The past three decades have seen American capitalism quietly transformed by a single, powerful idea--that financial markets are a suitable tool for measuring performance and structuring compensation. Stock instruments for managers, high-powered incentive contracts for investors, and the rise of alternative assets have dramatically altered the nature and level of incentives and rewards in our society, on both sides of the capital market. These changes have contributed significantly to the twin crises of modern American capitalism: repeated governance failures, which lead many to question the stewardship abilities of American managers and investors, and rising income inequality. When risk is repeatedly mispriced because investors enjoy skewed incentive schemes, financial capital is being misallocated. When managers undertake unwise investments or mergers in order to meet expectations that will trigger large compensation packages, real capital is being misallocated. And when relative compensation is as distorted as it has been by the financial-incentive bubble over the past several decades, one can only assume that human capital is being misallocated, to a disturbing degree. Awakening our monitors to their responsibilities and to the flaws of market-based compensation provides the best hope for correcting these imbalances and strengthening the U.S. economy for the challenges of this century.
In America today there's a growing sense that the political system is broken and that its ineffectiveness is a major threat to U.S. competitiveness. Why do so many think the political system is not working? Research shows that in Congress, Republicans and Democrats are more polarized than ever. They seem pulled apart by two starkly different conceptions of government: one viewing the government as inefficient, invasive, and easily corrupted, and another seeing it as a vehicle for solving people's problems. Yet the ideological divide may not be the true source of the breakdown. A look at U.S. history shows it's not new. Moreover, sharp ideological battles have often proved highly productive in policy terms, delivering the best ideas from both sides. In the 1840s, for instance, state politicians who were deeply skeptical of government pushed hard for balanced budget amendments while politicians at the other end of the spectrum demanded free public schools for all. In the end many states adopted both policies--a combination that proved enormously powerful. The problem today is that too many have come to view politics as war, where victory is paramount and "compromise" is a dirty word. This take-no-prisoners approach, which came into sharp relief during the debt-ceiling debate, threatens to cripple the best-of-both dynamic. Revitalizing America's culture of democracy--where the health of the nation comes first, above economic interest, party, and ideology--is essential. Business leaders must play a large role in this effort, because the implications for the economy are so great.
To remain a leader in innovation, the United States needs the support of foundational institutions that help seed, grow, and renew enterprises. Historically, these institutions--such as universities, venture creators, labor markets, and job-training programs--have tended to operate in silos. But they are far more effective when they're networked. By collaborating to bridge the gaps between them, business, academic, and policy leaders can help generate more ideas, start-ups, company growth, global competitors, and prosperity. In this article, Harvard Business School's Rosabeth Moss Kanter outlines an agenda for strengthening the links between key institutions. Leaders, she argues, should focus on four goals: 1) Linking knowledge creation to venture creation to speed the conversion of ideas into market-ready enterprises; 2) Linking small and large enterprises to promote the growth of younger companies and revitalize large corporations through partnerships with innovative SMEs; 3) Improving the match between education and employment opportunities, through apprenticeship programs and other education-industry links; and 4) Linking leaders across sectors to develop regional strategies and produce scalable models. In all four of these areas, promising models have already begun to emerge. By highlighting the most successful ones and what can be learned from them, Kanter shows how America can create a richer, more competitive business ecosystem.
Many Americans blame free trade for their nation's economic slide, but the authors' research shows that free trade has been assigned a villainous role that far exceeds its real impact. The evidence exposes three myths. Myth 1: "America's open trade policy is the main cause of job losses, especially in manufacturing." The real drivers of the losses: rising productivity growth in U.S. manufacturing and a shift in demand away from goods in favor of services. Myth 2: "U.S. living standards are falling and wage inequality is rising because developing countries compete with the U.S. in its export markets on cost." The truth is that the U.S. and developing countries have specialized in very different products and processes, making the latter complementary to America's growth. Myth 3: "The rapid growth of emerging markets like China and India is the most important reason for the higher oil prices that hurt Americans." The primary responsibility for the shortfall between demand and supply that has caused oil prices to soar rests with developed countries, which contributed to most of the price increase from 2000 to 2008. The authors advocate a more active U.S. trade policy that emphasizes exports, bilateral cooperation with other economies to maintain a trading order that supports U.S. economic interests, and plurilateral agreements with WTO members on issues such as competition policy.
