Showing papers in "Harvard Business Review in 2014"

How Smart, Connected Products Are Transforming Competition

Abstract: Information technology is revolutionizing products, from appliances to cars to mining equipment. Products once composed solely of mechanical and electrical parts have become complex systems combining hardware, sensors, electronics, and software that connect through the internet in myriad ways. These “smart, connected products” offer exponentially expanding opportunities for new functionality, far greater reliability, and capabilities that cut across and transcend traditional product boundaries. The changing nature of products is disrupting value chains, argue Michael Porter and PTC CEO James Heppelmann, and forcing companies to rethink nearly everything they do, from how they conceive, design, and source their products; to how they manufacture, operate, and service them; to how they build and secure the necessary IT infrastructure. Smart, connected products raise a broad set of new strategic choices for companies about how value is created and captured, how to work with traditional partners and what new partnerships will be required, and how to secure competitive advantage as the new capabilities reshape industry boundaries. For many firms, smart, connected products will force the fundamental question: “What business am I in?” This article provides a framework for developing strategy and achieving competitive advantage in a smart, connected world.

Decision-driven marketing

Abstract: The gap between marketers� aspirations and what their organizations can accomplish creates intense pressure to reshape how marketing is done. In recent years some leading companies have developed an innovative approach that focuses on the seams between marketing and the other functions it interacts with--the C-suite, IT, sales, finance, and so on. It is at these seams that communication most often breaks down and processes stall. Typically, three categories of marketing-related decisions cross organizational seams: strategy and planning; execution; and operations and infrastructure. When marketing works closely with other units to execute key decisions, it can get things done far more quickly and effectively than in the past. But divergent assumptions or a lack of alignment and shared commitment between functions can get in the way. When the authors asked people in marketing and other relevant units what roles they played in a decision, the answers were all over the map. In a classic example, both marketers and product developers in one automaker�s European division believed that they had the final say on which features to include in a new model. The authors provide a tool for revamping the decision process at the boundaries between functions and describe how Target, Nordstrom, and other large companies have identified important decisions at the seams and increased the impact of their marketing organizations.

What VUCA really means for you

Abstract: The article considers the management jargon acronym VUCA (volatility, uncertainty, complexity and ambiguity. The need for managers to recognize and respond to the different circumstances posed by each of the four situations within the acronym is discussed. Examples are presented of business situations and responses to them for each of the four conditions

Profits without prosperity.

Abstract: Though corporate profits are high, and the stock market is booming, most Americans are not sharing in the economic recovery. While the top 0.1% of income recipients reap almost all the income gains, good jobs keep disappearing, and new ones tend to be insecure and underpaid. One of the major causes: Instead of investing their profits in growth opportunities, corporations are using them for stock repurchases. Take the 449 firms in the S&P 500 that were publicly listed from 2003 through 2012. During that period, they used 54% of their earnings--a total of $2.4 trillion--to buy back their own stock. Dividends absorbed an extra 37% of their earnings. That left little to fund productive capabilities or better incomes for workers. Why are such massive resources dedicated to stock buybacks? Because stock-based instruments make up the majority of executives� pay, and buybacks drive up short-term stock prices. Buybacks contribute to runaway executive compensation and economic inequality in a major way. Because they extract value rather than create it, their overuse undermines the economy�s health. To restore true prosperity to the country, government and business leaders must take steps to rein them in. INSET: Idea in Brief. [ABSTRACT FROM AUTHOR]

Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business

Abstract: When Google bought Nest, a maker of digital thermostats, for $3.2 billion just a few months ago, it was a clear indication that digital transformation and connection are spreading across even the most traditional industrial segments and creating a staggering array of business opportunities and threats. The digitization of tasks and processes has become essential to competition. General Electric, for example, was at risk of losing many of its top customers to nontraditional competitors--IBM and SAP on the one hand, big data start-ups on the other--offering data-intensive, analytics-based services that could connect to any industrial device. So GE launched a multibillion-dollar initiative focused on what it calls the industrial internet: adding digital sensors to its machines; connecting them to a common, cloud-based software platform; investing in software development capabilities; building advanced analytics capabilities; and embracing crowd-based product development. With all this, GE is evolving its business model. Now, for example, revenue from its jet engines is tied to reduced downtime and miles flown over the course of a year. After just three years, GE is generating more than $1.5 billion in incremental income with digitally enabled, outcomes based business models. The company expects that number to double in 2014 and again in 2015. INSETS: WHAT MAKES DIGITAL TECHNOLOGY TRANSFORMATIONAL?;Idea in Brief;WHY NEST MATTERS;WHAT SMARTWOOL LEARNED FROM ITS DIGITAL CUSTOMERS

Workspaces that move people.

