First Look

May 8, 2018

We prefer advice given by machines

In a series of experiments, Jennifer M. Logg and colleagues show that, in many cases, humans prefer advice given by computer algorithms than by people. Algorithm Appreciation: People Prefer Algorithmic to Human Judgment.

The nurse who became a hospital CEO

A new case study looks at the strategy of Children’s Hospital of Philadelphia (CHOP), which operates facilities in three states. The case explores challenges faced by Madeline Bell, a pediatric nurse turned CEO, in the rapdily evolving health care arena. The case was written by Michael E. Porter, Thomas W. Feeley, and Toyin J. Okanlawon. The Children's Hospital of Philadelphia: Network Strategy 2016.

Who pays for hospital-acquired infections?

Medicare financially penalizes health care providers whose patients are hit with hospital-acquired infections (HAIs). But the system relies on self-reporting. A study by Joel Goh and colleagues found that 18.5 percent of providers are "upcoding," or deliberately misleading their HAI rates, costing Medicare $200 million annually. Evidence of Upcoding in Pay-for-Performance Programs

— Sean Silverthorne
 
  • forthcoming
  • Management Science

Evidence of Upcoding in Pay-for-Performance Programs

By: Bastani, Hamsa, Joel Goh, and Mohsen Bayati

Abstract—Recent Medicare legislation seeks to improve patient care quality by financially penalizing providers for hospital-acquired infections (HAIs). However, Medicare cannot directly monitor HAI rates and instead relies on providers accurately self-reporting HAIs in claims to correctly assess penalties. Consequently, the incentives for providers to improve service quality may disappear if providers upcode, i.e., misreport HAIs (possibly unintentionally) in a manner that increases reimbursement or avoids financial penalties. Identifying upcoding in claims data is challenging due to unobservable confounders (e.g., patient risk). We leverage state-level variations in adverse event reporting regulations and instrumental variables to discover contradictions in HAI and present-on-admission (POA) infection reporting rates that are strongly suggestive of upcoding. We conservatively estimate that 10,000 out of 60,000 annual reimbursed claims for POA infections (18.5%) were upcoded HAIs, costing Medicare $200 million. Our findings suggest that self-reported quality metrics are unreliable and thus, recent legislation may result in unintended consequences.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54443

  • in press
  • Business History

Internment as a Business Challenge: Political Risk Management and German Multinationals in Colonial India (1914–1947)

By: Lubinski, Christina, Valeria Giacomin, and Klara Schnitzer

Abstract—Internment in so-called “enemy countries” was a frequent occurrence in the 20th century and created significant obstacles for multinational enterprises (MNEs). This article focuses on German MNEs in India and shows how they addressed the formidable challenge of the internment of their employees in British camps during both WWI and WWII. We find that internment impacted business relationships in India well beyond its endpoint and that the WWI internment shaped the subsequent perception of and strategic response to the WWII experience. We show that internment aggravated existing staffing challenges, impacted the perception of racial lines of distinctions, and recast the category “European business.” While internment was perceived and managed as a political risk, the case also shows that it created unexpected networking opportunities, generating a tight community of German businesspeople in India.

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=54465

Abstract—Many production processes are subject to inspection to ensure they meet quality, safety, and environmental standards imposed by companies and regulators. Inspection accuracy is critical to inspections being a useful input to assessing risks, allocating quality improvement resources, and making sourcing decisions. This paper examines how the scheduling of inspections risks introducing bias that erodes inspection quality by altering inspector stringency. In particular, we theorize that inspection results are affected by (a) the inspection outcomes at the inspector’s prior inspected establishment and (b) when the inspection occurs within an inspector’s daily schedule. Analyzing thousands of food safety inspections of restaurants and other food-handling establishments, we find that inspectors cite more violations after inspecting establishments that exhibited worse compliance or greater deterioration in compliance and that inspectors cite fewer violations in successive inspections throughout their day and when inspections risk prolonging their typical workday. Our estimates suggest that, if the outcome effects were amplified by 100% and the daily schedule effects were fully mitigated (that is, reduced by 100%), the increase in inspectors’ detection rates would result in their citing an average of 9.9% more violations. Scaled nationwide, this would yield 19 million fewer foodborne illness cases per year, reducing annual foodborne illness costs by $14.2 billion to $30.9 billion. Understanding these biases can help managers develop alternative scheduling regimes that reduce bias in quality assessments in domains such as food safety, process quality, occupational safety, working conditions, and regulatory compliance.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=52570

Algorithm Appreciation: People Prefer Algorithmic to Human Judgment

By: Logg, Jennifer M., Julia A. Minson, and Don A. Moore

Abstract—Even though computational algorithms often outperform human judgment, received wisdom suggests that people may be skeptical of relying on them (Dawes, 1979). Counter to this notion, results from six experiments show that lay people adhere more to advice when they think it comes from an algorithm than from a person. People showed this sort of algorithm appreciation when making numeric estimates about a visual stimulus (Experiment 1A) and forecasts about the popularity of songs and romantic matches (Experiments 1B and 1C). Yet, researchers predicted the opposite result (Experiment 1D). Algorithm appreciation persisted when advice appeared jointly or separately (Experiment 2). However, algorithm appreciation waned when people chose between an algorithm’s estimate and their own (versus an external advisor’s—Experiment 3) and they had expertise in forecasting (Experiment 4). Paradoxically, experienced professionals, who make forecasts on a regular basis, relied less on algorithmic advice than lay people did, which hurt their accuracy. These results shed light on the important question of when people rely on algorithmic advice over advice from people and have implications for the use of “big data” and algorithmic advice it generates.

