How to Recognize and Build Upon Your Talents

Worried that you’re just not cut out for entrepreneurship? Don’t be.

Gallup’s Entrepreneurial Profile 10 (EP10) assessment has outlined the top ten talents of entrepreneurs and each and every one of us has them within us.

As Mona Anita Olsen, an assistant professor of entrepreneurship at the School of Hotel Administration at Cornell University, puts it: “Entrepreneurship is for everyone.”

Olsen joined eCornell’s Chris Wofford to discuss the EP10 assessment and how it can be used to provide a better understanding of anyone’s entrepreneurial talents and how they can be put to use in any work setting. What follows is an abridged version of their conversation.

Olsen: At the School of Hotel Administration, we have been promoting entrepreneurship to students at all levels. That’s where the EP10 comes in.

We’ve provided the opportunity for all freshmen, transfers and masters students to take this assessment at no cost. They can then take the results and come to a session on how to actually analyze those results. The main motivation behind it is to plant a seed that entrepreneurship can be part of your journey no matter where you go – whether you’re trying to innovate within a corporation or starting your own venture.

Wofford: What exactly does the EP10 assess?

Olsen: When thinking about the EP10 and its application to entrepreneurship, I want to first make sure we’re on the same page about the word entrepreneurship. An entrepreneur organizes, manages and assumes risk. Entrepreneurship is the capacity and willingness to develop, organize and manage a business venture along with its risks in order to make a profit.

There are ten talents that the EP10 assesses: confidence, delegator, determination, disruptor, independence, knowledge, profitability, relationship, risk and selling.

This is an online assessment, not a test. It takes 20 to 30 minutes to complete and it costs $12, so it is not a huge investment in terms of time or money. You can take it anywhere and at the end you get an assessment of those ten talents and they will be ranked in order of your highest score. So this really helps you identify your greatest natural strengths.

Gallup has studied entrepreneurship for a long time and they came up with the unique talents that successful entrepreneurs possess. Remember, talents are different from personality traits and encompass attitudes, motives, cognition and values. Entrepreneurs have certain business outcomes that they’re trying to reach and Gallup tried to figure out how the talents impact those business outcomes.

Wofford: How did you first get involved with the EP10?

Olsen: I was in Omaha in December to get certified as an administrator for the EP10 and there was this question on the wall that really struck me: “What would happen if we studied what is right with people versus what is wrong with people?”

It really struck me that not only is strength-based education training really important, there are also a lot of links between happiness and and being more productive in the workforce. Leveraging your talents actually influences your performance.

Wofford: I’m curious about some of the terms. Take profitability, for instance. How do you assess that for someone who has not necessarily gone out and generated profits themselves? Similarly, a term like ‘risk’ can be perceived very differently.

Olsen: OK, let’s look at the talents and their definitions. Let’s start with confidence, which is defined as the ability to accurately know yourself and to understand others.

A delegator is someone who recognizes that they can’t do everything themselves. Personally, that’s something that I struggle with.

Determination is a term that people usually understand – you persevere through difficulties and seemingly insurmountable obstacles. You’ll note that entrepreneurs actually love obstacles. They love being able to get through those challenges.

A disruptor is someone who exhibits creativity and takes an idea or existing product and turns it into something better. A lot of people will use disruptor synonymously with innovator but they’re not the same. With a disruptor, we’re talking about the creativity to bring value to an existing idea or product.

Independence is doing whatever needs to be done to be successful in a venture. This is a talent that’s ranked highly for most entrepreneurs.

Knowledge means that you’re constantly searching for information that is relevant to growing your business. You see this in almost all of the students that take the assessment.

To your previous question, when we talk about profitability we’re talking about making decisions based on an observed or anticipated effect on profit. In other words, you’re always thinking about how your decisions are going to impact the bottom line.

Relationship is assessing social awareness and the ability to build beneficial relationships. Naturally connecting people.

Selling is the ability to be persuasive and really be a champion for pitching an idea.

Risk refers not to taking a risk, but rather how to manage risk. How to instinctively deal with high-risk situations.

Wofford: Most of those definitions are pretty intuitive, I guess.

Olsen: Yes, but you’re right that people might have their own definitions for these terms so it’s good to establish what they mean in this context.

Now, once you do the assessment you will essentially be given a top four. Your top four talents will be weighted and then it will basically align your results with one of three entrepreneurial styles.

So you’re either relational, strategic or activation oriented. The difference between those last two is that strategic is more about planning while activation is getting things done.

At the end of the assessment, you’ll get this full report that includes your top four talents and your entrepreneurial style. It goes through each of the different talents that you have and gives you scenarios in which you might actually use those talents in your work environment.

Wofford: If you don’t mind me asking, what were your results?

Olsen: In my case, I have the activation style. What’s great about the assessment is not just that it gives you your top four talents but that it also helps you identify some of the areas in which you are not as strong.

Wofford: OK, so let’s say I’ve just gotten back the results of my assessment. Now what?

Olsen: There are many different things you can do. The first thing I usually ask students to do is to map their talent. I ask them to draw an inner circle, where they put their top four talents. In the second circle, they identify the next three and then the bottom talents are put in the last outer circle.

Why is it important to do that? Well, first, it’s important to really look at yourself and sort of accept where you are before you decide what you might want to do with the results.

If you know your talents, when was the last time you used them? How many times do you use your top talents on any given day or week or month?

If you’re not using them, how would doing so impact your work? Would you be more effective in whatever role you’re in? If you are using these talents on a more routine basis, how can you consciously work toward putting these talents forward?

When you have your results, you can you ask yourself how you are going to use these talents in a team setting. Understanding yourself before getting into a group makes you a more effective group member and also enables you or the group leader to strategically think about how to use your talents.

Wofford: So this isn’t solely about self-improvement or self-understanding, there is a team benefit to this as well?

Olsen: Absolutely. You can actually use the results to make team maps, where you map out the top four talents of all your team members. This can be very helpful in a startup situation because you can look at the talents that are necessary to be successful as entrepreneurs and determine which ones your team is really strong at and how to take advantage of that. You can also identify areas that might prove to be blind spots for your team.

Wofford: If your team map results showed that nobody is prepared to delegate, that would obviously be a problem.

Olsen: Exactly. Going through these assessments can be a great team-building tool.

Wofford: A question from the audience came in that really jumped out at me. It asked whether you’re likely to see immediate changes in someone’s behavior after they’ve taken the assessment.

Olsen: I think it makes you more mindful of what you’re doing on a daily basis. In my case, I might think that maybe the reason someone responded to me in a certain way is because my risk tolerance is so high that I’m willing to push something forward even when I know there’s going to be pushback. It’s made me more mindful of how I come across to others.

Recognizing my talents also helps me to focus on the most effective ways for me to spend my time and how I can be the most productive by leveraging these very naturally-developed talents that I have.

Wofford: It must also help to expose some deficiencies so you know what sorts of things you need to improve upon.

Olsen: Absolutely. It’s only natural to spend some time thinking about the talent that you scored the lowest on, especially if the results were surprising. But it’s important to remember that it’s all relative. For example, you could actually be a very strong delegator but it’s just not as strong as the other nine talents. It’s human nature to focus on areas that need improvement. It is important to be aware of your weaknesses but you shouldn’t let them overshadow your strengths.

Wofford: We’re just about out of time – any parting words?

Olsen: First of all, if you haven’t taken the assessment yet, go to the Gallup site and take it. It’s only $12 and it will take you less than 30 minutes. Before you take it, I think it can be very helpful to predict your four top talents and then try to analyze how your assessment results either matched your expectations or surprised you.

My challenge for all of you is to think about how you can use your talents at least once every single day. If you do that consistently over a week or two, will you see any results in your productivity or in your happiness or just in feeling like you’re very effective with the talents that you bring to the table?

Wofford: Mona, thank you so much. I also want to thank the audience and again, if you haven’t taken the assessment, go out there and do it!

Olsen: Thanks, Chris.

Want to hear more? This interview is based on Mona Anita Olsen’s live eCornell WebSeries event,The Entrepreneurial Profile: Buidling On Your Talents. Subscribe now gain access to a recording of this event and other Entrepreneurship topics.

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How to Make the Business Model Canvas Work For You

Neil Tarallo has more than two decades of entrepreneurial experience under his belt and is a senior lecturer at Cornell’s Hotel School as well as the director of the Cornell Entrepreneurship Bootcamp for Veterans with Disabilities.

But that doesn’t mean that he can simply come up with an idea and magically turn it into a successful startup. When Tarallo brainstorms ideas, he leans heavily on the Business Model Canvas. Created by Alexander Osterwalder, it is arguably the most important innovation in entrepreneurship and strategy in quite some time.

Tarallo joined eCornell’s Chris Wofford to discuss the Business Model Canvas as part of the Entrepreneurship webinar series. An abridged version of their conversation follows.

Tarallo: Entrepreneurs are problem solvers. We solve problems in a marketplace, and in doing so we create businesses. For us as entrepreneurs, it’s important to understand exactly who is feeling the pain, so to speak, that has been created by that problem. One of the nice things about the Business Model Canvas is it really helps us focus on that.

When I talk to entrepreneurs around the world about their businesses, one of the things they tend to miss is the value that their solution creates for their customers, and exactly what those customers think about that value.

People get a little upset with me sometimes when I say these things but products and services don’t create markets. Solving problems in markets, and creating value, allow us to create new markets. But in order to have a sustainable business, you have to solve real problems for real people and understand what that solution means to them.

It’s really not about your products or your cool technology or how great your food tastes. It’s always about how you create and capture value for your customers. So that’s what we want to focus on and I think one of the great things about the Business Model Canvas is it really helps us focus on that important element of our business.

There’s no shortage of new products. It’s not even cool anymore just to have a new product or new technology. There’s so many of them out there, but very few of them really bubble up to the top. That’s because the manufacturers misinterpret what it is that they’re trying to do. There’s that old adage: Build it and they will come. Whenever I hear that, I run as fast as I can and you should too because you need to do more than just build it. You need to make that connection and that’s really what the Business Model is about. It’s all about how a business captures and delivers value to the customers.

Wofford: Before we go much further, perhaps we better get into what the Business Model Canvas actually is and how it works.

Tarallo: OK. The Business Model was created by a guy named Alexander Osterwalder. He was doing his Ph.D. and his interest was in business models. What he discovered as he was doing his research is that when he would ask people about business models, no two people could define it the same way.

I give him a lot of credit for seeing that. I think it’s something that all of us who teach and talk about entrepreneurship over the last 15 or 20 years have encountered but we just never identified it.

Osterwalder wrote his dissertation, ‘The Business Model Ontology – a proposition in a design science approach’, about how we build and generate business models. His premise was that we need to have a common understanding of what a business model is and that we need sort of a shared language around it.

So he created this tool called the Business Model Canvas and that was followed shortly thereafter by another canvas called the Value Proposition Canvas. We won’t spend as much time on the Value Proposition Canvas today but it has also become a fundamental tool in innovation.

The Business Model Canvas has nine building blocks and we’re going to quickly go through each of those building blocks. In the very center of the canvas is the Value Proposition. This is where we articulate the problem that we’re solving as well as how we are solving it for our customers. It is the first building block and is at the dead center of the canvas because it is central to everything that we do.

All the way over to the right is Customer Segments. We need to understand, as specifically as we can, who the customers are. Who will be interested in our solution and what value do they see in what we propose for them? Continuing on, building block number three is Channels, and that’s how customers actually get and access our Value Proposition. It could be online, it could be in our store – there are a whole bunch of variations on how we do that.

