First Look

November 4, 2008

How can your large organization encourage more creative solutions from within? In "Teaming Up to Crack Innovation and Enterprise Integration" in the November issue of Harvard Business Review, HBS professor emeritus James Cash and colleagues recommend involving two dedicated, IT-powered teams. The first, a "distributed innovation group," consists of experts on the lookout for new ideas and developments inside and outside the company. The second team, an "enterprise integration group," successfully integrates projects in a practical way on the level of resources and operations. Write the authors, "Without such agencies, innovation and integration won't spread far enough or fast enough throughout a large organization to keep pace with the smaller, younger, more technology-based competitors to which innovation and integration come much more naturally." This week also sees research on gender in job negotiations and on creating new practice areas in professional service firms, among other topics; and a case on the quirky (and successful) entrepreneurship of science buff Marc Abrahams.
— Martha Lagace

Working Papers

Barriers to Acting in Time on Energy and Strategies for Overcoming Them

No abstract is available at this time.

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Fear of Rejection? Tiered Certification and Transparency


The sub-prime crisis has shown a harsh spotlight on the practices of securities underwriters, which provided too many complex securities that proved to ultimately have little value. This uproar calls attention to the fact that the literature on intermediaries has carefully analyzed their incentives but that we know little about the broader strategic dimensions of this market. The paper explores three related strategic dimensions of the certification market: the publicity given to applications, the coarseness of rating patterns, and the sellers' dynamic certification strategies. In the model, certifiers respond to the sellers' desire to get a chance to be highly rated and to limit the stigma from rejection. We find conditions under which sellers opt for an ambitious certification strategy, in which they apply to a demanding but non-transparent certifier and lower their ambitions when rejected. We derive the comparative statics with respect to the sellers' initial reputation, the probability of fortuitous disclosure, the sellers' self-knowledge and impatience, and the concentration of the certification industry. We also analyze the possibility that certifiers opt for a quick turnaround time at the expense of a lower accuracy. Finally, we investigate the opportunity of regulating transparency.

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Cases & Course Materials

The Carbon Market in 2008

Harvard Business School Note 209-064

The carbon market has emerged in response to concerns about global climate change. This note characterizes the market in 2008, describing each segment and how it operates.

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Curled Metal Inc.—Engineered Products Division

Harvard Business School Case 709-434

Curled Metal Incorporated has declining sales but has developed a new product (curled metal pile driver pads) that, in field tests, deliver customer benefits that are many times CMI's manufacturing costs. Joseph Fernandez and Rajiv Sanwal of CMI's Engineered Products Division are responsible for formulating a strategy for the new product. A key issue is the price to charge for the pads. The case raises issues of analyzing market potential, aligning price with business strategy, and the implications of a price on development and execution of integrated strategic options.

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Examining the Adoption of Drug-Eluting Stents

Harvard Business School Case 509-028

Marketers are often tasked with exploring the factors that impact the long-run adoption of a new product or technology. The new product under consideration here is the drug-eluting stent: a device which props open a clogged artery to the heart and then releases medication that reduces the risk of artery re-blockage. In light of recent medical and competitive trends in the market, the case prompts students to examine the future adoption of drug-eluting stents as well as to consider the potential marketing actions to be taken by Medtronic for ENDEAVOR—a newly approved stent that will hit the market in 2008.

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Iceland (A)

Harvard Business School Case 709-011

In May of 2008, a team of sovereign debt analysts at Moody's had to decide whether to downgrade the country's sovereign long-term debt from Aaa to Aa1 or lower. Investor sentiment toward Iceland had changed radically in March, and the Moody's team was fearful that the situation could spiral out of control. The Moody's team knew that carry traders increased Iceland's vulnerability to a confidence crisis because they were quick to liquidate their holdings at the first sign of distress. The plunge in the Icelandic Krona since the beginning of 2008 also forced the Icelandic people to confront a decision: would joining the European Union (EU) protect Iceland from capricious swings in investor sentiment? What, if anything, should Iceland do to avoid a future crisis?

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Marc Abrahams: Annals of an Improbable Entrepreneur

Harvard Business School Case 409-013

Marc Abrahams was a media entrepreneur who specialized in science humor. In 2008, he sought to boost the scale and monetization potential of his business. That business, called Improbable Research, encompassed a magazine (Annals of Improbable Research), a high-profile annual event (the Ig Nobel Prize Ceremony), a web site (, a series of books, and various public appearances. This case uses the story of the "improbable" emergence and expansion of that business to investigate the challenges and opportunities faced by an individual who seeks to build an enterprise around his own human capital. It includes background information on Abrahams's earlier career, a summary of the various segments of his company, and a discussion of recent efforts by Abrahams to break free of constraints that have limited the size and revenue-generating ability of Improbable Research for many years. Among those efforts are a decision to distribute magazine content over the Internet for free and a major investment in producing video content for the web. The case concludes by presenting various options under consideration by Abrahams-options that dealt both with external challenges (How should he define his brand? Which markets should he target?) and with internal challenges (Are there key positions that he should hire to fill?). The case also features lively exhibits that illustrate Abrahams's value proposition, analyze his business model and revenue sources, and so forth.

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Polanco: A Fashionable Opportunity

Harvard Business School Case 209-012

Roberto Charvel is a young MBA graduate making his first personal real estate investment in his native Mexico City. Charvel is planning to purchase and renovate a nine-unit apartment building. Is the market good? Should he sell or lease the units? How should he handle other issues like the architectural designs, the construction process, and the legal process? How should he balance all the competing demands on his time? This case serves as an introduction to the multifamily property type.

