The

Learn or Die: The

Business of Learning
••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••

Leadership: One Size

Does Not Fit All

European
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Emotions, Big Data

and the Coming
Retail Renaissance
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Business
How The IIoT Can
Add to The Wealth
of Nations

Review
May - June 2015
europeanbusinessreview.com

Moving Beyond The Anecdotal:

What Will It Take To Create Your
Digital 2.0 Business Model?

SA $22 E €17.5
empowering communication globally CAN $22 UK £15
 The European
Business Review
empowering communication globally

MAY - JUNE 2015

Selling Illusory Joy: Emotions, Big Data and the Coming Retail Renaissance, p32

Strategy
6 Moving Beyond The Anecdotal: What Will 47 Actions Speak Louder Than Words – Why
It Take to Create Your Digital 2.0 Business Adaptive Non-Verbal Communication Is A
Model? Key Leadership Tool
Todd Fisher and Richard Lynch Connson Locke

Technology 51 Act Like a Leader, Think Like a Leader

13 Big Data: Big Deal or Big Hype? Herminia Ibarra
Sunil Gupta
Innovation
23 How The Industrial Internet of Things Can Add to 56 Learn or Die: Every Business Will Be In The
The Wealth of Nations Business of Learning
Mark Purdy and Ladan Davarzani Edward D. Hess

28 Aargau – The Swiss High-Tech 62 Creativity at Work

Canton in Hot Pursuit of Silicon Valley Adrian Furnham

32 Selling Illusory Joy: Emotions, Big Data and the Human Resources
Coming Retail Renaissance 69 Keys To Manage Human Resources: Rules of
Christopher Surdak and Ed King Thumb Part 1
Guido Stein, Ángel Cervantes, and Marta
Leadership Cuadrado
39 Leadership Development: One Size Does Not Fit All:
Growing Leaders in Africa and Across the World Female Leaders
Vanessa Iwowo 74 Global Female Leaders 2015: International
Networking for Female Leaders in Berlin
43 Coaching for the Future
International Coach Federation

Production & Design: Angela Lamcaster Print Strategy: Stefan Newhart Production Accounts: Lynn Moses Editors: Elenora Elroy, David Lean Managing Editor Europe & Americas: Yetunde Olupitan Group
Managing Editor: Jane Liu Editor in Chief: The European Business Review Publishing Oscar Daniel READERS PLEASE NOTE: The views expressed in articles are the authors' and not necessarily those of
The European Business Review. Authors may have consulting or other business relationships with the companies they discuss. The European Business Review: 3 - 7 Sunnyhill Road, London SW16 2UG,
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reserved. ISSN 1754-5501

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From the Editors
A Tale of Two Cities
T
he results of the May 2015 UK general
elections were received with contrasting
reactions from two camps. Less than 48
hours after the results, and before the dust had
settled, it seemed the lines were already drawn
and everyone knew on which side they stood.
Unlike Magaret Thatcher’s victory of 1979, the
losing side did not hang around for matters to
unfold. When they woke up on 8 May, they knew
what was coming their way in the next 5 years
and so the battle for the heart of Britain began
before Mr Cameron had time to settle back in.
Those reactions to Tory victory tell the tale of
two cities. The City celebrated Tory victory and
City reaction can be summarised in the words
of Nick Batsford, owner of Tip TV, “Euphoria
returns to the City! Lobster Thermidor is back
on the menu! Buy shares in lap dancing bars!
The City is safe for five years.” Mr Batsford’s
jubilation may not be surprising given that his
Tip TV claims to be a web-based live video
magazine offering tips and trading ideas across
multiple investment and betting instruments. The
Conservative win was good news for the stock
exchanges too, shares went up in some sectors:
energy, banking and house – building companies
saw increases in their share prices - Royal Bank
of Scotland shares climbed 6%, Centrica gained
8% and the FTSE 100 rallied to an all time high
since January 2015 closing at 2.3% (159 points).
Within 24 hours, property companies were
predicting a boom in the prime housing market.
Lucian Cook, Director of Savills Residential
Research, said that a Conservative victory meant
“... certainty over the political landscape and
economic policy should allow both prime and
mainstream markets to naturally pick up some
momentum compared to pre-election. Given that
the spectre of a mansion tax is now lifted, the prime
market can expect much of the deferred demand
from the pre-election period to flow back into the
market over the remainder of 2015 and 2016.”
Also commenting on the Conservative
victory, Alison Platt, Chief Executive Officer,
Countrywide plc, said: “We now expect there
to be greater activity in the housing market,
especially in the £2 million plus markets facing
the prospect of a Mansion Tax.”
In the other camp, there was no celebration,
no jubilation. Less than 48 hours after Cameron’s
victory, the streets of England and Wales witnessed
the first anti-austerity protests. About a week later,
people took to the streets again in Cardiff and
Bristol warning against planned cuts and austerity.
Another demonstration is planned for 20 June in
the City of London to call for an end to austerity.
More demonstrations are planned for London and
the rest of the country over the coming months,
if not years. The Conservatives have promised to
cut the welfare budget by £12 billion, which will
obviously affect those worse off.
Less than two weeks after the Conservative
victory it would appear that the scene is set for
what to expect over the next 5 years: the have-
nots will take to the streets and the haves will
take to their favourite watering holes in the City
of London or their £2m plus mansions in the heart
of London. We are living in interesting times.
www.europeanbusinessreview.com 5
Today entire industries are facing
massive disruptions. Companies that
traverse through this turmoil successfully
will emerge as the leaders in the 21st
century. They need a Digital 2.0 Business
Model accompanied with an aligned
technology and information roadmap of
capabilities to direct, execute and deliver
the digital business model.
 Strategy
MOVING BEYOND THE
ANECDOTAL: WHAT WILL IT TAKE
TO CREATE YOUR DIGITAL 2.0
BUSINESS MODEL?
BY TODD FISHER AND RICHARD LYNCH
A Strategy to Execution planning process focused on
Technology Strategy, will raise the TQ (Technology Quotient)
of your senior leadership team and for that matter the entire
organisation. Being “technology savvy” and “information
aware” has moved from being just the job of the CIO to the
job of the entire organisation. Identifying and delivering your
Digital 2.0 Business Model is dependent not just on how well
you lead but how your business model and organisation will
adapt and realise the benefits of this new business model.
This is the first of a three part series on business transformation.
The premise is that it is hard to transform to 2.0 business models
when you run on old infrastructure; especially old technology
and out-of-date views of talent management.
W ebster defines the word anecdotal as not necessarily true,
or not entirely based on fact but rather personal opinion.
Digital strategies can’t be anecdotal. They must be grounded
in forward thinking operational terms.
At the turn of the 20th century, it is estimated the human
knowledge doubled every century. Today human knowledge
is estimated to double every 12 months. Fast forwarding to
some point in the near future, the point at which artificial in-
telligence eclipses human intelligence, the doubling will be
every 12 hours.1
Sounds like science fiction but in reality it is becoming
science fact. The impact on capitalism and socio-economic
development will undoubtedly be profound.
Today entire industries are facing massive disruptions.
Rapidly changing behaviours in how humans interact with
each other, with technology and with information is already
impacting organisational design, their underlying workflow
processes, information access and technology innovation.
Companies that traverse through this turmoil successful-
ly will emerge as the leaders in the 21st century. They will
discover that they will need more than a strategy to account
for these changes. They need a Digital 2.0 Business Model
accompanied with an aligned technology and information
roadmap of capabilities to direct, execute and deliver the
digital business model.
www.europeanbusinessreview.com 7
 Strategy
Consider the shift well underway as where your competition is going, but to
economies continue to rapidly trans- create a compelling business strategy
form into service economies vs. tradi- with a differentiated customer experi-
tional manufacturing and product. To ence. This will position your organisa-
enable this shift, organisations must tion head and shoulders above your com-
recognise that “consumer experiences” petition. But a clear strategy to align your
will drive company growth up or down organisation is not enough. You must
depending on how well you adapt to the possess the ability to execute.
digitisation of your organisations core At the accepted rate of change men-
and enabling capabilities. tioned earlier, a business model that once
Digitisation is the process by which use to last 25–50 years now will now last
information from the physical world and at most 3–5 years, meaning every 3–5
the virtual world flow freely to expose years organisations must shift research
new opportunities for consumer servic- and development dollars from traditional
es and experiences. All of us are seeing Run the Business activities and projects
dramatic shifts in every corner of the to Improve and Transform the business
economy, and in every industry … glob- projects. In addition to recognising the
ally. Below are some examples of how need to shift dollars into transformation
disruptive technologies are forcing trans- efforts, the rate at which one moves a
formation and the need for a Digital 2.0 product, service or innovation from idea
Business Model. through production will have to become
Some of the examples in the Table 1 more efficient, streamlined, and driven
may seem like they are straight out of a by digital automation. The challenge
1980s science fiction novel but they are becomes more complex as leadership
real, viable and will change how organi- must not only Improve and Transform the
sations interact with consumers. business, but they must continue to Run
A challenge for leaders is not only the business, deliver on customer prom-
how to identify these shifts and anticipate ises to generate the cash flow needed to
Table 1: Disruptive Technology Driving Digitisation
Industry Disruptive Technology Driving Digitisation
Wearable Technology, Connected Implants and Medical Devices, Vir-
Healthcare tual Medicine via tools like Cisco HealthPresence. Consumer Review
and Experience Communication tools like ZocDoc, Meeha.io and Yelp
Bitcoin, Person to Person Payments, Crowd Funding, Online only bank-
Financial
ing, Mobile Investment Advice Applications like Acorn, Kickstarter
Solar and Battery Storage Capabilities, Connected Devices, Appliances
Energy
and households with products like Nest, Power Sharing Distribution
Textile /
3D Printing, Robotics, Delivery Drones, Environmental Sensors
Manufacturing
Online Groceries, Product Sensors, Supply Chain Automation, 3D
Grocery
Printed Food
Free and Paid Digital Content, Digital Courseware, Small Private
University Online Courses (SPOCs), Massive Open Online Courses (MOOCs),
Google Glass, Virtual Reality
8 The European Business Review May - June 2015
A challenge for leaders is not
only how to identify these
shifts and anticipate where
your competition is going,
but to create a compelling
business strategy with a
differentiated customer
experience. This will position
your organisation head
and shoulders above your
competition.
fund the constantly evolving new busi-
ness model.
As the lines between the business and
supporting IT and technologies contin-
ue to blur, companies cannot approach
annual IT planning activities that same
way as they did in the 1990s or even in
the past decade. What is needed is a new,
integrated capability planning process
that brings together strategic planning
initiatives with IT and technology plan-
ning initiatives; a process driven by the
business, informed by technologist and
enabled by securing the right talent (see
Figure 1). This process not only informs
IT on strategic goals but informs and ed-
ucates the business leaders on technol-
ogy capabilities; thereby, raising every-
one’s TQ. When we execute our strategy
through capability based planning in this
manner a powerful union between the
business and IT is formed that will
improve efficiencies and enable organi-
sational agility.
Everything begins and ends with the
people. Begin by identifying select key
stakeholders from both the business and
technology that embody communica-
tion skills and traits needed regardless of
role or seniority. As you look across the
organisation, look for individuals that
will not only bring business knowledge
and technical expertise but individuals
Figure 1: Digital 2.0 Model Transformation
DIGITAL
STRATEGY
DIGITAL
s>h DW
CIO VISION
BUSINESS
STRATEGY
that will help build energy, momentum
and “start-up” ingenuity. Search for in-
dividuals who are comfortable with the
adaptive challenges caused by digiti-
sation and technology innovation (see
Figure 2 upper right quadrant). Place
them at the center of the strategy to ex-
ecution activities. “A diverse business
model innovation team has members
from various business units, of differ-
ent ages, with different areas of exper-
tise, of differing levels of seniority, with
a mixture of experiences, from different
cultural backgrounds.”2
The team will either thrust your
emerging Digital 2.0 Business Model
into the stratosphere or the gutter. The
latest Hartford survey, among many other
syndicates, indicates that millennials
aspire to lead in the next 5 years. They are
poised to bring experience, innovation
and disruption to traditional workplace
belief systems and cultures.3 As a result
include them in building your Digital 2.0
Business Model.
So we have the right people, they
are anxiously sitting around a virtual
conference room table, wondering
why they have been gathered before
the CEO, President, perhaps the Board.
Some never before privileged to be on
the CEO leaves, the Board leaves and
expectations are set that you now have
DIGITAL
TRANSFORMATION responsibility to take your CEO’s vision
W>E TRANSFORMATION
and make it real; all the while ensuring
W/>/dz
'W^ relevance and competitive advantage or
even blue ocean dominance.
/d W/>/dz
MODEL What do you do? Where does the team
start?
First, look across the organisation’s
operations both internal (Back Office)
and external (Consumer Facing) reflect-
ing on the task at hand: create a new,
sustainable and Digital 2.0 Business
Model. Where to start and where to
begin soon becomes the difficult ques-
tion and problem to admire. Take the
problem head on and move the discus-
sion into a value contribution and capa-
bility based discussion.
the proverbial 31st Executive Floor, Step back and determine what capa-
nervous and excited all at the same time. bilities, both core (External Facing) and
The time is at hand and the CEO begins operating (Internal back-office) are nec-
the meeting with an inspirational dialog essary to execute and deliver the CEO dif-
about the future of your respective in- ferentiated vision. This activity will serve
dustry and company. Everyone’s takes as our navigational compass and serve
pause for moment, perhaps asking a as our value differentiation attributes.
question or two or three but eventually For some businesses it is innovation and
Figure 2: Digital Strategy Adaptive Challenges
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,ƵŵĂŶĂŶĚŵĂĐŚŝŶĞĐŽŶǀĞƌŐĞŶĐĞ
FUTURE STATE MODEL
• /ŶŶŽǀĂƟǀĞ–ǁŚŝůĞďĞŝŶŐĞĸĐŝĞŶƚ
• ŝŐŝƚĂůĞdžƉĞƌŝĞŶĐĞƚƌĂŶƐĨŽƌŵĂƟŽŶ
FAILURE • ĞƩĞƌŝŶĨŽƌŵĂƟŽŶŵĂŶĂŐĞŵĞŶƚ
• ĂƚĐŚŝŶŐƵƉǁŝƚŚƚŚĞƉĂĐĞŽĨŝŶŶŽǀĂƟŽŶ
dĞĐŚŶŝĐĂů Ğďƚ dĞĐŚŶŽůŽŐLJ /ŶŶŽǀĂƟŽŶ
ƵƌƌĞŶƚďƵƐŝŶĞƐƐƐLJƐƚĞŵƐ EĞǁƚĞƌƌĂŝŶ͖ĞdžĐŝƟŶŐ͕
ůŽŐŝĐĂŶĚĐƵƐƚŽŵĞƌƐĞƚ͖ ŚƵŵĂŶĂŶĚŵĂĐŚŝŶĞŐĞŽƐƉĂĐŝĂůůLJ
ǁĞŬŶŽǁŚŽǁƚŽĮdž ĂǁĂƌĞŝŶĨŽƌŵĂƟŽŶ
FAILURE
CORE
BUSINESSES
,ƵŵĂŶ WƌŽĐĞƐƐ ŶŐŝŶĞĞƌŝŶŐ
EŽĂƵƚŽŵĂƟŽŶŽƌƚƌĂĚŝƟŽŶĂůĂƵƚŽŵĂƟŽŶ
www.europeanbusinessreview.com 9
 Strategy
Figure 3: Developing a Digital 2.0 Architecture
ZĞǀŝĞǁ ZĞǀŝĞǁ
ƵƐŝŶĞƐƐ
ƌĐŚŝƚĞĐƚƵƌĞ
dĞĐŚŶŽůŽŐLJ
ƌĐŚŝƚĞĐƚƵƌĞ
ŶĞĐĚŽƚĂů
agility and yet others efficiencies and cost.
Settling on 3 to 5 key points of market
differentiation provides clarity of business
purpose and a directional heading for your
digital strategy leadership.
As was previously discussed in
Making Capabilities Explicit is the
Work of Leadership (TEBR Nov-Dec
2014), identifying the “what” needs to
be accomplished is critical before be-
ginning the dialogue on how digitisation
may impact the business. Once identi-
fied, however, use industry trends and
immersion techniques to arrive at what
will be the core architecture guiding
principles and measures of digital
success. Architecture principles that
support extensibility, business agility,
modularity and drive positive consumer
experiences will be key. Begin by build-
ing the Digital 2.0 model from the heart,
from an unconstrained vantage point.
With a future state Digital 2.0
Business Model emerging,
capabilities outlined,
capability performance
and root cause captured,
and technology landscape
established, the work of
evangelising, executing
and delivery moves from
the background to the
foreground of our strategic
planning activities.
10 The European Business Review May - June 2015
dĞĐŚŶŽůŽŐLJ
ĂƉĂďŝůŝƚLJ
DŽĚĞů
dĞĐŚŶŽůŽŐLJ
WŽƌƞŽůŝŽ
'ĂƉ
ƐƐĞƐƐŵĞŶƚ
ĂƚĂYƵĂůŝƚLJ
ĞƐŝŐŶ
&ƵƚƵƌĞ
ƌĐŚŝƚĞĐƚƵƌĞ
ƌĐŚŝƚĞĐƚƵƌĞ
ZŽĂĚŵĂƉ
ŵƉŝƌŝĐĂů
Next overlay current state platforms and
technology capabilities accordingly to
determine functional gaps around tech-
nology, people and process.
Let the emerging value differentiation
drive the necessary capabilities. These
capabilities when assessed against the
industry and digital aspirations will pave
the way to create an executable invest-
ment roadmap that is real, actionable,
measurable and achievable. They become
the basis and foundation to not just artic-
ulate our future state business architec-
ture but the means by which we enable
it. At the abstract level, follow the direc-
tional course illustrated in Figure 3.
An Example Case for Action
Take for instance a recent US based
healthcare insurance provider. Like many
others in the industry, they had to un-
derstand how the Patient Protection and
Affordable Care Act (PPACA) would
impact its current and future state busi-
ness models. Hired by the CIO and CTO
we guided executive leadership through
series of innovation driven workshops to
develop not just not an impact assessment
but a Digital 2.0 Business Model that
would be leveraged to guide member and
patient experience unification between
two separate but sister companies; one
providing traditional insurance and the
other a major healthcare provider network
in the American Midwest.
As a business led effort, the team
was able to react, inform and develop a
quantifiable, actionable and executable
technology enablement assessment that
would serve as a means to unify com-
munications and improve service ex-
perience from online shopping through
brand loyalty to wellness/care man-
agement in a more digital, consumer
driven healthcare market (see Figure 4).
Digitisation and a Digital 2.0 Business
Model is more than providing an online
statement or access to a portal. It is un-
derstanding that the convergence of
information and member experience is
critical to securing current customer
segments and future market share.
The digital strategy team aligned the
current and emerging technology port-
folio to the architecture principles (like
examples referenced earlier) and ideated
measures to baseline whether a technol-
ogy or product would enable or prevent
a more Digital 2.0 Business Model.
Specifically, the team:
1. Developed Digital 2.0 Business Model
value metrics
a. Consumer Engagement
b. Capability Alignment
c. Revenue Generation
d. Membership
2. Developed Technology Value metrics
a. Flexibility
b. Modularity
c. Extensibility
d. Industry Leading
3. Juxtaposed those metrics on a quad chart
to visually communicate our technology
opportunities and targets (see Figure 5).
With a future state Digital 2.0
Business Model emerging, capabilities
outlined, capability performance and root
cause captured, and technology land-
scape established, the work of evangelis-
ing, executing and delivery moves from
the background to the foreground of our
strategic planning activities.
The game begins now. To use a sports
analogy, football, all of the scouting, plan-
ning, strategising and practice is over. It
is game time and now we need to rely on
our talent and all our hard preparation to
Figure 4: Patient Unification Digital Experiences may go but the order in which they are put together has to
remain flexible. Technology architects must still be able to or-
chestrate and communicate the business vision and tactically
ensure enabling projects are being assembled and completed.
healthfoods
This translates into being able to continually evangelise the
H SH OP
EALT &S business value of the Digital 2.0 Business Model and further-
EH EL
OV EC more create an Investment Roadmap that is agile and clearly
PR

T
IM

traced to enabling our digital capabilities. Demonstrating value

and progress achieving company’s vision is of critical impor-
M AN
INATE CARE

tance. The entire organisation’s TQ is raised as stakeholders

A G E A C CO U N T
MEMBER throughout the organisation develop a “common understanding”
tŽǁdžƉĞƌŝĞŶĐĞ on all digital transformational work. Our operating model must:
RD
COO

1. Establish Corporate and Organisational Ownership from

Strategy through Technology
2. Dive deep to understand departmental processes to under-
N

GA
EN

IO

GE AT stand how a Digital 2.0 Business Model will impact the

&A RM
C TI V FO
S IN
ATE ACCES day-to-day
3. We clearly distinguish projects across a Run, Improve and
Digital Transformation lifecycle of projects.

