First Look

May 27, 2014

Innovation—in product, in marketing, in strategy—is a primary theme of this week's list of new research publications by HBS faculty. And they reach from the present, such as Google's introduction of Google Glass a couple of weeks ago, to the mechanics of sighting a target on a rolling sea 115 years ago.

Looking Through Google Glass

Earlier this month, Google made its edgy (computer-in-eyeglasses) and pricey ($1,500) Google Glass product available to the public. Also debuting this month is a case study about the company's distribution strategy: Should it make the product itself or partner with other tech producers or even eyewear manufacturers? "Google Glass" was written by Thomas R. Eisenmann, Lauren Barley, and Liz Kind.

How David Can Beat Goliath

A small competitor going up against a dominant rival is disadvantaged in many ways—but clever marketing can help make up the difference. A new paper by Neeru Paharia, Jill Avery, and Anat Keinan supports the approach of focusing on the competitive threat rather than ignoring it. "We find that support for small brands goes up when faced with a competitive threat from large brands, versus when they are in competition with brands that are similar to them, or when consumers view them outside of a competitive context," according to authors. The paper, "Positioning Brands Versus Large Competitors to Increase Sales," is scheduled in a forthcoming issue of Journal of Marketing Research.

Overcoming Innovative Inertia

Although not developed at HBS, the case "Gunfire at Sea" has been taught to many of its students as a classic example of how organizational inertia can block innovation. The case, focusing on the early 1900s, describes efforts by Lt. William Sims to introduce technology into the US Navy that would improve gun targeting from the rolling deck of a ship. Michael Tushman and Tom Ryder add a multimedia component to the case with a short video that "illustrates the randomness of innovation and the importance of strong executive leadership in leading change associated with seemingly minor (in this case architectural) innovation."

— Sean Silverthorne


  • August 2013
  • Princeton University Press

A Social Strategy: How We Profit from Social Media

By: Piskorski, Mikołaj Jan

Abstract—Almost no one had heard of social media a decade ago, but today websites such as Facebook, Twitter, and LinkedIn have more than 1 billion users and account for almost 25 percent of Internet use. Practically overnight, social media seems indispensable to our lives-from friendship and dating to news and business. What makes social media so different from traditional media? Answering that question is the key to making social media work for any business, argues Mikołaj Piskorski, one of the world's leading experts on the business of social media. In A Social Strategy, he provides the most convincing answer yet, one backed by original research, data, and case studies from companies such as Nike and American Express.

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  • August 2013
  • Marketing Letters

Structural Models of Complementary Choices

By: Berry, Steven, Ahmed Khwaja, Vineet Kumar, Andres Musalem, Kenneth C. Wilbur, Greg Allenby, Bharat Anand, et al.

Abstract—Complementary choices are important and pervasive yet occasionally elusive. Single consumers make complementary choices in purchase decisions (e.g., chips and salsa), product inter-operabilities (smartphones and networks), and dynamic decisions (current exercise and future healthcare consumption). Multiple consumers make complementary choices when they interact in strategic games or form networks. Firms make complementary choices when determining production inputs, entering related markets, and strategic mergers.

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  • August 2013
  • Relations internationales

Firmes mondialisées et imaginaire de la beauté

By: Jones, G.

Abstract—This article highlights the role of business enterprises as influences on ideals of human beauty. The homogenization of such ideals has been one of the most noteworthy features of globalization over the last two centuries. This study suggests that firms were both responders to, and shapers of, beauty ideals. It uses case studies of three prominent firms to support the argument. During the nineteenth century, Coty and other French firms imagined Paris as the global capital of beauty. During the middle of the twentieth century, the strategies of Estée Lauder and other firms drove the rise in importance and prestige of American beauty brands. In the more recent past, L'Oréal has fostered a new pluralism in beauty by acquiring American and other international brands and offering global consumers a portfolio of beauty ideals, which were both global and locally customized. The article concludes by suggesting that the stratdegies of business enterprises need to be more fully integrated into wider narratives of the history of globalization.

  • August 2013
  • JMR, Journal of Marketing Research

Positioning Brands Versus Large Competitors to Increase Sales

By: Paharia, Neeru, Jill Avery, and Anat Keinan

Abstract—We explore the effect of having a large dominant competitor and show the conditions under which focusing on a competitive threat, rather than hiding it, can actually help a brand. We demonstrate through lab and field studies that highlighting a large competitor's size and close proximity can help smaller brands instead of harming them. We find that support for small brands goes up when faced with a competitive threat from large brands, versus when they are in competition with brands that are similar to them, or when consumers view them outside of a competitive context. This support translates into purchase intention, real purchase, and more favorable online reviews in a study of over 10,000 Yelp posts. We argue that this "framing the game effect" is mediated by consumers' motivation to express their views and have an impact on the marketplace through their purchasing.


Working Papers

Abstract—I examine Google's pattern and practice of tying and bundling to leverage its dominance into new sectors under antitrust law principles. In particular, I show how Google used these tactics to enter numerous markets, to compel usage of its services, and often to dominate competing offerings. I explore the technical and commercial implementations of these practices, and I identify their effects on competition. I conclude that Google's tying and bundling tactics are suspect under antitrust law.

