пятница, 31 июля 2015 г.

What Managers Expect from Entry Level Employees

There is a significant disparity between what managers say entry level employees need to succeed, and how man new hires actually have those skills in the managers’ opinions.
When it comes to hiring entry level employees, managers place a premium on attributes over skills, with a higher emphasis on finding and hiring individuals with skills that are difficult or impossible to be taught. When hiring:
  • 85% reported work ethic was the most important attribute for employee success.
  • 79% reported a candidate’s prestigious schooling was the least important consideration to make.
  • Only 4% of managers said how well a candidate performed during interview was the most important consideration to make when hiring.
WorkforceReadinessInfographic

Elliott Wave Principle

The idea of wave personality is a substantial expansion of the Wave Principle. It has the advantages of bringing human behavior more personally into the equation and even more important, of enhancing the utility of standard technical analysis.

The personality of each wave in the Elliott sequence is an integral part of the reflection of the mass psychology it embodies. The progression of mass emotions from pessimism to optimism and back again tends to follow a similar path each time around, producing similar circumstances at corresponding points in the wave structure. The personality of each wave type is usually manifest whether the wave is of Grand Supercycle degree or Subminuette. These properties not only forewarn the analyst about what to expect in the next sequence but at times can help determine one's present location in the progression of waves, when for other reasons the count is unclear or open to differing interpretations. As waves are in the process of unfolding, there are times when several different wave counts are perfectly admissible under all known Elliott rules. It is at these junctures that a knowledge of wave personality can be invaluable. If the analyst recognizes the character of a single wave, he can often correctly interpret the complexities of the larger pattern. The following discussions relate to an underlying bull market picture, as illustrated in Figures 2-14 and 2-15. These observations apply in reverse when the actionary waves are downward and the reactionary waves are upward.



Figure 2-14

Wave Personality


1) First waves — As a rough estimate, about half of first waves are part of the "basing" process and thus tend to be heavily corrected by wave two. In contrast to the bear market rallies within the previous decline, however, this first wave rise is technically more constructive, often displaying a subtle increase in volume and breadth. Plenty of short selling is in evidence as the majority has finally become convinced that the overall trend is down. Investors have finally gotten "one more rally to sell on," and they take advantage of it. The other fifty percent of first waves rise from either large bases formed by the previous correction, as in 1949, from downside failures, as in 1962, or from extreme compression, as in both 1962 and 1974. From such beginnings, first waves are dynamic and only moderately retraced.

2) Second waves — Second waves often retrace so much of wave one that most of the advancement up to that time is eroded away by the time it ends. This is especially true of call option purchases, as premiums sink drastically in the environment of fear during second waves. At this point, investors are thoroughly convinced that the bear market is back to stay. Second waves often produce downside non-confirmations and Dow Theory "buy spots," when low volume and volatility indicate a drying up of selling pressure.

3) Third waves — Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series. It follows, of course, that the third wave of a third wave, and so on, will be the most volatile point of strength in any wave sequence. Such points invariably produce breakouts, "continuation" gaps, volume expansions, exceptional breadth, major Dow Theory trend confirmations and runaway price movement, creating large hourly, daily, weekly, monthly or yearly gains in the market, depending on the degree of the wave. Virtually all stocks participate in third waves. Besides the personality of "B" waves, that of third waves produces the most valuable clues to the wave count as it unfolds.

4) Fourth waves — Fourth waves are predictable in both depth (see Lesson 11) and form, because by alternation they should differ from the previous second wave of the same degree. 
More often than not they trend sideways, building the base for the final fifth wave move. Lagging stocks build their tops and begin declining during this wave, since only the strength of a third wave was able to generate any motion in them in the first place. This initial deterioration in the market sets the stage for non-confirmations and subtle signs of weakness during the fifth wave.

5) Fifth waves — Fifth waves in stocks are always less dynamic than third waves in terms of breadth. They usually display a slower maximum speed of price change as well, although if a fifth wave is an extension, speed of price change in the third of the fifth can exceed that of the third wave. Similarly, while it is common for volume to increase through successive impulse waves at Cycle degree or larger, it usually happens below Primary degree only if the fifth wave extends. Otherwise, look for lesser volume as a rule in a fifth wave as opposed to the third. Market dabblers sometimes call for "blowoffs" at the end of long trends, but the stock market has no history of reaching maximum acceleration at a peak. Even if a fifth wave extends, the fifth of the fifth will lack the dynamism of what preceded it. During fifth advancing waves, optimism runs extremely high, despite a narrowing of breadth. Nevertheless, market action does improve relative to prior corrective wave rallies. For example, the year-end rally in 1976 was unexciting in the Dow, but it was nevertheless a motive wave as opposed to the preceding corrective wave advances in April, July and September, which, by contrast, had even less influence on the secondary indexes and the cumulative advance-decline line. As a monument to the optimism that fifth waves can produce, the market forecasting services polled two weeks after the conclusion of that rally turned in the lowest percentage of "bears," 4.5%, in the history of the recorded figures despite that fifth wave's failure to make a new high!




Figure 2-15

6) "A" waves — During "A" waves of bear markets, the investment world is generally convinced that this reaction is just a pullback pursuant to the next leg of advance. The public surges to the buy side despite the first really technically damaging cracks in individual stock patterns. The "A" wave sets the tone for the "B" wave to follow. A five-wave A indicates a zigzag for wave B, while a three-wave A indicates a flat or triangle.

