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How Do You Innovate “Innovation”?

Mukesh Gupta

A couple of days ago, I submitted my entry for the HBR/McKinsey M-Prize Challenge run by Management Exchange.

This challenge is about “Innovating Innovation” and will be judged by some of the greatest thinkers in innovation.

You can find below my submission for the challenge. If you like my thoughts, I request you to vote for my submission here.

SUMMARY

Its not the lack of ideas that stops organizations from being innovative, but the way resources are allocated & employees rewarded that is the key.

We need to change the way we set and manage KPI’s, the way we allocate funds (quarterly budgeting with reduced budget year-on-year for standard activities) and the way we recognize and reward teams (based on IQ – Innovation quotient).

PROBLEM

Currently, organizations are managed as follows:

KPI’s and organizational strategy:

  • The top management decides the strategy and the key initiatives for the organization.
  • These are then cascaded down to the different lines of businesses.
  • Each LoB head then defines the goals for his team based on the organizational goals

Challenges in this process:

  • This process resembles the election of a Pope. That is, the average employee has little to no understanding of, and input to, the process, and is instead reduced to waiting for the output of the process (“the white smoke up the chimney”).
  • This tends to dis-empower the employee base, but perhaps most importantly, robs decision-makers of the useful “push back” that the broader organization (particularly those working at the “front line”) can provide.

Budgeting:

  • Each LoB head takes his last year cost, adds a percentage (maybe 5 or 10%) to the cost and submits the same for approval.
  • This is an annual process and gets repeated only next year

Challenges in this process:

  • This is where power turfs are created which lead to a lot of power tussles in the organization which help no one.
  • This process also adds a lot of fat in the organization. If you are continuing to do the same tasks year-on-year, you should be getting better at the task & can find better ways to complete the same, thereby freeing up resources for the more important activities of the organization
  • Increases the cost of doing business as-usual
  • Due to the annual cycle, so many resources are wasted by continuing to pursue ideas or projects that should have been killed. This also means that other ideas/projects have not been allocated those very same resources.
  • There is a separate LoB responsible for product development or R&D or innovation.

Innovation:

  • This team also goes through the same process as all other LoB for KPI definition and budgeting.
  • Makes it difficult to get the right amount of funding for the innovation efforts.

Challenges in this approach:

  • This puts the imperative of innovation on a small team instead of the fact that everyone one in the organization should have innovation on their agenda.
  • This also reduces the total resources available for funding new innovations as this team also has to compete with other LoB’s for resources.

Rewards & recognition:

  • Individual employees are then rewarded and recognized based on their performance as measured against the cascaded KPI’s
  • A lot of times these KPI’s do not have any component about innovation as it is considered to be the responsibility of the Innovation department
  • This creates a culture of competition among employees as the rewards and recognitions are limited and all employees (alright, most of them) want a piece of that cake.
  • Most organizations have a bell curve for evaluating and rewarding employees, which means that in every team, they expect a few employees to be below average, a few to be above average and all others average performers. This hurts most when you have a great team with super employees. By definition, you prohibit such teams to form and thrive.

Challenges in this approach:

  • Innovation is a team activity. Running an organization is also a team activity. So, why rewarding individual performance results in a few lone wolves who might not be great team players getting a lot of .
  • By following the bell curve, you are naturally encouring average performance from the team and discouraging high performing teams with high performing employees.
  • Individual top performers who care only about their performances get rewarded, recognized and promoted. These are the kind of people who are most likely to get involved in turf wars and create what we call the mid-management wall or bulge.

SOLUTION

In my opinion the following approach would work much better:

KPI’s and organizational strategy:

  • The top management involves the frontline employees (sales, delivery, support, etc) who talk to customers/partners every day in the process of defining organizational strategy and key decision.
  • This process of discussion to also involve in defining the key challenges (with respect to product/service and competition). These challenges then become the areas to innovate.
  • The top management can now come out with the “Commanders Intent” of what they want to achieve and leave the details to the frontline staff to manage themselves, to achieve the intent.

