First Look

Abstract—I use daily prices collected from online retailers in five countries to study the impact of measurement bias on three common price stickiness statistics. Relative to previous results, I find that online prices have longer durations, with fewer price changes close to zero, and hazard functions that initially increase over time. I show that time-averaging and imputed prices in scanner and CPI data can fully explain the differences with the literature. I then report summary statistics for the duration and size of price changes using scraped data collected from 181 retailers in 31 countries.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=52241

Abstract—Firms spend millions of dollars annually on whistle-blower hotlines, training, and other efforts to ensure adherence to laws, regulations, and company policies. Yet malfeasance remains entrenched in the corporate world. Why? Too many firms treat compliance as a box-checking exercise, making employees sit through training and attest that they understand the rules, but failing to assess the effectiveness of their compliance programs, or doing so with faulty metrics. The authors explain how we reached this sorry state—and how we can remedy it. Firms should start by linking compliance initiatives more closely to specific objectives: preventing misconduct, detecting it, or aligning policies with laws and regulations. Then, using careful model design and some creativity, firms can develop better metrics to measure what’s working and what isn’t.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54214

Abstract—We consider a network revenue management problem where an online retailer aims to maximize revenue from multiple products with limited inventory constraints. As common in practice, the retailer does not know the consumer's purchase probability at each price and must learn the mean demand from sales data. We propose an efficient and effective dynamic pricing algorithm, which builds upon the Thompson sampling algorithm used for multi-armed bandit problems by incorporating inventory constraints into the model and algorithm. Our algorithm proves to have both strong theoretical performance guarantees and promising numerical performance results when compared to other algorithms developed for the same setting. More broadly, our paper contributes to the literature on the multi-armed bandit problem with resource constraints, since our algorithm applies directly to this setting when the inventory constraint is interpreted as a general resource constraint.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54267

Abstract—No abstract available.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54239

Abstract—Any list of top CEOs reveals a stunning lack of diversity. Among the leaders of Fortune 500 companies, for example, just 32 are women, three are African-American, and not one is an African-American woman. What’s going on? The authors studied the careers of the roughly 2,300 alumni of African descent who have graduated from Harvard Business School since its founding, focusing on the 67 African-American women who have attained top positions in corporations or professional services firms. These women thrived, they found, because of three characteristics that are key to resilience: emotional intelligence, authenticity, and agility. The women were adept at reading interpersonal dynamics and managing their own reactions; crafting their identities; and transforming obstacles into opportunities. Beyond personal strengths, the authors say, another factor was critical: nurturing relationships with mentors who recognized the women’s talent and made it their business to support them. The insights gleaned are important not just for African-Americans and women; they’re essential for any manager who recognizes that an organization’s diversity is its strength.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54215

Abstract—This paper investigates the impact of customer compatibility—the degree of fit between the needs of customers and the capabilities of the operations serving them—on customer experiences and firm performance. We decompose the variance of 58,294 face-to-face retail banking transactions, quantifying the relative importance of customer, employee, process, location, and market-level effects on customer satisfaction. In our models, which explain roughly a quarter of the aggregate variance in customer satisfaction, differences among customers account for 96%–97% of this variance. Further analysis reveals that customers report relatively consistent satisfaction across transactions, but that some customers are habitually more satisfied than others. An empirical investigation of the satisfaction of 149,389 customers interacting with 166 banks over a five-year period provides evidence that these customer-level differences are explained in part by customer compatibility. Customers whose needs diverge more starkly from those of their bank’s average customers report significantly lower levels of satisfaction on a broad range of operating dimensions. Consistently, banks that serve customer bases with more dispersed needs receive lower satisfaction scores than banks serving customer bases with less dispersed needs. Finally, a longitudinal analysis of the deposit growth of all federally insured banks in the United States from 2006 to 2017 reveals that customer compatibility affects financial performance. Branches with more divergent customers grow deposits more slowly than branches with less divergent customers. Institutions serving customer bases with more dispersed needs have branches that exhibit slower deposit growth than those of institutions serving customer bases with less dispersed needs.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=50612

