The Washington Monthly published a wonderful “College Ranking” study this month (its 2nd annual) that asks an interesting question–and makes me wonder why nobody asked this before: what are colleges and universities for? In other words, if college rankings are so important–what are we ranking these institutions on?

What are reasonable indicators of how much a school is benefiting the country? We came up with three: how well it performs as an engine of social mobility (ideally helping the poor to get rich rather than the very rich to get very, very rich), how well it does in fostering scientific and humanistic research, and how well it promotes an ethic of service to country. We then devised a way to measure and quantify these criteria (See “A Note on Methodology“).

Such an obvious question…in hindsight. And it turns out that asking the question this way gives you a ranking that barely matches the traditional rankings. While the other yardsticks describe the advantages that go to students attending particular schools, they miss the true contribution of the particular schools to those advantages.

Huh? To bite on my argument, you need to first buy the difference between intellectual capital and social capital. Simply put, intellectual capital is what you know, social capital is who you know. Some people are smart, others are well-connected (and some are both). Who wins in the end? You probably can guess the answer. There is hope that the best people become the best connected, but there is hope of winning the lottery too.

The study hit home for me because I had just read a wonderful post by Clarence Fisher on how computers and the internet (and internet blogging) reduces the distance from rural schools to the kind of social connections traditionally found only in metropolitan areas. Clarence cited an Economist article, The Invisible Hand on the Keyboard, that wondered why academics blog. A tangential point in the article is the diminishing benefit of connections that top schools provide as the ability to communicate easily across distance took hold:

With professors spending so much time blogging for no payment, universities might wonder whether this detracts from their value. Although there is no evidence of a direct link between blogging and publishing productivity, a new study* by E. Han Kim and Adair Morse, of the University of Michigan, and Luigi Zingales, of the University of Chicago, shows that the internet’s ability to spread knowledge beyond university classrooms has diminished the competitive edge that elite schools once held.

Top universities once benefited from having clusters of star professors. The study showed that during the 1970s, an economics professor from a random university, outside the top 25 programmes, would double his research productivity by moving to Harvard. The strong relationship between individual output and that of one’s colleagues weakened in the 1980s, and vanished by the end of the 1990s.

In this case, the professor’s intellectual capital (their smarts as measured by publications) depended significantly on their social capital (their networks of colleagues down the hall).

So would the same benefit seem to apply to the students taking classes with those same professors? Better performance comes from better connections.

You can’t argue with that–who doesn’t want better performance? But very interesting lessons might be learned if you try to separate out the advantages that go to students attending particular schools from the true contributions of those particular schools to creating those advantages. It might change our ideas about what we do, what we teach, and why.

There is an interesting kerfuffle brewing about the Long Tail phenomenon, and whether it’s all lies, damn lies, or just statistics. Thanks to Lance Knobel (Davos Newbies) to turning me on to more of the reactions to Chris Anderson’s new (and clearly provocative) book, The Long Tail.

Reading the online debate about whether 20% of the glass is 80% full or 80% of the glass is 20% empty will soon make dancing on the head of a pin sound like fun.

In any case, the Long Tail idea has the ring of truthiness about it. So let’s accept it for the sake of discussion as there seems to be an important question smack in the middle of the idea: Is the long tail good news or bad (or no news) for established businesses? The answer, of course, is it depends.

It seems to depend, mainly, on whose side of the supply chain you’re on. At its simplest, the Long Tail is good news if you’re selling what others are making and bad news if you’re making what others are selling.

If you’re an aggregator (i.e., retailer), the long tail can help you (presuming you can fit within the constraints of low-cost inventorying, customer acquisition, marketing, etc…) because it means you are able to offer a greater variety of products, catering to many small niches where there is less competition and better margins.

If, on the other hand, you’re making products, it means there’s plenty of room in the long tail for selling one of something. For established companies, selling one thing is bad business. For the guy producing an album in his bedroom, selling one thing is good business. And soon, according to the Long Tail, big companies will be competing with millions of these smaller producers, who would each be quite happy with an extremely infinitesimal piece of the pie.

But all is not lost. Most big companies, however, are some combination of aggregator and producer. Even manufacturing firms have established capabilities at the downstream end of the supply chain (like how they aggregate, distribute, and sell their back catalog products). So companies will have to think hard about the implications of the Long Tail trend for the different parts of their business–or, in other words, what long tails do they have, and what long tails are they competing against?