Budgeting:

  • Each LoB gets a cut in budget every year (maybe 5 or 10%) to manage their business as usual activities. The rationale behind this is the fact that if you are doing something regularly, you can always find ways to improve the same on a continuous basis and hence should be able to manage at a lower cost. This is an annual process.
  • There is a second budgeting cycle that is executed quarterly. This is to decide on the funding for various innovation projects in the areas identified as the focus areas during the process of forming the strategy or any other activity that can give competitive advantage to the organization. In any case, these projects could focus on one of the following:
    • New product or service creation
    • New business model creation
    • New market development
    • Process improvements that lead to improved topline or increased bottom-line
  • New projects are pitched and existing projects provide an update on their progress. As this is a quarterly process, the organizations can decide if any of the existing projects require to be killed and if new projects show promise and need to be funded. A panel consisting of senior executives, front-line managers and the relevant functional experts takes decisions on the funding for the various projects.
  • Projects where the team is convinced about the viability but the management is not sure, should have an option to get into the start-up mode with the organization providing the seed funding, provided the team is able to get funding from other VC funds. This with the option that the organization gets the first right of refusal for further funding and buy-out. At a later stage if the employees want to kill the project, they could also be considered for re-hire based on the then open situations.

Innovation:

  • A small team of innovation coaches created who can be used by the different teams on their innovation projects. They work as consultants, coaches and bring in the outside-in perspective to the problems and also facilitate the process of innovation.

Rewards & recognition:

  • Teams are rewarded and recognized rather than individuals.
  • Better performing teams are rewarded more than average performing teams or low performing teams.
  • Individual performances are still evaluated, recognized and rewarded, but within the framework of the performance of the team. So, if the team did well, your rewards will be better than if the team did not do well. So, in order for you to succeed, your team should also succeed. The individual performance evaluation is done by both managers and the peers.

PRACTICAL IMPACT

The impact of my ideas would be as below:

KPI’s and organizational strategy – advantages:

  • This process ensures that the perception of the senior management is put to test and corrected if required, thereby eliminating the risk of creating strategy based on wrong perception.
  • This process also gets the front-line employees to participate in the creation of strategy that they are expected to execute. This increases the chances that the execution of strategy will be much better than otherwise. As many CEO’s will vouch that the difference between great organizations and not so great ones is this ability to execute their strategy well.
  • With the commander’s intent for the organization in place, employees can respond better to any situation they encounter and hence the ability of the organization to respond to change quickly and correctly is greatly enhanced. In times of great uncertainty, this ability to respond fast can be the difference between survival and growth.

Advantages of the 2 stage Budgeting process: 

  • This process ensures that there is continuous improvements in the process and does not create a situation where there is more staff than there is work or worse, managers invent additional work for their staff, thereby creating a culture of improvement & innovation.
  • This process frees up a lot of resources that can be used to fund a lot more projects that can address the key challenges identified in the strategy building stage.
  • This also takes care of situations where the project team believes in a project and is willing to take the risk of starting up in order to continue their work. If they succeed, they win big and if they fail, they still have a chance to re-join the organization.
  • Innovation becomes the responsibility of the entire organization and not of one small team in the organization.

Advantages of the “Everyone Innovates” process: 

  • Clear identification of the key challenges helps in focusing the efforts of the organization in solving these problems which will have the biggest impact on the organizations success/failure.
  • Creates the opportunity for innovations in areas where they are needed the most as the employees who face challenging situations are also more likely to come up with solutions.

Advantages of the new team based Rewards & recognition:

  • This approach ensures that all employees are working together as a team as their individual success rewards and recognition depends on the success of the team.
  • This drastically reduces the chances of someone succeeding (at their KPI’s) at the cost of their colleagues or customers.
  • This also eliminates any bias (perceived or real) that might creep in the performance evaluation by the manager
  • This will create an environment of trust and togetherness, which by itself, leads to a better environment which fosters creativity and high productivity.

CHALLENGES

Challenges that one will face during implementation of the above approach:

  • This involves complete overhaul of the management processes used in the organizations currently, which means that change management is a big challenge in implementing this idea of management.
  • There will be resistance from the mid-managers as they will perceive to be stripped of a lot of power that comes with being in the mid-manager layers that they have enjoyed so far. Unless, this is handled well and there is buy-in from them, the entire process can potentially fall apart, which will then make it even more challenging environment for the CEO to start fresh.
  • This said, the upside of being able to implement this approach to management is very high and is still worth the risk.

