Grounded Airplanes: Routines versus Learning

Wall Street Journal has an interesting article about the low-price airline Allegiant Air, which is now making flight cancellations because it urgently needs to check the evacuation slides of its MD-80 aircraft. Why such a problem all of a sudden, when other airlines don't have problems with the same type of aircraft? This is where the story gets interesting.

One of its aircrafts needed an emergency evacuation after a minor incident, and the pilot ordered passengers to slide down the evacuation slides. The evacuation went without problems except for one thing: slides are supposed to inflate automatically when the door opens in an emergency, but only two of the four slides did. The other two had to be inflated manually by flight attendants. (I am assuming that manual inflation means pushing a button, not blowing air into the slide.) Half the slides not opening as they are supposed to is unusual, and the Federal Aviation Agency (FAA) quickly found out that the slides had not been inspected annually, as is required for older slides. The airline promised to fix its slides immediately, leading to the grounding of 34 planes that needed slide inspection or replacement.

Why did Allegiant Air not inspect its slides? Actually it did inspect them, at the three-year interval recommended for newer slides. This was their routine, where routine is a behavior that an organization repeatedly does to address an issue. Common features of routines are that they are easy to do because the organization is experienced with them, and they are not checked because people in the organization believe they are the correct set of actions. But routines can be wrong, like when the calendar for inspecting slides is marked with every third year instead of every year. 

Wrong routines are hard to fix because something needs to tell the organization that there is a problem, and that “something” is often an accident. That almost happened to Allegiance, but fortunately their airplane evacuation was not hurried and did not fail. Instead, they were told of the problem by two other mechanisms that often interrupt harmful routines. One is to document the correct action, as Boeing has done for the MD-80 slides (McDonnell Douglas was the original maker, but Boeing now has the documentation). The other is to communicate the correct action, as the FAA did when it suspected that the incorrect inspection interval had been followed.

Thanks to these actions, Allegiance Airlines evacuation slides for MD-80 planes should soon be in good shape. Of course, there are lots of airplane parts and airlines, so learning about such an incorrect routine is worrying for those who fly frequently.

Carey, S. 2013. Allegiant Air Forced to Ground Some Planes. Wall Street Journal.

BlackBerry as Niche: Firm Disappointment and Strategy Change

BlackBerry director Bert Nordberg was elected recently, but is not shy about making statements: he has already said publicly that the BlackBerry smartphones need to retreat to certain niches in the market, leaving others for the competitors. This may seem reasonable to many listeners given how BlackBerry has suffered from competition by Samsung, Apple, and other firms, but it is probably not a popular view in BlackBerry, where employees remember their earlier great times.

The statement reminded me of my discussion with a technical assistant when I got a new job and needed to choose between a BlackBerry and a different brand of Smarthphone. I asked about the details of the differences, and was told that the main difference was that the BlackBerry installation of the mailer was more complicated on their side, though it would look the same on mine. The security would also be greater. I was not quite convinced, and went for the other phone, which had some nice features. (I think there are more efficient ways of hacking email accounts than going for the smartphone, so the extra security did not impress me.)

Of course, the problem that BlackBerry might be having is that too many people are making my choice, that some firms have stopped offering BlackBerry, or that some other phones have improved their security so much that the difference is not important anymore. In fact, a mix of these things may be going on. Indeed, a recent worry is that Samsung has been approved as secure enough by Pentagon, and may also get other approvals by the US government. It is hard to argue you are most secure if the approvals line up with a major competitor.

If that is the strategic situation, where does the “niche” comment come from? Well, it really is an issue of how organizations learn specific actions. There is a lot of research on this, which Gavetti, Greve, Levinthal, and Ocasio recently reviewed, and some main conclusions are well known:

• Strategies have histories. For example, Mr. Nordberg has previously worked for Sony Ericsson, and one of the things he did there was to narrow its niche focus. It worked, making it likely that he will try it again and even that BlackBerry will be interested in having him as a board member.
• Strategies spread. For example, niche focus is a known strategy that can be observed among many firms, its sheer popularity can make it an option even if the success in each firm is uncertain.
• Strategies have reasons. For a firm that is losing in some places, the option of marketing more intensely in fewer places is easy to explain, and is a good way to sell a niche focus strategy.

