Technology and Organizations

Holiday travel, combined with company cutbacks due to the economy, inspires this post. News stories this week were all about the dismal results to expect from the retail sector. Hotels had reduced staff and services. Airline desks were as you imagine them at this time of the year. Many storefronts were boarded up (e.g., Linen ‘n Things, Mervins – more telling than their failure may be that the space hasn’t been taken over by other retailers).

I write while waiting for my delayed flight. Fewer extra planes (cost cutting) means longer delays when there is an unexpected problem. Even the generally helpful gate agents of this generally perky airline were showing the stress of being understaffed. My traveling companion and I discussed our options. The conclusion is we wait, and get used to waiting and other forms of reduced services.

The market will work (I am an optimistic capitalist), and the downturn will engender innovation. Paul J.H. Shoemaker (research director for Wharton’s Mack Center for Technological Innovation) is quoted in Knowledge@Wharton:

The crisis has multiple impacts,… Loss of revenue and profit will at first instill a cost cutting mentality, which is not good for innovation. But if the patient is bleeding you need to stop that first. Then, however, a phase starts where leaders ask which parts of their business model are weak (and perhaps unsustainable) and that, in turn, can lead to restructuring and reinvention…. The investment approach, however, has to emphasize more of an options and portfolio strategy rather than static NPV (Net Present Value valuation method).

The Knowledge@Wharton article provides other interesting points about disruptive innovation and the like. However, my question is more focused on the perspective of the users – and brings us to my reference to Hirschman’s 1970 book, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States.

Exit and voice are our options. Depending on your loyalty to the firm, you can choose to take your business/employment elsewhere, or you can provide feedback (voice) to the firm regarding the issues that have you thinking about exit. Exit has a more subtle effect on innovation as the company has to notice, figure out why exit is happening, then come up with a response. With voice, the signal hopefully includes viable suggestions for innovation. (See Schultze et al., 2006 for a discussion of “Internet-enabled co-production” with customers.)

In order to distract myself from my multiple hour wait (now, I learn, even longer), I have been wondering how changes in technology make us better able to exercise exit and voice. We have a broader market to work from in this downturn than we would have in 1970 – we can get on the Internet and search for a different hotel, examine the reviews and see if we are likely to be better off somewhere else. We also have more direct methods for voice – for example, through on-line reviews, direct emails to customer service, blogging, or Twitter.  Some related info:

• Advice for companies about managing email complaints
• Value of the old fashioned letter
• Discussion and list of complaint websites
• List of 800 Numbers

Increased computational capabilities has played a role in the increase of frequent flier/buyer/affinity programs. These programs are focused on increasing customer loyalty – ideally to then reduce exit – but do the companies then do more on their own to understand customer voice? In Hirschman’s 1970 world companies didn’t have the computational power to data mine, or the ability to get us to give up our demographic information in return for the possibility of discounts and free tickets. How are companies using this loyalty to speed-up innovation in this economic downturn?  Ideally, they will feel economic pain, and look for the most valuable adjustments, based on the data they have from their loyal customers.

How can we as individuals push the market toward innovation through exit and voice? Is it possible that this economic crisis will be more innovative that those of the past given the change in the information landscape?

I’m getting ready to update my syllabus for my Executive MBA course on Managing Innovation and Change. We cover the same material as in the regular MBA program, but with a greater focus on issues for the experienced manager. In my course we focus our attention on the creation and management of innovation, motivation/compensation, negotiation/change management, and the integration of technology tools with management practice. For each major course concept there is a written assignment where students explain the basics of the concept and provide citations, apply the concept to the student’s work or other related organization, and design an evaluation method to assess the ROI of the application. This last section is a major roadblock for most students, and I’m trying to understand why. I’m planning on changing the final project such that students must select, implement, and evaluate one of these concepts – not just write about how they might do these things.

Given the trouble that students have with even just writing about this process, how successful will they be at full implementation? That said, if they can’t implement what they are learning, and show value, then what’s the benefit to the organization? Even if you have good ideas about intertwining technology and organizational practice — if you can’t implement and evaluate, how will you be able to manage the situation as it unfolds?

(Pure speculation begins here.) Is this difficulty because the earlier portions of the Executive MBA program – accounting, operations management, finance, marketing, international management – imply that only certain kinds of objective outcomes have value? Do they imply that their measurement techniques are only valid in their particular disciplines? These students have been in the program for over 14 months when I meet them. They have gained the majority of the skills available in the program. They (and MBA students world-wide) have measurement and evaluation skills based on accounting, operations, finance, marketing – but why aren’t we teaching them measurement and evaluation skills for general management and organizational change, or at least showing them how these other, more traditionally empirical, disciplines may help them evaluate their management/technology practice?

I’ve mentioned evidence based management before/, but Tracy Allison Altman’s recent post on the loneliness of the evidence based manager made me look at my industry to see if we were doing our students a disservice by not formally teaching research methods appropriate to management. I have added a couple of class sections on the topic, but the underlying skills (survey design, experimental design, etc.) are generally given a full course in industrial psychology degree programs. Measuring more subjective outcomes is difficult and requires a specific skill set (bad surveys, for example, being far worse than no survey at all). An extensive search turned up very few appropriate readings (see below for links). Harvard Business School Press lists 997 cases and articles on negotiation. Eighteen cases and articles come up when you search on evidence-based management – and eleven of these are by the same two authors (Jeffrey Pfeffer & Robert Sutton) largely focused on their excellent “Hard Facts,” ideas, but you’d hope that this critical topic were addressed by more management scholars (again, see my list below for what is available). We don’t have room to add whole new courses in most MBA programs, so we better find a way to teach this material more efficiently.

The students have good intuition. They realize that their decisions may impact only a few and so fancy statistical assessments may not work with such small sample sizes. They also understand that a control group would be of value for being able to discern differences – but they don’t see how they can manage both an “experimental” and a control group in the real world. I am surprised by how rarely before and after measures are considered. I believe this has something to do with the limited culture of measurement, let alone evidence, in many of their organizations (i.e., they don’t have the “before” data). This harkens back to my earlier visualization posts. How can we know that what we implement is working if we didn’t know from where we started?

I’d appreciate thoughts on how you or your firms are working to build a culture of evidence. Both technology focused and general management practice can be measured, and as a result, adapted as need be. Evidence can also provide the background to make changes your intuition alone cannot support. On the other hand…

Background material:

• Pfeffer & Sutton’s website/blog. Includes teaching materials and case examples.
• Thomke’s Enlightened Experimentation: The New Imperative for Innovation
• Perla’s Do your Metrics Measure Up
• Lawler’s Why HR Practices are Not Evidence-Based
• Roussea & McCarthy’s Educating Managers from an Evidence-Based Perspective
• World Bank Selecting an Evaluation Design