FIRST STEPS

The process can be implemented in phases or pilots:

  • The senior management can initiate the workshop with front-line staff for strategy definition, along with the mid-managers, to identify the key areas where they need innovations or solutions to current challenges that have been identified. This can be done by any management at the start of their strategy cycle.
  • Create and communicate the “Commanders Intent” to the entire organization. Challenge the entire organization to move towards achieving the “Commanders intent”.
  • Create a team of experts who will work as coaches to teams that want help in addressing the challenge that they want to solve.
  • Identify 2 or 3 managers (of high performing teams) who are open to try the new team based performance appraisal system. Help them to get the buy-in from the team members.
  • Publicly announce the pilot of the appraisal system with the team and congratulate the teams that have taken the first step to adopt the new practices.
  • Budgeting process will need to be the last process change to be adopted. If the previous steps have yielded good results, the adoption of the budgeting process becomes so much more easier (as the senior management would have already won the trust of the organization).

Do you agree with the approaches that I have suggested above. Do let me know by commenting below or tweet your thoughts to me at @rmukeshgupta.

P.S.: Some interesting videos on Innovation:

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YouTube Direkt

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Mukesh Gupta

About Mukesh Gupta

Mukesh Gupta previously held the role of Executive Liaison for the SAP User group in India. He worked as the bridge between the User group and SAP (Development, Consulting, Sales and product management).

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awareness

The Future Of Supplier Collaboration: 9 Things CPOs Want Their Managers To Know Now

Sundar Kamak

As a sourcing or procurement manager, you may think there’s nothing new about supplier collaboration. Your chief procurement officer (CPO) most likely disagrees.
Forward-thinking CPOs acknowledge the benefit of supplier partnerships. They not only value collaboration, but require a revolution in how their buying organization conducts its business and operations. “Procurement must start looking to suppliers for inspiration and new capability, stop prescribing specifications and start tapping into the expertise of suppliers,” writes David Rae in Procurement Leaders. The CEO expects it of your CPO, and your CPO expects it of you. For sourcing managers, this can be a lot of pressure.

Here are nine things your CPO wants you to know about how supplier collaboration is changing – and why it matters to your company’s future and your own future.

1. The need for supplier collaboration in procurement is greater than ever

Over half (65%) of procurement practitioners say procurement at their company is becoming more collaborative with suppliers, according to The Future of Procurement, Making Collaboration Pay Off, by Oxford Economics. Why? Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren’t collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

Supplier collaboration itself isn’t new. What’s new is that it’s taken on a much greater urgency and importance.

2. You’re probably not realizing the full collective power of your supplier relationships

Supplier collaboration has always been a function of maintaining a delicate balance between demand and supply. For the most part, the primary focus of the supplier relationship is ensuring the right materials are available at the right time and location. However, sourcing managers with a narrow focus on delivery are missing out on one of the greatest advantages of forging collaborative supplier partnerships: an opportunity to drive synergies that are otherwise perceived as impossible within the confines of the business. The game-changer is when you drive those synergies with thousands, not hundreds of suppliers. Look at the Apple Store as a prime example of collaboration en masse. Without the apps, the iPhone is just another ordinary phone!

3. Collaboration comes in more than one flavor

Suppliers don’t just collaborate with you to provide a critical component or service. They also work with your engineers to help ensure costs are optimized from the buyer’s perspective as well as the supplier’s side. They may even take over the provisioning of an entire end-to-end solution. Or co-design with your R&D team through joint research and development. These forms of collaboration aren’t new, but they are becoming more common and more critical. And they are becoming more impactful, because once you start extending any of these collaboration models to more and more suppliers, your capabilities as a business increase by orders of magnitude. If one good supplier can enable your company to build its brand, expand its reach, and establish its position as a market leader – imagine what’s possible when you work collaboratively with hundreds or thousands of suppliers.

4. Keeping product sustainability top of mind pays off

Facing increasing demand for sustainable products and production, companies are relying on suppliers to answer this new market requirement.

