- 31 May 2017
- Sharpening Your Skills
10 Harvard Business School Research Stories That Will Make Your Mouth Water
The food industry is under intense study at Harvard Business School. This story sampler looks at issues including restaurant marketing, chefs as CEOs, and the business of food science. Open for comment; 0 Comments.
- 21 Mar 2017
- First Look
First Look at New Research, March 21
The rise and fall of the circus ... Do CEOs impact firm performance? ... The hidden power of a job referrer.
- 07 Sep 2016
- Working Paper Summaries
Decision-Making by Precedent and the Founding of American Honda (1948–1974)
While the production and distribution of goods in a firm is commonly overseen by a hierarchy of management, decision-making within these organizations is often frenetic. This paper demonstrates empirically that the president of American Honda made important strategic decisions by following the precedent set by his boss and former mentor, Honda’s chief strategist, Takeo Fujisawa—by making careful, educated guesses about how Fujisawa would have addressed similar issues. This study identifies the guiding influence of historical precedent and hypothesized intentions and emphasizes the social character of strategic decision-making.
- 09 Mar 2016
- Lessons from the Classroom
In This Classroom, Beer Can Improve Your Grade
The Strategic Brew computer simulation puts MBAs in charge of their own breweries, rising or sinking based on the popularity of their pseudo suds. Ramon Casadesus-Masanell explains lessons learned from a beer game Open for comment; 0 Comments.
- 09 Jun 2015
- Sharpening Your Skills
Sharpening Your Skills: Social Media
Sharpening Your Skills culls the HBS Working Knowledge archive to deliver insights around important business topics. This week: developing a social media strategy. Open for comment; 0 Comments.
- 03 Jun 2015
- Working Paper Summaries
Business Models--Nature and Benefits
The authors propose a concept of the "business model" as a set of decisions enforced by the authority of the firm. They then consider how these decisions could be used to the firm's benefit, and propose a new strategic role for the business model: a means of negotiating for a portion of "ambivalent value" (value produced by the interaction of two firms that does not necessarily accrue to either). This work will help managers clarify the organizational determinants of negotiation outcomes. Closed for comment; 0 Comments.
- 19 May 2014
- Research & Ideas
Why Companies Should Compete for Your Privacy
Consumers are sometimes willing to trade personal data for lower prices. How should companies compete for that valuable information? A discussion with Ramon Casadesus-Masanell and Andrés Hervás-Drane. Open for comment; 0 Comments.
- 22 Apr 2013
- Working Paper Summaries
Competing with Privacy
Personal consumer information has become a valuable asset in the marketplace and an important element of firm strategy. While consumers are unable to control the disclosure practices of services that collect their personal information, they can decide which services to trust and how much information to provide. How do these choices shape competition? The analysis in this paper explains how firms engaging in disclosure choose to share the benefits with consumers by subsidizing them, and firms charging positive prices choose not to engage in disclosure. Competition is likely to increase the supply of both subsidized and no-disclosure services. Moreover, subsidized services have the potential to remain highly profitable under competition despite the fact that disclosure generates consumer disutility. Overall, these findings are particularly relevant to the business models of Internet firms. Findings also contribute to inform the regulatory debate on consumer privacy. Key concepts include: High-disclosure services should be expected to play an important role in a competitive marketplace. Therefore, efforts to make disclosure practices salient and understandable for consumers are clearly desirable. High-disclosure services can outperform their no-disclosure counterparts in generating consumer surplus, ensuring that lower valuation consumers participate in the market. Initiatives to subsidize consumers in order to sustain disclosure revenues, such as Amazon's Special Offers program, are likely to become more widespread. There is scope for no-disclosure services to compete. Such services may attract consumers with larger stocks of personal information or those whose information is more sensitive to disclosure. Tensions surrounding consumer information provision and disclosure will remain for the foreseeable future. Closed for comment; 0 Comments.
