Strategy: Strategy Development

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Users Love Ello, But What’s the Business Model?

Social network upstart Ello is generating terrific buzz among users, but can it's ad-free approach compete against Facebook? Professors John Deighton and Sunil Gupta provide insights into what drives social media success. Open for comment; 1 Comment posted.

The Strategic Way To Hire a Sales Team

The equivalent of an entire sales force is replaced at many firms every four years, so it's critical that go-to-market initiatives remain tied to strategic goals. Frank Cespedes explains how in his book, Aligning Strategy and Sales. Open for comment; 3 Comments posted.

Tommy Koh: Background and Major Accomplishments of the ’Great Negotiator, 2014

Tommy Koh is a diplomat, professor, and international lawyer currently serving as Ambassador-at-Large for the Government of Singapore. He will be the 2014 recipient of the Harvard Program on Negotiation's "Great Negotiator Award." In this paper, the authors discuss Koh's life, career, and major accomplishments as a negotiator. They summarize several of his most significant negotiations to date, exploring his successes at forging creative, lasting solutions to complex challenges and disputes. The authors discuss Koh's leadership in establishing the United States-Singapore Free Trade Agreement (USSFTA), developing and ratifying a charter for the Association of Southeast Asian Nations (ASEAN), resolving territorial and humanitarian disputes in the Baltics and Asia, and successfully leading two unprecedented global megaconferences: the Third U.N. Conference on the Law of the Sea and the U.N. Conference on the Environment and Development, also known as the Earth Summit. As part of the 2014 Great Negotiator Awards program, negotiation faculty and students will analyze several of these experiences in much greater depth in order to extract their most valuable lessons for theory and practice. Read More

Missing the Wave in Ship Transport

Despite a repeating boom-bust cycle in the shipping industry, owners seem to make the same investment mistakes over time. Can other cyclical industries learn the lessons of the high seas? Research by Robin Greenwood and Samuel G. Hanson. Open for comment; 1 Comment posted.

Applying Random Coefficient Models to Strategy Research: Testing for Firm Heterogeneity, Predicting Firm-Specific Coefficients, and Estimating Strategy Trade-Offs

Textbooks generally define firm strategy as a set of decisions focused on managing organizational trade-offs in order to achieve long-term competitive advantage. Although strategy models theorize why the same actions by different firms lead to different effects on firm performance, empirical work typically estimates the average effect of an action across firms. The authors discuss how Random Coefficient Models (RCMs) can close the gap between theoretical and empirical research in strategy. Among other advantages to using RCMs, researchers can make a critical distinction between firm actions (or explanatory variables) that are statistically significant and those that are strategically significant. Read More

How Relevant is Long-Range Strategic Planning?

Summing Up: Jim Heskett's readers argue that long-range planning, while necessary for organizational success, must be adaptable to the competitive environment. What do YOU think? Closed for comment; 32 Comments posted.

The Impact of Patent Wars on Firm Strategy: Evidence from the Global Smartphone Market

Patents and patent enforcement strategies have become an essential part of firms' competitive strategies: They are used as isolating mechanisms to protect intellectual property or as defense mechanisms to help obtain access to external innovations. Using data from the global smartphone market, the authors of this paper investigate the effect of escalated patent litigations—the so-called patent war—on firm strategy. The smartphone industry is a classic example of a business ecosystem, as participants in this industry are highly interconnected and this interconnectivity means that effects on some ecosystem participants are likely to extend to affect the rest. The authors' findings show that the efficacy of patent enforcement systems across markets plays a significant role in firm strategy during patent wars, and ultimately shapes the global competitive landscape. As the patent war intensifies, smartphone vendors, even those not directly involved in patent litigations, gradually shift their business foci to markets with weaker intellectual property (IP) rights protection. This shift, however, is attenuated for vendors with stronger technological capabilities and is more pronounced for vendors whose home markets have weak IP systems. Together, these changes shape the competitive landscape for platform competition. Read More

Read All About It: Digital CEO Buys Traditional Media!

At 136 years old, the Washington Post has reported on critical news events over the decades. Now the sale of the Post to Jeff Bezos is itself a game changer, for digital media. Harvard Business School strategy experts Bharat Anand and David Collis read between the lines. Closed for comment; 3 Comments posted.

Three-Dimensional Strategy: Winning the Multisided Platform

Done right, companies competing as a multi-sided platform often win with higher percentage profit margins than those enjoyed by traditional resellers. The problem is that a winning strategy is far from self-evident. Professor Andrei Hagiu explains the potential and the pitfalls for life as an MSP. Closed for comment; 2 Comments posted.

