In organizations of all sizes, attention is a scarce resource. That’s why the leader who succeeds is the leader who helps people manage attention.

“What information consumes is rather obvious: It consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention.” – Herbert Simon, economist and Nobel Prize recipient

One of the striking realities of our time is that we have catapulted forward from an era of information overload to one of information assault. Today, the best and the brightest of CEOs are being challenged to absorb and manage the torrent of information—and the requests for information—that comes their way every day. That challenge underlines one of the most pressing problems for leaders: They simply do not have enough attention to give and to go around, to meet the unrelenting demands of and for information. Yes, we are living in the New Economy. At the same time, however, we are also living in the Attention Economy.

Today, there is no shortage of capital, labour, knowledge and, of course, information. There is, however, at least one glaring scarcity, human attention. There is a shortage not of telecommunications bandwidth, but rather of human bandwidth.  Businesses today have an attention deficit, and the implications for business—especially for issues of strategy and structure—can be surprising. Our research has convinced us that, in today’s economy, attention is the scarce resource. Consequently, corporate leaders need to help the people in their organizations manage attention. The starting points, we suggest, are strategy and structure.

THE ATTENTION CRISIS

There is an attention deficit, partly, but only partly, because the price of information has been growing less expensive for many, many years. By one analysis, there are more facts in a single edition of the Sunday New York Times than anyone in the world could have commanded in, say, the 15th century. In 1472, for example, the best university library in the world, at Queen’s College in Cambridge, had 199 books. Today, more than 300,000 new books spew forth from worldwide presses every year. The Web includes at least two billion pages, a large chunk of which can’t be found even with the best search engine. (And let’s not forget that there are 11,339 distinct electronic databases, up from just 301 in 1975.)

It’s not just library-type information that overwhelms us. The typical viewer today can choose from 80 percent more new feature films than were released in 1990. The average grocery store stocks about 40,000 different items or SKUs; roughly 15,000 new grocery products are introduced each year. Think of this business problem: In this environment, how can your new product become one of the only 150 SKUs the average household buys each year? The problem is not only one of reaching consumers; it is a problem that affects the B2B market and internal management as well. Today’s manager can, with just a few mouse clicks, call up more information than any of us can ever fully absorb—all the while dealing with an increasing number of phone calls, faxes and mail.

 

 

MORE THAN INFORMATION OVERLOAD

It’s important to understand that the growing importance of attention management is far more than a response to information overload. An equally important challenge is the increasing speed and complexity of our business lives. Decades of global competition have produced lean organizations, very high customer expectations, short cycle times, and a need for just-in-time everything. These challenges can be described in an information context, but they really go much further afield.

We all know about the attention deficit problem at some level; we live with it every day. And reflecting on our own experience may be the best indication of how serious this problem is for any business. Think of your own behaviour, and that of your colleagues. Do you know anyone who isn’t becoming used to having his or her attention skip from topic to topic like a fairy sprite? Who doesn’t have the nagging sense that there are far more people, tasks, topics, inputs and decisions than anyone could manage? In this environment, attention management becomes a question of survival. What if attention is focused on the wrong topics, or just wanders about randomly? Can we focus organizational attention at all? Can we stretch the organizational attention span when we need to? And if we can, then how can we?

There are answers, and they are ones your firm can live with. Having conducted substantial research on the Attention Economy, we have concluded that attention can be managed. Indeed, it must be. In this economy, every business faces two basic problems: How can it get and hold attention (consumers, stockholders, potential employees, etc.), and how should it allocate its own attention (in the face of overwhelming options)? Companies who fail in these tasks will fail—period. But those who succeed will find that winning the battle for attention pays handsome rewards.

Winning that battle begins with understanding the attributes of the Attention Economy. This will allow you to manipulate this era’s zero-sum resource more effectively both outside and inside the firm. Of course, attention is a big subject. In a book we have written, we use a principle-centred approach to analyze it systematically, exploring the full range of topics that executives need to understand—the economics and measurement of attention, its psycho-biological foundations, key technologies, lessons from the “attention industries,” implications for leadership, and much more (The Attention Economy, Thomas H. Davenport and John C. Beck, Harvard Business School Press, 2001). In this article, we want to focus on just two topics—topics no senior executive can afford to ignore: strategy and structure. These topics are the right starting place not only because they are so important, but because strategy and structure are, in essence, vehicles for focusing organizational attention.