7) "B" waves — "B" waves are phonies. They are sucker plays, bull traps, speculators' paradise, orgies of odd-lotter mentality or expressions of dumb institutional complacency (or both). They often involve a focus on a narrow list of stocks, are often "unconfirmed" (Dow Theory is covered in Lesson 28) by other averages, are rarely technically strong, and are virtually always doomed to complete retracement by wave C. If the analyst can easily say to himself, "There is something wrong with this market," chances are it's a "B" wave. "X" waves and "D" waves in expanding triangles, both of which are corrective wave advances,
have the same characteristics. Several examples will suffice to illustrate the point.

— The upward correction of 1930 was wave B within the 1929-1932 A-B-C zigzag decline. Robert Rhea describes the emotional climate well in his opus, The Story of the Averages (1934):

...many observers took it to be a bull market signal. I can remember having shorted stocks early in December, 1929, after having completed a satisfactory short position in October. When the slow but steady advance of January and February carried above [the previous high], I became panicky and covered at considerable loss. ...I forgot that the rally might normally be expected to retrace possibly 66 percent or more of the 1929 downswing. Nearly everyone was proclaiming a new bull market. Services were extremely bullish, and the upside volume was running higher than at the peak in 1929.

— The 1961-1962 rise was wave (b) in an (a)-(b)-(c) expanded flat correction. At the top in early 1962, stocks were selling at unheard of price/earnings multiples that had not been seen up to that time and have not been seen since. Cumulative breadth had already peaked along with the top of the third wave in 1959.

— The rise from 1966 to 1968 was wave [B]* in a corrective pattern of Cycle degree. Emotionalism had gripped the public and "cheapies" were skyrocketing in the speculative fever, unlike the orderly and usually fundamentally justifiable participation of the secondaries within first and third waves. The Dow Industrials struggled unconvincingly higher throughout the advance and finally refused to confirm the phenomenal new highs in the secondary indexes.

— In 1977, the Dow Jones Transportation Average climbed to new highs in a "B" wave, miserably unconfirmed by the Industrials. Airlines and truckers were sluggish. Only the coal-carrying rails were participating as part of the energy play. Thus, breadth within the index was conspicuously lacking, confirming again that good breadth is generally a property of impulse waves, not corrections.

As a general observation, "B" waves of Intermediate degree and lower usually show a diminution of volume, while "B" waves of Primary degree and greater can display volume heavier than that which accompanied the preceding bull market, usually indicating wide public participation.

8) "C" waves — Declining "C" waves are usually devastating in their destruction. They are third waves and have most of the properties of third waves. It is during this decline that there is virtually no place to hide except cash. The illusions held throughout waves A and B tend to evaporate and fear takes over. "C" waves are persistent and broad. 1930-1932 was a "C" wave. 1962 was a "C" wave. 1969-1970 and 1973-1974 can be classified as "C" waves. Advancing "C" waves within upward corrections in larger bear markets are just as dynamic and can be mistaken for the start of a new upswing, especially since they unfold in five waves. The October 1973 rally (see Figure 1-37), for instance, was a "C" wave in an inverted expanded flat correction.

9) "D" waves — "D" waves in all but expanding triangles are often accompanied by increased volume. This is true probably because "D" waves in non-expanding triangles are hybrids, part corrective, yet having some characteristics of first waves since they follow "C" waves and are not fully retraced. "D" waves, being advances within corrective waves, are as phony as "B" waves. The rise from 1970 to 1973 was wave [D] within the large wave IV of Cycle degree. The "one-decision" complacency that characterized the attitude of the average institutional fund manager at the time is well documented. The area of participation again was narrow, this time the "nifty fifty" growth and glamour issues. Breadth, as well as the Transportation Average, topped early, in 1972, and refused to confirm the extremely high multiples bestowed upon the favorite fifty. Washington was inflating at full steam to sustain the illusory prosperity during the entire advance in preparation for the election. As with the preceding wave [B], "phony" was an apt description.

10) "E" waves — "E" waves in triangles appear to most market observers to be the dramatic kickoff of a new downtrend after a top has been built. They almost always are accompanied by strongly supportive news. That, in conjunction with the tendency of "E" waves to stage a false breakdown through the triangle boundary line, intensifies the bearish conviction of market participants at precisely the time that they should be preparing for a substantial move in the opposite direction. Thus, "E" waves, being ending waves, are attended by a psychology as emotional as that of fifth waves.


Wave Tendencies

Because the tendencies discussed here are not inevitable, they are stated not as rules, but as guidelines. Their lack of inevitability nevertheless detracts little from their utility. For example, take a look at Figure 2-16, an hourly chart showing the first four Minor waves in the DJIA rally off the March 1, 1978 low. The waves are textbook Elliott from beginning to end, from the length of waves to the volume pattern (not shown) to the trend channels to the guideline of equality to the retracement by the "a" wave following the extension to the expected low for the fourth wave to the perfect internal counts to alternation to the Fibonacci time sequences to the Fibonacci ratio relationships embodied within. It might be worth noting that 914 would be a reasonable target in that it would mark a .618 retracement of the 1976-1978 decline.




Figure 2-16 

There are exceptions to guidelines, but without those, market analysis would be a science of exactitude, not one of probability. Nevertheless, with a thorough knowledge of the guide lines of wave structure, you can be quite confident of your wave count. In effect, you can use the market action to confirm the wave count as well as use the wave count to predict market action.