- 31 Jul 2012
- Working Paper Summaries
Investment Incentives in Proprietary and Open-Source Two-Sided Platforms
While proprietary and open-source software have coexisted since the early days of the computing industry, competition between these two modes of development has intensified dramatically following the surge of the Internet in the mid-1990s. This paper provides a first step to better understand incentives to invest in proprietary and open platforms. Specifically, the authors examine a model of a proprietary and an open-source two-sided platform to study equilibrium investment in platform quality. Their analysis provides answers to three important questions: (1) How are the incentives to invest in platform quality affected by the degree of platform openness? (2) Which of these two modes of governance leads to investment closer to the social optimum? And (3), how are incentives to invest in platform quality moderated by competition between proprietary and open two-sided platforms? Comparing monopoly platforms reveals that for a given level of user and developer adoption, investment incentives are stronger in proprietary platforms. However, open platforms may receive larger investment because they may benefit from wider adoption, which raises the returns to quality investment. The authors also find that proprietary platforms may benefit from higher investment in competing open platforms when developers multi-home, a result that helps explain why a proprietary platform such as Microsoft has chosen to contribute to the development of Linux. Key concepts include: Through access prices, a monopolistic proprietary platform can ensure that a particular level of investment in platform quality takes place regardless of how much users pay for applications. Quality investment in open platforms may be larger than for proprietary platforms, due to larger user and developer entry. Therefore, open platforms may lead to investments in platform quality closer to social efficiency. When developers multi-home, the proprietary platform may benefit from higher quality investment in a competing open-source platform. This result explains why proprietary firms may choose to contribute to the development of competing open-source platforms. Closed for comment; 0 Comments.
- 26 Oct 2010
- Working Paper Summaries
When Does a Platform Create Value by Limiting Choice?
Platforms such as video games and smartphones need to attract users, and the best way to do so is to offer more and more applications. Is there ever a point where a platform should limit the variety available? Researchers Ramon Casadesus-Masanell and Hanna Halaburda observe that in many situations users enjoy consuming applications together. When such consumption complementarities are present, users may benefit if the platform limits choice. With fewer applications to choose from, it is easier for users to take full advantage from shared consumption. Key concepts include: Platforms have traditionally encouraged user adoption by providing as many applications as possible. This works because users value having more choices. When users prefer both using many applications and using the same applications as other users (multiplayer video games, for example), they face a trade-off. As it turns out, there is the tendency to use too many applications, a situation similar to a Prisoners' Dilemma: everybody would be better off consuming fewer applications but each user individually has the desire to consume more. By limiting the number of applications, the platform prevents users from consuming too many applications. If there are many applications to choose from, it is less likely that users will purchase the same set. In this case, limiting the number of applications helps the users coordinate on the same set. To limit choice, the platform has a variety of direct and indirect alternatives including imposition of high prices for developers to access the platform or directly restricting the number of applications available. The insight to practitioners is that maximizing the number of applications available is not always the best strategy for platforms. Instead, actively managing the number of applications may result in substantial value creation, which could be captured though access fees. Closed for comment; 0 Comments.
- 22 Jul 2010
- Working Paper Summaries
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. Key concepts include: New entrants in a wide array of industries (such as Ryanair in the airline industry and IKEA in furniture) demonstrate that innovative business models can provide the basis for sustainable business success, even in industries with strong and well-established incumbents. Firms should take into account the likely competitive effects and responses before revealing a business model innovation. Just as product and process innovations are hard to protect, business model innovations can be imitated. For many years to come, firms in all kinds of industries will continue to surprise with unprecedented new ways of capturing value through sponsor-based business model innovation. Closed for comment; 0 Comments.
- 11 Jan 2010
- Research & Ideas
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. Key concepts include: Software companies are taking a "best of both worlds" approach by creating products that use a combination of OS and proprietary software code. The researchers wanted to get a clearer sense of when a profit-maximizing firm should adopt a mixed-source business model and what that model might look like under different circumstances. Results indicate recurring patterns and strategies that managers can take into consideration when setting strategy. Closed for comment; 0 Comments.
- 24 Nov 2009
- Working Paper Summaries
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. Key concepts include: An integrative framework that cleanly separates the realm of business model, strategy, and tactics will help guide the search for novel, interesting, and profitable new ways to compete. "Business model" refers to the logic of the firm, the way it operates, and how it creates value for its stakeholders. "Strategy" refers to the choice of business model through which the firm will compete in the marketplace. "Tactics" refers to the residual choices open to a firm by virtue of the business model that it employs. Closed for comment; 0 Comments.
- 22 Oct 2009
- Working Paper Summaries
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. Key concepts include: The presence of the ad-sponsored rival puts an upper bound on the number of ads that an incumbent competing through a mixed-product-line-extension can set. When the advertising rate is low, a mixed-product-line-extension model is inferior to the pure-subscription-based model. Even if the incumbent can avoid cannibalization by using a mixed-single-product model, the incumbent may still prefer to use the pure-subscription-based model, since the advertising intensities of the two firms are strategic substitutes. Sometimes the best response of the incumbent to an ad-sponsored entrant is to not change its business model and tactics. This happens only when the optimal business model under both monopoly and duopoly is the pure-subscription-based model, and when the quality difference between the incumbent and the entrant is large. Closed for comment; 0 Comments.