ATTENTION AND STRATEGY: IS THERE A DIFFERENCE?

Your firm places its own significant demands on employees’ attention, and unless your firm is very unusual, those demands have soared in recent years, with no real increase in the supply of brainpower. Yet organizations seem to survive, or at least most haven’t fallen apart yet. How is that possible? We see two factors that are responsible. One, professional and white-collar workers are putting in more hours. Two, we are processing messages faster. But there are obvious limits for both factors, and many of us feel that we have already reached them.

For virtually any firm you can name, making the right key decisions is, more than ever, a matter of attention management. Perhaps the main reason is that attention is the bridge between awareness and action. If an issue doesn’t receive attention, it won’t be resolved; attention, we know, is always the precursor of action. So attention is a vital resource indeed. That alone makes it a key in developing effective strategy. After all, one textbook method for defining strategy is to ask, “How and where am I going to commit my resources?” (R. Henry Miglione, An MBO Approach to Long-Range Planning, Prentice-Hall, 1983) Likewise with structure; an organization chart is, among other things, a map of who controls the firm’s resources.

Strategy and structure are fundamentally about attention. After all, in the world of everyday decision-making, what are strategy and structure? We answer from the behavioural perspective (exemplified by the management scholars Henry Mintzberg, James Brian Quinn and Richard Pascale). Both strategy and structure are mental constructs, important not in themselves, but for their impact on the people in the organization. There is no absolute reality of a firm’s strategy or its structure, or at least not one that we can all agree on. Rather, strategies and structures are tools to help us think. They matter only to the extent that they help executives, managers and employees work effectively. In other words, they are vehicles for focusing attention.

Consider the example of Jack Welch at General Electric. When he announced that all GE business units had to be first or second in market share by 1990, or no longer be part of GE, he was first and foremost focusing attention. After all, businesses below that level are often profitable. There might even have been a GE-owned business where it made sense to remain number three. But, in general, huge revenues and fat profit margins go to market leaders. Welch’s vision of GE as a stable of champions not only conveyed that message in a memorable way, it also focused the mind wonderfully. Its very lack of attention to the exceptional case told people that this was a serious commitment.

The need for superb attention management was also clear in Welch’s use of financial targets. For example, he felt that GE had too many people. Given a culture that verged on lifetime employment, he could have invested a lot of energy in winning support for personnel cuts. Or he could have ordered them. Instead, he relied on financial targets. “Discussion about whether you should lay off 2,000 people, or 3,000, or 4,000 is nonsense. You should be talking about how to deliver the results that a healthy business should deliver. It makes sense to talk about an earnings number. That number will force whatever head count or other changes the business needs.” That approach focused attention on two crucial elements. First, everyone understood that, whether the particular decision was on personnel cuts or anything else, the driving issue was performance. Second, the story of cuts, when they did come, wasn’t Welch, or an executive team, or “corporate” versus everyone else; it was “us versus our competitors in the market.”

ATTENDING TO STRUCTURE

We’ve seen that business strategy is largely about focusing managers’ and employees’ attention on some things rather than others. But strategy is a soft discipline. What about something hard, like organizational structure? After all, M&A decisions are ultimately about the numbers, right? And internal organization is about what it takes to get the job done. What does attention have to do with all that?

Actually, quite a bit. Organizational structure is the plan for, and the reality of, how power and responsibility are distributed across an organization. We humans are social animals. So, inside our groups, we focus on hierarchy; outside, we focus on the identifiable groups or individuals who represent opportunity or threat. Thus, organizational structure is a powerful vehicle for focusing employees’ and external stakeholders’ attention on a particular aspect of the business. It sends a message that some issues are more important than others. To create a focus on customers, we can organize around types of customers. To show employees, customers and external observers that quality is important, we can create a department for it and put a heavy hitter in charge. Structure is not the only means for focusing attention on a goal, but it often pulls other means along with it, including performance evaluation and compensation systems, organizational communications and informal social networks. For individuals, the weight of an organizational title and a position in the organization chart are powerful forces that channel attention toward a formally structured objective.