Notice also that Elliott Wave guidelines cover most aspects of traditional technical analysis, such as market momentum and investor sentiment. The result is that traditional technical analysis now has a greatly increased value in that it serves to aid the identification of the market's exact position in the Elliott Wave structure. To that end, using such tools is by all means encouraged.

Learning the Basics

With a knowledge of the tools in Lessons 1 through 15, any dedicated student can perform expert Elliott Wave analysis. People who neglect to study the subject thoroughly or to apply the tools rigorously have given up before really trying. The best learning procedure is to keep an hourly chart and try to fit all the wiggles into Elliott Wave patterns, while keeping an open mind for all the possibilities. Slowly the scales should drop from your eyes, and you will continually be amazed at what you see.

It is important to remember that while investment tactics always must go with the most valid wave count, knowledge of alternative possibilities can be extremely helpful in adjusting to unexpected events, putting them immediately into perspective, and adapting to the changing market framework. While the rigidities of the rules of wave formation are of great value in choosing entry and exit points, the flexibilities in the admissible patterns eliminate cries that whatever the market is doing now is "impossible."

"When you have eliminated the impossible, whatever remains, however improbable, must be the truth." Thus eloquently spoke Sherlock Holmes to his constant companion, Dr. Watson, in Arthur Conan Doyle's The Sign of Four. This one sentence is a capsule summary of what one needs to know to be successful with Elliott. The best approach is deductive reasoning. By knowing what Elliott rules will not allow, one can deduce that whatever remains must be the most likely course for the market. Applying all the rules of extensions, alternation, overlapping, channeling, volume and the rest, the analyst has a much more formidable arsenal than one might imagine at first glance. Unfortunately for many, the approach requires thought and work and rarely provides a mechanical signal. However, this kind of thinking, basically an elimination process, squeezes the best out of what Elliott has to offer and besides, it's fun!

As an example of such deductive reasoning, take another look at Figure 1-14, reproduced below:




Figure 1-14

Cover up the price action from November 17, 1976 forward. Without the wave labels and boundary lines, the market would appear as formless. But with the Wave Principle as a guide, the meaning of the structures becomes clear. Now ask yourself, how would you go about predicting the next movement? Here is Robert Prechter's analysis from that date, from a personal letter to A.J. Frost, summarizing a report he issued for Merrill Lynch the previous day:

Enclosed you will find my current opinion outlined on a recent Trendline chart, although I use only hourly point charts to arrive at these conclusions. My argument is that the third Primary wave, begun in October of 1975, has not completed its course as yet, and that the fifth Intermediate wave of that Primary is now underway. First and most important, I am convinced that October 1975 to March 1976 was so far a three-wave affair, not a five, and that only the possibility of a failure on May 11th could complete that wave as a five. However, the construction following that possible "failure" does not satisfy me as correct, since the first downleg to 956.45 would be of five waves and the entire ensuing construction is obviously a flat. Therefore, I think that we have been in a fourth corrective wave since March 24th. This corrective wave satisfies completely the requirements for an expanding triangle formation, which of course can only be a fourth wave. The trendlines concerned are uncannily accurate, as is the downside objective, obtained by multiplying the first important length of decline (March 24th to June 7th, 55.51 points) by 1.618 to obtain 89.82 points. 89.82 points from the orthodox high of the third Intermediate wave at 1011.96 gives a downside target of 922, which was hit last week (actual hourly low 920.62) on November 11th. This would suggest now a fifth Intermediate back to new highs, completing the third Primary wave. The only problem I can see with this interpretation is that Elliott suggests that fourth wave declines usually hold above the previous fourth wave decline of lesser degree, in this case 950.57 on February 17th, which of course has been broken on the downside. I have found, however, that this rule is not steadfast. The reverse symmetrical triangle formation should be followed by a rally only approximating the width of the widest part of the triangle. Such a rally would suggest 1020-1030 and fall far short of the trendline target of 1090-1100. Also, within third waves, the first and fifth subwaves tend toward equality in time and magnitude. Since the first wave (Oct. 75-Dec.75) was a 10% move in two months, this fifth should cover about 100 points (1020-1030) and peak in January 1977, again short of the trendline mark.

Now uncover the rest of the chart to see how all these guidelines helped in assessing the market's likely path.

Christopher Morley once said, "Dancing is a wonderful training for girls. It is the first way they learn to guess what a man is going to do before he does it." In the same way, the Wave Principle trains the analyst to discern what the market is likely to do before it does it.

After you have acquired an Elliott "touch," it will be forever with you, just as a child who learns to ride a bicycle never forgets. At that point, catching a turn becomes a fairly common experience and not really too difficult. Most important, in giving you a feeling of confidence as to where you are in the progress of the market, a knowledge of Elliott can prepare you psychologically for the inevitable fluctuating nature of price movement and free you from sharing the widely practiced analytical error of forever projecting today's trends linearly into the future.

Practical Application

The Wave Principle is unparalleled in providing an overall perspective on the position of the market most of the time. Most important to individuals, portfolio managers and investment corporations is that the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress. Living in harmony with those trends can make the difference between success and failure in financial affairs.
Despite the fact that many analysts do not treat it as such, the Wave Principle is by all means an objective study, or as Collins put it, "a disciplined form of technical analysis." Bolton used to say that one of the hardest things he had to learn was to believe what he saw. If the analyst does not believe what he sees, he is likely to read into his analysis what he thinks should be there for some other reason. At this point, his count becomes subjective. Subjective analysis is dangerous and destroys the value of any market approach.

