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SSA Notebook | July 2015

A Lesson from Zappos: Structure and New Ways of Driving Organic Growth

At Zappos, over 75% of sales come from repeat customers, so their “no shipping costs and relationship marketing” model requires iteration to reach new market segments. As this HBR article notes, that’s why Zappos CEO Tony Hsiah implemented “holocracy” – a new organizational structure where different teams assemble to solve a recurring problem. Such a problem signals unaddressed market needs and an innovation opportunity. For example, a Zappos customer might want boutique-style advice on matching a dress with shoes or a purse. A “holocratic” approach allows several teams to develop different answers (e.g., hire a fashion advisor, create an app that connects the customer to a fashion expert, both of these, etc.). Legacy companies must find new ways to build innovation cultures quickly or they will be disrupted by those that do.

How Design Helps IKEA Reduce Shipping Costs and Maintain a Loyal Customer Base

This Wall Street Journal article describes how IKEA is “sharpening its attention” to detail using strategic design upfront as a way to drive efficiencies for themselves and their customers. “We are engineering costs out of our value chain that don’t contribute anything,” says Chief Executive Peter Agnefjäll. IKEA’s designers use software that can calculate “optimal sizes and shapes” for its products, “helping the company avoid having to tweak designs or scrap ideas” after they hit the market. While designing for efficiency upfront helps IKEA reduce costs and pass along savings to customers, this approach must not come at the expense of quality or ease-of-use for customers. According to this Wall Street Journal blog post, the retailer has recently named a Global Head of Quality, a newly created role. This indicates that IKEA balances its investment in efficient design with a commitment to quality.

Today’s Startups Use Data Instead of a Middle Manager

This Wall Street Journal article highlights an important trend in organizational models. At some startup companies, several CEOs have opted for a flat hierarchy made possible by a fundamentally different management structure, “one that pushes decision-making to the periphery of the organization.” Thanks to new cloud-based services like Amazon.com Inc.’s Redshift, employees have more readily available data than ever before to make predictions based on simple human analysis.  With the tools to monitor progress, these newly empowered employees eliminate the need for the middle manager role of collecting information and making decisions. “Nor do the leaders who remain need to poll middle managers to find out how employees are doing, since transparency and accountability are the essence of the data-driven company,” the author notes. Large companies that fail to democratize data and decision making may fall behind to the small, lean startups that do.

Can Auto Insurers Win in a Driverless World? The Bank of UK Has Some Ideas…

The Bank of England’s new blog, BankUnderground, challenges the auto insurance industry to adapt to the new legislative issues and possible premium drops (40-50% in the UK) that driverless cars will bring to market. “As human drivers become replaced by lasers and sensors, the placement of liability may start to shift towards manufacturers,” the authors note. As the paradigm of insurance changes, insurers will need to develop new products and business models to win. The article offers a few interesting suggestions for insurers, including expanding into profitable lines of business (e.g. commercial and household insurance) or developing new products for emerging fields (e.g. automotive cyber-insurance). As industries change, the companies who see disruptions as opportunities will race ahead of slow-moving competitors.

Can Leaders Sustain the US Shale Boom with Big Data?

Ignore skeptics who seize on falling rig counts and low oil prices to predict the end of the US shale revolution. According to new research in MIT Technology Review, “total production has held steady or continued to rise” because of big data driven improvements in the accuracy of drilling. Data and analytics have increased oil production and lowered costs. This is also in part due to “high iteration learning” by looking at past wells to “apply lessons learned at a much higher rate” – a practice that has led producers to better sensing abilities. Thanks to these new capabilities, “the volume of data produced by a modern unconventional drilling operation is immense.” Companies that focus on data collection and analytics position themselves for the “real revolution on the horizon.” Leaders who harness the power of big data and advanced analytics to drive insights to action will transform businesses.

Exclusive Content on Modern Leadership from Stephen Miles, CEO of The Miles Group

Stephen Miles, CEO of our sister firm, The Miles Group (TMG), offers frank, pertinent insights on modern leadership. TMG develops talent strategies through CEO successions, executive transition, board succession, and Chairman/Lead Director transitions.

Why Syncing with Your Leader is So Important – and 3 Ways Not to Blow It

In a recent post, Stephen Miles shares three ways executives can improve their capability to communicate upward – to “synchronize” with one’s leader. The first is to lose the “me-first” attitude; an executive’s gut response to new information from the boss has to be wider than “what does this mean for me,” and look at the bigger picture. Another way is to bridge the style gap; you have to synchronize with the boss’s work style if you want to communicate effectively and deliver the right content. Lastly, don’t be like the 40% of employees who withhold key information, get critical information and solutions to the forefront early whether it’s an idea that would drive revenue or about organizational malfunctions.

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