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.

June 14

In a new article for Harvard Business Review, Thomas DeLong and Sara DeLong pose a paradox for high achievers. "Why is it that so many smart, ambitious professionals are less productive and satisfied than they could be? We argue that it's often because they're afraid to demonstrate any sign of weakness." One remedy: Adopt another person's point of view to review our own negative experiences. Read The Paradox of Excellence in the June edition.

Foursquare is one of the most popular of a new breed of mobile apps that broadcast your location to friends and businesses. In a new case, Mikołaj Jan Piskorski, Thomas R. Eisenmann, Jeffrey J. Bussgang, and David Chen ponder the company's growth pains and competitive threats from giants in the market including Yelp and Facebook. The case illustrates the promise of geo-location technologies and principles of lean startup technologies.

Another case looks to current headlines for lessons in how not to finance government. In The Greek Crisis: Tragedy or Opportunity?, Dante Roscini, Jonathan Schlefer, and Konstantinos Dimitriou explore the origins of the Greek financial crisis and the government's attempts to avoid default.

 

Publications

The Paradox of Excellence

Abstract

Why is it that so many smart, ambitious professionals are less productive and satisfied than they could be? We argue that it's often because they're afraid to demonstrate any sign of weakness. They're reluctant to ask important questions or try new approaches that push them outside their comfort zones. For high achievers, looking stupid or incompetent is anathema. So they stick to the tasks they're good at, even while the rest of the organization may be passing them by. In short, they'd rather do the wrong thing well than do the right thing poorly. They get stuck in this unproductive and unfulfilling pattern and can't break free. Of course, leaders in organizations bear some of the blame for this type of play-it-safe mind-set. They don't always want to hear that a person is struggling, nor do they necessarily reward risk taking, even though they might pay lip service to innovative initiative. The authors outline several steps that individuals can take to shake off fear and paralysis, including looking at past negative experiences from somebody else's point of view and seeking out safe ways to allow themselves to become vulnerable.

Read the article: http://hbr.org/2011/06/managing-yourself-the-paradox-of-excellence/ar/1

Segmenting the Base of the Pyramid

Abstract

The bottom of the economic pyramid is a risky place for business, but decent profits can be made there if companies link their financial success with their constituencies' well-being. To do that effectively, you must understand the nuances of people's daily lives, say Rangan and Chu of Harvard Business School and Petkoski of the World Bank. Start by dividing the base of the pyramid into three segments according to people's earnings and related personal needs: 1) Low income: 1.4 billion people, $3 to $5 a day; 2) Subsistence: 1.6 billion people, $1 to $3 a day; and 3) Extreme poverty: 1 billion people, less than $1 a day. Next, consider the roles of various groups in the value-creation relationship: consumers, coproducers, and clients. Specific strategies work best with people in certain roles and at particular income levels. Success requires appreciating the diversity at the base of the pyramid and the importance of scale in undertaking ventures there. Witness Manila Water's success in the Philippines and Hindustan Unilever's in South Asia. Failure to appreciate those elements can foil base-of-the-pyramid ventures, as Microsoft and Procter & Gamble each discovered.

Read the article: http://hbr.org/2011/06/the-globe-segmenting-the-base-of-the-pyramid/ar/1

The Ambidextrous CEO

Abstract

Although most managers publicly acknowledge the need to explore new businesses and markets, the claims of established businesses on company resources almost always come first, especially when times are hard. When top teams allow the tension between core and speculative units to play out at lower levels of management, innovation loses out. At best, leaders of core business units dismiss innovation initiatives as irrelevancies. At worst, they see the new businesses as threats to the firm's core identity and values. Many CEOs take a backseat in debates over resources, ceding much of their power to middle managers, and the company ends up as a collection of feudal baronies. This is a recipe for long-term failure, say the authors. Their research of 12 top management teams at major companies suggests that firms thrive only when senior teams lead ambidextrously—when they foster a state of constant creative conflict between the old and the new. Successful CEOs first develop a broad, forward-looking strategic aspiration that sets ambitious targets both for innovation and core business growth. They then hold the tension between innovation unit demands and core business demands at the very top of the organization. And finally they embrace inconsistency, allowing themselves the latitude to pursue multiple and often conflicting agendas.