What the Wave Principle provides is an objective means of assessing the relative probabilities of possible future paths for the market. At any time, two or more valid wave interpretations are usually acceptable by the rules of the Wave Principle. The rules are highly specific and keep the number of valid alternatives to a minimum. Among the valid alternatives, the analyst will generally regard as preferred the interpretation that satisfies the largest number of guidelines, and so on. As a result, competent analysts applying the rules and guidelines of the Wave Principle objectively should usually agree on the order of probabilities for various possible outcomes at any particular time. That order can usually be stated with certainty. Let no one assume, however, that certainty about the order of probabilities is the same as certainty about one specific outcome. Under only the rarest of circumstances does the analyst ever know exactly what the market is going to do. One must understand and accept that even an approach that can identify high odds for a fairly specific outcome will be wrong some of the time. Of course, such a result is a far better performance than any other approach to market forecasting provides.

Using Elliott, it is often possible to make money even when you are in error. For instance, after a minor low that you erroneously consider of major importance, you may recognize at a higher level that the market is vulnerable again to new lows. A clear-cut three-wave rally following the minor low rather than the necessary five gives the signal, since a three-wave rally is the sign of an upward correction. Thus, what happens after the turning point often helps confirm or refute the assumed status of the low or high, well in advance of danger.

Even if the market allows no such graceful exit, the Wave Principle still offers exceptional value. Most other approaches to market analysis, whether fundamental, technical or cyclical, have no good way of forcing a change of opinion if you are wrong. The Wave Principle, in contrast, provides a built-in objective method for changing your mind. Since Elliott Wave analysis is based upon price patterns, a pattern identified as having been completed is either over or it isn't. If the market changes direction, the analyst has caught the turn. If the market moves beyond what the apparently completed pattern allows, the conclusion is wrong, and any funds at risk can be reclaimed immediately. Investors using the Wave Principle can prepare themselves psychologically for such outcomes through the continual updating of the second best interpretation, sometimes called the "alternate count." Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of investing with it. In the event that the market violates the expected scenario, the alternate count immediately becomes the investor's new preferred count. If you're thrown by your horse, it's useful to land right atop another.

Of course, there are often times when, despite a rigorous analysis, the question may arise as to how a developing move is to be counted, or perhaps classified as to degree. When there is no clearly preferred interpretation, the analyst must wait until 
the count resolves itself, in other words, to "sweep it under the rug until the air clears," as Bolton suggested. Almost always, subsequent moves will clarify the status of previous waves by revealing their position in the pattern of the next higher degree. When subsequent waves clarify the picture, the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%.

Practical Application

The ability to identify junctures is remarkable enough, but the Wave Principle is the only method of analysis which also provides guidelines for forecasting, as outlined in Lessons 10 through 15 and 20 through 25 of this course. Many of these guidelines are specific and can occasionally yield results of stunning precision. If indeed markets are patterned, and if those patterns have a recognizable geometry, then regardless of the variations allowed, certain price and time relationships are likely to recur. In fact, real world experience shows that they do.

It is our practice to try to determine in advance where the next move will likely take the market. One advantage of setting a target is that it gives a sort of backdrop against which to monitor the market's actual path. This way, you are alerted quickly when something is wrong and can shift your interpretation to a more appropriate one if the market does not do what is expected. If you then learn the reasons for your mistakes, the market will be less likely to mislead you in the future.

Still, no matter what your convictions, it pays never to take your eye off what is happening in the wave structure in real time. Although prediction of target levels well in advance can be done surprisingly often, such predictions are not required in order to make money in the stock market. Ultimately, the market is the message, and a change in behavior can dictate a change in outlook. All one really needs to know at the time is whether to be bullish, bearish or neutral, a decision that can sometimes be made with a swift glance at a chart.

Of the many approaches to stock market analysis, the Elliott Wave Principle, in our view, offers the best tool for identifying market turns as they are approached. If you keep an hourly chart, the fifth of the fifth of the fifth in a primary trend alerts you within hours of a major change in direction by the market. It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so. Elliott may not be the perfect formulation since the stock market is part of life and no formula can enclose it or express it completely. However, the Wave Principle is without a doubt the single most comprehensive approach to market analysis and, viewed in its proper light, delivers everything it promises.


http://www.traderslaboratory.com

пятница, 24 июля 2015 г.

The Opportunity Paradox

Christopher B. Bingham, Nathan R. Furr and Kathleen M. Eisenhardt

Experimentation, iteration and improvisational change are all the rage in today’s dynamic business environments. But when evaluating new business opportunities, there’s a paradoxical tension between strategic focus and flexibility that can define or break your business.


Capturing new growth opportunities is fundamental to strategy, innovation and entrepreneurship. But how can managers best meet this challenge? With flexibility or focus? The answer, as it turns out, can be more complex and more crucial to a company’s success than previously thought. Our research on mature corporations, growing businesses and new ventures suggests a paradoxical tension between focus and flexibility that can define or break your business. In this article, we explore when and where to be focused and disciplined versus when to be flexible and opportunistic.
Experimentation is a familiar innovation tool, but some industry pundits suggest that planning rarely succeeds in dynamic environments; instead, they argue for a rapid cycle of experimentation and pivoting.1 Such an approach holds both intuitive and rational appeal in a world characterized by uncertainty, where the flow of opportunities is swift yet unpredictable, where market boundaries are shifting and where competitors are constantly changing. Given the new competitive environment that promotes change and flexibility, is the old strategic emphasis on focus less relevant? We argue it is not. In fact, we discovered in our interviews with a wide variety of managers that focus may be just as important as flexibility, and, counterintuitively, a company’s focus may even influence its flexibility and vice versa. (See “About the Research.”)