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Abstract—We provide a tractable model of firm-level expected holding period returns using two firm fundamentals-book-to-market ratio and ROE-and study the cross-sectional properties of the model-implied expected returns. We find that 1) firm-level expected returns and expected profitability are time-varying but highly persistent and 2) forecasts of holding period returns strongly predict the cross section of future returns up to three years ahead. We document a highly significant predictive pooled regression slope for future quarterly returns of 0.86, whereas the popular factor-based expected return models have either an insignificant or a significantly negative association with future returns. In supplemental analyses, we show that these forecasts are also informative of the time-series variation in aggregate conditions: 1) for a representative firm, the slope of the conditional expected return curve is more positive in good times, when expected short-run returns are relatively low and 2) the model-implied forecaster of aggregate returns exhibits modest predictive ability. Collectively, we provide a simple, theoretically motivated and practically useful approach to estimating multi-period ahead expected returns.

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Abstract—We study how government green procurement policies influence private-sector demand for similar products. Specifically, we measure the impact of municipal policies requiring governments to construct green buildings on private-sector adoption of the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) standard. Using matching methods, panel data, and instrumental variables, we find that government procurement rules produce spillover effects that stimulate both private-sector adoption of the LEED standard and investments in green building expertise by local suppliers. These findings suggest that government procurement policies can accelerate the diffusion of new environmental standards that require coordinated complementary investments by various types of private adopter.

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Cases & Course Materials

  • Harvard Business School Case 814-089

Raising Startup Capital

Entrepreneurs typically focus their full energies on business building. But raising capital is a core part of building a valuable business. Developing expertise in raising capital is more than a necessary evil, it is a competitive weapon. Master it and you will be in a better position to make your company a massive success. But how do you finance a new venture? In this note, I will try to help answer this question by addressing the following topics: 1) Types of funding. The two major types of startup capital are equity funding and debt funding although there are a few hybrid flavors as well. 2) Sources of funding. These include venture capital firms, angel investors, crowd-funding, and accelerators/incubators. 3) What investors look for. Each source has a different funding process and set of criteria that you need to understand before seeking funding from that source. 4) The mechanics of equity funding. Seeking and securing funding involves setting amounts, agreeing to terms, and defining relationships.

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  • Harvard Business School Case 814-102

Google Glass

In early 2014, business development executives at Google were formulating a distribution strategy for Glass, a wearable computer that projected information on a display viewable with an upward glance. Options, which were not mutually exclusive, included 1) continuing to sell Glass directly through online channels, 2) creating an open platform to allow any eyewear manufacturer to create frames compatible with Glass, and 3) negotiating a partnership with a leading eyewear manufacturer to jointly develop and market Glass.

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  • Harvard Business School Case 314-084

Rail Transportation in the United States

In the 20th century, automobiles and airlines pushed rail into the background as an often-troubled and neglected mode. After a review of the long history of rail in the U.S., this paper examines the situation in the 21st century, including the rail market structure, and discusses key players like BNSF, CSX, and Norfolk Southern. Today, by most measures, freight rail is doing better than ever, while passenger rail faces significant challenges-though it is clear that numerous pain points and bottlenecks interfere with optimal use of rail to move both people and goods. This note offers a structured way of thinking through the issues facing rail transportation and discusses three recent freight rail infrastructure projects that hold promise for the future: the National Gateway, the Keystone Corridor, and the CREATE decongestion project in Chicago.

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The U.S. air transportation system flies high on some indicators, mostly involving capacity to take to the air, but lands low on others, mostly involving ground facilities and processes. This note provides an overview of the history and current state of air transportation in the U.S., covering industry costs; types of airlines, including passenger and cargo (e.g., Delta, Southwest, Alaska, and Frontier); airport issues; and the role of technology. It reviews some opportunities for innovation that will solve the pain points and bottlenecks facing the system and outlines high-priority policy areas. It becomes clear that individual airlines have often been managed back to health and focus on innovation, but the overall system itself and its governmental connections need attention, including the desire for NextGen air traffic control and revisiting Open Skies agreements.

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  • Harvard Business School Case 714-465

Patagonia (B)

Patagonia produces high-quality environmentally friendly garments that command significant price premiums. In spring 2010, Patagonia rolled out a new, radical environmental initiative called "Product Lifecycle Initiative" (PLI), which was committed to lengthening the lifecycle of each product and reducing landfill waste. This case provides an update on Patagonia's PLI as well as on other company environmental and social commitments.

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  • Harvard Business School Case 414-707

Gunfire at Sea (multi-media case)

This short video illustrates the challenges of leading innovation and change. This classic case (one of the oldest in the HBS system) retains its timeliness. The case describes how Lt. Sims develops a new form of gunfire at sea-continuous aim gunfire. While 3,000% more accurate than existing guns, the video case describes how the Navy, as a successful social system, systematically rejected Sims' innovation. The case gets at multiple sources of inertia including culture, capabilities, personality, power, structure, Navy processes, and the fact that the U.S. Navy was one of the most successful Navies at the time. The case's extraordinary outcome illustrates the randomness of innovation and the importance of strong executive leadership in leading change associated with seemingly minor (in this case architectural) innovation.

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