As a sourcing manager, you may need to go outside your comfort zone to think about new, innovative ways to collaborate for achieving sustainability. Recently, I heard from an acquaintance who is a CPO of a leading services company. His organization is currently collaborating with one of the largest suppliers in the world to adhere to regulatory mandates and consumer demand for “lean and green” lightbulbs. Although this approach was interesting to me, what really struck me was his observation on how this co-innovation with the supplier is spawning cost and resource optimization and the delivery of competitive products. As reported by Andrew Winston in The Harvard Business Review, Target and Walmart partnered to launch the Personal Care Sustainability Summit last year. So even competitors are collaborating with each other and with their suppliers in the name of sustainability.

5. Co-marketing is a win-win

Look at your list of suppliers. Does anyone have a brand that is bigger than your company’s? Believe it or not, almost all of us do. So why not seize the opportunity to raise your and your supplier’s brand profile in the marketplace?

Take Intel, for example. The laptop you’re working on right now may very well have an “Intel inside” sticker on it. That’s co-marketing at work. Consistently ranked as one of the world’s top 100 most valuable brands by Millward Brown Optimor, this largest supplier of microprocessors is world-renowned for its technology and innovation. For many companies that buy supplies from Intel, the decision to co-market is a strategic approach to convey that the product is reliable and provides real value for their computing needs.

6. Suppliers get to choose their customers, too

Increased competition for high-performing suppliers is changing the way procurement operates, say 58% of procurement executives in the Oxford Economics study. Buyers have a responsibility to the supplier – and to their CEO – to be a customer of choice. When the economy is going well, you might be able to dictate the supplier’s goods and services – and sometimes even the service delivery model. When times get tough (and they can very quickly), suppliers will typically reevaluate your organization’s needs to see whether they can continue service in a fiscally responsible manner. To secure suppliers’ attention in favorable and challenging economic conditions, your organization should establish collaborative and mutually productive partnerships with them.

7. Suppliers can help simplify operations

Cost optimization will always be one of your performance metrics; however, that is only one small part of the entire puzzle. What will help your organization get noticed is leveraging the supplier relationship to innovate new and better ways of managing the product line and operating the business while balancing risk and cost optimization. Ask yourself: Which functions are no longer needed? Can they be outsourced to a supplier that can perform them better? What can be automated?

8. Suppliers have a better grasp of your sourcing categories than you do

Understand your category like never before so that your organization can realize the full potential of its supplier investments while delivering products that are consistent and of high quality. How? By leveraging the wisdom of your suppliers. To be blunt: they know more than you do. Tap into that knowledge to gain a solid understanding of the product, market category, suppliers’ capabilities, and shifting dynamics in the industry, If a buyer does not understand these areas deeply, no amount of collaboration will empower a supplier to help your company innovate as well as optimize costs and resources.

9. Remember that there’s something in it for you as well

All of us want to do strategic, impactful work. Sourcing managers with aspirations of becoming CPOs should move beyond writing contracts and pushing PO requests by building strategic procurement skill sets. For example, a working knowledge in analytics allows you to choose suppliers that can shape the market and help a product succeed – and can catch the eye of the senior leadership team.

Sundar Kamak is global vice president of solutions marketing at Ariba, an SAP company.

For more on supplier collaboration, read Making Collaboration Pay Off, part of a series on the Future of Procurement, by Oxford Economics.

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Sundar Kamak

About Sundar Kamak

Sundar Kamak is the Vice President of Products & Innovation at SAP Ariba. He is an accomplished Solutions Marketing and Product Management Execuive with 15 + year's broad experience in product strategy, positioning, SaaS, Freemium offering, go-to-market planning and execution.

Transform Or Die: What Will You Do In The Digital Economy?

Scott Feldman and Puneet Suppal

By now, most executives are keenly aware that the digital economy can be either an opportunity or a threat. The question is not whether they should engage their business in it. Rather, it’s how to unleash the power of digital technology while maintaining a healthy business, leveraging existing IT investments, and innovating without disrupting themselves.

Yet most of those executives are shying away Businesspeople in a Meeting --- Image by © Monalyn Gracia/Corbisfrom such a challenge. According to a recent study by MIT Sloan and Capgemini, only 15% of CEOs are executing a digital strategy, even though 90% agree that the digital economy will impact their industry. As these businesses ignore this reality, early adopters of digital transformation are achieving 9% higher revenue creation, 26% greater impact on profitability, and 12% more market valuation.

