First Look

First Look summarizes new working papers, case studies, and publications produced by Harvard Business School faculty. Readers receive early knowledge of cutting-edge ideas before they enter the mainstream of business practice. For complete details on faculty research, see our Working Papers section.

September 11, 2007

If your company has been plagued by a series of revolving-door chief executives, here's a heads-up for autumn. A book due out in November takes a fresh approach to the problems of succession planning. According to Joseph L. Bower, companies can avoid some of the disappointing results associated with newcomers and promote from within, but in a savvy way. The secret is cultivating "inside outsiders," leaders who know the company inside and out yet bring enough emotional distance to make appropriate decisions. The book is The CEO Within: Why Inside Outsiders Are the Key to Succession Planning. Bower, a professor at Harvard Business School, has taught in the MBA and Executive Education programs and is an expert on corporate strategy, organization, and leadership.

Also new this week, a working paper on strategy; a case on critical business challenges for Indian pharmaceutical Biocon; and much more.

 

Working Papers

Strategic Interactions in Two-Sided Market Oligopolies

Abstract

Strategic interactions between two-sided platforms depend not only on whether their decision variables are strategic complements or substitutes as for one-sided firms, but also—and crucially so—on whether or not the platforms subsidize one side of the market in equilibrium. For example, with prices being strategic complements across platforms, we show that a cost-reducing investment by one firm may have a positive effect on its rival's profits and a negative effect on its own profits when one side is subsidized in equilibrium. By contrast, if platforms make positive margins on both sides, the same investment has the regular, expected effects. Our analysis implies that the strategy space and the logic of competitive advantage are fundamentally different in two-sided markets relative to one-sided markets.

Download the paper: http://www.hbs.edu/research/pdf/08-011.pdf

Future Lock-In: Future Implementation Increases Selection of 'Should' Choices

Abstract

Revised August 2007. People often experience tension over certain choices (e.g., they should reduce their gas consumption or increase their savings, but they do not want to). Some posit that this tension arises from the competing interests of a deliberative "should" self and an affective "want" self. We show that people are more likely to select choices that serve the should self (should-choices) when the choices will be implemented in the distant rather than the near future. This "future lock-in" is demonstrated in four experiments for should-choices involving donation, public policy, and self-improvement. Additionally, we show that future lock-in can arise without changing the structure of a should-choice, but by just changing people's temporal focus. Finally, we provide evidence that the should self operates at a higher construal level (abstract, superordinate) than the want self, and that this difference in construal partly underlies future lock-in.

Download the paper: http://www.hbs.edu/research/pdf/07-038.pdf

 

Cases & Course Materials

Abraham Lincoln and the Civil War

Harvard Business School Compilation 805-115

Analyzes Abraham Lincoln's leadership during America's greatest crisis, the 1861-1865 Civil War. Using Lincoln's own words, the case traces the development of the 16th president's leadership philosophy, ethics, and skills in the years leading up to war.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=805115

Biocon Limited

Harvard Business School Case 107-083

Biocon Limited was facing significant pricing pressure in their cash cow business, that primarily consisted of manufacturing Active Pharmaceutical Ingredients (APIs). To combat this commoditization, Biocon's leadership had chosen an innovation-led strategy. This new strategy consisted of licensing and developing proven molecules from strategic partners to leapfrog competition and create large molecule biologics in India. The company understood that its transition from an API to an innovation-led company focused on new biologics would require patience and a risk-taking mindset. Although there was some commonality in the bioprocessing aspects of both approaches, the regulatory approvals, product development paths, and market-access timelines were dramatically different--almost diametrically opposed. Analyzes Biocon's strategic decisions, as well as the risks and challenges associated with migrating from a manufacturing to an innovation-led enterprise. How would they balance short-term pragmatism versus long-term vision? Do they have the appropriate human resources to scale and innovate? Is their India-centric strategy appropriate, since 86% of their end-market demand is in the U.S., Europe, and Japan? Fortunately, early indications with their innovation-led strategy were showing positive signs and demonstrable results—such as their biogenetic insulin and monoclonal antibody launch in India. Their lead oral insulin project, with a planned $100 million budget, was meeting its milestones and deliverables. Many critical business challenges are detailed in this case. Nevertheless, given their fully integrated business model and significant manufacturing base, the odds are in Biocon's favor to overcome these challenges and lead India's biotechnology revolution.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=107083

BT Plc: The Broadband Revolution (B)

Harvard Business School Supplement 407-002

Supplements the (A) case.