Read this article: http://hbr.org/2011/06/the-ambidextrous-ceo/ar/1

 

Working Papers

Better-reply Dynamics in Deferred Acceptance Games

Abstract

In this paper we address the question of learning in a two-sided matching mechanism that utilizes the deferred acceptance algorithm. We consider a repeated matching game where at each period agents observe their match and have the opportunity to revise their strategy (i.e., the preference list they will submit to the mechanism). We focus in this paper on better-reply dynamics. To this end, we first provide a characterization of better-replies and a comprehensive description of the dominance relation between strategies. Better-replies are shown to have a simple structure and can be decomposed into four types of changes. We then present a simple better-reply dynamics with myopic and boundedly rational agents and identify conditions that ensure that limit outcomes are outcome equivalent to the outcome obtained when agents play their dominant strategies. Better-reply dynamics may not converge, but if they do converge, then the limit strategy profiles constitute a subset of the Nash equilibria of the stage game.

Download the paper: http://www.hbs.edu/research/pdf/11-126.pdf

Quantity vs. Quality: Exclusion by Platforms with Network Effects

Abstract

This paper provides a simple model of platforms with direct network effects, in which users value not just the quantity (i.e., number) of other users who join, but also their average quality in some dimension. A monopoly platform is more likely to exclude low-quality users when users place more value on average quality and less value on total quantity. With competing platforms, the effect of user preferences for quantity is reversed. Furthermore, exclusion incentives depend in a non-trivial way on the proportion of high-quality users in the overall population and on their opportunity cost of joining the platform relative to low-quality users. The net effect of these two parameters depends on whether they have a stronger impact on the gains from exclusion (higher average quality) or on its costs (lower quantity).

Download the paper: http://www.hbs.edu/research/pdf/11-125.pdf

Search Diversion, Rent Extraction and Competition

Abstract

This paper studies search diversion by competing intermediaries connecting consumers with third-party stores. First, we show that endogenizing store entry leads to more search diversion when intermediaries cannot price discriminate among stores because the intermediaries' incentives are aligned with the marginal stores. Second, competition among intermediaries may lead to more or less search diversion relative to monopoly, depending on whether consumers multihome and stores singlehome or vice-versa.

Download the paper: http://www.hbs.edu/research/pdf/11-124.pdf

First-Party Content, Commitment and Coordination in Two-Sided Markets

Abstract

We study the effect of two-sided platforms' ability to invest in first-party content on their optimal pricing strategies. If first-party content and third-party seller participation are complements (substitutes) then 1) a monopoly platform facing favorable expectations invests more (less) in first-party content than a platform facing unfavorable expectations and 2) the platform facing unfavorable expectations is more likely to subsidize sellers (buyers) when its investment in first-party content is higher. These results hold with both simultaneous and sequential entry of the two sides. With two competing platforms-an incumbent facing favorable expectations and an entrant facing unfavorable expectations-and singlehoming on one side of the market, the incumbent always invests (weakly) more in first-party content relative to the case in which it is a monopolist.

Download the paper: http://www.hbs.edu/research/pdf/11-123.pdf

 

Cases & Course Materials

AQR's Momentum Funds (B)

Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, and Christopher Malloy
Harvard Business School Supplement 211-075

This is a (B) case for "AQR's Momentum Funds." It follows the first year of performance of the funds after launching and gives students a critical inflection point for analyzing the nascent stages of a new product launch and the potential path dependence of the product depending on initial returns. It allows students to wrestle with the way forward given these conditions, and how (if at all) it changes their views, pitch, and perspective on the strategy, and traditional long-short strategies more generally.

Purchase this supplement:
http://cb.hbsp.harvard.edu/cb/product/211075-PDF-ENG

If We Ran The World

Hałaburda, Hanna, Radka Dohnalova, and Aldo Sesia
Harvard Business School Case 711-490

Cindy Gallop launched IfWeRanTheWorld (IWRTW) in February 2010, as what the tech world called minimum viable product, in order to real-world test Gallop's "business of the future" concept while development was ongoing. IWRTW was conceived to bring together human good intentions with corporate good intentions, to activate both into shared action, against shared goals, to deliver shared and mutually accountable results. She wanted to make "doing good as sexy as hell" for both individuals and businesses, to make it quicker, easier, and simpler to turn intention into action, one "microaction" at a time. In January 2011, Gallop's key challenge was how to amplify the IWRTW experience in a way that would make it a more valuable—and immediately understandable—business proposition to a brand. The idea behind the venture was only as good as its business model and its execution.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711490-PDF-ENG

