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    First Look: November 11

    First Look

    11 Nov 2014

    Understanding The Internet Of Things

    The November issue of Harvard Business Review tackles the fast-moving target of "The Internet of Things," the ubiquitous connectivity among many of the things we own or consume. Among the contributors, Michael Porter looks at IOT's impacts on competition ("How Smart, Connected Products Are Transforming Competition,") while Marco Iansiti and Karim Lakhani write about General Electric's growing bet on what it calls the industrial Internet. ("Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business.")

    Switched On: The First Consumer Led Bulb

    The new case study "Cree Inc.: Introducing the LED Light Bulb," by John Gourville and Michael Norris, explores the difficulties of introducing unfamiliar technology to consumers—especially when it costs more. "Given that it is an unfamiliar technology and that it costs ten times what an incandescent bulb costs, there are questions about how best to promote adoption and what sales level might be expected," the case writers observe.

    The Second Wave Of Internet Disruption?

    Researchers Thales S. Teixeira and Peter Jamieson say the fist wave of Internet disruption was marked by the unbundling of digital content—albums to tunes, for example. The next wave? "Digital disruptors," they say—essentially startups that insert themselves between consumers and producers in ways that "allow consumers to benefit from the value created at a lower cost or effort compared to what is delivered by traditional businesses."

    —Sean Silverthorne
    LinkedIn
    Email
     

    Publications

    • November 2014
    • Harvard Business Review

    Cooks Make Tastier Food When They Can See Their Customers

    By: Buell, Ryan W., Tami Kim, and Chia-Jung Tsay

    Abstract—While existing theory suggests that increased contact between customers and employees diminishes efficiency, recent research demonstrates that when employees can see their customers, the beneficiaries of their efforts, the quality and efficiency of the service they deliver can actually improve. Studies in food service show how revealing customers to employees can lead employees to feel more appreciated, enhancing their job satisfaction and willingness to exert effort.

    Publisher's link: https://archive.harvardbusiness.org/cla/web/pl/product.seam?c=35966&i=35968&cs=c47cdb98df17b9135950d44df0b063b0

    • November 2014
    • Zhongguo ke xue yuan yuan kan [Bulletin of the Chinese Academy of Sciences]

    Framework for China's Novel Sustainable Evaluation System Strategy

    By: Eccles, Robert G., and Peijun Duan

    Abstract—China's sustainable development faces three challenges: first, the follow-up momentum of sustainable economic growth and economic transformation is insufficient; second, some resources and environment loads have reached their limits; third, some products affecting the health and rights of the people as well as the related entities' behavior are challenging the legal and moral bottom line. These three aspects are required to establish a new evaluation system including the indexes of economic performance, environmental performance, and social responsibility evaluation, which cover the company in the national, regional, and corporate levels for the purpose of realizing the comprehensive evaluation of economic and environmental performance and social responsibility. Considering the lessons learned from implementing a national evaluation system of green GDP, and before forming the system complexity model, the easiest issues first can be taken to establish the evaluation system of economic, environmental, and social responsibility respectively, which will be integrated in practice by the executive entities. The strategy of a new evaluation system should adjust the structure of the original evaluation system with the idea of reform and require the development of the rule of law, including formulating relevant laws and the legal framework. This paper proposes three specific suggestions about the new sustainable evaluation system and emphasizes that the evaluation based on the integrated report is the specific performance of the new evaluation system strategy at the enterprise level.

    Publisher's link: http://www.bulletin.cas.cn/ch/reader/view_full_html.aspx?file_no=20140401&flag=1

    • November 2014
    • Harvard Business Review

    Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business

    By: Iansiti, Marco, and Karim R. Lakhani

    Abstract—When Google bought Nest, a maker of digital thermostats, for $3.2 billion just a few months ago, it was a clear indication that digital transformation and connection are spreading across even the most traditional industrial segments and creating a staggering array of business opportunities and threats. The digitization of tasks and processes has become essential to competition. General Electric, for example, was at risk of losing many of its top customers to nontraditional competitors-IBM and SAP on the one hand, big data start-ups on the other-offering data-intensive, analytics-based services that could connect to any industrial device. So GE launched a multibillion-dollar initiative focused on what it calls the industrial Internet: adding digital sensors to its machines; connecting them to a common, cloud-based software platform; investing in software development capabilities; building advanced analytics capabilities; and embracing crowd-based product development. With all this, GE is evolving its business model. Now, for example, revenue from its jet engines is tied to reduced downtime and miles flown over the course of a year. After just three years, GE is generating more than $1.5 billion in incremental income with digitally enabled, outcomes-based business models. The company expects that number to double in 2014 and again in 2015.