Should Managers Bother Listening to Predictions?

Summing Up Should we use predictions at all when planning for the future? Jim Heskett's readers offer a variety of opinions. What do YOU think? Closed for comment; 38 Comments posted.

Book Excerpt: ‘The Strategist’

It's time for CEOs to start reclaiming strategy as a key executive responsibility, argues Cynthia A. Montgomery in her new book, The Strategist. Closed for comment; 10 Comments posted.

Are You a Strategist?

Corporate strategy has become the bailiwick of consultants and business analysts, so much so that it is no longer a top-of-mind responsibility for many senior executives. Professor Cynthia A. Montgomery says it's time for CEOs to again become strategists. Closed for comment; 43 Comments posted.

Creating an R&D Strategy

This note by Gary P. Pisano provides a framework for designing an R&D strategy. It starts with the simple notion that a strategy is a system approach to solving a problem. An R&D strategy is defined a coherent set of interrelated choices across decision concerning: organizational architecture, processes, people, and project portfolios. To illustrate the framework, we use examples of three pharmaceutical companies and examine how their different R&D strategies were rooted in different assumptions about the core driver of R&D performance. This suggests that the very first question to be answered in strategy development is: What's our shared understanding of the root cause of the problem we are trying to solve? Read More

Platform Competition Under Partial Belief Advantage

In platform competition in a two-sided market, a platform's ability to attract consumers depends not only on the consumers' beliefs regarding its quality, but also on consumers' beliefs regarding the platform's ability to attract the other side of the market. For example, in the market for smart-phones the recent introductions of Apple's iPhone 4S with the improved operating system, and Samsung's Galaxy II with the improved Android 4, open a new round in the competition between the two platforms. The ability of each platform to attract users depends not only on its perceived quality, but also on users' beliefs regarding the number new applications developed for the platform. Likewise, the ability to attract application developers to the platform depends on their beliefs regarding the number of users that will join the platform. In a competitive market, some platforms may enjoy more favorable beliefs of the market (about their ability to attract ``the other side) than other platforms. Such a belief advantage may be source of a competitive advantage. In this paper, the authors look at how the belief advantage helps the platform to compete in the market, and also how a platform may create the belief advantage. The authors find that the degree of the platform's belief advantage affects its decision regarding its business model (whether to subsidize buyers or sellers), as well as the access fees and the size of the platform. Moreover, the paper looks into the optimal advertising strategy that leads to creating belief advantage. This paper contributes to scholarship on economics and business strategy. Read More

The New Challenge of Leading Financial Firms

Running a financial organization, never easy to begin with, has quickly become one of the most difficult leadership challenges that an executive can undertake, requiring mastery of talent management, change management, and ethics. An interview with Professor Boris Groysberg, who teaches a new HBS Executive Education program on the subject with Professor Paul M. Healy. Open for comment; 13 Comments posted.

Reinventing the National Geographic Society

How do you transform a 123-year-old cultural icon and prepare it for the digital world? Slowly, as a new case on the National Geographic Society by professor David Garvin demonstrates. Open for comment; 19 Comments posted.

Sharpening Your Skills: Doing Business in Emerging Markets

Going global is one thing, targeting emerging economies quite another. In this collection from our archives, HBS faculty discuss strategy development, government relations, exploiting local opportunities, and risk management when dealing in emerging economies. Read More

Seven Strategy Questions: A Simple Approach for Better Execution

Successful business strategy lies not in having all the right answers, but rather in asking the right questions, says Harvard Business School professor Robert Simons. In an excerpt from his new book, Seven Strategy Questions, Simons explains how posing these questions can help managers make smart choices. Read More

Tesco’s Stumble into the US Market

UK retailer Tesco was very successful penetrating foreign markets—until it set its sights on the United States. Its series of mistakes and some bad luck are captured in a new case by Harvard Business School marketing professor John A. Quelch. Read More

Seven Strategy Questions: A Simple Approach to Execution

Faculty Research Symposium 2010: Business managers who fail to make tough strategic choices doom their organizations to eventual failure. Read More

Multinational Firms, Labor Market Discrimination, and the Capture of Competitive Advantage by Exploiting the Social Divide

Women and ethnic minorities are frequently discriminated against in the labor markets of both developed and emerging economies, particularly in opportunities for management positions. Multinationals entering such markets must decide whether to aggressively hire and promote the excluded group, thus reaping the benefits of their underutilized talent, or conform to local practice and avoid provoking some bigoted policymakers, executives, purchasers, and/or supply agents. In this paper, HBS professor Jordan Siegel, Lynn Pyun, and B.Y. Cheon find that multinationals gain significant competitive opportunities by scanning the host-market social landscape, identifying social schisms in the labor market, and exploiting such schisms by actively hiring and promoting members of the excluded group to positions of management responsibility. Read More

