunities and moving others along with them to generate new ways of improvising. If you are cooperative and late to learn how to react well, you will be even better at generating improvisation than competitive people will.

And even better, people can change over time. In particular, you may be one of those who start out competitive because so much is at stake and you feel insecure, but after initial successes you become collaborative. That is the best kind of improvising leader, because that means you will quickly go through each stage of learning how to improvise, and you will reach the peak of improvisation that is done by so few and needed by so many organizations.

Mannucci, P. V., D. C. Orazi, and K. de Valck. 2020. "Developing Improvisation Skills: The Influence of Individual Orientations." Administrative Science Quarterly, forthcoming.

Friday, November 13, 2020

Light ’em Up! How to Win Stigmatization Battles

What if you are selling a product that is stigmatized by many, yet you think it benefits society? Life insurance used to be that type of product, because gaining money from someone’s death was deeply sinful. Most who have driven around Silicon Valley have a similarly negative view of fully autonomous vehicles (they are VERY annoying to have around), yet they already drive more safely than cars with human drivers and are not that much slower.

Many organizations are dealing with products that have varying levels of stigmatization, so this is an important problem to solve. Thanks to research by Olga M. Khessina, Samira Reis, and J. Cameron Verhaal published in Administrative Science Quarterly, we have a better idea of what works best. They looked at firms that are still highly stigmatized by many – marijuana dispensaries – and asked the question of whether they benefited from subtle or brash self-presentations.

The question is important because the self-presentation shapes how customers respond in three ways. First, through shop naming, location, and design, the dispensary can make it easier or harder for potential customers to enter, given that some people are interested in the product but also worried about becoming stigmatized as, well, dope-heads or whatever the fashionable denigrating term happens to be. Second, a shop that is seen to celebrate its identity as a seller of marijuana can influence customers’ thinking, because its celebration can be a source of pride that counters the stigma.

The third mechanism is especially important. People influence each other very powerfully, especially when there is no clear profit motive (unlike the influence from a shop to a potential customer). Maybe when some of the shops celebrate their identity, that makes it easier for their customers to openly do the same. If that happens, the influence among people can greatly reduce the stigma.

The conventional belief is that a store selling stigmatized products, or even just controversial ones, should keep a low profile. The California dealerships selling three-ton trucks to consumers are often placed away from where the Priuses are found, and the Hermès-ish bags in Paris are not found near rue Saint-Honoré. Any benefits from being open would surprise a lot of people. But surprise is exactly what the data offered. Stores that openly celebrated their products increased acceptance of marijuana in their local communities. Customers posting online store and product reviews with more open discussion of the products increased acceptance of marijuana in their local communities.

These findings are not the same as saying that each of these stores benefited directly – the data are not fine-grained enough to allow that conclusion. But they do show that a community of stores with a shared stigmatized product are best off being open about their identity. Together they can change opinions, wear down the stigma, and gain acceptance as a legitimate form of business. And that is very useful guidance for organizations in need of advice because their products are stigmatized.

Khessina, Olga M. , Samira Reis, and J. Cameron Verhaal. 2020. Stepping out of the Shadows: Identity Exposure as a Remedy for Stigma Transfer Concerns in the Medical Marijuana Market. Administrative ScienceQuarterly, forthcoming.

Tuesday, October 20, 2020

Motivating (Soccer) Teams: What Price Success, or Failure?

Here is something we would like to know about teamwork: What is the effect of successes along the way? Or failures? The answer is important because teams often have partial goals that they either fulfill or not at the designated time, so a team may be encouraged by a success or disappointed by a failure. And those effects, in turn, may affect their work, though it is by no means certain that teams work better after a success. 

Jo Nesbø, Nils Rudi, Marat Salikhov, and me investigated this question in an article published in PLOS ONE, picking a context that has very literal teams and goals – top national leagues of professional soccer (known as football in most of the world). The idea was that a goal scored is a success for scoring team and a failure for the conceding team, so each goal changes the dynamics of the game. The question, then, is how that affects the likelihood of a victory or the full-time goal difference in the game.

To start with the obvious, soccer games have few goals, so simply scoring a goal makes a big difference. But here is also something less obvious, and potentially important. Usually the play goes on after a goal, but an important exception is when the goal is just before halftime. For example, in the last minute before halftime, which is what we investigated. In that case, the referee blows the whistle soon, and the teams go to their locker rooms. Then what?

The halftime break is when managers (coaches) make adjustments and motivate their teams, and team members rest and prepare for the second half. A goal just before the break is supposed to be demoralizing for the team that conceded the goal, and managers try to counter that effect. If they fail in doing that, a goal just before halftime influences the game much more than one at any other time. And indeed, that is what we found – halftime goals by the home team are influential; halftime goals by the away team are not. The difference is interesting because away teams are playing at a disadvantage to begin with, and conceding a goal at a bad time just makes things worse.

So, is the conclusion that successes are good, and failure are bad? It looks that way, and in fact it is quite likely that success just before the break gives the team a better start. Actually, it is not so simple that we can draw that conclusion. You see, another possibility is that successes produce overconfidence that makes a team more vulnerable to mistakes for a (short) while after. If that is true, halftime goals are great simply because the halftime removes the vulnerable period. That would affect home team more because away teams play in front of hostile fans and feel vulnerable even after scoring a goal.

What is the real explanation of this effect? We cannot be sure, because team dynamics are complicated and difficult to dissect very accurately. That, along with how important teams are for work in many kinds of organizations, means that we have to be very careful in the research before drawing final conclusions. That sounds like a reason to do more research on goal scoring in soccer, and on teams having successes and failures more generally.

