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    First Look: September 23

    First Look

    23 Sep 2014

    Behind Bitcoin--a Primer

    As a monetary system, Bitcoin remains rather a mystery to many. (As an organization, of course, its recent failings have been well documented.) In the new working paper Bitcoin, Benjamin Edelman and colleagues attempt to explain the platform's design and properties for a nontechnical audience. According to the authors, "Bitcoin is of interest to economists in part for its potential to disrupt existing payment systems and perhaps monetary systems, and also for the wealth of data it provides about agents' behavior and about the Bitcoin system itself."

    Valve's Organization Without Organization

    Valve, one of the largest game software firms, is debating a move into hardware as a new case study looks over the shoulders of its leaders. Famous for its free-flowing organization (no org charts, no set hours, no managers), Valve needs to rethink its structure given a potential change in strategy. The case, according to authors Ethan Bernstein, Francesca Gino, and Bradley Staats, "presents students with a strategic and organizational challenge that tests students' understanding, and Valve's resolve, with regard to the congruence between their organizational model and strategic direction."

    Can Amazon Be A Grocer, Too?

    Sometimes executives at Amazon must have believed that making a go of it in the online grocery business was harder than delivering packages via drones. But after five years experimenting with AmazonFresh in the Seattle area, the company is making progress and is at a decision point about whether to proceed. Read the case study "AmazonFresh: Rekindling the Online Grocery Market," by Rory McDonald, Clayton Christensen, Robin Yang, and Ty Hollingsworth.

    —Sean Silverthorne
    LinkedIn
    Email
     

    Publications

    • September 2014
    • Research in Organizational Behavior

    The Governance of Social Enterprises: Mission Drift and Accountability Challenges in Hybrid Organizations

    By: Ebrahim, Alnoor, Julie Battilana, and Johanna Mair

    Abstract—We examine the challenges of governance facing organizations that pursue a social mission through the use of market mechanisms. These hybrid organizations, often referred to as social enterprises, combine aspects of both charity and business at their core. In this paper we distinguish between two ideal types of such hybrids, differentiated and integrated, and we conceptualize two key challenges of governance they face: accountability for dual performance objectives and accountability to multiple principal stakeholders. We revisit the potential and limitations of recently introduced legal forms to address these challenges. We then theorize about the importance of organizational governance, and the role of governing boards in particular, in prioritizing and aligning potentially conflicting objectives and interests in order to avoid mission drift and to maintain organizational hybridity in social enterprises. Finally, we discuss future research directions and the implications of this work for rethinking traditional categories of organizations, namely business and charity.

    • September 2014
    • Perspectives on Psychological Science

    How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

    By: Kiatpongsan, Sorapop, and Michael I. Norton

    Abstract—Do people from different countries and different backgrounds have similar preferences for how much more the rich should earn than the poor? Using survey data from 40 countries (N = 55,238), we compare respondents' estimates of the wages of people in different occupations-chief executive officers, cabinet ministers, and unskilled workers-to their ideals for what those wages should be. We show that ideal pay gaps between skilled and unskilled workers are significantly smaller than estimated pay gaps, and that there is consensus across countries, socioeconomic status, and political beliefs for ideal pay ratios. Moreover, data from 16 countries reveals that people dramatically underestimate actual pay inequality. In the United States-where underestimation was particularly pronounced-the actual pay ratio of CEOs to unskilled workers (354:1) far exceeded the estimated ratio (30:1), which in turn far exceeded the ideal ratio (7:1). In sum, respondents underestimate actual pay gaps, and their ideal pay gaps are even further from reality than those underestimates.

    Publisher's link: http://www.hbs.edu/faculty/Publication%20Files/Kiatpongsan%20Norton%20PPS_31f17547-5033-401c-8ed2-ccc9b6a2b433.pdf

     

    Working Papers

    Bitcoin

    By: Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore

    Abstract—Bitcoin is an online communication protocol that facilitates virtual currency including electronic payments. Since its inception in 2009 by an anonymous group of developers, Bitcoin has served tens of millions of transactions with total dollar value in the billions. Users have been drawn to Bitcoin for its decentralization, intentionally relying on no single server or set of servers to store transactions and also avoiding any single party that can ban certain participants or certain types of transactions. Bitcoin is of interest to economists in part for its potential to disrupt existing payment systems and perhaps monetary systems, and also for the wealth of data it provides about agents' behavior and about the Bitcoin system itself. This article presents the platform's design principles and properties for a non-technical audience; reviews its past, present, and future uses; and points out risks and regulatory issues as Bitcoin interacts with the conventional financial system and the real economy.