Next, Customer Relationships, which is primarily the marketing component of what we do. Moving to the left on the canvas, we have Key Resources, what we need in order to deliver our value proposition. Above that is Key Activities, where you identify what activities your business engages in on a daily basis that deliver the Value Proposition.

All the way on the left is Key Partners and those are other organizations or people that we can work with to help us deliver our Value Proposition. An example there might be, if I sell coffee, coffee growers may be a key partner for me because I have to bring them on board.

The bottom of the campus is all about the financial aspects of our business. To the right, we see Revenue Streams, and that’s those unique products or services that generate revenue for our business. To left is Cost Structure, or what it costs us to deliver our Value Proposition.

Notice that when I talk about each of these building blocks, I’m always referencing the Value Proposition. The activities that happen within these building blocks are central to that. Everything I talk about on the Business Model Canvas focuses on that Value Proposition.

Wofford: Yes, I did notice that you were really driving that home.

Tarallo: Now, if you look at the layout of the canvas, what you really see on the right side is what we call front stage operations or what we call front of house in the hospitality industry. These are the forward-facing activities that customers see and feel and touch. On the left side of the canvas are what we call backstage or back of house operations and those are the things we do behind-the-scenes that customers don’t necessarily see that support the delivery of our value proposition.

My work with companies and with entrepreneurs tends to focus on that left side because it’s a much more difficult thing to do. I call the front stage operations low-hanging fruit: we get to talk to our customers, we get to do some research, we see what they value and what they don’t value. That’s all pretty easy to do. The interesting thing about backstage operations is that if we can figure out how to deliver value through our operations, we tend to create a competitive advantage that’s very difficult for our competitors to break into.

An example I always use for that is Disney World. It’s one of my favorite places to go because I learn so much about operations there. Disney really delivers value through their operations. They entertain you while you’re going through lines, they have a series of tunnels underneath the entire facility, so that they can get anywhere in the park in six minutes or less. Other parks can’t do that so they’re creating value through operations that really gives them a big advantage over their competitors.

Wofford: It’s fascinating, and for our viewers who are interested, just Google ‘Disney World front stage operations and backstage operations’. There’s so much stuff out there written about it.

Tarallo: Now, the lower part of the Business Model Canvas is what I call the economic model.
It’s how different elements of the cost and revenue structure of our business come into play and work together. So that’s the way I think about the model: right, left and lower side, with value being in the center of everything.

Wofford: So how does the canvas work?

Tarallo: As we build our Business Model Canvas, we really hypothesize and we’re guessing what we think is going to happen or could happen in each of these building blocks. Then our job is to go into the marketplace and test our hypotheses. We learn from those tests and we go back and we repeat this over and over again until we get it right.

Wofford: So following this model allows you to test your assumptions, right? That’s where you validate whether or not you do have unique value, whether you’ve got a competitive advantage and so on?

Tarallo: Exactly. You need to be objective. One of the big challenges for me in disseminating information about the canvas both to my students and entrepreneurs is that they’re very emotionally invested in their solution to the problem. For me, one of the measures that I use to determine whether I think somebody is in fact going to be successful as an entrepreneur is how flexible they’re willing to be in that solution.

Wofford: How do you know when you’ve got it right?

Tarallo: To be very candid with you, as much as we work on this and as much as we test, it will not be accurate. The day that we open our business is when we really find out whether it’s accurate or not. None of this is an absolute, but the canvas gets me on the right page. It gets me as close as I can so that when I have to make adjustment when I open my business, or as I’m running my business, I don’t have to take big leaps. I’m trying to mitigate risk and I think one of my favorite things about the Business Model Canvas is it lets me do that.

Entrepreneurs don’t like risk, contrary to what a lot of people believe. We understand risk. We understand it’s part of our lives and we work hard to mitigate that risk, but we don’t love risks.

Wofford: So you’re not rushing off to Vegas every chance you get?

Tarallo: Haha, no. When it comes to testing ideas we’re really trying to set up a series of controlled experiments that you can fail without jeopardizing your business. I always say that entrepreneurship is nothing more than a series of small failures. I’m very careful about how I say this though, because I think there is this belief out there that it’s good for entrepreneurs to fail big and fail fast. I’m not a fan of that. Failure is never a good thing. I want to try to control my failures so that I’m mitigating risk and I learn from my market in a way that’s not going to damage my brand or what I’m trying to accomplish.

It’s important to me to stress that in my opinion, the Business Model Canvas is not a replacement for a business plan. It’s not a replacement for a marketing plan or a strategic plan. It is an effective tool for understanding who your customers are, what they value and how you can create a solution for their problem.

One of the things that Steve Jobs was really good at with Apple was not even thinking about a product necessarily but going into the market and interfacing with the market and seeing what it is that they were struggling with. The iPod is a great example of that. He saw a problem that was happening in the marketplace and he really found it through observation and getting people to tell stories about how they get music and how they listen to music.

I contend that Apple’s business model as a whole is that they’re problem solvers. They find problems in the market that they can solve with their core competencies, which are design and technology. That’s how they come up with these really great innovative products.

I shouldn’t say this because you’re recording, but I think Apple is going to be out of the phone business before too long.

Wofford: Really? Why do you say that?

Tarallo: Because the problem is solved. It’s no longer compelling for them and for the first time ever we saw iPhone sales drop last year. If you think about the iPod, you can’t buy one of those on a store shelf anymore. Why not? Because the problem has been solved, so Apple no longer makes them. Our phones are now substitutes for iPods and I think you’ll see the same thing happen with the iPhone, perhaps sooner than a lot of people think.

Wofford: Well, if you’re right you’ll be glad we were recording this so you can pull up the video and say “told ya so”. Neil, this has been very interesting. Thank you for sharing your insights into the Business Model Canvas.

Tarallo: Thanks, Chris. I enjoyed it.

Want to hear more? This interview is based on Neil Tarallo’s live eCornell WebSeries event,Business Model Canvas: A Tool for Entrepreneurs and Managers. Subscribe now gain access to a recording of this event and other Entrepreneurship topics.

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How to Manage Risk, Uncertainty and Opportunity (The Smart Way)

Having spent many years as a business consultant, Stephanie Thomas says she has “a long history with risk.” But although many people view risk as a negative thing, Thomas says that risk is more like the flip side of opportunity.

Now an economics lecturer at Cornell University’s ILR School, Thomas joined Chris Wofford to discuss the relationship between risk, uncertainty and opportunity as part of eCornell’s WebSeries.

An abridged version of her presentation follows.

Thomas: It’s important for people to realize that, risk isn’t necessarily a negative thing. Without risk, there’s no opportunity. If we never take a risk, we can’t really ever move forward to build, grow, develop and expand. So we have to take calculated risks but not stupid risks.

Wofford: To make sure we’re all on the same page, how do you define risk?

Thomas: Risk can take a variety of forms. There are four kinds of risks within the business setting: hazard risks, financial risks, operational risks and strategic risks.

The first, hazard risks, are usually the kinds of things that we think of when we hear the word ‘risk.’ This is the risk of something bad happening – natural disasters, floods, car accidents, those kinds of things.

Wofford: The risk there is not having prepared for them, right?

Thomas: Yes, and it’s really difficult to prepare for them because oftentimes they’re unanticipated. But when they do happen, they’re going to impact the business. Hazard risks are things that happen to the organization from the outside. Insurance, contingency planning and emergency preparedness plans can really mitigate hazard risks. So even though hazard risks are unanticipated, we usually have some pretty good mechanisms in place to deal with them.

Most organizations will also have protocols and policies in place to manage financial risks. These are things like fluctuations in interest rates, debt, asset losses or shrinkage if you’re in a retail environment. We all face these kinds of financial risks, but they’re typically well controlled and well understood as a part of routine discussion.

Then we can talk about the operational risks like supply chain issues and cost overruns. These are things that you might not plan for or take insurance out to mitigate against, but they’re still risks that are pretty well understood. If you have supply chain issues and can’t finish your product because something has happened to the person that you’re relying on – their truck broke down or they’re behind in production – this can really blow everything up.

But again, these kinds of risks are usually able to be managed pretty well. As an organization, you’re going to have a sense of what could go wrong and what you’re going to do to mitigate that situation.

Wofford: So that leaves the big category.

Thomas: Yes, the fun one. Strategic risks. Here we’re talking about things like customer retention. We’re talking about R&D projects. We’re talking about industry or sectorial issues and broader macroeconomic fluctuations. You’ve forecasted demand and it turned out that your forecasts were wrong and you have all this excess inventory. What are you going to do with it? Or you manufacture a toy and all of a sudden it becomes the “it” toy for the holidays and everybody is buying them and you haven’t produced enough to satisfy demand. What now?

These are examples of strategic risks and you really need to think about how they can potentially impinge on your strategy and what you’re going to do.

Wofford: So do you get everybody in the same room and sort of talk through these different possible scenarios and your responses to them?

Thomas: Absolutely. I’d like to turn to some real-life risk examples. When Apple did their R&D to create the iPhone, they didn’t really know for sure if it was going to be a success. It was a touch screen; it looked nothing like the flip phones or the clam shells of the day. It was a huge risk. But what was the upside? Well, it was enormous. The iPhone is now on its seventh generation and everybody has one.

To give another example, do you like to cook?

Wofford: Yes, a lot.

Thomas: Okay, let’s say that you’re making a new recipe for the first time. If it doesn’t turn out the way that you hope it does, what’s the downside?

Wofford: Well, I’d certainly be disappointed myself, and I could have unhappy guests. Worst case, someone gets ill.

Thomas: Let’s not even get into the getting ill part. Let’s just say it doesn’t look the way it’s supposed to look or it doesn’t taste the way it’s supposed to taste. The downside is, well, you can’t eat it and you have to order take-out. This is relatively minor in the grand scheme of life. But the upside is you prepare something wonderful for your family, you’ve learned a new skill and you’ve added to your credentials as a chef.

Wofford: Right, it’s not a huge downside if we have to order pizza because I messed up dinner.

Thomas: It’s not catastrophic. But in some cases, the downside of strategic risk can be catastrophic. If we look at Exxon Valdez, if we look at Deepwater Horizon, those things have huge potential downsides in terms of not just money and resources but in terms of human life. So how we balance these risk-versus-reward situations depends on what’s at stake. Context is super important when we talk about managing these risks.

Wofford: When we think of risks, we sort of associate them with trying new things. But can you think of any examples in which it is better to stick to what you were doing? I ask because I’m from Rochester, New York, the home of Kodak. And that’s a company that willfully decided to neglect the burgeoning digital market to their peril.

Thomas: Again, I think it depends on the situation. In the case of Kodak, it was a strategic choice that they were the leader in what they do and wanted to focus on that core capacity. I certainly can’t speculate on the decision-making process, but if I had to guess, I would say that they felt that even with this new digital marketplace coming, there was still going to be a need for the old analog film. And there are still photographers and artists that use film even though the market has gone overwhelmingly digital.

Wofford: I know it depends on the situation, but typically, how do companies typically deal with risk, uncertainty and opportunity?

Thomas: I think that you need to take a holistic approach. There’s not necessarily one single correct answer but we can assign likelihoods to things. To go back to the cooking example: if you’re trying a new recipe, what is your level of cooking ability? Can you read a recipe? Do you know how to measure ingredients? If you’ve never cooked anything before, the downside for you is a lot more likely than if you’re an experienced cook. You need to really think about what those potential upsides and downsides are and how likely they are to happen.