What does this means to your organisation today and tomor-

execute the plan and the game. Having the right talent will be as
instrumental and significant as our planning activities.
Continual Alignment
As a Technology Strategist it is extremely important to not
only see the entire picture but understand that innovation
means constant change and accepting an ever shifting portfo-
lio of projects and tasks. This is like commissioning an artist
to paint a landscape but doing so on a 1000 puzzle pieces.
We know the artist’s subject, a winter landscape and we con-
ceptually accept the painting’s boundaries meaning the paint-
ing is to be on a 3x3 canvas, and the aspect ratios meaning
larger objects in foreground with distant trees being smaller.
The point is we know conceptually where the puzzle pieces
Figure 5: Technology Opportunity Assessment
0ʋʉȩɏ
UC1
UC4
UC6 UC5
UC2
UC8
1ʑɃʑɠ
GɛʃȱHȿɏ 0ʋʉȩɏɚԨ
row? How can you begin to apply lessons learned? Digital strate-
gy is the responsibility the entire organisation in the 21st century.
Focus on what you can control:
• What kind of leaders and people are hired, engaged and
developed?
• What technologies and information are needed to deliver the
vision?
• How to continually assess the operating model and transfor-
mation progress?
• How to create a culture that supports change, agility and em-
phasises progress of perfection?
About the Authors
Todd Fisher is a Vice President of Digital Strategy
at Accelare Inc. creators of Workfit, a collabora-
tive, enterprise tool for taking strategy to execution.
His focus is on developing Digital Transformation
Roadmaps and breaking barriers between business
strategy and technology enablement.
Richard Lynch is a Vice President at Accelare
&KȹRȿɏʓUʝə
and leads the Strategy to Execution Global
ʃȱHȿɏ ʤZɛ
Practice. He is a co-author of The Capable
Company (Wiley) and Strategy Made Simple
UC3
UC7 (www.strategymadesimple.net).
References
1. According to IBM’s the Internet of Things and the concept of singularity
2. Alexander Osterwalder, Business Model Generation: A Handbook for Visionaries,
Game Changers, and Challengers
3. Pollack, Lindsey, Millennials Tomorrow’s Leaders Today, http://www.thehartford.com/
sites/thehartford/files/millennials-leadership.pdf

www.europeanbusinessreview.com 11
There is a critical
business process missing
in your organization

The Strategy-to-Execution Process™ (S2E). This

process enables the alignment of innovative
strategies, a next generation capability-based
business model, a cross-functionally sponsored
heat map review of performance, a multi-year
agenda which balances the run, improve, transform
priorities and support for everyday management
activities. This process can be used whether you are
The S2E process is supported by WorkFit, the
a CEO sponsoring S2E enterprise-wide, a Business
leading management collaboration tool built on
Area Owner sponsoring S2E for your business area Microsoft SharePoint.™
or a Project Owner trying to get a cross-functional
project delivered.

In North America contact

www.accelare.com or +1 781.961.1760
In EMEA contact
www.archtexx.com or +49 6173 998700
 Technology
BIG DATA:
Big Deal or Big Hype?
BY SUNIL GUPTA
Google Flu Trends article of November 2008 heralded in a
new age for big data where it is possible to leverage the vast
amount of data to speak for itself, without theory or expert
knowledge of the subject matter. However, in a short span, the
pendulum swung from big data being a big deal to becoming
a big hype. As is usually the case, the truth is somewhere
between these two extremes, this article highlights the
potential impact of big data on business practices in three
broad areas: applications, methods and infrastructure.
I
n November 2008, researchers at Google published an article
in the journal Nature about Google Flu Trends (GFT) – a
model that used hundreds of billions of US consumer searches
on Google about influenza during the years 2003-2008 to
predict the incidence of the flu. Google scientists did not use
any prior knowledge of influenza; instead they analysed more
than 50 million of the most commonly used search queries to
automatically select the best-fitting search terms by estimating
450 million different models. The final model, which used a
mere 45 search terms, was used to predict rate of flu in several
US regions and these results were compared with the actual
incidence of influenza as reported by the Centers for Disease
Control (CDC). The paper reported an incredible accuracy rate
with correlations between actual and predicted influenza rates
between 0.90 and 0.97.1
While proponents of big data had been around for many
years before the Google study, this article soon became the
poster child for the promise of big data. It came on the heels of a
provocative article by Chris Anderson, editor of Wired magazine,
who argued that big data heralds a new age where theory and
expert knowledge of a subject matter are irrelevant. Google
scientists were neither experts in influenza nor did they build
any sophisticated theory about the reasons for the propagation
of the disease. Instead they leveraged the vast amount of data to
“speak” for itself. This emboldened the champions of big data,
and soon the popular press and technology blogs were filled
with the visions of a new era of big data.
An article in the March 2014 issue of the journal Science
sent a serious blow to this hype by reporting that, since August
2011, GFT had overestimated the rate of flu for 100 of the last
108 weeks.2 In some weeks, GFT predictions were almost
double the actual incidence of flu. This article opened the
floodgates of criticisms about big data and the hype surrounding
it. Articles with titles such as “Big data: are we making a big
mistake?”3 or “Eight (no, Nine!) Problems with Big Data,”4 now
started showing up everywhere.
In a short span, the pendulum seemed to have swung from big
data being a big deal to becoming a big hype. Doubts about the
business value of big data started emerging. Gartner, a research
company, predicted that by 2017 almost 60% of big-data
projects would fail to go beyond piloting and experimentation.
Wired magazine noted that almost 70% of enterprise project
money is spent on aggregating, storing, and optimising data
before a single penny of value is created. Companies around the
world, which until now were busy collecting and storing vast
amounts of data, were beginning to wonder what, if any, insights
they could draw from these data.
As is usually the case, the truth is somewhere between
these two extremes. While some of the claims of big data were
clearly hyped, there are indeed invaluable opportunities offered
by these data. Instead of focusing on the characteristics of big
data (e.g., the so-called 3Vs: volume, variety, and velocity), this
article highlights the potential impact of big data on business
practices in three broad areas (see Figure 1 on next page).
www.europeanbusinessreview.com 13
 Technology
Applications
Business applications of big data can
be grouped into three categories: doing
traditional things better and faster,
improving efficiency of business
operations, and new applications that were
not possible before the arrival of big data.
1. Doing things better and faster
Big data does not have to offer big insights;
small increments in current business
practices spread over a large customer
base can yield significant improvement.
Companies can now gather and process
information almost instantaneously, called
“nowcasting”, which offers unparalleled
speed and accuracy. Credit card
companies have always used data for fraud
detection, but now they can use real-
time data to detect fraud faster that could
save them billions of dollars. Macy’s, a
department store chain, uses real-time
demand information for 73 million items
to re-price them within an hour.
Companies can now
gather and process
information almost
instantaneously, called
“nowcasting”, which
offers unparalleled speed
and accuracy.
In the advertising world, small
improvements in click-through rates
(CTR) of online ads can significantly
improve return on investment. One
study used consumers’ browsing data to
learn, automatically and near optimally,
which banner ads to serve to consumers
in order to maximize CTR. Data from
100,000 consumers and 450,000
banner ads showed that morphing
banner ads almost doubled CTR of ads
from 0.17% to 0.31%.5 This seemingly
small improvement in CTR can translate
14 The European Business Review May - June 2015
Figure 1: Three Areas of Big Data Impact
into billions of dollars in savings for the
advertising industry.
Lending companies, such as LendUp
and Kabbage, use traditional financial data
along with social media information to
gauge credit worthiness of their customers,
usually small businesses. Kabbage
examines a variety of information about
these businesses, including reviews of
their customers, to determine their credit
worthiness and approve a loan of up to
$50,000 within seven minutes.
Bluefin Labs, acquired by Twitter in
2013, links television programming with
discussion on social platforms to assess
how reach and engagement of television
programs or ads is amplified in social
media. As more and more consumers
use multiple screens simultaneously, this
Social TV Analytics provides a better and
more complete picture of the impact of a
television programme or ad.
2. Improving efficiency
UPS ships almost 16 million packages
daily using its fleet of more than 100,000
drivers. Reducing just one mile per driver
per day can reduce the company’s cost
by $50 million per year. Using telematics
sensors on its trucks and a route-
optimising programme called ORION
(On-Road Integrated Optimisation and
Navigation), UPS suggests optimal routes
to its drivers within 6-8 seconds. This
system has managed to reduce 85 million
miles driven per year, which translated
into 8 million fewer gallons of fuel used.
It also managed to reduce engine idling
time by 10 million minutes, which led to
a reduction in fuel consumption of about
650,000 gallons.6
Kimberly-Clark Corp., a consumer
products giant, is reducing its inventory
costs by getting real-time demand data
from several retailers. This has allowed
the company to improve the accuracy of
its inventory forecasts by 20% to 35%,
which has led to savings of millions
of dollars.7 GE is using sensors in its
machines, including jet engines and wind
turbines, to collect data and develop a
platform called PREDIX, which allows it
to do predictive maintenance and improve
the efficiency of its machines. Improving
airline engine efficiency by 1% resulted
in $2 billion in annual savings.8
3. New applications
Data from new and varied sources are
making it possible for us to apply them
in new domains that were either not
possible before or were not thought of as
ripe for data driven decisions.
People Analytics
In his famous book Moneyball, Michael
Lewis described how Oakland’s baseball
team used data analytics to thrive in a
field that was dominated by the gut feels
of baseball experts. Now more novel and
interesting applications of such “people
analytics” are emerging. Knack, a startup
in Silicon Valley, makes app-based video
games like Dungeon Scrawl and Wasabi
Waiter. By asking employees to play
these games for 20 minutes, it gathers
an enormous amount of data on which
actions a person takes, the sequence of
these actions, and whether or not he or she
hesitates before taking an action. These
data are then used to analyse a person’s
creativity, persistence, and ability to
prioritize and learn from mistakes.
New Business Opportunities
The Weather Channel reinvented
itself by finding new and interesting
applications of its data. In early 2013,
the company launched the WeatherFX
division, which analysed microclimates
for 500,000 locations worldwide, and
started connecting weather data with data
on consumer purchases to predict their
behavior based on weather-sentiment
analysis, or how weather makes people
feel in a particular location at a particular
time. One of the first brands to use
WeatherFX was Pantene, which targeted
Pantene promotions by weather in a zip
code – if hot and humid show Pantene
Smooth, if low humidity, show volumizer.
Sales of Pantene’s advertised products
jumped 28%.
MasterCard offers its commercial
clients a service called SpendingPulse,
which captures near real-time purchase
data from billions of transactions around
the world to provide a holistic picture of
the economy and to predict trends in a
variety of industries.
Leading Economic Indicators
Consumer web searches continue to
serve as leading economic indicators
in many areas. Israel’s central bank
analyses Google search keywords to
gauge consumer demand before releasing
government statistics. Popularity of
the search term JSA (for job seekers
allowance) helped predict unemployment
for Bank of England. Travel related search
allowed the Bank of Spain to predict
tourism, while mortgage-refinancing
search helped predict New York Fed
refinance applications. Under the new
Prime Minister Shinzo Abe, Japan is also
looking at Big Data for timely economic
indicators.
Social Impact
New forms of data also have the potential
to significantly impact and improve
social programmes. United Nations
started a new initiative, Global Pulse,
which identifies problems that could be
addressed through real-time monitoring
of digital data. Examples of its research
include using mobile phone data to
estimate food security, using social media
for remote monitoring and detection
of HIV in Brazil, and nowcasting food
prices in Indonesia using social media
signals.9
To achieve financial inclusion for their
poorest citizens, governments around the
world are using biometrics and big data to
create identity, digitally pay government
grants, and provide access to financial
services such as insurance to billions of
people around the world. India started its
unique ID programme called Aadhaar
in 2009, and by January 2015 it has
been successfully issued to more than
734 million people. Nigeria and South
Africa started a similar programme to
create a national ID in partnership with
MasterCard.10
Governments are beginning to use
big data to build smart cities. London is
currently working with Bologna, Genoa,
and Barcelona as part of the EU’s iCity
programme to develop an urban platform
for testing the sourcing, capture, and
storage of the different types of public and
private data, which will be collected from
millions of devices across smart cities.
These data would be used for managing
congestion, saving energy, public safety,
and many other applications.
Methods
Scientists and data analysts are used to
working with samples of data to build
sophisticated models to test theories and
predict future behavior. While some of
these methods will continue to be useful,
big data requires different thinking for
how models are constructed.
1. Data visualisation
Perhaps the simplest and most powerful
way to generate insights from large
amounts of data is through visualisation.
One of the famous examples of data
United Nations started
a new initiative, Global
Pulse, which identifies
problems that could
be addressed through
real-time monitoring of
digital data.
visualisation comes from the 1854
cholera outbreak in London. During
that time, poor air quality was believed
to spread diseases such as cholera and
bubonic plague. John Snow, a physician,
was skeptical of this theory, and instead
of creating a complex model or a new
theory to uncover the cause of cholera
outbreak in London; he simply created a
dot map to identify the cluster of patients
on a London map. He soon realised that
majority of the cholera deaths occurred
around a public water pump on Broad
Street, which later turned out to be the
real cause of this outbreak.
Procter and Gamble (P&G) has
institutionalised data visualisation as
a primary tool for decision making by
creating decision cockpits, which visually
display the key information on desktops.
Senior management meetings are held
in specially built meeting spaces, called
Business Spheres, which are outfitted
with large screens that display key data
for the sales of its major products around
the globe. Executives can drill down on
the data at any level of detail in real time
to make quick decisions. This approach
has made decision making faster, easier,
and fact based at P&G.11
Ayasdi, a DARPA-funded spinout,
uses topological data analysis to produce
3-D visual maps to uncover patterns in
data. Its work has revealed genetic traits
of cancer survivors, tracked the source of
an E. coli outbreak, and provided insights
about terrorist behavior in and around
Baghdad. Tableau, a software company,
www.europeanbusinessreview.com 15
 Technology

provides simple drag and drop tools for

people of any skills to create maps and
graphs that offer quick and deep insights
from large amounts of data.

2. Explore and discover

John Tukey, one of the most celebrated
statisticians of our times, was a firm
believer in the power of exploratory data
analysis. Tukey’s ideas are even more
relevant today when data from a variety of
sources offers new and rich patterns. Most
data now comes in unstructured form
such as videos, images, and social media
discussions. To make sense of these data
we need methods that not only anticipate
every possible action, but also learn and
adapt to the new information.
IBM’s Watson system and its cognitive
computing approach are built on the idea
of exploring, discovering, and learning over
time. Unlike the expert systems of the
past where rules are hard coded, cognitive
computing is based on artificial intelligence
and machine learning that allows it to
process natural language and unstructured
data to learn a domain and adapt like
humans. Instead of simply confirming
current hypotheses and theories, the system
can generate new hypotheses as it learns
and adapts with the new patterns in the data.

3. Simple models
As the scientific disciplines progress, there is
a tendency for scholars and data scientists to
make the models more complex. In a 2000
paper titled, “How complicated does the
model have to be?” Paul Krugman, a Nobel
Laureate in economics, wrote that modern-
day complex models of macroeconomics are
neither more accurate nor more insightful
than the simpler models used decades ago.12

In the end, the value of big

data will come from generating
new and powerful insights or
from disconfirming some of
our strongly held ideas.

16 The European Business Review May - June 2015

 In 2000, two Microsoft researchers
compared four algorithms on how to
improve grammar in Word documents
with 10 million, 100 million and 1 billion
words. With more data performance of all
algorithms improved, but a simple algorithm
that was the worst performer with half a
million words performed the best.13
Diversity over Complexity
Why do simple models with large data
beat complex models? While this is still
an ongoing area of research, some insight
in this topic comes from research on the
combination of forecasts. In a seminal
paper published in 1969, Bates and
Granger showed that combining a pair of
forecasts can produce a better forecast,
an idea similar to financial portfolio
optimisation. Later studies by Clemen,
Winkler, and others confirmed this idea
to show that simple averaging of various
forecasts produces a far superior forecast
than any single method.
More recently, statisticians have
developed a classification method called
random forest that combines several
simple decision trees to classify and
predict a phenomenon. Each tree is able
to capture a unique aspect of the data and,
by combining several simple but different
trees; the algorithm is able to capture all
the nuances of the data.
One of the most celebrated examples
of this idea comes from the Netflix
competition. In October 2006, Netflix
announced a competition, with a $1 million
prize, for anyone who could help improve
its movie recommendation algorithm.
During its award ceremony in 2009,
Netflix’s chief product officer described
the key learning from this competition:
“At first, a whole lot of teams got in — and
they got 6-percent improvement, 7-percent
improvement, 8-percent improvement, and
then it started slowing down… Then there
was a great insight among some of the teams
— that if they combined their approaches,
they actually got better.”14
The more diverse and different
the approaches, the more value they
added when combined with an existing
algorithm. Joe Still of the Ensemble, the
team that finished second in this contest,
reflected on his experience and said, “One
of the big lessons was developing diverse
models that captured distinct effects even
if they’re very small effects.”15
4. Experiments
Digital technology enables companies to do
large-scale field experiments in real time.
Experiments have been used to examine
how changes in price affect demand, the
impact of advertising on sales, the diffusion
of information, social influence on voting
behavior, and the transfer of moods among
friends in a social network.
To determine the impact of advertising
on offline sales of a retailer, Facebook
conducts field experiments instead of
building complex models. First, it links
a retailer’s customer database with their
Facebook accounts. Next, a randomly
selected set of customers is exposed to
the retailer’s ads on Facebook while others
are exposed to controls ads. Finally, the
customers’ actual purchase behavior in
offline stores is monitored to determine
the impact of Facebook advertising.
To understand what makes a song,
movie, or a book a hit, Salganik, Dodds, and
Watts created an artificial music market
where more than 14,000 participants
were asked to listen to songs and rate them
on a 1-5 scale. The study showed that the
number of times a song was downloaded
by others (a number that was manipulated
by the researchers) had a huge impact
on the participants’ likability of a song.
In other words, social influence, and not
the quality of a song or a movie, largely
determines their success.16
Infrastructure
Traditional databases, such as those
offered by Oracle, store information in
rows and columns on servers and use
www.europeanbusinessreview.com 17

query languages such as SQL to retrieve this information. As
datasets get large and include unstructured information that
does not neatly fit into rows and columns format, this type of
database becomes less useful.
Based on research papers published by Google in 2003-
2004, a programmer at Yahoo created a new open-source
software framework called Hadoop, named after his son’s
toy elephant. Hadoop comprises two things: a distributed file
system that splits files into large blocks that allow it to store this
information across a network of thousands of cheap computers,
making it less costly and scalable; and a data-processing system
called MapReduce that accesses data from multiple locations
and processes it in parallel.
Soon, several companies such as Cloudera, MapR, and
Hortonworks started using Hadoop - many of them by building
proprietary accessories to the open-source version of the
original software system. However, one of the key problems
with Hadoop is that it crunches data in a “batch,” which makes
it slow for real-time data access and analysis. To overcome this
problem, a host of new systems have emerged, such as Dremel
by Google, Impala by Cloudera, and Drill by MapR. One of the
fastest systems to come up in the market is from Databricks, a
startup spun out of the University of California, Berkeley. Its
system called Spark has been able to sort 100 terabytes of data,
or one trillion records, in a record 23 minutes.17
18 The European Business Review May - June 2015
Conclusion
Big data is here to stay. It is opening up new opportunities,
advancing new methods as well as resurrecting some of old
approaches such as data visualisation, and creating a brand
new infrastructure to store and process large amounts of
unstructured data in near real time. In the end, the value of big
data will come from generating new and powerful insights or
from disconfirming some of our strongly held ideas. As Mark
Twain said, “It ain’t what you don’t know that gets you into
trouble. It’s what you know for sure that just ain’t so.”
About the Author
Sunil Gupta is the Edward W. Carter Professor of Business
Administration and Chair of the General Management Program
at Harvard Business School. He is also the co-chair of the ex-
ecutive program on Driving Digital and Social Strategy. In the
recent past, he has taught an elective course on Digital Mar-
keting Strategy to MBA students and Advanced Management
Program to senior managers.
References
1. Jeremy Ginsberg, Matthew H. Mohebbi, Rajan S. Patel, Lynnette
Brammer, Mark S. Smolinski & Larry Bril, “Detecting influenza epidemics
using search engine query data,” Nature, 457, Nov 2008, 1012-1014.
2. David Lazer, Ryna Kennedy, Gary King, Alessandro Vespignani, “The
Parable of Google Flu: Traps in Big Data Analysis,” Science, 343, March
14, 2014, 1203-1205.
3. Tim Hardord, “Big data: are we making a big mistake,” Financial Times,
March 28, 2014.
4. Gary Marcus and Ernest Davis, “Eight (no, Nine!) Problems with Big
Data,” The New York Times, April 6, 2014.
5. Glen Urban, Gui Liberali, Erin MacDonald, Robert Bordley, and John
Hauser, “Morphing Banner Advertising,” Marketing Science, 33, 1 (Jan-
Feb), 2014, 27-46.
6. “UPS: Putting Analytics in the Driver’s Seat,” Digital Transformation
Review, CapGemini, January 2014.
7. James Cooke, “Kimberly-Clark connects its supply chain to the store
shelf,” Supply Chain Quarterly, Quarter 1, 2103.
8. Karim Lakhani, Marco Iansiti, and Kerry Herman, “GE and the Industrial
Internet,” HBS Case, 614-032, June 2014.
9. http://www.unglobalpulse.org/research
10. Sunil Gupta, Rajiv Lal, and Natalie Kindred, “MasterCard: Driving
Financial Inclusion,” HBS Case # 515-035, October 2014.
11. Thomas Davenport, Marco Iansiti, and Alain Sereis, “Competing with
Analytics at Procter & Gamble,” HBS Case # 613-045, April 2013.
12. Paul Krugman, “How Complicated Does the Model Have to be?” Oxford
Review of Economic Policy, vol. 16, no. 4, 2000.
13. Michael Banko and Eric Brill, “Scaling a Very Very Large Corpora for
Natural Language Disambiguation,” Microsoft Research Paper, 2001.
14. Eliot van Buskirk, “How the Netflix Prize was Won,” Wired, September
22, 2009.
15. Ibid.
16. Salganik, Matthew J., Peter S. Doods, and Duncan J. Watts, “Experimental
Study of the Inequality and Unpredictability in an Artificial Cultural
Market,” Science, Feb 10, 2006, 854-856.
17. https://databricks.com/blog/2014/10/10/spark-petabyte-sort.html
 Strategic Planning & Execution in an Uncertain World