Opportunities Are Complex

Opportunities are more complex than people recognize. Few managers recognize that there are two components to capturing a new business opportunity: opportunity selection and opportunity execution. Opportunity selection involves determining which customer problem to solve, whereas opportunity execution deals with solving the particular problem chosen.2 Most books, articles and thought leaders studying opportunities focus heavily on opportunity execution — how to create value by developing a solution for customers. But research suggests that most innovation efforts move so quickly to identify a solution that they have to cycle back to figure out what problem they are actually solving.3
We found that opportunity selection appears to matter as much as opportunity execution, the place where most companies spend their time. More importantly, how you approach opportunity selection (whether with flexibility or with focus) has a critical impact on how successful you are at opportunity execution.

Opportunists vs. Strategists

We observed that managers and entrepreneurs tend to fall into two groups that we label opportunistsand strategists. The opportunists relied on a less scripted and more flexible approach to opportunity selection. Instead of mapping out ahead of time which opportunities they would pursue and then letting the map be their guide for subsequent action, opportunists let emergent customer inquiries shape opportunity selection. For example, one U.S.-based security software company made the choice to enter the German market because a German customer was interested in its security-monitoring services. Likewise, the software company’s decision to go to Switzerland was based on unforeseen customer demand in the country, not a deliberate plan to enter Switzerland. As one company executive stated about that decision, “It was more like we were drawn in rather than a conscious decision.”
On the surface, these managers and entrepreneurs felt they were cherry-picking low-hanging fruit and taking advantage of narrow windows of opportunity before those windows closed or before competitors captured the opportunity. Rather than wasting time developing and then executing detailed plans that might be flawed or outdated or both, they took advantage of what emerged. Overall, this flexible approach to opportunity selection is consistent with the broader strategy and entrepreneurship literature, which argues that the dynamic nature of the markets in which many companies operate lowers the benefit of pre-action deliberation, and that ambiguity is not necessarily a bad thing. Indeed, many business leaders make better decisions as they go along, rather than beforehand through focused planning.4
Strategists followed a different pattern. Since a central threat facing companies that capture emergent opportunities is the lack of focus associated with trying to address the needs of multiple markets, strategists constrained the selection of opportunities to particular markets in order to help their companies channel efforts toward opportunities that were more likely to result in success. As a result, rather than taking advantage of unforeseen emergent opportunities, strategists were more disciplined. They began by studying the nature of opportunity capture in their market. Once they had done this, they created a focused plan that riveted attention on what they believed was the best opportunity (not just the easiest) and that would allow them to capture several opportunities in a row versus one in isolation. For example, at a Finland-based company that helps organizations manage inventory through point-of-sale software solutions, leaders selected their first international market, Sweden, based on what they could learn — not just on their ability to get a sale. Although not a large market, Sweden was both culturally similar and geographically close. This reduced the risk that the company’s Finnish leaders would be overwhelmed with regional differences and increased the likelihood that they would be able to learn how to do business abroad. As the CEO explained, “We were quite conservative in this process because we didn’t know much about international business. So we started with Sweden.” After Sweden, the company chose Norway, then France, Germany, the United Kingdom and then the United States. It was able to gain experience in progressively bigger markets and exploit its growing knowledge. Overall, by being more focused in opportunity selection, companies can start with easier opportunities or opportunities that are advantageous to pursue earlier; those initial opportunities then provide the foundation for subsequent opportunities. Thus, just as the order of assembly is key when building a bridge or assembling a computer, the order of experience appears critical for effective opportunity capture.

Flexible Selection and Inflexible Execution

So how do these different patterns for opportunity selection unfold? Although flexibility can be extremely useful, we found that the opportunists who had been the most flexible in the opportunity selection phase tended to be the least flexible in the execution phase. In other words, although these managers were adept at flexibly responding to emergent opportunities, once they started to execute the opportunities, many became surprisingly inflexible. For example, at a U.S.-based medical imaging software company, leaders were very flexible about the selection of opportunities. One cofounder noted, “We were trying to get something going in Europe, so we looked for opportunities and we cherry-picked.” The company decided to enter Sweden based on some interest from local doctors there. Yet, after the company entered Sweden, the doctors appeared reluctant to use what they viewed as a new technology for an established method of mammography. Importantly, instead of flexibly executing the opportunity and changing their solutions to meet local market needs, the software company attempted to sell Americanized products everywhere. Executives selected their second country, Norway, in the same flexible fashion. When sales there didn’t materialize, executives believed the targeted customers didn’t understand the product. Rather than adjusting their approach, they pushed existing solutions. The pattern of being more flexible in opportunity selection but less flexible in opportunity execution often led to poor results. For example, commenting on their entry into Sweden, executives at the medical imaging company remarked, “We could not sell into Sweden” and “They ran off a cliff. They went nowhere.” Performance in subsequent countries was much the same.