The classic expression is “nothing risked, nothing gained.” If Apple had not taken the risk to move forward on their R&D project, they would have lost a lot. The iPhone really helped make Apple one of the world’s leading consumer brands.

There are a few common approaches that are used to address risk. The first one is to be like an ostrich and put your head in the sand and ignore it. Not a good idea. Ignoring everything around you is a catastrophe waiting to happen.

A second approach is to say, “Okay, so we know last quarter this happened. And the quarter before that, this happened. And two years ago this happened, so we’re going to predict what we’re going to do in the future based on historical information.” That often works, especially if you’re in a stable environment and producing a product or service that hasn’t changed in the last 10 to 15 years. In that situation, looking at history is going to help you predict the future.

But if you’re in the tech world, you certainly don’t want to look at what’s happened in the last five years to try to predict what’s going to happen in the next five. Things change too rapidly.
To tie it back to your Kodak example, they had been a leader for a number of years so they might have thought that what worked in the past was going to continue to work in the future.
It didn’t. Projecting the past into the future is like driving on the highway looking only in your rear view mirror. You’ve got some information — you know where you’ve been — but you’re still missing what’s in front of you.

Wofford: Let’s talk about the distinction between risk and uncertainty.

Thomas: The way I think about risk is that it is something that can be known. If I cross the street, there are certain inherent risks. With uncertainty, on the other hand, we have no way to quantify it. It’s the realm of unknown unknowns.

If it’s risk, we can manage it. We can manage hazard risk through insurance policies. We can manage financial risk through standard operating procedures and audit controls and generally accepted accounting principles and so on. But if it is truly uncertain, there’s really not much you can do. Uncertainty in my mind is a lot scarier than risk. If it’s true uncertainty, you’re not able to even articulate the array of possible outcomes.

Wofford: So we’ve made that distinction and we’ve talked about a couple of risk case studies. Do you have any advice for putting risk assessment into practice?

Thomas: I think that when coping with risk, particularly strategic risk, you really need to understand what it is that you do and what your customers expect. What is it about you that distinguishes you from your competitors? What is your strategy? You need to have a firm grip on these things in order to think about what is likely to happen in the future.

Do we want to go from making widgets to digital switches? Are we going to transition into that new area to cope with the new business environment or are we going to stay on track and continue to do what we’ve always done? Again, depending on the scenario and the environment that you operate in, both could be viable alternatives. But when you choose one path, you should be able to articulate a set of reasons as to why you made that decision. You need to understand the opportunities as well as the risks and make a calculated decision.

Wofford: Stephanie, thanks for that practical advice and thank you so much for joining me today.

Thomas: Thanks, Chris.

Want to hear more? This interview is based on Stephanie Thomas’ live eCornell WebSeries event,How to manage Risk, Uncertainty and Opportunity. Subscribe now gain access to a recording of this event and other Entrepreneurship topics.

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Can Pay Transparency Help Close the Gender Wage Gap?

Women may have more professional opportunities today than ever before in history but the unfortunate reality is that they still earn less than men on the whole, thanks to a persistent gender wage gap. The most commonly cited statistic in the gender pay gap discussion is that women earn 77 cents for every $1 earned by their male counterparts. But according to Stephanie Thomas, a lecturer at Cornell University’s ILR School who has spent 15 years researching the gender gap, there is more to that figure than meets the eye.

As part of eCornell’s webinar series, Thomas joined Chris Wofford to discuss the complexities of the gender wage gap and how employers can use transparent pay practices to help close it. Below is an abridged version of their conversation.

Wofford: I think everyone is probably familiar with the common figure that we all kick around, that women earn 77 cents to the dollar that men earn. Is there more to the story?

Thomas: That figure is part of the story, but it’s not the whole story. When we look at various explanatory factors and make appropriate comparisons, we see that the 23 cent gap really narrows. Yes, it’s a real number but it’s not necessarily reflective of the true gender pay gap when we measure things correctly.

Part of the reason that we have this 23 cent differential is due to the way we’re measuring the gap. If we look at all men versus all women, we see a large gap but that’s not necessarily the right comparison to make. We know that there are a lot of non-discriminatory factors that influence pay, like occupational choice, industry, labor market experience, and education — all those kinds of things. So when we lump everybody together and look at all men versus all women, and the only thing we account for is gender, we see that 23 cent gap. When we control for things like occupation, industry, labor market experience and union status, we see that the 23 cent gap really closes. When these factors are included, we get that gap down to about nine cents per dollar.

Wofford: If everything else has been accounted for, does that suggest that the nine cent difference is down to pure discrimination?

Thomas: It’s difficult to make an inference of discrimination. We first need to make sure that we’re comparing people properly, so we want to look at people who are in the same occupation, in the same industry, with the same labor market experience. Women tend to have less labor market experience than men, simply because of biology. Women are the ones that give birth and most women don’t want to give birth under their desk and go right back to work. So we take time off and that makes a difference in the labor force experience of men and women of the same age. When we account for all of those things, there’s about a nine cent gap left.

But there are some other factors that are a little more difficult to measure, that could explain that remaining nine cents. For example, women will, generally speaking, take a lower salary and a richer benefits package while men are more likely to take a higher salary and less benefits. Men also tend to prefer more risky compensation elements like stock options and bonuses. Women, on the other hand, tend to be a little more risk averse than their male counterparts.

We can also look at the role of caregiving responsibilities, whether that’s for children, disabled family members or elderly parents. In our society today, women still bear the brunt of those caregiving responsibilities. Whether that is right or wrong is a different conversation, but it’s still seen as a female thing to do. So if women are taking time off from work, or scaling back their hours, that can influence what we see in terms of the overall earnings numbers.

Wofford: Doesn’t negotiation also play an important role in this?

Thomas: Absolutely. Negotiation and compensation expectations are really important. There have been a variety of studies done on this. One of the most interesting asked people who had just finished their MBA what they thought a reasonable starting salary would be. Depending on how you look at the data, compensation expectations for women were anywhere from 25 to 50 percent lower than their male counterparts.

Wofford: Wow, that’s substantial.

Thomas: It is, and if women have lower expectations about what a reasonable pay package would look like, that can contribute to the disparity. We also know that women are only one-third as likely as men to engage in compensation negotiations. When they do negotiate, they’re just as successful but they’re only one-third as likely to start that conversation.

The last thing I want to bring up here that helps explain that nine cent differential is the difference in work hours. We know that men tend to work more hours per week than women. A lot of times those extra hours are paid as time-and-a-half overtime earnings, so if men are working more overtime, that alone can be enough to explain the difference in the amount on the paycheck. Even though you and I might be paid the same hourly rate, if you’re getting time and a half for overtime and I’m not, you’re going to have higher earnings than me.

Now, even if we account for caregiving, hours, the cash benefits tradeoff, and all those other things, there still may be some gap left over. I think it’s important to note that just because we can explain the gap in the aggregate doesn’t mean that there aren’t real cases of gender discrimination happening. We could have a zero differential in the aggregate but that doesn’t mean that everyone’s being paid fairly. If there are cases of gender discrimination, and unfortunately there are, it’s really more than just the impact on the woman herself. It’s really a family issue. It’s a societal issue. More than 7.3 million families are headed by single mothers. If they’re not earning as much as they should be, then that’s going to affect where they can live, access to education, and opportunities for their kids. It’s really much more than just paying the woman fairly. If women have less income, that’s going to affect the economy as a whole because they’re not going to be spending as much, which in turn has a dampening effect on GDP growth and macroeconomic issues.

Wofford: So actually, everyone would benefit if the gender gap was brought down to zero, not just women.

Thomas: Yes. People are starting to realize that the gender pay gap is more than just about the woman. It’s a family issue, a societal issue and a big macroeconomic issue.

Wofford: So how do we work on closing the gap?

Thomas: One thing that can help is pay transparency, which is something we are hearing a lot about these days. Why do we care so much about pay transparency right now? From my perspective, I think that there are two different sets of forces playing a role here. On the one hand, it’s sort of a logical extension of what we’re seeing in society as a whole. With the rise of social media, people are sharing more things about themselves. I’m a little bit older and I was raised with the idea that nice people don’t talk about politics, religion or money. But my 16-year-old niece just tells everybody everything about herself on social media. It’s very open, it’s not a big deal. I think that millennials don’t have the same kind of privacy concerns that Gen-Xers like me do.

I think this push toward pay transparency is also an extension of business trends and the rise of big data. Today, we’re collecting more information and we have better technology to process that information and generate insights. Organizations are shifting somewhat to more person-based jobs, rather than job title-based jobs. It used to be that job descriptions would include “other duties as assigned.” A lot of times now, the “other duties as assigned” is the job. It’s a combination of business and societal trends that are sort of causing this issue of transparency to rise to the surface.

Wofford: How do you go about showing pay transparency? I’ve never been in an environment where that was the case.

Thomas: Pay transparency means different things to different people. What I recommend for businesses is what I refer to as pay process transparency. What that means is really setting out a very well-defined, organized, clear set of expectations. If this is your job and this is how many years of experience you have, and these are your skills, abilities, talents, and qualifications, this is what the pay range is going to be.

Cornell has what I would call pay process transparency. Depending on the job family that you’re in, there are different grades – B, C, D and E – and a starting salary range. If you are in this particular job family at this particular grade, then your salary is going to be between here and here. In order to get to the next step or to earn the next pay increase, the criteria are laid out very clearly. Each employee knows what they have to do to get that next merit increase or bonus. Being transparent about your pay process is really providing employees with enough information to really understand how those pay decisions are made.

Wofford: This also tells an employee how much negotiation wiggle room they have, right?

Thomas: Yes, there’s a minimum and maximum. Sometimes you’ll see it presented in terms of a midpoint. Some organizations, particularly in the high tech sector, have decided to opt for non-negotiation policies. They know that men and women have different tendencies to engage in those conversations, so one of the ways that they’re addressing the gender pay gap is to say, “This is what we’re offering you. Take it or leave it, we’re not going to discuss it.”

Another element of pay transparency is what I refer to as pay disclosure. Whole Foods is a great example of this. At Whole
Foods, anybody can go in and say, “I want to see how much so-and-so is earning” or “I want to see what the CEO’s compensation package is.” Whole Foods has taken somewhat of a radical approach to this in that they’re making their payroll books open. Any employee can go in and look at any other employee’s pay. For the culture that Whole Foods has, this is a good strategy for them but for other organizations this may not be optimal. I think you have to figure out what’s appropriate for your organization and what fits with your culture.

The third example that I want to talk about is something that happened at Google, and this is what I call radical transparency. This was not something that Google put into place but rather something that Google employees did on their own. It started with a former Google employee who was concerned about some pay equity issues at Google. She created a Google spreadsheet and circulated it among some of her co-workers and said, “Put in your name and your salary and we’re going to see what the pay practices are.” It was voluntary disclosure on the part of the employees.

Wofford: What happened? How did the higher-ups respond?

Thomas: Well, they weren’t happy, but technically, there was nothing that could be done. It’s not illegal for employees to talk amongst themselves about their pay. Whether you’re unionized or not, the National Labor Relations Act gives employees the right to talk about compensation.

There was a lot of buy-in from the fellow Google employees and the spreadsheet revealed what the workers thought were some discrepancies that needed to be looked at. Now, just looking at a sheet of people’s names and pay rates is not going to tell you everything that you need to know. Just because you and I have the same job title doesn’t mean that we should have the exact same pay rate.

Wofford: What happened at Google as a result?