S
etting business strategy used to be as simple mindset. The program offers distinct advantages by
as defining what the organization wanted to design, says Ulrich, Wharton professor of operations and
achieve and then laying out the steps to get there. information management. “Our intent in joining with
Management used this plan to set priorities, allocate IESE is to provide global market insights and hands-on
resources, assess operations, align employees, and satisfy experiences that span geography, academic perspectives,
stakeholders. But today, executives face a complex and and pedagogical methods. The inclusion of a competitive
competitive world that can defy all forecasts. According business simulation along with visits to best-of-breed
to Pedro Videla, professor of economics at the IESE companies, faculty experts, and relevant speakers ensures
Business School, the fast-paced, continual challenges that the theory participants learn can be readily put
interfere with executives’ ability to formulate clear into practice.”
strategies, or know whether those strategies are being
executed well, because they are too busy reacting.
“One day, they are facing challenges from competition
in Asia. The next day it could be new technology
that threatens to disrupt their business model. The
“ They will come to better understand the
relationship between elements of their
organization’s operations and its financial
following day they find their e-commerce website doesn’t
work on mobile platforms,” says Videla. “These are performance, along with the operational
difficult situations, which are then compounded by the levers most likely to develop advantage.”
macroeconomic impact of emerging markets, global
demographic shifts, and income inequality within and — Karl Ulrich
across countries.” Professor of Operations and Information Management;
Videla and Wharton Professor Karl Ulrich are faculty Vice Dean of Innovation, The Wharton School
directors of a new joint Wharton-IESE Executive
Education program designed to give senior executives
a unique strategic and global perspective—and the
operational tactics needed to achieve business goals.
Business Strategy & Operational Execution: Bridging
the Divide enables participants to draw insights from
across their organization and read cues from the global
environment, gaining a better understanding of the
interlocking factors that influence and complement one
another in creating value.
The Wharton School and the IESE Business School
have joined forces to present this one-of-a-kind program,
which combines execution, operational excellence,
and change management, all with a decidedly global
 The two-week program takes a coast-to-coast
journey, beginning with a module at the New York
Center of the IESE Business School followed three
months later with a second week at Wharton | San
Francisco. A break between the two weeks provides the
time and space for participants to apply and reflect on
their new business knowledge.
The combined impact of the two locations, two
business schools, and dual focus on strategy and
operational execution is intended to develop in
participants the enhanced ability to translate strategy
into action and lead change across diverse units
within their organization. “They will come to better
understand the relationship between elements of their
organization’s operations and its financial performance,
along with the operational levers most likely to develop
advantage,” Ulrich says. “This will expand their abilities
to identify and create opportunities for performance
improvement and to develop metrics of performance
for monitoring progress.”
Ultimately, says Videla, “we want to give participants
the tools and frameworks for identifying all the
challenges they face in today’s changing business
environment so they can develop effective strategies
and apply them in day-to-day operations. We are
bridging the gap between two essential elements for
organizations—strategy and operational execution.”
Further Information:
Wharton Executive Education and IESE Business School
are offering Business Strategy & Operational Execution:
Bridging the Divide July 13–17, 2015, in New York, NY,
and October 4–9, 2015, in San Francisco, CA. Both
sessions are required for program completion.
To find out more, please visit:
execed.wharton.upenn.edu/BSE

Business Strategy & Operational

Execution: Bridging the Divide

MODULE 1
MODULE 2 Jul. 13–17, 2015
New York, NY
Oct. 4–9, 2015 IESE Business School
San Francisco, CA
The Wharton School

HERE’S YOUR GAME CHANGER:

Strategy means nothing
Business Strategy & Operational
without proper execution. Execution: Bridging the Divide
Leverage global business insights by learning how to execute an New York, NY | San Francisco, CA
effective strategy in this new program for senior executives offered by
2 Leading Business Schools
two of the world’s leading business schools—Wharton and IESE.
2 Pivotal Locations • 2 Key Success Factors

Translate Strategy into Action: execed.wharton.upenn.edu/BSE

 Technology

HOW THE
INDUSTRIAL
INTERNET
OF THINGS
CAN ADD TO THE
WEALTH OF
NATIONS
BY MARK PURDY AND LADAN DAVARZANI
To capture the benefits of Internet-connected ma-
chines, national leaders must nurture the conditions
that are needed to translate technological change
into economic growth.

C
all it the multi-trillion-dollar question: can the
Industrial Internet of Things (IIoT) jumpstart the
lacklustre global economy, which is still struggling
seven years after the onset of the Great Recession?
Many government leaders hope the answer is yes. For
example, Prime Minister David Cameron wants the UK to
lead this ‘new industrial revolution’ and has directed nearly
US$125 million to IIoT research. In China, the government
has designated the Internet of Things an ‘emerging strategic
industry’ and plans to invest some US$800 million in the
IIIoT by 2015. These and several other governments are
looking to the IIoT as a means to stimulate national com-
petitiveness and economic growth.
And with good reason: the IIoT — a vast network of
Internet-enabled devices that interact with each other and
with their human operators — has the potential to help over-
come structural barriers to faster growth. The IIoT could
contribute US$14.2 trillion to world output by 2030, ac-
cording to Accenture’s analysis.

In China, the government has designated

the Internet of Things an ‘emerging
strategic industry’ and plans to invest
some US$800 million in the IIIoT by 2015.
Why such optimism? The IIoT can boost productivity,
drive the emergence of new markets, and encourage in-
novation. In manufacturing, connected sensor networks
already monitor logistics movements and machines at
mining operations and utilities plants, helping organizations
reduce costs. In agriculture, similar networks deployed on
farmlands are improving the use of natural resources and
contributing to better harvests. The IIoT is also creating en-
tirely new markets in areas such as digital health and ‘con-
nected lifestyle’ products.
But optimistic predictions won’t become reality without
a lot of hard work. And when we look at national econo-
mies, we see that government leaders and policy makers are
going to have to take many steps to ensure that technologi-
cal change gets translated into economic growth.
Before we get to that, however, let’s take a look at a
historical example that sheds light on the challenge that
lies ahead.

www.europeanbusinessreview.com 23
 Technology
To Whose Benefit?
With IIoT technologies already reshap-
ing industries, optimism about global
economic growth seems warranted.
But when one thinks in terms of na-
tional economic growth, there is reason
for concern. Historically, some coun-
tries have been able to capitalize on the
economic potential of new technology
better than others. This trend may play
out again with the IIoT.
Take the introduction of electrifica-
tion in the industrialized world at the turn
of the twentieth century. Although many
countries were initially at the same level
of technological development, the US
became the world leader in electrification
because it embedded the new technology
in the wider economy and changed pro-
duction and organizational structures to
take advantage of it.
Consider the electrification of fac-
tories. Before electrification, factory
workers moved around static work sta-
tions before finally bringing the dif-
ferent parts of the product together.
Electrification turned this concept on
its head, with the product moving down
a central assembly line while workers
remained static, saving thousands of
hours in labour costs and permitting
greater standardization of activities. By
the 1920s, American industries were
constructing new all-electric factories
in line with the recommendations of in-
dustrial engineers, and were retraining
factory workers for the new environment.
As the decades progressed, electricity
expanded beyond industrial sites to in-
fluence the consumer economy. By the
1950s, 94 percent of American families
had electricity in their homes, fuelling
strong demand for electrified household
appliances.
This example shows that techno-
logical diffusion is not the same as the
economic diffusion of a technology.
Technological diffusion is much narrow-
er in scope: the term covers the invention,
availability and adoption of a technology.
24 The European Business Review May - June 2015
Business
Commons
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ͻ ,ƵŵĂŶ ĐĂƉŝƚĂů
ͻ 'ŽŽĚ ŐŽǀĞƌŶĂŶĐĞ ĂŶĚ
ŝŶƐƟƚƵƟŽŶƐ
ͻ ĐĐĞƐƐ ƚŽ ĐĂƉŝƚĂů
ͻ ĐŽŶŽŵŝĐ ŽƉĞŶŶĞƐƐ
/ŶŶŽǀĂƟŽŶ dĂŬĞͲŽī &ĂĐƚŽƌƐ
Dynamo ͻ 'ŽǀĞƌŶŵĞŶƚ ƐƵƉƉŽƌƚ Θ
ƐƉĞŶĚŝŶŐ ŽŶ ZΘ
ͻ ŶƚƌĞƉƌĞŶĞƵƌŝĂů ĐƵůƚƵƌĞ
ͻ ͞DĂŬĞƌŝƐŵ͟
ͻ ^dD ƚĂůĞŶƚ
ͻ YƵĂůŝƚLJ ŽĨ ƐĐŝĞŶƟĮĐ ƌĞƐĞĂƌĐŚ
ͻ hŶŝǀĞƌƐŝƚLJͲŝŶĚƵƐƚƌLJ
ŝŶƐƟƚƵƟŽŶƐ
ĐŽůůĂďŽƌĂƟŽŶ ŝŶ ZΘ
ͻ ĞǀĞůŽƉŵĞŶƚ ŽĨ ƚĞĐŚŶŽůŽŐLJ
ͻ ^ƚĂŶĚĂƌĚ ƐĞƚƚŝŶŐ
ͻ hƌďĂŶŝnjĂƚŝŽŶ
ĐůƵƐƚĞƌƐ
ͻ džƉĂŶĚŝŶŐ ŵŝĚĚůĞ ĐůĂƐƐ
ͻ &ŽƌŵƐ ĨŽĐƵƐ ŽŶ ĐƵƐƚŽŵĞƌ ŶĞĞĚƐ
Transfer Factors
ͻ &ŽƌŵĂů ĂŶĚ ŝŶĨŽƌŵĂů
ŬŶŽǁůĞĚŐĞ ƚƌĂŶƐĨĞƌƐ
ͻ &ŝƌŵƐ ĂďŝůŝƚLJ ƚŽ ĞŵďƌĂĐĞ ŶĞǁ
ƚĞĐŚŶŽůŽŐŝĞƐ ǁŝƚŚŝŶ
ŽƌŐĂŶŝnjĂƟŽŶ
ͻ ŽŶƐƵŵĞƌ ǁŝůůŝŶŐŶĞƐƐ ƚŽ ĂĚŽƉƚ
ŶĞǁ ƚĞĐŚŶŽůŽŐŝĞƐ
ͻ ĂƚĂ ƉƌŝǀĂĐLJ ĂŶĚ ƐĞĐƵƌŝƚLJ
ĐŽŶĐĞƌŶƐ
Figure 1
Economic diffusion comes about through potential of the IIoT. We see these con-
significant value - creating changes in ditions in terms of a country’s ‘national
production and consumption activities — absorptive capacity.’
new ways of organizing the supply chain, Through our research into previous
running a factory, or selling to consum- eras of technological revolution and in-
ers, for example. terviews with experts from technology,
Consider social media today. Although economics and business, we identified
this technology is widely available four enabling conditions for national
and used by billions of people (for in- absorptive capacity. (See Figure 1.) The
stance, through networking sites such impact and progress of economic diffu-
as Facebook and Snapchat), only a small sion is determined by the relative strength
fraction of social media users are cur- of these components.
rently generating economic value from
it. Few businesses have fundamentally Figure 1: Reaching the economic poten-
reinvented their approach to, say, work tial of the Industrial Internet of Things
processes or marketing and sales to take Government leaders can’t take for granted
advantage of this technology. that their nations will enjoy econom-
ic growth thanks to the IIoT. To make
Spreading the Wealth growth possible, they’ll have to shift their
If countries do not recognize this dif- attention away from the technology itself
ference and fail to create enabling con- and toward the conditions that convert
ditions for economic diffusion, they run technology diffusion into economic
the risk of losing out on the economic diffusion. The four-component model
below reveals what countries need in order to enjoy the greatest
benefits from the IIoT.
Establishing the Business Commons
Building on a technological foundation, countries must create a
sound ‘business commons.’ Key ingredients include an educat-
ed population, a reliable system of banking and finance, a healthy
network of local suppliers and distributors, all working under condi-
tions of good governance and rule of law. A strong telecommunica-
tions and Internet infrastructure magnifies the effects of these factors.
Although they have room for improvement, countries in
the developed world already have a well-developed business
commons. Many countries in the developing world, however,
are still working to establish a technological base for the Internet.
However, they should also do what they can to begin im-
proving their business commons. While countries with a weak
business commons may be able to compensate with strengths
in the other enabling conditions, they are much less likely to
realize the full benefits of the IIoT’s opportunity.
Launching the Take-off Factors
Business and government leaders also need to encourage the
‘take-off factors’ that spur on the economic impact of a new
technology. Once the infrastructure for electricity started to
proliferate, new inventions such as the radio and the televi-
sion emerged, helping many of the world’s economies ‘take off’
toward further economic diffusion of electricity.
As the technology begins to reach a wider population,
a process of standards setting (either by government or the
market) begins. The battle between Tesla and Edison in the early
days of electricity illustrates how technology pioneers compet-
ed to define the new era. Other industries also begin to innovate,
using the core technology and generating value from it.
We can see a similar dynamic with the IIoT, as technology
companies race to be IIoT leaders. This process is sped up by
the fact that the IIoT can piggyback on existing telecommu-
nications networks. Widespread mobile phone coverage and
consumer use—even in the poorest countries—means that much
of the world is positioned to take advantage of the IIoT in some
form. It is estimated that nearly 85 percent of the IIoT is based
in legacy infrastructure. Thus, consumers, businesses, and in-
novators can take advantage of the IIoT at relatively low cost.
Enabling the Transfer Factors
For a technology to become much more deeply ingrained in
an economy, transfer factors must be developed. These factors
induce wider changes in the behaviour of firms, consumers and
society. The technology becomes ‘democratised.’ Knowledge
of its use becomes ‘open source,; leading to widespread pri-
vate-sector innovation.
It is estimated that nearly 85 percent of
the IIoT is based in legacy infrastructure.
Thus, consumers, businesses, and
innovators can take advantage of the IIoT
at relatively low cost.
The economic diffusion of the Internet in the past two
decades demonstrates the impact of this process. While early
Internet applications involved little more than emailing and
limited file sharing, today they are the foundation for how busi-
ness gets done and how many consumers conduct their daily
lives. Teleconferencing replaces business travel, while the
widespread use of ‘apps’ has given consumers access to seem-
ingly unlimited amounts of information and products.
A key factor within this component is changing social
norms and attitudes toward new technology. Take e-com-
merce as an example. Today, it generates billions in revenue,
whereas ten years ago many consumers were afraid to shop
online because of data privacy concerns. In many countries
today, consumers still refuse to shop online because of fears of
fraud. As automobiles, personal health maintenance devices,
and homes become integrated into the IIoT, such concerns
resonate even more with consumers.
Firms and other organizations also must adapt to the chang-
ing technological conditions, or run the risk of obsolescence.
Research has shown that European firms have seen far fewer
benefits from the proliferation of information and communi-
cations technology than their US counterparts in part because
of their inability to redesign their organizational structures and
management styles. Adapting to the IIoT will carry even greater
implications for organizations’ competitiveness.
Building an Innovation Dynamo
When a technology produces self-sustaining innovation and
development, it is effectively an innovation dynamo. Electricity
led to electronics. Electronics led to modern computing.
Modern computing combined with telecommunications led to
today’s Internet and the IIoT.
The post-war development of plastics shows how a new
technology not only changes business models, but works with
developments in other areas to spur greater innovations. The ad-
vances in plastics, mass production, and new electrical products
combined with government-sponsored infrastructure projects
and home-buying programs in the post-war US led to consum-
er and institutional demands for lighter, cheaper, and more so-
phisticated products. Plastics provided the basis for countless
items, from coffee makers to telephones and computers.
www.europeanbusinessreview.com 25
 Technology

History reminds us that the Play to your strengths
Does your economy have a strong high-
diffusion of technology tech industrial sector? Or is it a largely
is not the same as its agrarian, developing nation? Such ques-
economic diffusion. tions will help policymakers pursue ap-
The innovative potential of the IIoT is
only beginning to be understood. A new,
grassroots source of innovation is being
led by the ‘maker’ culture — a technol-
ogy-based extension of do-it-yourself
ethic. Many are already working to build
their own personalized IIoT ecosystems
in their homes through use of devices like
Raspberry Pi, which allows makers to
program and run their own networks, and
even build their own connected robots
and drones. This movement holds great
promise in fostering the next generation
of Internet innovators and entrepreneurs.
The emergence of an IIoT innova-
tion dynamo can be supported through
policy guidance, marketing, and invest-
ment. Technology companies as well as
governments will need to expand their
research and development programs to
create further technological and infra-
structural bases for the next generation of
IIoT products. Technology clusters and
tech-focused business incubators — sub-
sidised both by large technology com-
panies and governments — can spur the
innovation process.
Galvanizing the Industrial Internet of
Things
Policymakers are right to look at the
IIoT as a source of economic growth
and innovation. But the lessons of
history tell us that without the right en-
abling conditions, the IIoT gamble may
not pay off. What can country leaders
therefore do to maximise the economic
return from their IIoT investments? The
specific answer will vary from country
to country, but along with building the
enabling conditions, policy leaders can
take the following actions to increase
the chances of success:
propriate investment strategies given
resource constraints. It is important that
they work with the grain of their econo-
mies to get the most benefit from the IIoT.
For example, relatively small investments
by agrarian nations in establishing sensing
networks in farms and irrigation systems
can have a massive payoff and capitalize
on existing comparative advantages.
Create a chain reaction across
industries
The IIoT has the potential to create new
ecosystems cutting across traditional in-
dustry boundaries and value chains. The
move to servitising products, for instance,
has led to farm equipment makers teaming
up with fertilizer suppliers and insurance
providers. Therefore, it is important for
policymakers to encourage businesses to
look beyond their own industry and build
new partnerships that enable the creation
of new business models, and products
and services.
Combat resource deficiencies
Many economies will come up against
deficiencies in skills, capital, and tech-
nology in their efforts to realize the
IIoT’s economic diffusion. Policymakers
will need to consider whether to ‘make-
or-buy’ these capabilities. For example,
they can nurture talent within the ex-
isting workforce (‘make’), but it may be
speedier to address skill gaps by tailor-
ing immigration policy to attract skills
from abroad (‘buy’). Equally, technology
deficiencies may be addressed by at-
tracting foreign direct investment and
encouraging technology transfers.
Connect the dots
To spur innovation in the IIoT, govern-
ments can draw on their powerful net-
works of various stakeholders (industry,
academia, NGOs) to share ideas and best
practices and identify mutual areas of in-
terest for further research. Governments
can also play a part in increasing collab-
oration and partnerships between global
and large companies, SMEs, and start-
ups. Facilitating and being part of such
collaborations will also help ensure that
policymakers design regulation in a way
that does not stifle innovation.
Shorten the investment lag
Organizations first have to assess the po-
tential value of a new technology before
they decide to invest in it. Business and
policymakers can work to shorten this
time lag by promoting experimental, pilot
and demonstration projects in IIoT ap-
plications. These will help raise business
awareness of the benefits—and mutual
growth prospects for both traditional and
new service industries. Early success
stories should be shared throughout the
business community to spur other com-
panies — and entrepreneurs — into action.
Policymakers are right to look at the
IIoT as a source of economic growth
and innovation. But there is no guarantee
that the IIoT gamble will pay off. History
reminds us that the diffusion of technology
is not the same as its economic diffusion.
Leaders can ensure that the IIoT gen-
erates growth by understanding how eco-
nomic diffusion develops over time and
by building national absorptive capacity
accordingly. That’s a large challenge, but
considering the IIoT’s potential to add to
the wealth of nations, one that should be
well worth the investment.
About the Authors
Mark Purdy is a managing director and
chief economist at the Accenture Insti-
tute for High Performance in London.
mark.purdy@accenture.com
Ladan Davarzani is a research fellow
at the Accenture Institute for High Per-
formance in London. ladan.davarzani@
accenture.com

26 The European Business Review May - June 2015

 Variety of high-tech
skills due to specialist
staff and industry leaders.
Attractive HR market
due to wide
catchment area.

Above-average quality
of life due to unspoilt
local recreation areas.
Strong housing supply
due to advantageous
real estate prices.

