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Spreadsheet Supplement for Product #M347

Senior management of a large stock exchange is reviewing a recent software problem that resulted in a botched opening for the initial public offering of a popular social media company. They are drawing up a list of recommendations on how to prevent this type of failure in the future, taking into account the needs of their various stakeholders, including customers, market makers, listed firms, regulators and shareholders. Overviews of the stock market, NASDAQ in particular, and the use of technology to trade stocks securely and quickly are followed by examining the aftermath of a delay in the correct trading of Facebook shares on its opening.

This note surveys some of the shifting considerations in play as chief communications officers (CCOs) have come to see reputation as a useful umbrella concept for managing the many activities that form perceptions of their large organizations. Primary among these is the alignment of internal and external communications to achieve a coherent and consistent message.

Ashifi Gogo, founder and CEO of Sproxil, wants to scale his mobile product authentication technology to new applications and new regions, but he is uncertain which business model to use. Sproxil is a Nigeria-based company that verifies the authenticity of medicines using a scratch-off code and SMS. Students are asked to examine the role of private and public actors in verifying the quality of medicines as well as the advantages and disadvantages of non-profit and social enterprise models in providing people at the Base of the Pyramid with this much-needed service.

The case describes competition in the market for E-Books, and Barnes & Noble's Strategy in this industry. As a traditional retailer, B&N was challenged by the introduction of digital technologies that allow books to be published, distributed and sold to consumers electronically. New competitors like Amazon and Apple attacked the traditional industry structure, creating many uncertainties over the long term viability of traditional retailers. Amid this uncertainty, B&N must decide how to compete, in terms of both devices that can read E-Books, as well as standards for their distribution. Should they create a separate digital business, centered around their "Nook" E-Book reader, or maintain an integrated strategy? And how should they think about the fragmented standards for distributing E-Books? The case allows students to probe the dynamics of platform based industries, as well as what happens in traditional industries when attacked by new competitors adopting new digital technologies. It is developed using public source material.

Randall Fojtasek, a partner at Dallas-based Brazos Private Equity Partners, must decide whether now is the time to sell his firm's investment in Tri-Northern Distribution. Brazos, a middle-market leveraged buyout group, created the company two years earlier through the acquisition of two electronic security distribution companies: Tri-Ed Distribution and Northern Video Systems. Twenty-four months after successfully integrating the two companies, Brazos has received two attractive offers for the combined distributor. With the company's management projecting double-digit growth for 2012, however, it is far from clear that now is the optimal time to exit from the firm's third fund.

Spreadsheet supplement to 213100.

James Baker is general manager of a large lumber mill in rural Virginia, Johnson Lumber. While on a business trip with the owner (the founder's grandson) and the owner's son, he receives the news that the company's planing mill has caught fire and is burning down. Baker, the owner, and the owner's son must decide what to do in the wake of losing the planing mill. Choices include rebuilding, seeking partnerships with other mills to use their facilities to fulfill existing business, or possibly closing shop and simply taking current profits. If they rebuild, Johnson Lumber will have to shut down for a year, risking the loss of customers and putting several people from the struggling community around the mill out of a job. If Johnson Lumber closes entirely, it will put its workers in an even worse position. But would it be feasible to use other mills' facilities? What if the other mills turned them down? On top of everything, the owner and his son have differences in their attitudes about and goals for the business. Baker must consider the options carefully and balance the pressure to please both the current and future owners of Johnson Lumber with what would be best for the business and the local community whose families it helped support.

The public primarily encounters the corporate communications function during a crisis. General rules are a good starting place for dealing with a crisis and handy to know, but a historical perspective is a critical supplement. Understanding the kind of crisis your organization faces or is attempting to avoid-indeed, managing a crisis successfully to the extent possible-involves precedents encompassing connections among corporate identity and culture, brand, reputation, business model, and business type, as well as the changing nature of media and crises themselves.

First Green Bank is a bank start-up in the midst of the financial crisis which aims to promote sustainability while making money as a bank. The case presents an ethical dilemma as the bank considers a loan to an arms manufacturer.