    Download working paper: http://ssrn.com/abstract=2495572

    Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards

    By: Toffel, Michael W., Jodi L. Short, and Melissa Ouellet

    Abstract—Transnational business regulation is increasingly implemented through private voluntary programs-like certification regimes and codes of conduct-that diffuse global standards. But little is known about the conditions under which companies adhere to these standards. We conduct one of the first large-scale comparative studies to determine which international, domestic, civil society, and market institutions promote supply chain factories' adherence to the global labor standards embodied in codes of conduct imposed by multinational buyers. We find that suppliers are more likely to adhere when they are embedded in states that participate actively in the International Labour Organization (ILO) treaty regime and that have stringent domestic labor law and high levels of press freedom. We further demonstrate that suppliers perform better when they serve buyers located in countries where consumers are wealthy and socially conscious. Taken together, these findings suggest the importance of overlapping state, civil society, and market governance regimes to meaningful transnational regulation.

    Download working paper: http://ssrn.com/abstract=2178540

     

    Cases & Course Materials

    • Harvard Business School Case 415-015

    Opening the Valve: From Software to Hardware (A)

    Valve, one of the world's top video game software companies, has also become an iconic example of an organization with virtually no hierarchy. A 400-person organization, Valve's unique organizational form (described in detail in the case and accompanying employee handbook) includes 100% self-allocated time, no managers (and therefore no managerial oversight), a structure so fluid that all desks have wheels to allow free movement between "cabals" (teams) on a regular basis (which happens frequently enough that Valve created a homegrown tracking app to allow peers to find each other), a unique hiring apparatus that supports recruitment of T-shaped individuals, and a purely peer-based performance review and stack ranking. As customer demand and market forces draw Valve into hardware in 2013, Valve questions whether their organizational model will need to change as it expands from software into hardware-and, if so, whether they should prioritize strategy over structure or structure over strategy. The case, therefore, presents students with a strategic and organizational challenge that tests students' understanding, and Valve's resolve, with regard to the congruence between their organizational model and strategic direction.

    Purchase this case:
    http://hbr.org/product/Opening-the-Valve--From-S/an/415015-PDF-ENG

    • Harvard Business School Case 415-016

    Opening the Valve: From Software to Hardware (B)

    The (B) case provides significant detail on Valve's initial decisions but keeps the final outcome as a work-in-process.

    Purchase this case:
    http://hbr.org/product/Opening-the-Valve--From-S/an/415016-PDF-ENG

    • Harvard Business School Case 415-023

    Belk: Towards Exceptional Scheduling

    With 24,000 staff and over 300 stores, Belk Inc. sought to replace its entirely manual labor scheduling system with an automated software solution from Reflexis. Belk hoped the upgrade would simplify scheduling, reduce time employees spent in non-customer-facing roles, and result in improved allocation of resources through the use of big data, thereby increasing sales productivity. Like many other retailers, Belk expected the benefits from automated scheduling software to be significant. But unlike other retailers who took an iron hand approach to push compliance, Belk's implementation permitted store managers to "edit" the system to "fix" the "bugs" in the automated schedules-seeking not to replace labor but rather inform it. Belk commenced piloting the solution in May 2013 and subsequently expanded the number of stores running the software to 50 over the course of 2013. Despite signs of initial success with the stores running the scheduling solution, SVP Eric Bass quickly began to notice a significant issue with the implementation: over 70% of shifts generated by the system were receiving manual overrides ("edits") by the store managers. Store managers believed the edits were necessary to remain responsive to local needs-and were, indeed, productive. Senior executives were skeptical, concerned that edits indicated resistance to productive change, and unsure of why Belk had spent so much time and money on an automated system only to have the stores override it. Having deliberately allowed store managers and lead schedulers to override the system, Bass (a retail store veteran who worked his way up to corporate) now needed to understand how and why they were doing so and to make sure that those edits were being made in a constructive manner. In a disagreement between human and machine, Belk allowed humans to win by design by giving them the right to edit the "optimized" schedules. The case allows students to go deep into the question (qualitatively and quantitatively) and drive a detailed conversation about whether the result of Belk's flexible "edit" policy was a more or less effective implementation.

    Purchase this case:
    http://hbr.org/product/Belk--Towards-Exceptional/an/415023-PDF-ENG

    • Harvard Business School Case 915-002

    Reinventing Retail: ShopRunner's Network Bet

    ShopRunner considers adjustments to improve its online shopping service, which offers no-charge two-day shipping as well as easy returns and other conveniences. Competitors' diverse pricing models and ancillary benefits raise questions about how to structure and price ShopRunner's offering. Meanwhile, an investment from Alibaba presents new opportunities in China but risks distraction from the core business.