Building the future together

www.aargauservices.com
Telephone: +41 62 835 24 40
Aerial view of the
Paul Scherrer Institute
situated on both sides
of the river Aare
© Paul Scherrer Institute

Technology
Aargau – The Swiss High-Tech
Canton in Hot Pursuit of
Silicon Valley
“Hightech Aargau” is a program of the Aargau government
to encourage innovation and growth. With that, the canton
of Aargau aims to become the leading hub and role model
for high-tech innovation and development in Switzerland. In
short: the canton of Aargau has the ambition to become the
Swiss counterpart of Silicon Valley.
Silicon Valley and Switzerland: Peers in Innovation
In the United States, Silicon Valley is a leading hub and a role
model for high-tech innovation and development worldwide,
accounting for one third of all venture capital investment in the
United States. Switzerland, on the other hand, has been rated
the most innovative country in the world for the last few years.
Strength in innovation is an important driver of a country's
competitiveness. The key factors here are knowledge and tech-
nology. Various studies show that knowledge and technology
transfer strengthens a company's capability to innovate. Busi-
nesses that collaborate with scientific institutions are far more
successful than others. Their production runs more efficiently
and cost-effectively. In addition to that, they are much more
export-driven and offer outstandingly innovative products.
Nowadays, technology used in production processes of any
kind is becoming increasingly complex and demands knowl-
edge of various disciplines. That is why working with scientists
means a competitive advantage.
With its leading universities, technology transfer and tech-
nology parks, Switzerland's strengths are clear for all to see.
Switzerland's innovativeness is similar to that of the San Fran-
cisco area. It is well positioned in terms of the number of pat-
ents and ranks among the top countries in the world. Previously,
though, Switzerland found it more difficult to turn ideas into
marketable products and services. In contrast to California, the
Feature
Swiss are still less willing to take the risk of setting up their own
companies. Moreover, venture capital does not flow as easily,
with only more modest approaches adopted up until now. It
is true that there are a relatively high number of start-ups, but
these grow more slowly than those in Silicon Valley. Switzer-
land is therefore more about progressive development than the
large capital-intensive technological success stories that are
typical of Silicon Valley.
Canton of Aargau – The Land of High-Tech Industry and
Cutting-Edge Research
The canton of Aargau is ideally placed within Switzerland. The
fourth-largest canton in Switzerland is one of the country's
foremost driving forces in the technology sector. The region is
number one in energy and electrical engineering, nanotechnol-
ogy and plastics. Many companies in the plastics sector develop
and manufacture medical devices. Other key sectors in Aargau
are the life sciences industry, information and communication
technology, and also the machinery and metalworking industry.
How did Aargau come to be a centre for high-tech indus-
tries? Aargau became industrialised very early on due to its geo-
graphical location and abundant supply of water. For example, the
Brown Boveri Company (BBC), which was the predecessor of
Switzerland's innovativeness is similar
to that of the San Francisco area. It is
well positioned in terms of the number
of patents and ranks among the top
countries in the world.
www.europeanbusinessreview.com 29
 Technology
The number of people
working in research and
development in the canton
of Aargau is twice the Swiss
average. Aargau has more
software developers than
any other Swiss canton.
the industrial giant ABB, was founded in
the canton in 1891. Many highly special-
ised industries and clusters soon followed
throughout the canton. Even at that time,
businesses were exporting goods to the
whole world, and many of these are now
world leaders in their specific sectors.
The number of people working in re-
search and development in the canton of
Aargau is twice the Swiss average. Aargau
has more software developers than any
other Swiss canton. The University of Ap-
plied Sciences Northwestern Switzerland
with its School of Engineering has been
involved in research, innovation and tech-
nology transfer for over twenty years. The
university conducts more than two-hun-
dred projects with small and medium en-
terprises (SMEs) every year. A strong focus
is on ICT (information and communication
technology). The School of Engineering is
home to three ICT-related institutes.
Hightech Aargau – A Program to
Encourage Research and Innovation
The entire world admires Silicon Valley
for its innovation culture and economic
success. This is where young researchers
with a pioneering spirit can access ven-
ture capital and commercial know-how.
The region acts as a magnet for talent-
ed and ambitious people from across the
world. Literature on the subject names five
factors that drive California's success:
• excellent universities conducting ap-
plied market-based research
• direct technology transfer from uni-
versities to businesses
• technology parks close to research
30 The European Business Review May - June 2015
laboratories
• an environment that promotes entre-
preneurship
• a venture capital industry with suffi-
cient capital resources
The Governing Council of Aargau is
unable to conjure up a Silicon Valley
in Aargau. But it can help to ensure that
as many factors for success as possible
are in place in Aargau. This is the idea
behind the “Hightech Aargau" program,
which the Governing Council of Aargau
launched three years ago.
One of the goals of “Hightech Aargau"
is to promote cutting-edge research as
carried out at the Paul Scherrer Institute,
for example.
Park InnovAARE, the High-Tech
Business Park
The Paul Scherrer Institute is the largest
research centre for natural sciences and
engineering in Switzerland. It is a strong Attractive Production Factors Ensure
advocate of applying research results to Growth
the development of new industrial prod- Another objective of the “Hightech Aar-
ucts and procedures. A collaborative gau" program is to make attractive indus-
project of the canton of Aargau and the trial sites available to businesses that wish
Paul Scherrer Institute is PARK inno- to expand or establish themselves here.
vAARE, a high-tech business park. A large number of specialist suppliers
PARK innovAARE will be part of the and competitive production costs – low
Swiss Innovation Park, a nationwide initi- taxes, wages and real estate prices in
ative to promote innovative businesses in comparison with other Swiss cantons –
Switzerland. PARK innovAARE will be ensure that their innovation projects will
located right on the doorstep of the Paul progress rapidly.
Scherrer Institute in Villigen. Businesses Moreover, the high-tech canton of
that settle at PARK innovAARE will prof- Aargau is particularly well located to
it from the Institute's top-flight research develop the market. It lies at the heart
and unique infrastructure. The innovation of Switzerland's strongest economic re-
PARK innovAARE aims to intensify the gion, within easy reach of the interna-
exchange between research and business. tional airports in Zurich, Geneva, Berne
Companies that settle there benefit from and Basel. The dense rail and motorway
the proximity and direct access to the PSI's infrastructure that is optimally linked to
unique large-scale research facilities, its the European transport network allows
experts and specialists and their particular companies to benefit from short distanc-
and detailed know-how. Moreover, they es to customers, suppliers and business
profit from a widely ramified international partners worldwide.
network of universities, research institu- This whole package is rounded off su-
tions, knowledge transfer establishments perbly by attractive and safe residential
and internationally active enterprises. areas with a modern infrastructure. The

authorities are business-friendly and will
play a supportive role in the project.
Speed to Market Thanks to Highly
Efficient Technology Transfer
But the program's most important aim is
to finance specialised technology scouts
and innovation consultants. To this end,
the Hightech Zentrum Aargau was
founded in Brugg in December 2012.
The centre's consultants help busi-
nesses turn their innovative ideas into
profitable solutions and products. This
high-tech consulting centre makes it
easier for resident SMEs to gain access
to know-how, technology, universities
and industry partners. It performs inno-
vation check-ups, analyses innovations,
and looks for solutions, appropriate inno-
vation partners and financial support.
This helps SMEs in a number of differ-
ent ways. On the one hand, they can re-
duce the risks that the innovation process
poses to the business and thereby save
on the costs of innovating. On the oth-
er hand, they spend less time looking for
the knowledge, technology and partners
required, and conduct their own initial
analysis. Companies can also take advan-
tage of an active network of public and
private research facilities and technology
providers. The main aim here is to offer
businesses the best possible technolo-
gy and partner. The Hightech Zentrum
Aargau also provides access to financial
support at either cantonal, national or EU
level. The services are equally available
to all businesses that are in the process of
innovating. Support is given to enterpris-
es of any size, and irrespective of their
technological background such as (but
not limited to) the fields of engineering,
life sciences, medical technology, ICT,
micro and nanotechnology, energy and
environmental technology. The key con-
cept here is speed to market.
The Hightech Zentrum
Aargau also provides access
to financial support at
either cantonal, national or
EU level.
Feature
From Left: Visualization
of PARK innovAARE
© Homberger Architekten;
The School of Engineering
at the University of
Applied Sciences FHNW in
Brugg-Windisch trains the
high-tech young talent of
the future © FHNW
Starting Up and Growing the Local
Network
To help companies and their employees
settle, the Economic Promotion Depart-
ment of the canton of Aargau – Aargau
Services – provides a network of valu-
able industry contacts. The organisation
acts as a direct link to both cantonal and
federal authorities, easing the administra-
tive burden of moving to a new location.
There are teams to deal with migration,
tax and trade registration issues, as well
as consulting partners such as lawyers
and tax advisers. Aargau Services sup-
ports companies in answering business
and location questions and finding the
right site. The aim is to enable entrepre-
neurs to concentrate on their daily busi-
ness during the process.
Please contact us for further information:
Aargau Services Economic Promotion
Rain 53
CH-5001 Aarau
Phone: +41 62 835 24 40
Fax: +41 62 835 24 19
E-Mail: aargau.services@ag.ch
www.aargauservices.com
www.europeanbusinessreview.com 31
Nike Gangnam, Seoul, Korea
Source: http://news.nike.com/news/nike-gangnam-opens-in-seoul
 Technology
Selling Illusory Joy :
Emotions, Big Data and the
Coming Retail Renaissance
BY CHRISTOPHER SURDAK AND ED KING
Today the world is awash in massive
amounts of context-rich data. Whether
it’s GPS position information, social
media posts, emails, digital audio or
video, - even bio-sensor gathered data -
customers are creating an endless stream
of contextual information just waiting to
be mined. In this article, Christopher
Surdak and his guest author Ed King
explore how big data can help retailers
remain relevant and connected with cus-
tomers on an emotional level.
A
mong his extensive works, 17th
Century French philosopher René
Descartes often wrote of the dis-
tinction between our thoughts and our
emotions. Descartes believed that there
was a distinct “separation of mind and
body, rationality and emotion.” This dis-
tinction allows us to make decisions
that make sense, and in this manner we
are all rational human beings who make
optimal decisions where ever and when-
ever possible. If this is true, contempo-
rary retailers are significantly challenged
to stem the overwhelming move to online
commerce.
However, in his 1994 book, Descarte’s
Error, psychologist Anthony Damasio
suggests that emotion, rather than logic,
guides behavior and decision making
1
in the brain. Damasio studied people
who suffered a significant brain injury.
Specifically, he focused on those who
had fully-functioning “logical” brains,
but lacked the “emotional” center. The
subjects were able to apply logic to a
variety of situations but struggled to
make a decision.
Without emotions, Damasio con-
tends, people lack the drive, motivation
and “spark” to make decisions. In other
words, it’s emotion, not logic that triggers
decisions and purchases. Who is right?
More importantly, how can you possibly
connect with customers on an emotional
level, and remain relevant to them despite
their addiction to mobile shopping?
In this article, Christopher Surdak
and his guest author Ed King, VP of
Strategy for MaxMedia, an agency
focused on crafting digital experiences
for retail environments, explore how big
data can not only help retailers survive
this digital onslaught but how effective
use of data can transform your relation-
ship with your customers.
Retail in the Age of "The New Normal"
As we approach the mid-point of 2015
it's often hard to imagine our world
without smartphones, apps and analytics.
These technologies are just entering their
www.europeanbusinessreview.com 33
 Technology
adolescence as they really only started to
take hold roughly ten years ago. Youth
notwithstanding, these three technol-
ogies, the “digital trinity" as I call them,
have fundamentally and permanent-
ly altered our world, and these changes
aren't technical, they're sociological.
The digital trinity has brought about
six social trends that are part of our “New
Normal."
These six trends are:
1. Quality: Today, people expect per-
fection. Deliver less and they will
abandon you forever.
2. Ubiquity: People expect everything,
everywhere, all of the time.
3. Immediacy: People expect imme-
diate gratification. Just-in-time isn't
anymore.
4. Disengagement: People care about
the ends, the means are irrelevant.
5. Intimacy: People hunger to feel con-
nected and part of a community.
6. Purpose: People crave a sense of
purpose.
These trends are pervasive and affect
every aspect of our society.
As each of us becomes ever more
wedded to our smartphones, we become
ever-more appified. We expect our every
need to be met in 30 seconds or less, for
a Euro or less, or we simply look else-
where. We expect perfection in all of
our transactions with vendors, anything
34 The European Business Review May - June 2015
less is simply unacceptable. And we are
experiencing an increasing disconnect
between the things we want and the value
chains that provide them.
These trends have made the business
of retail exceedingly difficult. The rules of
retail have changed, and dramatically so.
Because of the digital trinity all pricing
power is now literally in the hands of con-
sumers. Retail is being polarised; meaning
businesses must provide commodities at
the lowest possible price against ruthless
competition or they must provide a rich,
meaningful, quality experience.
Unless you intend to out-Amazon
Amazon, or out-Tesco Tesco you're
going to lose the price game, which
implies that you need to provide expe-
riential value to your customers. Further,
the convenience of digital retail means
that maintaining physical locations must
be turned into an advantage; otherwise it's
a huge disadvantage.
If you've spent any amount of time in
a shopping mall or high street recently
you've likely noticed that appification
has dramatically changed the landscape
of retail. Many retail locations are seeing
reduced foot traffic, and frequently those
customers that do visit a favourite store
appear to be “showrooming;" the infu-
riating behaviour of browsing through
physical merchandise, then ordering
the same item online for 20% less with
next day shipping. There is evidence that
Did you know that over
90% of all retail purchases
are still made in a physical,
brick and mortar location?2
Even more shocking, did
you know that 83% of
millennials prefer shopping
in a physical environment
vs. online?
showrooming is on the decline2, however
this due to either customers' greater
comfort with online shopping, in-store
price matching policies, or both. In any
case, many people believe that retail is
dead, and it is just a matter of time until
all of our retail stores board up their
windows and close shop.
When Fast, Easy and Cheap aren’t
Enough
We live in a society engineered for effi-
ciency. Thanks to technology, shoppers
can now get virtually anything deliv-
ered right to their doorsteps—and at the
lowest possible price. Surely, technology
will spell the end of physical shopping
and onsite retail is dead, isn't it? Did you
know that over 90% of all retail purchas-
es are still made in a physical, brick and
mortar location?3 Even more shocking,
did you know that 83% of millennials
prefer shopping in a physical environ-
ment vs. online?4
The lesson to be learned from polari-
sation is that efficiency is not enough to
satisfy our shopping instinct. To the con-
trary, many of us are becoming increas-
ingly annoyed by the dramatic drop in
customer service most of us experience
with most of our purchases.5 Inefficiency,
when properly applied, can be a positive
differentiator, rather than negative.
As stated by Nadia Shouraboura,
CEO of the retail consultancy Hointer
and former technology VP for Amazon.
com, “eCommerce has reached a plateau.
The opportunity lies in brick and mortar
experiences. It's hard to make online
shopping cool and exciting, and make
you feel beautiful.”
While eCommerce has enjoyed
success, it’s clear that physical shop-
ping isn’t going anywhere. Looking to
gain an unfair advantage of their own,
brick and mortar retailers have started
to bring a technology and analytics lens
to the physical shopping space. Traffic,
dwell time, basket analysis, time spent—
terms that were once the domain of
online analytics packages like Google
Analytics—have now become the domain
of savvy physical retailers.
The hope is that by applying analytical
rigor to measure the physical shopping
experience, retailers can use data to rep-
licate the ease and convenience of shop-
ping online. In retail, what is most easily
measured gets the most attention, and
typically the most funding.
Shoppers Don’t Buy Until they Buy-In
Despite the convenience of online pur-
chases people still want to “go shopping."
To these consumers shopping is an expe-
rience, an event, an activity. There is more
to this activity than acquiring some object
or service, otherwise, the consumer could
achieve the same result faster, cheaper and
more conveniently online. This implies
that something other than these factors
is at play, and figuring out what that is
becomes the key to customer satisfaction.
These factors are based upon emotion,
not efficiency. If a customer takes the
time to visit a store they are likely mo-
tivated by something other than price,
and this is the opportunity to engage
their emotions. Indeed, if you can figure
out what is motivating your customers
emotionally they may become extremely
price-insensitive as their emotions over-
come their logic centers. Do this correct-
ly and you may achieve retailer nirvana;
where customers actually act irrationally
and their visits to your store become im-
pulsive and habitualised.
The mere act of walking inside the
store tells us that they’re seeking some-
thing more than a product; but what might
that be? What they crave is meaning.
Your shopper doesn’t consciously realise
it, but they want to scratch an emotional
itch, not merely satisfy a tangible need.
They want to buy into what your brand
stands for and, ultimately, they’re con-
cerned with how the shopping experi-
ence will make them feel. Shoppers are
giving you a gift by walking into your
physical locations. They are offering you
the opportunity to engage their hearts, not
just their heads.
Changing the Game: New Data, New
Questions, New Results
Physical retailers potentially have an
incredible advantage over their online
counterparts. Brick and mortars can
immerse the shopper in a physical man-
ifestation of a brand. They can tap into
peoples' emotions, trump their logical
centers, and feed their deeper, intangible
need for connection and purpose. Short
of the omnipresence of the Oculus Rift,
Microsoft’s Hololens and other expensive
virtual reality solutions, this is an advan-
tage that physical retailers will hold for
years to come.
The physical retail space represents an
opportunity to become deeply relevant to
customers and the path to get there is from
data. This may cause some skepticism.
After all, retailers have been analysing
customer data for decades. However, in a
mobile, social, context-rich world, there
are now entirely new sources and types
of data whose value is only starting to be
understood and leveraged.
Retailers have been analysing struc-
tured, transactional data since the in-
vention of the accounting ledger. Every
technical advance in retail, from cash
registers to loyalty cards and more re-
cently beacons and apps, has managed
to collect more and more transactional
data; that is, more and more answers to
the question, “what?" Transactional data
answers the question “what" has hap-
pened, but rarely explains “why.” And this
is the hidden piece of the retail puzzle.
Transactional data captures very little
context. It reflects details such as price,
inventory, specifications, etc., but not
why certain things sell better than others.
Alternatively, “why" questions are full
of context. Asking and answering ques-
tions of “why" is how we can understand
customers more deeply, more emotion-
ally. And by connecting with customers’
emotions we can fulfill their need for
connection and purpose.
Since transactional data is poor in
context, retailers have traditionally looked
to people to provide this missing context.
They did so by using people who had the
three “E's:"
Education,
Experience and
Expertise.
People applied these three “E's" to fig-
uring out why customers do what they
do, in a rather hit-or-miss, opinion based
process.
We are no longer hindered by such
guesswork. Today the world is awash in
massive amounts of context-rich data.
Whether it’s GPS position information,
social media posts, emails, digital audio
or video, - even bio-sensor gathered
data - customers are creating an endless
stream of contextual information just
waiting to be mined. People are con-
nected and transmitting details about
themselves 24 hours a day, where social
media platforms act as digital confes-
sionals within which people provide
even more intimate details of how and
what they think. As a result the old
“Three E's" are no longer adequate. In
a Big Data world, we must work with a
new “Three E's:"
Eduction,
Environment and
Emotion.
www.europeanbusinessreview.com 35
 Technology
Eduction is the process of taking all of the structured and
unstructured information we have on a person and figure out
what this tells us about their thinking and their frame of mind.
It tells us their “why" as well as their “what”. Next, we use this
information to manage the environment that we provide to the
customer. This is a key differentiator for brick and mortar stores,
and this sort of optimisation of the customers' surroundings. In
fact, if you are not leveraging customer contextual information
to optimise your store's environment, it's hard to justify contin-
uing to maintain a physical store. Finally, this manipulation of
the customers' environment is done in order to elicit an emo-
tional response.
The Store of the Near Future: Feelings for Sale
Imagine a store where technology is creatively integrated into
the shopping environment so artfully that it provides an emo-
tionally-inspiring experience. Far too often, retailers design the
store to maximise sales without concern for engaging shoppers’
emotions. By making a few smart changes, retailers can see im-
mediate results.
Digital signage, mobile technology, creative merchandising
and sales associate training all make the retail environment more
appealing to a shopper’s emotions—making them more likely to
offer up that precious other currency of emotional buy-in.
Shopping isn’t broken, but we do find ourselves in the midst
of a religious debate. One side is driven by short-term sales and
looks to wring every possible dollar out of every single shopping
trip. The other sees shopping as a great opportunity to inspire
everyone to buy something … a product, an idea, connectedness,
even reassurance.
Neuroscience and data science are clearly telling us which
side will win. The only question that remains is this: Which
retailers will use this powerful information to forge ahead and
which ones will cling to outdated thinking and be left behind?
I Think, Therefore I Shop?
Given these insights, one wonders if Descartes had it right when
36 The European Business Review May - June 2015
Physical retailers potentially have an
incredible advantage over their online
counterparts. Brick and mortars can
immerse the shopper in a physical
manifestation of a brand.
he spoke of our split selves, either distinctly rational or emo-
tional, and never both. Perhaps Descartes' English contempo-
rary, John Locke, reflected our reality more accurately when
he said,
“A sound mind in a sound body, is a short, but full description
of a happy state in this World: he that has these two, has little
more to wish for; and he that wants either of them, will be little
the better for anything else.”
In the context of this article, perhaps the value that brick and
mortar retailers truly deliver to their customers is not the objects
that change hands, but the experience provided along the way.
Properly applied, data can help you answer your customers'
“why." In so doing, you can feed their mind and body, and place
a great deal of their “what" in your register drawer.
Who’s Getting It Right?
Nike, Seoul Korea
Nike’s flagship store in Seoul, Korea uses digital media to
create personal moments of brand exploration throughout its
over 19,000 square foot space. As shoppers enter the store,
LCD navigation points are installed throughout the store to
guide customers through the expansive retail environment.
Floor directories are transparent digital LCDs housed seam-
lessly within concrete support beams. Throughout the store,
touchscreen mirrors dive deeper into product information
when tapped by the shopper. “Digiwalls” threaded across the
retail space operate based on proximity sensors, sharing rich
video content via holographic projection on the wall glass
when shoppers approach. As customers touch a product, rel-
evant technical information populates the surrounding screen.
The interactive customer experience technology is not solely
tied to product exploration, however. In the women’s fitting
room area, Nike takes a light-hearted play on the photo booth
by creating an apparel photo booth. After entering the fitting
room, shoppers can tap on the interactive mirrored display and
snap a picture of themselves wearing Nike’s latest gear. A pa-
per-free booth, shoppers can easily send the digital pictures to
their smartphone.
Miele, Vianen Netherlands
Miele, the brand known for high-quality household appliances
and commercial equipment, places its
products in context by creating a “mul-
tisensory” customer experience. Rather
than parcel out the products to disparate
parts of an appliance store, Miele created
the Inspirience Centre—an in-store ex-
perience blending the physical, digital,
and emotional in seamless interactions.
Through custom lighting, furniture, in-
formation paths, and interactive content,
shoppers interact with products, enjoy
relaxation areas and connect physical
reactions to the sounds and smells asso-
ciated with the products.
The store sign-in initiates personali-
sation for visitors. An Apple iPod Touch
is available for each visitor, serving up
direct messaging, acting as a product
research tool and offering recommen-
dations based on the shopper. The GPS
system in the flooring tracks each Football Legend Ji-Sung Park launchesNike Brand
uniquely tagged iPod Touch and serves Experience store, Seoul, Korea
Source: http://news.nike.com/news/nike-gangnam-opens-in-seoul
up contextual content as the shopper
navigates the store. If you indicated that
you liked the smell of fresh linen, the
system would dispense the aroma when in-store technology and interaction Tidal Wave is Driving New Business
you entered the laundry area. However, points to support its central brand Opportunities, get Abstract’s International
if your partner had allergies and the theme of personalisation. Customers use Book of the Year for 2014.
system was aware, it would not dispense touchscreens and iPads to receive indi- Ed King is VP of Strategy
the scent. The Miele Inspirience Centre vidualised beauty recommendations and for MaxMedia, an inter-
is the next generation in smart stores read user product reviews. Store associ- active agency creating the
using technology to connect the emo- ates act as partners in the beauty expe- next evolution in digital
tional, physical and digital in retail. rience, guiding shoppers through a bevy retail experiences. Believing
of options. The store encourages hands- people want to fall in love with shopping
Birchbox, New York, New York on experimentation with the thousands again, Ed helps retailers appeal to shop-
In 2014, the online beauty subscrip- of available products. From the Try Bar pers’ hearts, not just their heads. He can
tion brand expanded to brick-and- and the in-store salon to the video tuto- be reached at eking@maxmedia.com or
mortar with a multi-level digital ex- rials offered in each section, visitors can @StayingInDroves.
perience store. Birchbox couples explore selections at their own speed.
Birchbox uses visitor Instagram photos References
to line the walls at check out, encourag- 1. René Descartes, “Illusory joy is often worth more
than genuine sorrow.”, Quote
Properly applied, data ing both in-store and social engagement 2. Showrooming left in the dust as shoppers go online
with this personal beauty brand. http://cnb.cx/1hipDnH
can help you answer your 3. Tom Gara, “One Useful Feature for Online Retailers
customers' “why." In so About the Authors
Lots of Physical Stores," The Wall Street Journal, July
24, 2014
doing, you can feed their Christopher Surdak is 4. Christopher Donnelly and Scaff Renato, “Who are
the Millennial Shoppers? And what do they really
mind and body, and place a an Engineer, Juris Doctor, want?" Accenture, 2013
Strategist, Tech Evangelist, 5. Christopher Surdak, “I Can’t Help You:” The
great deal of their “what" in and Author of Data Crush:
Dangers of Employees Disablement in the Social/
Media Era" The European Business Review, January-
your register drawer. How the Information February 2015,