Thomas: Well, the employee departed the organization and the whole thing blew up in the news. It was ultimately resolved internally so I don’t know the details but I know Google did take a look at this issue. I hope that if there were real disparities that needed to be corrected, they were.

Wofford: Great, so we’ve seen several examples of pay transparency, radical and otherwise. What’s next? Are more companies thinking of transitioning to a transparent process?

Thomas: A lot of organizations are thinking about it. Before I came to Cornell, I spent 15 years in private consulting and one of the things that I specialized in was the statistical analysis of pay disparities. So we would be retained to go in and look at an organization’s data, understand how they paid people, and actually do a statistical analysis to identify those disparities. If we found disparities, we would report that information back to the organization and help them figure out what steps they needed to put into place, not only to correct the situation, but to prevent it from happening again.

Wofford: Would you advocate generally for this kind of transparency?

Thomas: I completely support pay process transparency. I think that it’s the right thing to do. I think it’s information that your employees are entitled to and should be provided. For some organizations, it’s probably not time yet, but it might be in the future. You have to understand your workforce, their needs and their wants. There really isn’t a one-size-fits-all solution to this.

I think the bottom line is your employees are going to talk about pay. They’re going to have those conversations, whether you want them to or not. You can’t legally prevent them from doing it but what you can do is help manage them. By being open and providing this information up front, you can inform and direct those conversations. If you’re providing accurate information and people have an understanding of how those decisions are made, it can shut down the rumor mill.

Wofford: Stephanie, thank you for the conversation on these very important issues.

Thomas: Thank you, Chris.

Want to hear more? This interview is based on Stephanie Thomas’ live eCornell WebSeries event, The Gender Wage Gap: Causes, Consequences and the Way Forward. Subscribe now gain access to a recording of this event and other Human Resources topics.

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Are Most Managers Bad Listeners?

The Art of Listening for Impactful Leadership

When you think of the traits that define a good leader, does your list include listening? If it doesn’t, it should. If you learn to develop and improve your ability to listen, you’ll likely be better prepared to lead and manage individuals, teams and organizations.

In this edition of the Women in Leadership WebSeries, Professor Judi Brownell from Cornell University’s Hotel School joined eCornell’s Chris Wofford to discuss how listening can improve your effectiveness as a manager and to share practical tools for improving your leadership ability through listening.

What follows is an abridged version of their conversation.

Wofford: Is it true that most managers are bad listeners?

Brownell: Well, most managers certainly believe they listen more effectively than they do. I think that speaks to our lack of awareness of listening.

Listening is like any other communication skill in that you really can keep improving. Regardless of how well you actually do listen, there is always more you can do.

In a professional context, there is a really interesting curve where listening is critical as you come into an organization but then speaking is often more important in the middle of a career because you’re influencing through your ideas. And then as you go into senior management, listening once again becomes really important.

For new employees, listening is particularly important because it’s through listening that you begin to understand how things are done in an organization and whose voices are really heard. But it’s also important in senior positions. One of the problems is that sometimes senior executives think they have all the answers but they often don’t. They really need to rely on other people’s perspectives.

Wofford: Listening is easily taken for granted, right?

Brownell: Absolutely. A lot of us don’t think actively about how we listen.

Listening is what we call a receiver-defined activity, which means that things mean what the listener thinks they mean. We’ve seen that in many cases in the political arena recently. No matter where you stand, things can mean different things to different people. That’s because as a listener, you have a lot of personal characteristics that contribute to how you interpret things.

Wofford: Speaking of personal characteristics, let’s check in with the audience. As Judi mentioned, most people think they’re better listeners than they actually turn out to be based on feedback. So I’m going to ask the audience: How would you rate yourself as a listener? Do you perceive yourself as an excellent listener, a pretty good listener, an okay listener or a pretty poor listener?

Looks like almost 75 percent say they are either excellent or pretty good, although we do have two admitting to being poor listeners. This probably jibes perfectly with your data, right?

Brownell: Yes, generally people think that they’re pretty good listeners.

Wofford: I’d now like to ask the audience to think of someone you work with who is a great listener. What is it that they do? Give us the one particular characteristic or a bit of feedback they display that demonstrates to you that this person really listens.

Brownell: The responses coming in are what I would expect. People list “eye contact,” “nodding,” “asking follow-up questions,” “focusing,” and “reciprocating.” These are all great and I think asking follow-up questions is probably one of my favorite things about having a conversation with somebody. That’s an indicator that they’re listening. I’m not satisfied when I’m talking to someone and they’ve got nothing but answers.

Wofford: Okay Judi, so what else can people do to develop their listening skills?

Brownell: I want to talk about the LAW of listening, which is Listening = Ability + Willingness. Although listening is a skill that you can develop, nothing really matters if you don’t have a willingness to listen or if you don’t have an interest in focusing on your listening and making it a priority.

I think it’s important that everybody see themselves as someone who can improve their listening, no matter how great or dismal you think you are at listening.

We certainly learn by listening and we facilitate by listening. As a leader you’re not the one who has all the ideas or all the opinions, you’re the one who brings out the best in the team. So a good listener makes sure that all of the people in the group feel like they’re heard.

Listening also builds trust. If you are someone who listens and encourages others to listen, trust increases. When trust increases, so does job satisfaction.

Wofford: And the flip side is that poor listening then leads to lower job satisfaction, right?

Brownell: Yes. Let’s talk about what it means for you as a leader when you are not listening.

I was asked to do a listening training session at a large healthcare organization where the employees were unhappy with the way their managers listened. When I went in to try to find out a little more about the problem I discovered that different employees meant different things by not listening. In some cases they would mean that a manager would say, “Sure, don’t worry, I’ll take care of it” but then didn’t follow through. To them, it was like not listening. In other cases a manager would have an open door policy but when someone would come in to speak to him, he’d be multitasking and doing a lot of other things. So the employees were frustrated with their managers but for quite different reasons.

Over the course of five to ten years of doing a lot of needs analysis and a lot of interviewing and a lot of follow up, we came up with a model that has six interrelated components that represent the different types of skills that contribute to what people think of as effective listening.

I’ll go through each of those from the standpoint of a leader. The first of these is focusing attention. Are you paying attention to the right things? Next is understanding, which is getting more complicated as we have a more diverse workforce and customer base. Then we have memory. If you don’t remember, it affects the way that your listening is perceived. Fourth, interpreting. This has to do with the nonverbal aspects of listening, while the fifth component, evaluating, has to do with making a judgment about something. Finally, the last component we’ll discuss is responding.

So you can see with all of these components that listening is a process. It involves a multitude of different skills and you may be really good in one skill area but not so good in another area.

Wofford: How do you improve in the areas that need it?

Brownell: We have what is called listening strategy, which is a way to focus your attention. There are two components of listening strategy. One is the context. Usually in leadership situations, you’re in a team context. But even if you’re not the leader of the team, you can still have a lot of real influence as a team member by changing your listening behavior. Many times what a team needs is someone who’s really listening and paying attention.

Wofford: What are some of the different contexts that listening can play out in?

Brownell: It could be whether or not you’re listening one on one if you’re in the context of two people. Or listening within the context of the team or within the context of a presentation, where you’re just sitting there listening to somebody speak. Or the context of a mediated communication, which is the type of ‘listening’ that takes place while communicating through texting, email or the telephone. I expanded listening to include texting and all of the ways in which people today, particularly younger people, are communicating because there’s always a listening component to those interactions.

Part of context is how many people are involved. A team situation is the most dynamic because you’ve got all these players. The other element of context is the purpose. You may not always think about it, but whenever you go to talk with someone, there’s almost always some purpose. It can be to learn, to make a decision, to solve a problem or just to get to know someone better. So looking at the context, both in terms of the number of people and the purpose, helps you focus your attention on the things that are important.

We all know about selective attention, which means that you tend to seek out things that confirm your beliefs. But being open minded is so important in listening. You need to at least attempt to understand what the other person is saying, even if you don’t agree with it. It’s fine not to agree, but you need to listen until you understand.

Wofford: When your disagree with someone, do your own beliefs interfere with your ability to really listen?

Brownell: Well, there are a lot of personal factors that influence what you hear. As I mentioned earlier, individual differences and diversity are major factors in our ability to really understand all messages. When I’m listening, I try not to make assumptions. I try to really ask probing questions, questions that show that I’m interested.

Everyone is so different now, with different understandings of things and different amounts of information about things, so you should never just assume what someone may or may not know. Along with that, you should never take for granted that someone is listening to you. You need to look for the visual cues and ask questions. Sometimes when you are listening to someone, asking them if they feel that they’ve been heard is really powerful. To ask, “Do you feel I’ve understood you, and if you don’t, then please tell me more so that I do understand” is pretty effective.

Wofford: That’s a great tip. Do you have any others to help people focus and understand?

Brownell: Well, as you know, a lot of people have trouble with remembering names when they are introduced to someone. It’s typically because they’re not really focusing on listening to the name — instead, they’re focusing on what they plan to say next. So some of that difficulty in remembering is just due to where you’re focusing your attention.

Wofford: I think using people’s names in conversation is a great way to indicate that you’re paying attention.

Brownell: Absolutely, that’s a great tool. When meeting someone, you need to give a firm handshake, have really direct eye contact and then repeat their name: “It’s good to meet you, So-and-So.” That definitely helps you remember their name, and remembering is part of the perception of listening. If you don’t remember, you are perceived as having not listened.

Also, and I think most people are already aware of this, it is very important to be sensitive to the non-verbal elements that either contradict or support what someone says verbally. The non-verbal carries something like 70 percent of the message so you need to try to understand not just the content in the language but also the emotional aspects that are communicated through body language, expressions and vocal characteristics.

Wofford: We had an observation come in from the audience that I find really interesting. This person writes: “When you are known as active listener, especially when you listen with emotional intelligence and show that you actually relate to the speaker, they always try to burden you with personal issues.” Judi, what do you think of that?

Brownell: I think it’s true that sometimes when you’re perceived as someone who will listen, people may take advantage of you. If you are a good listener, you may attract people who are needy and that is a really difficult balance. You need to find a way to get yourself out of those situations. As soon as you realize what is going on, you need to continue to have empathy and project empathy but then you need to say, “I really wish I had more time for this, but I don’t.” If it’s somebody you really care about then you can set up another, more appropriate time to discuss it.

Being a good listener doesn’t mean that you can’t be assertive. Assertive skills can go in combination with listening skills. You need to protect your time because your time is really valuable.

Wofford: I think most of us can relate to being in a situation where someone really wants you to listen to them but for whatever reason you just can’t do it right then. It can be very awkward, so I think that was a great comment from the audience.

There’s another question that I’d like you to weigh in on because I think it’s another situation a lot of people can relate to. Katherine asks: “What if a senior executive you work with does not exhibit healthy listening behaviors? That is, he or she interrupts, doesn’t give feedback, doesn’t probe. How do you handle that?” I suppose there’s no short answer to that one, but do you want to respond?

Brownell: Can you help a leader become a better listener? Well, changing someone else’s behavior is really hard. One of the things I’ve always found is helpful in trying to get someone to really listen to you is to connect with them. Treat them as a real person and not just the person in their role. Learn about their interests. I find that helps them get into listening mode a little bit. Timing is also important. If you approach some people at a bad time, they’re not going to listen regardless. So you can try to strategically select what might be a good time.

Also, maybe the reason they’re not listening is that they have something they want to say. People don’t listen if they also want to speak. If you go to your supervisor and there were things your supervisor wanted to tell you, he or she won’t listen to you until they’ve had the opportunity to tell you what they had in mind for the meeting. After they get something off their chest, they’re much better positioned to listen.