The long tail seems to be bad for companies who invest a lot in product development and manufacturing commitments, but great for those who can develop and produce a variety of products cheaply (where they can experiment with emerging niches). It’s bad for companies that rely on others for distribution and sales (where they may wind up in someone else’s long tail), but good for those with established networks whose long tails they can harvest.

Like most good books with great ideas, the theory behind the Long Tail has already leapt the bounds of its original context–retail–and been applied to everyone everywhere. I’m working on my long tail now. Aren’t you?

Bob Prosen just published a very nice book, Kiss Theory Goodbye, on the need for action–and actionable advice–rather than another theory of how business works. It’s refreshing in its call for returning to the basics, sort of like how I imagine Bobby Knight might view management: if you can’t dribble with both hands, master the bounce pass, and shoot the jumper, all the rest doesn’t matter. After my post on “How to read a business book”, we got to talking. Here’s the jist of the conversation:

1. If you could ask one question (or look at one behavior) to gauge the “execution” skills of an individual, what would it be?

I would ask this simple question, “Can you tell me your top three objectives and, as of today, how are you performing against each of them?” Every leader should be able to answer this on the spot without hesitation.

2. If you could measure one behavior to gauge the “execution” skills of a company, what would it be?

The most important measurement is the company’s track record at meeting their profitability objectives. Increasing positive net cash flow is king of the hill. A great way to gauge a company’s execution skills is the number of “effective” meetings they have. If meetings have an agenda, are time bound, action items are captured and completed on time and people are willingly offering assistance to one another, that’s a company focused on results.

3. You’ve spent a lot of time working with individuals and organizations–helping them be more effective. What have you learned about making your own consulting more effective?

Two important things come to mind.

1. Pick the most important things to work on and see them through to completion. Don’t get distracted. Stay focused on the significant few, not the important many.
2. Do what I do best. In other words, only work on customer opportunities that are right in my “sweet spot”. And, outsource tasks to other professionals whenever possible so I can spend my time doing what I do best–teaching and speaking.

4. Your book focuses on managing execution in existing companies–what are the critical execution skills in managing innovation, where clear directions and constant measurement can run up against uncertainoutcomes, productive failures, and non-linear progress?

Great question. In some areas such as R&D, measurements and results are applied a bit differently. First, it’s important to determine how many resources will be devoted to these areas. This allows boundaries to be established and expectations to be set. Goals such as the number of patents received, papers written in top journals, and new products brought to market on time are potential areas to measure. Often, it’s best to measure these items over time to evaluate the trend. This allows for the inevitable swing in results inherent with innovation. Another way to evaluate performance is via reviews. This allows the company’s manufacturing and development groups the opportunity to evaluate if products were delivered as agreed. Customers can assess quality and usability and, senior management can see if the ROI is meeting expectations. Even thought it may be hard to apply traditional productivity measures, companies still need to hold the leaders ofinnovation accountable.

5. What’s the most important execution skill every MBA should graduate with?

As you know, I’m fortunate to teach the nation’s only EMBA business execution course at The University of Texas – Dallas which provides me a unique perspective on this question. My advice for MBA grads is to understand and maintain the proper balance between planning and doing. Leadership is the relentless pursuit of vision and results. Both are needed. Perhaps the best way to sum it up is “At the beginning of the day, it’s all about possibilities. At the end of the day, it’s all about results”. Finally, be hard on performance and easy on people. Done well, people will judge us as someone who is fair (Here are some comments from recent EMBA grads).

Remember in the old movies when a car was racing the train to cross the tracks? The same race is underway right now between organic, the concept, and organic, the marketing feature. Nowhere was this made more clear to me than this morning, when I saw Kellog’s new Organic Rice Krispies.

The consumer market is undergoing a rapid shift towards “organic” food. The sign of the times is Walmart’s declaration of providing organic alternatives in their food offerings. Organic used to be a fringe market. Its acceptance by mainstream retailers and producers is creating a race between consumers who are asking, with their dollars, for more confidence in their food supply (from mad cow, to factory farms, to GMO foods, to Bovine Growth Hormone, to trans-fats, and on and on) and producers who are asking, with their dollars, for broader legal definitions of terms like “organic” in order to keep doing as much of what they already do as possible.
Will the shift in consumer demand create meaningful changes in the food supply? Or will the train that is the established food industry crush the concept into nothing but another meaningless marketing feature?