www.europeanbusinessreview.com 37
 EXECUTIVE
EDUCATION

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Marketing & Communications,
Manufacturing Company, Italy

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 Leadership
Leadership Development:
One Size Does Not Fit All
Growing Leaders in Africa and
Across the World
BY VANESSA IWOWO
Despite the diversity of business and social cultures around
the world, we continue to teach and take part in a “one size
fits all” approach to leadership development. Dr Iwowo from
LSE discusses why this approach is fundamentally flawed,
arguing that leadership is socially constructed, contextual,
and culturally contingent.
W
ithin the domain of executive education, the concept
of leadership development is an increasingly roman-
ticised one. When we say ‘leadership development,’
more often than not, images of executive travel, luxury retreats,
world class ‘experts’ delivering ‘high-end management inter-
ventions’ spring to mind, with management gurus flown across
the globe to impart knowledge on organisational transformation.
But the accepted approach taught in the majority of these
standardised executive leadership development programmes
across the globe fails to address one important issue: business
and social culture around the world is diverse, and therefore a
universal ‘one size fits all’ approach is flawed as it ignores two
fundamental truths which empirical research brings to light.
Firstly, a universal approach glosses over the fact that leader-
ship is first and foremost a social construct rather than a purely
scientific phenomenon. Leadership ‘knowledge’ is construct-
ed in the context of human interactions – leadership is, after all,
about ‘leading people.’ Human beings are not static or isolated, but
rather they can be seen as social actors, entrenched in a dynamic
and interwoven social reality within which they base their per-
ceptions, actions, interactions, and sense of meaning. Therefore
whatever knowledge we might have about leadership has been
Feature
developed within a wider framework of human interaction, which
will be diverse across different cultures around the world.
Secondly, not only is leadership socially constructed, it is
also contextual. We know that human interactions, thoughts,
dynamic exchanges and shared understandings of things occur
in the context of the society and the socially-bounded space
in which people find themselves. This social context itself is
governed by cultural forces, meaning that leadership knowledge
developed by practitioners around the world will be developed
within a culturally-influenced context.
With these two insights in mind, it is clear that knowledge
about leadership is not absolute, objective and universal, but
rather more subjective and culturally contingent than we might
think. Fundamentally, leadership is socially constructed, con-
textual and culturally contingent.
My research at the London School of Economics focuses on
leadership development, in particular within Africa. This rich
and diverse continent gives a real example of the need for a con-
textually sensitive and culturally aware approach to leadership
development programmes. Building leadership capacity is an
important need in the region as economies struggle to develop
and grow, however so far contemporary practice has in many
Knowledge about leadership is not
absolute, objective and universal, but
rather more subjective and culturally
contingent than we might think.
www.europeanbusinessreview.com 39

cases continued to use a ‘one size fits all’
approach. It is sadly not far from the truth
that many African societies have contin-
ued to flounder in leadership mediocrity.
Management educators will agree that
most of the voices that presently shape
the literature and accepted approach-
es to management and leadership arise
from the Anglo-American scholarship
belt. For example these are some widely
used current leadership theories, which
all originate from Western, Anglophone
cultures: transformational leadership
(Burns, 1978; Bass 1985), situational/
contingency models (Hersey & Blanchard,
1969, 1977, 1988; Fiedler, 1987; Adair,
1983), Servant leadership (Greenleaf,
1970), and more recently, distributed
leadership (Bennett et al, 2003).
Indeed, not only has much of the
modern published discourse on leadership
originated primarily from the West, but to
date, contemporary management educa-
tion and leadership development – even in
African Business Schools – has remained
predominantly structured around this.
Western thought-leadership has become
more or less the canon for the cultivation
of global business leaders, regardless of the
part of the world in which those learning
interventions actually occur.
40 The European Business Review May - June 2015
While the reasons for this might be a
matter of intense speculation, I believe
it is necessary that we begin to critical-
ly address this issue. Leadership is con-
textual and culturally contingent, and this
means that leadership practice cannot be
divorced from the specific socio-cul-
tural context within which it occurs.
Leadership development must begin to
make contextual sense to its recipients,
and to the social contexts in which they
will be practicing as leaders.
This is a very significant issue for the
development of would-be management
and leadership practitioners in Africa.
Within this culturally heterogeneous
continent, global leadership develop-
ment programmes targeted at leadership
capacity building cannot fundamental-
ly ignore the cultural terrain, and must be
held rigorously to account for the local
cultural frameworks within which they
are applied. I believe that this is essential,
if not urgently critical, to effective capac-
ity building in Africa.
Across the diversity of cultures world-
wide, it is unwise to continue to import
value laden pre-packaged learning inter-
ventions in a bid to super-impose these
on local societies. Instead, contempo-
rary leadership development in diverse
Leadership development
must begin to make
contextual sense to its
recipients, and to the social
contexts in which they will
be practicing as leaders.
regions such as Africa must begin to
embrace and embody the key cultural el-
ements of that society, in order to be truly
effective.
Contextual learning content can begin
to incorporate its own conversations,
cultural symbolisms, identities, and most
importantly, its expectations and expe-
riences. All of these are important ele-
ments that resonate with would-be par-
ticipants in the local society, who will
need to return to that society in order to
practice their development learning.
The notion of ‘development’ itself
implies that something is already there
to be developed, and leadership devel-
opment can work to enhance the pre-
existing, contextual characteristics and
talents of the managers and leaders it
is teaching. Rather than relying on tra-
ditionally accepted abstract learning,
taking a new approach that is cultural-
ly-recognisable can provide solutions to
avoid condemning leaders to mediocri-
ty, and enable the development of real
cutting-edge global talent in Africa and
across the world.
About the Author
Dr Iwowo is a Fellow in the
Department of Management
at the London School of
Economics and Political
Science. She is a manage-
ment scholar whose research interests
focus on the critical study of process-
es, interactions and relationships through
which knowledge is generated and
applied, particularly in the fields of lead-
ership and management development.

Leadership
COACHING
FOR THE FUTURE
Using the example of the Indian company
J.K. Organisation, this article shows how
the adoption of a coaching culture has
transformed the organisation, setting up
each employee for success.
F
ounded more than a century ago, J.K.
Organisation is one of India’s largest in-
dustrial groups. With a diverse portfolio
of companies responsible for the manufacture,
distribution, sale and service of products in-
cluding tyres, paper, cement, industrial sup-
plies, and agricultural and dairy products, J.K.
employs more than 22,000 individuals across
India and around the globe.
As India continues its emergence as a
global economic power, J.K.’s leaders are
seeking ways to capitalise on this opportunity,
retaining the organisation’s legacy of excel-
lence while adapting to a dynamic operating
environment. In 2008, J.K.’s senior decision-
makers chose to adopt coaching as a strategy
for talent development, leadership enhance-
ment, and change management. What began
as an initiative pairing external Executive
Coaches (most of whom held ICF Credentials)
with senior leaders has evolved into an inte-
grated program that incorporates coaching,
training for a growing cadre of internal coach
practitioners, and opportunities for managers
and leaders to learn and apply coaching skills.
The result is a coaching culture that impacts
not only the organisation, but also the personal
lives of J.K.’s employees.
In recognition of J.K. Organisation’s excep-
tional use of coaching, the International Coach
Federation (ICF) awarded it with the 2014 ICF
International Prism Award. The Prism Award
Feature
honours organisations that have achieved the
highest standard of excellence in coaching
programs that yield discernible and measurable
positive impacts, fulfill rigorous profession-
al standards, address key strategic goals, and
shape organisational culture. Learn more about
the award at Coachfederation.org/prism.
Prior to 2008, J.K.’s legacy of excellence was
premised on a directive management model.
“The senior employees have all grown up in
the culture of expecting instruction from their
bosses,” explains ICF Professional Certified
Coach Alan Meyne. Innovation and initiative
were expected to come from the top, down.
The demands on Indian organisations
are changing, however. While most of J.K.’s
leaders are in their fifties, the average age of
an Indian citizen is 27. Managers and leaders
need skills and strategies to negotiate this
generation gap in order to unleash their direct
reports’ potential, promote innovation, retain
top talent, and ensure J.K.’s continued success
in the 21st century. The growth of a coaching
culture at J.K. has helped address this need.
“A coaching culture is visible in the behav-
iour of people. It’s a way of looking at people
and treating each other with respect. When we
describe a coaching culture, we’re describ-
ing a learning culture that is respectful and
that values people’s potential and promotes
innovation,” Meyne explains. “The significant
breakthrough was in influencing the leaders’
mindsets about people development.”
Although J.K.’s strategy calls for a move
away from top-down management, the organi-
sation’s president of corporate human resourc-
es, ICF Associate Certified Coach Dilep Misra,
concluded that top-down implementation of
www.europeanbusinessreview.com 43
 Leadership
coaching was the right fit. Awareness of professional coaching in
India is increasing, but there’s still a great deal of confusion about
what coaching is — and what it isn’t. The perception of coaching
as a remedial intervention persists throughout the country, largely
due to the word’s academic connotations. (India is home to nu-
merous “coaching” institutes and programs that prepare students
for school, university, and professional exams.) Consequently,
the program’s developers knew they’d need leaders to model the
experience and impacts of coaching for lower-level employees.
This trickle-down strategy has worked: what began as Executive
Coaching for a handful of top senior leaders rapidly expanded to
include high-potential leaders at the VP level and below.
Since 2008, J.K.'s revenues have grown by 105
percent, employee satisfaction has increased
by 16 percent and attrition of high-potential
employees has decreased by two percent (from
an all- time high of 7.1 percent).
Prior to the start of the Executive Coaching engagement,
clients participate in a 360-degree feedback process. Based on
the final report, they are asked to identify two to three goals for
the coaching engagement, with an eye toward the transforma-
tions they believe would most impact themselves, their team
and the business. They also have the opportunity to identify one
goal that may not be explicitly related to their professional lives.
Executive Coaching engagements at J.K. typically last eight
to 12 months, and include mid-term and end-of-engagement
meetings with the coach, client and human resources team.
The coach also checks in with key stakeholders throughout
the process to monitor the effectiveness of coaching. At the
end of the engagement, the coach, client, and the client’s direct
supervisor all submit written feedback about the process and
outcomes. From the beginning of the program, leaders who re-
ceived coaching took what they had learned to their interactions
with direct reports and peers, applying coaching skills to per-
formance conversations and making a greater effort to nurture
innovation and personal responsibility within their teams.
In 2013, J.K. took the next step, engaging ICF Credential-
holders to provide a course of coach-specific training to leaders
interested in becoming internal coach practitioners. Coach
training is marketed to these leaders as an opportunity to build
their legacy at J.K. “We ask them, ‘What’s the gift you’d like to
leave this company?’” Meyne says.
J.K.’s goal is to train a cadre of 200 internal coaches by
2019. To date, more than 28 senior executives have complet-
ed an initial course of training, while additional vice presidents
and functional heads are currently enrolled in training. The
44 The European Business Review May - June 2015
Feature
organisation is committed to supporting these practitioners in
their continuing professional development by investing time
and funds in additional coach-specific training and supporting
internal coaches in their pursuit of ICF Credentials.
As coaching continues to evolve at J.K., the organisation-
al and individual impacts are appreciable. Within the four J.K.
companies where coaching is used most frequently, leaders
have reported improved performance, profitability and employ-
ee retention. Since 2008, revenues have grown by 105 percent,
employee satisfaction has increased by 16 percent and attri-
tion of high-potential employees has decreased by two percent
(from an all-time high of 7.1 percent).
Leaders receiving Executive Coaching have reported a high
return on expectations, particularly in the areas of stress man-
agement (with one client reporting a 60- to 65-percent de-
crease in stress during and after coaching), management skills,
role transitions, self-confidence, and enhanced teamwork. The
positive impacts go beyond the office walls: coaching clients
also report enhanced communication and relationships with
their spouses, children, and extended families.
Perhaps the most significant change wrought by coaching
within J.K. Organisation has been the shift from a top-down
management style to a system of collegial, collaborative rela-
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 Leadership
Actions Speak Louder Than Words – Why
Adaptive Non-Verbal Communication is a
Key Leadership Tool
BY CONNSON LOCKE
Non-verbal communication is extremely influential in in-
terpersonal encounters, and knowing how to leverage non-
verbal signals effectively can be a key leadership tool. In this
article, Dr. Locke from LSE demonstrates the falsity behind
the conventionally held belief that leaders should always act
a certain way.
I
t is widely accepted that non-verbal communication is ex-
tremely influential in interpersonal encounters, and non-
verbal signals (i.e. everything except the words themselves),
including body language, eye contact, tone of voice, and rapid-
ity of speech, can have a subtle but significant influence on
the dynamic between two people. For leaders in a professional
context, there is no exception.
As a teacher and researcher specialising in leadership
in the Department of Management at the London School of
Economics, I have recently completed new research explor-
ing non-verbal communication in leadership roles. The results
suggest that, contrary to many traditional beliefs, there is no one
single ‘best’ way to look and act like a leader.
Instead, three behavioural studies which I conducted point to
the fact that leaders should consciously adjust their non-verbal
strategy to the specific situation in order to get the best out of
their team and make optimum decisions.
In general, the accepted view on non-verbal leadership is
that confidence and authority should be conveyed. This means,
for example, using upright body posture, direct eye contact, and
a confident tone of voice. The results of the first study in my re-
search project reflected exactly this. A pair of participants were
assigned roles, where one was ‘leader’ and the other ‘subordi-
nate’, and in almost every case the ‘leader’ participant imme-
diately took on confidence-displaying non-verbal behaviour,
such as sitting up straighter, taking up more space, and using
more eye contact.
Feature
However, my research has exposed the fact that displaying
this type of confident and authoritative non-verbal communica-
tion is not always the best approach for a leader to take - and in
fact in some situations, this can have a damaging effect. Instead, it
is crucial for leaders to adjust their non-verbal behaviour accord-
ing to the specific situation, in order to achieve optimum results.
Leaders often rely on members of their team to collect data,
and there will be many cases where a leader needs the insight,
knowledge or expertise from a member of their team in order to
reach an optimum decision. In situations such as this, display-
ing a confident and powerful non-verbal demeanour can have a
negative impact. My research has shown that a person report-
ing in to a leader will be much less likely to share information,
participate in a collaborative discussion of ideas, and argue their
own point of view, when dealing with a leader who is displaying
traditional authoritative non-verbal behaviour.
This is not necessarily because the person in the subordi-
nate role feels intimidated by the leader, but rather because they
are receiving strong signals that the leader is extremely sure of
themself, and they will therefore assume that their own opinion
and knowledge is less valid than that of the leader. For example,
they will be less likely to argue for a new approach to an issue,
or bring to light relevant facts, if those do not align with the
views of the leader. The leader might therefore unwittingly miss
out on receiving key information and insight on an issue.
A person reporting in to a leader will be much
less likely to share information, participate in
a collaborative discussion of ideas, and argue
their own point of view, when dealing with a
leader who is displaying traditional authoritative
non-verbal behaviour.
www.europeanbusinessreview.com 47

