First Look

March 8, 2016

Can Uber find a road in China?

Although the China market is tempting for many companies—it's tough to turn away from 1.3 billion potential consumers—it's difficult to break into. A new case study looks at Uber's approach to entering the country, which already has a strong incumbent in the "ride-hailing market," Didi-Kuaidi. "Could Uber overcome these obstacles and thrive in the China market?" asks the case's authors, William Kirby and colleagues. Order the case, Uber in China: Driving in the Gray Zone.

Improving health through saliency

Behavioral scientists understand that healthier habits can be ecouraged through the use of incentives. But what makes for the best motivators? In the working paper The Role of Incentive Salience in Habit Formation, results suggest that incecentives that are salient (in this case, marketing messages that are delivered repeatedly) are best at persuading people to change habits. The research was conducted by Leslie John, Katherine L. Milkman, Francesca Gino, Bradford Tuckfield, and Luca Foschini.

Making a product a 'cognitive referent'

Products such as Google Search and Starbucks coffee have become cultural symbols for their industries. New research by Rory McDonald looks at how entrepreneurs in nascent markets can do the same. In short, "Successful firms conceptualize market creation as problem solving; they pursue a sequence that begins with targeted rhetorical attacks on existing solutions, proceeds to dissemination of founding stories that can shift with a change in logics, and culminates in rejection of the labels that audiences try to apply to their activities and products." The paper is titled Becoming a Cognitive Referent: Market Creation and Cultural Strategy.

— Sean Silverthorne
  • March 2016
  • Harvard Business Review

Lean Strategy

By: Collis, David J.

Abstract—Strategy and entrepreneurship are often seen as polar opposites. Yet the two desperately need each other: strategy without entrepreneurship is central planning; entrepreneurship without strategy leads to chaos. The two approaches can be reconciled through the Lean Strategy process, which ensures that startups innovate in a disciplined fashion and make the most of their limited resources by knowing "what not to do." Deliberate strategy sets the bounds within which entrepreneurial experimentation takes place, while the results of that innovation leads to learning that reshapes the strategy. Lean Strategy enables company builders to pursue viable opportunities, stay focused, and align the entire organisation while supporting front-line entrepreneurial activities.

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  • forthcoming
  • Journal of Marketing Research

Design of Search Engine Services: Channel Interdependence in Search Engine Results

By: Edelman, Benjamin, and Zhenyu Lai

Abstract—The authors examine prominent placement of search engines' own services and effects on users' choices. Evaluating a natural experiment in which different results were shown to users who performed similar searches, they find that Google's prominent placement of its Flight Search service increased the clicks on paid advertising listings by more than half while decreasing the clicks on organic search listings by about the same quantity. This effect appears to result from interactions between the design of search results and users' decisions about where and how to focus their attention: users who decide what to click based on listings' relevance became more likely to select paid listings, while users who are influenced by listings' visual presentation and page position became more likely to click on Google's own Flight Search listing. The authors consider implications of these findings for competition policy and for online marketing strategies.

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  • March 2016
  • Harvard Business Review

Start-Ups That Last: How to Scale Your Business

By: Gulati, Ranjay, and Alicia DeSantola

Abstract—No abstract available.

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  • in press
  • Current Opinion in Psychology

Consumer Neuroscience: Advances in Understanding Consumer Psychology

By: Karmarkar, Uma R., and Carolyn Yoon

Abstract—While the study of consumer behavior has been enriched by improved abilities to generate new insights, many of the mechanisms underlying judgments and decision making remain difficult to investigate. In this review, we highlight some of the ways in which our understanding of consumer psychology has been, and can be, advanced through the use of neurophysiological methods. In particular, we outline some of the common neural circuitry that is involved in affective processing, subjective value, persuasion, and attention. We discuss how an understanding of these mechanisms can be used to better elucidate various elements of consumer psychology. We show how recent findings have produced a deeper understanding of decision making and suggest directions for future research.