Download working paper: https://www.hbs.edu/faculty/Pages/item.aspx?num=52499

  • Harvard Business School Case 518-064

A Note on the Snack Food Industry

This note provides an overview of the snacking industry in 2017.

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  • Harvard Business School Case 918-404

Ørsted Goes Global

The European leader in offshore wind, the Danish Ørsted is building a global position and entering markets where offshore wind is nascent. The case examines the transformations in strategy leading to Ørsted’s success and the challenges of adopting that strategy in order to enter the U.S. market.

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  • Harvard Business School Case 818-013

Magpie: Developing and Using Buyer Personas

The founders of a start-up platform for publishers have developed preliminary personas of target customers and are evaluating the implications for initial target buyers, messaging, and marketing programs. The case is useful for discussing the process of developing buyer personas, the uses and limitations of these constructs in allocating resources in a venture, and the relevance of different marketing methods to different customer segments.

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  • Harvard Business School Case 818-039

Cumplo.com

In August 2017, Cumplo’s Founder Shea and CEO Kirberg meet to discuss growth and strategy issues faced by this Chilean fintech startup. What sales and marketing strategy will best foster the company’s growth? Are changes needed in the product lineup? How and when should Cumplo begin to expand beyond Chile to other countries in Latin America? The company raised $1.4 million in its first three years, mainly from individual investors, and then issued new shares for $3 million in 2015. By June 2017, Cumplo was debt-free, had achieved break-even, and had raised an additional $2.3 million. The case considers scaling options for an early-stage venture, including new geographical, product, pricing, and/or customer-type options.

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  • Harvard Business School Case 518-082

Qualtrics (A)

No abstract available.

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  • Harvard Business School Case 518-083

Qualtrics (B)

Supplements the (A) case.

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  • Harvard Business School Case 518-084

Qualtrics (C)

Supplements the (A) case.

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  • Harvard Business School Case 517-077

Big Data in Marketing

No abstract available.

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  • Harvard Business School Case 417-066

Rebuilding a Community: Father Vien The Nguyen

No abstract available.

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This case updates Wenzhou Kangning Hospital Co, Ltd.'s activities since its IPO in late 2015, focusing on its strategy and growth since the IPO and challenges for the future.

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  • Harvard Business School Case 717-478

Precision Agriculture at Deere & Company

No abstract available.

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Children’s Hospital of Philadelphia (CHOP) began as a stand-alone hospital in the heart of downtown Philadelphia in 1855. By 2016 the CHOP Care Network stretched across Pennsylvania, New Jersey, and the New York metropolitan area, providing a wide range of services from primary care to complex specialty care. In 2016, U.S. News and World Report had ranked CHOP as the number 2 pediatric hospital in the nation and among the top 10 in 10 pediatric specialties. CHOP’s residency program for training pediatricians was also ranked number one in the country. Madeline Bell, who had been President and Chief Operating Officer, was named Chief Executive Officer in 2015. A pediatric nurse who became a hospital administrator, Bell saw the network as a means to serve more patients, improve pediatric care, and address the challenges posed by a rapidly changing health care environment.

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  • Harvard Business School Case 118-028

Summa Equity: Building Purpose-Driven Organizations

In 2015, Reynir Indahl left top Nordic private equity firm Altor Equity Partners to found Summa Equity (Summa). After long contemplation following the financial crisis, Indahl was convinced the financial system was producing negative externalities and that the current private equity model adopted by most firms would no longer be successful. Summa was developed under a new private equity model that sought to “future-proof” businesses by focusing on long-term value creation and growth, in addition to traditional private equity practices of implementing best practices and productivity improvements. To find businesses best suited for long-term growth with disruptive potential, Summa invested in four thematic areas that were mapped to megatrends outlined in the United Nations Sustainable Development Goals—trends Summa believed presented long-term growth opportunities for businesses that presented commercial solutions for these challenges. After a period of successful recruiting, fund raising, and deal completion, Summa needed to develop a set of practices and expectations across portfolio companies and partners. The case concludes with Indahl making three recommendations to his partners on how to align portfolio company management with Summa, build purpose-driven high performance organizations, and introduce greater clarity in the management processes.

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  • Harvard Business School Case 718-489

Cisco Systems and OpenDNS: Strategic Integration

No abstract available.

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