Michael Pollan (author of Omnivore’s Dilemma, the nearest thing to Silent Spring in the current debate) wrote a wonderful essay in NYT (6-4-06; Mass Natural) recently about the implications of Walmart’s lurch toward things organic:

Beginning later this year, Wal-Mart plans to roll out a complete selection of organic foods — food certified by the U.S.D.A. to have been grown without synthetic pesticides or fertilizers — in its nearly 4,000 stores. Just as significant, the company says it will price all this organic food at an eye-poppingly tiny premium over its already-cheap conventional food: the organic Cocoa Puffs and Oreos will cost only 10 percent more than the conventional kind. Organic food will soon be available to the tens of millions of Americans who now cannot afford it — indeed, who have little or no idea what the term even means. Organic food, which represents merely 2.5 percent of America’s half-trillion-dollar food economy, is about to go mainstream.

Pollan raises the critical issue: if Walmart insists on charging only 10% more for its organic foods, it will be virtually impossible for the concept of “Organic” to survive. What’s left will be the Organic Rice Krispies of the world: old wine in new, green, bottles.

Fortunately, my race-with-the-train analogy is not the only one that applies. The mass market often coopts emerging fringe concepts (like locally brewed beers into “macro-micros,” italian cafes into Starbucks, and Tex-Mex into McChipotles). And there is good evidence that this helps, rather than hurts, the cause. The very superficiality of marketing features legitimizes fringe behaviors, turning them into more acceptable desires for more people. One study found, for example, that when a Starbuck came to town, more people began buying coffee (and hanging around) at local coffee shops too. Who used to meet friends at a coffee shop (any coffee shop) before Starbucks?

The question on my mind: did Snap, Crackle, and Pop really go green or do they just drive their SUVs down to meet at the nearest Starbucks for a Free-Trade latte?

About 3,000 new business books are published each year in the U.S. (according to the Economist). That’s roughly 57 new books each week when, for most of us, reading even one a week feels like an accomplishment. How do you keep up? How do you read a business book?

Because I study, write, and teach innovation—a subject that fills a healthy chunk of the business book market–I end up reading a lot and so do many of the people I know (professors, consultants, and professional book reviewers). When Comstocks asked me to write a brief column, “how to read a business book,” I asked my friends and colleagues how they selected, read, and thought about business books. Their responses are organized here.

I. Read wisely.
You’ll never read everything, so relax about it. Instead, be strategic in your choice of what to read. Know what subjects you’re interested in and what you’re looking for. Books tend to focus on subjects like leadership, managing people, operations, entrepreneurship, marketing, creativity, etc… If you’re a new manager, a book on managing people can give you a good sense of how to select, train, and reward employees. If you’re looking to grow your business, a book about marketing or sales will help you think about finding new customers or closing deals. Since you’ll never read them all, know why you’re reading the ones you choose.

Books also tend to fit one of four flavors: prescriptive, descriptive, narrative, and fables. Prescriptives promise to particular solution: managing teams, motivating poor performers, making strategic decisions, finding a job, reaching your full potential, leading organizations, etc… and usually have some number of answers (5 secrets, 7 habits, 22 laws, etc…). Descriptives offer interesting explanations of what’s going on but no real actionable advice (e.g., The Tipping Point and The World is Flat). Narratives are the “great man” and “great woman” stories, usually auto-biographical, that explain how that one person was responsible for a company’s great performance (Who Say’s Elephants Can’t Dance). Finally, there are the fables, short books that offer a simple creamy insight inside a fluffy, allegorical, outside. Usually (and not surprisingly) food-related: like cheese, fish, chicken-soup. High-calorie and low-nutrition books, read them at your own peril. Know which kind of books you enjoy reading, when, and why.

