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.

October 29

Three recent cases offer students perspective on a wide range of business-related issues: product design, corruption, and the market opportunities of an aging population.

Designing the perfect coffee mug

In the case study "An Exercise in Designing a Travel Coffee Mug," students explore a structured approach to designing a new product—in this case, a coffee mug. The case, written by Elie Ofek and Michael Norris, includes exhibits to help students visualize the market and an appendix with a detailed explanation of the product design process.

The corruption of Lance Armstrong

The downfall of cyclist Lance Armstrong is chronicled in "Following Lance Armstrong: Excellence Corrupted," written by Clayton Rose and Noah Fisher. "This case explores Armstrong's leadership of a corrupt culture, the extensive nature of the cheating scandal among elite athletes, the decisions taken by other riders to both support Armstrong and his scheme and ultimately to admit to cheating, and the costs borne by those associated with Armstrong," according to authors. Sudents have an opportunity to discuss the responsibilities that leaders have to followers, and that followers have to themselves and to others.

Can you see the future?

The prescription eyeglass lens industry is under the microscope in the case "Carl Zeiss and Free-Form Production: Can We See Clearly Yet?" Author Willy Shih details how managers at Carl Zeiss AG strategize to capitalize on shifts in the value network as the industry rolls out innovations such as new production methods to fill the needs of an aging world.

 

Publications

  • August 2013
  • Harvard Business Review Press

The Good Struggle: Responsible Leadership in an Unforgiving World

By: Badaracco, Joseph L., Jr.

Abstract—The question of how to lead successfully and responsibly is crucially important in our uncertain, high-pressure, turbulent world. In this book, Joseph Badaracco answers this question in practical and, at times, provocative ways.

Publisher's link: http://hbr.org/product/the-good-struggle-responsible-leadership-in-an-unforgiving-world/an/11540-HBK-ENG

  • August 2013
  • Simon & Schuster

The Art of Negotiation: How to Improvise Agreement in a Chaotic World

By: Wheeler, Michael

Abstract—A member of the world-renowned Program on Negotiation at Harvard Law School introduces the powerful next-generation approach to negotiation. For many years, two approaches to negotiation have prevailed: the "win-win" method exemplified in Getting to Yes by Roger Fisher, William Ury, and Bruce Patton and the hard-bargaining style of Herb Cohen's You Can Negotiate Anything. Now Michael Wheeler provides a dynamic alternative to one-size-fits-all strategies that don't match real world realities. The Art of Negotiation shows how master negotiators thrive in the face of chaos and uncertainty. They don't trap themselves with rigid plans. Instead they understand negotiation as a process of exploration that demands ongoing learning, adapting, and influencing. Their agility enables them to reach agreement when others would be stalemated. Michael Wheeler illuminates the improvisational nature of negotiation, drawing on his own research and his work with Program on Negotiation colleagues. He explains how the best practices of diplomats such as George J. Mitchell, dealmaker Bruce Wasserstein, and Hollywood producer Jerry Weintraub apply to everyday transactions like selling a house, buying a car, or landing a new contract. Wheeler also draws lessons on agility and creativity from fields like jazz, sports, theater, and even military science.

Publisher's link: http://books.simonandschuster.co.uk/Art-of-Negotiation/Michael-Wheeler/9781451690446

  • August 2013
  • Current Directions in Psychological Science

Prosocial Spending and Happiness: Using Money to Benefit Others Pays Off

By: Dunn, Elizabeth W., Lara B. Aknin, and Michael I. Norton

Abstract—While a great deal of research has shown that people with more money are somewhat happier than people with less money, our research demonstrates that how people spend their money also matters for their happiness. In particular, both correlational and experimental studies show that people who spend money on others report greater happiness. The benefits of such prosocial spending emerge among adults around the world, and the warm glow of giving can be detected even in toddlers. These benefits are most likely to emerge when giving satisfies one or more core human needs (relatedness, competence, and autonomy). The rewards of prosocial spending are observable in both the brain and the body and can potentially be harnessed by organizations and governments.

Publisher's link: http://www.hbs.edu/faculty/Pages/download.aspx?name=dunn%20aknin%20norton%20CD.pdf

  • August 2013
  • Globalizing Beauty: Consumerism and Body Aesthetics in the Twentieth Century

The Global and the Local in the Beauty Industry: A Historical Perspective

By: Jones, G.

Abstract—This chapter explores the impact of the global beauty industry on beauty ideals. It shows that as the industry internationalized from the late nineteenth century, there was a homogenization of beauty ideals and practices around the world. Western and white beauty ideals emerged as the global standard. The momentum of this standard was reinforced by the impact of Hollywood and other drivers of an international consumer culture from the interwar years. However the study shows that the drive for homogenization, although powerful, was never complete. The local was never entirely subsumed by the global. Convergence and homogenization were stronger in aspirations than in preferences for particular products and scents, which remained more persistently local despite the spread of global brand names. The more recent era of globalization since the 1980s has coincided with a strong revival in interest in local traditions and practices, which is particularly noticeable in some of the fastest growing emerging markets such as China.