Focused Selection and Flexible Execution

Companies that were more focused in opportunity selection were generally more flexible in opportunity execution. This pattern surprised us because although these companies showed a consistent, focused pattern of disciplined search for opportunities, they were also remarkably flexible about how they pursued the selected opportunity. For example, the founders of a Singapore-based company that develops content for wireless providers thought long and hard about which markets to enter. Based on customer interviews and market observations, management outlined the best way to tackle multiple markets, concluding that they needed to start with the Japanese market, given that consumer trends appeared to diffuse from Japan to the rest of Asia. After entering Japan, leaders started selling digital content to Japanese wireless providers. But this required going head-to-head with Japanese content providers, who were technically competent and entrenched in the market. In light of these challenges, management decided to stop trying to sell their own company’s content in Japan and instead allied themselves with Japanese content companies to sell their partners’ content in Asia. As the chairman explained, “Instead of competing with them [Japanese content companies], we decided to partner with them and take their products and sell in Hong Kong, China and Japan. So we decided to change our strategy.” The outcome from flexibly executing the opportunity in Japan was greater success. As one leader remembered, “Once we decided to partner with [Japanese companies to start selling their content outside Japan], within three months we signed up quite a lot of very reputable content makers.” We observed a similar pattern with other companies in our study: Increased focus on opportunity selection meant increased flexibility in opportunity execution. (See “Focus and Flexibility in Opportunity Capture.")

Lessons About Opportunity Capture

Our research revealed two lessons about opportunity capture that are fundamental for growth in new markets: (1) Although opportunists can be flexible in selecting opportunities, they are less flexible in executing them; and (2) longer-term success partly depends on sequencing opportunities for learning.

Cognitive Lock-In

We observed that once opportunists started to execute opportunities, they often became less flexible. Our research suggests that opportunistic managers fell into what is called a cognitive dissonance trap — a psychological pattern wherein individuals who make a decision contrary to a prior belief set experience discomfort that leads them to reshape their beliefs and perceptions to match the discordant decision.5 Not surprisingly, we observed that opportunists (like strategists) generally believed they were careful decision makers. When opportunity selection was flexible and emergent, opportunists subsequently rationalized their opportunity choices, often focusing only on the positive aspects of the opportunity and ignoring the negative. In a similar vein, they tended to blame bad events associated with the selected opportunity on external circumstances beyond their control rather than questioning the way they chose the opportunity in the first place.
For example, executives at the Finland-based security software company flexibly selected opportunities. Entry into the first country, Sweden, was not planned out in advance. As the chief financial officer noted, “Sweden was very much ad hoc.” But this view was not consistent with the rationale managers gave later, when they suggested that Sweden was purposely selected as a location where employees could “cut their teeth.” When sales in Sweden fell short, leaders began placing the blame on external sources, such as their customers’ financial positions, rather than on internal ones, such as faulty strategy. Because the weak sales were attributed to external factors, leaders did not alter their method of executing opportunities. A senior leader described how the company worked with an outside lawyer to develop a standard template: “We just would not budge on that,” he said. These restrictive policies interfered with the company’s ability to work out agreements with several major customers when it was attempting to enter the United States. The experience underscores a paradox of opportunity capture: The more that leaders attempt to control opportunity execution, the less control they seem to have. The lack of control stems, in part, from trying to standardize solutions for opportunities that are inherently unique. Among opportunist companies, greater company maturity and increased executive experience seem to further decrease the chances of flexible opportunity execution. This may be because prior patterns for executing opportunities that have proved successful become increasingly rooted and institutionalized in company practices and executive actions.
A different pattern was evident among strategists. Particular opportunities within the broader set of possibilities were viewed ahead of time and found to be more attractive than others. As leaders selected the most attractive opportunities, this reduced the need to justify choices and therefore made leaders more likely to flexibly execute opportunities. As a result, they tended to improvise and experiment during the execution of opportunities, sometimes initiating radical changes to their product or business model. For example, one company we studied provided IT security software. After carefully studying its opportunity set, it decided to enter China. To management’s surprise, Chinese customers were suspicious about paying for software — they expected software to be free. So the team leading the effort switched gears and developed a hardware solution, which ended up selling very well. As the CEO recounted, “They [Chinese customers] only pay if they see hardware. It becomes an appliance … basically it’s a PC, and then they sell it to the customer.” In general, the strategists were more likely to pivot and change than opportunists when it came to opportunity execution. They were better able to abandon existing products and practices designed for opportunity execution and adopt new, more appropriate ones.

Sequencing Opportunities

On the surface, being more flexible would seem to help managers learn and adapt. However, we found that many of the managers and entrepreneurs who were the most flexible discovered an important lesson: It’s difficult to learn if you are always changing course. Sustained business success appears to depend not just on capturing one opportunity but also on stringing multiple opportunities together. Hence, longer-term success hinges in part on sequencing business opportunities: Understanding how to capture one discrete opportunity prepares managers and the organization to capture others.
Because opportunists often took advantage of the most immediate opportunities from the flow of possibilities, they found it very difficult to learn from and build off of their efforts. Managers of more established businesses often expressed confusion about the connection between the different opportunities they were chasing and uncertainty about the lessons learned. Managers of newer businesses complained that chasing multiple markets suggested a lack of vision. These executives had a morass of data — customer needs, feedback and product features — that pulled them in many directions. As a result, it was hard to know what was most important to do to succeed. For example, the CEO of the security software developer based in Finland described the difficulty his team had applying the lessons they learned, lamenting, “We should have had more focus and more country-by-country-specific plans rather than just trying to cover all the bases in a shotgun approach.” Similarly, a U.S. entrepreneur developing and testing tools for professionals recalled, “We were doing so many things — so many different tools and quiz formats — that it wasn’t clear what we were learning from any of it. Every time we made a change, we changed so many things [that] it wasn’t clear what caused what.”
By contrast, strategists who were more disciplined in opportunity selection also paid attention to how their opportunities were sequenced. They often selected smaller or more difficult markets, which allowed managers to learn from the opportunities. For example, an entrepreneur developing learning tools in the United States decided to eliminate nearly all of the solutions he had developed and focus instead on delivering quizzes to the education market. When asked why, he said, “By focusing on a single problem for a single market, we could actually really start to learn what solved customers problems … It was the best decision I ever made. We began to really understand what educators needed and what would lead to more revenue.” By narrowing his focus, the entrepreneur was able to increase revenue 400% in the next year before moving into the testing market for business enterprises, where he found even greater success.