2. Don’t read.
There is such a thing as reading too many books. The “margin of diminishing returns” rule applies to reading business books. Don’t read more than 2-3 books in any one field: the first can teach you a lot, the second will add a bit more, but the third will likely sound repetitive. Once that happens, move on to another field or topic. If you want to do this right, start with the classics (like Peter Drucker). As Simon London, an occasional reviewer for the Financial Times says, “It is a cliche, but true, that the biggest challenge for any management writer is finding something to say that Drucker has not already said better.”

3. Read efficiently
The first chapter of a business book (almost) always provides the entire set of ideas contained in the book. Also, the authors likely spent the most time and attention on it, as it was the one they used to pitch the book to the publishers. Read that chapter well. Most of the other chapters will elaborate on the ideas presented here—so decide in this first chapter which ideas are most interesting to you and read (or skim) those subsequent chapters closely.

Also, because readers pay attention to the beginning and end of every chapter, paragraph, and section, if writers want to say anything important, they usually say it there. So a well-written book can often be read simply by reading the first section of every chapter, the first paragraph of every section, and the first sentence of every paragraph. Decide how much time you’re willing to devote to this book. Is it a classic? Read it well throughout. Is this your second book on a subject? Read the introductions to each chapter, and skim the sections. Try to figure out what each chapter and section are saying—in your own words—and search for the key points. Is this your third (or more) book? Read the chapter headings and only dive deeper if it looks like you’ll find something you don’t already know.

4. Read skeptically.
Most business books are made of three roughly equal parts. The first part is just plain obvious. It’s the head-nodding claims about how critical leadership is, what changing times we live in, or how we need to be happy in our work. This stuff makes sure the reader is reading the right book—a little like when the flight attendant tells you where this fight is heading. The second major part includes the ideas that are common to most every business book on the subject: leaders are visionary, innovation is about breaking the rules, etc… This is valuable knowledge the first time you hear it, and also why the second book you read is less enlightening. The last third of the book is what’s the unique contribution of the author. When you’ve got a good sense of the first two thirds, you can begin skimming books looking for this last, elusive bit of value. But beware! The rule of thirds applies here too: 1/3 of this unique contribution will be brilliant, 1/3 will be obvious, and 1/3 will be complete malarkey. You’ll have to figure out which is which.

5. Finally, read the reviews
Even if you read the book, read the reviews other people write. For some books, it’s more important to know what everyone else thinks it says than to know what the author actually said. These are the cocktail and conference room books: Tipping Point, Innovator’s Dilemma, etc… I recommend getting familiar with one or more professional reviewers, like Jim Pawlak (syndicated columnist, Biz Books) and Robert Morris (a top-ten reviewer for Amazon)—it’s easier to trust a review when you’ve read others by the same reviewer. Read a few reviews to find out how everyone has decided to interpret these books. Tipping Point is about how networks enable the flow of ideas; Innovator’s dilemma is about how established companies always miss the next disruptive technology–these books are about a lot more than that, but this is what everyone thinks they said.

There’s a lot of talk about how alternative energy will displace oil, but the real revolution will probably not come by replacing a single ingredient in the jambalaya that is our current energy predicament. It will probably come from making wholly new markets where none existed before. One such market is emerging now: the market for energy savings (see Red Herring’s Checks For Demand-Response). Think of it as Web2.0 for the 100-year old energy industry.

Got any unused energy to sell? Maybe. If you’re big, flexible, and organized. If you are, then you may be able to sell to utilities the ability to turn off your big ticket energy appliances (think HVAC, primarily, but also other major energy drains that you can do without for short periods of time with little advance warning). The idea is called demand-response, and it enables the utilities to avoid those rolling black-outs that shutter entire neighborhoods (causing technical and PR nightmares).

But if you’re not big, flexible, and organized, there’s no market for you. Enter market-makers like Consumer Powerline, which both enables consumers to sell their (potentially) unused power and aggregates many small consumers into a single big, flexible, and organized one. In essence, companies like Consumer Powerline are mimicking utilities by enabling and then aggregating the demand response capabilities of their clients and selling it back to the utilities under peak power conditions.

The interesting idea: using technology to enable and then aggregate many small energy sources (in this case, sources of energy savings) which then can be sold back to the utilities. Once such a ground-up market emerges, the variability in energy demand and production becomes itself a resource to manage and commercialize. Call it Grid2.0, it’s a business model very similar to Web 2.0, in which IT enables, aggregates, and then exploits the value of user-generated content.