 

Working Papers

Do Measures of Financial Constraints Measure Financial Constraints?

By: Farre-Mensa, Joan, and Alexander Ljungqvist

Abstract—Financial constraints are not directly observable, so empirical research relies on indirect measures. We evaluate how well five popular measures (paying dividends, having a credit rating, and the Kaplan-Zingales, Whited-Wu, and Hadlock-Pierce indices) identify firms that are financially constrained, using three novel tests: an exogenous increase in a firm's demand for credit, exogenous variation in the supply of bank loans, and the tendency for firms to pay out the proceeds of equity issues to their shareholders ("equity recycling"). We find that none of the five measures identifies firms that behave as if they were constrained: public firms classified as constrained have no trouble raising debt when their demand for debt increases, are unaffected by changes in the supply of bank loans, and engage in equity recycling. The point estimates are little different for supposedly constrained and unconstrained firms, even though we find important differences in their characteristics and sources of financing. On the other hand, privately held firms (particularly small ones) and public firms with below investment-grade ratings appear to be financially constrained.

Download working paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2338575

Abstract—This paper combines experimental and field data to examine how those who transgress rules may elicit more stringent penalties from those with the authority to punish them if they appeal to relevant norms endorsing leniency. Specifically, we test how transgressors are punished when it's their birthday: a day when social norms dictate people should be treated preferentially. We first use a scenario study to establish that individuals expect leniency on their birthday. We then show that, compared to other days, transgressors are penalized more severely when it's their birthday, both by law enforcement (using more than 134,000 arrest records for drunk driving in Washington State) and by participants with the authority to penalize transgressions in an experimental lab setting. An additional experiment provides evidence that this effect is driven by psychological reactance rather than by overcompensation for potential bias. We discuss both the theoretical and practical implications of our findings.

Download working paper: http://ssrn.com/abstract=2280370

Digital Dark Matter and the Economics of Apache

By: Greenstein, Shane, and Frank Nagle

Abstract—Researchers have long hypothesized that spillovers from government, university, and private company R&D contribute to economic growth, but these contributions may be difficult to measure when they take a non-pecuniary form. The growth of networking devices and the Internet in the 1990s and 2000s magnified these challenges, as illustrated by the deployment of the descendent of the NCSA HTTPd server, otherwise known as Apache. This study asks whether this experience could produce measurement issues in standard productivity analysis, specifically omission and attribution issues, and, if so, whether the magnitude is large enough to matter. The study develops and analyzes a novel data set consisting of a 1% sample of all outward-facing web servers used in the United States. We find that use of Apache potentially accounts for a mismeasurement of somewhere between $2 billion and $12 billion, which equates to between 1.3% and 8.7% of the stock of prepackaged software in private fixed investment in the United States. We argue that these findings point to a large potential undercounting of "digital dark matter" and related IT spillovers from university and federal funding.

Download working paper: http://www.nber.org/papers/w19507

Abstract—This paper, based on a five-year longitudinal study at two UK-based banks, documents and analyzes the practices used by risk managers as they aim to gather and establish influence in their organizations. Specifically, we examine how influence-seeking risk managers (1) establish and maintain interpersonal connections with decision makers and how they (2) adopt, deploy, and reconfigure tools-practices that we define collectively as toolmaking. Using prior literature and our empirical observations, we distinguish between influence activities to which toolmaking was not central and those to which toolmaking was important. As for the influence activities that imply toolmaking, we can outline the contours of three modes of operation, which describe experts operating as Compliance Experts, Engaged Toolmakers, or Technical Champions, depending on the communicability of the tools and on the extent to which the experts are involved in practices related to those tools. Our study contributes to the accounting and management literature on influence gathering, underlining that toolmaking plays a vital role in explaining how functional experts may compete in the intraorganizational marketplace for influential ideas and the attention of decision makers. Specifically, as risk management becomes more tool-driven and toolmaking may become more prevalent, our study provides a more nuanced understanding of the nature and consequences of risk managers' influence activities. An explicit focus on toolmaking extends accounting research that has hitherto focused attention on the structural arrangements and interpersonal connections when explaining the emergence of the influential financial expert.