The Influence of Prior Industry Affiliation on Framing in Nascent Industries: The Evolution of Digital Cameras

Firms entering a new product market face tremendous ambiguity and competitive uncertainty, particularly when the new market is sparked by radical technological change. Potential customers have little or no experience with products, and during this period of turbulence, firms experiment with alternative product configurations, functions, and technologies. By studying the emergence of the consumer mass market for digital cameras, Carlson School of Management professor Mary J. Benner and HBS professor Mary Tripsas explore what factors influence a firm's initial introduction of product features during the nascent stage of a product market, and how the process of convergence on a standard set of features unfolds. In particular, they assess how a firm's prior industry affiliation influences its conceptualization of the product. Read More

Yes, You Can Raise Prices in a Downturn

If you and your customers understand the value represented in your pricing, you can—and should—charge more for delivering more. An interview on "performance pricing" with researchers Frank Cespedes, Benson P. Shapiro, and Elliot Ross. Read More

Business Model Innovation and Competitive Imitation

When and why should an entrant adopt a new business model when the innovation could be imitated by an incumbent? In this paper, HBS professor Ramon Casadesus-Masanell and University of Southern California professor Feng Zhu examine the desirability, or lack thereof, of business model innovations when they cannot be protected, opening the door to competitive imitation. Issues of competing through new business model design become more important given the increasing number of opportunities for business model configurations enabled by technological progress, new customer preferences, and deregulation. Read More

One Report: Better Strategy through Integrated Reporting

Stakeholders expect it. And smart companies are doing it: integrating their reporting of financial and nonfinancial performance in order to improve sustainable strategy. HBS senior lecturer Robert G. Eccles and coauthor Michael P. Krzus explain the benefits and value of the One Report method. Plus: book excerpt from One Report: Integrated Reporting for a Sustainable Strategy. Read More

Multinational Strategies and Developing Countries in Historical Perspective

HBS professor Geoffrey Jones offers a historical analysis of the strategies of multinationals from developed countries in developing countries. His central argument, that strategies were shaped by the trade-off between opportunity and risk, highlights how three broad environmental factors determined the trade-off. The first was the prevailing political economy, including the policies of both host and home governments, and the international legal framework. The second was the market and resources of the host country. The third was competition from local firms. Jones explores the impact of these factors on corporate strategies during the three eras in the modern history of globalization from the nineteenth century until the present day. He argues that the performance of specific multinationals depended on the extent to which their internal capabilities enabled them to respond to these external opportunities and threats. The paper highlights in particular the changing nature of political risk faced by multinationals. The era of expropriation has, for the moment, largely passed, but multinationals now experience new kinds of policy risk, and new forms of home country political risk also, such as the Alien Tort Claims Act in the United States. Read More

When Open Architecture Beats Closed: The Entrepreneurial Use of Architectural Knowledge

Entrepreneurial firms rich in knowledge but poor in other resources can use superior architectural knowledge of a technical system to gain strategic advantage over larger and better endowed rivals. This paper presents a model and provides examples showing that architectural knowledge can be applied strategically to change a firm's scope and boundaries, make innovations more or less autonomous, and change the span of problems it must solve. Read More

One Strategy: Aligning Planning and Execution

Strategy as it is written up in the corporate playbook often becomes lost or muddled when the team takes the field to execute. In their new book, Professor Marco Iansiti and Microsoft's Steven Sinofsky discuss a "One Strategy" approach to aligning plan and action. Read More

The Mirroring Hypothesis: Theory, Evidence and Exceptions

In its simplest form, the mirroring hypothesis suggests that the organizational patterns of a development project, such as communication links, geographic collocation, and team and firm membership, correspond to the technical patterns of dependency in the system under development. According to the hypothesis, independent, dispersed contributors develop largely modular designs, while richly interacting, collocated contributors develop highly integral designs. Yet many development projects do not conform to the mirroring hypothesis. HBS doctoral graduate Lyra Colfer and professor Carliss Y. Baldwin synthesize observations from a large number of cases that violate the hypothesis to explain when and how development organizations can "break the mirror." Read More

Mixing Open Source and Proprietary Software Strategies

Open source and proprietary software development used to be competing strategies. Now software firms are experimenting with strategies that mix the two models. Researcher Gaston Llanes discusses recent research into these "mixed source" strategies. Read More