Consider one specific structural challenge, process management. The traditional organizational chart creates an attention problem: The organization is focused on lines of business or functional distinctions, not on the activities by which work gets done. Not surprisingly, it is widely believed that focusing on these processes is always good—and critical when a company is trying to improve efficiency, reduce cycle time and improve customer service. So some attention must be shifted from managers and employees. Some observers suggest that firms adopt process management as the primary or even only dimension of organizational structure. But many firms have found that this suggestion goes too far; that other, existing dimensions require attention. Typically, if other dimensions such as functional skills, geographical variations, and different markets for products and services no longer receive attention, performance will begin to suffer.

One example, of both a problem and a solution, is the Chrysler division of DaimlerChrysler. In the early 1990s, it shifted to cross-functional “platform teams” that managed the entire process of developing a new vehicle. Over all, these teams worked well, producing both successful new car designs and shorter development cycles. But the functional organization that had focused attention on producing and maintaining technical skills was no longer in place. Soon, technical experts found themselves working not with others of their ilk, but with manufacturers, marketers and financial experts on cross-functional issues. The result? A recurrence of quality problems that Chrysler had previously solved. The company is now attempting to turn some of its attention to increasing functional and technical knowledge by organizing “Tech Clubs,” so that engineers in specific domains of car development can meet with each other and exchange ideas. In general, matrix structures such as these create attention problems; our innate focus on hierarchy and threat/reward does not match well with situations where it is not clear which dimension is the primary one. But Chrysler’s Tech Club approach, a kind of “stealth” matrix, avoids this problem by giving only informal legitimacy to a second dimension of structure. It’s important to understand that the balancing act here is not about power, but rather about attention; Chrysler needs employees to stay focused on the process of developing new vehicles, but not forget about enhancing their technical skills. The Tech Club structure seems to get that balance just about right.

THE URGE TO MERGE

The lens of attention can be especially useful in deciding on, and managing, structural initiatives such as joint ventures, mergers and acquisitions. Again, the principle is simple: Scarce attention is paid to how your organization deals with both external and internal information. But the implications can seem contradictory. One of the best ways to get more attention in the market is to get bigger, so M&A activity makes sense. But the very process of deciding on, closing and absorbing a merger or acquisition fragments internal attention. A recent energy-industry joint venture illustrates the point: The JV confronted employees with new management that had an unclear agenda, was uncertain about organizational structure (including function, business unit and geography), and had literally 158 various business-improvement initiatives. Even with high oil prices, the company’s financial performance was poor. Does that mean mergers are bad?

Not at all. It means that, no matter how useful mergers are for focusing external attention, they are challenges for the internal attention market. But they can be managed. In this case, a new CEO was brought in from one of the parent companies. He reduced the number of improvement initiatives to three or four, concluded that process management was important but not something that the company was ready for, and postponed some e-commerce initiatives. “We don’t have the attention to do all this stuff,” he said.

Of course, another way of dealing with an internal attention shortage is the opposite of merging—spinning off or outsourcing. Spinoffs are much more rare than mergers, but they can have very positive bottom-line results; less to consider means more attention focused on the remaining elements. A study by Rick Escherich of J.P. Morgan shows that the typical spinoff between 1995 and 1997 actually outperformed the market by 2.6 percentage points. (Recent successes include PepsiCo’s spinoff of Tricon, its fast-food businesses, and Sears’ spinoff of non-core businesses as a key part of its turnaround.) In slower economic growth environments, as in the U.S. in the early 1990s, spinoffs did even better. By essentially splitting a corporation into two or more autonomous entities, employee attention is enhanced, not hampered. Not only is their group mission clearer, but individuals in the spinoffs who had never been eligible for stock options before suddenly become eligible. They now are paying more voluntary attention to the stock price of the unit, which seems tied more directly to their own performance. Because a spun-off firm usually has a narrow strategic focus, its value is clearer to analysts and investors. The business model is usually easier to understand and attend to, hence the market values of both the original company and the spinoff may both go up.

 

 

PROCESS MATTERS

Spinoffs and outsourcing can be great, but the urge to merge is strong for financial and psychological reasons, if nothing else. Attention analysis may sometimes suggest another path. In our experience, when acquisitions and mergers fail, attention is the issue more often than not. No matter what the external drivers are, the attention of both upper management and employees immediately shifts to internal issues once the merger is announced. In other words, in an attention-scarce environment, attention that was given to customers, suppliers, partners and other stakeholders is suddenly allocated to answering questions such as “Will I be fired?” “Will my product line be cut?” and “Who will I report to?” And while your customers may not care deeply about these issues, everyone inside your firm does; they have to. So the longer these issues remain unresolved, the faster the merger’s strategic value disappears.

