- 28 Oct 2008
- First Look
- 27 Oct 2008
- Lessons from the Classroom
Achieving Excellence in Nonprofits
Nonprofit boards and executives are confronted by a confusing landscape of conflicting demands, rapidly evolving rules, and changing opportunities for finding resources. How can organizations stay focused? Harvard Business School professor Herman B. "Dutch" Leonard discusses today's challenges and his Executive Education program on Governing for Nonprofit Excellence. Key concepts include: The biggest challenge facing nonprofit boards is staying focused on key goals; developing a strategy for accomplishing them; and generating a set of tactics, operations, and actions that are aligned with producing them. In high-performing social-mission-driven organizations, the board and executive management team are in clear agreement on goals, strategy, and actions. Always involved in rapidly changing environments, nonprofits need to maintain "situational awareness," rethink their approaches, and implement change constantly. Closed for comment; 0 Comments.
- 24 Oct 2008
- Working Paper Summaries
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. Key concepts include: The scope of strategy for multi-sided platforms is significantly wider than for normal firms. It is not limited to pricing, product design, and technology, but also and critically includes control over interactions that do not happen at the firm's boundaries. There is a wide array of strategic instruments available to implement MSP regulation, including contractual, technological, and information design. The need for and consequences of MSP regulation may evolve over time. Closed for comment; 0 Comments.
- 24 Oct 2008
- Working Paper Summaries
Signaling Firm Performance Through Financial Statement Presentation: An Analysis Using Special Items
Do managers' presentation decisions within their financial statements reflect informational motivations (that is, revealing the underlying economics of the firm) or opportunistic motivations (that is, attempts to bias perceptions of firm performance)? The authors examine managers' choices to present special items (such as write-offs and restructuring charges) separately on the income statement rather than aggregated in other line items with disclosure only in the footnotes. Prior research suggests that managers engage in opportunistic reporting in other presentation decisions, and that managers' presentation decisions on the financial statement affects users' judgments. The distinction also matters because current changes in reporting standards are likely to increase the occurrence of "nonrecurring" type charges similar to special items, such as fair value changes. Key concepts include: Managers, in most instances, appear to use the flexibility afforded in the presentation of special items to inform users of the underlying economics of these items. Special items receiving income statement presentation are more transitory than those receiving footnote presentation. These results are consistent with managers using discretion in the financial statement presentation of special items for informational reasons. There is limited evidence that opportunistic motivations underlie this presentation decision. Closed for comment; 0 Comments.
- 23 Oct 2008
- Working Paper Summaries
Economic Impacts of Immigration: A Survey
International migration is a mighty force globally. According to United Nations statistics, over 175 million people, accounting for 3 percent of the world's population, live permanently outside their countries of birth. This paper surveys the economic impacts of immigration for host countries, mostly emphasizing the recent experiences of Northern Europe and Scandinavia. The paper documents how migrant flows to some countries within this region are now of similar magnitude to the United States. The authors discuss the impact of immigration on national labor markets in terms of both immigrant assimilation and possible native displacement. Their survey concludes with the impact of immigration on the public finances of host countries, which is of particular policy importance within Europe today given ageing populations and fiscal imbalances. Key concepts include: The general view on immigration overstates the adverse effects of immigration on natives of the host countries in terms of labor market or wage displacement. Immigrants' use of social benefits varies widely across countries, as does the degree of assimilation into or out of the host country's welfare system. Immigration is generally viewed as a large fiscal burden for European public sectors (or as a possible savior if correctly harnessed). Most empirical studies, however, estimate the fiscal impacts of immigration to be relatively small. Closed for comment; 0 Comments.
- 22 Oct 2008
- Working Paper Summaries
Variation in Experience and Team Familiarity: Addressing the Knowledge Acquisition-Application Problem
Team familiarity helps team members successfully locate knowledge within a group, share the knowledge they possess, and respond to the knowledge of others. While team familiarity may help all teams to better coordinate their actions, it may play a particularly important role for teams with individuals looking to apply knowledge from their varied experience. This possibility leads to the question that provides the foundation for this paper: Does team familiarity moderate the relationship between variation in experience and performance? Prior research attempting to link variation in experience and performance has found effects ranging from positive to neutral to negative. Huckman and Staats explain these differential results by drawing on related work from learning, knowledge management, and social networking. Key concepts include: Managers may benefit from a more detailed understanding of the types of experience that are relevant in their setting (e.g., market, technology). If the most valuable assets of many companies are their employees, then organizations may need to shift from thinking about their project portfolio to their employee-experience portfolio. Conditions that assist in the acquisition of useful knowledge, such as variation in experience, will not guarantee—and may even deter—the eventual application of that knowledge. It is important to separate the processes of knowledge acquisition and knowledge application. Closed for comment; 0 Comments.
