- 08 Jun 2009
- Research & Ideas
The Return of the Salesman
Salesmen have received a bad rap over the years, but increasingly the profession is drawing scholarly interest. Business History Review coeditor Walter A. Friedman discusses the publication's recent themed issue on salesmanship. Key concepts include: Scholarly books on the history of salespeople began to appear more frequently beginning in the 1990s, with more recent work comparing 20th-century salespeople in Europe with those in the United States. In addition to comparative trends, research in this area attempts to place the story of the salesperson within the broader themes of history. Salespeople played a positive role displacing old products and promoting innovation. A strong sales force could also create a barrier to entry, as in the case of IBM. Negative portrayals have had lasting effects on the field. Closed for comment; 0 Comments.
- 05 Jun 2009
- Research Event
Business Summit: Niall Ferguson and the Certainty of Uncertainty
The economic crisis should not have been unexpected, says professor Niall Ferguson. Business leaders should consider history when developing their strategies, plans, and models, and should keep in mind that outlier events occur. Closed for comment; 0 Comments.
- 05 Jun 2009
- What Do You Think?
What Does Slower Economic Growth Really Mean?
Respondents to this month's column by HBS professor Jim Heskett came close to general agreement on the proposition that economic growth is not measured properly by GDP, calling for new indicators. Jim sums up. (Online forum now closed. Next forum begins July 6.) Closed for comment; 0 Comments.
- 04 Jun 2009
- Working Paper Summaries
Can a Continuously-Liquidating Tontine (or Mutual Inheritance Fund) Succeed where Immediate Annuities Have Floundered?
The changeover from defined benefit to defined contributions retirement plans in the United States has created a vast group of individuals that faces (or will face) the difficult problem of using a lump sum of assets to provide consumption for a relatively long but uncertain number of years. Up to this point, however, consumers appear not to have embraced annuitization. HBS professor Julio J. Rotemberg suggests an alternative instrument that, like immediate annuities, provides longevity insurance and postpones income until old age. In the proposed Mutual Inheritance Fund (MIF), a pool is formed by having individuals of a particular age buy shares in a mutual fund. The income from the underlying assets in the mutual fund is reinvested in the fund so that the value of the shares in an individual's name (and possibly also the number of these shares) grows over time. The basic idea behind the MIF is that the shares of pool members who die are liquidated, and the proceeds are then distributed in cash to the remaining members in proportion to the number of mutual fund shares that are currently in their name. Key concepts include: The essence of the MIF is that people within a pool are bequeathing benefits to each other. The commonality of purpose among the members of the pool, inherent in the MIF, fits with the "mutual insurance" idea with which a great deal of insurance was started. The MIF might be more successful when the members of a pool have some reason to feel altruism toward each other (perhaps because they worked for the same organization). This altruism may be able to counteract an aspect of annuities that potential contributors customers dislike, namely, that they "get nothing" after they die. The MIF suggests an implicit concern for direct descendants. While annuities are sometimes seen as robbing children of their inheritance, the strong tilt of the MIF toward old age leads to a lottery-like component where heirs have a good chance to inherit some of the tontine's proceeds if a contributor policyholder survives until old age. Closed for comment; 0 Comments.
- 03 Jun 2009
- Working Paper Summaries
It Is Okay for Artists to Make Money…No, Really, It’s Okay
When art and commerce are mentioned in the same sentence, many people become bad tempered or think something needs fixing. This paper argues that more artists ought to make more money more often. HBS professor Robert Austin and theater dramaturg Lee Devin identify and undermine three fallacies about art and commerce, and suggest that it is necessary to carry on a more careful and less emotional conversation about the tensions between art and business and to overcome a general aversion to business common among artists and their patrons. They also stress the need to develop better theories about how art and commerce can achieve integration helpful to both. Key concepts include: The interests of art, artists, and business can be best served if more commerce enters into the world of art, not less. There are three fallacies, often implicit, about relationships between art and commerce: (1) art is a luxury and an indulgence, (2) art is clearly distinguishable from "non-art," and (3) commerce dominates and corrupts art, and subverts its purpose. Good art should achieve appropriate commercial value consistently, not just occasionally. A conversation takes place when art and commerce are in tension, a conversation in which neither artists nor managers should dominate. Closed for comment; 0 Comments.