Supplement for case 412002

In the spring of 2012, the president of Encylopaedia Britannica announced that the company would cease producing bound volumes of the iconic reference work. Some people were shocked, and many assumed that EB had buckled under the internet--specifically, Wikipedia. EB's content model was dismissed as "vintage." What many people didn't know was that sales of the print set were by then responsible for only 1% of the business. The decision to stop printing it was, the author writes, "a nonevent." The encyclopedia's famous door-to-door sales force had reached its peak in 1990 with 100,000 units sold. But then the business collapsed. Busy families had less patience for personal solicitations, and personal computers had started shipping with CD-ROM drives, which created a demand for multimedia and interactivity--unknown territory for print-focused editorial and product teams. By 1996, the year Cauz joined the company, sales were down to 3,000 units. This is the story of how Encylopaedia Britannica became savvy--first with CD-ROM, then with the internet, and finally with the learning business. Wikipedia's success reinforced EB's strategic decision to reduce reliance on consumer reference and accelerate activity in the K-12 market. The company aggressively overhauled its editorial operation; now content is updated on Britannica Online every 20 minutes. Today, the author writes, the business is growing on all measures: revenue, margins, staff, content, and reach.

In recent years a new--disquieting--form of disruptive innovation has emerged. It doesn't follow Clayton Christensen's classic model, entering the market as a cheap substitute to a high-end product and then gradually increasing in quality and moving up the customer chain. Instead, the innovation beats incumbents on both price and quality right from the start and quickly sweeps through every customer segment. This kind of "big bang" disruption can devastate entire product lines virtually overnight. Look at the effect that free navigation apps, preloaded on smartphones, had on the market for devices made by TomTom, Garmin, and Magellan. Big-bang disruptions often come out of the blue from people who aren't your traditional competitors. Frequently, they're developed by inventors who are just doing low-cost experiments with existing technologies to see what new products they can dream up. Once launched, these innovations don't adhere to conventional strategic paths or normal patterns of market adoption. That makes them incredibly hard to combat. The authors, who've spent 15 years studying marketplace disruptions, offer some strategic principles to help businesses survive big bangs: Be on the watch for failed experiments that could signal that a big bang is brewing in your industry. Find ways to slow the disruptive innovation down and to leverage your surviving assets in another business. These assets will usually be intangible; other kinds of assets generally lose value quickly after a big bang and must be shed quickly. Diversifying into new kinds of business will protect your company. Though technology- and information-intensive firms are most vulnerable to big bangs, mature industries face this threat, too. Credit cards, automobiles, and education, for instance, are all experiencing early warning signs. But in every industry, big-bang disruption will be keeping executives in a cold sweat for a long time to come.

Most marketers think they know how their advertising affects consumer behavior and drives revenue. They correlate sales data with a few dozen discrete variables, and they rely on consumer surveys, focus groups, media-mix models, and online last-click attribution. But to treat advertising touch points as if each works in isolation is to misrepresent the way today's complex combination of marketing efforts influences purchasing outcomes. MarketShare CEO Wes Nichols explains how many big companies are now deploying analytics 2.0, a set of capabilities that can chew through terabytes of data and hundreds of variables in real time to accurately reveal how advertising touch points interact dynamically. The results: 10% to 30% improvements in marketing performance. Firms of various sizes can make the shift to analytics 2.0 by engaging in three broad activities: 1) Attribution: quantifying the contribution of each element of advertising; 2) Optimization: using predictive-analytics tools to run scenarios for business planning; and 3) Allocation: redistributing resources across marketing activities in real time. Nichols argues that implementing analytics 2.0 means building the required infrastructure and entwining it in organizational culture, strategy development, and operations. Any company can begin that journey; businesses that don't will be overtaken by those that do.

Many companies envision mobile ads becoming an integral part of their communications strategies. But there's a growing consensus that ads don't work on mobile devices; consumers just don't like them. Instead of creating tiny banner ads, smart marketers will turn to apps to reach customers and engage them. Effective apps will do one of the following: 1) Add convenience. Banking apps, for example, let people pay their bills online, and airline apps let them check in and monitor the status of their flights. 2) Offer unique value. In South Korea, commuters can use an app to order groceries while waiting for their trains. 3) Provide social value. Apps on Facebook and other sites let users send gifts to their friends. 4) Offer incentives. Apps that give away mobile minutes, for instance, can entice customers. 5) Entertain. Red Bull and other companies have devised popular games focused on their brands. "Mobile advertising" is often a hollow phrase, but mobile apps can enable marketers to communicate with consumers in a format that enhances their lives and offers long-term value.