Greve, H. R., J. Nesbø, N. Rudi, and M. Salikhov. 2020 "Are goals scored just before halftime worth more? An old soccer wisdom statistically tested." PLOS ONE, 15: e0240438.


Monday, October 19, 2020

Making It Easier for Firms to Adapt to Social Norms: The Art of Facilitation

Organizations are often asked to change so that they become more in sync with societal norms. Social movements, activist employees, and even the state can ask for change, but as we have discussed already, change often meets with resistance. What to do in the face of resistance? The usual response has been to push harder when an organization resists, just as battering rams were used to get through fortress gates.

In an article published in Administrative Science Quarterly, Lisa Buchter documents another approach that has been overlooked: facilitating the change. This approach is built on the principle of creating mechanisms that make it easier for the organization to change, by creating models for how change can be implemented and setting examples showing its success. The reason this works is that resistance to change is partly motivated by the effort of changing structures and processes and partly by the uncertainty of its success. The reason this works smoothly is that it is a way of reducing rather than overcoming resistance.

How did Buchter discover this approach? She studied French organizations adopting policies that accept LGBT rights. This was a complex initiative because French law had been written to ensure the rights of diverse groups, mentioning disability, sex, age, and ethno-racial categories but omitting sexual orientation. The task facing LGBT employees was to become recognized as a group that also deserved equal treatment and to have policies implemented.

To accomplish this, employee activists made use of implementation resources – including documentation of the need for fair LGBT treatment but focusing on creating preconfigured policies and procedures that the organization could adopt directly or with simple modifications. They did push for change, but there was a clear emphasis on making the change easier to implement. They could do this because LGBT activists shared information among themselves on what had been done successfully in pioneer organizations, and activists in each organization could point to successes when advocating change in their employer.

While one benefit of this approach was to accelerate change by making it easier to do, another was to ensure that the policy adoptions actually worked as intended. Organizations often react to changes in societal norms by doing as little as possible because they favor stability – not necessarily because they dislike the new norms. But presenting preconfigured policies meant that the new policies would not be minimal and symbolic changes but changes that actually led to fair treatment of the LGBT community.

Notice that the keys to success were that the initiatives were systematically spread among organizations and that in each organization insiders – employees – had prime responsibility for helping implementation. Employees need to learn what are the most effective implementation approaches, and they already know which leaders in their organization are best to approach. History offers few examples of the successful use of a battering ram but many more of successful castle sieges in which the gate was opened from the inside.

Buchter, L. 2020 "Escaping the Ellipsis of Diversity: Insider Activists’ Use of Implementation Resources to Influence Organization Policy." Administrative Science Quarterly, forthcoming.

Friday, October 16, 2020

What Happens When Firms Adapt to Societal Norms? Resistance

We have seen many changes in how society thinks about the workplace—changes that started long before the current pandemic and have become especially important now. One key change is the new and critical view of all-consuming jobs and professions, which are widely seen as a relic of the days with a breadwinner husband and a stay-at-home wife. Strangely enough, these types of jobs are quite common in occupations that require higher education, such as law, finance, and consulting. In all of them, many employees face rigid promotion schemes that require very long workweeks both before and after promotion, with the up-or-out promotion to partner being particularly out of touch with current societal norms.

Naturally, some firms have decided to adapt to the societal view and introduce an alternative career path. What happens after those decisions is the topic of an article in Administrative Science Quarterly by Namrata Malhotra, Charlene Zietsma, Timothy Morris, and Michael Smets. They studied law firms that added the position of council as an alternative to the partner position, with the idea that a council did not need to face the same demands before or after promotion as a partner would. So far so good, right? Firms ought to conform to societal norms, especially when these are turning against exploitation of employee time budgets, and employees should welcome such changes.

Wrong. The introduction of the council position met with significant resistance from the employees it was supposed to help, even though many of them would agree with its goals. Of course, organizational change is always difficult because it involves calculations of who wins, who loses, and what is at stake. This change was especially problematic for a different reason. Societal norms favored the change, but as members of the profession and the firm, the lawyers saw the old norm of rigid and demanding up-or-out promotion as correct.

What followed was a battle in which resistance was expressed as concerns about the change being too great, too ambiguous, and too contrary to current norms and practices. Each of these were met with counterarguments from those driving the change. The change is too great? But instead of focusing on what’s different from current practice, focus on how the change improves life—family life. The change is too ambiguous? Focus on how some goals are still shared between old and new practices. The change is contrary to current norms? Focus on reassuring employees that there are pragmatic solutions to the contradictions. Through these three moves, the law firms were able to establish some degree of acceptance of the council position.

The big irony is that the introduction of a council position removed nothing of the old system of associates and partners; it just added a third position of council with a different career track. It could benefit both firm and employee by preventing the firing of employees who held valuable skills but could not or would not conform to the old career system. In principle, changes that introduce options without taking other options away should never be challenged. Organizational change is more complicated than that, however, as there is always the question of whether the old options stay the same once this new option has been introduced. And when the logic underlying the council position appeared too dissimilar with the old way of running law firms, employees were disturbed by the change.

Career systems of the employees, by the employees, and for the employees are ideal. When the career systems are meant to be for the employees but are not decided by the employees, conflict is a likely result, because the combination of different norms and distrust can be poisonous.

Malhotra, N., C. Zietsma, T. Morris, and M. Smets. 2020. "Handling Resistance to Change When Societal and Workplace Logics Conflict." Administrative Science Quarterly, forthcoming.