Wofford: Judi, I want to thank you for joining us today.

Brownell: Thank you, Chris. We really had some great feedback from an active audience so I think we’ve got a pretty healthy bunch of listeners out there.

 

Want to hear more? This interview is based on Judi Brownell’s live eCornell WebSeries event, The Art of Listening for Impactful Leadership. Subscribe now to gain access to a recording of this event and other Women in Leadership topics. 

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Do You Know What Your Customers Really Want?

Learn from Cornell Hotel Experts how to determine what customers really want and how to deliver it to them in ways that build trust and exceeds expectations.

Here’s What Most Companies Get Wrong About Service

As we enter an age of experiential service, customers not only want more out of their interactions with companies, they also enter into those interactions armed with more knowledge – and thus greater expectations – than ever before. But in order for service professionals to exceed their customers’ expectations, they must first know what those expectations are.

As part of the Hospitality webcast series hosted by eCornell, Elizabeth Martyn of Cornell Hotel School delivered a presentation on how to determine what customers really want and how to deliver it to them in a way that builds trust and exceeds expectations.

Below is an abridged version of her conversation with eCornell’s Chris Wofford.

Wofford: What do organizations most often miss when it comes to exceeding customer expectations?

Martyn: In order to exceed expectations, you have to understand what your guests’ expectations are to begin with. That might sound kind of obvious but I think a lot of times we get so focused on going above and beyond that we sort of miss some of the key steps in making sure that we know what it is that customers are expecting when they come to us for service in the first place.

Meeting all of those expectations has to come before we take the next step and talk about exceeding them. You’ve got to hit the basics first and it’s easy to look right past that.

Wofford: Does it start with trust?

Martyn: That’s one of the things that I get really passionate about because a lot of times we end up spending our time focused on the standards we need to hit when there really needs to be a focus on what’s going to work for you to build a trusting relationship. How do we tailor our service to our clients in order to build a trusting relationship and create loyalty?

Wofford: I have to imagine it’s about the whole brand experience these days.

Martyn: That’s right. We have really left the age of customer service and are moving into the age of experiential service. We talk a lot about millennials now, and millennials want experiences. But it’s actually something that’s true across all demographics of consumers. They’re looking for a more authentic experience, a more authentic connection.

So we need to think about the holistic service experience that we’re providing. The service experience is the entire experience that your brand or organization provides to your customer. We need to think about it from a broad perspective.

Wofford: And there are many more touch points available now due to technology.

Martyn: Yes — that’s part of what this “age of experiential service” means. You have all of these different interactions going on. The guest goes to your website, they check out your social media, they look at your reviews on Yelp, TripAdvisor and Google. There’s e-mail communication, maybe some company support text communication. They’re calling on the phone. They may be engaging with the automated bot-oriented service providers that we’re seeing more and more, where customers can engage with a scripted bot online. And they’re also still interacting with your personnel face to face.

Customers have this whole digital perception of what your company is and they create expectations before they ever pick up a phone and call you or walk into your place of business. So we have a lot more to think about when we think about the service experience because it’s so broad.

Wofford: And this is changing quickly, right?

Martyn: It is. By 2020, the customer experience is going to be more important than both price or actual product differences in terms of differentiating brands. A recent study found that 56 percent of consumers have higher expectations for service than they did just one year ago, and that’s part of this flood of information that they have about who you are and what services they can expect. We can also see that 68 percent of consumers are switching brands because their expectations aren’t being met. They have other options and they’re much more informed so they can choose to take their business elsewhere.

The study also shows that 74 percent of consumers have actually spent more money because of the quality of service that they received. Think about that. With three quarters of the people you’re interacting with, you have the ability to drive their engagement and increase what they spend on your company if you provide that trusted service and exceed the expectations level.

Wofford: And that 68 percent figure shows that you can steal business away from your competitors if they’re not doing it right.

Martyn: Exactly. The stakes are really high and there’s a lot of pressure on the face to face, phone-based and email-based interactions that service providers actually have control over.

One of the things that we need to do as we look to elevate the services that we’re providing is to take a close look at how we’re currently doing things today. Often times, companies find themselves falling back on a standards-based approach that tends to focus on the customer’s stated need. But this is difficult because a lot of times our customers don’t actually necessarily know what they want. Or they know what they want, but they don’t know the right question to ask to get the answer that they want.

Let me give you an example. Let’s say you’re traveling somewhere and you go into a hotel and you say, “Hey, where’s the best place to eat around here?”

The person at the front desk says, “Ah! The best restaurant in the area is Cafe ABCD. You have to go there, it’s terrific.” So, off you go. You walk three blocks to the cafe and, surprise, it’s closed. That’s because it’s lunchtime and they only serve dinner.

So that front desk worker actually did answer the question correctly. Cafe ABCD truly is the best restaurant in the area. But they didn’t take that extra step to ask about your real need. To ask you if you were looking to eat now or later, or if you wanted the best place to entertain a client or if you were just looking for something quick. They didn’t ask how much money you wanted to spend. There are all of these components involved in really delivering the right service at the right time to the right person.

This is the kind of scenario that tends to unfold in a service environment with a standards-based approach. Now, if we look at an excellence approach to delivering service, you’re really focusing on teaching techniques and strategies that allow your team members to think critically, to be fast on their feet and be able to adapt on the fly during that service exchange. In this approach, you’re tailoring your responses and your delivery to each individual based on all those clues that you’re picking up.

Doing this effectively helps to develop amazing relationships because when the customers feels like the person they’re talking to is really taking the time to figure out what they need, they think, “Wow, these people are great. They get me. I love coming here.” And that’s where we move into totally exceeded expectations.

Wofford: And those are the customers that are likely to come back to you time after time.

Martyn: Absolutely. You know, when we start to get into the difference of standards for excellence, it can be hard to explain, even to our fellow colleagues. What are we really talking about here? If you’re thinking about standards as being what your customers expect, how do you then deliver on those expectations? How do you meet or exceed them?

The next step in moving to the service excellence approach is to really recognize the client. Who is our customer, and how can we adjust our service delivery to make them feel important, relevant, heard, respected, or whatever it is that’s critical to your audience? What makes them want to come back and give you their business? The service excellence approach is adjusting your service to meet these standards and expectations.

A lot of companies will dictate a service delivery. You have to smile, you have to make eye contact and have a friendly and engaging attitude. The customer’s always right, and so on. These are not bad ideas but they’re limited because they’re not allowing the individual service provider to really do critical thinking and be able to take ownership of their service and deliver the best service as opposed to just being friendly and engaging.

Wofford: When you talk about the concept of critical thinking, it sounds like something that’s maybe difficult to teach and certainly something that would make it more difficult to get everyone on the same page. What does critical thinking look like in practice?

Martyn: Critical thinking would be taking an active role as a service provider in the moment and making decisions based on the information that you’re processing. That’s the real difference. Sometimes, when we’re in a more standards-based approach, we just follow the script. When we see something that deviates, we might notice it but not act on it.

In an excellence approach, if you see it, you want to do something about it. The important thing is to use that information and adjust or modify your approach because of the new information that’s coming in.

Wofford: What other approaches can help your service delivery, particularly for those who are out there on the front lines interacting with clients, guests or customers every day?

Martyn: Another great technique is to listen, observe and ask. That’s a terrific way to manage the actual exchange portion with each guest. Be open to what they’re saying, truly hear and confirm that you received the message correctly. Watch for changes in body language or facial expression and then decide, “Okay, was that a positive change or a negative change?” Then use that to reconfirm and ask thorough questions. “Does this work for you? Is there anything else I can do? We have a choice of A or B, which would you prefer?”

Make sure that you’re really open to information. Then seek out validation. Am I doing the right service for this guest?

The final piece is to be sensitive to context and use that to inform your delivery. The right service to the right guest is really dependent on the clues that you’re receiving. I think a lot of us are comfortable with the idea of using guest clues like facial expression and body language, but there are a lot of what we call environmental clues too. It can be whether they are wearing a coat or not. Do they have a wet umbrella? What kind of bags do they have with them? What else can you look at and use in order to customize that service delivery?

This is probably something that we’re all already doing automatically from time to time, but it’s about using it with every guest very intentionally to step up your service level beyond just those most obvious instances.

Wofford: It’s more than just seeing someone come in soaking wet and saying something painfully obvious like, “Oh my, you got caught in the rain.”

Martyn: Right, it’s about picking up on clues that aren’t so blatant and acting on them.

Good customer service isn’t rocket science, and I don’t want to tell anyone that it is. But that’s the thing. Some people are just innately good at it but they can’t necessarily explain why. You almost feel like they either have good customer service in their DNA or they don’t, but I think there are a lot of people who don’t necessarily realize that they’re not doing the right thing even though they’re really well intentioned.

As I said at the outset, you cannot possibly exceed expectations if you’re unclear on what the expectations are. It’s important for leaders to distill service down to a framework that puts some structure around the things that really great service providers are already doing. Creating critical thinking standards for the people on the front lines can be really successful. It helps them deliver good service to your clients and also gives them the confidence in knowing how to perform their job.

Wofford: It sort of eliminates the gray area.

Martyn: That’s right. My challenge for everyone here is to think about what they are going to do today and tomorrow. What are the next steps? This is not big picture stuff that should take six months or a year to put in place.

There are absolutely things that everyone can go out and do today and decide to put a stake in the ground and say, “I’m going to make a change. I’m going to try something different tomorrow or on my next phone call and see what sort of results I get from being a little bit more engaged, and thinking about both the before and the after, the prep and the follow-on of that service exchange.”

Wofford: Thank you, Elizabeth, for joining me in the studio. You’ve really given us some great advice here today.

Martyn: Thank you, Chris.

Elizabeth Martyn is the author of Cornell University’s Service Excellence On-Demand Training, an eight-lesson online program focused on actionable frameworks for delivering what customers need, when they need it.

 

Want to hear more? This interview is based on Elizabeth Martyn’s live eCornell WebSeries event, Building Trust and Exceeding Expectations: Service Excellence at Cornell. Subscribe now to gain access to a recording of this event and other Hospitality topics. 

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Have a Great Startup Idea? Beware These Seven Pitfalls.

As a follow-up to his recent presentation on what makes a great startup idea, Cornell entrepreneurship expert Bradley Treat has returned to eCornell to discuss some of the common pitfalls that often keep great business ideas from succeeding. Below is an abridged version of his discussion.

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People often go down the entrepreneurial path only to discover that their idea actually won’t work before they’ve made it very far. What I want to discuss today is how to spot potential pitfalls in your business idea and address them early on.

Most of this presentation comes from a class I teach at the Johnson School called “The Business Idea Factory”, which helps students work through a business plan or business pitch.

YOU DON’T ALWAYS HAVE TO GO BIG

Most times, when we are looking for great business ideas, we look for really big markets. We’re thinking of being as big as Walmart, which basically sells everything to everybody.

But there’s always a counterpoint. The counterpoint to Walmart is a company called Fox 40, which makes whistles. The founder of Fox 40 was a hockey referee. As he was refereeing a hockey game, he went to blow his whistle – it was one of those metal ones with a little bounce-around cork thingy – and it didn’t blow. Maybe it was cold, covered with sweat or whatever, but it didn’t work. Some of the players saw him raise his hand to indicate a penalty but some did not and, as a result, a player got hurt.

