The Best of the November Issue

 

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October 14, 2014 By Best of the Issue Idea Watch How Companies Can Profit from a "Growth Mindset" Carol Dweck This Stanford psychology professor is well known for her work on the power of mindsets to promote or discourage academic achievement and innovation. She's famously seen an important distinction between people who view success as an outgrowth of talent that is inborn and immutable – those with a fixed mindset – and people who view failure as a chance to learn from mistakes and develop new skills – those with a growth mindset. Now she's extending her work from individuals to companies. Survey results from employees working for seven Fortune 1,000 companies suggest that organizations similarly exhibit fixed or growth mindsets. Those in the fixed camp depend more on star workers, whom they tend to hire from outside, placing great stock on educational pedigree. Those with a growth mindset tend to hire from within, caring more about potential and less about past accomplishments. Although Dweck has not yet connected mindset to financial performance, she has found levels of worker satisfaction, innovation, collaboration, and even ethical behavior are higher in the growth-oriented companies. The Big Idea The Best-Performing CEOs in the World Adi Ignatius How do you measure a CEO's worth? HBR took a data-driven approach, looking at the increase in market capitalization and in country- and industry-adjusted total shareholder returns for the CEOs on the S&P 1200 who were on the job at least two years (and not convicted of anything). And by that measure, they're certainly effective: the top 50 have delivered total shareholders returns of 1,350%, which translates into an annual return of 26%, during their time on the job. What puts you on the 100-person list is exemplified by the first-place holder, Jeff Bezos of Amazon, whose stock has frequently underperformed in the short term, while he continues to make big bets on the future. Instead of focusing on competitors or technology shifts, Dan McGinn explains in an accompanying profile, Bezos and his team continually invest in grinding out incremental improvements in delivery speed and product offerings while chipping away at costs, reinvesting the profits into new ventures to grow ever bigger. It's a formula that in the long term has led to shareholder returns so robust that even if Amazon's share price dropped 20%, Bezos would still top the rankings. Spotlight How Smart, Connected Products Are Transforming Competition Michael E. Porter and James E. Heppelmann GE used to be in the business of making and selling stuff. Now it's increasingly in the business of creating, and capitalizing on the data all that stuff generates. How are smart devices like its self-monitoring wind turbines, or Google's Nest thermostat, changing the basis of competitive strategy? Porter teams up with smart-software firm PTC's CEO to take a comprehensive look at how the opportunities and threats smart devices create could change each of the five forces that form an industry's competitive landscape, and offers up 10 questions executives need to resolve in order to devise the right strategy for their company. The basic tenets of strategy have not changed at all – advantage still depends on an ability to differentiate your company to command a price premium at a lower cost than your rivals. But many of the questions you need to consider to determine how – such as, What smart features should your products include? How much function should be in the product and how much in the cloud? Who should own the rights to the data? – are entirely new. See how smart products are radically transforming the way mining company Joy Global seeks competitive advantage. Managing Yourself Where to Look for Insight Mohanbir Sawhney and Sanjay Khosla Several Fortune 500 companies have been founded on a single insight into what customers want — Starbucks gave coffee drinkers a little bit of Italy; Home Depot gave do-it-yourselfers access to professional building supplies. But where do those insights come from? In their research, these two Kellogg school professors have found seven main sources. New insights likely await those who investigate deviations from the norm (like why Russian consumers don't buy online, which led to a take-the-store-to-you retailing model) or consider the confluences of large trends (like what's possible if you combine mobile telephones, social networks, and short attention spans, which suggested the viability of Snapchat). Observing people's frustrations works well too, leading would-be engagement ring consumer Mark Vadon to found the on-line jeweler Blue Nile. Inspiration may also fruitfully arise from diligently questioning orthodoxies, paying attention to your leading edge or laggard customers, fully immersing yourself in some new place or experience, or drawing analogies from other industries and disciplines. Few people find great ideas on a blank canvas — most of us need to have our imaginations channeled.

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