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TCS: The MCA 21 Project

Harvard Business School Case 609-024

Tata Consultancy Services (TCS), a leading outsourced software services provider based in India, must decide whether to bid on a high-profile government project within India. The project, if completed successfully, would mark another step in TCS's progression from a provider of low-cost technical resources to their goal of becoming an end-to-end technology-enabled services provider. However, the project was not only complex but also presented considerable hazards to the firm. The case permits the exploration of how and when companies in developing countries can leverage their domestic markets to build capabilities to serve global customers, by using their home market as a base for learning. The case is also designed to examine strategies (more generally) for such organizations to climb the value chain and access higher-margin businesses with powerful incumbents.

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Gender in Job Negotiations: A Two-Level Game


We propose taking a two-level-game perspective on gender in job negotiations. At Level One, candidates negotiate with employers. At Level Two, candidates negotiate with household members. In order to illuminate the interplay between these two levels, we review research from two separate bodies of literature. Research in psychology and organizational behavior on candidate-employer negotiations sheds light on the effects of gender on Level One negotiations. Research from economics and sociology on intrahousehold bargaining elucidates how negotiations over the allocation of domestic labor at Level Two influence labor force participation at Level One. In conclusion, we integrate practical implications from these two bodies of literature to propose a set of prescriptive suggestions for candidates to approach job negotiations as a two-level game and to minimize the disadvantageous effects of gender on job negotiation outcomes.

Teaming Up to Crack Innovation and Enterprise Integration


In the continuing quest for business growth, many CEOs are turning to their CIOs and IT organizations because technology is absolutely essential to two compelling sources of growth: innovation and enterprise integration. The speed of innovation often depends on the ability to coordinate across organizational boundaries. Innovations cannot reach a sufficient level of scale and impact unless they are integrated into the larger operations of the corporation. And yet, say recently retired Harvard Business School dean Cash, Oxford dean Earl, and nGenera director of research Morison, the two endeavors remain "unnatural acts": Far too many large businesses are better at stifling innovation than at capitalizing on it, better at optimizing local operations than at integrating them for the good of the enterprise and its customers. To make both pursuits seem more natural, the authors recommend creating two dedicated, IT-powered teams: a distributed innovation group (DIG) and an enterprise integration group (EIG). The DIG serves as the center of expertise for innovation techniques, considers new uses for technology already being developed inside the company, looks for new developments outside the company, and provides experts for internal innovation initiatives. The EIG selects the most promising from among competing integration projects, provides resources to give them a strong start, and then folds them into the operating model of the enterprise. Without such agencies, the authors maintain, innovation and integration won't spread far enough or fast enough throughout a large organization to keep pace with the smaller, younger, more technology-based competitors to which innovation and integration come much more naturally.

Chartering Innovative Territory: Diversification, Legitimacy and Practice Area Creation in Professional Service Firms


Diversification into innovative domains through new practice area creation is a critical imperative for professional services firms. Using theories of organizational territoriality and corporate charters, we conceptualize professional firms as federations of distinct practice areas and argue that the chartering of a new practice is an inherently political act. New practice area founders need to engage in appropriate legitimacy-mobilizing efforts in order to sustain diversification efforts. Our analysis of 46 cases of new practice area creation attempts in consulting and law firms shows that the mix of legitimacy required for new practice areas created through radical diversification is very different from that required for incremental diversification efforts. Our findings have important implications for studying how innovation is structurally accomplished in professional firms.

When 'Stars' Migrate, Do They Still Perform Like Stars?

No abstract is available at this time.

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What Is a Free Customer Worth?


Free customers who are subsidized by paying customers are essential to a vast array of businesses, such as media companies, employment services, and even IT providers. But because they generate revenue only indirectly, figuring out the true value of those customers has always been a challenge. This paper develops a network model to estimate the long-term impact of each additional free customer on a company's profits, factoring in the degree to which he or she brings in other customers—whether paying or free—and the ripple effect of these customers. The model was used to help an online auction firm make several critical decisions including its pricing and marketing strategy as well as its overall firm valuation.

HBS Focus: The Reality of Corporate Boards


As Harvard Business School celebrates its first century, it can take pride in being a pioneer in exploring what transpires in the boardroom … and how it helped shape the evolution of enlightened governance. Early research honed right in on "what makes a good director."

How Can Decision Making Be Improved?


The optimal moment to address the question of how to improve human decision making has arrived. Thanks to fifty years of research by judgment and decision-making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This paper argues that the time has come to focus attention on the search for strategies that will improve bounded judgment because decision making errors are costly and are growing more costly, decision makers are receptive, and academic insights are sure to follow from research on improvement. In addition to calling for research on improvement strategies, this paper organizes the existing literature pertaining to improvement strategies, highlighting promising directions for future research.

Moving to a New Global Competitiveness Index




Race and Jury Selection: Psychological Perspectives on the Peremptory Challenge Debate


The legal system is a domain of potential relevance for psychologists, whether in the capacity of expert witness or citizen juror. In this article, the authors apply a psychological framework to legal debate surrounding the impact of race on the process of jury selection. More specifically, the authors consider race and the peremptory challenge, the procedure by which attorneys may remove prospective jurors without explanation. This debate is addressed from a psychological perspective by (a) examining traditional justifications for the practice of the peremptory challenge, (b) reviewing research regarding the influence of race on social judgment, (c) considering empirical investigations that examine directly race and peremptory challenge use, and (d) assessing current jury selection procedures intended to curtail racial discrimination. These analyses converge to suggest that the discretionary nature of the peremptory challenge renders it precisely the type of judgment most likely to be biased by race. The need for additional psychological investigation of race and jury selection is emphasized, and specific avenues for such research are identified.