Understanding that risk lets you manage it. And real-life examples prove it can be done. Consider the Megahertz Corporation. In 1994, this $50-million (U.S.) PC-card modem manufacturer based in Utah contracted with Asia Pacific Ventures (APV) to find a suitable partner to expand its operations in Japan. Megahertzal ready had captured 50 percent of the American PC-card modem market. This was due to the popularity of the xJack, a pop-out phone connector that eliminated the need to attach a separate adapter to connect to phone lines.

Megahertz had many suitors in Japan, including large and powerful companies with broad distribution relationships. With APV’s guidance, Megahertz selected Integran KK of Tokyo, making Integran its exclusive distributor for Japan. Megahertz’s decision was very much based on a pre-deal evaluation of which company would be able to pay the most attention to its products. It deemed that the large Japanese trading houses would not be able to focus on the Megahertz product line because of all the other companies they represented in Japan. Integran, on the other hand, was presented as a scrappy reseller of modem products that could drop its current product lines in favour of the Megahertz brand.

After the union of Megahertz and Integran, certain attention-based dynamics helped bolster the success of the partnership. These included the following:

1. Megahertz experienced lacklustre results in Europe, causing it to terminate all operations there, allowing international managers to give full attention to the market in Japan. This also allowed Integran to get the attention of Megahertz’s engineering and software groups to adapt Megahertz’s operations to the Japanese market.

2. Because of some other partnership deals at Integran, little management attention had been given to the division that would work with Megahertz in the period preceding the deal. By the time Megahertz came along, however, the VP of the division, Mark Uno, had become more committed to and adamant about the need to give all of his attention to the division and Megahertz. The president of Integran acquiesced, giving Uno complete freedom to manage his group. To most observers, Uno’s intense focus (with total disregard for his personal needs and health) was the primary factor in Integran/Megahertz’s success in Japan.

3. Igor Best-Devereux, the manager of Megahertz’s Asia Pacific Marketing Group, recognized Uno’s undivided attention in the success of Megahertz’s products in Japan. He gave Uno as much freedom as possible to succeed—more freedom, actually, than that typically allotted to independent organizations under corporate policy.

4. Finally, there was a very effective middleman (marriage counsellor) to keep the relationship running smoothly, despite language and cultural barriers. Integran and Megahertz decided from the beginning to retain a U.S.-based external contractor, JapanWorks, to aid with translation and cultural interfacing. A small firm founded by bilingual engineers, the company ensured that communication was accurate and swift. In the days before the universal use of e-mail, the JapanWorks team would receive fax messages from Japan in the middle of the night, translate them into English and forward them to the Megahertz team. The team would then follow up by phone to work out any potential problems. Even in an era of email, this model of cross-border relationship management is not a bad one.

Much of Megahertz’s success in Japan boiled down to attention management. The importance of attention continued to manifest itself as Megahertz was first acquired by US Robotics (USR)—which allowed Megahertz to continue to operate rather independently and with great success in Japan—and then USR, which was in turn acquired by 3Com in 1997. But in this acquisition, Megahertz’s luck with attention came to an end. 3Com was unclear about its post-merger strategies, delaying decisions for several months after the merger was completed. Once decisions were made, the structure was changed from a centralized model—where the team was able to pay full attention to international sales and support—to a distributed model, in which product managers were forced to allocate their attention between domestic and international markets. Since the domestic market produced most of the revenues, the managers naturally focused most of their attention on that market, leaving local in-country offices to fend for themselves. Sales of modem products in Japan began to suffer. The lesson of this most recent Megahertz chapter is this: Not everything that we pay attention to is succeeds, but things that we don’t pay attention to nearly always fail.

PAY ATTENTION. IT PAYS

Our research reveals that attention is a valuable lens for viewing strategy and structure. But does attention alone determine success or failure? Of course not. However, attention is the right place to start, and a perspective worth monitoring consistently. Attention is the scarce resource of our time, and a resource that is innately tied to what the human beings in the organization actually do. Leaders who understand and manage it are a long stride ahead of their competitors.