First Look

June 12, 2012

Innovation In The Great Depression

The Great Depression wiped out banks, companies, jobs, and personal savings. Yet it was also a time of tremendous innovation in industries including autos, chemicals, and radio and television. "If the health of the financial sector is so critical to the functioning of the real economy," a new research paper asks, "how can it be reconciled that technological development continued to advance rapidly despite a disrupted financial system?" Professors Ramana Nanda and Tom Nicholas explore the connection between financial sector health and technological innovation in their paper, Did Bank Distress Stifle Innovation During the Great Depression?

The June issue of Harvard Business Review includes a number of articles by Harvard Business School faculty:

Using Customers To Set Price

In "Pricing to Create Shared Value," Marco Bertini and John T. Gourville urge companies to use customers as partners in creating pricing strategy. "That means viewing customers as partners in value creation—a collaboration that increases customers' engagement and taps their insights about the value they seek and how firms could deliver it," they write. "The result can be new revenue, increased customer satisfaction and loyalty, positive word of mouth, and cost savings."

The Talking Organization

As command-and-control management evaporates, leaders are replacing it with organizational structures that emphasize operational flexibility, employee engagement, and strategic alignment. The key managerial technique in this new world? Talking. "Organizational conversation is less corporate in tone and more casual," according to authors Boris Groysberg and Michael Slind. "And it's less about issuing and taking orders than about asking and answering questions." Read, "Leadership Is a Conversation."

Executives Set The Tone With Investors

It's a common complaint of executives: How can I build a long-term strategy when our investors demand short-term performance? But new research by professors Francois Brochet, George Serafeim, and doctoral candidate Maria Loumioti reveals that these execs may be sowing the seeds of their own discontent. That's because some investors are attracted by executives who demonstrate short-term orientation. "The language a company uses when talking to investors is a meaningful indicator of its orientation-and the investors listening in on calls that emphasize a short-term approach are a largely self-selecting group who like what they hear," the article reports.

— Sean Silverthorne


Pricing to Create Shared Value


Many companies are in competition with their customers to extract as much value as possible from every transaction. Pricing is their weapon of choice, and consumers fight back by rooting out and disseminating pricing policies that seem unfair. The problem is that companies generally think of value as a pie that is rightfully theirs. But value is not fixed, and it neither originates with nor belongs solely to the firm. Without a willing customer, there is no value. Instead of using pricing in a way that turns customers into adversaries, companies can use it to enlarge the pie. That means viewing customers as partners in value creation-a collaboration that increases customers' engagement and taps their insights about the value they seek and how firms could deliver it. The result can be new revenue, increased customer satisfaction and loyalty, positive word of mouth, and cost savings. The multiyear process to price the 8 million tickets to the upcoming London 2012 Olympic Games suggests five principles for using pricing to create shared value: focus on relationships, not on transactions, by using pricing to communicate that you value customers as people; set prices proactively to discourage detrimental behavior and to encourage behavior that is beneficial to both your firm and your customers; allow prices to change in response to shifting customer needs; promote transparency by providing the rationale for your pricing; and make sure that prices and the processes by which they are set meet consumers' expectations about what is fair.

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Self-Knowledge, Unconscious Thought, and Decision Making


An abstract is unavailable at this time.

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Short-Termism: Don't Blame Investors


The article presents research on executives and corporation investor relations. A study is conducted of the language used by executives in conference calls discussing earnings with investors and financial analysts. A correlation was found between the use of language indicating a short-term focus by those executives and both their company's financial management practices and the company's stockholders, who were more likely to hold stock for short periods of time compared to other stocks.

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Leadership Is a Conversation


Globalization and new technologies have sharply reduced the efficacy of command-and-control management and its accompanying forms of corporate communication. In the course of a recent research project, the authors concluded that by talking with employees, rather than simply issuing orders, leaders can promote operational flexibility, employee engagement, and tight strategic alignment. Groysberg and Slind have identified four elements of organizational conversation that reflect the essential attributes of interpersonal conversation: intimacy, interactivity, inclusion, and intentionality. Intimacy shifts the focus from a top-down distribution of information to a bottom-up exchange of ideas. Organizational conversation is less corporate in tone and more casual. And it's less about issuing and taking orders than about asking and answering questions. Interactivity entails shunning the simplicity of monologue and embracing the unpredictable vitality of dialogue. Traditional one-way media-print and broadcast, in particular-give way to social media buttressed by social thinking. Inclusion turns employees into full-fledged conversation partners, entitling them to provide their own ideas, often on company channels. They can create content and act as brand ambassadors, thought leaders, and storytellers. Intentionality enables leaders and employees to derive strategically relevant action from the push and pull of discussion and debate.

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Meta-Organization Design: Rethinking Design in Interorganizational and Community Contexts


This article provides conceptual foundations for analyzing organizations comprising multiple legally autonomous entities, which we call meta-organizations. We assess the antecedents of the emergence of such collectives and the design choices they entail. The article identifies key parameters on which such meta-organizations' designs differ from each other. It also presents a taxonomy that elucidates how such forms of collective action vary and the constraints they must address to be successful. We conclude with implications for research on meta-organizational design.

Managing Risks: A New Framework


Risk management is too often treated as a compliance issue that can be solved by drawing up lots of rules and making sure that all employees follow them. Many such rules, of course, are sensible and do reduce some risks that could severely damage a company. But rules-based risk management will not diminish either the likelihood or the impact of a disaster, such as Deepwater Horizon, just as it did not prevent the failure of many financial institutions during the 2007-2008 credit crisis. In this article, Robert S. Kaplan and Anette Mikes present a categorization of risk that allows executives to understand the qualitative distinctions between the types of risks that organizations face. Preventable risks, arising from within the organization, are controllable and ought to be eliminated or avoided. Examples are the risks from employees' and managers' unauthorized, unethical, or inappropriate actions and the risks from breakdowns in routine operational processes. Strategy risks are those a company voluntarily assumes in order to generate superior returns from its strategy. External risks arise from events outside the company and are beyond its influence or control. Sources of these risks include natural and political disasters and major macroeconomic shifts. Risk events from any category can be fatal to a company's strategy and even to its survival. Companies should tailor their risk management processes to these different risk categories. A rules-based approach is effective for managing preventable risks, whereas strategy risks require a fundamentally different approach based on open and explicit risk discussions. To anticipate and mitigate the impact of major external risks, companies can call on tools such as war gaming and scenario analysis.

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Working Papers

Did Bank Distress Stifle Innovation During the Great Depression?


Bank distress during the Great Depression had a significant negative impact on the level, quality, and trajectory of firm-level innovation, particularly for R&D firms operating in capital intensive industries. However, because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress did stifle innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.

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Cases & Course Materials

Piramal e-Swasthya: Attempting Big Changes for Small Places-in India and Beyond

Rosabeth Moss Kanter and Matthew Bird
Harvard Business School Case 310-134

Anand Piramal and his team sought to "democratize healthcare" in India through the development of a new service delivery model. If Henry Ford could build and deliver cars to everyone in the United States, Piramal thought, then why can't India deliver healthcare to the 70% of its citizens who lack access to it? They began pilots in 2008 but soon ran into unexpected difficulties. After a second round of pilots in early 2010, they had to decide whether to proceed, and if so, how.

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