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  • 2016
  • Handbook of Media Economics

User-Generated Content and Social Media

By: Luca, Michael

Abstract—This paper documents what economists have learned about user-generated content (UGC) and social media. A growing body of evidence suggests that UGC on platforms ranging from Yelp to Facebook has a large causal impact on economic and social outcomes ranging from restaurant decisions to voting behavior. These findings often leverage unique data sets and methods ranging from regression discontinuity to field experiments, and researchers often work directly with the companies they study. I then survey the factors that influence the quality of UGC. Quality is influenced by factors including promotional content, peer effects between contributors, biases of contributors, and self-selection into the decision to contribute. Nonpecuniary incentives, such as “badges” and social status on a platform, are often used to encourage and steer contributions. I then discuss other issues including business models, network effects, and privacy. Throughout the paper, I discuss open questions in this area.

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How Do Customers Respond to Increased Service Quality Competition?

By: Buell, Ryan W., Dennis Campbell, and Frances X. Frei

Abstract—When does increased service quality competition lead to customer defection, and which customers are most likely to defect? Our empirical analysis of 82,235 customers exploits the varying competitive dynamics in 644 geographically isolated markets in which a nationwide retail bank conducted business over a five-year period. We find that customers defect at a higher rate from the incumbent following increased service quality (price) competition only when the incumbent offers high (low) quality service relative to existing competitors in a local market. We provide evidence that these results are due to a sorting effect, whereby firms trade-off service quality and price, and in turn, the incumbent attracts service (price) sensitive customers in markets where it has supplied relatively high (low) levels of service quality in the past. Furthermore, we show that it is the high quality incumbent’s most profitable customers who are the most attracted by superior quality alternatives. Our results appear to have long-run implications whereby sustaining a high level of service quality is associated with the incumbent attracting and retaining more profitable customers over time.

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Abstract—In a paper published in the Journal of Financial Economics (JFE) in 2013, we provided evidence that market participants perceive staggered boards to be on average value reducing. In a recent response paper, Amihud and Stoyanov (2015) “contest” our results. They advocate using alternative methods for estimating risk-adjusted returns and excluding some observations from our sample. Amihud and Stoyanov claim that making such changes renders our results not significant (though retaining their direction) and conclude that staggered boards have no significant effect on firm value. This paper examines and replies to the Amihud-Stoyanov challenge. We question their methodological claims, study the consequences of following their suggestions, and conduct additional robustness tests. Our analysis shows that the evidence is overall consistent with the results and conclusions of our JFE paper.

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The Role of Incentive Salience in Habit Formation

By: John, Leslie, Katherine L. Milkman, Francesca Gino, Bradford Tuckfield, and Luca Foschini

Abstract—Incentives can be powerful in motivating people to change their behavior, from working harder on tasks to engaging in healthier habits. Recent research has examined the residual effects of incentives: by altering behavior, incentives can cause participants to form habits that persist after the original behavior-altering incentives are removed. We conducted a field experiment with users of a pedometer-tracking app to examine whether the salience of incentives would affect their ability to produce habit formation in this context. We offered incentives to all participants and experimentally varied the salience of the incentives (i.e., whether participants received regular announcements about the incentives). Salient incentives produced significantly more behavior change and more lasting exercise habits than incentives presented without significant marketing. Through a difference-in-differences analysis comparing those in our experiment with a similar population, we show that the difference between offering no incentives at all and offering incentives that are not made salient is actually undetectable, whereas the difference between offering salient incentives and incentives that receive minimal marketing is quite stark. We discuss implications for research on incentives, habit formation, and exercise.

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Abstract—Research has examined firms' use of rhetoric and symbolic activities in the process of creating new markets. This study analyzes how entrepreneurial firms use these cultural strategies to position themselves in a nascent market category they are creating. Using an inductive multiple case study of five entrepreneurial firms in an emergent online investing market, we construct a theory to explain how a firm becomes a cognitive referent in a nascent market and other firms' failure to do so. Successful firms conceptualize market creation as problem solving; they pursue a sequence that begins with targeted rhetorical attacks on existing solutions, proceeds to dissemination of founding stories that can shift with a change in logics, and culminates in rejection of the labels that audiences try to apply to their activities and products. By contrast, unsuccessful firms conceptualize market creation as evangelizing for a new cultural model and undermine their own positions with inappropriate use of symbolic market-creation actions.

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The pharmacy benefit manager (PBM) sector processes prescription drug claims on behalf of companies that offer a prescription drug benefit to their employees. This case follows Bob Nease, chief scientist at Express Scripts, as he considers methods to promote home delivery of prescription drugs by mail—a process proven to lower prescription fill error rates, increase cost savings, and improve medication adherence.