Download working paper: http://www.hbs.edu/faculty/Pages/download.aspx?name=11-068.pdf

Towards a Contingency Theory of Enterprise Risk Management

By: Mikes, Anette, and Robert Kaplan

Abstract—Enterprise risk management (ERM) has become a crucial component of contemporary corporate governance reforms, with an abundance of principles, guidelines, and standards. This paper portrays ERM as an evolving discipline and presents empirical findings on its current state of maturity, as evidenced by a survey of the academic literature and by our own field research. Academics are increasingly examining the adoption and impact of ERM, but the studies are inconsistent and inconclusive, due, we believe, to an inadequate specification of how ERM is used in practice. Based on a ten-year field project, over 250 interviews with senior risk officers, and three detailed case studies, we put forward a contingency theory of ERM, identifying potential design parameters that can explain observable variation in the "ERM mix" adopted by organizations. We also add a new contingent variable: the type of risk that a specific ERM practice addresses. We outline a "minimum necessary contingency framework" (Otley, 1980) that is sufficiently nuanced, while still empirically observable, that empirical researchers may, in due course, hypothesize about "fit" between contingent variables, such as risk types and the ERM mix, as well as about outcomes such as organizational effectiveness.

Download working paper: http://www.hbs.edu/faculty/Pages/download.aspx?name=13-063.pdf

 

Cases & Course Materials

  • Harvard Business School Case 214-005

Stock Pitching at Freelin Capital

No abstract available.

Purchase this case:
http://hbr.org/search/214005-PDF-ENG

In an era of rapidly evolving systems of health care delivery, the impact on patients, physicians, hospitals, medical device manufacturers, and small business owners are often conflicting. This case highlights these conflicts and stressors from all perspectives, providing unique insights and offering potential options.

Purchase this case:
http://hbr.org/search/114009-PDF-ENG

  • Harvard Business School Case 213-043

Private Equity Valuation in Emerging Markets

This note provides an opportunity to understand how private equity investors need to adapt to emerging markets.

Purchase this case:
http://hbr.org/search/213043-PDF-ENG

This Course Outline and Syllabus gives an overview of the Fall 2013 class Building Life Science Businesses.

Purchase this case:
http://hbr.org/search/814019-PDF-ENG

  • Harvard Business School Case 514-042

An Exercise in Designing a Travel Coffee Mug

In recent years design has emerged as a critical factor in the success of many new products. This case exercise provides a hands-on way to experience the design process and offers a structured approach for incorporating key considerations that can aid in effective design. Students are asked to generate ideas for the design of a new reusable travel coffee mug. Relevant information on the consumer coffee market and on existing coffee mugs is provided. To assist students in this task, they are presented with an approach employed by the design firm RKS and which has been called Psycho-Aesthetics (PA) by its pioneer Ravi Sawhney. The PA process involves in-depth market research and visualization, a lens to assess existing competitive offerings, the creation of potential customer personas, and imagining a "hero's journey." When combined, these analyses allow designers to conceive elements that will result in a new product or service that delivers a unique customer connection for a specific target market. The exercise gives students an example of a company that successfully used PA principles to design and launch a new reusable water bottle in the late-2000s. It then asks them to follow the PA process to design a reusable travel coffee mug. The exercise includes exhibits to help students visualize the market and an appendix with a detailed explanation of the PA process.

Purchase this case:
http://hbr.org/search/514042-PDF-ENG

  • Harvard Business School Case 314-015

Following Lance Armstrong: Excellence Corrupted

After years of vigorous denials, on January 14, 2013, Lance Armstrong admitted in a television interview with Oprah Winfrey that he "doped" in each of his record seven consecutive Tour de France victories, confirming the findings a few months earlier by the U.S. Anti-Doping Agency that he had orchestrated "a massive team doping scheme, more extensive than any previously revealed in professional sports history." Until that moment with Oprah, Armstrong had consistently and strenuously denied using performance enhancing drugs (PEDs), blood transfusions, or other artificial enhancers to compete in the grueling, three-week race throughout France. He verbally thrashed, bullied, and threatened legal action against riders, journalists, race officials, and anyone else who had suggested he had cheated. This case explores Armstrong's leadership of a corrupt culture, the extensive nature of the cheating scandal among elite athletes, the decisions taken by other riders to both support Armstrong and his scheme and ultimately to admit to cheating, and the costs borne by those associated with Armstrong. It allows for discussion of the responsibilities that leaders have to followers, and that followers have to themselves and to others.

Purchase this case:
http://hbr.org/search/314015-PDF-ENG

The prescription eyeglass lens industry was complicated and highly fragmented, and even though many of the tools and techniques employed have been relatively unchanged over the last century, there was still a surprising pace of innovation. An aging population around the world meant the demand for progressive lenses was increasing rapidly, and innovations in production technology meant an evolving competitive dynamic with potentially quite different patterns of manufacturing and distribution. Are there theories that Zeiss managers can use to see clearly how industry evolution might portend shifts in the value network?

Purchase this case:
http://hbr.org/search/614007-PDF-ENG