Why aren’t more leaders willing to transform their business and seize the opportunity of our hyperconnected world? The answer is as simple as human nature. Innately, humans are uncomfortable with the notion of change. We even find comfort in stability and predictability. Unfortunately, the digital economy is none of these – it’s fast and always evolving.

Digital transformation is no longer an option – it’s the imperative

At this moment, we are witnessing an explosion of connections, data, and innovations. And even though this hyperconnectivity has changed the game, customers are radically changing the rules – demanding simple, seamless, and personalized experiences at every touch point.

Billions of people are using social and digital communities to provide services, share insights, and engage in commerce. All the while, new channels for engaging with customers are created, and new ways for making better use of resources are emerging. It is these communities that allow companies to not only give customers what they want, but also align efforts across the business network to maximize value potential.

To seize the opportunities ahead, businesses must go beyond sensors, Big Data, analytics, and social media. More important, they need to reinvent themselves in a manner that is compatible with an increasingly digital world and its inhabitants (a.k.a. your consumers).

Here are a few companies that understand the importance of digital transformation – and are reaping the rewards:

  1. Under Armour:  No longer is this widely popular athletic brand just selling shoes and apparel. They are connecting 38 million people on a digital platform. By focusing on this services side of the business, Under Armour is poised to become a lifestyle advisor and health consultant, using his product side as the enabler.
  1. Port of Hamburg: Europe’s second-largest port is keeping carrier trucks and ships productive around the clock. By fusing facility, weather, and traffic conditions with vehicle availability and shipment schedules, the Port increased container handling capacity by 178% without expanding its physical space.
  1. Haier Asia: This top-ranking multinational consumer electronics and home appliances company decided to disrupt itself before someone else did. The company used a two-prong approach to digital transformation to create a service-based model to seize the potential of changing consumer behaviors and accelerate product development. 
  1. Uber: This startup darling is more than just a taxi service. It is transforming how urban logistics operates through a technology trifecta: Big Data, cloud, and mobile.
  1. American Society of Clinical Oncologists (ASCO): Even nonprofits can benefit from digital transformation. ASCO is transforming care for cancer patients worldwide by consolidating patient information with its CancerLinQ. By unlocking knowledge and value from the 97% of cancer patients who are not involved in clinical trials, healthcare providers can drive better, more data-driven decision making and outcomes.

It’s time to take action 

During the SAP Executive Technology Summit at SAP TechEd on October 19–20, an elite group of CIOs, CTOs, and corporate executives will gather to discuss the challenges of digital transformation and how they can solve them. With the freedom of open, candid, and interactive discussions led by SAP Board Members and senior technology leadership, delegates will exchange ideas on how to get on the right path while leveraging their existing technology infrastructure.

Stay tuned for exclusive insights from this invitation-only event in our next blog!
Scott Feldman is Global Head of the SAP HANA Customer Community at SAP. Connect with him on Twitter @sfeldman0.

Puneet Suppal drives Solution Strategy and Adoption (Customer Innovation & IoT) at SAP Labs. Connect with him on Twitter @puneetsuppal.

 

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Scott Feldman and Puneet Suppal

About Scott Feldman and Puneet Suppal

Scott Feldman is the Head of SAP HANA International Customer Community. Puneet Suppal is the Customer Co-Innovation & Solution Adoption Executive at SAP.

Running Future Cities on Blockchain

Dan Wellers , Raimund Gross and Ulrich Scholl

Building on the Blockchain Framework

Some experts say these seemingly far-future speculations about the possibilities of combining technologies using blockchain are actually both inevitable and imminent:


Democratizing design and manufacturing by enabling individuals and small businesses to buy, sell, share, and digitally remix products affordably while protecting intellectual property rights.
Decentralizing warehousing and logistics by combining autonomous vehicles, 3D printers, and smart contracts to optimize delivery of products and materials, and even to create them on site as needed.
Distributing commerce by mixing virtual reality, 3D scanning and printing, self-driving vehicles, and artificial intelligence into immersive, personalized, on-demand shopping experiences that still protect buyers’ personal and proprietary data.