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Supplements the (B) case.

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  • Harvard Business School Case 616-034

Open Innovation at Fujitsu (A)

This case study examines the open innovation journey at Fujitsu, a global information and communication technology company. The case ends with the location decision between Tokyo, Japan, downtown San Francisco or Sunnyvale, California, regarding establishing a small unit for the purpose of institutionalizing Fujitsu’s open innovation journey. Mohi Ahmed, together with Mikito Kiname and Tango Matsumoto, embarked on the journey to strengthen Fujitsu’s marketing and innovation platform in North America and to transform the company’s innovation culture by making the Japanese giant more open and leaner in its approach to innovation. In the past, Fujitsu struggled with opening up its innovation process in Silicon Valley: partnering with other organizations to integrate outside technology in its products and services; spinning out unexploited technology had proved challenging. With input from thinkers and practitioners inside and outside of Fujitsu, Ahmed identified the maker movement as a potential avenue to begin Fujitsu’s open innovation journey because of the significance of Monozukuri (art and science of making) in the company’s origin. He engaged with Mark Hatch, CEO of TechShop Inc., a fast-growing chain of member-based maker spaces, in a conversation about how companies could focus on “doing well by doing good,” and they jointly initiated four projects on which they could collaborate. Ahmed planned to leverage these projects to transform Fujitsu’s innovation culture by illustrating that the company could successfully engage in exploration with new external partners and could move quickly into experimentation to accelerate learning and innovation. This case also shows how two very different organizations managed to team across boundaries. Doing so, it emphasizes the human side of inter-organizational collaboration by highlighting leadership activities that served to develop a shared vision, nurture psychological safety, leverage collective capabilities, and promote execution-as-learning.

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  • Harvard Business School Case 616-035

Open Innovation at Fujitsu (B)

This add-on case study reveals the location decision that was made in front of the challenge presented in the (A) case. The launch of the Open Innovation Gateway (OIG) was a success. Fujitsu's management team now had to figure out the best way to continue to build momentum and develop the best model for OIG to become an integral part of the company's open innovation journey.

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Discourses on the links between eating, health, and social standing in America have deep roots. As mechanisms of food production, distribution, and storage were developed in the nineteenth century, Americans began receiving information about what to and not-to eat, from public and religious figures, scientists, government officials, and food companies. In an increasingly industrializing and urbanizing society, such information translated into consumer decisions that had both economic and cultural antecedents and consequences. Even before the growth in the market for organic, health, and gourmet foods in the late twentieth and early twenty-first century, food choices were associated with lifestyle.

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  • Harvard Business School Case 316-135

Uber in China: Driving in the Gray Zone

CEO and Founder of Uber Technologies, Travis Kalanick, had made clear to investors and the public that expansion into China was one of his company's major priorities for 2016. Uber had already demonstrated remarkable capacity for rapid, global scaling and for operating despite its unclear legal status in many markets. But the China market, while offering Uber unprecedented opportunity in terms of customer demand, presented Uber with a host of new challenges, including a murky regulatory framework and a strong, native incumbent, Didi-Kuaidi, that boasted the lion's share of the ride-hailing market. Could Uber overcome these obstacles and thrive in the China market?

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  • Harvard Business School Case 315-127

2012 Obama Campaign: Learning in the Field

The development and utilization of an intentional Field learning strategy developed for the “Obama for President” campaign in 2012 following an after-action Review calling for it after the 2008 elections.

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  • Harvard Business School Case 714-004

The Republic of the Philippines: The Next Asian Tiger?

The Philippines, for long a laggard in Asia, is now growing fast in 2012, with a positive current account balance. While it still exports services, it is increasing its assembly of manufactured products and trying to increase mining. For these activities, however, it needs more foreign direct investment. And for that, it needs domestic tranquility and better infrastructure.

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  • Harvard Business School Case 916-035

Honoring the Contract—Role for Quantron

No abstract available.

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  • Harvard Business School Case 714-035

The Role of Government in Market Economies (RoGME)

This course is about one question: what is the proper role of the government in the market economy? We study the role of government as it plays out in the real world, using vivid case studies from many countries, decades, and policy angles. At the same time, we align these cases with a rigorous theoretical framework that clarifies the circumstances under which government intervention in the market can improve outcomes.

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