Does It Hurt To Ask? (DIHTA) is an interactive exercise that pairs students (in groups of two) for a brief, spontaneous, open-ended conversation during class. Each student is given instructions to ask many questions (as many as possible) or few questions (ideally zero) during their conversation (resulting in some high-high questioning pairs, some low-low questioning pairs, and some high-low questioning pairs). The exercise is flexible—it can stand on its own for a whole class session (taking 60-90 minutes), or it can be used to supplement other material within the same class session (taking as little as 30 minutes total). This teaching note provides step-by-step instructions to administer the exercise in class. The goals of the exercise are to examine how asking questions during conversation influences interpersonal perception, information exchange, decision making, productivity, as well as relationships and happiness over time—to weigh the pros and cons of asking questions versus making statements in conversation. While there are many reasons people don’t ask questions (such as egocentrism, anxiety, apathy, and ignorance), those who can become talented question askers stand to learn more information, to be better liked, and to have more influence than those who do not.

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This case profiles the early career choices faced by three McKinsey associates. The (A) case profiles the dilemma faced by each individual and sets up the class discussion.

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The (B) case outlines the choices made by the associates in real life and the consequences of such choices.

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Founded by a team of hedge fund and NGO alumni, OpenInvest launched its platform in 2015 to enable retail investors to tailor their portfolios to their personal values in an automated way, for instance by screening out weapons manufacturers stocks or overweighting LGBTQ friendly companies, while still closely tracking the overall stock market performance. In 2017, bolstered by $3.25 million in seed funding from Andreessen Horowitz, OpenInvest was preparing to launch an app targeted at millennial customers that would include a novel proxy voting feature that allowed clients to vote on shareholder resolutions with a simple swipe. With this technological addition, OpenInvest was well on its way towards realizing its mission of democratizing socially responsible investing, bringing transparency to the financial services market, and enabling retail investors to invest their capital in a way that aligned with their values. However, getting to scale and profitability in the crowded robo-advisors space was a critical challenge. The case closes with the founders contemplating expanding or migrating their model from B2C to B2B in order to achieve scale and profitability faster. The case is an opportunity to discuss the theoretical underpinning of creating impact in public markets, to explore how portfolio performance might be affected by Socially Responsible Investment (SRI) screens, and to understand drivers of demand for impacting investing more broadly. The case also explores the challenges the founders face when aiming to design a new product to meet an emerging need and which distribution channel to choose for doing so.

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No abstract available.

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No abstract available.

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No abstract available.

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No abstract available.

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For roughly six weeks between late December 1936 and February 1937, a major strike at several critical General Motors (GM) plants in Flint, Michigan, essentially halted the corporation’s U.S. production and resulted in significant gains for the nascent United Automobile Workers of America union and the Committee for Industrial Organization, both of which had supported the strike. The Flint, Michigan, Sit-Down Strike represented a stunning victory for organized labor in a context where New Deal era legislation—most notably the National Labor Relations Act of 1935—created a labor friendly environment in the short run, with possibly adverse consequences for the performance of the U.S. automobile industry in the long run.

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The case describes Blue Harbour Group's investment in Babcock & Wilcox and its transformation into BWX Technologies. In 2004, activist hedge fund Blue Harbour Group invested in Babcock & Wilcox, an energy and construction company. Blue Harbour developed an investment thesis around Babcock & Wilcox spinning off its non-nuclear, coal-based energy segments and focused on being a defense and nuclear power company. But when the company made the spin-off announcement, the stock price barely reacted. The case protagonist, Robb LeMasters (MBA ’05), managing director at Blue Harbour, joined the new company, BWX Technologies board of directors, to help guide it after the spin-off. The case allows students to discuss various value creation strategies that could be adopted by BWXT after the spin-off.

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Follow-up case detailing the changes and performance upswing at BWX Technologies after hedge fund Blue Harbour Group's investment and when the fund’s Managing Director Robb LeMasters (MBA’05) joined its board of directors.

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Using machine-learning technology, New Constructs creates cleaned up financial statement data that removes accounting distortions. This powerful data aims to provide unparalleled insights into companies’ true economic picture. Could they convince market participants of the data’s value?

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