From Strategy to Business Models and to Tactics

Drivers such as globalization, deregulation, or technological change, just to mention a few, are profoundly changing the competitive game. Scholars and practitioners agree that the fastest-growing firms in this new environment appear to have taken advantage of these structural changes to compete "differently" and innovate in their business models. However, there is not yet agreement on what are the distinctive features of superior business models. This dispute may have arisen, in part, because of a lack of a clear distinction between the notions of strategy, business model, and tactics. HBS professor Ramon Casadesus-Masanell and Joan Enric Ricart present an integrative framework to distinguish and relate the concepts of business model, strategy, and tactics. Read More

Strategies to Fight Ad-sponsored Rivals

Many companies choose to finance themselves using ad revenues and offer their products or services—from newspapers to software applications, television programs, and online search—free to consumers. Yet the emergence of ad-sponsored entrants in various industries poses significant threats to the incumbents in these markets whose business models are often based on subscriptions or fees charged to their customers. Faced with the threat from ad-sponsored entrants, incumbents must choose strategies to respond. HBS professor Ramon Casadesus-Masanell and University of Southern California professor Feng Zhu create an analytical framework to establish guidelines for incumbent firms facing these issues. The researchers consider four alternative business models: pure-subscription-based; pure-ad-sponsored; mixed-single-product; and mixed-product-line-extension. Analysis shows that the optimal strategic and tactical choices change dramatically in the presence of an ad-sponsored rival. This is the first study to provide a comprehensive analysis of the competition between a free ad-sponsored entrant and an incumbent that has the option of choosing different business models. Read More

Mixed Source

As most managers know, commercial firms may benefit from participating in open source software development by selling complementary goods or services. Open source has the potential to improve value creation because it benefits from the efforts of a large community of developers. Proprietary software, on the other hand, results in superior value capture because the intellectual property remains under the control of the original developer. While the straightforward rationale for "mixed source" (a combination of the two) is appealing, what does it mean for a business model? Under what circumstances should a profit-maximizing firm adopt a mixed source business model? How should firms respond to competitors' adoption of mixed source business models? And what are the right pricing structures under mixed source compared with the proprietary business model? In this paper the researchers analyze a model where firms with modular software must decide which modules to open and which to keep proprietary. Findings can be directly applied to the design of optimal business strategies. Read More

Informed and Interconnected: A Manifesto for Smarter Cities

To make our cities and communities smarter, we must become a little smarter ourselves, seeking information and an agenda to forge connections enabling collaboration, according to HBS professor Rosabeth Moss Kanter and IBM's Stanley S. Litow. Their vision is that someday soon, leaders will combine technological capabilities and social innovation to help produce a smarter world. That world will be seen on the ground in smarter cities composed of smarter communities that support the well-being of all citizens. This paper outlines eight challenges facing cities and the communities they encompass, based on experience in the United States. Kanter and Litow provide examples of practices and programs led by both government and nonprofit organizations, many technology-enabled, that point the way to solutions, and they conclude with a call for leaders to embrace an agenda for change. Read More

Monopolistic Competition Between Differentiated Products With Demand For More Than One Variety

How and when is price competition most significant among firms? This paper develops a theoretical framework for studying price competition between multiple firms. Two examples of markets that fit the description for study are software applications and videogames: There are thousands of software applications as well as games, and different users are interested in different applications and/or games. A given software or game user's tastes may overlap with another's, yet they may have nothing in common with a third's. Thus, although there is a sense in which competition is localized (any given firm competes only with firms whose brands are similar to its own), it is not clear how the fact that consumers are generally interested in purchasing multiple products affects the type of competition waged among firms. Read More

Quantity vs. Quality and Exclusion by Two-Sided Platforms

It is common for two-sided platforms to deny participation to some potential customers, who would otherwise be willing to pay the platforms' access and/or transaction fees. Videogame console manufacturers such as Microsoft, Sony, and Nintendo, for example, restrict access to a select set of game developers and exclude many others by including security chips in their consoles, even though the latter would also be willing to pay the per-game royalties levied by the manufacturers. Apple routinely excludes certain application developers from its highly popular iPhone store. Professor Andrei Hagiu builds a simple model formalizing profit-maximizing two-sided platforms' choice of exclusion policies, which is fundamentally determined by a tradeoff between quality and quantity. Read More

Broadening Focus: Spillovers and the Benefits of Specialization in the Hospital Industry