Monday, October 12, 2020

When It Comes to Group Conflict, We’ve Been Tricked

Here are three things about group conflict that managers and researchers think they know: Group conflict is common, it continues unless there is an intervention, and it reduces group performance. Are they correct? Actually, they are wrong, wrong, and wrong. These are the conclusions from research on group conflict done by Priti Pradhan Shah, Randall S. Peterson, Stephen L. Jones, and Amanda J. Ferguson and published in an article in Administrative Science Quarterly.

Why is there a gap between managerial belief and reality and – even worse (for scholars) – between research and reality? To start, let’s take groups apart. Group conflict means that there is conflict among most or all of a group’s members. But many groups contain a difficult person who creates conflicts, and these are not actually group conflicts because they center on that individual. Other groups contain people who pair up poorly and are in conflict with each other, and such dyads are not group conflicts either. The problem is that such conflicts can be confusing because the difficult person (and perhaps people in contact with him or her) thinks the group has a conflict, and so do the poorly paired people. Some things that look like group conflict are not.

Now look at conflicts over time. Do they stay the same if there is no intervention? Actually, they can shrink, stay the same, or grow. That is true both for true group conflicts and for individual or dyad conflicts. Many conflicts that occur in groups become group conflicts only if they grow; otherwise they stay minor or even disappear. Finally, consider how conflict affects performance. The common belief is that conflict worsens performance because it cuts down communication and joint problem solving. That seems intuitive, but it also seems to hold mainly if the conflict is a true group conflict rather than one involving an individual or a dyad. I certainly know how to work around a difficult individual, and I bet you do too.

The authors present data on how many conflicts within teams start out as true group conflicts. In one set of teams, it was only 14 percent. So, most of the conflicts occurring in the groups they studied were not group conflicts, at least not at first. How many conflicts grew over time? 24 percent of those that were not group conflicts to begin with. Most of the rest stayed the same, and a few shrank. Taking into account conflicts that grew, 28 percent of the teams experienced group conflict at some time. Another study in this article shows similar percentages at the start but fewer conflicts that grew to the team level.   

What about group performance? The low level of group conflict is good news, with most groups doing quite well because their conflict – if there is any – involves only a few members. The news is even better, in fact, because groups with individual or dyad conflicts have higher performance than groups with no conflict. How can this be? To me, it looks a lot like the findings from research on minority effects on jury deliberations. Having one or more members disagree with the rest of the group can be stressful, but it has the benefit of providing a deeper consideration of how to best conduct the work. Even if those members are wrong, they improve the group’s performance by forcing the rest of the group to consider their processes more carefully.

Being wrong about so much should be a serious call to reconsider what we know about groups. There is an important reason that managers and researchers are so often wrong: It is easy to confuse some group members’ feelings that there is conflict with an actual group conflict. Individual impressions do not mean much unless they are connected with actual examination of the group, which many managers and researchers overlook because they take the statements of the noisy individual or dyad to be the whole story. Management is about the big picture, but it must also be about attention to detail.

Shah, P. P., R. S. Peterson, S. L. Jones, and A. J. Ferguson. 2020 "Things Are Not Always What They Seem: The Origins and Evolution of Intragroup Conflict." Administrative Science Quarterly, forthcoming.

Tuesday, October 6, 2020

Solving Problems: How Subordinates’ Ideas Can be Implemented

Here is the main reason that organizations are inefficient and prone to making errors: subordinates know the processes best and can propose solutions to problems they see, but those in higher positions ignore or decline the proposals. Three-quarters of the solutions proposed by subordinates were shot down in the healthcare team studied by Patricia Satterstrom, Michaela Kerrissey, and Julia DiBenigno in a study recently published in Administrative Science Quarterly. Despite this, their research has a message of hope for subordinates who want to solve problems in their organization.

Why be hopeful if those in higher positions are so likely to dismiss solutions? The reason is simple. Good ideas don’t just die – the proposer and others on the team remember them and keep them alive, and many more solutions than the fraction that are immediately accepted eventually find their way into the organization. Indeed, members of this organization were so devoted to improvement that they used a variety of mechanisms to push through solutions to problems they saw.

Let me talk about two simple mechanisms here, out of the many documented in the paper. The first is persistence. Those who identify a problem and find a solution don’t just shut up forever after being ignored or put down. The solution is clear to them, and people in higher positions ignoring subordinates is commonplace in organizations, so it makes sense to bring up the solution whenever possible – preferably after there has been another event showing that the problem remains serious. As you might expect, persistence works. It was the second-fastest approach to solving problems in this study.

So, what was the fastest one? The answer will make sense to many who are familiar with organizations in research or practice: coalitions, or what the authors call allyship. Once a good solution has been voiced, other subordinates may decide that they too think it is better than the current way of doing things and that the people resisting change need frequent reminders that there is a better way of doing things. Coalitions work for multiple reasons. One is political: even an employee in a higher position has difficulty resisting solutions that many others favor. There is also a simpler reason that is especially effective. An informal coalition of people who support a solution will affect others’ thinking because they will argue for its benefits, and their arguments gain weight because multiple people say the same thing.

Persistence and coalitions are simple approaches to driving solutions through a resisting organization, and they are not the only ones that can be used. So, does that mean everything is good, and we don’t have to worry about whether organizations can improve? Well, not exactly. The first problem is that the initial decline of most solutions is consequential because it significantly delays their acceptance and implementation. In this research, only coalitions/allies were able to push solutions through in less than a year (on average); all other approaches took a year or more.