In a predictable world, getting a new initiative off the ground typically involves analyzing the market, creating a forecast, and writing a business plan. But what about in an unpredictable environment? The authors recommend looking to those who are experts in navigating extreme uncertainty while minimizing risk: serial entrepreneurs. These business leaders act, learn, and build their way into the future. Managers in traditional organizations can do the same, starting with smart, low-risk steps that follow simple rules: Use the means at hand; stay within an acceptable loss; secure only the commitment needed for the next step; bring along only volunteers; link the initiative to a business imperative; produce early results; and manage expectations. Momentum is gained by continuing to act based on what is learned at each step. The launch of Clorox's Green Works product line is discussed as an example.
Betsy Sugarman, a rising star in a biotech company, finds out that she is pregnant. This is good news for her, but bad timing for her career. She has been interviewing internally to take on a new role as the director of overseas operations, a position that requires a great deal of travel. Her prospective boss has all but offered her the job and is expecting a commitment from her within a week. She wants the job and feels she is prepared to do what it requires, but she's hesitant to disclose such personal information. Should she tell him about the pregnancy or not? With commentaries by Mary B. Cranston, the firm senior partner at Pillsbury Winthrop Shaw Pittman, and Michael Hamilton, a partner at Ernst & Young.
Betsy Sugarman, a rising star in a biotech company, finds out that she is pregnant. This is good news for her, but bad timing for her career. She has been interviewing internally to take on a new role as the director of overseas operations, a position that requires a great deal of travel. Her prospective boss has all but offered her the job and is expecting a commitment from her within a week. She wants the job and feels she is prepared to do what it requires, but she's hesitant to disclose such personal information. Should she tell him about the pregnancy or not?
Betsy Sugarman, a rising star in a biotech company, finds out that she is pregnant. This is good news for her, but bad timing for her career. She has been interviewing internally to take on a new role as the director of overseas operations, a position that requires a great deal of travel. Her prospective boss has all but offered her the job and is expecting a commitment from her within a week. She wants the job and feels she is prepared to do what it requires, but she's hesitant to disclose such personal information. Should she tell him about the pregnancy or not? With commentaries by Mary B. Cranston, the firm senior partner at Pillsbury Winthrop Shaw Pittman, and Michael Hamilton, a partner at Ernst & Young.
The case is based on the crisis faced by Kingfisher Airlines during November 2011. It describes the paradoxical situation faced by the airline industry in India which experienced exponential growth in passenger volumes; but with the exception of IndiGo Airlines, all the airlines failed to make profits. However, in general, the low-cost airlines did better than the full service airlines. Other than the government-owned Air India, Kingfisher Airlines, a full service airline, was in the worst possible shape and close to bankruptcy during that period. Lack of cash forced the airline to cancel about 35 flights in a day in November 2011, disappointing customers, the only stakeholder group that was happy with the airline. This event brought the whole industry under public scrutiny. Using the stakeholder perspective, the case suggests that owing to an excessive focus on one stakeholder group, the customers; and the neglect of the other four stakeholder groups, namely, suppliers, employees, community and society, including government agencies, and also the owners or shareholders; the organization had nearly gone bankrupt. The top management has to chalk out a strategy that reengages with all the stakeholders to get them to support it during Kingfisher's struggle for survival and to put the airline on a track of recovery.