    Publisher's link: http://hbr.org/2014/11/digital-ubiquity-how-connections-sensors-and-data-are-revolutionizing-business/ar/1

    • November 2014
    • Harvard Business Review

    How Not to Cut Health Care Costs

    By: Kaplan, Robert S., and Derek A. Haas

    Abstract—Health care providers in much of the world are trying to respond to the tremendous pressure to reduce costs-but evidence suggests that many of their attempts are counterproductive, raising costs and sometimes decreasing the quality of care. Using evidence from field research conducted at more than 50 health care provider organizations, Kaplan and Haas identify five common mistakes when managers attempt to cut health care costs. The mistakes are triggered, primarily, by working from the line-item expense categories on P&Ls, rather than clinically based structural models of the processes actually used to deliver care. Sustainable cost reduction is best achieved by optimizing the quantity and mix of all the resources needed to produce excellent outcomes for a patient's medical condition, not by across-the-board reductions in line-item expenses.

    Publisher's link: http://hbr.org/2014/11/how-not-to-cut-health-care-costs/ar/1

    • November 2014
    • Harvard Business Review

    How Smart, Connected Products Are Transforming Competition

    By: Porter, Michael E., and James E. Heppelmann

    Abstract—Information technology is revolutionizing products. Once composed solely of mechanical and electrical parts, products have become complex systems that combine hardware, sensors, data storage, microprocessors, software, and connectivity in myriad ways. These "smart, connected products"-made possible by vast improvements in processing power and device miniaturization and by the network benefits of ubiquitous wireless connectivity-have unleashed a new era of competition.

    Publisher's link: http://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition/ar/1

     

    Working Papers

    The Search for Benchmarks: When Do Crowds Provide Wisdom?

    By: Lee, Charles M.C., Paul Ma, and Charles C.Y. Wang

    Abstract—We compare the performance of a comprehensive set of alternative peer identification schemes. Our results show the peer firms identified from aggregation of informed agents' revealed choices in Lee, Ma, and Wang (2014) perform best, followed by peers with the highest overlap in analyst coverage. Conversely, peer firms identified by Google and Yahoo Finance, as well as product market competitors gleaned from 10-K disclosures, turned in consistently worse performances. We contextualize these results in a simple model that predicts when information aggregation across heterogeneously informed individuals is likely to lead to improvements in dealing with the problem of economic benchmarking.

    Download working paper: http://ssrn.com/abstract=2517496

    The Decoupling Effect of Digital Disruptors

    By: Teixeira, Thales S., and Peter Jamieson

    Abstract—While the Internet's first wave of disruption was marked by the unbundling of digital content, the second wave, decoupling, promises to generate more casualties in an even broader array of industries. Digital start-ups are disrupting traditional businesses by inserting themselves at every juncture in the customer's consumption chain. By decoupling-the act of separating activities that people are used to co-consuming-new digital businesses are disrupting retailing, telecom, and other industries. Decoupling allows consumers to benefit from the value created at a lower cost or effort compared to what is delivered by traditional businesses. For those companies, the only solutions are to either recouple activities or rebalance to create and capture value (i.e., revenues) from both activities separately. Here, digital technologies can be seen as an instrument that will both disrupt traditional business models and potentially preserve them.

    Download working paper: http://www.hbs.edu/faculty/Pages/download.aspx?name=15-031.pdf

     

    Cases & Course Materials

    • Harvard Business School Case 815-057

    HGRM (B): Launching Hoxell, a New IT Venture

    No abstract available.

    Purchase this case:
    http://hbr.org/product/hgrm-b-launching-hoxell-a-new-it-venture/an/815057-PDF-ENG

    • Harvard Business School Case 515-026

    Cree Inc.: Introducing the LED Light Bulb

    Cree, a North Carolina-based maker of light emitting diodes (LEDs), has just introduced its first consumer product-an LED light bulb. It is designed as an energy efficient replacement for the ubiquitous incandescent light bulb. But given that it is an unfamiliar technology and that it costs ten times what an incandescent bulb costs, there are questions about how best to promote adoption and what sales level might be expected.