He said, “Okay, I need a whistle that always works in all situations.” And so he developed a whistle that is loud and works whether it’s wet, cold, high-altitude, you name it.

When he said, “I’m going to make a whistle that always works,” was that a huge market? Of course not. But is it a great company? Yes. The whistles have become very popular with the military, the police and lifeguards.

My point here is that you can go big, or you can play small, and still find success.

HIGH MARGIN ISN’T THE ONLY MODEL

Another thing we tend to think about when starting a new business is high margins. We like businesses with high margins, but there is again a counterpoint to be made.

For example, Harley Davidson has extremely high margins on their motorcycles. And people who buy Harleys are not buying them just to get from point A to point B. It’s a state of mind, it’s who you are. You can go to a tattoo shop and choose multiple options for Harley Davidson tattoos. Harley is a brand for life and they tend to keep people. The motorcycle aficionados out there would probably say that if they made a list of bikes with the highest-performing, cutting-edge technology, Harley Davidson might not be at the top. But it’s that brand identity that gives the company such an extremely high margin.

Now look at Costco. I guarantee you will not find a Costco tattoo on anybody. But they do extremely high volume with extremely low margins. They just move a lot of product. Their number one product is toilet paper. So they’re a great counterpoint example of how a low margin/high volume model can work.

EXECUTION TRUMPS ALL

Let’s take Planet Hollywood. This company was started by A-list celebrities – Arnold Schwarzenegger, Bruce Willis, Demi Moore – but it went bankrupt twice. With that kind of marquee value, you might ask, how that is even possible? Or you could look at Dive!, a restaurant that was opened by Steven Spielberg, arguably the greatest movie director of our generation. But the thing bombed. He lost like $20 million on it.

What these examples have in common is that they prove that the success or failure of restaurants and bars is not the concept. It’s the execution.

Great restaurateurs make it look easy. They’re like professional basketball players draining three pointers. But if you want to be successful, particularly in the hospitality or service industry, it’s not about having a great idea. It’s about having the right experience. The truth of the matter is that there are very thin margins in the industry.

I mean, one of the most successful restaurants in the world is McDonalds. Their concept is not that special. It’s hamburgers and french fries. But just think about the volume of food they move. It’s almost unbelievable they can sell their food for as cheap as they do on the margin, but they’re very successful operators.

DON’T MISS THE REST OF THE ECOSYSTEM

Another thing to consider is the ecosystem. Most college students would agree that their textbooks are really expensive. But the textbook ecosystem isn’t just buyer and seller. There is the teacher, there is the institution, the publisher. It’s a very complex ecosystem.

So is the taxi business. It’s much more than just the driver and the rider. There’s a whole ecosystem of dispatchers and cab owners. There are also all the government regulations, and different rules for different places, such as airports.

At first glance, it might look like just two players, but in fact there are often many more. Understanding that ecosystem is very important. And it’s not only about understanding the rules and the players, but also the individual people involved that could impact your business.

NOT ALL ADVICE IS CREATED EQUAL

When you’re starting a business, you should be out talking to a lot of people. What you’ll quickly find is that you’re going to get a lot of conflicting advice. Some people will tell you that your best idea is A, others will say it’s B. What are you going to do about it? Whose advice should you care about?

Try the mosaic method. A mosaic, when you look at it up close, is just a bunch of broken ceramics. But when you step back, you start to see a picture. So you need to have a lot of conversations in order to see that big picture emerge.

The other thing is to make sure you understand the context in which people are giving you advice. A mistake many people make is to put too much stock in the advice they get from investors at the detriment of advice from potential customers. When an angel investor comes in and says, “Here’s what you should do with your business,” people tend to go, “Oh, well, they can write a big check so I should listen to them.”

I would actually discourage you from doing that unless you’re selling to venture capitalists. You should heavily weigh the advice of the people who are most relevant to your business, and if you’re already up and running, those who are actually using it.

ONLINE AD REVENUE – IT’S A TOUGH GAME

When people tell me their plans to do this and that in their app and I ask them how they are going to make money, they almost always say “ads.”

Well, the challenge with ads is the numbers just aren’t there anymore. The way that a lot of online businesses make money through advertising is described in terms of cost per thousand, cost per click, cost per action and so on.

The problem is, these prices have gone into freefall. The cost of ads has dropped precipitously. To make $3, you have to show a video a thousand times. To make $3 million, you’ve got to have a video that is seen 100 million times. Just do the math. You need just insane volume to make money off this.

When somebody tells you their big plans for an app and they say they are going to make money through ads, it means they haven’t thought about the business very well.

YOUR MOM ISN’T YOUR BEST CUSTOMER

The last pitfall I want to touch on quickly is confirmation bias. I see this a lot. Basically, when people are convinced that they have a great idea, they pay attention to all the data that confirms that their idea is great and ignore all of the data that says it’s a bad idea.

I guarantee if you talk to your mom about your business idea she’ll think it’s the best idea ever.
Instead of only listening to those whose inclination is to support you, you really need to go out there and talk to people who don’t know you. The best ones to talk to are your potential customers.

 

Want to hear more? This article is based on Bradley Treat’s live eCornell WebSeries event, What Makes a Great Startup Business Idea? Subscribe now to gain access to a recording of this event and other Entrepreneurship topics. 

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Don’t Just Beat Your Competitors, Learn From Them

If you’re starting your own business, you need to know your competition. But rather than viewing your competitors solely as enemies, why not think about what you can learn from them? What are they doing right that you can emulate? Where are they underperforming and how can you use that to your advantage?

As part of our Entrepreneurship WebSeries, Stephani Robson, a senior lecturer at Cornell, joined eCornell’s Chris Wofford to talk through the process of analyzing your competitors. What follows is an abridged version of her webinar presentation.

Robson: Let’s start off discussing the idea of competition. A lot of people see competition as a bad thing. They think of it as somebody to be beaten, someone to be defeated. That’s actually a mistake, because your competitors are probably your best source of information about what your business should and should not be.

There’s a great quote that I like from Otto von Bismarck: “Only a fool learns from his own mistakes, a wise man from the mistakes of others.” That should be your major takeaway from today: competitors are a great source of learning. Think of your competition as someone you’re trying to absorb as much as you can from.

With that in mind, let’s talk about how to figure out who your competition is. A lot of people think competition has to be a company doing the exact same thing — but competition can come from many different angles. It really depends on what you’re trying to sell and what other entities out there are trying to do something similar.

Wofford: But how do you know which ones you’ll really be competing with?

Robson: There’s a method for identifying your competitors that we call “the three Ps.” The first one is “product.” What is it that you intend to sell? The second P is “price” — and by that I don’t mean a specific number, but a price range or a segment. And finally, the third P is “proximity”, which is how close that other business is to yours. Perhaps not physically close, because if you’re not doing a bricks and mortar business it’s not all that important, but certainly how close you are in terms of your mindset.

I typically break down competitive analysis into three parts: macro, vicinity and unit. In the first category, macro, you have competitors that may not be competing with you directly but you can still learn something from them. Next, vicinity, is simply whether there are businesses in your area, whether it’s a physical area or a virtual one, that are going after a similar customer base even if they aren’t necessarily competing with you directly. The last part, unit, involves looking very carefully at specific organizations that are direct competitors to you.

Wofford: It would be great to hear you expand on this.

Robson: Sure. As I mentioned, macro is referring to businesses anywhere that are going after a similar customer experience to what you plan to offer. As an example, let’s take a lemonade stand. If I were going to start my own lemonade business, I would want to look at businesses all over the place that were trying to offer the same kind of experience. That is, not just others selling lemonade, but it could be iced tea or ice cream or basically anything else that is a single serve refreshment that you could walk around with.

First I’d look to see what their product is. What are they selling? What’s the range of items they sell? How are those items packaged? How are they presented to the customer? What’s their price structure – do they have a range of prices or do they offer just one item at one price point?

As you know, people don’t purchase a product just because of a price – they’re looking at the whole value proposition. So when you look at a competitor – whether it’s something directly competing with you or something out there in the world that you think you can learn from – ask, “What’s the value they’re bringing to their customer?”

If I am starting a lemonade stand, I’m going to look at Starbucks and ask what value Starbucks brings to its customers. Very quickly, you’ll see that it’s not just about a cup of coffee. Part of the value proposition for Starbucks is that it’s a brand identity that people feel they can connect to. It’s also products that relate to the consumption of coffee that you may not necessarily think of. For example, Starbucks was one of the top sellers of music for a long time. So, what’s that whole package? What’s the value proposition and how did they do it?

Looking to see what competitors are doing in terms of how they execute is really one of the areas where an entrepreneur should spend a lot of time, even before they’ve really figured out their business. How you execute really makes the difference — it’s not so much about the product.

Wofford: Even a great product can’t save poor execution.

Robson: Are you familiar with the term “servicescape”?

Wofford: No, I can’t say that I am. What’s a “servicescape” all about?

Robson: Servicescape is essentially the environment in which the service takes place. It’s not just the room. It’s the lighting, the seats, the packaging, the branding. It’s the music and the smell. All of that is servicescape and a lot of very successful brands really use it effectively. You can learn a lot from competitors’ servicescapes about how to compete effectively and the things that are connecting with your customer base.

Wofford: I had a good servicescape experience with a lemonade stand. There are some kids in our village, maybe 10 years old, who did the fresh-squeezed thing in a little play area in the center of town. They made a boatload of money and I think that squeezing it fresh is what did it. You saw it being made right in front of you. That was their competitive advantage, right?

Robson: Precisely. For a kid to do that at a lemonade stand is just brilliant.

Wofford: What else should we consider when looking at how competitors provide service?

Robson: When you’re looking at a competitor’s servicespace, you also want to consider their position in the marketplace. Are they market leaders? How quickly are they growing?

Wofford: How do you access that information? How do you find another business’s growth plan?

Robson: Well, it comes from doing some detective work and some judicious Googling. For example, let’s take a business in the lodging sector. There is a company called citizenM, which is a small Dutch hotel company that is growing very rapidly. They have 6 hotels now and the plan is to open 9 in the next year, and 12 in the following year. I found that out by going to their website and digging up a press release.

You can usually find a lot online. A Google News search is often helpful. You can also read up on reviews to learn about the buzz surrounding the business. What are consumers saying about it in online reviews?

The things you really want to get at when you’re looking at these other businesses is how they are emotionally engaging the customer. We all know that in order to be successful in business, it’s really not about what you are selling. It’s about how you make a connection with the person who is buying it. Is it through the fresh-squeezed lemon right in front of the guest, or is it through the servicescape or is it through great social media use? There are always going to be strengths and weaknesses when you’re looking at competition and there are always going to be gaps in the market.

My background is in restaurants so I do a lot of work with restaurateurs and we talk about this idea of gap analysis. That is, a way of figuring out if there is room in the marketplace for your particular concept. So for restaurants, it could be asking if there is room for an old-fashioned meatloaf restaurant, for example.

Wofford: I don’t think there is.

Robson: Probably not, but with gap analysis, you can look at pricing and the quality of concepts that are similar to or adjacent to the concept you’re thinking about developing. You rank them on the two dimensions of price and quality and look for gaps. When you find the gap in that ranking, ask yourself why the gap is there. That will tell you something about whether your business idea is viable or not. There might be a very viable reason for a gap. Maybe there is simply no way to deliver the right experience at that particular price point.