What is the optimal scope of operations for firms? This question has particular relevance for the US hospital industry, because understanding the effects of focus and spillovers might help hospitals determine how they should balance focusing in a single clinical area with building expertise in related areas. While some scholars argue that narrowing an organization's set of activities improves its operational efficiency, others have noted that seemingly unfocused operations perform at a high level and that a broader range of activities may in fact increase firm value. This study by HBS doctoral student Jonathan Clark and professor Robert Huckman highlights the potential role of spillovers—specifically complementary spillovers—in generating benefits from focus at the operating unit level. Read More

Applying the Care Delivery Value Chain: HIV/AIDS Care in Resource Poor Settings

The prevention and treatment of a complex disease such as HIV/AIDS in resource‐poor settings presents enormous challenges. Many of the social and economic factors that make populations living in these settings vulnerable to HIV/AIDS such as poverty, malnutrition, and political instability conspire to create barriers to effective care delivery. Understanding how interventions are related to each other and how local socioeconomic factors influence them is critical to effective program design. The Care Delivery Value Chain (CDVC) looks at care as an overall system, not as a series of discrete interventions, and describes the activities required to deliver care, illustrating their sequence and organization. Government agencies, philanthropic organizations, and non‐governmental organizations can use the framework to improve HIV/AIDS care delivery. Read More

Parallel Search, Incentives and Problem Type: Revisiting the Competition and Innovation Link

The innovation process is fraught with uncertainty. Managers often do not know ahead of time the ideal mix of individuals and skills needed to solve innovation-related problems. One way around this uncertainty is to have multiple paths, approaches, or designs explored at once. The "parallel search" principle can be used inside the firm just as it may be used more generally by pursuing "open innovation". However, having too many searchers attempting to solve the same problem can undercut the benefits if it leads to less effort and investment. The authors study the outcomes of 645 software development contests, conducted by a software outsourcing vendor, involving over 9,000 coders, to understand the relationship between parallel search and increasing competition and innovation. Read More

Platform Rules: Multi-Sided Platforms as Regulators

Using case studies of Facebook, Tokyo's Roppongi Hills "mini-city," Harvard Business School, and TopCoder, a vendor of outsourced software products, Boudreau and Hagiu explore how multi-sided platforms (MSPs) regulate an industry ecosystem. An MSP is a platform that enables interactions between multiple groups of surrounding consumers and complementors. As the authors demonstrate, the regulatory role played in these cases by MSPs was pervasive and at the core of their business models. That regulatory role goes beyond price-setting and includes imposing rules and constraints, creating inducements, and generally shaping behaviors. These various non-price instruments essentially solve problems that could otherwise lead to market failure. The authors' analytical framework suggests a two-step approach for a platform owner: (1) maximize value created for the entire ecosystem, and (2) maximize the value extracted. "Platform Rules" is a chapter in the forthcoming book Platforms, Markets and Innovation, Gawer, A. (ed) (2009), Cheltenham, UK and Northampton, MA, U.S.: Edward Elgar. Read More

Opening Platforms: How, When and Why?

It is crucial for firms that create and maintain platforms to select optimal levels of openness. Decisions to open a platform entail tradeoffs between adoption and appropriability, and opening a platform can spur adoption by harnessing network effects, reducing users' concerns about lock-in, and stimulating production of differentiated goods that meet the needs of user segments. At the same time, opening a platform typically reduces users' switching costs and increases competition among platform providers, making it more difficult for them to appropriate rents from the platform. This paper describes research on factors that motivate managers to open or close mature platforms. Read More

Competing Complements

Over the last two decades, an increasing number of industries have evolved from vertical integration to more horizontal structures where firms design and manufacture components that are later assembled by third parties for the final customer. In these horizontal industries, firms may be "complementors," rather than customers, suppliers, or competitors. Classic examples of complementors include Intel and Microsoft. Similar complementor relationships arise in industries such as communications, consumer electronics, automobiles, and health care. In these industries, complementor analysis may be as important as competitor analysis. The authors of this paper introduce competition into one side of complementor analysis, and suggest implications for managers, public policy, and the development of theory. Read More

Strategy Execution and the Balanced Scorecard

Companies often manage strategy in fits and starts, with strategy execution lost along the way. A new book by Balanced Scorecard creators Robert S. Kaplan and David P. Norton aims to make strategy a continual process. Read More

Sharpening Your Skills: Balanced Scorecard in Action

Introduced by Harvard Business School professor Robert Kaplan and colleague David Norton, the Balanced Scorecard has been used by thousands of organizations to align business activities with the strategy. Read More

Testing Strategy with Multiple Performance Measures Evidence from a Balanced Scorecard at Store24