Risk Management at Wellfleet Bank: All That Glisters Is Not Gold

Anette Mikes
Harvard Business School Case 110-011

Inspired by one of the few banks that successfully weathered the 2007-2009 credit crisis, the case illustrates risk management in the world of corporate lending. Chief executive Alastair Dawes has to decide if the risk governance process is adequate to uncover mega-risks, based on reflections on the risk assessment and sanctioning of a $1 billion credit proposal. Students are invited to assess and review the risks in the proposal, prepared by the bank's sales organization on behalf of a large gold-mining company, and to arrive at a decision (whether Wellfleet should accept it or not). At the same time, students will learn that gray-area risk decisions and, in particular, risk-adjusted performance measurement can rarely be automated. Risk governance requires executives to strike a balance between risk modeling and qualitative business judgment-a holistic (rather than silo-based) view of risks.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/110011-PDF-ENG

Risk Management at Wellfleet Bank: Deciding about 'Megadeals'

Anette Mikes
Harvard Business School Case 109-071

Inspired by one of the few banks that successfully weathered the 2007-2009 credit crisis, the case illustrates risk management in a corporate finance business. Chief executive Alastair Dowes has to decide whether the risk governance process is adequate to uncover mega-risks in the portfolio, based on reflections of the risk assessment and sanctioning of two $1 billion credit proposals. Students will be invited to assess and review the risks in the two proposals and to arrive at a decision (whether Wellfleet should accept them or not). At the same time, students will learn that gray-area risk decisions and, in particular, risk-adjusted performance measurement can rarely be automated. Risk governance requires executives to strike a balance between risk modeling and qualitative business judgment—a holistic (rather than silo-based) view of risks.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/109071-PDF-ENG

foursquare

Mikołaj Jan Piskorski, Thomas R. Eisenmann, Jeffrey J. Bussgang, and David Chen
Harvard Business School Case 711-418

Co-founders of foursquare are deciding how to respond to competitive threats and scale up the organization. Foursquare was a location-based online service that allowed users to "check in" to a location using an application on a smartphone. Foursquare kept track of a user's check-ins, shared them with users' friends, and unlocked "Specials" that gave users discounts at nearby locations. Within a year and a half of its founding the company had 45 employees and over 5 million users and was valued in excess of $100 million. However, many competitors, including Facebook, Twitter, and Yelp, developed competitive services requiring foursquare to respond.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711418-PDF-ENG

The Greek Crisis: Tragedy or Opportunity?

Dante Roscini, Jonathan Schlefer, and Konstantinos Dimitriou
Harvard Business School Case 711-088

After its 2009-2010 fiscal crisis shook the euro, could the Greek government stabilize debt, avoid default, and stay on the euro? This case looks at the Greek social and political road to fiscal crisis; the economics of that crisis and efforts to recover from it; the danger the crisis posed to the euro; cooperation and conflict among European states, the European Central Bank, and the International Monetary Fund to try to help Greece emerge from crisis; and the role financial markets played in these events.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/711088-PDF-ENG

Caesars Entertainment: CodeGreen

George Serafeim, Robert G. Eccles, and Tiffany A. Clay
Harvard Business School Case 111-115

The case describes the development of Caesar's sustainability initiative program, including the effect of the initiative on employee engagement and motivation and on customer satisfaction.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/111115-PDF-ENG

InterfaceRAISE: Sustainability Consulting

Michael W. Toffel, Robert G. Eccles, and Casey Taylor
Harvard Business School Case 611-069

InterfaceRAISE is a sustainability management consulting firm created to leverage the capabilities of its parent company Interface, Inc., a carpet manufacturer recognized as a global leader in corporate environmental sustainability. This case illustrates the challenges of turning an internal capability into a client facing revenue stream. This is made especially difficult by the fact that the parent company is a manufacturing firm and InterfaceRAISE is a professional service firm (consulting). InterfaceRAISE is not being staffed by a traditional consulting firm model, relying instead on the part-time availability of employees in the parent company. At the time of the case, InterfaceRAISE was grappling to identify the appropriate business model for the type of consulting firm it wants to be, to determine what its client portfolio should look like, and to set its pricing structure. InterfaceRAISE needed to decide how to accelerate its growth while better achieving its three objectives: improving its clients' sustainability performance, enhancing its parent company's brand image and sales, and increasing operating profits.

Purchase this case:
http://cb.hbsp.harvard.edu/cb/product/611069-PDF-ENG

Strengths Become Weaknesses: Cognitive Biases in Founder Decision-Making

Noam Wasserman and Kyle Anderson
Harvard Business School Note 811-068

This note combines vignettes and scholarly research to outline the cognitive biases and decision-making strategies that influence key decisions in the founding process. It is argued that the same biases that provide early benefits can later prove to be a weakness for the startup, and that founders must learn to identify their biases and work to balance them out with sound advice and dispassionate analysis.

Purchase this note:
http://cb.hbsp.harvard.edu/cb/product/811068-PDF-ENG