Abstract: Few companies measure whether the design of their workspaces helps or hurts performance, but they should The authors have collected data that capture individuals' interactions, communications, and location information They've learned that face-to-face interactions are by far the most important activity in an office; creating chance encounters between knowledge workers, both inside and outside the organization, improves performance The Norwegian telecom company Telenor was ahead of its time in 2003, when it incorporated "hot desking" (no assigned seats) and spaces that could easily be reconfigured for different tasks and evolving teams The CEO credits the design of the offices with helping Telenor shift from a state-run monopoly to a competitive multinational carrier with 150 million subscribers In another example, data collected at one pharmaceuticals company showed that when a salesperson increased interactions with coworkers on other teams by 10%, his or her sales increased by 10% To get the sales staff running into colleagues from other departments, management shifted from one coffee machine for every six employees to one for every 120 and created a new large cafeteria for everyone Sales rose by 20%, or $200 million, afterjust one quarter, quickly justifying the capital investment in the redesign

Making "freemium" work

Abstract: The article discusses the "freemium" business model which is used by some Internet businesses and smartphone application developers to give users free basic features of a digital product and access to premium functionality for a subscription fee. The discussion topics include the freemium marketing strategy, the life cycle of upgrades in freemium companies, and the six questions that new business enterprises should explore when considering the freemium model. The article mentions how four companies including NYTimes.com newspaper and Dropbox cloud storage use the freemium model.

Focusing capital on the long term

Abstract: Since the financial crisis of 2008, there has been widespread agreement on the need for public companies to build value for the long term. Nonetheless, because of pressure from financial markets, a detrimental focus on short-term performance persists. Reversing this trend, the authors say, depends on the leadership of major asset owners such as pension funds, insurance firms, and mutual funds. They should act by taking four practical, proven steps: Define long-term objectives and risk appetite, and invest accordingly. Major asset owners should set a multiyear time frame for creating value, decide how much underperformance they can tolerate in the short term, and then align their investments with this agenda. Practice engagement and active ownership. Big investors should cultivate ongoing relationships with the companies they invest in, collaborating with management to optimize corporate strategy and governance. Demand long-term metrics from companies to improve investment decision making. Rather than focusing on quarterly financial statements, investors should seek to obtain and analyze data that indicate a company's long-term health. Structure institutional governance to support a long-term approach. Big investors must have competent board members committed to investing for the long term, as well as policies and mechanisms to translate this philosophy into action.

Creating a culture of quality.

Abstract: The article discusses research on quality-improvement actions and strategies that employers use to encourage employees to care about quality outcomes and to make quality a cultural value in the organization. The researchers found that leadership emphasis, message credibility, peer involvement, and employee ownership are attributes which predict a corporate culture focused on quality. The discussion topics include making quality a leadership priority, delivering communications that appeal to workers, holding peers responsible for quality, and empowering workers to make quality decisions and to challenge directives that do not maintain or improve quality. INSET: THE FOUR ESSENTIALS OF QUALITY.

Understanding “New Power”

Abstract: Power clearly isn’t what it used to be. We see Goliaths being toppled by Davids all around us, from the networked drivers of Uber to the crowdfunded creatives of Kickstarter. But it’s difficult to understand what power actually is in this changed world, and how to gain more of it. Two fresh voices to HBR--Jeremy Heimans, cofounder of Purpose and Avaaz, and Henry Timms, director of the 92nd Street Y in New York--offer a framework for organizations seeking to effectively use the two distinct forces of “old power” and “new power.” Old power, the authors argue, works like a currency. It is held by few and is zero-sum. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. New power operates differently, like a current. It is made by many. It is open, participatory, and peer-driven. Like water or electricity, it’s most forceful when it surges. The goal with new power is not to hoard it but to channel it. New power actors differ from old power players along two dimensions: the models they use to accumulate and exercise power and the values they embrace. Some enterprises, like Facebook, have new power models but don’t seem to embrace the values; others, like Patagonia, have new power values but wield their influence using traditional old power models. This big-picture piece examines the underlying dynamics at work and looks at how power is really shifting: who has it, how it is distributed, and where it is heading. INSETS: New Power Case Study: Uber;Campaigning with New Power, Governing with Old.