- 02 Jun 2009
- First Look
- 01 Jun 2009
- Lessons from the Classroom
The Challenges of Investing in Science-Based Innovation
Smart science-based businesses view today's economic turmoil as an opportunity to stoke up research and innovation for long-term competitive advantage, says professor Vicki L. Sato. How about your business? Key concepts include: Companies with highly differentiated products will be able to weather this storm, and come out the other side stronger. Innovation management challenges fall across several key areas, including strategy, organizational design, decision-making, and resource allocation. Different situations will require different business decisions—investing in R&D isn't always the right path to take. Closed for comment; 0 Comments.
- 29 May 2009
- Research Event
Business Summit: Introduction to the Future of Market Capitalism
Professor Joseph L. Bower discusses a two-year research project exploring the views of global business leaders and HBS faculty on what might threaten the world's economic progress. Closed for comment; 0 Comments.
- 29 May 2009
- Working Paper Summaries
Crafting Integrated Multichannel Retailing Strategies
The past fifteen years has been a period of rapid growth in the practice of multichannel retailing, mirroring the rise of the Internet as a nearly ubiquitous tool that firms use to interact with customers. More than 80 percent of a broad cross-section of U.S. retailers now report that they sell merchandise through multiple channels. This practice seems to be on the cusp of a new era in which firms start demanding even more from their investments, with particular emphasis being given to financial performance in light of the current economic crisis. These circumstances present a great opportunity both to firms that are looking to gain a competitive advantage through multichannel retailing and to researchers who are interested in helping them make more informed decisions. This article provides a broad discussion of these issues, synthesizes current knowledge, and suggests directions for future research. Key concepts include: The ability of the multichannel marketers to discover, develop, and exploit fully the potential synergies among multiple channels may depend on the degree of commitment to the new channels. Commitment is likely to depend on early results. Use caution in evaluating the effectiveness of a multichannel retailing program on the basis of short-term results alone. The effects of opening a new channel can be multi-faceted, and the benefits from embarking on a multichannel strategy can take time to develop. Over time, new organizational forms may emerge as the potential for new channels becomes clearer. Closed for comment; 0 Comments.
- 28 May 2009
- Working Paper Summaries
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. Key concepts include: This paper proposes a theoretical framework for studying competition between differentiated products when consumers are interested in purchasing more than one brand. Closed for comment; 0 Comments.
- 27 May 2009
- First Look
- 26 May 2009
- Research & Ideas
Improving Market Research in a Recession
At the same time that marketers must pare research expenditures, they face added pressure to secure high-quality data and insights. What's a CMO to do? Ask HBS marketing professor John Quelch. Key concepts include: The degree of uncertainty in business and consumer markets has soared. Most big consumer marketers are seeking to shave 10 to 20 percent off research budgets. CMOs must make every remaining market research dollar count. Closed for comment; 0 Comments.
- 21 May 2009
- Working Paper Summaries
Do Friends Influence Purchases in a Social Network?
In spite of the cultural and social revolution in the rise of social networking sites such as Facebook and MySpace (and in South Korea, Cyworld), the business viability of these sites remains in question. While many sites are attempting to follow Google and generate revenues from advertising, will advertising be effective? If friends influence the purchases of a user in a social network, it could potentially be a significant source of revenue for the sites and their corporate sponsors. Using a unique data set from Cyworld, this study empirically assesses if friends indeed influence purchases. The answer: It depends. Findings are relevant for social networking sites and large advertisers. Key concepts include: There is a significant and positive impact of friends' purchases on the purchase probability of a user. However, there are significant differences across users. Specifically, this social effect is zero for 48 percent of the users, negative for 12 percent of the users, and positive for 40 percent of the users. "Moderately connected" users exhibit "keeping up with the Joneses" behavior. On average, this social influence translates into a 5 percent increase in revenues. Highly connected users tend to reduce their purchases of items when they see their friends buying them. This negative social effect reduces the revenue for this group by more than 14 percent. This finding is consistent with the typical fashion cycle wherein opinion leaders or the elite in the fashion industry tend to abandon one type of fashion and adopt the next in order to differentiate themselves from the masses. Closed for comment; 0 Comments.