    Purchase this case:
    http://hbr.org/product/cree-inc-introducing-the-led-light-bulb/an/515026-PDF-ENG

    • Harvard Business School Case 115-011

    Virtual Revenue Recognition

    No abstract available.

    Purchase this case:
    http://hbr.org/product/virtual-revenue-recognition/an/115011-PDF-ENG

    • Harvard Business School Case 415-022

    McKinsey & Co.-Protecting Its Reputation (B)

    On Tuesday March 15, 2011, all 1,200 global Partners of McKinsey & Co. gathered at the Gaylord National Hotel & Convention Center near Washington, DC for their annual Partners' conference. The atmosphere was tense as Partners, in addition to their normal agenda, discussed the Galleon Group insider-trading trial and the recent allegations against the Firm's former Managing Director, Rajat Gupta. Three months earlier Senior Partner, Anil Kumar, plead guilty to providing confidential information about McKinsey clients he served to Galleon Group founder Raj Rajaratnam. The McKinsey Partners were shocked and dismayed by the actions of Kumar, as well as the recent allegations against Gupta and were closely monitoring the situation. Could a former Managing Director of their Firm have conspired to enable insider trading? And if so, what did that mean for the future of the Firm?

    Purchase this case:
    http://hbr.org/product/McKinsey---Co----Protecti/an/415022-PDF-ENG

    • Harvard Business School Case 815-025

    Fast Ion Battery

    John Davidson, a partner at Ware Street Capital (WSC) and a board member at Fast Ion Battery, had just received a phone call from Don Lerner at Bluelock Ventures telling him that Bluelock would not participate in the $5 million bridge financing for Fast Ion Battery. Lerner's call could not have come at a worse time. Fast Ion was running out of cash and needed another round of financing urgently to continue developing its revolutionary battery. Davidson faced a real dilemma. On the one hand, the company was finally gaining traction with developing its technology, and the search to replace the current CEO had yielded two prospective candidates who were extremely well suited to drive the company forward with a more capital efficient business model. On the other hand, Ware Street Capital and the two other investors had already invested $10 million into a company that had not performed up to investors' expectations. Would they be throwing more good money after bad by providing the bridge financing? Moreover, would other, later stage, investors be willing to provide the significant amounts of capital required to get the company to an exit event given the changing climate for clean tech investments? These questions became more pressing following Lerner's call that Bluelock had chosen not to continue backing Fast Ion. Was Fast Ion Battery worth saving?

    Purchase this case:
    http://hbr.org/product/fast-ion-battery/an/815025-PDF-ENG

    • Harvard Business School Case 115-017

    Alibaba Goes Public

    In 2014 Alibaba debuted on the New York Stock exchange, creating the largest IPO in history, but this initial desire to list on the Hong Kong Stock Exchange was denied due to the company's desire to preserve its partner's control over decision rights. Why did Hong Kong deny Alibaba's requests to list dual-class shares or to allow its partners to nominate a majority of the board of directors and, in the process, turn away a superstar in Alibaba? Why did American stock markets approve of Alibaba's governance structures, despite the warnings of many governance experts? How can investors ensure that their capital would be deployed effectively by the company's top management?

    Purchase this case:
    http://hbr.org/product/alibaba-goes-public/an/115017-PDF-ENG

    • Harvard Business School Case 615-003

    Humanitarian Assistance/Disaster Relief: What Can We Learn from Commercial Supply Chains?

    Organizing speedy and efficient supply operations for unpredictable major natural disasters was a continuing challenge for the U.S. military, and the 2010 earthquake in Haiti was both unique in its operational scope and political complexity. As he reviewed the after-action reports, George Topic, the Vice Director of the Center for Joint and Strategic Logistics at the National Defense University wondered how the performance of disaster relief efforts should really be measured. How should the efficiency of the response be characterized? He wondered if they could overcome some of the hurdles to applying concepts from commercial supply chains. The case explores some of the lessons learned from the Haiti disaster and offers an opportunity to test well-known supply chain concepts.

    Purchase this case:
    http://hbr.org/product/humanitarian-assistance-disaster-relief-what-can-we-learn-from-commercial-supply-chains/an/615003-PDF-ENG

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