The crisis in retirement planning

Abstract: Corporate America began to really take notice of the looming retirement crisis in the wake of the dot-com crash, when companies in major industries went bankrupt in large part because of their inability to meet their pension obligations. The result was an acceleration of America�s shift away from employer-sponsored pension plans toward defined-contribution plans--epitomized by the ubiquitous 401(k)--which transfer the investment risk from the company to the employee. With that transfer has come a dangerous shift in investment focus, argues Nobel Laureate Robert C. Merton. Traditional pension plans were conceived and managed to provide members with a guaranteed income. And because that objective filtered right through the scheme, members thought of their benefits in those terms. Ask a member what her pension is worth and she�ll reply with an income figure: �two-thirds of my final salary,� for example. Most DC schemes, however, are designed and managed as investment accounts with the goal of accumulating the largest possible pot of savings. Communication with savers is framed entirely in terms of assets and returns. Ask a saver what his 401(k) is worth and you�ll hear a cash amount and perhaps a lament to the value lost in the financial crisis. The trouble is that investment value and asset volatility are simply the wrong measures if your goal is to secure a particular future income. In this article, Merton explains a liability-driven investment strategy whose aim is to improve the probability of achieving a desired retirement income rather than to maximize the capital value of the savings. INSET: When Income Is the Goal

Why China Can't Innovate

Abstract: China has no lack of entrepreneurs, market demand, or wealth, but can the country succeed in its quest to become the world's innovation leader? For nearly 40 years, the government has been establishing research programs and high-tech zones, encouraging domestic firms to boost their innovation capacity, and helping colleges and universities flourish. Recently it declared its intention to transform China into "an innovative society" by 2020 and a world leader in science and technology by 2050. But against the government's intentions and resources run some powerful currents. Communist Party representatives must be present in companies with more than 50 employees--a requirement that constrains competitive and entrepreneurial behavior. And many Chinese companies have found that the rewards for incremental improvements are so vast that there's little incentive to pursue breakthroughs. Certainly, China has shown a potential for innovation and has the capacity to do much more. But will the state have the wisdom to lighten up? INSET: Creating Leaders Through the Liberal Arts.

Tiebreaker selling: how nonstrategic suppliers can help customers solve important problems

Abstract: In B2B markets, suppliers of nonstrategic products and services tend to assume they have only two options for landing sales: stressing their offerings’ unique characteristics and competing on price. The problem is, the features touted often don’t matter to purchasing managers, and neither do price concessions. How, then, do you win their business? The authors’ research with 46 companies points to a solution: After meeting the customer’s basic specs within an acceptable price range, give the purchasing manager "a justifier"—an extra that provides obvious value to the business. A car-leasing company, for instance, might offer the option to cancel a number of contracts without penalty, or a delivery service might print customers’ logos on their envelopes. The justifier provides a clear-cut reason to select one supplier over others and breaks the tie among the finalists on the short list. To uncover justifiers, you should explore how customers use your offerings, learn about their priorities and those of their customers, and look at ways to integrate your offerings with other suppliers’. The right justifier can win you more business—and even help you launch a new one.