The second problem is that this study focused on a healthcare organization, with proposals from patients, receptionists, and nurses being declined by doctors. Given that healthcare organizations are in the business of saving and improving lives, I can think of many forms of organizations in which the subordinates will be less motivated to push superiors to accept solutions. I can also think of many forms of organizations in which the people in higher positions – managers – are less in touch with the actual work processes than doctors in a hospital. Still, this research gives us hope that solutions will happen, along with some ideas of how and when they happen.

Satterstrom, P., M. Kerrissey, and J. DiBenigno

2020 "The Voice Cultivation Process: How Team Members Can Help Upward Voice Live on to Implementation." Administrative Science Quarterly, forthcoming.

Wednesday, August 19, 2020

Prioritize Me! Assembling and Breaking Routines in Complex Work

Organizational scholars are fascinated by routines because they are the core of organizational efficiency. People working together learn how to improve their work, especially in repeated work with measurable consequences. All routines are not equal though. Factory workers can become fabulously productive because their routines keep being examined and improved; many low-level service workers or administrative workers can also do well. The exception is often highly educated professionals, especially when working in teams. Their outputs are too complex to measure accurately, and there is not much repetition to allow improvement. How can they still work efficiently?

Clues to the answer are found in research by Waldemar Kremser and Blagoy Blagoev published in Administrative Science Quarterly. They looked at how consultants working on a civil construction project struggled to keep a steady workflow and meet deadlines. They found that the intermingled project tasks, meetings, interactions, and deadlines created a complex environment that made execution of routine work difficult even when the routines were well-known. Still, the consultants knew the importance of routines and efficiency and applied a sequence of solutions to make progress.

The first-priority solution was to follow the normal sequence of tasks, which is exactly how routines are normally done – when one task is completed (by you or someone else), start the next one in the sequence. But timing conflicts often made demands on the consultants that interrupted sequences, which led to the second priority: follow the deadlines and work on tasks labeled as urgent. Sometimes the second priority was not good enough either because multiple tasks were urgent, which led to a third priority: work on tasks requested by the person filling the most important role. 

Each step along this priority chain reduced efficiency, and the consultants knew it. Nevertheless, the steps were followed because deadlines have a special status, and ignoring important people is a bad idea. The result was an ecology of tasks that added up to progress, though often with inefficient execution because some consultants had multiple requests that needed to be done in sequence, some consultants had to wait, and many routines were torn apart because the normal sequence of actions was interrupted by deadlines or requests from high-status coworkers.

Was the result enduring inefficiency? Actually, two graphs in the paper show that the consultants learned how to deal with these time conflicts over time. One graph shows that acute time conflicts peaked soon after the start of the project and were significantly reduced after that. The other shows that the solution of catering to the most important roles took up more than half their time initially, but after consultants made adjustments, the time spent on this effort was reduced to less than one-fifth thereafter. After consultants got through that initial adjustment period, they split their remaining time equally between sequence-based and timing-based prioritizing.

Compared with work done by an assembly-line worker, the inefficiency documented here is staggering. But keep in mind that these consultants are creating and applying routines to generate never-before-seen output, and much of the inefficiency originates in the deadlines. Deadlines are a well-known enemy of efficiency, and so are complexity and novelty. Thanks to this research, we now know more about how professionals working in teams handle these challenges.

Kremser, W., and B. Blagoev

2020 "The Dynamics of Prioritizing: How Actors Temporally Pattern Complex Role–Routine Ecologies." Administrative Science Quarterly, forthcoming.

Monday, August 17, 2020

My Work Is a Calling. Let Me Tell You Why

If you are like most people, your work is somewhere between mind-numbing and mind-blowing, but you do not see it as a calling. You likely have met people who see their work as a calling, and you are vaguely envious of them (except perhaps of their pay). What makes people see their work as a calling? Or to be more precise, how do they describe their journey to a type of work that they experience as a calling?

Thanks to research by Matt Bloom, Amy E. Colbert, and Jordan D. Nielsen published in Administrative Science Quarterly, we know much more about how people describe their calling. The authors studied four caregiving professions that are richly populated by people who see their work as a calling: pastors, physicians, teachers, and international aid workers. They asked people in these occupations to talk about how they found both their calling in the occupation and their place doing it. Interestingly, they heard two different types of stories.

One was the journey toward the true self. This is the story we are most familiar with, and it involves spending time on introspection to discover oneself, discovering exemplars who show how greatness can be achieved, and listening to wise advice. This version is familiar in part because it is well captured in popular literature—any Star Wars fan can see these elements in the Luke Skywalker story. Its prominence does not mean it is fictional. It is exactly how many people find their calling, and an important part of these stories is the discovery of a better path. That could mean learning that the occupations others thought were best were not right—they didn’t resonate. It could involve getting wise guidance about one’s abilities that pointed in a particular direction.

The other type of story people told was about exploration leading to finding. This is a less familiar story that is overlooked, perhaps because it is less of a straight path. It involves departure from work that missed an emotional connection, fortuitous discovery of a better kind of work, and choosing the newly discovered work. This path toward a calling sounds less like finding a destiny, but it is equally strong and prominent among those who see their work as a calling. Departing something that is good but not great can lead to discoveries, and pursuing these discoveries may lead to work as a calling.

Maybe the second story is even something we prefer not to know about because of what it means for all those who experience their work as a regular activity and not as a calling. Is there something better out there? Would leaving the current work and exploring other activities be the way to discover a calling? It is for many others. But most people worry about risk and want to maintain their investments in their current activities, so exploration is rarely tried. Indeed, in troubled times such as these, who dares to explore unless they are forced to?