Wofford: I’d like to turn to an audience question now if that’s okay. It’s from Caitlin, who asks: “This is all a little overwhelming. Do you have any advice on how to keep your head above water when getting started? ”

Robson: That’s an excellent question, because I’m throwing a lot of things out there for you to do. The best place to begin is to identify four or five businesses that you admire. They don’t have to necessarily be in your particular discipline, just organizations that you admire and want to learn something from. Then use this competitive analysis approach that we’re talking about to look carefully at those businesses. Once you’ve done that, you sort of get used to the process and if you want to expand it, you can then look at other businesses that are closer to what you are doing. What you want to try and take away is what they are doing right and how you can apply it to your business.

It’s important to recognize that sometimes your successful competitors may have advantages that are really hard for an entrepreneur to compete with. They may have a parent company with deep pockets, for example. To use the restaurant industry as an example again, a lot of people look at Chipotle and think, “I want to be just like them.” Well, guess what? Chipotle was bankrolled by McDonald’s so it’s hard to compete with that kind of money.

But at the same time, there are things that you can look at that might be weaknesses in those organizations. Is their execution reliable? Are they so limited in their offerings that they may be at risk as tastes change? Look for expensive operations that are doing an amazing job and try to come up with a way of doing things less expensively.

Another thing I want to touch on is ubiquity. There is an interesting phenomenon that when a business starts to grow so much that it is everywhere, there starts to be a bit of a backlash against it.

Wofford: This is like the Starbucks effect, right? There are so many Starbucks that people start saying, “I want the anti-Starbucks.” Or someone might want to start their own coffee business that is the anti-Starbucks just because they know they cannot compete with them head-to-head.

Robson: Right. I talked earlier about the concept of macro, which is looking at companies anywhere that are delivering a similar customer experience to what you are shooting for. If you are thinking of something bricks and mortar, then obviously it would be in the physical area that you are thinking of building or renting. If you are looking at a digital business, it could be businesses that are going to be offered in the same venue, like Apple’s App Store, for instance.

What you are looking for is who is there now and who is coming into the market, which can be tricky depending on what kind of business it is. You can also look to see who has failed in this marketplace and why they failed.

It’s also very helpful to look at online reviews. Look at the number of stars and look at the trend. Is there a lot of variation or is it pretty consistent? Look at the number of ratings and who is making the ratings. One of the nice things about these review websites is they tell you something about who the rater is. We know their age, where they are located, how many reviews they have written. I like to look at that very closely to see if the person doing the review is actually the kind of customer that we are going after.

A lot of entrepreneurs make the mistake of thinking that everybody is their customer. That is probably not going to be the most effective strategy. You need to nail down who your customer is and then the reviews from people who fit that profile are going to be much more interesting to you. If the type of customer you’ve identified is giving your competitor 4 and 5 stars, you know that business is probably doing very well at connecting with your customer.

Wofford: I have always found that written reviews are very good for understanding the kinds of expectations people have. Poor reviews are almost invariably the result of the customer not getting what they expected. On the other hand, a lot of good reviews talk about how their expectations were exceeded.

Robson: Exactly — and it’s also important to remember that you need to be careful with reviews because the two situations you’ve just described are usually what motivates someone to write a review to begin with. So I’m a little cautious about doing too much of a deep dive into the text and instead focus on the average rating.

Wofford: Right. People do not write reviews just to say, “It was okay.”

Robson: I’d like to wrap up by saying that you need to cast a wide net to learn as much as you can. You need to test your ideas. You need to be flexible. You need to be nimble. Those four things together are what describe most successful entrepreneurs.

Wofford: Stephani, thanks so much for joining us today. You really gave some great advice.

Robson: Thank you, I hope the viewers can use it.

 

Want to hear more? This interview is based on Stephani Robson’s live eCornell WebSeries event, Entrepreneurship: How to Learn from Your Competition. Subscribe now to gain access to a recording of this event and other Entrepreneurship topics. 

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What Makes a Great Startup Idea

Bradley Treat is the type of guy that carries several business cards. He teaches entrepreneurship at the Johnson School at Cornell and at Ithaca College. He’s involved in the startup incubator Rev: Ithaca Startup Works. And he was also the CEO of the video and voice communications company SightSpeed before it was bought up by Logitech.

So the self-described serial entrepreneur was a natural fit to join eCornell’s Chris Wofford for a WebSeries event on what makes a great startup business idea. What follows is an abridged version of their conversation.

Treat: What I’m going to talk about today is actually an excerpt from a class I teach at the Johnson School called “The Business Idea Factory.” As people begin the entrepreneurial journey, they need to make sure they have some great ideas to start with. We’ll focus on giving you the tools to generate a lot of ideas and then help you filter out the best one and decide where to go from there.

To start the process, ask yourself: “What is a business?”

A business solves a problem that people care about. Someone has to be willing to pay for the solution. To break that down a little bit, the first thing we have to ask is, not what does your business do, but what problem does it solve?

Wofford: So this is really thinking about your potential customer in terms of what problems they might face and what kinds of solutions to that problem they’d pay for?

Treat: Right. Why do they care about solving this problem? Why should they be willing to pay you?

What I want to do next is give you some examples of businesses that solve problems. The first problem we’ll look at is the need to save money.

There’s a company called Forward Air, which is an air freight company that doesn’t own planes and a trucking company that doesn’t own trucks. What Forward Air does is to drive trucks between airports in the middle of the night.

You might say, “But Brad, why would somebody want to drive trucks to airports in the middle of the night?”

Well, what they figured out was a lot of air freight doesn’t have to go on planes. If you were to send an air package from Syracuse to Boston, you’d have to send it by 7pm. It’s not going to leave the FedEx depot in Boston until 7am the next day, so that’s a 12-hour period. They realized Syracuse to Boston is a one hour plane flight or a five-hour truck ride. So why not put that envelope on a truck and drive it to Boston? It’s much cheaper to drive mail than it is to fly mail. Forward Air figured out that they could handle a lot of airmail for the overnight carriers and save them significant money.

I also mentioned that this is a trucking company that doesn’t own trucks. One of the things Forward Air identified was the fact that many trucks sit idle in the middle of the night. So they went to truck owners and said, “Hey, your truck is just sitting there overnight. Let us use it. We’ll drive it, fill it back up with gas and get it back to you in the morning. You’ll make a little money instead of it just sitting in your driveway.” They identified a problem and solved it in a very unique and practical way.

Another example of a company solving the “Save Money” problem is a company called Kettleshell. This company invented a way to turn dumbbells into kettlebells. As you might know from the gym, a kettlebell sort of looks like a Civil War cannonball with a handle on it and there are a lot of workouts you can do with them.

Kettleshell converts a dumbbell into a kettlebell through a handle that bolts right on. If you’ve already got a set of dumbbells, you can now bolt this handle on and do kettlebell exercises using your existing dumbbells.

It’s a tremendous idea but interestingly, the founder originally thought he was going to save people money on not having to go out and buy a bunch of new kettlebells but it turned out that people in urban areas, particularly urban gym owners or urban apartment dwellers, were actually less concerned about the cost than the space. They didn’t have anywhere to put a bunch of kettlebells. So this product ended up solving two problems.

Wofford: It sounds like one of those products where you think, “Why hadn’t anyone thought of this before?” What about addressing problems that aren’t money-related?

Treat: Another area where businesses find success is in making something more convenient.
A good example is Sean Neville, the founder of Simply Audiobooks. Audiobooks are still something that people listen to on a physical medium because so many people listen to them in a car. So Sean developed a subscription service similar to the early days of Netflix, in which subscribers get mailed the audiobook CDs. Part of their innovation was coming up with a packaging sleeve that allowed the company to mail multiple audio discs at once. Unlike Netflix, which would send one disc at a time, Simply Audiobooks would send all of the discs required for a book, which sometimes could be as many as 12.

At the time Sean sold the company to a Toronto private equity firm, they had 25,000 customers and were North America’s number one audiobook rental company. Each one of those customers was paying an average of $25 to $35 per month.

To understand how valuable the convenience they provided is, you need to remember that their number one competitor wasn’t charging anything. Their top competitor was the local public library, where users could get an audiobook for free. But the convenience of having the audiobooks come to your home and being able to send it back and forth was worth $25-$35 a month to over 25,000 people. Convenience is truly valuable even if you’re competing against free.

Another good example is a Cornell company called Rosie. Rosie is an app to do grocery delivery. Now, people typically view grocery delivery as a luxury item for rich people. But what Rosie discovered was that rich people actually like to go to the grocery store. They like to walk the aisles at Wegmans. They like to pick out their own apples.

It turns out that the people who really need something like this are folks for whom getting to the grocery store is actually quite inconvenient. This is primarily people without cars. It could be students, it could be people who can’t afford a car, it could be people who choose not to have a car because they use public transportation for most things. But going to the grocery store is wildly inconvenient if you have to take a bus. You have to fit all of your grocery bags on the bus or you have to pay for a taxi, and that’s both inconvenient and expensive.

So what Rosie discovered is that although they thought they would be selling to rich people, their audience was really those who found the value in paying a very low delivery fee that was cheaper than a cab and more convenient than a bus ride.

Wofford: I know someone who has a modest income with three children under the age of two. With the inconvenience of trying to take the kids to the grocery store, this sounds like a no-brainer.

Treat: That’s a perfect example of who Rosie reaches. The company polled college students and asked why they needed a car and the number one reason given was for going grocery shopping. With Rosie, you don’t need a car anymore. I can also tell you that university administrations don’t like having to deal with a lot of cars and parking and all the permits. They’d prefer that students do not have cars. I also know that here in Ithaca, our mayor is very excited about it because he’s trying to figure out how to get people out of their cars from an environmental standpoint.

Wofford: So this company is actually addressing numerous problems at once.

Treat: Exactly. When you’re thinking about problems, think broadly. It’s not just about saving money or saving time. There are always creative ways of solving a problem for someone out there if you can deliver on it in a meaningful way.

One thing I really like to point out to people is that you do not have to come up with a business that nobody else has ever come up with. It’s a popular myth that a good idea is one that nobody else has ever had. But think of Google. There were all kinds of web search engines that existed before Google but Google came in and said, “Hey, we can do this better, we can do it differently, and we will be able to compete with all of these.” And of course, they didn’t just compete, they completely took over the market.

The way we see it is that if there are no competitors doing it, that’s a problem. It means nobody cares and you don’t want to try to solve a problem that nobody cares about. Having competitors is good — you just need to know your competitors and understand how you’re different and unique from them. If you can be slightly different or slightly better or target a different, underserved market, that’s a tremendous opportunity for you. Don’t get discouraged and just say, “Gosh, somebody already came up with that idea.” Revisit the idea and say, “How can I do it better? How can I do it different? How can I find a new market that is being underserved?”

Wofford: I think that’s great advice. It certainly seems easier to improve upon something that already exists than to invent something out of whole cloth.

Treat: It is. If you can understand how big a problem is for people or how you are better than the competitors at addressing it, you’ll have an edge. Focus on the problem you solve and then you can build an organization around that.

So, where do you find the ideas? You need to put on your entrepreneur glasses and look at the world in terms of problems that you could solve. If they’re big problems, people will pay to solve them. The bigger the problem, the more they’ll pay. Find somebody who has their hair on fire and they will pay you a lot to put it out.

Once you change your lenses and look at the world through different ways, you can actually start coming up with lots of ideas. I would encourage you to put everything on the list.

Wofford: Let’s say you have a list of 100 ideas. How do you know which ones are worth acting on?

Treat: There are certain criteria that we can use to define what makes a good business idea. You have to make sure it’s a good business idea for the customer. We want you to say, “I want to make what customers want to buy.” That should be the focus rather than trying to sell something that you want to make. Understand the customer and build an organization accordingly.