To what extent do balanced scorecards provide useful information for testing and validating an organization's strategy? Numerous case studies of balanced scorecard implementations document their use in translating organizational strategies to objectives and measures, communicating strategic objectives to employees, evaluating the performance of business units, and aligning the incentives of employees across business units and functions. There has been comparatively little research, however, on the potential learning and feedback role of balanced scorecards. Analyzing balanced scorecard data from Store24—a privately held convenience store retailer in New England—during the implementation of an innovative but ultimately unsuccessful strategy, this study investigates whether, when, and how information about problems with the firm's strategy was captured in the multiple performance measures of its balanced scorecard. Read More

Finding Missing Markets (and a disturbing epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

Why do farmers continue to grow crops for local markets when crops for export markets are thought to be much more profitable? Answers may include missing information about the profitability of these crops, lack of access to the necessary capital to make the switch possible, lack of infrastructure necessary to bring the crops to export outlets, high risk of the export markets, lack of human capital necessary to adopt successfully a new agricultural technology, and misperception by researchers and policymakers about the true profit opportunities and risk of crops grown for export markets. Ashraf and colleagues conducted an experimental trial with DrumNet, a social enterprise of Pride Africa, a nongovernmental organization, to evaluate whether a package of services can help farmers adopt, finance, and market export crops, and thus earn more income. This experiment was motivated by a recent push in development to build sustainable interventions that help complete missing markets. Read More

On Best-Response Bidding in GSP Auctions

Keyword auctions have become a critical source of revenue for Google and Yahoo!, among others. This new form of advertising has provided a new way for advertisers to reach customers. But advertisers also face the complex task of optimizing bids to increase their exposure while avoiding unnecessary costs. HBS professor Benjamin Edelman and colleagues analyzed a class of bidding strategies that attempt to increase advertiser utility under limited assumptions about other players' behavior. Under a strategy they call Balanced Bidding (BB), advertisers converge to the advertiser-preferred equilibrium—achieving stability of bids and reducing advertisers' costs relative to other possible outcomes. Read More

How Sustainable Is Sustainability in a For-Profit Organization?

Online forum now closed. For managers, sustainability can mean the integration and intersection of social, environmental, and economic responsibilities. The concept is admirable, says Jim Heskett, but does it also confuse managers entrusted with the bottom line? How should they make trade-offs? Jim sums up reader responses. Closed for comment; 77 Comments posted.

Strategic Interactions in Two-Sided Market Oligopolies

Strategic interactions and the logic of competitive advantage in 2-sided markets are fundamentally different than in traditional, 1-sided markets. For instance, an investment that decreases a firm's costs may increase the profits of its competitors and decrease the profits of the firm undertaking the investment. Such surprising effects arise because of the possibility that 2-sided platforms may end up subsidizing the participation of 1 side. There are also important implications for antitrust scholars: tying and other practices that may appear as harming competition in 1-sided markets can in fact benefit competitors in 2-sided markets. Read More

Diversification of Chinese Companies: An International Comparison

Many observers have argued that Chinese managers are particularly quick to diversify their enterprises. Fueled by robust economic growth and the scant enforcement of intellectual property rights that could serve as barriers to entry, Chinese companies appear to be aggressively expanding into new industries whenever economic opportunities appear to beckon. There is much anecdotal evidence to support this view. But because the Chinese economy is extraordinarily large and dynamic, it is difficult to know whether anecdotes reflect an underlying trend toward greater diversification. This paper provides systematic evidence about the scope of Chinese companies, and compares the data with the evolution of firm scope in 8 other large economies. Read More

Why Do Intermediaries Divert Search?

(Previously titled "Designing a Two-Sided Platform: When to Increase Search Costs?") Conventional wisdom holds that at the most fundamental level, market intermediaries exist in order to reduce search and transaction costs among the parties they serve and that they are more valuable the larger the cost savings they generate. This would seem to be true of both traditional, brick-and-mortar intermediaries (retailers, shopping malls, brokers, magazines, market exchanges) and "new economy" ones (Amazon, eBay, iTunes, Yahoo), all of which connect buyers and sellers of goods or services. However, many intermediaries, while providing the relevant information, seem at some stage of the process to do the opposite of reducing search costs—and by purposeful design rather than by accident. Retail stores, for instance, stack the products they carry so that the most sought-after items are hard to find and thereby induce consumers to walk along aisles carrying other products. This paper challenges the conventional wisdom that intermediaries create value by reducing search and transaction costs. It proposes a model that sheds light on the economic motivations that in some contexts may lead intermediaries to make it harder for the parties they serve—consumers and third-party sellers—to find each other. Read More

The Dark Side of Trust

It has been well documented that strong trust between a buyer and supplier provides many advantages, such as increased productivity. But according to new research coauthored by HBS professor Felix Oberholzer-Gee, trusting relationships can also have a negative side that managers must take into account. Read More