The two paths to a calling are interesting especially because the second one has so much promise for those who think they will never find a calling. It may even offer hope for those who are forced by the current crisis to stop their work and look for something new. I’ve seen social media posts reminding us that “What you do not change is what you choose.” For those seeking change in the form of a calling, perhaps finding it is as simple—and daring—as choosing again.

Bloom, M., A. E. Colbert, and J. D. Nielsen

2020 "Stories of Calling: How Called Professionals Construct Narrative Identities." Administrative Science Quarterly, forthcoming.

Tuesday, July 7, 2020

Media and Management: Are Firms Easy to Control?

Who do firms answer to? Among researchers and the press, there has been much talk about how firms are willing to ignore a wide range of environmental and social concerns. This discussion is often coupled with the observation that firm pay inequality drives economic inequality. On the other hand, many firms were pioneers in the Black Lives Matter movement, and before that they put pressure on states seeking to enact discriminatory laws. So, which is it?

In research published in Strategic Management Journal, Andrew Shipilov, Tim Rowley, and I looked at whether firms respond to one particularly influential actor – mass media. We examined a very controversial firm action – changing the governance structure to give the board of directors greater control over the CEO and top management team. This type of change is a good indicator of whether the firm is responsive or not, because it goes against top management interests but had significant press coverage for a while.

The key observation we made is that media not only talks positively about what are good governance structures; newspaper articles also describes individual firms. Articles can contain praise or critique. Articles can even contain emotional words, which can be either positive or negative. A person reading a newspaper article describing the governance of a firm can easily find out whether the firm is viewed positively. If that person is the CEO of Chair of the Board, a negative article could be a reason to reconsider the current governance.

Did this happen? Fortunately, newspaper articles can also be read and interpreted by laptop computers, so we asked ours to look at them. We found that firms were indeed responsive to press reports, and they responded in more ways than we imagined when we started the research. First, does a firm improve governance when it gets negative press coverage? Yes. Critique from the press is a problem to solve, and the solution was to act – not to ignore it.

Second, what did firms do when it received positive press coverage of the governance? They improved it further! The press discussing governance set the agenda, which pushed the firms to make subsequent improvements, especially because many firms received press coverage with praise exactly because they had improved their governance. So, they made further changes in response to this praise.

Third, firms also learnt from each other. Many boards of directors are interconnected because the same person serves two firms. These connected board members were like bees spreading the pollen of good governance: when one of their firms had been criticized for poor governance, they advised other firms to avoid this fate.

Firms are not unresponsive: they answer to society. The reason they are often thought to be unresponsive is that they are selective about when to respond, and who to respond to. Any issue that becomes important in mass media and a source of praise and criticism will get their attention. As suggested by their recent responsiveness to social issues, and as we showed in our research, they can respond quite powerfully.


Shipilov, A. V., H. R. Greve, and T. J. Rowley

2019 "Is all publicity good publicity? The impact of direct and indirect media pressure on the adoption of governance practices." Strategic Management Journal, 40: 1368-1393.

Monday, July 6, 2020

Firefighting in Organizations: Understanding Time and Timing

We often use the term “firefighting” to express that we are solving urgent and serious problems in organizations, and anyone who has been involved in firefighting knows how important it is to act at the right time and synchronized with others. I have certainly seen things fall apart when someone responds to a problem too late or when someone responds so soon that others are unable to coordinate. Too fast and too slow are both problematic. How, then, to make organizations reliable firefighters?

To study this problem, Daniel Geiger, Anja Danner-Schröder, and Waldemar Kremser studied real firefighters in an article published in Administrative Science Quarterly. Their idea was that the problem of coordinated responses to rapid and unpredictably changing situations is something that firefighters face so often, and need to address so reliably, that we can learn from how they prepare and execute. Importantly, fire departments are just like other organizations in that they usually do not face significant surprises, so they can develop routines for normal situations and be ready to adapt when a fire or other emergency goes off script.

What did they find? Interestingly, the concepts of routine, duration, and event, which organizational scholars care about and think that real workers do not pay attention to, are central to how firefighters organize. Before acting they plan (“triage”) their approach. When multiple teams are needed, they pace themselves to be in sync. When problems are discovered, commands are used to react to the event and change the approach.

This does not mean that firefighters work as fast as possible, contrary to what one may think from television and movies. Exactly because teams may be out of sight of each other but need to be synchronized, they have to pace themselves carefully. Exactly because they can encounter surprises such as suddenly learning that a person is missing in a burning building, they need to be organized so they do not over-commit but can respond flexibly. The pacing and the caution slow them down, but in return they get reliability and flexibility.

Are these approaches effective? We don’t know that they are the most effective possible, but they are routinely used and flexible enough to help firefighters address situations involving significant risk to lives and value, as well as very unpredictable events. They seem robust.

How are these approaches developed? Firefighters are trained, of course, and the training gives them the basic routines and ability to flexibly respond when a situation changes. Indeed, the simulated fires used in training are designed to contain surprises. Following the training, they gain experience in handling a wide range of firefighting tasks, starting in the role of a team member who follows team leader instructions and learns by observing experienced team members. They learn to take cues from how others react to alarms, and they learn the firefighter and team leader mindset.

This mindset is particularly interesting because firefighters think and talk about time a lot. Using their words, they want to “get ahead of time” always, and they fear “running behind.” The key skill they develop is to quickly understand the situation well enough to choose the right routine and to coordinate actions accordingly. Routine, duration, and events are exactly the concepts our theories obsess over, and firefighters put them together in a very flexible and robust way.