- 15 Oct 2009
- Working Paper Summaries
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. Key concepts include: Firms may become more closed in response to competition from an outside open source (OS) project, and are more likely to use a proprietary business model. Firms are more likely to open substitute, rather than complementary, modules to existing OS projects. Low-quality firms are generally more prone to opening some of their technologies than firms with high-quality products. Closed for comment; 0 Comments.
- 12 Feb 2009
- Working Paper Summaries
Platform Competition, Compatibility, and Social Efficiency
The last three decades have witnessed unprecedented growth in network industries such as video games, computers, credit cards, media, and telecommunications. These industries are often organized around physical or virtual platforms that enable distinct groups of agents to interact with one another, and are commonly referred to as two-sided markets or markets with two-sided platforms. An operating systems developer such as Microsoft, for example, provides a software platform that makes possible the completion of value-creating transactions between independent software vendors and users. A key attribute of the market that determines the intensity and scope of network effects is whether or not competing platforms are compatible. The effects of platform (in)compatibility on market outcomes, however, have largely been ignored by the literature on markets with two-sided platforms. This paper develops an explanation of why markets with two-sided platforms are often characterized by incompatibility with one dominant player that may choose to subsidize access to one side of the market. Key concepts include: This paper provides a theory for why firms may choose to make their platforms incompatible. Incompatibility might lead to market dominance and high profits by one of the platform providers, even if both providers are ex ante identical and there are no fixed costs of operation. Closed for comment; 0 Comments.
- 11 Sep 2008
- Working Paper Summaries
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. Key concepts include: For managers, one way to persuade complementors to behave in ways beneficial to you is by promoting competition in their "spaces." However, if the competition that you can induce is mild, you are better off dealing with monopolist complements. From a public policy viewpoint, mild competition within complements might be preferable to intense competition. Moreover, duopolistic competition between complements might generate more total surplus than a triopoly. From a theoretical viewpoint, this paper is a first step toward a general theory of competition between and within complements. The paper adds to the literature on co-opetition initiated by Brandenburger and Nalebuff (1996). Closed for comment; 0 Comments.
- 08 Sep 2008
- HBS Case
The Value of Environmental Activists
With decidedly non-profit goals leading them on, how do environmental protection groups such as Greenpeace and World Wildlife Fund create value? Can it be measured? A Q&A with Harvard Business School professor Ramon Casadesus-Masanell and case writer Jordan Mitchell. Key concepts include: The challenge for a business student is how to put a quantifiable measure on whether Greenpeace and WWF are successful in reaching goals. WWF and Greenpeace create value by increasing the world's willingness-to-pay on environmental issues. Most scientists agree that the earth is deteriorating at a faster rate than during the 1960s and 1970s, but it would be worse off had it not been for the tireless campaigning of environmental NGOs. Closed for comment; 0 Comments.
- 16 Apr 2007
- Research & Ideas
Delivering the Digital Goods: iTunes vs. Peer-to-Peer
Apple's iTunes music download service and illegal peer-to-peer music downloads offer two contrasting approaches to delivering digital content to users. Can Apple and the recording industry seriously compete against free? Do iTunes and p2p help each other in some ways? Professor Ramon Casadesus-Masanell and collaborator Andres Hervas-Drane discuss their recent research on competition in digital distribution. Key concepts include: ITunes demonstrates that to compete effectively against free p2p networks, online digital distribution must deliver experiences to consumers that cannot be easily matched by decentralized, self-sustained peer-to-peer networks. In designing new models, managers must consider how robust a given design is to models of other industry participants with which they interact. Managers must also ponder how aggressive their business models are toward those of other players and ask whether or not complementarities are exploited. The "scarce" resource in digital goods distribution through p2p networks is not content, but bandwidth. As a consequence, ISPs will have a more visible role in shaping industry structure. Closed for comment; 0 Comments.
Platform Competition: Betfair and the U.K. Market for Sports Betting
Since the early 2000s, online betting exchanges have had a new relationship with customers relative to traditional bookmakers, providing a platform to match individuals willing to lay and back the same outcome. This study shows how exchanges’ platform design choices have major implications for their likelihood of success.