This case chronicles the evolution and challenges faced by LabourNet, an organization that was conceptualized as a social enterprise to create and enhance income opportunities for workers in the Indian urban informal sector, workers who are typically poor, exploited, and disenfranchised. LabourNet endeavored to establish linkages between informal-sector labourers and potential employers through an Internet-based portal and cellular phones, bringing about efficiency in the search process as well as reducing the role of intermediaries who typically exploited the labourers and reduced their share of wages. Realizing that informal sector labourers were mostly migrants from rural India who did not possess any proof of identity or social security, LabourNet worked with banks and insurance companies to provide the registered labourers with proof of identity, insurance, bank accounts, and ATM facilities. Further, LabourNet provided the registered labourers with training so that they could command better prices for their services. However, LabourNet struggled to earn revenue and to become financially self-reliant because of difficulties in scaling its operations, its inability to monetize the services that it provided as well as for being unable to command any price premium for their labourers from the markets. The case ends at a point where LabourNet had to decide its future course of action because the donor funds on which it was relying was becoming exhausted and LabourNet was unsure about the strategy that it should adopt in order to create a business model that was both inclusive and financially sustainable
This case critically analyzes the positioning journey traversed by Saffola, one of India's leading cooking oils. For nearly half a century, Saffola was strongly associated with the health of the human heart, with its visual language, communication strategy, and brand positioning, all revolving around heart-related risks. With changing trends and market sentiments, Saffola became painfully cognizant of its shrinking relevance as a brand, indicated by stagnating sales, thus posing a unique conundrum: how should Saffola expand its user base to include non-heart patients while still being relevant to its current, loyal user base? In order to address this, the marketing team at Saffola undertook two re-positioning exercises, one in 2001 and the other in 2004. This case studies both these efforts in detail, analyzing the dynamics of the brand's image, identity, and positioning in tandem with changing consumer trends and market conditions.
In India, air travel in the early twentieth century is mostly between major cities and has historically been driven by businesses. However, a set of relatively unused airfields exist in or near smaller cities, presenting a potential opportunity for generating air travel demand in these locations. This would require a thorough understanding of existing travel options and the design of an air travel offering that can successfully compete with these options. The three-part case describes a methodology to arrive at the appropriate new air travel offering and an assessment of the extent of potential demand in this context. In the first part (A), competing travel modes are examined and the attributes that are relevant to the design of a new air travel offering are identified. A choice-based conjoint experiment is designed and pilot data is obtained and analyzed.
In India, air travel in the early twentieth century is mostly between major cities and has historically been driven by businesses. However, a set of relatively unused airfields exist in or near smaller cities, presenting a potential opportunity for generating air travel demand in these locations. This would require a thorough understanding of existing travel options and the design of an air travel offering that can successfully compete with these options. The three-part case describes a methodology to arrive at the appropriate new air travel offering and an assessment of the extent of potential demand in this context. Inputs from part (A), which detail a pilot conjoint study, are used to refine the design and data is collected from a large sample for one origin-destination pair and presented in the second part (B).
In India, air travel in the early twentieth century is mostly between major cities and has historically been driven by businesses. However, a set of relatively unused airfields exist in or near smaller cities, presenting a potential opportunity for generating air travel demand in these locations. This would require a thorough understanding of existing travel options and the design of an air travel offering that can successfully compete with these options. The three-part case describes a methodology to arrive at the appropriate new air travel offering and an assessment of the extent of potential demand in this context. In the first part (A), competing travel modes are examined and the attributes that are relevant to the design of a new air travel offering are identified. A choice-based conjoint experiment is designed and pilot data is obtained and analyzed.
As commercials migrate from television to the Internet, marketers need to use different techniques to keep viewers watching--and to encourage them to send the ad to others. Harvard Business School's Thales Teixeira utilizes infrared eye tracking and facial-emotion-detection software to understand how people respond to online ads, and he offers five techniques to increase the odds an online ad will go viral.
Studies have always shown that the adage "There's no such thing as bad publicity" is wrong. It turns out, though, that sometimes the saying has merit. By studying sales of books reviewed in the New York Times, Jonah Berger of the Wharton School demonstrates that if a product is relatively unknown, even the most scathing publicity can help the bottom line by making people aware of the product's existence. This is good news for smaller and unknown producers, who might want to allow some bad press or to make controversial moves that risk incurring it.
When you're building a team to generate radical innovation, make sure you include a few conformists among the radical thinkers and rule-breakers. Conformists are crucial because they support the creatives and strengthen group cohesion, according to research on a high-tech company by Ella Miron-Spektor, Miriam Erez, and Eitan Naveh of Technion-Israel Institute of Technology.