Thursday, June 18, 2020

Between Two Chairs: The Power of the Bridging

One of the differences between practice and science is that in management practice, the person with a clear identity, focused expertise, and undivided loyalty is valued greatly. In science, we often find that this person is too narrow to respond to a complex world. Indeed, we regularly publish findings suggesting that more complex people are more useful to their organization.

Is this true also at the highest levels of management? One way to answer this question is to look at boards of directors, as Jiao Luo,Dongjie Chen, and Jia Chen did in research published in Administrative Science Quarterly. They looked at directors who had studied or worked outside China but then returned and became board members. They examined whether these board members helped introduce the novel (in China) practice of donating to corporate social responsibility (CSR) initiatives.

The reason such returnee board members might be less influential than other organizational members with complex backgrounds is simple: power. The board of directors is the most important decision-making body in an organization. It makes decisions through voting because there is no central authority, and board members may not come to agree on the right decision. That is different from what happens further down in the organization, where an idea-rich person can become recognized and promoted by someone higher up, to the benefit of both.

So are returnee board members more effective in promoting CSR than those who stayed in China? The authors found that the answer is yes butas you might expect given boards’power games—under certain conditions. First, they need allies. More returnees in a board help, and interestingly, returnee directors also become stronger when they have strong local political contacts. In an interesting twist, the directors returning from nations in which political contacts would normally be useless are especially influential if they have political contacts.

Second, the returnees are helped by conditions showing a need for CSR. As in any power game, showing that your side is the right one for helping the community, and getting potential allies that way, can help push the opposition into conceding.

The benefits of having a diverse background and seeing a decision from multiple angles are well known. Whether they translate into actually making the right decision is less well known, and it is very useful to learn that allies are necessary. After all, the main reason that the person with clear identity is trusted more is that they are more common, so they more easily form allies with those like themselves. For people with complex backgrounds, this task is harder.

Luo, J., D. Chen, and J. Chen2020. "Coming Back and Giving Back: Transposition, Institutional Actors, and the Paradox of Peripheral Influence." Administrative Science Quarterly, forthcoming.

Friday, June 12, 2020

Shopping for Judges: How Firms Try to Manipulate Legal Decisions

Many people are not aware that the US legal system facing corporations is much like a shopping mall that lets the plaintiff choose jurisdictions just as freely as we choose between the Adidas, Nike, or Puma store. And plaintiffs choose for the same reasons we choose a shoe store – price and fit. They want quick decisions, because they are inexpensive, and they want decisions that fit their wish. Which is to win, of course.

Thanks to research by Maxim Sytch and Yong H. Kim published in Administrative Science Quarterly, we now know more about how plaintiffs choose jurisdictions. The authors find that the choice is often guided by social connections, a way of choosing that sounds odd but is actually very effective. To understand how this works, there are two things we need to know.
The first is that although the law is said to be the same for everyone, it is not. Legal cases involve communication and interpretation, so whoever can tailor their message to the judge has a better chance of winning.

The second is that communication and interpretation are learnt. That matters because sharing law school education means sharing this type of learning, as well as the feeling of coming from the same stock. Sharing work experience matters too, because people who work together practicing law, as newly minted lawyers do when serving as clerks for judges, learn how their colleagues communicate and think.

Knowing these two things, we can start understanding how a patent lawsuit, which is what Sytch and Kim studied, is filed. The law firm (patent lawsuits are not handled by in-house lawyers) looks for judges who attended the same law school as one or more of its lawyers or for whom its lawyers served as clerks. The firm picks a jurisdiction that has such connected judges. If it gets the judge it wants, the firm’s lawyers tailor the language in their filing to match the communication and interpretation of the judge. And then they win – not always, of course, but much more often than they would if there was no connection or no tailoring of the message.

The increase in win likelihood is stunning. Having studied at the same school at the same time as the judge multiplied the likelihood of a win by 4.6, and having been a clerk for the judge multiplied it by 2.8. Tailoring the lawsuit further increased the likelihood. Clearly, we cannot say that “all corporations are equal before the law.” Those who pick law firms that get the judges they want do a lot better.

Is there no risk to this behavior? Well, the way it works is that a law firm chooses the jurisdiction (Federal District Court), but the judge is chosen randomly within the jurisdiction. Because the law firm looks for social connections, it may actually sacrifice some human capital when assigning its lawyers to the case. That, in turn, means that a loss is more likely if the judge they’re hoping for does not get assigned to the case. The downside is not huge, though: the firm is just over 10 percent less likely to win the case. So, we are looking at a one-sided bet.

Clearly the practice of law is in some jeopardy if it is done in such a club-like fashion. This is especially so because under the US legal system, decisions establish precedent, so any decision in favor of the plaintiff that pushes the boundary of what a patent claim can cover has future consequences. These consequences are already seen in the form of “patent trolls,” which are corporations that acquire (buy) patents not to make products and do business but just to file lawsuits against other firms. Patent trolls benefit from the ability to threaten firms into offering settlements (paying without even going to court), which is more likely when law firms skilled in jurisdiction choice keep winning their cases.

Tuesday, June 9, 2020

Are Fraudsters Innovative? Real-life Ocean’s Eleven

Do we admire fraudsters? I know you want to answer negatively, but there is a great deal of admiration of the clever fraudster expressed in popular culture, as seen in novels and in movies such as Ocean’s Eleven. Much of the admiration has to do with how clever and innovative fraudsters are, unlike most of us. From an outsider’s point of view, it is almost as if someone with a known history of deception in business and private life could get sufficient votes to win an election to a public office.

