Today we use far fewer materials to get the same things done--manufacture a PC, for instance, or produce a ton of steel. But with that efficiency has come an exponential increase in overall demand for resources.
On April 20, 2010, as BP p.l.c., the third-largest listed oil producer in the world, was preparing to report strong first quarter results, an explosion occurred on its drilling rig Deepwater Horizon, killing 11 workers and injuring 16 others. Over the next two days, the rig burned and sank, resulting in a massive offshore oil spill in the Gulf of Mexico. The spill was considered "the largest environmental disaster to hit the United States" and the largest accidental marine oil spill in history. The financial reporting implications of the accident and subsequent claims, especially the recognition and measurement of provisions and related expenses, and disclosure of contingent liabilities, were a major consideration for BP and its investors.
This case provides a comprehensive introduction to the basics of capital budgeting. It presents students with two distinct capital budgeting exercises revolving around the athletic footwear industry. The first exercise is about a running sneaker with a large capital outlay and a six-year project life. It contains many traditional project cash flows as well as a significant endorsement risk. The second exercise involves evaluating a hiking shoe project with a smaller initial investment in a more rapidly growing but unfamiliar market segment. The authors have used this case with audiences including sophomore undergraduates, MBAs, and seasoned executives. In the first two audiences, students build spreadsheet solutions from the assumptions provided; for executives, we often give them the completed analysis and focus more on interpretation of financial metrics and on qualitative discussion. We have also used one or both of the exercises as exam questions.
Because improved surgical care leads to better health outcomes, multiple groups of surgeons have developed metrics and tools for monitoring the availability and quality of surgical care. However, a critical barrier to monitoring quality in surgical care is the need to include a risk-stratification model to account for differences in case mix and patient comorbidities between hospitals. Researchers in developed countries use protocols for risk-stratification in surgical care, but staffing and resource issues have prevented researchers from using these protocols in low-income countries. To improve the quality of surgical care in Mozambique, a partnership was developed between the Universidade Eduardo Mondlane Medical School and the University of California, San Diego School of Medicine, with guidance and support from the Mozambican Ministry of Health. The immediate priority of the research team was to define the epidemiology of surgical conditions and evaluate local capacity to meet that need at three pilot hospitals across the country. This case explores the process of implementing a risk-stratification model for low- income countries and challenges students to critique the model and set direction for future work.
In 2011, Dr. Paul Firth, an anesthesiologist from Massachusetts General Hospital, began to explore methods for capturing and utilizing clinical data for quality improvement at Mbarara Regional Referral Hospital (MRRH) in Mbarara, Uganda. Partnering with Dr. Stephen Ttendo, head of the anesthesia department at MRRH, Firth obtained funding from the Harvard Milton Fund and from the General Electric Foundation in 2012 and established an electronic medical record database, now known as the SQUAD (Surgical Quality Assurance Database) initiative. Case A discusses the challenges of implementing an electronic medical record system in a public hospital where patient data had not previously been prioritized, and where resources for providing even basic care are limited. Case A explores the process of determining what to measure and how to measure and validate data.
In 2000, Dr. Benjamin Warf, a pediatric neurosurgeon, became the medical director and chief of surgery at CURE Children's Hospital in eastern Uganda. He quickly noticed a high incidence of hydrocephalus among his patients. Frustrated by the lack of options for these patients and by the limitations of shunts in a low-resource setting, Warf pioneered an alternative low-cost, one-time treatment for hydrocephalus using endoscopic techniques. This new approach, ETV/CPC, combined two procedures: endoscopic third ventriculostomy (ETV) and choroid plexus cauterization (CPC). Through rigorous clinical trials, Warf showed that ETV/CPC was at least as safe and effective as ventricular shunts but required much less medical infrastructure and post-surgical maintenance. In addition to his clinical work, Warf started the International Program to Advance Treatment of Hydrocephalus (IPath). He also designed a training program for neurosurgeons from developing countries around the world to learn this new hydrocephalus treatment. After his return to the United States, Warf began investigating the role ETV/CPC might play as a hydrocephalus treatment in both developed and developing countries.
Sodexo was founded in 1966 to provide food and catering services to businesses, schools, hospitals, and other institutions. When the French space agency, a client, asked the company to organize cleaning and maintenance for its base in Guyana as well, it was an early sign that Sodexo could extend its reach into previously unconsidered areas. Companies have outsourced so many functions for so many years that managing and coordinating the work of their suppliers has become a significant challenge. Some of them realize that working with a single integrated provider such as Sodexo--which now manages everything from employee cafeterias to HVAC systems, landscaping, incentive programs, and employee benefits--is far easier. Over the past decade Sodexo has diversified broadly and globally while observing four basic rules: (1) Be true to the business model. Almost all Sodexo's services can be provided by an individual or a team and don't require capital investments in property or serious machinery. (2) Make people happy and productive. An orientation toward the needs of the individuals who actually use the company's services guides choices about what Sodexo will or will not do. (3) Help clients execute strategy. Direct dialogue with top management differentiates the company and demonstrates that its offerings are not just commodities. (4) Rely on employees, not subcontractors. Sodexo owns the businesses it's in and works hard to motivate and develop its employees.