The Evolution of Apple

Apple's continuing development from computer maker to consumer electronics pioneer is rich material in a number of Harvard Business School classrooms. Professor David Yoffie discusses his latest case study of Apple, the 5th update in 14 years, which challenges students to think strategically about Apple's successes and failures in the past, and opportunities and challenges in the future. Read More

Platform Envelopment

Established platform providers can be difficult to displace. This paper explores a path to platform leadership change that does not rely on breakthrough innovation or Schumpeterian creative destruction: a phenomenon the authors call "platform envelopment." In practical terms, envelopment entails one platform provider adding another platform's functionality to its own, and then offering a multiplatform bundle. Eisenmann and his colleagues describe a variety of envelopment attacks based on the relationship between the attacker's platform and its target's, and then discuss the economic and strategic motivations for each attack type. Read More

Multi-Sided Platforms: From Microfoundations to Design and Expansion Strategies

The term "platform" is increasingly popular among executives today. Platforms, and multi-sided platforms (MSPs) in particular, serve the needs of interdependent constituents. Although MSPs have existed for centuries in the form of matchmakers and village markets, information technology has increased tremendously the opportunities for building larger, more powerful, and more valuable platforms. At the same time, by expanding the potential scope of platforms, information technology has also increased the number and complexity of factors, both economic and technical, that drive the strategic design of MSPs. Surprisingly, few companies rigorously analyze the underlying drivers of their MSPs, and the emerging business and economics literature on two-sided markets has not been very helpful in this direction, either. This article provides a general framework to help organize managerial thinking about MSPs. Read More

The Demise of Cost and Profit Centers

The Balanced Scorecard has proven to be a general and powerful performance management framework for units previously treated as profit and investment centers. The management control literature, however, identifies other organizational forms for decentralized units, including standard cost centers, revenue centers, and support units treated as discretionary expense centers. Starting from the example of a classic teaching case, Empire Glass Company, Kaplan explains how strategy maps and the Balanced Scorecard transform cost, revenue, and discretionary expense centers into strategic business units in their own right. Read More

The Office of Strategy Management

Many organizations suffer a disconnect between strategy formulation and its execution. The answer? HBS professor Robert S. Kaplan and colleague Andrew Pateman argue for the creation of a new corporate office. Read More

Identify Emerging Market Opportunities

Yes, you understand your company needs to compete in emerging markets. But which country is the best fit for you? A Harvard Business Review excerpt by Tarun Khanna, Krishna G. Palepu, and Jayant Sinha. Read More

Wintel: Cooperation or Conflict

Industries are becoming more horizontal. Products that used to be designed and manufactured by a single firm are now produced by different companies that must coordinate activities. Here, the authors detail the relationship between Intel and Microsoft (both integral to PCs) and, using a mixed-duopoly model, analyze the dynamics of cooperation verses competition. They find that costs associated with complementary R&D, conflicts of interest in pricing, and the possibility of competitors all factor in the decision of when to cooperate or compete. Read More

Creating the Office of Strategy Management

Organizations often fail to execute their strategy—failure rates may range as high as 60 to 90 percent. Successful companies align their key management processes for effective strategy execution. Creating a new corporate-unit level, the Office of Strategy Management (OSM), may help align management processes to strategy. The authors explain, among other topics, OSM core processes, desirable OSM processes, integrative processes, and positioning the OSM. Read More

The Innovator’s Battle Plan

Great firms can be undone by disruptors who analyze and exploit an incumbent’s strengths and motivations. From Clayton Christensen’s new book Seeing What’s Next. Read More

Bringing History into International Business

International Business scholars often talk about history, but rarely take it seriously. The first generation of International Business scholars placed a high priority on evolutionary and historical perspectives and methodology, but little work these days grapples with the history of International Business or uses historical data to explore an issue. Jones and Khanna discuss new avenues for researching business groups in history and in contemporary emerging markets, resource-based and path-dependent theories of the firm, and foreign direct investment and development over time. Read More

Strategy for Small Fish

Microsoft, Wal-Mart, and eBay provide ecosystems in which other companies thrive or fail. But what are effective strategies for a small fish in a big pond? An excerpt from The Keystone Advantage by HBS professor Marco Iansiti and Roy Levien. Read More

A Diagnostic for Disruptive Innovation

You have three potential innovations, but resources to develop just one. Here are diagnostics to help you make the best decision. From Strategy & Innovation newsletter. Read More

How to Avoid a Price Increase

Consumers hate price increases, but what is a company to do when material costs skyrocket? One answer: Think small. Professor John Gourville considers the alternative in this Q&A. Read More