Purchase this supplement:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407002

Marie Trellu-Kane at Unis-Cite (A)

Harvard Business School Case 407-106

Marie Trellu-Kane is trying to decide how Unis-Cite should respond to French President Jacques Chirac's announcement in 2005 of a new national voluntary civil service program. Since 1994, Trellu-Kane and her co-founders had been creating and overseeing a civil service program called Unis-Cite, in which youth, particularly from the disadvantaged immigrant population, volunteered nine months of their time to work on community projects. Based in Paris, France, Unis-Cite had begun to expand to other areas. With the announcement that the government would provide funding to mobilize thousands of youth volunteers, Trellu-Kane needed to decide how Unis-Cite would proceed.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407106

A Note on European Private Equity

Harvard Business School Note 299-017

Provides an overview of the European private equity industry as of mid-1998.

Purchase this note:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=299017

 

Publications

The CEO Within: Why Inside Outsiders Are the Key to Succession Planning

Abstract

With rising CEO turnover, companies are increasingly looking outside for qualified candidates. Sure, externally recruited CEOs bring fresh perspectives and connections. But they lack the in-depth knowledge of the company's culture and history that they need to succeed. Result? Many deliver disappointing performances. Companies can avoid this scenario, contends Joseph Bower in The CEO Within. Drawing on a decade's research (including interviews with leading CEOs) and experience managing the succession process, Bower explains how companies can develop a cohort of internal candidates—one of whom may be suited to the increasingly demanding CEO role. The key? Groom "inside-outsiders." These leaders view their role through the lens of someone who just bought the company—unencumbered by the cognitive and emotional baggage that comes from a long tenure in the organization. But they also leverage the knowledge they've accumulated about the company's people, suppliers, customers, and future direction. Placed squarely at the intersection of succession planning and leadership development, this book describes the distinguishing attributes of the inside-outsider and reveals how to recruit, nurture, and promote this special type of leader. With a healthy supply of qualified internal candidates, companies get the leadership they need—when they need it.

Who Killed Health Care? America's $2 Trillion Medical Problem—and the Consumer-Driven Cure

Abstract

In the battle for U.S. health care, patients and doctors are losing. Who Killed Health Care? shows how to win the war. One of the nation's most respected health care analysts, Regina Herzlinger, exposes the motives and methods of those who have crippled America's health care system—figures in the insurance, hospital, employment, governmental, and academic sectors. She proves how our current system, which is organized around payers and providers rather than the needs of its users, is dangerously eroding patient welfare and is pushing costs out of the reach of millions. Who Killed Health Care? then outlines Herzlinger's bold new plan for a consumer-driven system that will deliver affordable, high-quality care to everyone. By putting insurance money in the hands of patients, removing the middleman in the doctor-patient relationship, and giving employers cost relief, consumers and physicians will be empowered to make the system work the way it should.

Return to Imperial Trade? John Holt & Co (Liverpool) Ltd. as a Contemporary Free-standing Company, 1945-2006

Abstract

John Holt & Co is one of a group of unlikely survivors from the imperial era: medium-sized firms that continue to trade between Europe and Africa and whose continued existence is only rarely commented upon. The Liverpool-based John Holt & Co with its Nigerian subsidiary John Holt PLC is an interesting case for a pilot study because the company returned in 2001 to an organizational form that is known as free-standing company in the historical literature on imperial business. These companies only had a small head office in the metropolitan country, often in major port cities or the capital, which supervised the operations in another, normally less developed, country, where all business and investment took place. Although frequently associated with imperialism, there is reason to believe that John Holt is not an isolated case of a company assuming this form. Holt and others function as intermediaries between global business, which rarely invests in small African markets and where commercial practices are often complicated, heavily based on personal contacts, and incompatible with the structures of large multinationals.

Local Company Politics: A Proposal

Abstract

Corrupt politicians, and poor government more generally, are commonly viewed as a primary barrier to economic progress. The roots to these problems run deep in many political systems across the developing world, and attempts at reform have rarely found much success. To combat this impasse, we suggest a radical new approach to local politics that, instead of proposing reforms to the electoral process, focuses on the political actors that might enter into this process. Specifically, we suggest that private firms be allowed to compete in elections to hold public office. That is, a corporate entity (e.g., Ernst and Young), rather than an individual representative of the firm, would be permitted to contest a local election. We argue that this is feasible: sufficient economic incentives could be put in place to induce firms to run for office, particularly if company officeholders prove to be competent in revenue collection. More importantly, we claim that there are many channels through which company politics should improve government, from breaking up entrenched old boys' networks to leveraging a company's existing organizational expertise. Private firms have realized efficiency and performance gains in areas such as infrastructure and many bureaucratic functions; we argue that the private sector can also attain results in politics, the most public of all realms.

Teaching Executives and Teaching MBAs: Reflections on the Case Method

Abstract

In this article, I draw on interviews with experienced executive education teachers and young instructors who have recently shifted into executive teaching to explore the distinctive features of executive teaching, as contrasted with MBA teaching, in a case method environment. These interviews highlight differences in three broad areas: program purpose, student characteristics, and class dynamics. In each area, I examine the associated pedagogical challenges and then develop implications for instructor preparation, class planning, session design, and approaches to discussion leadership.