Almost 120 million people in the European Union are classified as at risk of poverty or social exclusion. Although many companies offer low-cost products and services, they have largely ignored the needs of these consumers. In this article the founder of Grameen Bank and his coauthors describe how five leading companies, working through the not-for-profit Action Tank, have developed "social business" models to serve the bottom of the pyramid in France. Those companies include Danone, which works with the French Red Cross to provide low-income parents with affordable and nutritious food for children aged six months to 24 months; Essilor, which provides easily affordable reading glasses to poor pensioners; and Renault, whose project Mobiliz aims to resolve transportation issues for poor people. In rural areas without public transportation, that involves a network of "solidarity garages" that repair damaged or broken cars at a nominal cost. A social business has three characteristics: It seeks to alleviate social problems; it must be run sustainably; and any profits must be reinvested in the company rather than funneled back to shareholders. Unlike a low-cost business, a social business determines up front who will be eligible for its offer and strives to maintain high quality in its product or service. The spillover effects of creating one may in the long run be as commercially valuable as the profits of a low-cost business. Those effects include uncovering opportunities for innovation in new markets, motivating employees, and enhancing the company's reputation.
Two-thirds to three-quarters of large organizations struggle with execution. And it's no wonder: Research reveals that several common beliefs about implementing strategy are just plain wrong. This article debunks five of the most pernicious myths. (1) Execution equals alignment. Processes to align activities with strategy up and down the hierarchy are generally sound. The real problem is coordination: People in other units can't be counted on. (2) Execution means sticking to the plan. Changing market conditions demand agility. (3) Communication equals understanding. E-mails and meetings about strategy are relentless--but executives change and dilute their messages. Only half of middle managers can name any of their company's top five priorities. (4) A performance culture drives execution. Companies need to reward other things too, including agility, teamwork, and ambition. (5) Execution should be driven from the top. It lives and dies with managers in the middle--but they are hamstrung by the poor communication from above. Redefining execution as the ability to seize opportunities aligned with strategy while coordinating with other parts of the organization can help managers pinpoint why execution is stalling and focus on the factors that matter most for translating strategy into results.
As established markets become less profitable, companies increasingly need to find ways to create and capture new markets. Despite much investment and commitment, most firms struggle to do this. What, exactly, is getting in their way? The authors of the best-selling book "Blue Ocean Strategy" have spent over a decade exploring that question. They have seen that the trouble lies in managers' mental models--ingrained assumptions and theories about the way the world works. Though these models may work perfectly well in mature markets, they undermine executives' attempts to discover uncontested new spaces with ample potential (blue oceans) and keep companies firmly anchored in existing spaces where competition is bloody (red oceans). This article describes how to break free of these red ocean traps. To do that, managers need to: (1) Focus on attracting new customers, not pleasing current customers; (2) Worry less about segmentation and more about what different segments have in common; (3) Understand that market creation is not synonymous with either technological innovation or creative destruction; and (4) Stop focusing on premium versus low-cost strategies.
For professional services firms, the only way to address clients' most complex issues is for specialists to work together across the boundaries of their expertise. When they do, their firms earn higher margins, inspire greater client loyalty, and gain a competitive edge. The author's research shows that the more practice groups involved in a client engagement, the greater the average annual revenue the client generates. And the more cross-specialty work professionals engage in, the more work they will subsequently get and the more they'll be able to charge for it. But although the financial benefits to the firm of multidisciplinary collaboration are clear, the benefits to individuals accrue slowly--and the downsides are immediate. The organizational structure, compensation systems, and cultures in many firms favor "rock stars, not the whole band." Moreover, learning to collaborate effectively is difficult. Both individuals and firms can encourage the kind of collaboration that lands high-value client work. Professionals, for instance, can reap the benefits sooner by establishing themselves with an influential colleague who can help them build connections to specialists across the firm. And leaders can take steps to lower the cultural and structural barriers to cross-disciplinary work.