Rethink what you “know” about high-achieving women

Abstract: On the occasion of the 50th anniversary of the admission of women to Harvard Business School’s MBA program, the authors, who have spent more than 20 years studying professional women, set out to learn what HBS graduates had to say about work and family and how their experiences, attitudes, and decisions might shed light on prevailing controversies. What their comprehensive survey revealed suggests that the conventional wisdom about women’s careers doesn’t always square with reality. The survey showed, for instance, that: • The highly educated, ambitious women and men of HBS don’t differ much in terms of what they value and hope for in their lives and careers. • It simply isn’t true that a large proportion of HBS alumnae have “opted out” to care for children. • Going part-time or taking a career break to care for children doesn’t explain the gender gap in senior management. • The vast majority of women anticipated that their careers would rank equally with those of their partners. Many of them were disappointed. It is now time, the authors write, for companies to consider how they can institutionalize a level playing field for all employees, including caregivers of both genders. The misguided assumption that high-potential women are “riskier” hires than their male peers because they are apt to discard their careers after parenthood has become yet another bias for women to contend with. INSET: The Gender Gap?s Refusal to Die

Four paths to business model innovation

Abstract: Drawing on the idea that any business model is essentially a set of key decisions that collectively determine how a business earns its revenue, incurs its costs, and manages its risks, the authors view innovations to the model as changes to those decisions: What mix of products or services should you offer? When should you make your key decisions? Who are your best decision makers? and Why do key decision makers choose as they do? In this article they present a framework to help managers take business model innovation to the level of a reliable and improvable discipline. Companies can use the framework to make their innovation processes more systematic and open so that business model reinvention becomes a continual, inclusive process rather than a series of isolated, internally focused events.

The collaboration imperative.

Abstract: Addressing global sustainability challenges--including climate change, resource depletion, and ecosystem loss--is beyond the individual capabilities of even the largest companies. To tackle these threats, and unleash new value, companies and other stakeholders must collaborate in new ways that treat fragile and complex ecosystems as a whole. In this article, the authors draw on cases including the Latin American Water Funds Partnership, the Sustainable Apparel Coalition (led by Nike, Patagonia, and Walmart), and Action to Accelerate Recycling (a partnership between Alcoa, consumer packaged goods companies, and local governments, among others) to describe four new collaboration models that create shared value and address environmental protection across the value stream. Optimal collaborations focus on improving either business processes or outcomes. They start with a small group of key organizations, bring in project management expertise, link self-interest to shared interest, encourage productive competition, create quick wins, and, above all, build and maintain trust.

The ultimate marketing machine

Abstract: Though social and digital media are rapidly transforming marketing and new tools emerge daily, in most firms the organization of the function hasn�t changed in 40 years. How should marketers revamp their strategies, structures, and capabilities to meet the new realities? To find out, the consultancy Effective- Brands and its partners conducted a study involving 10,000 marketers from 92 countries, which examined what separated high-performing marketers from the pack. High performers, the study showed, excelled in three areas: integrating data about what customers are doing with an understanding of why they are doing it; communicating a brand purpose (the functional, emotional, and societal benefits of the offering); and delivering a �total experience� to customers. To provide this kind of experience, high performers break down silos and enlist the help of the entire organization. That means they must link marketing strategy tightly to business strategy and to other functions; inspire employees across the company with the brand�s purpose; focus and align around a few key priorities; set up nimble, cross-functional teams; and build internal capabilities through extensive training at all levels. Surprisingly, few companies have been able to put all these pieces together. Only half of even high-performing organizations excel on some of these capabilities. But that shouldn�t be discouraging; rather, it just illuminates where there�s work to do.

The Capitalist's Dilemma

Abstract: Sixty months after the 2008 recession ended, the economy was still sputtering, producing disappointing growth and job numbers. Corporations seemed stuck: Despite low interest rates, they were sitting on massive piles of cash and failing to invest in new initiatives. In this article, a leading innovation expert and his HBS colleague explore the reasons for this sluggishness. The crux of the problem, they say, is that investments in different types of innovation have different effects on growth but are all evaluated using the same (flawed) metrics. Performance-improving innovations, which replace old products with better models, and efficiency innovations, which lower costs, don't produce many jobs. (Indeed, efficiency innovations eliminate them.) Market-creating innovations, which transform products so radically they create a new class of consumer, do generate jobs for their originators and for the economy. But the assessment metrics that financial markets--and companies--use always show efficiency and performance-improving innovations to be better opportunities. This is the capitalist's dilemma: Doing the right thing for long-term prosperity is the wrong thing for investors, according to the tools that guide investments. Those tools, however, are based on an unexamined assumption: that capital is scarce, and that performance should be assessed by how efficiently companies use it. The truth is, capital is no longer scarce, and our tools need to catch up to that reality. INSETS: Idea in Brief;Untitled;Spreadsheets: The Fast Food of Strategic Decision Making;When the World Is Awash in Capital

The real cost of "patent trolls"

Abstract: The article discusses research findings on the effects of patent trolling on the U.S. economy and presents statistics on the costs of patent litigation, reduced investment in research and development, and declines in venture investing.