So, we can tell where this strategy came from. Will it work? That’s too early to tell: what firms do and what saves firms is not so well linked.

Gavetti, G., Greve, H. R., Levinthal, D.A., & Ocasio, W. (2012). The Behavioral Theory of the Firm: Assessment and Prospects. Academy of Management Annals, 6, 1-40.

Confusion and Phone Sales: What is Really Important?

I looked at the cover page of a major business web site today and got a bit confused. In the central place reserved for the best stories, I saw news on Sony’s new Smartphone as well as Apple’s plans for two new iPhones. In less prominent parts of the web site I read that banks in China are increasingly breaking lending rules, Japan is considering a spending increase to go with a potential tax increase, Asian stock markets are falling, and North Korea are making moves to avoid the influence of defectors. Smaller stuff than Smartphones, you might say, especially Smartphones from Sony.

So what is going on here? Well, let us admit that journalists arrange front pages in part to follow the tastes of their customers – us – which are not perfectly correlated with importance. But it is not just that. Sony and Apple are star companies, both of which have arguably done better before than they are doing now (certainly Sony). The combination of stardom and current problems is very easy to sell. 

How important are these phones? Well, it is hard to say because both companies are holding back information. But, Apple is supposed to launch one low-end and one high-end iPhone, and is particularly interested in getting new customers with the low-end phone. Rumors on Sony center on a very powerful camera, though a good screen should also be expected. OK, nice stuff. But the same page of the web site has key information on Asian stock markets and economic stimulus in Japan. Without the star power of Sony and Apple, the smartphone news would not have deserved its placement.

What does this mean for companies? Well, we can clearly see the strong and lasting advantages of high status. Not only do you get solid coverage of the important things you do if you are a high-status company, you can also do pretty trivial stuff and find it good places in the press. Not bad, or what? I am guessing that Sony is particularly grateful, because their actual fall in economic performance has been a lot greater than that of Apple. There are few things that last a long time in business, but a high status is one of the best.We still can't guarantee that this will give Apple and Sony sales over new and powerful Smartphone competitors, of course. Competition happens in many other places than business web sites.

PS: Let me also apologize for the delay in updating this page. Regrettably I was recently put in hospital by an event on the road, but I am now improving well and writing new blog entries. At least now and then!

Global Warming or Polluted River? Environmentalism in the Press

Those of us following the international news media could easily be led to believe that the environmental case followed most closely by the media is global warming. We have seen reports on withdrawing glaciers and a lake around the North Pole, as well as interesting plot twists around accusations of skewed research reports and contra-scientists funded by foundations linked with the Koch brothers (see my earlier post). Fascinating stuff, but much of the discussion around environmental issues takes place in the local newspapers, not on CNN. What gets covered in the local news media?

Research by Kenneth Andrews and Neal Caren in American Journal of Sociology shows that local news media has a completely different agenda, and one that helps us understand why it is important to remember that news media are organizations, not just some random collection of journalists. Organizations have a market niche that they cater to. For news media, the niche is their audience, and local news media knows that local issues like a polluted river, tourism, employment, and economic growth will play better. So if you think the press is biased toward global warming, you are probably viewing the global press (they like global issues because they have no local ones); if you are viewing the local press you likely have seen a lot less about global warming.

But the insights on press-as-organization continue beyond this one. The news media don’t investigate as much as you might think; instead stories are brought to their attention, often by social movements campaigning for or against something. Essentially, news media are offices receiving inquiries for attention. Whether social movements actually get media attention depends on how organized they are: media organizations are better at dealing with organizations than with people, so movements led by formal organizations are more successful. (So, the highly organized conservation movement in the USA is the reason that rare butterflies can stop developments.) Not only that, social movement organizations that have conventional and uncontroversial protest tactics get more press attention than those who choose unusual protest tactics. This may sound counter-intuitive, and is surely disappointing for the social movements that choose unusual tactics precisely to gain attention, but a petition is easier to understand and write about than, for example, trespassing on an industrial development site.