When executed well, annual gatherings of an organization's high-level leaders are worth the effort and expense. But for many companies, the leadership summit is a numbing series of presentations and sessions in which information flows only from the top--and not all that coherently. By applying the appropriate techniques before, during, and after the summit, C-level leaders can seize this rare opportunity to harness the collective knowledge of their frontline executives. Before the summit, it's crucial to clarify roles and responsibilities (a director, who oversees planning and owns the agenda; a design team; a content editor; and so on), define a clear set of objectives for the summit, design the event around those objectives, and prepare attendees for productive conversations by giving them reading material in advance. During the event, a variety of low- and high-tech approaches, from color-coded 3 x 5 index cards to instant polls, can capture the thinking of attendees and communicate it upward. And various exercises can help attendees connect in ways that lead to genuine collaboration after the event. After the summit, organizers should track commitments made during the event and equip attendees with talking points and pithy presentations that help them discuss with their employees what happened at the summit and how to turn the results into action.
Achieving best practices in corporate governance has been hindered, the author writes, by a patchwork system of regulation, a mix of public and private policy makers, and no accepted metric for determining what constitutes success. He proposes Corporate Governance 2.0: not quite a clean-sheet redesign, but a back-to-basics reconceptualization built on three core principles. They are: (1) Boards should have the right to manage the company for the long term. This would mean an end to earnings guidance, a variation on the staggered board, and exclusive forum provisions. (2) Boards should install mechanisms to ensure the best possible people in the boardroom. This would require meaningful director evaluations and a consideration of shareholder proxy access. (3) Boards should give shareholders an orderly voice. Instead of defending the corporate bastion at all costs, directors should guarantee a reasonable process whereby shareholders get to decide.
Sales reps have long been taught to seek out a senior executive who can single-handedly approve a deal, but unilateral decision makers are now rare. Today most purchases are made by groups of individuals, all with different roles and priorities, and all with veto power. As a result, getting deals done has become an increasingly painful and protracted process. But innovative suppliers are finding ways to drive consensus in diverse buying groups, say three authors from CEB, which has been researching the impact of this buying shift. Those suppliers prime group members to find common ground by creating shared language and perspectives around problems and solutions. They identify internal champions for their offerings at the customers' companies; motivate those individuals to become active advocates; and arm them with the skills and materials needed to win over fellow decision makers. Accomplishing all this requires some novel approaches, such as social-media mining, customer "learning tours," and inventive diagnostic tools. It also calls for a new level of collaboration between sales and marketing. But given today's pressure to drive consensus, suppliers that don't align the two functions as a single team will be trounced by those who do.
Four types of psychological distance can separate you from your goals: (1) social (between yourself and other people); (2) temporal (between the present and the future); (3) spatial (between your physical location and faraway places); and (4) experiential (between imagining something and experiencing it). Success depends on bridging those gaps. For example, skillful negotiation requires considering the interests of other parties as well as your own (which narrows social distance). Effective time management means accurately predicting which commitments will be most pressing in the future (temporal distance). Inspired leadership involves not only appreciating and incorporating different people's goals, but also anticipating how they will change over time (social distance and temporal distance). And profitable product management means using imperfect information to figure out how to meet distant customers' changing needs (social, temporal, spatial, and experiential distance). None of this is easy to do. But, relying on more than 15 years of academic research and her own work with students and executives, the author has found that leaders who recognize and understand the effects of psychological distance and then use two specific strategies to reduce (or sometimes increase) it can improve their outcomes in many professional scenarios.
The actor, producer, director, and mother talks about adjusting to fame at a young age, developing rapport with other actors, how her industry has changed, and the foundation she has established to teach resilience and mindfulness to children.
The Tiny Prints case describes the founding of the online stationery company in 2004, through its growth and evolution to 2007. The three cofounders bootstrapped the company from the beginning, primarily so that they could retain control over the decision-making and strategic direction of the company. While that decision allowed the cofounders flexibility and independence, it also led to capital constraints and a "good enough" culture that had a variety of positive and negative implications for the company. Ultimately, Tiny Prints was able to grow because of its very specific focus on the birth announcement, and later holiday, market, an emphasis on customer service and innovations in design and distribution. As of 2007, the founders faced questions regarding their future growth strategy, particularly given increasing competition in the market, and were at an inflection point where they needed to consider the important decision of bringing in outside capital. Part B of the case explores the management team's decision to move forward with a purchase offer from Shutterfly or to maintain control of the company and continue to grow organically.
MONDRAGON, the largest cooperative in the world, and the inspiration for several U.S. cooperatives, faces a challenge in 2013 after one of its largest cooperatives votes to leave the group and another goes bankrupt.
The case describes the decision of Omar Selim to set up Arabesque as an independent organization and how he organized Arabesque to use both financial and environmental, social and governance (ESG) data in order to deliver performance for its clients. Supplement to case 115021.