Our standard way of
thinking about leadership
sees leaders as influencers,
i.e. influencing people and
directing work. But leaders
also have a second key role,
as facilitators.
Participants in the second study in my
research project were assigned the ‘subor-
dinate’ role and given the task of commu-
nicating information about the best person
to hire for an imaginary job to a ‘leader’
(who, unbeknownst to them, was an actor).
When interacting with half the partici-
pants, the actor playing the ‘leader’ was
briefed to take on a confident demeanour,
including strong posture, confident tone of
voice, and direct eye contact. In contrast,
with the other half of the participants, the
actor displayed a less confident demean-
our, including slumped posture, less direct
eye contact, and uncertain tone of voice.
In the first case, the ‘subordinate’ par-
ticipants failed to share the full infor-
mation they had been given and did not
persist in their arguments when the ‘leader’
chose to hire the least qualified person for
48 The European Business Review May - June 2015
the job. In comparison, the second group
of participants shared far more informa-
tion and argued back strongly when the
‘leader’ expressed a desire to choose the
wrong person for the job.
At first glance, it may seem counter-
intuitive for leaders to appear timid and
uncertain, and of course any non-verbal
communication which goes as far as un-
dermining respect and confidence in the
leader will be detrimental and is not rec-
ommended. However, the results of this
study bring to light an extremely important
distinction in the type of behaviour appro-
priate for different leadership situations.
Our standard way of thinking about
leadership sees leaders as influencers, i.e.
influencing people and directing work.
But leaders also have a second key role,
as facilitators. In some situations leaders
benefit from stepping out of the influ-
encer role, and instead taking on the dif-
ferent non-verbal demeanour of a more
neutral listener, in order to facilitate the
sharing of information and collaboration
in decision-making.
My research explored the non-verbal
behaviours which underpin the facilitator
role, ones that signal ‘open’ communica-
tion, such as uncrossed arms and legs,
body oriented toward the other person,
and nodding and maintaining eye contact
while listening. Participants in my third
and final study were again assigned a
‘subordinate’ role in the same task, helping
the ‘leader’ choose the best candidate for
a job. This time, there were four scenarios
in which the actor was briefed to display
four different demeanours to different
groups of participants – confident versus
non-confident, and ‘open’ versus ‘closed’
(i.e., body oriented away from the ‘sub-
ordinate’, arms and legs crossed, minimal
eye contact, etc.). The results show that
when a ‘leader’ displayed confident de-
meanour combined with ‘open’ char-
acteristics, the ‘subordinate’ was highly
likely to communicate all the relevant
information they had been given and par-
ticipate usefully in the hiring decision.
This means that leaders do not need
to display the counterintuitive, and po-
tentially damaging, uncertain and timid
non-verbal behaviour as my second
study might have initially suggested.
Instead, my third study found that the
negative effects of confident and authori-
tative non-verbal communication can be
successfully mitigated when an ‘open’ fa-
cilitator role is used by a confident leader.
This is a key lesson that I teach in my
leadership classes at LSE: effective lead-
ership involves adapting to the situation.
This includes adjusting non-verbal de-
meanour and moving between influencer
and facilitator roles. An outstanding leader
is someone who can clearly understand a
situation, and adapt their leadership style
and behaviour accordingly.
About the Author
Dr Locke is Assistant
Professor of Management
at the LSE Department of
Management. She teaches
leadership to LSE ex-
ecutive students and holds the role of
Deputy Programme Director for the
flagship Executive Global Master’s in
Management programme, an innovative
alternative to an MBA.
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 Leadership
ACT LIKE A LEADER,
THINK LIKE A LEADER
BY HERMINI IBARRA
In this excerpt from her book, Act Like a Leader, Think Like
a Leader Herminia Ibarra discusses what she describes as
the ‘Outsight’ Principle: the cycle of acting like a leader and
then thinking like a leader; change from the outside in. She
argues that people become leaders by acting their way into a
leadership position.
The “Outsight” Principle: How to Act and Think Like a Leader
“I’m like the fire patrol,” says Jacob, a thirty-five-year-
old production manager for a midsized European food
manufacturer. “I run from one corner to the other to fix things,
just to keep producing.” To step up to a bigger leadership role
in his organisation, Jacob knows he needs to get out from
under all the operational details that are keeping him from
thinking about important strategic issues his unit faces. He
should be focused on issues such as how best to continue
to expand the business, how to increase cross-enterprise
collaboration, and how to anticipate the fast-changing
market. His solution? He tries to set aside two hours of
uninterrupted thinking time every day. As you might expect,
this tactic didn’t work.
Perhaps you, like Jacob, are feeling the frustration of
having too much on your plate and not enough time to reflect
on how your business is changing and how to become a
better leader. It’s all too easy to fall hostage to the urgent
over the important. But you face an even bigger challenge in
stepping up to play a leadership role: you can only learn what
you need to know about your job and about yourself by doing
it—not by just thinking about it.
Why the Conventional Wisdom Won’t Get You Very Far
Most traditional leadership training or coaching aims to
change the way you think, asking you to reflect on who you
are and who you’d like to become. Indeed, introspection
and self-reflection have become the holy grail of leadership
development. Increase your self-awareness first. Know who
you are. Define your leadership purpose and authentic self,
and these insights will guide your leadership journey. There
is an entire leadership cottage industry based on this idea,
with thousands of books, programs, and courses designed to
help you find your leadership style, be an authentic leader,
and play from your leadership strengths while working on
your weaknesses.
If you’ve tried these sorts of methods, then you know just
how limited they are. They can greatly help you identify
your current strengths and leadership style. But as we’ll see,
your current way of thinking about your job and yourself is
exactly what’s keeping you from stepping up. You’ll need to
change your mind-set, and there’s only one way to do that:
by acting differently.
Your current way of thinking about your
job and yourself is exactly what’s keeping
you from stepping up. You’ll need to
change your mind-set, and there’s only
one way to do that: by acting differently.
www.europeanbusinessreview.com 51
 Leadership
Aristotle observed that people become
virtuous by acting virtuous: if you do
good, you’ll be good. His insight has
been confirmed in a wealth of social
psychology research showing that people
change their minds by first changing their
behaviour. Simply put, change happens
from the outside in, not from the inside
out (See Figure 1.1). As management guru
Richard Pascale puts it, “Adults are more
likely to act their way into a new way of
thinking than to think their way into a new
way of acting.”
So it is with leadership. Research
on how adults learn shows that the
logical sequence — think, then act — is
actually reversed in personal change
processes such as those involved in
becoming a better leader. Paradoxically,
we only increase our self-knowledge in
the process of making changes. We try
something new and then observe the
results — how it feels to us, how others
around us react — and only later reflect
on and perhaps internalize what our
experience taught us. In other words,
we act like a leader and then think like a
leader (thus the title of the book).
How Leaders Really Become Leaders
Throughout my entire career as a
researcher, an author, an educator, and
an adviser, I have examined how people
navigate important transitions at work. I
FIGURE 1-1
Becoming a leader: the traditional sequence (think, then act)
versus the way it really works (act, then think)
The way it really works
Act
Change
what you do
Traditional model
52 The European Business Review May - June 2015
have written numerous Harvard Business
Review articles on leadership and career
transitions (along with Working Identity,
a book on the same topic). Interestingly,
most of what I’ve learned about transitions
goes against conventional wisdom.
The fallacy of changing from the
inside out persists because of the way
leadership is traditionally studied.
Researchers all too often identify high-
performing leaders, innovative leaders,
or authentic leaders and then set out to
study who these leaders are or what they
do. Inevitably, the researchers discover
that effective leaders are highly self-
aware, purpose-driven, and authentic.
But with little insight on how the leaders
became that way, the research falls short
of providing realistic guidance for our
own personal journeys.
My research focuses instead on the
development of a leader’s identity — how
people come to see and define themselves
as leaders. I have found that people
become leaders by doing leadership
work. Doing leadership sparks two
important, interrelated processes, one
external and one internal. The external
process is about developing a reputation
for leadership potential or competency;
it can dramatically change how we
see ourselves. The internal process
concerns the evolution of our own
internal motivations and self-definition;
Think
Change the
way you
think
The fallacy of changing
from the inside out
persists because of
the way leadership is
traditionally studied.
it doesn’t happen in a vacuum but rather
in our relationships with others.
When we act like a leader by proposing
new ideas, making contributions outside
our area of expertise, or connecting people
and resources to a worthwhile goal (to cite
just a few examples), people see us behaving
as leaders and confirm as much. The social
recognition and the reputation that develop
over time with repeated demonstrations
of leadership create conditions for what
psychologists call internalizing a leadership
identity—coming to see oneself as a leader
and seizing more and more opportunities
to behave accordingly. As a person’s
capacity for leadership grows, so too does
the likelihood of receiving endorsement
from all corners of the organisation by, for
example, being given a bigger job. And the
cycle continues.
This cycle of acting like a leader and
then thinking like a leader — of change from
the outside in — creates what I call outsight.
The Outsight Principle
For Jacob and many of the other people
whose stories form the basis for this book,
deep-seated ways of thinking keep us from
making — or sticking to — the behavioural
adjustments necessary for leadership. How
we think— what we notice, believe to be
the truth, prioritise, and value — directly
affects what we do. In fact, inside-out
thinking can actually impede change.
Our mind-sets are very difficult
to change because changing requires
experience in what we are least apt to
do. Without the benefit of an outside-
in approach to change, our self-
conceptions and therefore our habitual
patterns of thought and action are
rigidly fenced in by the past. No one
pigeonholes us better than we ourselves
do. The paradox of change is that the
only way to alter the way we think is
by doing the very things our habitual
thinking keeps us from doing.
This outsight principle is the core idea
of this book. The principle holds that the
only way to think like a leader is to first
act: to plunge yourself into new projects
and activities, interact with very different
kinds of people, and experiment with
unfamiliar ways of getting things done.
Those freshly challenging experiences and
their outcomes will transform the habitual
actions and thoughts that currently define
your limits. In times of transition and
uncertainty, thinking and introspection
should follow action and experimentation
— not vice versa. New experiences not only
change how you think — your perspective
on what is important and worth doing — but
also change who you become. They help
you let go of old sources of self-esteem,
old goals, and old habits, not just because
the old ways no longer fit the situation at
hand but because you have discovered
new purposes and more relevant and
valuable things to do.
Outsight, much more than reflection,
lets you reshape your image of what you
can do and what is worth doing. Who you
are as a leader is not the starting point on
your development journey, but rather the
outcome of learning about yourself. This
The outsight principle holds
that the only way to think
like a leader is to first act:
to plunge yourself into
new projects and activities,
interact with very different
kinds of people, and
experiment with unfamiliar
ways of getting things done.
TABLE 1-1
The difference between insight and outsight
Insight
• Internal knowledge
• Past experience
• Thinking
knowledge can only come about when
you do new things and work with new and
different people. You don’t unearth your
true self; it emerges from what you do.
But we get stuck when we try to
approach change the other way around, from
the inside out. Contrary to popular opinion,
too much introspection anchors us in the
past and amplifies our blinders, shielding us
from discovering our leadership potential
and leaving us unprepared for fundamental
shifts in the situations around us (Table 1.1).
This is akin to looking for the lost watch
under the proverbial streetlamp when the
answers to new problems demand greater
outsight — the fresh, external perspective
we get when we do different things. The
great social psychologist Karl Weick put it
very succinctly: “How can I know who I
am until I see what I do?”
Lost in Transition
To help put this idea of outsight into
perspective, let’s return to Jacob, the
productionmanagerofafoodmanufacturer.
After a private investor bought out his
company, Jacob’s first priority was to
guide one of his operations through a major
upgrade of the manufacturing process. But
with the constant firefighting and cross-
functional conflicts at the factories, he
had little time to think about important
strategic issues like how to best continue
expanding the business.
Jacob attributed his thus-far stellar
results to his hands-on and demanding
style. But after a devastating 360-degree
feedback report, he became painfully
aware that his direct reports were tired of
his constant micromanagement (and bad
Outsight
• External knowledge
• New experience
• Acting
temper) and that his boss expected him
to collaborate more, and fight less, with
his peers in the other disciplines, and
that he was often the last to know about
the future initiatives his company was
considering.
Although Jacob’s job title had not
changed since the buyout, what was now
expected of him had changed by quite
a bit. Jacob had come into the role with
an established track record of turning
around factories, one at a time. Now he
was managing two, and the second plant
was not only twice as large as any he
had ever managed, but also in a different
location from the first. And although
he had enjoyed a strong intracompany
network and staff groups with whom to
toss around new ideas and keep abreast of
new developments, he now found himself
on his own. A distant boss and few peers
in his geographic region meant he had
no one with whom to exchange ideas
about increasing cost efficiencies and
modernising the plants.
Despite the scathing evaluation
from his team, an escalating fight with
his counterpart in sales, and being
obviously out of the loop at leadership
team meetings, Jacob just worked harder
doing more of the same. He was proud
of his rigor and hands-on approach to
factory management.
Jacob’s predicaments are typical.
He was tired of putting out fires and
having to approve and follow up on
nearly every move his people made, and
he knew that they wanted more space.
He wanted instead to concentrate on
the more strategic issues facing him,
www.europeanbusinessreview.com 53
 Leadership
but it seemed that every time he sat
down to think, he was interrupted by a
new problem the team wanted him to
solve. Jacob attributed their passivity
to the top-down culture instilled by his
predecessor, but failed to see that he
himself was not stepping up to a do-it-
yourself leadership transition.
The Do-It-Yourself Transition: Why
Outsight Is More Important than Ever
A promotion or new job assignment
used to mean that the time had come to
adjust or even reinvent your leadership.
Today more than ever, major transitions
do not come neatly labeled with a new
job title or formal move. Subtle (and
not-so-subtle) shifts in your business
environments create new — but not
always clearly articulated — expectations
for what and how you deliver. This kind
of ambiguity about the timing of the
transition was the case for Jacob.
Figure 1-2, prepared from a 2013
survey of my executive program alumni,
shows how managerial jobs have changed
between 2011 and 2013. The changes in
managerial responsibilities are not trivial
and require commensurate adjustment.
Yet, among the people who reported
major changes in what was expected
of them, only 47 percent had been
promoted in the two years preceding
the survey. The rest were nevertheless
expected to step up to a significantly
bigger leadership role while still sitting
in the same jobs and holding the same
titles, like Jacob. This need to step up
to leadership with little specific outside
recognition or guidance is what I call the
The more your current
situation tilts toward a do-
it-yourself environment, the
more outsight you need to
make the transition.
54 The European Business Review May - June 2015
FIGURE 1-2
How manager’s jobs are changing, from 2011 to 2013
The percentage of respondents saying these are the responsibilities that have changed
over the past two years
Different stakeholders to manage
56%
Increase in cross-functional responsibilities
53%
Significant change in my business environment
49%
Increase in multinational scope of the job
42%
30% or more increase in number of people reporting to you
41%
Shift to one or more new functions
40%
30% or more increase in your P&L
30%
Start-up of a new business or market
22%
Source: Author’s survey of 173 INSEAD executive program alumni conducted in October 2013.
do-it-yourself transition. the transition. If you don’t create new
No matter how long you have been opportunities within the confines of
doing your current job and how far your “day job,” they may never come
you might be from a next formal role your way.
or assignment, this do-it-yourself
environment means that today, more Reprinted by permission of Harvard
than ever, what made you successful so Business Review Press. Excerpted from
far can easily keep you from succeeding Act Like a Leader, Think Like a Leader.
in the future. The pace of change is ever Copyright 2015 Herminia Ibarra. All
rights reserved.
faster, and agility is at a premium. Most
people understand the importance of
agility: in the same survey of executive About the Author
program alumni, fully 79 percent agreed Herminia Ibarra is the Cora
that “what got you here won’t get you Chaired Professor of Lead-
there.” But people still find it hard to ership and Learning, and
reinvent themselves, because what they Professor of Organisational
are being asked to do clashes with how Behavior at INSEAD. Ibarra
they think about their jobs and how they speaks and consults internationally and
think about themselves. is a member of the World Economic Fo-
The more your current situation tilts rum Global Agenda Councils. Thinkers 50
toward a do-it-yourself environment, ranked her among the top 10 most influ-
the more outsight you need to make ential business gurus in the world.
THE CONNECTIONS WE MAKE LEAD TO
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 Innovation
Learn Or Die:
Every Business Will
Be In The Business
Of Learning
BY EDWARD D. HESS
The velocity of business change will increase over the next
decade driven by technology advances making the speed
and quality of adaptive learning an organisational strategic
imperative. That will require most organisations to use the
science of learning to create a learning-enabling culture and
to install best learning processes.
T
echnology and globalisation have dramatically impacted
the competitive business environment. Technology has
disrupted business models, diminished traditional compet-
itive advantages, democratised raising capital and empowered
the customer. Over the next 10 years, artificial intelligence, the
Internet of Things, cheaper and smarter robots, and Big Data
will continue to transform how businesses are staffed, operated
and managed. The pace of business change is unlikely to de-
crease. In environments characterised by rapid change, sustain-
able competitive advantages are likely to be no more than rela-
tive competitive advantages, making adaptive learning mission
critical. That means that the speed and quality of learning will
become a strategic imperative for most businesses.
The organisation of the future will look a lot different than
the organisation of today. Most businesses will be staffed by
some combination of smart robots, smart thinking machines
and people. People will do what technology cannot do well and
that is, generally, think critically, creatively and innovatively,
and engage emotionally with other humans. Operational excel-
lence will likely become technology dependent and commod-
itised, making innovation the key organic value differentiator.
Developing innovation capability that continuously produces
new value requires building a superior learning capability.
An organisation’s ability to learn is dependent upon the ability
of its people to learn. Peter Senge wrote a landmark book1 on
56 The European Business Review May - June 2015
learning organisations 25 years ago. His systems approach to
building a learning organisation still stands as a pillar. What
has changed since that book was published in 1990 is that the
science of learning has made material advances across the fields
of psychology, neuroscience and behavioural economics. Today
we know much more about how people learn best and the types
of environments that optimise learning. In Learn or Die: Using
Science to Build a Leading-Edge Learning Organisation2 I syn-
thesized that research and put forth a new blueprint for building a
learning organisation using illustrations of leading-edge learning
organisations Bridgewater Associates, LP; Intuit, Inc.; W.L. Gore
& Associates; IDEO; and United Parcel Service, Inc.
The Science of Learning
What does the science of learning say about adult learning?
Unfortunately, it is not a pretty picture. All of us are basically sub-
optimal learners, because cognitively, we are reflexive, fast think-
ers. That has been OK for many of us, because our only competi-
tors have been other human beings. Artificial intelligence and big
data analytics will likely change that in the near future by expand-
ing our competitors to include smart machines. Smart machines
will in some cases complement us, but in many cases they will
replace us. In order to stay relevant and competitive, most of us
will have to take our learning skills — how we think, listen, emo-
tionally engage and collaborate — to a much higher level.
Taking our thinking to a higher level starts with acknowledg-
ing that according to Nobel Laureate Daniel Kahneman, “lazi-
ness is built deep into our nature.”3 We are, in effect, confirma-
tion machines seeking to process information that confirms our
existing mental models (our stories of the world), and we tend
not to process disconfirming information. We are limited by our
cognitive blindness, dissonance and biases. As the late noted

Professor Jack Mezirow stated: “We have
a strong tendency to reject ideas that fail
to meet our perceptions.”4 Nobel Laureate
Herbert Simon described our penchant for
confirmation this way: “People who agree
with you are apt to seem a little more in-
telligent than those who don’t.” 5
Scientists used to believe that human
emotions were centered in certain parts of
the brain and mostly segregated from cog-
nitive processing. To be rational, we just
had to be non-emotional. Neuroscience
research now tells us that our emotions are
integrally intertwined in every part of our
cognitive processing.6 Emotionally, we
engage in what the late, esteemed, Harvard
Professor Chris Argyris called “defensive
reasoning,” because our natural reflexive
inclination is to deny, defend and deflect
information that challenges our self-im-
age or ego. Emotionally, we all tend to
be insecure and fearful, and that impacts
the quality of our thinking and learning.
Rationality is a myth.
In most situations we operate reflex-
ively on autopilot; emotionally we defend
and cognitively we seek to confirm.
Overcoming our autopilot mode requires
us to slow down, quiet our egos and in-
tentionally and deliberately take our
thinking, listening and collaborating to a
much higher level using good thinking,
listening and collaborating checklists
and processes. To do that requires us to
accept the science that we are suboptimal
learners. That is the first step. The second
step to help us overcome our natural ten-
dencies is to change our mental model of
what “being smart” means.
The “New Smart”
Most people learned through their
schooling that “being smart” meant that
you knew more than other people and
made fewer mistakes. It was a quanti-
ty-based approach — fill up your brain
with more facts and make fewer mis-
takes as evidenced by higher grades.
Many of us adopted strategies to avoid
making mistakes by avoiding taking on
challenging tasks and avoiding situations
where the unknowns greatly exceeded
the known.
That definition of “being smart” does
not work well in a world where new
knowledge is being created faster and
faster, making the shelf life of existing
knowledge in many cases shorter and
shorter. It also does not work well in a
world where smart machines can process,
remember and accurately retrieve much
more information much faster and more
accurately than we humans can.
In today’s world “being smart” should
mean that one is good at not knowing by
understanding what one doesn’t know
but needs to know and knowing how to
best learn that. Today the irony is that the
smartest people will be people who admit
their ignorance and continually try to
become less ignorant.
No longer should we define our selves
or invest our egos so heavily in a quanti-
ty-based concept of being smart. A dif-
ferent concept put forth by noted criti-
cal thinking experts Richard W. Paul and
Linda Elder better serves us in today’s
environment. They propose that we define
ourselves not by “the content of any belief”
but by “the way I come to my beliefs” by
being a good critical thinker, who uses good
critical thinking processes, and an open,
fair-minded thinker, who is always willing
to stress-test my beliefs against new data
and follow that evidence no matter where
it goes. 7
I want to expand Paul and Elder’s
concept to deal with our emotional de-
fensiveness. “New smart” means that we
are not our ideas. Our mental models are
not reality — they are only our story of our
world, which is limited by our experienc-
es, biases and fears. Acknowledging that
allows us to decouple our ego from our
beliefs (not our values), making it easier
to be open-minded, non-defensive and
more willing to stress-test and modify
our beliefs as dictated by better evi-
dence. In other words, “new smart” means
treating everything we think we know as
being conditional subject to modification
based on better data.
In today’s world
“being smart” should
mean that one is good
at not knowing by
understanding what one
doesn’t know but needs
to know and knowing
how to best learn that.
www.europeanbusinessreview.com 57
 Innovation

“New smart” people will have a healthy respect for the mag-
nitude of what they do not know. This can be a game changer in
that once a person becomes comfortable living the “new smart”
definition, he no longer will be as reflexively defensive and un-
comfortable when his beliefs are challenged. Quite to the con-
trary, he will likely be uncomfortable when his beliefs are not
challenged because he has learned that it is very hard for any of
us to individually uncover our thinking weaknesses.

Mistakes Are Learning Opportunities

“New smart” also allows us to make necessary changes to our
mindset about mistakes. This is necessary because most adult
learning comes from mistakes. So long as mistakes are made within
financial risk parameters and so long as one does not repeatedly
make the same mistake, mistakes are not to be avoided, denied,
hidden or punished, because mistakes are learning opportunities.
The faster people make mistakes, the faster they learn and improve.
Great learning organisations like Bridgewater Associates, LP, the
largest and one of the most successful hedge funds in the world,
holds this view strongly. Another learning organisation, Intuit, Inc.,
goes so far as to characterise mistakes/failures in its innovation
experimentation model as “surprises,” because it is from surpris-
es—unexpected results—that innovation occurs.
Accepting the science of learning, adopting a “new smart”
mental model, and recasting mistakes as learning opportunities are
three key steps for an individual to become a better learner. As we
shall discuss next, however, while those steps are necessary, they
are not sufficient. High-performance learning within an organisa-
tion also requires a special kind of organisational environment.