The New Patterns of Innovation

Abstract: The search for new business ideas--and models--is hit-or-miss at most firms. Tackling the problem systematically, of course, will improve your odds of success. Traditional ways of framing this search examine competencies, customer needs, and shifts in the landscape. This article proposes adding a new IT-based framework. It involves asking, How can data and analytic tools be used to create new value? The authors have explored that question with many clients. In their work, they've seen IT create new value in five patterns: using data from sensors in objects to improve offerings (think smart energy meters); digitizing physical assets (such as health records); combining data within and across industries (to, say, coordinate supply chains); trading data (as mobile providers do with information on users' whereabouts); and codifying best-in-class capabilities (such as online expense management) as services. Drawing on examples from their own experience and their clients', the authors walk readers through each of the five patterns and how to apply them. They also provide advice and questions that will help executives get started on their own searches. INSET: Why Are These Patterns Emerging Now?.

Engaging doctors in the health care revolution

Abstract: A health care revolution is under way, and doctors must be part of it But many are deeply anxious and angry about the transformation, fearing loss of autonomy, respect, and income Given their resistance, how can health system Leaders engage them in redesigning care? In this article, Dr Thomas H Lee, Press Ganey's chief medical officer, and Dr Toby Cosgrove, the CEO of the Cleveland Clinic, describe a framework they've developed for encouraging buy-in Adapting Max Weber's "typology of motives," and applying behavioral economics and other motivational principles, they describe four tactics leadership must apply in concert: engaging doctors in a noble shared purpose; addressing their economic self-interest; leveraging their desire for respect; and appealing to their sense of tradition Drawing from experiences at the Mayo Clinic, Geisinger Health System, Partners HealthCare, the Cleveland Clinic, Ascension Health, and others, the authors show how the four motivational levers work together to bring this critical group of stakeholders on board

To raise productivity, let more employees work from home

Abstract: An interview is presented with Nicholas Bloom, a professor of economics at Stanford University. Bloom discusses his research on the Chinese Internet travel agency Ctrip which found that telecommuting employees were both more productive and less likely to leave their jobs. He states that telecommuting saved Ctrip $1900 per employee in costs for the nine months of the survey. Bloom acknowledges his study involved call center employees, work that can be easily done at home

Manage your work, manage your life. (cover story)

Abstract: Senior executives have discovered through hard experience that prospering at their level is a matter of carefully combining work and home so as not to lose themselves, their loved ones, or their foothold on success. To learn how they reconcile their professional and personal lives, the authors drew on five years' worth of interviews with almost 4,000 executives worldwide, conducted by students at Harvard Business School, and a survey of 82 executives in an HBS leadership course. The stories and advice of these leaders reflect five main themes: defining success for yourself, managing technology, building support networks at work and at home, traveling or relocating selectively, and collaborating with your partner. Some intriguing gender differences emerged in the survey data. For example, men still think of their family responsibilities in terms of breadwinning, whereas women often see theirs as role modeling for their children. And male executives tend to praise their partners for making positive contributions to their careers, whereas women praise theirs for not interfering. Executives of both sexes consider the tension between work and family to be primarily a woman's problem, and most of them believe that one can't compete in the global marketplace while leading a "balanced" life. "Earnestly trying to focus," the authors conclude, "is what will see them through." INSETS: Idea in Brief;ABOUT THE RESEARCH.

