First Look

Abstract—This paper describes the available data and research on venture capital investments and performance. We comment on the challenges inherent in those data and research as well as possible opportunities to do better.

Publisher's link: http://www.hbs.edu/faculty/Pages/item.aspx?num=50652

Abstract—We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing, investment selection, valuation, deal structure, post-investment value-added, exits, internal firm organization, and relationships with limited partners. In selecting investments, VCs see the management team as more important than business-related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and find) differences in practices across industry, stage, geography, and past success. We compare our results to those for CFOs (Graham and Harvey 2001) and private equity investors (Gompers, Kaplan, and Mukharlyamov forthcoming).

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Abstract—Executive development programs have entered a period of disruption catalyzed by the digitalization of content, connectivity, and communication and are driven by renewed demand for high-level executive and managerial skills. Unlike other segments of higher education, the executive education market is heavily subsidized by the organizations employing the executives that participate in them. To understand the ongoing transformation of the industry, we use a large database of interviews with participants in executive development programs at HBS—and executives in their sponsoring organizations—to map out the (multidimensional) objective functions of executive participants and their organizations and show how the trio of disruptive forces (disintermediation, disaggregation, and decoupling) that have figured prominently in other industries disrupted by digitalization (media, travel, publishing) are likely to reshape the structure of demand for executive development.

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Abstract—Executive development programs have entered a period of rapid transformation, driven on one side by the proliferation of a new technological, cultural, and economic landscape commonly referred to as “digital disruption” and on the other by a widening gap between the skills and capabilities participants and their organizations demand and those provided by the executive program itself. We document—on the basis of transcripts of some 100 interviews with Fortune 500 executives—a current and growing awareness of a mismatch between executive development offerings and the skill sets executives need in a volatile, uncertain, ambiguous, and complex (VUCA), Web 2.5-enabled economy. We show that a trio of forces of digital disruption—specifically the disintermediation of the services of instructors and facilitators, the disaggregation of the previously bundled experiences that constitute an executive program, and the decoupling of the sources of value participants derive from any one experience—together open up the executive education industry to a radical restructuration. We argue that any consequential strategic action on the part of providers must address two major current gaps: the gap between the skills required by participants and those provided by suppliers (“the skills gap”) and the gap that separates skill acquisition from skill application (“the skills transfer gap”). We canvass the literature on skill measurement, acquisition, and transfer to establish the enduring power of these distinctions in explaining the success of various training and education programs. We use these distinctions to structure the landscape of strategic decisions that both organizations committed to organizational development and providers of executive development programs must in very short order make.

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Abstract—Using patents as indicators of inventive activity, this article characterizes the concentration of origins of invention from 1976 to 2010 and how these have changed over time. The analysis finds pervasive deconcentration in virtually every area related to ICT, but it can explain only a small part of this trend. Deconcentration happens despite the role of lateral entry by existing firms. New firm entry drives part of the deconcentration, but this alone cannot explain the change. A single supply factor in the market for ideas, such as the breakup of AT&T, cannot explain the trend either. Finally, 11% of patents change hands through mergers and acquisitions activity, but this does not make up for the declines in concentration in the origins of invention.

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Abstract—We consider the impact of cohort turnover—the planned simultaneous exit of a large number of experienced employees and a similarly sized entry of new workers—on operational performance in the context of teaching hospitals. Specifically, we examine the impact of the annual July turnover of residents in U.S. teaching hospitals on the average length of hospital stay and mortality rate in teaching hospitals relative to a control group of non-teaching hospitals. Despite the anticipated nature of the cohort turnover and the supervisory structures that exist in teaching hospitals, the annual July turnover of residents results in increased resource utilization (i.e., longer average length of stay) for both minor and major teaching hospitals, relative to a control group of non-teaching hospitals. We find limited evidence of negative effects on quality as measured by mortality rates. In major teaching hospitals, we find evidence of a substantial anticipation effect that presents as a gradual decrease in operational performance beginning several months before the actual cohort turnover. We identify higher overall quality of nursing and increased intensity of potential quality assurance as managerial levers for mitigating the decrease in hospital operational performance both at the time of and in the months leading up to the cohort turnover.

Download working paper: http://www.hbs.edu/faculty/Pages/item.aspx?num=49849

Longchamp’s Le Pliage is one of the fashion world’s most successful products, a cultural icon across the globe. But managing the low priced, nylon handbag is challenging as Longchamp tries to move its brand upmarket into higher priced, luxury leather goods. How much should Longchamp focus on Le Pliage versus its leather handbags? How should the subbrand be distributed, merchandised, priced, and promoted? How does Le Pliage both contribute to and detract from Longchamp’s brand equity?