As the revolution slowly unfolds…Tivo responds to the networks’ posting their programming on the web by partnering with startup Brightcove to allow TiVo subscribers to download (via the web) “television-like” programming: Tivo Brightcove pact.

So while the networks fret about how their right to bundle good and bad shows together, stuff the gaps with commercials, and insist viewers sit through the whole mess, the world evolves around them. And while they put some half-hearted effort into posting their own shows on their own websites, others find a better way to give the viewers what they want.

Is it really unexpected that we would receive programming via the web? We saw that wave coming a mile away. The interesting questions aren’t if, but how. Will we all watch via RSS feeds? Via blogs, complete with commentary? Bundling will look more like Long Tail TV than must-see TV, where recommendations will lead particular viewers along particular paths based on their own preferences.

In that world, neither TiVo (with or without Brightcove) nor the networks have an advantage.

Had Santayana been a business guru, he might have noted how business’ obsession with the now guarantees they will repeat the past. A wonderful article by Steve Lohr in the NYT today (Microsoft and Google Grapple for Supremacy) put the battle for the internet in the context of historical battles: for the automobile market (Ford vs GM) and for retailing (Sears vs Montgomery Ward) in the early 1900s.
As Lohr points out:

…perhaps even more significant, those who came out on top, judging from history, had two more specific attributes. They were the companies, according to business historians, that proved able to adapt to change instead of being prisoners of past success. And in their glory days, these corporate champions were magnets for the best and brightest people.

Interestingly, the first case, of “not being prisoners of the past” seems to be both the reason why nervous executives avoid history and, at the same time, remains prisoners of their own.

The second case, winning the war for talent, may be misleading as it’s a real chicken-and-egg issue. Lohr suggests the scientist Kai-fu Lee’s migration from M’soft to Google is a sign of Google’s winning the war for talent, similar to when Robert E. Wood left Montgomery Ward for Sears. The same thing happened at Ford. One of Henry Ford’s top executives, Knudsen, went to GM, where he was responsible for many of the manufacturing innovations that enabled GMs rise.

But it was not Knudsen’s arrival at GM that signaled the turning point. It was his departure from Ford . A subtle difference, yes, but a crucial one.

Knudsen left because Henry Ford stopped listening to his lieutenants–who were pushing for different car models and more robust manufacturing (two other top executives left as well, Harold Wills and Norval Hawkins). Did Kai-fu Lee leave because Google looked like more fun, or because M’soft stopped listening? If you focus on his arrival, it looks like Google is winning; if you focus on his departure, it looks like Microsoft has already lost. A subtle difference.

History has a lot to say, but Lohr ends the article by asking historian Richard Tedlow what insight history might provide into the future: “I’m a historian,” said Mr. Tedlow of Harvard. “Ask me in 10 years and I’ll tell you why what happened was inevitable.”

The Bush administration has become adept at dangling technological panaceas in front of us, promising a solution is around the corner that will end our energy woes (earlier). The latest in the litany is ethanol–the promise that converting biomass (corn, switchgrass, sugarcane) into ethanol would displace some percentage of gasoline consumption, thus reducing our “oil addiction.” Unfortunately, we may be as addicted to corporate lobbying and government subsidies as we are to oil, dooming any effort to effectively promote ethanol.

The recent spikes in gas pricing have been attributed to a government mandate for increased ethanol additives–something that everyone saw coming and nobody managed to plan for. And now ethanol shortages have driven up prices everywhere. Underneath the surface, however, we find that the shortage in ethanol comes in large part from steep tariffs on ethanol imports:

The U.S. currently levies a tariff of 2.5%, as well as a second duty of 54-cents-a-gallon, on all ethanol. That equals a giant tax that must be factored into already sky-high gas prices, and helps explain why the import market remains tiny. (WSJ, A Good Gas Idea)

Emerging technologies will never overpower the established interests strictly on technical merits. As the WSJ editorial continues, “[domestic] ethanol makers receive more government subsidies and are responsible for far more of the current gasoline price spike.” When it comes to complex systems, and energy is as complex as they get, new solutions (or even underused old ones) will have to find ways to ally with established interests or they will remain, as Bush said, just around the corner. Good for politicians, bad for progress.