Making business personal

Abstract: Most people expend a lot of energy at work attempting to hide their inadequacies from colleagues. The authors believe that this is the single biggest cause of wasted resources in nearly every company today. When they went in search of firms where people see their mistakes not as vulnerabilities but as prime opportunities for growth, they found only a handful. Two stood out: Bridgewater Associates, an East Coast investment firm, and the Decurion Corporation, a West Coast real estate manager, cinema operator, and senior living center owner. Both are committed to developing every one of their people by weaving personal growth into daily work--and both are highly successful businesses. The authors spent hundreds of hours observing their practices and interviewing employees at all levels. What they saw was people working together, in meetings, in one-on-one sessions, and in the course of their everyday work, to get at the root causes of problems and devise more-productive ways of doing things. Many companies conduct root cause analysis but stop short of crossing into an employee's interior world, where so many problems begin--in, for example, a tendency to avoid confrontation, to act before thinking things through, to be overly aggressive if one's ideas are criticized, and other counterproductive thinking and behavior. At Decurion and Bridgewater, everyone from the CEOs on down to the teenage ushers works on identifying and overcoming these patterns as part of doing the job well. INSETS: Idea in Brief;LEADING a Deliberately Developmental Organization;JOINING a Deliberately Developmental Organization

IDEO's Culture of Helping

Abstract: Leaders can do few things more important than encouraging helping behavior within their organizations. In the highest-performing companies, it is a norm that colleagues support one another's efforts to do the best work they can. That has always been true for efficiency reasons, but collaborative helping becomes even more vital in an era of knowledge work, when positive business outcomes depend on high creativity in often very complex projects. A help-friendly organization has to be actively nurtured, however, because helpfulness among colleagues does not arise automatically: Competition, pride, or distrust may get in the way. The trickiness of this management challenge-to increase a discretionary behavior that by definition must be inspired- makes all the more impressive what the design firm IDEO has already achieved. Its help-seeking and help-giving culture is behind the firm's success. But how has IDEO managed to make helping the norm? To answer this question, the authors spent two years observing, interviewing people, and conducting surveys at one office of the firm. They discovered four keys to building a help-friendly organization that leaders of other organizations could learn and apply to similar effect. INSETS: Mapping Help at IDEO;The Helping Tango

The new rules of globalization

Abstract: Until 2008 going global seemed to make sense for just about every company in the world. Since then, we've entered a different phase, one of guarded globalization. Governments of developing nations have become wary of opening more industries to multinational companies. They are defining national security more broadly and perceiving more and more sectors to be of strategic importance, taking active steps to deter foreign companies from entering them and promoting domestic, often state-owned enterprises. Indeed, the rise of state capitalism in some of the world's most important emerging markets has altered the playing field. To factor globalization's new risks into strategy, executives must consider their industry's strategic importance to the host government and their home government. They can then choose among various approaches: strike alliances with local players, look for new ways to add value abroad, enter multiple sectors, or stay home. INSET: The New Risks.

Managing the "invisibles".

Abstract: Even in an age of relentless self-promotion, some extremely capable professionals prefer to avoid the spotlight. "Invisibles" work in fields ranging from engineering to interpreting to perfumery, but they have three things in common: They are ambivalent about recognition, seeing any time spent courting fame as time taken away from the work at hand. They are meticulous. And they savor responsibility, viewing even high pressure as an honor and a source of fascination. Something else unites Invisibles: They represent a management challenge. The usual carrots don't motivate them; however, managers can take several steps to ensure their satisfaction. Leaders should recognize who their Invisibles are; decide if they want more Invisibles on the team; reward them fairly, soliciting reports on their accomplishments; make the work more intrinisically interesting; and talk to the Invisibles about what works best for them. These actions are well worth taking, as Invisibles not only bring exceptional levels of achievement to an organization but quietly improve the work of those around them, elevating performance and tone across the board.

A chinese approach to management.

Abstract: At first glance, China, which is known for large, often inefficient state-owned enterprises, might appear an unlikely source of fresh management thinking. Yet Chinese companies have a lot to teach the world about today�s business imperatives: responsiveness, improvisation, flexibility, and speed. To cope with their turbulent environment, the Chinese have developed those capabilities and learned to build everything--from skilled recruits to suppliers to capital sources--from scratch. They manage very differently, too: Eschewing Western-style matrix organizations, they favor flat, loose structures that allow them to jump on new opportunities and expand quickly. They roll out new products constantly and localize offerings with a vengeance. They�re also adept at nonmarket strategies, particularly navigating local politics and relationships with the state. Indeed, China�s entrepreneurial companies may well be the vanguard of an era in which the ability to adapt quickly, navigate messy environments, and use unproven talent yields a global competitive advantage. [ABSTRACT FROM AUTHOR]