- 20 May 2009
- Working Paper Summaries
On Good Scholarship, Goal Setting, and Scholars Gone Wild
When confronted by anecdotal evidence and some causal evidence, how should scholars—and indeed businesses and society—react? In this response to a critique in the journal Academy of Management Perspectives, the authors articulate the aims of their article "Goals Gone Wild: How Goals Systematically Harm Individuals and Organizations," describe points of disagreement with the critics, offer a definition of good scholarship, and suggest a program of research for future studies of goal setting. Key concepts include: Future research should investigate both the constructive and harmful effects of goals. These studies will require new and creative approaches. Anecdotal evidence matters. Given that one large negative effect can overwhelm the influence of many positive effects, anecdotes and empirical results linking goals with harmful outcomes deserve more attention and systematic research. As financial crises, Ponzi schemes, and the collapse of the automotive industry demonstrate, the combination of unethical behavior, risk-taking and poor judgment can be toxic. Three areas of research with significant prospects for illuminating potential problems are the links between goal setting and unethical behavior, goal setting and excessive risk-taking, and goal setting and judgment. Closed for comment; 0 Comments.
- 19 May 2009
- First Look
- 18 May 2009
- Research & Ideas
The Unseen Link Between Savings and National Growth
Professor Diego Comin and fellow researchers find a little observed link between private savings and country growth. The work may offer a simple interpretation for the East Asia "miracle" and for failures in Latin America. Q&A. Key concepts include: Companies in poor countries must attract FDI to gain access to "frontier technologies" that drive productivity and growth. Savings become key to attracting these investors, who expect the local company to have colateral in the deal. A 10 percent increase in the savings rate over the previous 10 years leads to an increase in the average growth rate over the next 10 years of 1.3 percent. Developing countries should consider policies that foster domestic savings. Closed for comment; 0 Comments.
- 15 May 2009
- Working Paper Summaries
Barriers to Household Risk Management: Evidence from India
Insurance markets are growing rapidly in developing countries. Despite the promise of these markets, however, adoption to date has been relatively slow. Yet households often remain exposed to movements in local weather; regional house prices; prices of commodities like rice, heating oil, and gasoline; and local, regional, and national income fluctuations. In many cases, financial contracts simply do not exist to hedge these exposures, and when contracts do exist their use is not widespread. Why don't financial markets develop to help households hedge these risks? Why don't more households participate when formal markets are available? HBS professor Shawn Cole and coauthors attempt to shed light on these questions by studying participation in rural India in a rainfall risk-management product that provides a payoff based on monsoon rainfall. The results suggest that it may take a significant amount of time—and substantial marketing efforts—to increase adoption of risk-management tools at the household level. Key concepts include: To increase the insurance penetration rate of insurance products, it is important to minimize transaction and administrative costs and foster competition among insurance providers. Technological advances and contractual innovations may improve these products. The estimated significance of trust and vendor experience suggests that product diffusion through the population may be relatively slow until a track record is established. Optimal contract design could help by paying a positive return with sufficient frequency. "Catastrophe"-type insurance might be most beneficial for households, since it provides payouts that are concentrated in states of nature where the marginal utility of consumption is particularly high. Closed for comment; 0 Comments.
- 15 May 2009
- Working Paper Summaries
Money or Knowledge? What Drives Demand for Financial Services in Emerging Markets?
Why is there apparently limited demand for financial services in emerging markets? On the one hand, low-income individuals may not want formal services when informal savings, credit, and insurance markets function reasonably well, and the benefits of formal financial market participation may not exceed the costs. On the other hand, limited financial literacy could be the barrier: If people are not familiar or comfortable with products, they will not demand them. These two views carry significantly different implications for the development of financial markets around the world, and would suggest quite different policy decisions by governments and international organizations seeking to promote "financial deepening." HBS professor Shawn Cole and coauthors found that financial literacy education has no effect on the probability of opening a bank savings account for the full population, although it does significantly increase the probability among those with low initial levels of financial literacy and low levels of education. In contrast, modest financial subsidies significantly increase the share of households that open a bank savings account within the subsequent two months. Key concepts include: Subsidies or price reductions may represent a more cost-effective way of drawing households into the financial system. Financial literacy efforts targeted at the general population may be relatively ineffective. These results do not necessarily constitute support for financial literacy education even among the low-literacy subpopulation. Even if financial literacy programs are carefully targeted, they may still not be cost-effective. Closed for comment; 0 Comments.
- 14 May 2009
- Working Paper Summaries
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. Key concepts include: A simple model captures the incentives that two-sided platforms have to exclude some participants who would be willing to pay the platform's access fees. Platforms' exclusion incentives are fundamentally determined by a tradeoff between quality and quantity. Closed for comment; 0 Comments.
Business Summit: Enterprise Risk Management
Risk management is a key to sustained firm growth, says professor Robert S. Kaplan. Key ingredients to a successful risk management program include the proper culture, clear parameters, discipline, measurement, and accountability. Closed for comment; 0 Comments.