- 21 Oct 2008
- First Look
- 20 Oct 2008
- Research & Ideas
The Seven Things That Surprise New CEOs
In the newly released book On Competition, Professor Michael E. Porter updates his classic articles on the competitive forces that shape strategy. We excerpt a portion on advice for new CEOs, written with HBS faculty Jay W. Lorsch and Nitin Nohria. Key concepts include: Most new chief executives are taken aback by unfamiliar new roles, time and information limitations, and altered professional relationships. The CEO must learn to manage organizational context rather than focus on daily operations. The CEO must not get totally absorbed in the role. Closed for comment; 0 Comments.
- 17 Oct 2008
- Working Paper Summaries
Consequences of Voluntary and Mandatory Fair Value Accounting: Evidence Surrounding IFRS Adoption in the EU Real Estate Industry
The required adoption of International Financial Reporting Standards (IFRS) in the European Union, effective January 1, 2005, resulted in a number of significant changes in how firms report their financial results. Mandatory IFRS adoption has been criticized for both the flexibility afforded under the standards and the encroachment of the fair value paradigm. Specifically, common accounting standards alone may not be sufficient to provide the benefits of common accounting practices. This paper examines the causes and consequences of different forms of fair value disclosures for tangible long-lived assets. Insights may assist standard setters and users in understanding the factors influencing firms' current and future accounting choices, and may also interest U.S. standard setters and managers of the almost 250 publicly traded U.S. real estate firms. Key concepts include: Investors believe that investment property fair values are reliable enough to warrant a significantly lower cost of capital for those firms providing them. The demand for fair value information (reflected in a firm's ownership structure) and the firm's commitment to reporting transparency is associated with the decision to provide fair values. Critically, adoption of this fair value standard under IFRS, in and of itself, is insufficient to fully overcome previous perceived reporting differences across these firms. This is consistent with investors perceiving that property firms across EU countries vary in how they implement this standard. Closed for comment; 0 Comments.
- 16 Oct 2008
- Working Paper Summaries
Making the Gambler’s Fallacy Disappear: The Role of Experience
The Gambler's Fallacy refers to the belief that chance is a self correcting process. The longer the random run of one outcome, the stronger the belief that the opposite outcome is due to appear. This paper asks whether the way we acquire information, by sequential experience or by simultaneous description, plays a critical role in the emergence of the bias in a binary prediction task (betting on red or black roulette outcomes, for example). The results show that the fallacy only occurs when decision makers experience outcomes over time and not when past outcomes are revealed all at once. The question is interesting since several recent papers on decisions from experience and descriptions suggest that the way people acquire information can have a significant effect on behavior. Key concepts include: This paper's main contribution is in delineating a boundary condition for the emergence of a well-known cognitive bias. Taken together, results suggest that qualitatively different processes are engaged when people encounter information sequentially over time. Closed for comment; 0 Comments.
- 16 Oct 2008
- Working Paper Summaries
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. Key concepts include: Absent careful definitions, it is not possible to make general statements about the attractiveness of open versus closed platform strategies. Platform openness occurs at multiple levels depending on whether participation is unrestricted at the demand-side user (end-user), supply-side user (application developer), platform provider, or platform sponsor levels. These distinctions in turn give rise to multiple strategies for managing openness. Forces tend to push both proprietary and shared platforms over time toward hybrid governance models typified by central control over platform technology and shared responsibility for serving users. Closed for comment; 0 Comments.
- 15 Oct 2008
- Working Paper Summaries
The Artful Dodger: Answering the Wrong Question the Right Way
Individuals frequently attempt to avoid questions they do not want to answer, from politicians dodging reporters' requests to clarify their position on when life begins, to employees sidestepping their bosses' questions as to why they are late for the third straight day. Rogers, a recent PhD grad from HBS, and Norton, an assistant professor in the Marketing unit, suggest that when faced with unwanted queries, question-dodgers sometimes exploit conversational blindness—a phenomenon whereby listeners fail to notice when speakers respond to a different question than the one they are asked—by responding with answers that seem to address the question asked, but which in fact address an entirely different question. In the context of political debates, two studies demonstrate conversational blindness, exploring both the conditions that impact the likelihood of such dodges going unnoticed, and how speakers' successful—and failed—attempts to capitalize on conversational blindness impact listeners' opinions of them. Key concepts include: Conversational blindness occurs in part because real-world conversations occur as a continuous ebb and flow, leaving little time for people to reflect on how every statement links to each previous statement. A successful dodge occurs when a speaker's answer to the wrong question is so compelling that the listener both forgets the right one, and rates the dodger positively. In some cases, speakers end up better off by answering the wrong question well rather than the right question poorly. These results add to the growing literature on people's surprising unawareness to changes in their environment. Closed for comment; 0 Comments.
- 15 Oct 2008
- First Look
- 14 Oct 2008
- Research & Ideas
Should You Bring Advertising Expertise In-House?