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The net neutrality debate had implications for Internet service providers, content providers, and end users. This note aims to inform the reader of the various sides of the debate where open issues remain, as well as what aspects an entrepreneur, investor, or content provider—either an existing player or a new entrant—should know. From a management perspective, net neutrality rules could have major consequences on the business models of content providers, ISPs, and other businesses that depend on the transfer of data across the Internet.

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In 2015, Downingtown Area School District (DASD), a suburban school district near Philadelphia, entered its second year implementing Ivy Academy, a blended learning program, in its two traditional high schools. Superintendent Larry Mussoline, having for several years worked to incorporate technology into student learning, hoped that Ivy Academy would deepen student learning, provide more rigorous courses, introduce more scheduling flexibility, and change the culture among teachers in his district. In Ivy Academy, classes meet two out of every six days in-person, and students are expected to work asynchronously online during the other days. In the first year, 341 students (out of 3,800 eligible) and 19 teachers (out of 240 eligible) participated in Ivy Academy; in the second year, the program grew. However, final exam results for students participating in Ivy Academy are mixed, and certain staff and parents remain skeptical of its effectiveness. This case explores whether DASD is ready to scale Ivy Academy and make it the primary way in which students learn.

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Digital Lumens, founded in 2007, developed and implemented intelligent LED lighting solutions for the industrial market. Sensors and wireless connectivity embedded in its LED fixtures not only significantly reduced lighting-related energy use—by up to 90% in some cases—but also served as a tool for the Internet of Things (IoT) to expose powerful insights about facility use. Yet in 2016, few of Digital Lumens’s customers were fully embracing the system as an IoT product. Both LED lighting and IoT were rapidly evolving markets, and Digital Lumens had to decide if it should focus on driving down lighting hardware costs to expand its total addressable market or on improving the software controls to enhance the system’s IoT functionality.

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This module lays the foundation for implementing strategy using management control systems. It explains why managers rely on profit plans and performance measurement systems to implement their strategy and explores the five organizational tensions that managers must resolve to ensure success: (1) balancing profit, growth, and control; (2) balancing short-term results with long-term sustainability; (3) balancing the expectations of different constituents; (4) balancing opportunities and attention; and (5) balancing the motives of human behavior. Management control systems are essential tools used by all managers to achieve their desired profit goals and strategies. Properly applied, management control systems can be used to overcome the organizational blocks that impede the potential of all people who work in modern organizations. While this module is designed to be used alone, it is part of the Management Control Systems series. The series forms a complete course that focuses on the techniques for using performance measurement and control systems to implement strategy. Modules 1–4 set out the foundations for strategy implementation. Modules 5–9 teach quantitative tools for performance measurement and control. Modules 10–15 illustrate the use of these techniques by managers to achieve profit goals and strategies. This module sets the stage for the series, preparing the reader to build on the basic concepts and definitions introduced in this module.

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Module 2 in the Management Control Systems series focuses on the basics of building a successful strategy. Topics in this module include a discussion of the distinction between corporate and business strategy; how to conduct a SWOT analysis of market dynamics and internal capabilities; the use of the five forces analysis to understand customers, suppliers, products, and competitors; how to use this analysis to identify unique opportunities to create value for customers; and an overview of the four Ps of strategy implementation (strategy as perspective, position, plans, and patterns of action). The concepts introduced in this module provide the foundation for building effective management control systems. The Management Control Systems series forms a complete course on the techniques for using performance measurement and control systems to implement strategy.

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Module 3 in the Management Control Systems series explains how managers use information to control critical outputs. Managers use this information to communicate goals up, down, and across their organizations and later to monitor performance against those goals. Using information requires choices about what to monitor and measure. Managers can focus their attention on inputs, processes, and outputs based on factors such as measurability, cost, understanding of cause and effect, and desired levels of innovation. We discuss the technical feasibility of monitoring and measurement, the cost of information, and the effects of performance measurement and control on innovation. We end the module by discussing how managers use information not only for decision making and control but also for signaling, learning, and external communication. While this module is designed to be used alone, it is part of the Management Control Systems series. The series forms a complete course that focuses on the techniques for using performance measurement and control systems to implement strategy. This module demonstrates how managers use information, an essential component in the management control and performance measurement techniques that are explained in later modules.

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