Rethink the Value of Joint Ventures

Why are joint ventures losing favor with transnational companies? Professor Mihir A. Desai discusses research that suggests globalization makes go-it-alone strategies pay off. Read More

Operations and the Competitive Edge

Many managers expect operations organizations to fulfill only a support role. But an effective operations strategy can give you a competitive advantage. An interview with professor Robert Hayes. Read More

Creating Value in Your Business Ecosystem

The metaphors of keystones and ecology help you think about your business environment, say professor Marco Iansiti and consultant Roy Levien. A Harvard Business Review excerpt. Read More

Got a New Strategy? Now Make it Happen

Many strategies never take off for lack of honest discussion, say Harvard Business School's Michael Beer and co-author Russell A. Eisenstat. A Harvard Business Review excerpt. Read More

Does Your HQ Operation Fit With Corporate Strategy?

Is a lean headquarters operation the key to success? How should headquarters design fit with corporate strategy? New research from professor David J. Collis has surprising answers. Read More

Globalization: The Strategy of Differences

Should your global strategy optimize scale or exploit differences? HBS professor Pankaj Ghemawat suggests a mix-and-match strategy in this excerpt from Harvard Business Review. Read More

Is “the Innovator’s Solution” to Sustained Corporate Growth an Unnatural Act?

In their new book, The Innovator’s Solution, HBS professor Clayton Christensen and co-author Michael E. Raynor propose four guidelines for developing a "disruptive growth engine." The problem: According to the authors, few organizations have been able to achieve more than one disruptive technology in their lifetimes. Why is it so difficult? Closed for comment; 11 Comments posted.

Three Steps for Crisis Prevention

Can you predict a business disaster? In this Harvard Business Review excerpt, professors Michael D. Watkins and Max H. Bazerman outline the keys for disaster prevention: recognition, prioritization, and mobilization. Read More

New Cluster Mapping Project Helps Companies Locate Facilities

A company's decision on where to locate a facility must take more into account than simple labor costs, says Harvard Business School professor Michael E. Porter. The new Cluster Mapping Project, developed at Porter's Institute for Strategy and Competitiveness, reveals detailed patterns of growth, resources, and competitiveness in forty-one regional clusters in the United States. Read More

Use the Psychology of Pricing To Keep Customers Returning

When to charge for a product or service can be more important than how much to charge, says Harvard Business School professor John Gourville. If you want to build long-term loyalty with customers, you better understand the difference. Read More

Is Performance-Based Pricing the Right Price for You?

Not every industry or company can benefit from performance-based pricing. But where there is a fit, PBP can be a powerful tool that merges the interests of buyers and sellers, says Harvard Business School professor Benson Shapiro. Read More

Going Green Makes Good Business Sense

Green can be good, says HBS professor Forest L. Reinhardt. In a recent reunion session for alumni, he outlined how environmentally-minded company policies can make good strategic sense for business. Here are some strategies you might consider. Read More

Reinventing the Industrial Giant

It's not easy to transform a trusty but ailing old stalwart. In an excerpt from their book, Changing Fortunes: Remaking the Industrial Corporation, HBS professor Nitin Nohria and co-authors Davis Dyer and Frederick Dalzell discuss how General Motors and Kodak are attempting precisely that. Read More

How to Compete Like a Judo Strategist

Movement, balance, and leverage: Savvy executives use these principles to compete every day. In this excerpt from their new book Judo Strategy: Turning Your Competitors' Strength to Your Advantage, HBS professor David B. Yoffie and research associate Mary Kwak reveal five techniques of the masters. Read More

RealNetworks, CNET, and Judo Strategy

Both companies successfully outmaneuvered bigger competitors to lead their markets. But can they still win when the rules have changed? Read More

Good News, Not Blues, For the Inner City

What's located at the crossroads of a sophisticated infrastructure—containing airports, railroads, and ports—and boasts a large potential workforce of consistently underemployed people? A typical inner city, of course. And, says Harvard University Professor Michael E. Porter; inner cities are already rewriting the map of competitive advantage. Read More

Can Japan Compete? [Part Two]

In this, the second part of a two-part interview, HBS professor Michael Porter expands upon the message of his new book, Can Japan Compete?, and on the value of clearly defined strategies and open competition. Read More

Can Japan Compete? [Part One]

Not long ago, Japan was considered a competitive powerhouse with exemplary business practices that were admired and often copied, particularly in the West. What went wrong? In a new book, HBS professor Michael Porter and two coauthors take a closer look. [ Part 1 ] Read More