We live in a media-saturated world, where consumers are drowning in irrelevant messages delivered from the web, TV, radio, print, outdoor displays, and a proliferating array of mobile devices. Advertising strategies built on persuading through interruption, repetition, and brute ubiquity are increasingly ineffective. To win consumers' attention and trust, marketers must think less about what advertising says to its targets and more about what it does for them. Rayport outlines four domains of human experience: In the "public sphere" people move from one place or activity to another, both online and off. In the "social sphere" they interact with and relate to one another. In the "tribal sphere" they affiliate with groups to define or express their identity. In the "psychological sphere" they connect language with specific thoughts and feelings. Savvy marketers think about crafting messages that consumers will welcome in these domains. Zappos did that when it placed ads in airport security bins (the public sphere)--reaching people whose minds may be on their shoes. Nintendo identified young mothers who were willing to host Wii parties and provided them with everything they needed for these social-sphere events. Yelp's Elite Squad of reviewers have a heightened sense of tribal affiliation that makes them powerful brand ambassadors. Life is good Inc. is rooted in the psychological sphere: It advertises only through the optimism-promoting logo and slogan on its products.

"What with ad-optimizing technologies and filter-defying product placement, search-based ad serves, real-time media bidding, and location-based features for mobile devices," the author writes, "it would be easy to conclude that advertising has flipped to all science and no art." But she highlights six campaigns to prove that advertising creativity will never cease: 1) Wonderful Pistachios, whose ads include memes such as YouTube's infamous Honey Badger and Secret Service agents partying with prostitutes; 2) Coca-Cola China, which created a TV-plus-smartphone game for the Hong Kong market; 3) Nabisco's "Daily Twist" campaign for Oreo cookies, in which members of the public nominated news pegs and company designers sculpted cookies to illustrate them; 4) Kia Motors America, whose ads are populated with anthropomorphic hamsters; 5) Marks and Spencer, which introduced "shwopping"-- a campaign with Oxfam to encourage clothing recycling; and 6) Neiman Marcus and Target, which teamed up on some merchandise, became the sole sponsors of ABC's drama Revenge, and then hired the cast to perform in five long-form commercials.

You have an idea for an innovative project that could have a significant impact on your business. But you also suspect that your idea will meet internal resistance: If realized, it would upend the status quo, and if you were to send it through the regular process for creating new projects, other parts of the organization would probably try to kill it along the way. So what's your next step? The conventional answer is to get a mandate from the top. This strategy, however, carries its own set of risks. In most large firms, CEOs are constantly barraged with ideas for new projects, and most often, they give the pitches a five-minute perusal followed by a "no." And even if you do get the support from the top, the corporate spotlight can be a dangerous place for young, unproven ideas. In this article, authors Paddy Miller and Thomas Wedell-Wedellsborg propose a different way to get your idea off the starting block: stealth innovation. They describe how to nurture your idea under the radar, which involves facing four key challenges: finding allies who can support you on the sly; building a proof of concept; accessing funds on the quiet; and developing a good cover story to deflect unwanted early attention from your idea.

For the past two decades, fair value accounting--the practice of measuring assets and liabilities at estimates of their current value--has been on the ascent, marking a major departure from the centuries-old tradition of keeping books at historical cost. Why has this happened? The author, an associate professor of business administration at Harvard Business School, offers one answer: The membership of the Financial Accounting Standards Board, which sets the standards for GAAP in the United States, has shifted over the decades to include more people from the financial services industry. Ramanna offers strong evidence that these executives prefer fair value and several possible motives for their preference. One, investment banks and asset managers are accustomed to using fair value in their day-to-day business. Two, GAAP profits defined on the basis of fair value rather than historical cost accelerate the recognition of gains, particularly in periods of rising asset prices. Three, the use of fair value to determine impairment of goodwill from M&A activity may impose less drag on earnings, potentially boosting M&A activity--a major revenue source for investment banks.