Wofford: I’d like to now turn to the audience and take some questions. We had a good one come through from Lawrence in the chat window while you were speaking: “How should a successful startup value its equity prior to seeking angel funding?”

Treat: I would actually encourage him to not value it. I know that sounds like a dodge, but valuing early-stage companies is extremely difficult to do. It becomes a sort of a thumb in the wind.

Still, there are techniques we can use, the most notable of which is something called convertible debt. What this says is that any money that comes in will be valued at some future date and there is a whole mechanism for doing it. You can actually find a lot of these templates online but basically what it says is you put the money in now, that money will earn interest, and then at some future date it will convert into equity once we have a better way of determining valuation.

Wofford: Here’s another great one: Once you’ve got a good idea for a new or improved product, what’s the best way to go about getting it out there?

Treat: Let’s go back to the Kettleshell example. He made the handle that goes on the dumbbells and he thought he should go out and build a prototype out of steel, aluminum, rubber handles — the whole thing. I said, “Don’t do that. Just make a mock-up.” So he went over to the art supply store, got some styrofoam, some duct tape, and some spray paint. That was enough to make a mock-up that he could put into gym owners’ hands. They were then able to give him feedback and suggest some changes. That styrofoam version turned out to be way more valuable than had he made the real thing. He was able to get pre-orders based on a CAD drawing, essentially. The more you can talk to customers, the better.

Wofford: We’ve got another audience question here, this one from Rohit in India. “I have a great product idea, but building it requires funding. I’ve done my research and believe this product will be the first of its kind. Where and how do I begin?”

Treat: Well, as I said earlier, it is rare that I find something that’s truly one of a kind. So I would challenge Rohit by asking how people are currently solving the problem that his product addresses. You may be solving it in a unique and different way, but how are others currently solving it? If you can go out there and talk to customers and find out what their needs are, then they’ll help you build the products.

I would challenge you, Rohit, to think very creatively about how you can get a minimally-viable product. If the guys from Kettleshell can do it with Styrofoam, then you should be able to creatively come up with some way to demonstrate your product.

Wofford: We have a question from Lance, who asks if you can recommend any other resources for generating ideas.

Treat: The best way to come up with a lot of ideas is to talk to a lot of people. Ask them open-ended questions about what problems they face. The more open-ended, the better. What’s your top expense? What check do you hate writing each month? What is one thing that you do in your job that you wish would just go away?

If you’ve currently got a job, look at the company you are at right now and ask yourself “What’s something that my company does now but shouldn’t be doing because it’s not our core business?” That could help you spin it out into a whole new business.

Wofford: Those are all great ideas. We’ve unfortunately run out of time, so I want to thank Brad for joining us and thanks to all of you in the audience for posing such good questions.

Treat: Thanks Chris, this has been fun.

 

Want to hear more? This interview is based on Bradley Treat’s live eCornell WebSeries event, What Makes a Great Startup Business Idea? Subscribe now to gain access to a recording of this event and other Entrepreneurship topics. 

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How to Plan and Prepare for Organizational Change

The Greek philosopher Heraclitus said that “the only thing that is constant is change”. This is true both in life and in business. Organizational changes are inevitable. It’s how we handle them that matters.

As part of eCornell’s Women in Leadership webcast series, Amy Newman from the School of Hotel Administration at Cornell University joined eCornell’s Chris Wofford for a discussion on how to effectively communicate and prepare for organizational change. What follows is an abridged version of their discussion.

Wofford: Amy, it’s great to have you again.

Newman: I’m glad to be here. Thanks for having me.

Wofford: Amy and I have done this before. About a year ago, we did a webcast on crisis communications. That’s pretty related to this but tell me, Amy, what are we going to learn here today?

Newman: The focus is on managing a change and communicating that change. What I’ve found is that organizations are pretty good at implementing change but they often forget to actually communicate with people both internally and externally. Sometimes, the external communication seems to be the priority in companies. They’ll tell their investors and their customers but often forget that employees are important ambassadors of the change and are the ones who will actually implement the change.

Wofford: All right. So what is the value of communication planning?

Newman: Well, let’s look at some research. In a paper published in Corporate Communications: An International Journal, Wim Elving identified four goals of change communication. The first is to increase buy-in and decrease resistance. We know that people naturally resist change, so the more we can do to prepare them to increase readiness, the more likely that they’ll buy into the change. So that’s one component.

The other is obviously to inform the audience. People need to know there is a change. They need to know how it affects them and what they’re going to be doing differently. Those are kind of the basics, but they’re essential.

Next, we have creating a sense of community or a sense of belonging, and this is the piece I think people don’t really think much about. When people hear there will be organizational change, they worry about layoffs or worry that they’ll have more work to do. There’s a tendency to focus on the negative results of a change, so you want people to feel like they’re part of the process and they’re going to be a critical piece of the organization going forward.

And then finally, it’s important to reduce uncertainty. You need to let people know what they can expect and what is expected of them. This also gives you a better chance that your change is going to be successful.

Wofford: I think a lot of people in the corporate world have probably experienced situations in which hirings and firings and big, sweeping departmental changes don’t always tend to be communicated very well.

Newman: Absolutely. And I think the tendency is to not communicate for a couple of reasons.
One, we simply forget because there are all these logistical things to deal with. But I also think people don’t like to deliver bad news, so they think it’s better to say nothing at all. Of course, that’s not true.

There are really two types of communications strategies for change. One is to inform people of what’s happening, but the second is critical and that’s about creating a sense of community.

I’ll give an example. When Marriott acquired Starwood last year, in one of the early messages that Arne Sorenson, the CEO of Marriott, sent to Starwood associates announcing the change, he said, “It’s strange for us to go from competitors to teammates.” I thought that was just such a great way to say it. He acknowledged that, “Yeah, this is weird.” First we were competitors and now we’re supposed to be part of one big happy family. Everybody’s thinking it, so acknowledging that up front makes people really feel like they’re part of the process.

Wofford: That we’re all in the same boat.

Newman: Exactly. Honesty like that reduces uncertainty and job insecurity. It prepares people for the change and then it ensures an effective change.

Now I thought that there was one goal missing from Elving’s work that I added and that’s to prevent a crisis situation. If you’re not communicating well, at some point your employees can be angry at you. So can your investors or your customers. And we know that social media will respond.

Wofford: There will be a whistleblower tweet out there or something like that, right?

Newman: Yes… It could go viral and, suddenly, in addition to trying to communicate the change, you now also have a crisis situation to handle. So it’s best to get out ahead of things even if it’s bad news.

Wofford: Like in The Godfather when Tom Hagen says, “Mr. Corleone is a man who insists on hearing bad news at once.” Obviously that was great advice.

Newman: That’s right. With bad news, you just need to get it out. In my classes, we talk about indirect communication and direct communication. The older style of thinking is indirect communication for bad news. You know, soften the blow. I don’t think that really works anymore. People want to hear what it is and just get past it.

Wofford: So that’s good advice for crisis avoidance?

Newman: Absolutely. I can share an example where the planning may have not gone so well. This is the Carrier situation and I know it’s a very sensitive one. President Trump got involved.

Wofford: The heating and air conditioning manufacturing jobs in Indiana?

Newman: Exactly. They announced that this plant was moving to Mexico and they did it in a large forum. I mean, I’m not so sure what would be a better choice really, maybe smaller department meetings. There’s no great way to tell 1,400 or so employees that they’ll be losing their jobs but, in this case, someone had an iPhone and recorded it and that’s what went viral for everyone to see. So it did not turn out so well for them and it’s something that they really should have thought about in advance.

I think part of the communication planning process is that you have to assume that any internal message is going to go external.

Wofford: You’ve developed an actual change communication plan, haven’t you? Should we get into that now?

Newman: Yes, I have something that I’ve used for many companies. It’s something to be used for major organizational changes like a merger or acquisition. But even with small department changes like a new system implementation, it would be helpful to think about who we need to communicate to and what our messages are.

Wofford: Okay, so how does it work?

Newman: The major categories are to identify the audiences, to do some work thinking about their potential reactions and to look at some communication objectives. What media or channels are you going to use? What is the timing?

Let’s start with the audience and their potential reactions. I put together a sample involving the closing of a restaurant. In every situation, this is going to be a little bit different but this is the way you might think through that kind of change.

The first thing I would do is to identify all of the audiences. Usually, we get into something called cascading communication where most likely you’re starting at the senior-most level of your organization and working your way down. You’ve got to think about the levels of management and the level of employees involved. So in this case, I’m saying the corporate management team, the restaurant management team and then the restaurant staff. Clearly they need to be notified pretty quickly. The corporate staff might be next and then you might have to notify the local government depending on the local laws. You may want to directly reach out to some VIP customers. Maybe the media will be next.

They all get different messages, different media choices. All of that has to be thought through.

Next is to look at the background of the different audiences and their potential reactions. This is the step I often find is missing. It’s really about empathy, about trying to put yourself in someone else’s shoes. It’s thinking through some of those potential, particularly negative reactions and trying to address them.

Wofford: Right. What else is involved in your template?

Newman: First, let’s look at the communication objectives. You want the corporate management team to understand the rationale and details and then you have to plan communications for their team. And when you’re coming up with these communication objectives, I would really recommend to once again think from that audience’s perspective.

The next thing to consider is responsibility, and this is easy to identify but a little harder to carry out in the communication plan. If we’re using this cascading communication, the corporate management team would communicate to the restaurant management team, for example, and the restaurant GM would communicate to the restaurant staff, probably with the help of H.R.

Next we’ve got to decide on our communication media or channel. You know, the default communication channel is most often email. For 12 years now, I’ve been hearing about the death of email. I’m still waiting for it to die.

Email is particularly effective in communicating bad news. Can you think about why?

Wofford: Well, it’s directed at me. I mean, people are tethered to their phones, right? So there’s an expediency to it.

Newman: Right. Plus, everybody’s getting the same message at the same time. In layoff situations, companies will usually send those messages on a Friday and then people go home so they’re not in their office angrily talking to each other and getting each other riled up.

But there is a downside to email. Many people would prefer a call, or better yet, a face-to-face conversation. So that’s a decision that really has to be thought through.

The last component here is about the dates or the timing of the messages. It is important to think about who should know what and in what kind of sequence. I’ll go back to the Marriott Starwood example, because I think they did a pretty good job overall.

When the announcement was first made, and this was back in November 2015, there was an email from Starwood executives to Starwood associates with a press release that hadn’t gone out yet attached. That was really the first communication, as it should be, because this was an acquisition, not a merger. Starwood associates are the ones who are thinking they might have the most to lose. When that email went out, it was presumably the first that anybody had heard of this.

Next, we get an email from Marriott executives to Starwood associates that came less than two hours later. Clearly this was all well orchestrated and planned. And that was the message I mentioned before, where they say it’s strange to go from competitors to teammates. It was just a very welcoming message. There was also a video with Arne Sorenson that was lovely.
Then, we had the press release. That public announcement was a little later in the day, but at this point employees already knew that it was coming. In other words, they didn’t have to read about it in the press. All of this happened within three hours of that first message.

Wofford: Amy, thanks so much for joining us once again and thanks to all of you who tuned in.

Newman: Thank you, Chris. It’s been a great conversation.

 

Want to hear more? This interview is based on Amy Newman’s live eCornell WebSeries event, Communication Planning: Preparing for Organizational Change. Subscribe now to gain access to a recording of this event and other Women in Leadership topics.