Building a Learning System

Building organisational learning capability requires a systems
approach to creating an environment that enables and promotes
learning mindsets and behaviours. In this Learning System, the
right culture, leadership behaviours, measurements and rewards
must be aligned to consistently send messages to employees
that enable and promote those defined learning mindsets and
behaviours and the use of best learning processes.
What learning mindsets or motivations are we seeking to
promote? Here is my definition of the ideal learner of the 21st
century: Someone who has the curiosity of a young child; the
courage of an explorer; the skepticism of a philosopher; and the
A learning environment has to be a
psychologically safe environment in order to
mitigate fear. And as importantly, the Learning
System has to fight daily complacency, arrogance,
over-confidence, groupthink, and big egos.
open-mindedness, humility, and learning resiliency of a scien-
tist who is good at not knowing and good at learning by exper-
imenting. That means our workplace environment must enable
and promote, through its culture, leadership behaviours, meas-
urements, rewards and work processes, curiosity, the courage to
try, skeptical thinking, open-mindedness, humility, experimen-
tation, and learning from mistakes and failures.
The Learning Systems at exemplar learning organisations like
Google, Pixar Animated Studios, IDEO, W.L. Gore & Associates,
Bridgewater Associates, LP and Intuit, Inc. have the above at-
tributes plus the following: candor, a practice of confronting the
brutal facts and permission to speak freely; permission to fail
within allowable financial risk parameters; high mutual account-
ability; and an idea meritocracy that devalues positional rank.
A Learning System must also mitigate the two big learn-
ing inhibitors: fear and ego. A learning environment has to be a
psychologically safe environment in order to mitigate fear. As
Abraham Maslow, the noted humanistic psychologist stated: a
person will learn “to the extent that he is not crippled by fear

58 The European Business Review May - June 2015


and to the extent he feels safe enough to
dare.”8 And as importantly, the Learning
System has to fight daily complacency,
arrogance, over-confidence, groupthink,
and big egos. All of this has to be opera-
tionalized by culture and processes.
A Learning Culture
The best learning culture cultivates a hu-
manistic, emotionally positive, people-cen-
tric environment. Positive emotions enable
learning while negative emotions generally
inhibit learning. Cultures of fear will not
optimise learning. Being people-centric
means that the environment must meet
the basic human needs, as outlined by
Edward L. Deci and Richard M. Ryan in
their “self-determination” theory, of (1)
autonomy — some choice and control over
our actions; (2) effectiveness — a feeling of
competence and sense of accomplishment;
and (3) relatedness — a sense of mutual
respect and reliance with others.9 The en-
vironment must result in high employee
engagement because there is high congru-
ence between high employee engagement
as defined by the Gallup Q12®10 and high
learner engagement as defined by educa-
tional psychology research.
Learning Processes
Exemplar learning organisations help drive
the right behaviours by putting in place and
requiring the rigorous daily use of learn-
ing processes and checklists dealing with
critical thinking; innovative thinking; the
unpacking of assumptions; root cause anal-
ysis; after-action reviews; good listening
practices; and good collaboration practices.
Feedback is frequent; it is candid and it is
mutual. Small team structures are preferred,
and everyone plays by the same rules and is
held accountable irrespective of rank.
These organisations that I studied
are not “soft squishy” places. They have
found how to have the highest standards
of performance while being humanis-
tic and valuing authenticity, humility,
empathy and compassion. Learning is a
team activity, and people learn best when
there is trust and meaningful emotional
engagement in teams.
The Organisation of the Future
To optimise organisational learning, or-
ganisations need to optimise employee
learning by building a Learning System;
installing and rigorously using best
learning processes; and adopting a lead-
ership learning behavioural model based
upon the science of learning. That will
present big challenges to many business-
es, especially those that operate under a
top-down, command-and-control and
non-humanistic management model that
drives compliance through fear. As Intuit
CEO Brad Smith stated: “It’s time to bury
Caesar.”11 Coming technology advances
along with the science of learning will
likely make the dominant management
and leadership models of the Industrial
Revolution as obsolete as the Model T.
Every business will most likely become
a technology-enabled business in the
business of learning.
About the Author
Edward D. Hess is Professor
of Business Administration
& Batten Executive-in-
Residence at the Darden
Graduate School of Business.
He is the author of 11 books, 70 articles and
65 cases. His work has appeared in over
300 media outlets globally, and his research,
teaching and consulting focuses on learning
and innovation cultures and processes.
References
1. Peter Senge, The Fifth Discipline: The Art &
Science of the Learning Organisation (New York:
Doubleday, 1990).
2. Edward D. Hess, Learn or Die: Using Science to
Build a Leading-Edge Learning Organisation (New
York: Columbia University Press, 2014), 35.
3. Daniel Kahneman, Thinking, Fast and Slow (New
York: Farrar, Straus and Giroux, 2011).
4. Jack Mezirow, “Transformative Learning: Theory
to Practice, “ New Directions for Adult Continuing
Education 74 (Summer 1997), 7.
5. Herbert Simon, Models of My Life (Cambridge:
MIT Press, 1996), 144.
6. Antonio Damasio, Descartes’ Error: Emotion,
Reason, and the Human Brain (New York: Penguin,
1994); Mary Helen Immordino-Yang, “Implications
of Affective and Social Neuroscience for Education-
al Theory,” Educational Philosophy and Theory 43, 1
(2011): 98-103; Justin Storbeck and Gerald L. Clore,
“On the Interdependence of Cognition and Emo-
tion,” Cognition & Emotion 21, 6 (2007): 1212-1237.
7. Richard W. Paul and Linda Elder, Critical Think-
ing: Tools for Taking Charge of Your Professional and
Personal Life (Upper Saddle River, NJ: Financial
Times Prentice Hall, 2002), 25.
8. Malcolm S. Knowles, Elwood F. Holton III, and
Richard A. Swanson, The Adult Learner: The Defini-
tive Classic in Adult Education and Human Resource
Development (Burlington, MA: Elsevier, 2005), 47.
9. Richard M. Ryan and Edward L. Deci, “Self-De-
termination Theory and the Facilitation of Intrinsic
Motivation, Social Development, and Well-Being,”
American Psychologist 55 (2000): 68-78.
10. Gallup, Inc., “Q12 Meta-Analysis: The
Relationship Between Engagement at Work and
Organisational Outcomes 2012,” www.gallup.com/
services/177047/q12-meta-analysis.aspx.
11. Brad Smith, “Lean Startup Leadership: It’s Time
to Bury Caesar,” Intuit Network website, November
30, 2012, http://network.intuit.com/2012/11/30/lean-
startup-leadership-its-time-to-bury-caesar-2/.
www.europeanbusinessreview.com 59
 Innovation
CREATIVITY AT WORK
BY ADRIAN FURNHAM
Creativity is not an easy topic to research and few
serious scientists conduct work in the area. First,
creativity is difficult to define and secondly, there
are few good ways of measuring it. In this article,
Adrian Furnham queries the popular belief that ‘we
are all creative’ and creative workshops will help
unleash, liberate our creativity. Organisations who
are looking for creative individuals must understand
the true nature of creativity and personality.
M
any businesses say they value creativity
because it is the father of innovation which in
turn is the engine of change. They often spend
billions on Research and Development on a creative
process or people which looks to find different, better,
cheaper, stronger, etc. products and work processes.
Some have argued creativity is an individual’s, an
organisation’s, a society’s, indeed even a species’ great-
est resource. Creativity means adaptation and innova-
tion. Some organisations have innovation or innova-
tiveness as a supposedly measurable core competency
for senior staff. They attempt to select for, encourage
and manage innovation believing it to be a major re-
source. Some appear to believe that innovation is
best achieved through the selection and management
of creative individuals. Hence they attempt to recruit
those with trait creativity which is usually conceived of
as an ability to come up with new ideas.
People like to believe they are all (particularly, es-
pecially) creative. Organisations like to believe they
need creative ideas which come from creative people.
Managers might or might not be wrong depending on
the organisation they come from. Others believe that
creativity can be relatively easily taught. Many re-
searchers have been sceptical of the many courses
available that supposedly teach creativity.
A great deal of nonsense is talked about creativity. It’s
not an easy topic to research and few serious scientists
conduct work in the area for two simple but fundamental
reasons: the first is that creativity is difficult to define; the
62 The European Business Review May - June 2015
second is that there are few good ways of measuring it. If
you can’t agree a definition or have good tools of meas-
urement you aren’t really off the starting blocks.
Creativity is a bit of a scientific backwater. This
problem is measurement: there is no simple, agreed,
robust and valid measure of creativity. This means it is
difficult to test theories and ideas such as where it comes
from and whether it can be taught. As a result, the whole
area attracts Charlatans, Conference Troubadors and
Purveyors of Piffle. It certainly seems that really cre-
ative people are difficult to manage. Further, we know
that creativity in the arts and sciences are very different.
Often “Arty-farty” creative types are often poorly ad-
justed, disagreeable and unreliable, while scientific types
are geeky, picky and perfectionistic. Innovation is more
difficult and more important than creativity
Definitions
At the heart of most definitions of the concept of crea-
tivity is the production of ideas and/or products which
are both novel and useful. That is, an idea might be
new, but not at all useful, or practical but not new. The
essence of the idea is that real, genuine creativity is
marked by new thinking that has real applications.
One issue that does seem important is to decide on
whether the determinants of, and the process involved
in, creativity are different in different areas like arts,
business, commerce or science. Another is whether
creativity as an ability or trait is normally distributed in
the population as a whole, or highly skewed such that
only a very few are highly creative.
Yet, creativity remains an academic backwater mainly
because of how to decide whether a person, invention,
work of art or science is truly creative. The question is
who makes the judgement and the extent to which they
have to agree before one can say ‘it’ is a real manifestation
of creativity. Criteria could be based on patent awards,
judgements made by professionals, social recognition or
even sales. Different groups have different criteria and
different levels of reliability. For the scientist the whole
 Innovation
enterprise hardly gets off the starting blocks.
If one cannot adequately, robustly and relia-
bly describe the criteria or label the product
it remains particularly difficult to under-
stand the process.
It seems that researchers have adopted
essentially one of four approaches to the
problem:
1. The creative person: differential
psychologists have attempted to delineate
the particular and peculiar set of abilities,
motives and traits that together describe
the creative individual.
2. The creative process: this is an
attempt to understand the thought (cogni-
tive) processes that go on in the process of
creativity. It is not so much an attempt at
the who, but the how question.
3. The creative situation: social and
business psychologists are particularly in-
terested in cultural, environmental and or-
ganisational factors that inhibit or facilitate
creativity. The idea is that one can there-
fore construct situations that induce crea-
tivity even in the not particularly creative.
4. The creative product: this approach
attempts to study all aspects of creativ-
ity by looking at those products that are
clearly defined as creative.
Is creativity defined by a person, a
product, a process or an environment? Can
a person be creative without creating any-
thing? If so, what are the personal charac-
teristics of creative people? Can you have
creative groups, rather than individuals,
where somehow the group dynamic is the
key to the creative process? Can you only
really define creativity by the output of
creative persons or groups? That is, crea-
tivity is best measured by tangible, agreed
upon, outcomes.
Or is creativity a process? Is it the way
painters sketch, writers scribble, sculptors
carve, that makes them creative rather
than some innate ability, drive or attitude?
Or is it the environment that people or or-
ganisations engender that promotes crea-
tivity? Does one need funky murals, new
age music, and a spirit of non-judgmental
communication to be really creative?
64 The European Business Review May - June 2015
Alas, it is little more than a
conformity myth perpetrated by
workshop junkies or salesman
that people can be taught to be
creative. We are not all creative
anymore than we are all musical
or mathematically gifted.
Most people seem happy with the
concept of a creative person. Many of the
creative people one can mention like Van
Gogh or Mozart died young, ignored, pen-
niless and mentally ill. Later generations
thought them creative but they were not
recognised as such in their life times.
But if, for the sake of argument, one
believes at very minimum there must be
something inside people to make them
creative the question at least for the psy-
chologists in this: is creativity
1. An ability?
2. A stable trait?
3. A (mood) state?
4. A thinking style?
If creativity is an ability, we would
expect it, like intelligence, to be normally
distributed. Most physical abilities (with
each sex) are like this. High jump and long
jump; linguistic ability and spatial ability
are normally distributed. Some people
are naturally talented and an equally small
number are, alas, talentless.
You measure abilities by performance
tests. They are tests with correct and in-
correct answers and speed of processing
may also be taken into account. It was pa-
tently obvious at school that with identical
tuition, some did very well at maths and
others were… shall we say ‘numerically
challenged’. The same is true of languag-
es: some people just seem to have an ear.
If creativity is a (cognitive) ability it can
certainly be improved, but the ability level
(from very bad to very good) dictates the
range of improvement.
Is creativity more a personality trait,
like extraversion or neuroticism? Is it a
temperamental thing, possibly related to
pathology? Certainly there do seem to be
high incidences of similar behaviours and
backgrounds in successful writers, artists
etc. But personality is like ability: normal-
ly distributed and difficult to change partly
because it is “hard-wired” and biological-
ly based. Some introverts can pretend to
be extraverts and vice versa, but it is tiring
and unnatural for them and the pretence
cannot be kept up for too long.
Is creativity a state, like a mood state?
Can it be induced by music, watching a
film, even detecting a powerfully evoc-
ative smell?
Most of us may feel subjectively
more creative after a couple of glasses
of Chardonnay but alas the evidence is
against us. True trait creatives work better
when in various specific emotional states
but all the drug does is get you in the
mood. In fact, from the numerous confes-
sions of very creative writers, state-alter-
ing substances (the preference is booze)
rarely if ever facilitate creativity…in fact,
the precise opposite.
So what about creativity as a thinking
style? This is the preferred word of our
time. Why? Obviously… because style in-
volves easy change. Just as you can change
your clothes and hairstyle…even political
beliefs, so we are told, you can change
your thinking style to become more cre-
ative. The message you hear at creativity
workshops is (a) everyone is creative and
(b) we can teach you to find your creativ-
ity (inner voice, inner child…blah, blah) by
using techniques that alter your approach
to issues. You can be taught (easily but
expensively) to alter your thinking style so
your “natural creativity” can breakthrough.
And so you do a bit of brain storming, a bit
of de Bonoing etc. and get to feel you can
become a lateral thinker.
Alas there is precious little evidence to
support this breathlessly exciting approach
to creativity. We know scientists tend to be
convergent thinkers and artists divergent
thinkers. We know both can be creative in
their own ways. We also know that nearly
all creatives have always been that way. It
is very rare to find someone who once went
on a course and suddenly became creative,
though it is possible…only if they had the
ability and temperament in the first place.
Alas, it is little more than a conformity
myth perpetrated by workshop junkies or
salesman that people can be taught to be
creative. We are not all creative anymore
than we are all musical or mathematical-
ly gifted. You can learn to do better but
only within the constraints of your God-
given, biologically based, genetically de-
termined make-up.
Teaching Creativity
The language of creativity-cultivating
sessions is particularly interesting. There
seem to be five related models.
First, there is the muesli model. People
need to unblock their creativity. They are
in some curious way creativity-constipat-
ed and unable to let go and express them-
selves. In this sense creativity courses
may be seen as laxatives.
Second, there is the dominatrix model.
Here we are told to unleash our creativi-
ty. Somehow we have been bound up, tied
down, physically constrained from that
most natural and normal of tasks, namely
being creative. So courses are liberators.
Third, there is the arsonist model. Creative
consultants and trainers aim to spark ideas
and light fires. They see people as dry tinder
just waiting for the right moment. Their job
is to find ways of facilitating fire-setting
ideas. The courses are igniters.
Fourth, there is the kindergarten model.
The problem appears to be that we have
all forgotten how to be playful. Playfulness
is apparently not only a lot of fun but it is
also very productive. So our trainer helps us
regress to a time when we were happy and
quite unabashed to draw pictures, sing songs,
etc. These courses aim for rediscovery.
Fifth, there is the gaol-liberator model.
The problem, you see, is that we have all
been boxed in a sort of cognitive gaol that
has stopped us…..wait for it…thinking outside
the box! And here, our happy consultants
throw open the doors of our prison and out
pops our creative jack-in-the-box. The
course delivers a release.
Note that all the models assume that
somewhere and somehow our natural cre-
ativity is suppressed. Quite contrary to all
that we know about individual differences
and human abilities, the assumption is that
creativity is not normally distributed: every-
body is (potentially) very creative.
Clearly not everyone is musical, or
good with numbers, or a natural sprinter.
Almost all human characteristics (ability,
personality, motivation) are normally
distributed. Handedness is an exception.
It means most people, by definition, are
average on any characteristic and only
a few are relatively high or low. It is the
Bell Curve of life. And this suggests that
most of us have average creativity talents,
some are worse than average and a few
are greatly endowed.
Certainly people can be taught skills
and they can become better at almost
everything they do. The question is what
and how much they need to practise and
with what overall and long-lasting effect.
Studies of genuinely creative individ-
uals show they have both considerable
talent but also sustained effort. Whilst
it is true that ‘good ideas’ emerge often
in times of relaxation (called the incu-
bation period), a great deal of work has
gone into thinking about the problem
at hand. Creatives are talented, driven,
hard-working…. and by reputation quirky,
unconventional, difficult to manage.
Most creativity courses are enjoyable,
whether arsonists or kindergarten teachers
lead them. Most aim at ‘fun and games’ and
are more about self-concept and self-es-
teem than anything else. Many people are
neither blocked nor gaoled, and given the
right circumstances they may all display
some level of creative thinking.
Alas, Edison was right: it’s 99% per-
spiration and 1% inspiration. Learning to
“thought-shower” – the new PC term for
brainstorm – in a nice hotel at the company’s
expense may be a fun break from the office
routine, but is unlikely to do much more
than persuade people - rightly or wrongly -
that they are as creative as anyone else.
Creativity and Innovation
The way people most often use the word
“to be creative” is both different from, and
certainly more desirable than being inno-
vative. Innovation is about doing things
radically differently. It seems implicitly
assumed that creativity is special, innova-
tiveness ordinary; that creativity is a rare
gift; innovativeness can be learnt.
It is certainly true one of the pathways to
success in organisations is indeed through
innovation. Some have rejoiced in the in-
novative product route. Disney, Polaroid,
Sony and Windows typify this route to
success. Others have developed innova-
tive technology like Benetton, Honda and
Evergreen. Some have tried to be innova-
tive in the way in which they have a “rela-
tionship” with their customers. Some of the
airlines (Virgin) and credit card companies
have been successful doing this.
But other organisations have been ex-
tremely successful without any particular
innovation. Some have simply explored
the rigidity of their competitors like
Federal Express or Easyjet. Others have
turned around a slowly declining business
like the Hilton Hotels. Saatchi and Saatchi
arguably were successful not because of
amazing creativity but rather by capital-
ising, mobilizing and manipulating market
forces. Some airlines have found success
through the exceptional service route.
Certainly people can be
taught skills and they can
become better at almost
everything they do. The
question is what and how
much they need to practise
and with what overall and
long-lasting effect.
www.europeanbusinessreview.com 65
 Innovation

Personality and Creativity

There is both good and bad news when looking at the scattered
scientific literature on creativity. The first is that it is true that
both “creatives” and psychotic mental patients share the ability to
produce more unusual associations between words and ideas com-
pared to that long but undistinguished group called normals. In the
jargon this means creatives and certain mad people have common
information processing patterns which could be seen as deficits.
They seem unable to inhibit irrelevant information from enter-
ing consciousness. They find whether they like it or not unrelated
ideas become interconnected... and this is often bizarrely a very
creative process. They also both have high resting levels of ac-
tivation and tend to be oversensitive to stimuli. Hence they may
demand a special environment in which they can feel comfortable.
The extant research on creativity and madness suggests persons
genetically related to psychotics are often unusually and statisti-
cally improbably creative. Creative persons often suffer bouts of
serious breakdown and psychopathology. And psychotics and
creative achievers have strikingly similar ways of thinking.
But of course madness is neither necessary nor sufficient for cre-
ativity. Most mad people (psychotics) are far from creative. Most Now you know why advertising agencies have account man-
mad people (psychotics) are far from creative. And many highly agers. These are relatively normal people who intercede between
creative people are more prone to neurosis rather than psychosis. the client and the creative. Put the latter two together and you
Certainly many creative writers have been prone to depression; but may expect sparks and a quick end to the business.
few (with some notable exceptions) have ever been hospitalised Don’t be fooled at the interview. The creative person is not the
A recent study comparing equivalent groups of creative and marginally flamboyant figure in coloured bow tie. The charm-
non-creative “normal” people brought to light the problems with ing person with a steady history both personal and professional
managing creatives. The creatives were marginally more extra- is unlikely to be the real creative. Real creatives are likely to be
verted but much less conscientious. They were all less efficient, pierced and have tattoos in places you never thought possible.
dependable, organised, responsible and thorough. In short they were Further their daily intake of legal and illegal substances would
lazy and self-indulgent... but they were creative by all accounts. also probably make you shiver.
However the creatives certainly were artistic, curious and By definition the real creative is difficult to manage. They are
imaginative. They were marked for the unconventionality, in- cold, manipulative and uncaring and they do not easily work in
trospective and unusual thought processes. But they were also teams. Frequently absent they often let you down. But some are
distinctly neurotic. They tended to be self-pitying with brittle clearly worth the investment and pain... but which. All however
ego defences; they tended to be tense and prone to depression. are difficult. After all they score on both neuroticism and psy-
People noted they were anxious and touchy. They certainly are choticism. How do you manage the anti-social, ego centric and
impulsive and moody. Many seem overly concerned with their unreliable? The answer is with difficulty. But if you really care
levels of adequacy. It maybe that neurosis is associated with cre- about creativity you may have to.
ativity in “normal” populations and psychosis in abnormal popu- But as any business person knows the hard bit is not coming
lations. Certainly if one has been around talented “arty-fartys” for up with the idea: it is much more about innovation. Taking the
any time it is not difficult to notice rather high levels of neurosis. idea to market; getting people to accept and buy it; and then in-
But once again it must be emphasised that not all neurotics are troduce it to the organisation.
creative... one does need raw talent.
About the Author
Adrian Furnham is an organisational and applied psychologist,
The charming person with a steady management expert and Professor of Psychology at University
College London. He has written over 700 scientific papers and
history both personal and professional 57 books. In addition to his academic roles, he is a consultant on
is unlikely to be the real creative. organisational behaviour and management, writer and broadcaster.