Focus and Flexibility in Opportunity Capture

More focused opportunity selection appears to lead to more flexible opportunity execution. However, more flexibility in opportunity selection often leads to less flexibility in opportunity execution.

In other cases, we found that strategist managers sequenced opportunities to improve their legitimacy and credibility in the marketplace. Sometimes, managers of unproven businesses attempted to establish themselves with third-tier customers and then tried to move to second-tier customers and eventually to first-tier customers. For example, a provider of semiconductor solutions for wireless devices had aspirations to sell in the U.S. market but recognized that it first needed to establish a track record. To do so, it began selling to customers in Taiwan, then leveraged those sales to win customers in Korea, and eventually lined up customers in the United States, Germany and Japan. Depending on the circumstances, the pattern can also operate in reverse and involve starting at the high end and then expanding to the broader market. For example, Tesla Motors Inc. of Palo Alto, California, which designs and manufactures electric cars, decided that selling high-end electric vehicles would promote the sale of electric vehicles in other parts of the market.
Overall, creating a sequence for opportunity capture permits leaders to bring the present and future together in a way that facilitates team alignment and channels the energy and attention of geographically dispersed employees and managers. This helps organizations get into a rhythm and move forward in a synchronized fashion. Sequencing therefore provides an order for opportunity selection (that is, where organizations are now, where they want to go and the path to get there) that serves as a counterpoint to the more freewheeling manner of selecting opportunities based on emergent customer demand. More broadly, the use of sequencing reflects increased cognitive sophistication, as it takes time for individuals to gain insight about how opportunities can and should be ordered. This is perhaps one reason why the use of sequencing seems to occur more in older companies or in companies where founders have greater experience.

Managing the Opportunity Paradox

Leaders who acted more flexibly during opportunity selection (Which problem should we tackle?) tended to be less flexible during opportunity execution (How do we solve the problem?). Conversely, leaders who were more focused during opportunity selection tended to be more flexible in executing those opportunities. Focused selection and flexible execution lead to better outcomes than the reverse. The pattern of flexible opportunity selection leading to lower-performing, less flexible opportunity execution suggests another paradox for companies pursuing new avenues for growth and profitability. While being open to selecting new opportunities based on emergent customer demand appears attractive because it offers the promise of an immediate reward, that very openness may prevent the reward from being realized.6 A key implication for entrepreneurs and managers is that they should be disciplined in seeking to understand the nature of opportunities and linkages among them and then focus their resources on the opportunities that will help them move in a sequenced fashion from their current state to a desired end state.

How to Select Opportunities

At the start of the process, there are a few rules of thumb to guide you in choosing an opportunity. To begin with, resist jumping at the first potential opportunity or customer. Showing restraint may not be easy when cash is limited and the opportunity appears to be reasonable. Nevertheless, it’s important to focus on the longer term rather than the shorter term. What does the right opportunity look like, and how will it set you up for future opportunities? Remember the lessons on sequencing: Try to see if there is an internal sequence to a series of opportunities. Will one opportunity position you for another one? Will this opportunity help you learn about another one? Will it give you the legitimacy to capture future customers? The founders of a digital gaming company applied these criteria when they assessed their opportunities for building their consumer business in Asia. In their case, it meant starting in Japan and then progressively moving to Taiwan and Hong Kong before going after other markets. One founder remarked: “The digital content business is really a consumer business, and looking at Asia’s development for consumer business — whether it’s fashion or electronics or whatever, the trend always starts in Japan and progressively moves to Taiwan and then to Hong Kong and then to the rest of the market. I mean, this trend has been like that for the last 50 years. So when we pushed consumer-based, consumer-oriented digital products, that’s the same thing we did. We started by securing deals in Japan and pushed to the next most obvious market, which is Taiwan. Once [the] consumer products were accepted in Taiwan, then we progressed even more to other markets.”

Second, think about the full portfolio of choices before you, taking into account such criteria as the opportunity size (Is it large enough to be worth your time?); reachability (Does the company have or can it develop capabilities to capture the market?); and competition (How crowded is the field of competitors?). Many managers make the mistake of chasing small opportunities that are not worth the time, big opportunities that are out of reach or moderate opportunities that are too competitive.
Finally, we note that being strategic about which opportunities make the most sense may be particularly important for younger businesses. By considering the unique characteristics of each opportunity and its link to other opportunities, entrepreneurial companies can more easily and rapidly overcome inherent liabilities of newness (such as lack of resources and track record)7 by accumulating experience in a manner that builds on the past, while simultaneously increasing credibility.