The City of the Future

Imagine that every agency, building, office, residence, and piece of infrastructure has an entry on a blockchain used as a city’s digital ledger. This “digital twin” could transform the delivery of city services.

For example:

  • Property owners could easily monetize assets by renting rooms, selling solar power back to the grid, and more.
  • Utilities could use customer data and AIs to make energy-saving recommendations, and smart contracts to automatically adjust power usage for greater efficiency.
  • Embedded sensors could sense problems (like a water main break) and alert an AI to send a technician with the right parts, tools, and training.
  • Autonomous vehicles could route themselves to open parking spaces or charging stations, and pay for services safely and automatically.
  • Cities could improve traffic monitoring and routing, saving commuters’ time and fuel while increasing productivity.

Every interaction would be transparent and verifiable, providing more data to analyze for future improvements.


Welcome to the Next Industrial Revolution

When exponential technologies intersect and combine, transformation happens on a massive scale. It’s time to start thinking through outcomes in a disciplined, proactive way to prepare for a future we’re only just beginning to imagine.

Download the executive brief Running Future Cities on Blockchain.


Read the full article Pulling Cities Into The Future With Blockchain

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Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

Raimund Gross

About Raimund Gross

Raimund Gross is a solution architect and futurist at SAP Innovation Center Network, where he evaluates emerging technologies and trends to address the challenges of businesses arising from digitization. He is currently evaluating the impact of blockchain for SAP and our enterprise customers.

Ulrich Scholl

About Ulrich Scholl

Ulrich Scholl is Vice President of Industry Cloud and Custom Development at SAP. In this role, Ulrich discovers and implements best practices to help further the understanding and adoption of the SAP portfolio of industry cloud innovations.

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Culture: More Than Just An HR Thing

Shane Green

“Company culture shapes every minute of the workday and every decision that is made.” -Taylor Smith, CEO & Cofounder of Blueboard.

What is culture? I consider it the collective mindset and attitude of your employees about what they do, which manifests itself in how they do things—in other words, their actions and behaviors. These behaviors manifest themselves in their interactions with your company, your customers, and other associates or staff.

This mindset—the one your staff brings to work every day—determines how they will take care of your customers, how much effort they will put into their work, and whether or not they will stay with you long-term.

The mindset and attitude of your employees plays a significant role in how they will perform at work. How someone feels about coming to work affects his or her energy levels and cognitive abilities. The impact of a negative culture is tremendous. It can lead to poor customer interactions, high turnover, underperforming staff, and in turn, reduced profits. Depending on the size of your company, the cost could be thousands, millions, or even billions of dollars.

The research is clear across industries: When your employees are more positive, your company is more productive and profitable. According to a Gallup study from 2012, organizations with engaged employees are:

  • 10% more customer service-oriented
  • 21% more productive
  • 22% more profitable

When you consider the numbers, culture is the most important consideration in business today. And as a result, we should reconsider the position and idea that culture is only the responsibility of your human resources team. Culture must be the focus and responsibility of every executive, owner, and manager in your company.

I often hear owners, executives, and managers argue against investing in their staff. Here are a few of the arguments I hear most frequently:

  • We need to remain focused on our customers and their experience. After all, we are in the customer experience economy. While customers are important, I would argue that we are in the employee experience economy. The talent war is over—talent won, and as a result, if we do not take care of our best and brightest people, another company will. And if you take care of your employees and they feel good about who they work for and what they do, they will naturally take care of your customers anyway.
  • Employees (especially young ones) don’t work hard anyway, so why give them more? The reality is this generation, just like previous generations, have the capacity to work very hard; it’s just that the new generation of workers don’t see the value in investing in a business that doesn’t invest in them.
  • The employees will just leave anyway. To this I say: maybe they will, but if you want any chance to keep your best and brightest, you need to provide them a better employee experience than they received in the past.

If you are focused on profits and productivity (and let’s face it, who isn’t?), then you must be willing to deliver a better employee experience to positively impact the mindset and attitude of your people coming to work. Culture is the most important thing in business today, so every owner, executive, and manager must keep it front and center in everything they do.

Remember what author Stephen Covey said: “The main thing is to keep your main thing the main thing.” Make culture your main thing.

Additional resources

Photo Credit: Françoise Challard Flickr via Compfight cc

 

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