An important premise of the admiration is that fraud and innovation are found in the same people and the same firms. So, maybe those who fraudulently get money are the ones who will use it most innovatively? Whether that is true is the topic of research by Yanbo Wang, Toby Stuart, and Jizhen Li recently published in Administrative Science Quarterly. Their idea was simple and powerful. One of the main ways that firms do fraud is by misstating their financial statements. For example, a fraudster might report huge losses and no wealth to the tax authorities and tell everyone else that he is a billionaire. The benefit of the fraud is to get something valuable – paying less taxes while getting trust and resources from others.

Wang, Stuart, and Li were able to find data proving that such fraud took place because they could compare Chinese firms’ regular financial statements with those they reported when applying for innovation grants. Obviously, reporting success can help a firm get innovation grants, even if the report is false. After all, when the state grants innovation funds it acts like an angel investor or a venture capital firm – it chases success.

For those of you who value honesty, I should start with the authors’ finding that half the firms were honest. How you react to this finding depends on what you thought was true, of course, but it can be either relief or disappointment.

What follows is worse. Fraud pays. Exaggerating success helped firms get money, so the final pool of firms getting innovation grants was less honest than the initial pool of applicants. Also, fraud leads to waste. Honest firms winning grants increased their hiring overall, including R&D hiring, whereas fraudulent firms winning grants only increased non-R&D hiring. It is unclear what exactly the fraudulent firms were using their innovation grants for, but it clearly was not pursuit of innovation. Logically, they would succeed in innovating only if they were smarter than the honest firms to begin with. Were they?

What follows is even worse. Fraud produces smoke and mirrors only. Honest firms winning grants produced more innovations that they patented, whereas fraudulent firms winning grants did not. However, the fraudulent firms excelled at producing utility patents, which is a form of patent that establishes legal claim over a non-innovative feature of a product. Utility patents can be ways of claiming progress when there is none, but they can also be a way to get the legal means to become a patent troll.

Clearly this is one type of fraud that did nothing good for society and in fact produced significant waste of resources. And why should we expect otherwise? The brilliant (and good-looking) fraudsters in Ocean’s Eleven are fiction, and the fun of fiction often lies in that it is very different from reality.

People still have illusions that invite fraud, because success looks so wonderful that even those who should have better judgment often do not stop to ask whether what they are seeing is true. For example, in retrospect it seems strange that the bold claims of innovative blood testing by Theranos could seem true. They were still able to recruit a stellar board of directors including people like Riley Bechtel of the famous Bechtel Corporation, William Foege, who had been with the CDC (yes, the people trying to save the U.S. from Covid-19), Fabrizio Bonanni who had been with the biotech firm Amgen, and James Mattis, Marine Corps general. Of course, it ended well for James Mattis, who was awarded for his good judgment in Theranos by being picked as President Trump’s Secretary of Defense.

Fraudsters win because others are naïve and optimistic. They win especially easily when lack of transparency enables fraudsters to tell different things to different people. So when we know that information is being concealed, we should pay even closer attention.  

Thursday, June 4, 2020

I Did It My Way: Finding Allies When Solving Problems

Firms often run into problems. The most common one is that low performance causes unrest in the board of directors and shareholders. More unusual ones (but still too often) are safety problems with the product, pollution from the production, disputes with the employees, and so on. When there is a problem, managers and board members look for a solution, and the question is, which one to pick?

The question is important for the firm because different solutions have different merit. It also reveals a lot about power and politics in the firm, and especially when the board of directors makes the decision. This is because each board member has learnt from their experience and knows some ways of solving problems well, other ways less well. That sets up a power play between different fractions of the board with different experience and different solutions to the problem. Finding out which side wins is the topic of research by Cindy Man Zhang and myself published in Academy of Management Journal.

The context was acquisitions of other firms in China. Globally, acquisitions are a frequent solution for firms trying to improve their performance -- paradoxically so, because most acquisitions are bad for performance. Still, it is hard to find a board that is not confident enough to think they can do better than most others, so acquisitions happen a lot. The key feature of acquisitions in China’s market economy with many regular firms (not state-owned firms) is that many acquisition targets were available, and these came in two types: regular market-based targets and the more unusual state-guided acquisitions, which were firms that the state very much wanted to see acquired by another (wealthier, more capable, or better managed) firm.

Now the power play is clear, right? Market-based acquisitions are identified by the acquirer and are firms that promise economic benefit in some way, such as synergies or opportunities to downsize. State-guided acquisitions can also bring economic benefit, but probably less, though they earn political capital with the state. A director with experience in the private sector, especially outside China, wants nothing to do with the state-guided acquisition and prefers the market-based one. A director with experience working for the state is comfortable following state directives and suspicious of methods for assessing the economic benefit of market-based acquisitions. Game on: there are two potential solutions, each with supporting board members.

It looks like we could determine what solution is chosen just by counting votes in each direction and seeing which one wins, but it is not that simple. What about the director with no state or market experience? What about the director with both? What if the state-directed alternative is economically very attractive (or the opposite, very unattractive)? We cannot treat board members as robots who do one thing only, regardless of circumstances. What we need to consider is that each side tries to build a coalition of like-minded directors, but also draws in all others who might join because they start out in a neutral position.

What we found was more interesting and also more intuitive. Counting votes does predict the type of solution provided we take into account the in-between directors – those with no clear loyalty to the state or market, or those with split loyalty. These in-between directors are very influential on acquisition decisions because they can join either one of the coalitions and can change sides depending on how good each alternative acquisition target is. Experience matters in firms because each decision makers wants to “do it my way.” Power and politics matter because there is more than one way, and decision makers need to build coalitions.