66 The European Business Review May - June 2015

Leadership
is paramount
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 HR

KEYS TO MANAGE
HUMAN RESOURCES
Rules of Thumb: Part 1
BY GUIDO STEIN, ÁNGEL CERVANTES AND MARTA CUADRADO
This article, which is in two parts, aims to acquaint readers with
the main personnel management policies found in enterprises.
It is intended not to be exhaustive but to serve as a reference for
managers in charge of their own teams, regardless of their posi-
tion or department. It was not written specifically for human re-
sources experts, although they too may find this direct academic
approach – reinforced by daily practice – rather useful.

P
eople are not robots, which is to say that they cannot be au-
tomated. Therefore, two people may respond differently to
the same order, incentive, or external cause. This incontro-
vertible reality makes management more exciting but much more
difficult. Policies, which are nothing but decision-making rules in-
tegrated more or less successfully after being applied in practice,
take this reality into account in the case of personnel management.
Meanwhile, they contribute to the company’s smooth operation by
trying to impose order where subjectivity and freedom reign. Their
use does not ensure effectiveness, but their absence is a sure sign
of chaos. Companies can live with some chaos, although they do
not have to: management’s job is to manage or avoid it as much as
possible. In addition, sound policies help us avoid many mistakes.
The line between arbitrariness (deciding and doing things
differently each time out of personal desire) and discretion (de-
ciding and doing things differently because the circumstances
so require) is drawn between a person who relies on objective
criteria and one who does not. Nepotism is arbitrary, while proper
leadership is discretionary. Uncertainty is part of the human ex-
perience, and applying rules will not dilute much of what sur-
rounds us. But our surroundings are better managed when we
do resort to rules. Human resources policies based on a healthy
dose of common sense will provide more fairness than frustration,
which is what ultimately matters when people are the priority.

1. Performance Management and Talent (Potential) Management

When implementing HR policies and using them to make decisions,
they should be viewed as impacting two distinct but related business
realities: an employee’s performance, on the one hand, and the talent
from which his or her future potential derives, on the other.
The following are key to performance management:
• Formulation of the job description.
• Accentuation of performance achievements.
• Focus on immediate objectives and roles to be performed.
• Identification of current performance levels in relation to
expectations for the position.
• Determination of the individual’s training needs.
• Fixed compensation, which evolves according to the extent
to which the objectives are achieved.
• Variable compensation, based on measurable quantitative
and qualitative objectives.
• Evaluation by management and self-assessment.

www.europeanbusinessreview.com 69
 HR
The following are key to talent
management:
• Skills and conduct (competences)
that improve performance.
• Skills that should be included within
the catalog of those described by the
company in its strategy.
• Objective identification (based on
observable conduct) of the employee’s
current capabilities and his or her potential
for growth within the organisation.
• Detachment from compensation,
since the key is to grow rather than to
reward.
• Using multisource assessment
schemes such as 360° feedback, but only
in those organisations whose management
so permits.
• Leveraging in relation to employees’
interests and aspirations.
• Performance management foundation,
but with a view to the future.
Effective policies are those that do
not confuse one reality for the other and
thereby distort both.
70 The European Business Review May - June 2015
2. Hiring and Recruitment
Given the speed at which most busi-
nesses operate today, the need for quick
results, and the complexities of the labor
market (high unemployment with a
shortage of specialists, among others), the
strategic importance of recruitment and
hiring processes is increasingly greater.
The first step in the recruitment and
hiring process is to objectively determine
short- and medium-term staffing needs.
The absence of a rigorous and clear pro-
cedure for determining the necessary
number of people, and their qualifications
and terms, will give rise to more difficult
situations, for example:
a) Imbalances in the workforce’s
functional distribution: in some sectors
with a highly diversified sales network, it
is normal for large back office concen-
trations to arise.
b) The business requires more people
than is strictly necessary: it is an ac-
cepted practice in periods of expansion,
when there is greater demand for people
in the sales network. Without a strategic
approach to hiring, the process would be
undertaken only upon request and reac-
tively, and would be difficult to manage.
c) Staffing requirements are justi-
fied by subjective perceptions: “I cannot
attain objectives because I’m missing X
number of people.”
d) And, on the contrary, insufficient
staff causes overtime labor, along with
the additional costs involved.
An organisational plan suitable for the
business facilitates success in hiring and
promotes reflections such as “Do I have
the structure, the jobs, and people with
the precise skills to achieve business ob-
jectives?” while avoiding assertions such
as “I’m missing X number of people.”
2.1 Recruitment Approach. What
Profile Does My Organisation Need in
the Short and Medium Term?
It is necessary to have in place a man-
agement system (e.g., by skill set) that
enables hiring managers to have an idea
of the combination of knowledge and
skills a candidate for a given position must
possess. The worst enemy of HR man-
agement is subjective perception as the
main source of information and criteria
for decision making. When these tools are
disregarded, many decisions about people
(not only in the hiring process) may end
up erroneous and will bring about costs
and problems.
Prior to the crisis, the focus was on iden-
tifying pure salesmanship skills: initiative,
communication, customer relationships,
or negotiation. Knowledge was seen as
secondary, and sales became the area that
would receive graduates in fields other than
the more traditional technical ones. Over
time, knowledge gained its value back, as
customer loyalty is based not only on the
front office’s empathy but also on its tech-
nical capacity to serve the customer.
This is even more obvious in the back
office. Specialisation is widespread.
Companies have been absorbing those
not only coming from the real estate
sector but those professionally specialised in finance and risk
due to regulatory pressures (e.g., capital management).
In other sectors, depending on a position’s level and the type
of company, management skills are as or more important than
knowledge: a manager in the automotive sector with experience
in factory management can successfully fulfill the same role in the
dairy industry; a textiles salesman can quickly learn to sell beer.
2.2 How to Attract the Right Talent
It is useful to differentiate between companies firmly commit-
ted to an internal promotion model (also immersed in organic
growth processes) and those combining internal promotion
with the integration of professionals formerly employed by
competitors. The first group focuses on recent graduates in the
fields of economics, business, law and engineering.1 The way to
reach these candidates was through print advertisements, which
were later replaced by digital ads on general employment sites
(Infojobs, Infoempleo, etc.). CV collection naturally evolved into
the creation of dedicated sections on corporate websites where
offers were published. Although businesses began collaborating
with universities, specialised schools, and professional associ-
ations to access the databases of final-year students and recent
graduates, these actions were primarily reactive.
Prior to the crisis a peculiar phenomenon took place in the retail
banking sector: the job offers for recent graduates were such that
some websites (Buscaoposiciones, for example) became forums
where candidates informed each other about the place, character-
istics, or specific tests related to hiring processes. In addition, they
openly expressed their views on the hiring companies. Specific
emphasis began to be placed on the companies’ image as employ-
ers and not just the brand conveyed to markets, shareholders, or
customers. Hence the need to build and properly care for company
employer brands. Today, the marketing, communications, and HR
departments should work closely together so that their respective
target audiences end up with objective and desirable perceptions
of the company. Furthermore, given that the best candidates today
have the luxury of choice, that they are more connected than ever,
and that the sector has suffered a huge reputational blow, employ-
er branding systems can make the difference.2 It is also true that
companies have greater information on candidates today thanks to
the digital footprint the latter leave online.
For companies that combine internal promotion with the
integration of professionals from competitors, the processes
were quite homogeneous as far as hiring the latter. Most com-
panies opt to use consultancies depending on the profile of the
candidate sought. Therefore, relationships with external sup-
pliers are key. Often, consultants would scout the area where
the company was to open a branch, and would make the initial
contacts with possible candidates for the job. The hiring process
was extremely fast and relationships with the consulting firms
focused on the operational. Some information on the customer
and the job was enough, as rapid integration was prioritised over
any other aspect. Some consulting firms were even acquired by
their clients.
It should be noted that the use of personal references can
provide quality to the hiring process and often increases em-
ployee retention over other sources of recruitment.
3. Onboarding and Integration Processes
The onboarding (induction) plan is a structured process whereby
new employees are given precise information about the organ-
isation, job, people with whom they will first be in contact, who
is who, company culture and values, available tools and ser-
vices, etc., with the main objective being that the person can
immediately begin to carry out his or her role. The objective
is for the new professionals to achieve greater autonomy in the
shortest time possible and become acquainted with the benefits
of working for the company – other than salary. Regardless of
the method used, a well-structured onboarding process present
at all levels of the organisation is key to motivating new em-
ployees, while the absence or noncompliance thereof may lead
to failure. The new hires must be under the impression that the
company was awaiting their arrival.
3.1 Who Manages the Onboarding Processes?
Human resources departments are usually in charge of the on-
boarding and integration processes, but they are not the real
difference makers. Because time is limited, new employees
usually receive their first direct input from the training depart-
ment, normally at an in-person course.
In recent years there has been a boom in digital corporate
portals that include sections dedicated to new employees. These
have also become training content “warehouses,” thereby replac-
ing the initial courses at which new employees received their first
direct inputs with online training. The training department’s role
in onboarding processes has accordingly been losing value.
The use of employee portals as the backbone of the on-
boarding process has great advantages but admittedly runs
the risk of placing responsibility for the process on the new
hire. The main actors in the onboarding process are those who
will work directly with the new employee: his or her direct
The use of employee portals as the
backbone of the onboarding process has
great advantages but admittedly runs
the risk of placing responsibility for the
process on the new hire.
www.europeanbusinessreview.com 71
 HR
manager and peers. This is particularly relevant in sectors with
highly dispersed workplaces, which have correspondingly
limited staff (three or four people).
An otherwise careful onboarding process can fail due to a bad
first day at the workplace or poor reception by the new employ-
ee’s peers. These situations, as well as inadequate company su-
pervision, constitute the most fragile components of onboarding
processes. Therefore, it is important that those responsible for the
company’s new hires participate from the outset. They must be
aware of their role as integrators, properly trained, and committed.
It will also enable them to understand and, to some extent, better
internalise what happens in the human resources domain.
3.2 Placement Processes
Not everyone, however well trained, is an ideal “first boss” for a
new employee. In this respect, the retail banking sector’s evo-
lution is a clear example. The speed of integration was so high
that new employees would start their jobs (usually at branches)
after excessively rapid and sequentially disorganised onboard-
ing processes. The branch managers were thus, more than ever,
the company’s first and only reference points for new employ-
ees. In addition, there was a change in the profile of new hires
as a new generation began to enter the workforce, causing a
greater rift between managers and new employees. The new
hires wondered about their schedule, short-term career outlook,
quality of life, and work-life balance. Furthermore, 60% of new
hires between 2002 and 2007 were women. This all occurred
at a time of external rotation within the sector, with demand ex-
ceeding supply. A bad reception could become the first reason
for new hires to think about changing companies.
The new employee was normally placed to fill a vacancy,
without there being any rotation processes aimed at “stimu-
lating” vacancies depending on the branch manager’s profile.
There are branch managers who are very skilled at facilitating
the integration of new hires and others who are not. Typically,
new employees begin working in branches overseen by manag-
ers who are closely linked to the organisation and used to inte-
grating new employees. Generating vacancies at such branches
requires continuous and planned internal rotation. However,
these rotations were not made given the speed with which the
hires were made. By consequence, employees were not opti-
mally placed, ending up at branches on the basis of the man-
ager’s profile or for other reasons, such as the type of business.
This would have a major impact on the new employee.
As the HR director of one of the big banks warned:
“In 2005 and 2006 we were worried about the increasing per-
centage of new employees (hired for six months and then indef-
initely) who quit within the first three months. We started calling
those who had quit 15 days after their departure: most stated that
their career expectations at the bank had vanished within the first
72 The European Business Review May - June 2015
week. I remember two specific cases. One was a girl with an ex-
cellent background and exceptional English relative to the new
hires. She left after two months, telling us she had made her deci-
sion on her first day on the job. Her manager clearly and frankly
told her that ‘he did not care what she had been told during the
onboarding process’ and that her job was ‘to maintain the archives
and forget about everything else.’ The other was a guy with a very
good sales background who went to a branch in a small town 300
kilometers from his home city. He finished his first training course
(prior to joining the branch) on a Friday and his assigned branch
manager instructed him to report on that Saturday (he had to drive
home and travel the 300 kilometers again). When Saturday came,
after having driven almost overnight, he found that his manager
had taken the day off and that he was instead received by the con-
troller, who left the bank a week later. He lasted one month.”
Onboarding processes are not immune to fragility.
The crisis brought an opportunity to emphasise new hire place-
ment schemes within onboarding processes. The present genera-
tion, known as the “millennials,” view their career as an opportu-
nity to work on the projects they like, reject the idea of working
for only one company throughout their careers, place a lot of im-
portance on their careers independent of their company’s culture,
and value having enough time for personal life. They appreciate
transparency and need to be constantly connected. However, they
also require reference and instruction, so their bosses can play a
crucial role as mentors. For some sectors, these new mentors have
a very important task to undertake: they must counterbalance their
reputational image in the eyes of the new employees.
4. Development and Training
Training and development are HR management tools primarily
aimed at employees’ continuous adaptation of knowledge and
skills in line with business needs. However, training is also one
of the few HR systems that transcend its own objectives: it is
a major tool for internal communication (“Whatever you want
to communicate to your staff can take the form of training”), it
contributes to the building of loyalty and commitment, or stim-
ulates a sense of belonging, and also serves to support transition
processes.
One of the keys to a successful policy is to identify the real
needs, either through a performance assessment or an evalu-
ation of the potential and talent. The former can help with the
design of job-specific training plans, and the latter with com-
prehensive development plans.
Training is also one of the few HR systems
that transcend its own objectives: it is a
major tool for internal communication.
4.1 Client Mentality
The first point is to treat the training program attendee as a
client. When a person is called into a training program, he or
she has to be immersed in a process in which everything works.
Therefore:
– The content and methodology must be perfectly aligned with
the objectives of the training course. These objectives must be
clearly communicated to the attendees (this is obvious but some-
times fails to be observed in practice), both through the invitation
to participate and, more importantly, by the immediate manager.
– If the course is in-person and requires travel, the expense
reimbursement process (tickets, accommodation, and meals)
should run perfectly.
– If the program is Web-based, companies must be especial-
ly mindful of the technological aspects (servers, accessibility
from any device and from anywhere, etc.).
However, the most important aspects of the program are its
content and delivery, which directly impact employees’ per-
ceptions of the company, and therefore their sense of belonging.
Another HR director of a regional bank noted:
“For the first time, recent graduates of the bank’s executive de-
velopment program were able to invite their partners to the grad-
uation ceremony. Program participants who lived outside Madrid
arrived with their families the night before. The next morning we
learned that the hotel (with which we had been working for four
years) did not have rooms for five participants and their invitees,
who had to find their own accommodation (in short-term apart-
ments). When we learned of this (too late, obviously), my sole
concern was to apologize and have the hotel somehow com-
pensate them. A fellow team member told me that everything
had gone well and that we should not worry about it anymore.
However, two days later, once we got the hotel to compensate
them with a free stay at any location of the chain, one of the af-
fected executives called me and said, “Thank you for the apology
and for the compensation, but above all, thanks for giving me a
way to show my wife (who was very upset by what happened)
that I work in a company that cares about people.”
4.2 Priorities
The primary objective of a training and development department
is to combine the knowledge and skills of the personnel with the
strategic and business needs of the company. The essential step to
achieving this objective is to properly determine the level of knowl-
edge and skills of the company’s employees. To develop skills, it is
necessary to rely on a performance evaluation system that is well
defined, communicated, and known by all those involved in the
training process. The less the evaluation process is clear, communi-
cated, or known, the more subjective perception will play a role in
defining training needs. When dealing with knowledge, the updating
of job descriptions allows the training department to work reliably.
The most important aspects of the training program
are its content and delivery, which directly impact
employees’ perceptions of the company, and
therefore their sense of belonging.
In models based solely on internal promotion, access pro-
grams must be accordingly emphasised in the training model.
In retail banking from 2002 until 2008, there was a mass
hiring of new graduates, which was accompanied by a high
number of veterans leaving through early retirements. It was a
time of company expansion, with many branches opening due
to the housing boom. Generational change caused losses not
only in experience but also in knowledge.
The new hires were valued for their theoretical commercial
competence, with basic practical experience being treated as
secondary. A mid-sized firm launched an executive development
program based on skills, leaving knowledge aside; 30% of partic-
ipants were recent graduates or diploma recipients in either eco-
nomics or business. This all took place despite regulations begin-
ning to require technical training in the area of financial advice
for those employees who would be dealing directly with the
public. This approach produced a de-emphasis on knowledge in
the banks’ front-end networks. In a context of expansion in which
the banks’ core business was credit and where client negotiations
centered primarily on price and trust, there did not appear to be a
need for substantial investments to enhance technical knowledge.
Now it seems that excessively commercial tendencies are a thing
of the past, having been replaced by advisory services (particu-
larly in taxation and secondary markets, achieved through proper
training combining knowledge and skills).
As noted, due to greater regulatory complexity and tighter
budgets, retail banking has again started to emphasise internal
training and external training with highly personalized content
and tailored to very specific needs, in place of more general
training and with less impact on daily operations.
About the Authors
Guido Stein is Professor at IESE Business School.
Ángel Cervantes is an HR Consultant
Marta Cuadrado is a Research Assitant at IESE Business School.
References
1. This model risks compromising diversity and encouraging people to
grow within a uniform culture.
2. Employer branding is evolving from attracting CVs from candidates
towards greater selectivity: companies are becoming only interested in
candidates with a greater potential to fit their culture (i.e., incentive-
based referral programs to employees who nominate candidates,
including family, friends, and acquaintances).
www.europeanbusinessreview.com 73
 Female Leaders

Global Female Leaders 2015:

International Networking for Female Leaders in Berlin

T
he Global Female Leaders Summit
2015 brought together female
leaders from more than 20 coun-
tries in Berlin’s prestigious Adlon
Kempinski Hotel during April 20th–22nd
for discussions and exchange of knowl-
edge and ideas. “Last year we organised
the Global Female Leaders Summit for the
first time. Our aim was – and still is – to
create a world economic forum for women
who are predominantly top-level manag-
ers, scientists and media makers, to come
together for an exchange of current issues
in business, politics and society”, explains
Sigrid Bauschert, organiser and CEO of
Management Circle AG.

amongst them Sherilyn Casiano, CEO, continue to strengthen this commitment in

With female executives such as Helena
Morrissey, CEO, Newton Investment
Management and 30% Club Founder,
alongside Jane Jie Sun, COO Ctrip.
com International Ltd. China as well
as Corinne Vigreux, Founder and COO
TomTom N.V. the panels were filled with
business leaders’ top brass. “Compared
to the first summit, the number of par-
ticipants has more than doubled”, notes
Sigrid Bauschert. The panels were char-
acterised by lively discussions, and many
female participants were full of praise,
S.I. Williams Wealth Management, LLC,
New York says, “This was an impressive
gathering of 200+ women in leadership
positions in many industries and across
diverse disciplines. My experience at the
conference was magnified by the smart,
beautiful and powerful women I met and
with whom I engaged in conversation.
Women, who are thought leaders, trail
blazers, activists for change and peace,
and who express themselves so elegant-
ly and insightfully. I was inspired, chal-
lenged and invigorated.”
“We women have different experienc-
es from our male counterparts in the way
in which we acquire knowledge and work
along our carrier paths and that is even
true for the way in which we network.
Therefore we came together and will
“My experience at the conference
was magnified by the smart,
beautiful and powerful women I
met and with whom I engaged in
conversation.”
- Sherilyn Casiano, CEO, S.I. Williams Wealth
Management, LLC, New York
the following months and years. The third
Global Female Leaders Summit will take
place in April 2016 again in Berlin”, the
Management Circle CEO confirms. The
Summit’s media partner, The European
Business Review was represented by its
Managing Editor, Tunde Olupitan who was
very impressed with the calibre of attend-
ees and states, “The European Business
Review and indeed EBR Media, its publish-
ers, will continue to support the summit and
as we did in the months running up to this
summit, we will continue to profile women
leaders in the pages of our journals in the
run up to the next Summit.” EBR Media
publishes The European Business Review,
The European Financial Review, The World
Financial Review and All China Review.
Eleven well-known and international
operating companies such as Fujitsu, GFT
and KPMG supported the Global Female
Leaders 2015. At the gala dinner, the
ESCADA Spring/Summer 2015 Fashion
Show further inspired guests with a glam-
orous special evening exhibition.
For further information visit:
www.globalfemaleleaders.com

74 The European Business Review May - June 2015

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 THE LEGEND AMONG
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