    Purchase this case:
    http://hbr.org/product/Reinventing-Retail--ShopR/an/915002-PDF-ENG

    • Harvard Business School Case 114-098

    Three-Year Planning at Li & Fung Limited

    tHaving been able to follow its own "three-year plan" on course constantly, Li & Fung Limited fell short of meeting its stretch earnings target for the first time in almost two decades, leading to a double-digit drop in stock price overnight. Questions were raised on the company's strategies pursued to meet such targets and on the validity of its three-year planning process.

    Purchase this case:
    http://hbr.org/product/three-year-planning-at-li-fung-limited/an/114098-PDF-ENG

    • Harvard Business School Case 714-510

    Health City Cayman Islands

    Narayana Health (NH) had been successfully delivering affordable high quality tertiary care to the masses in India through its chain of hospitals for over a decade. To encourage the adoption of the NH affordable care delivery model worldwide, Dr. Shetty, chairman of NH, was keen to establish a hospital in the western hemisphere and believed that it was important to demonstrate the model to the U.S. Thus, when the Cayman Islands' government was interested in developing the island as a medical tourism hub during 2008-2009, Dr. Shetty agreed to develop the Health City Cayman Islands (HCCI), a 2,000 bed conglomeration of multiple super-specialty hospitals within a single campus located on Grand Cayman Island. The first phase of HCCI, a 104 bed hospital focused on cardiac care and orthopedics, was developed jointly by NH and Ascension, the largest non-profit hospital system in U.S. The hospital was inaugurated in February 2014, but there were open questions related to pricing of the procedures and the related target patient segment and volumes. Also, HCCI senior management realized the need to adapt the NH model developed in and for India to fit the new environment at Cayman and was open to experimentation in the coming months.

    Purchase this case:
    http://hbr.org/product/Health-City-Cayman-Island/an/714510-PDF-ENG

    • Harvard Business School Case 615-013

    AmazonFresh: Rekindling the Online Grocery Market

    More than a decade after the high-profile failures of early online grocers such as Webvan, grocery remains both the largest single U.S. retail category and one of the few that has not yet migrated online. Amazon began testing its grocery delivery service called AmazonFresh in Seattle, and after five years, the company has made significant progress. The case traces the evolution of the AmazonFresh business model and describes the operating capabilities necessary to compete in grocery. Would there come a day when most grocery shopping was done online? If so, how would Amazon compete with established retail chains like Wal-Mart and Safeway as well as new digital grocery startups? Most urgently, Amazon needed to plan AmazonFresh's next step. Should the company continue refining its business model in Seattle or expand to another city? What factors should it take into account when planning its next move?

    Purchase this case:
    http://hbr.org/product/AmazonFresh--Rekindling-t/an/615013-PDF-ENG

    • Harvard Business School Case 714-026

    Asia Optical: The Myanmar Decision

    No abstract available.

    Purchase this case:
    http://hbr.org/product/Asia-Optical--The-Myanmar/an/714026-PDF-ENG

    • Harvard Business School Case 714-018

    Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit

    In 2013, Rio Tinto was expected to begin commercial shipments from Oyu Tolgoi, a copper and gold mine in the Gobi Desert of Mongolia. Oyu Tolgoi was one of the last great unmined deposits in the world and, once operations were in full swing, was expected to constitute around a tenth of Rio Tinto's profits and over a quarter of Mongolia's GDP. But the terms of the deal were being threatened by elections in Mongolia and a change in voter sentiment towards the project. With around $6 billion invested, Rio Tinto had to figure out how to make its investment work out. Meanwhile the Mongolian government, facing scorching economic growth rates, had to lead the country through its most significant transformation since the time of Ghengis Khan nine centuries earlier.

    Purchase this case:
    http://hbr.org/product/Rio-Tinto-and-Mining-in-M/an/714018-PDF-ENG

    • Harvard Business School Case 615-017

    Qihoo

    Qihoo, one of the largest Internet companies in China today, was founded in 2005. The company started its business by offering a security software produc, and quickly dominated the market in China after its unusual move of giving its product away for free in 2009. Later, it expanded its offering to cover a broad spectrum of Internet and mobile security products. In 2012 the company launched its own Internet search engine called So.com. By August 2013, So.com captured 18% PC market share and had posed a threat to Baidu, China's largest and most established search engine provider. Yet to compete against Baidu and other Chinese Internet giants in the long run, Qihoo needed to find a way to replicate its PC market success in the mobile market. How could Qihoo continue to evolve its search engine business and what was the best mobile strategy to help company grow?

    Purchase this case:
    http://hbr.org/product/Qihoo/an/615017-PDF-ENG

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