How to Execute Opportunities

Once you have selected an opportunity, remember that opportunity execution requires having a flexible, rapid and iterative learning cycle. Therefore, while emphasizing common products and practices is important for capturing efficiencies, too much emphasis on routine actions can make it hard for companies to adapt or to walk away from losing situations in the future. Leaders should begin by designing a series of experiments to test what customers want and then rapidly adjust the offerings to meet their needs. Many of the companies we studied made radical changes to their products and business models (sometimes as significant as changing from selling software to selling hardware or from being content providers to being content resellers) upon entering a new market. Some of the most successful companies walked away from what seemed like an attractive opportunity after their initial experiments. In most cases, successful execution depended on regular interaction with customers and an openness to seeing negative results and adapting, rather than blaming negative results on someone else or firing salespeople.

The Opportunity Audit

How should you proceed if you suspect you have been too opportunistic in selecting new projects and too rigid in executing those opportunities? What should you do in that situation? In our view, you should conduct an opportunity audit built around the following questions:
  • How did you choose the opportunities you are currently pursuing?
  • If you could start over, which opportunities would you choose? Which opportunities make the most sense in terms of building a powerful sequence?
  • What are the results of your current efforts? What excuses have you made for negative results that place the blame externally? What could you be missing by doing this?
  • If the company were threatened with bankruptcy today, what one opportunity would you keep and which opportunities would you give up?
After answering these questions, don’t be afraid to make substantial changes to what you are doing. Throwing good money after bad is a common trap: People tend to increase their commitment to a failure they feel responsible for when, in fact, the most rational choice may be to simply let it go and adopt a more disciplined process for opportunity selection in the future. Although this may seem counterintuitive, it will help foster the flexibility you will need for opportunity execution.

Although flexibility in opportunity capture is extremely popular these days, few recognize that opportunity capture is a two-phase process involving opportunity selection and opportunity execution. Greater focus and discipline during opportunity selection through sequencing can increase effective flexibility during opportunity execution. By contrast, a lack of discipline in selecting opportunities can result in reduced ability to learn and adapt, which in turn can hurt chances for success. Overall, what appears to be at the core of successful opportunity capture is the intended capture of the expected along with the emergent capture of the unexpected. While the former is more controlled, future-oriented and top-down, the latter is more spontaneous, action-oriented and bottom-up. Moving back and forth between focus and flexibility during opportunity capture allows companies to glean the benefits of efficiency while still allowing room for change.


REFERENCES (7)
1. E. Ries, “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” (New York: Crown Business, 2011).
2. C.B. Bingham, “Oscillating Improvisation: How Entrepreneurial Firms Create Success in Foreign Market Entries Over Time,” Strategic Entrepreneurship Journal 3, no. 4 (December 2009): 321-345.

вторник, 21 июля 2015 г.

Staying in the Know





In an era of information overload, getting the right information remains a challenge for time-pressed executives. Is it time to overhaul your personal knowledge infrastructure?
A common thread runs through many recent corporate setbacks and scandals. In crises ranging from BP’s Deepwater Horizon oil spill debacle to the Libor rate-fixing scandal in the City of London, the troubles simmered below the CEO’s radar. By the time the problems were revealed, most of the damage had arguably already been done. Despite indications that large companies are becoming increasingly complicated to manage,1 executives are still responsible for staying abreast of what’s going in their organization. But how do you keep tabs on what your competitors and employees are doing? How do you spot the next big idea and make the best judgments? How do you distinguish usable information from distracting noise? And how do you maintain focus on what’s critical?
Many management experts have assumed that better information systems and more data would solve the problem. Some have pushed for faster and more powerful information technologies. Others have put their faith in better dashboards, big data and social networking. But is better technology or more tools really the most promising way forward? We think not. In this article, we maintain that the capacity of senior executives to remain appropriately and effectively knowledgeable in order to perform their jobs is based on a personal and organizational capability to continually “stay in the know” by assembling and maintaining what we call a “personal knowledge infrastructure.” And while information technologies may be part of this personal knowledge infrastructure, they are really just one of the components.
We are not the first researchers to make this claim. More than 40 years ago, organizational theorist Henry Mintzberg suggested that information was central to managerial work and that the most important managerial roles revolved around information (monitoring, disseminating and acting as a spokesperson). Mintzberg described managers as the nerve centers of organizations and said informational activities “tie all managerial work together.”2 Other researchers suggested that management itself could be considered a form of information gathering and that we are quickly moving from an information society to an attention economy, where competitive advantage comes not from acquiring more information but from knowing what to pay attention to.3 Later research confirmed that dealing with information is critical and found that managers’ communication abilities are directly related to their performance.4
While the importance of informational roles and activities is well established, we take the idea a step further, arguing that managers — and especially senior executives — are only as good at acquiring and interpreting critical information as their personal knowledge infrastructures are. Managers rely on specific learned modes to manage and allocate their attention.5 However, how we pay attention is not simply a matter of internal mental processes that we can do little about. Rather, attentiveness (in other words, the capacity to stay on top, and the ability to distinguish between what matters and what doesn’t) mostly stems from what managers do or don’t do, whom they talk to and when, and what tools and tricks of the trade they use. In short, attentiveness relies on and is facilitated by things we can observe — and things we can do something about.
Technologies and new tools are not and cannot be “silver bullet” solutions. At times, simpler things such as talking to customers or networking with board members may be more important, provided they are done methodically and with some purpose. Selecting when particular elements are appropriate depends on the circumstances. As a result, understanding and, when needed, overhauling one’s personal knowledge infrastructure should be routine. In this article, we explain how this can be done, drawing on insights obtained by shadowing individual CEOs as they went about their daily jobs.6