As consumers of news, we should remember how the news are filtered by these criteria, which are unrelated to the importance of the issue, and are not even particularly well related to its newsworthiness. They simply reflect how a media organization works more easily. And if you are considering starting a social movement, the advice is clear: be organized, be large, be conventional, and be local. If you can’t be local (maybe you care about global warming), link your cause to local issues.

Andrews, Kenneth T., and Neal Caren. 2010. "Making the News: Movement Organizations, Media Attention, and the Public Agenda." American Sociological Review 75(6):841-66.

Raising Entrepreneurial Children: Folklore and Fact

A Wall Street Journal article offers some advice for parents who want their children to become entrepreneurs, and who are wondering how to raise them. Advice on raising children is not frequent in the Wall Street Journal, so it caught my attention. The advisors are Arthur Blank, co-founder of Home Depot, Pierre Omidyar, founder of eBay, and Jim Koch, founder of Boston Beers. All are very successful entrepreneurs. Let's take a look at how they fare as child-raising advisors.

The full list of advice is to make the children, adventurous, dependable and stable, observant, and team players. Not all of those can be validated by evidence, but team player can be, so let's focus on that one. The advice is to get children involved in team sports at an early age order to instill the values and lessons from winning and losing, as well as that of working together as a team. OK, this sounds intuitive. But many intuitive ideas are wrong, and we know that this advice comes from entrepreneurs who draw from their own experience, as well as observation from others. But of course their own experience is much more powerful. So, if we view the background of their advice scientifically, it is based on a small number of observations, and they weight one (their own upbringing and venture) much more heavily than others. Any social scientist would say that it would take luck for them to be right in their advice.

Were they lucky? I currently do research with Marc-David Seidel and Dennis Ma that answers the question. We have data on what activities youth were engaged in at early ages (10-11 years) as well as later on (15), including sports. We can distinguish team sports and sports without a team structure. The distinction is interesting because sports offer different experiences: risk taking, winning and losing, working together as a team, taking instructions from a coach. We were interested in team sports because our intuition was the opposite of that of the entrepreneurs: Because team sports involve coaching, they are mini organizations that may prepare children better for employment than for entrepreneurship.

The evidence was interesting. Involving children in team sports early reduces their wish to become entrepreneurs. As we expected, it makes them comfortable working with others, which is what they would do in a job, as a paid employee. The entrepreneur, at least initially, needs to be comfortable working alone. But children who were involved in team sports at the age of 15 were more likely to aspire to entrepreneurship. We suspect that the age difference has to do with the shift in decision making between 10 and 15: the youth who is involved in team sports at age 15 has probably decided to do so on his or her own, so it is a result of some personal characteristics related to entrepreneurship. The child who does team sports at the age of 10 is probably put there by the parents. When tracing these children forward to adulthood we found that in the early 20's, those who were involved in team sports at ages 10-11 had no more or less entrepreneurial income than others, but those involved in sports at age 15 had more entrepreneurial income (barely measureable, but enough to prove a relation). And what about non-team sports at age 10-11? No relation to entrepreneurship.

I don’t usually give advice on how to raise children, but I can summarize the evidence. Getting your child into a sports team at an early age puts him or her on path to become an employee. Letting children do some non-team sport (skateboarding, anyone?) has no effect. Make your own call on whether you want your child to become an entrepreneur, please, but this is what to do or not to do.

Haislip, B. 2013.7.13. “How to Raise an Entrepreneur.” Wall Street Journal, Asia Edition.

Seidel, M-D, Greve, H.R., Ma, D.G. 2013. “Leaving the Herd. The Deviant Roots of Entrepreneurship.” Working paper, University of British Columbia and INSEAD.