Advertising agencies have traditionally offered services to firms that couldn't afford or didn't find value in having that expertise in-house. But a recent study indicates more firms than previously thought are developing internal advertising units. Q&A with HBS professor emeritus Alvin J. Silk. Key concepts include: The likelihood of a firm internalizing advertising services decreases as the size of its advertising expenditures increases. Cost efficiencies and savings are the major reasons for pursuing the in-house advertising route. Some industries more than others develop in-house advertising expertise, particularly technology-based and creative industries. The make or buy decision relating to advertising services is complex, and should be based on a careful economic analysis. Closed for comment; 0 Comments.
- 10 Oct 2008
- Working Paper Summaries
The Architecture of Platforms: A Unified View
Product and system designers have long exploited opportunities to create families of complex artifacts by developing and recombining modular components. An especially common design pattern is associated with the concept of a platform, which Baldwin and Woodard define as a set of stable components that supports variety and evolvability in a system by constraining linkages among the other components. In this paper, the authors shed light on the relationships between platforms and the systems in which they are embedded to better understand and explain firms and industries where platforms play an important role. Key concepts include: There is a fundamental unity in the architecture of platforms. The combination of stability and variety in the architecture makes it possible to create novelty without developing a new system from scratch. Thus platform systems are evolvable. Although they display a fundamental unity at the level of architecture, platform systems vary a great deal in construction and appearance. A benefit of viewing platform architectures in a unified way is that theories and observations of seemingly disparate phenomena in diverse fields can be brought into focus as part of a coherent whole. Closed for comment; 0 Comments.
- 09 Oct 2008
- Working Paper Summaries
Dirty Work, Clean Hands: The Moral Psychology of Indirect Agency
When powerful people do morally questionable things, they rarely interact directly with their putative victims. Mobsters have hit men. CEOs have vice presidents, lawyers, and accountants. More specifically, the powerful are likely to carry out their intentions through the actions of other agents, with varying degrees of explicit direction and control. This working paper describes four studies that explore the effects of such "indirect agency" on moral judgment. Key concepts include: Results of these studies suggest that heightened awareness of people's sometimes dubious motivations for acting indirectly, and the organizational structures that facilitate them, may be a useful safeguard against the abuse of power. Acting indirectly through another can hide the fact that one has caused harm, hide the fact that one knowingly chose to cause harm, and hide the extent of one's control over the harmful outcome. Causing harm indirectly through another can protect harm-doers, and thus harm society in a more subtle and insidious way. This is important to know, given that many of the greatest crimes against society are perpetrated by powerful people who carry out their intentions through others. Closed for comment; 0 Comments.
- 08 Oct 2008
- Research & Ideas
Book Excerpt: A Sense of Urgency
Urgency can be a positive force in companies, says leadership expert and HBS professor emeritus John P. Kotter. His new book, A Sense of Urgency (Harvard Business Press), makes that conviction clear. Our excerpt describes how leaders might skillfully transform a crisis into an organizational motivator for the better. Key concepts include: Always think of crises as potential opportunities, and not only dreadful problems that automatically must be delegated to the damage control specialists. Plans and actions should always focus on others' hearts as much or more than their minds. If you are at a middle or low level in an organization and see how a crisis can be used as an opportunity, identify and then work with an open-minded and approachable person who can take the lead. Closed for comment; 0 Comments.
- 07 Oct 2008
- First Look
- 07 Oct 2008
- Working Paper Summaries
Securing Online Advertising: Rustlers and Sheriffs in the New Wild West
Online advertising remains a "Wild West" where users are faced with ads they ought not believe and where firms overpay for ads without getting the results they were promised. But it doesn't have to be this way. Enforcement by public agencies is starting to remind advertisers and ad networks that long-standing consumer protection rules still apply online. And as advertisers become more sophisticated, they're less likely to tolerate opaque charges for services they can't confirm they received. During the past five years, Edelman has uncovered hundreds of online advertising scams defrauding thousands of users, including all the Web's top merchants. This chapter summarizes some of what he has found and what users and advertisers can do to protect themselves. Key concepts include: Advertising security gaps are widespread. Many companies don't view advertising fraud as a priority. Marketers often write off advertising fraud as an unavoidable cost of doing business. But effective fraud reduction can transform "unavoidable" losses into a bigger bottom-line and a real competitive advantage. Some advertisers compensate ad buyers in ways that discourage ad buyers from rooting out fraud. Furthermore, ad networks operate under mixed incentives in their supervision of partners, affiliates, and syndicators. Often, a marketer's partners and even its own staff have strong incentives to ignore problems rather than to take effective action. Closed for comment; 0 Comments.
The Next Marketing Challenge: Selling to ’Simplifiers’
The mass consumption of the 1990s is fast fading in the rearview mirror. Now a growing number of people want to declutter their lives and invest in experiences rather than things. What's a marketer to do, asks professor John Quelch. Key concepts include: As the world economy slumps, one consumer segment will grow faster than ever: The Simplifiers. Simplifiers present a challenge to marketers. These are well-off people who value quality over quantity and who do not buy proportionately more goods as their net worth increases. Dining out, foreign travel, and learning a new sport will all prove more resilient than expected in the face of recession. Closed for comment; 0 Comments.