Zhang,C.M., H.R. Greve. 2019. Dominant Coalitions Directing Acquisitions: Different Decision Makers, Different Decisions. Academy of Management Journal 62(1)44-65.

Wednesday, April 29, 2020

Ineffective Efficiency: Designing Organizations for Surprises

Those of us who teach management are used to handling a paradox common in firms and other organizations: the most efficient and admired firms are often those that fail most spectacularly when facing unexpected problems. This is, or should be, a reason for modesty for those teach or manage, and it is also be a reason to think about the source of failure.

In research published in Industrial and Corporate Change, I examined this issue with PeterW. Glynn and Hayagreeva Rao. We did not embark on a study of failures in famous firms – it has been done so many times before. Instead, we modeled different ways of designing organizational structures to see how well they performed. The idea behind the model is that, in addition to whatever else it does, any firm faces a sequence of incoming problems that it needs to spend time solving, and it matters how quickly these problems are solved. This is an easy conceptual model that takes some advanced math to solve; and looking at it we got some surprises.

First, problem solution times can vary tremendously, especially when the firm is busy. This is important because efficiency comes from not having too many resources at hand, which means that efficient firms are busy. It is one reason that success and failure are so closely linked.

Second, managers can make the problem worse. Adding any level of approval of a solution multiplies the time it takes to finalize, which is very problematic when the solution time is already long. Large span of control (many subordinates), as we see in many lean organizations, makes this problem worse. It is another reason that success and failure are so closely linked.

Third, teams can solve the problem. If they communicate well, a team will much more rarely have very long solution times than an individual, even if the individual has exactly the same expertise as all team members combined. This sounds surprising, so I should be quick to add that communication slows down teams significantly.

Fourth, smart rule-breaking can help solve the problem. Specifically, a worker who selectively solves some problems without forwarding the to the manager for approval can reduce the number of problems that take a long time to solve. Similarly, a worker who simply tosses out some problems instead of solving them can radically reduce the number of problems that take a long time to solve. Naturally, rule-breaking is only good for the firm if the workers can identify problems that don’t need approval or don’t need a solution.

These are simple facts useful for putting together an organizational structure and its processes. A designer who knows them can make the right choices between efficiency today and resilience tomorrow, because they dictate how much slower reactions to surprises are when a structure is set up for efficiency. Perhaps the main lesson is exactly in understanding that this is a trade-off. Efficiency is great until the day it isn’t, and it instead becomes the source of failure.

Wednesday, April 22, 2020

Similar but Better: When Product Comparisons Are Traps

One of the oldest forms of advertising innovative products and services is the comparison with existing ones. Whenever a firm can argue that its innovation is similar to an existing product, but better, two things happen. First, the similarity makes acceptance easier. Second, the improvement makes changes to the innovative products easier. What could go wrong?

Research by Greta Hsu and Stine Grodal published in Administrative Science Quarterly gives one answer to how a strategy of comparison can go wrong. They looked at the growth of electronic nicotine delivery products – vape devices – and how the makers of such products took steps to get them quickly accepted. These steps in turn led them into a trap of their own making.

The starting point is that the cigarette industry is large and highly profitable. After all, even taking taxation into account, cigarettes are vastly overpriced wrapped dried leaves. Cigarette customers are addicted customers (at least addicted to the product category), which is even better than having loyal customers. The only problem for cigarette makers is that the health damages are well known, and the industry is shrinking. Smokers do not quit in great numbers – the product is addictive after all – but more old customers die than new customers appear.

Actors outside the cigarette industry invented superior systems for delivering nicotine and other flavored vapors through well-controlled electronic devices. They then faced the dilemma of how to market this innovation. What to name it? How to have it regulated, or try to avoid regulation? How to market it? A series of decisions led them onto the path to “similar but better,” including naming these devices e-cigarettes.

In many ways this was a natural path because cigarettes are also delivery systems for nicotine and other flavored vapors. The new systems were more complex but also much more controllable, so they really were similar but better. But positioning them that way instead of emphasizing distinctiveness was still a choice, and it turned out to have a series of consequences. On the positive side, some of the innovators got acquired by major cigarette makers and earned greatly from that. Also on the positive side, the major cigarette makers added their marketing muscle and made e-cigarettes widespread very quickly.

Then there was the negative side. The e-cigarettes are efficient nicotine delivery systems, which is a problem because the addiction to smoking comes from nicotine, not from other parts of the cigarette. So, these devices were similar in addictive properties and better at delivering nicotine, a point that anti-smoking activists immediately understood. They were also quick to notice that one maker started adding tastes that made e-cigarettes appealing to youth, as a way of recruiting new users. As a result, campaigning against e-cigarettes increased, and public opinion has turned against them. A good thing too, because a while after these products became popular, a wave of deaths from vaping THC additives showed that these products can be dangerous in ways that regular cigarettes are not.

So “similar but better” is a choice, and when the basic product is bad for health or for any other part of life that we value, it is not obvious that it is the best choice. If over time we confirm that these products actually are healthier than regular cigarettes, then calling them e-cigarettes and making other comparisons has been a serious mistake. An alternative name was easily available, after all. Using e-cigarettes is called vaping (a simplification of “vaporizing”), and the devices could have been called vapers. Instead, a vaper is now someone using an e-cigarette. Just words, you may say, but words have consequences.

Hsu, G., S. Grodal. 2020. The Double-edged Sword of Oppositional Category Positioning: A Study of the U.S. E-cigarette Category, 2007–2017. Administrative Science Quarterly, forthcoming.