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Leaders as Decision Architects
Everyone from CEOs to frontline workers commits preventable mistakes-for example, underestimating how long it will take to finish a project or focusing too much on information that supports their current view. It is extraordinarily difficult to rewire the human brain to undo the patterns that lead to such mistakes. But there is another approach: Alter the environment in ways that encourage people to make decisions that lead to good outcomes. Leaders can do this by restructuring how work is performed, say Harvard Business School's John Beshears and Francesca Gino. In this article, they offer a five-step process for mitigating the effects of cognitive biases and low motivation on decision making: Understand the kinds of systematic errors people make and the factors that affect motivation. Define the problem to determine whether behavioral issues are at play. Diagnose the specific underlying causes. Design a way to tweak the environment to reduce or mitigate the negative impact of cognitive biases and insufficient motivation on decisions. Rigorously test the proposed solution. -
Outsmart Your Own Biases
When making decisions, we all rely too heavily on intuition and use flawed reasoning. But it's possible to fight these pernicious sources of bias by learning to spot them and using the techniques presented in this article, gleaned from the latest research. They'll open up your thinking about possible outcomes, objectives, and options and lead to better choices. To broaden your perspective on the future, the authors suggest, you can use proven tactics for improving the accuracy of estimates and preparing for contingencies. You'll think more expansively about your objectives if you come up with many possibilities before deciding what's most important, get input from others, and then carefully examine one goal at a time. And you'll generate better options if you identify several and evaluate them side by side. Don't settle for the first one that's acceptable; imagine that you can't pursue it, and you might find an even stronger alternative. Strong emotional attachments or investments make cognitive biases even harder to overcome. When that's the case, use checklists and algorithms to stay focused on the right things, and set "trip wires" to trigger planned responses at key points in the decision-making process. -
Fooled by Experience
We interpret the past--what we've experienced and what we've been told--to chart a course for the future. It seems like a reasonable approach, but it could be a mistake. The problem is that we view the past through filters that distort reality. One filter is the business environment, which focuses on outcomes rather than the processes that lead to them and celebrates successes while ignoring failures, thus making it hard for us to learn from mistakes. Another is our circle of advisers, who may censor the information they share with us. A third filter is our own limited reasoning abilities. We tend to focus on evidence that confirms our beliefs and gloss over information that contradicts them, and we read too much into our personal experience, which inevitably involves a small sample of incidents. We can base our decisions on a clearer view of the world if we study failures and near misses--especially the processes behind them; encourage all employees to pursue preventive measures instead of just solving problems; surround ourselves with people who will speak frankly; search for evidence that our hunches are wrong, and encourage employees, data scientists, and consultants to do the same; and broaden our perspective in order to give new meaning to our varied experiences. -
From "Economic Man" to Behavioral Economics
When we make decisions, we make mistakes. We all know this from personal experience, of course. But in case we didn't, a stream of experimental evidence in recent years has documented the human penchant for error. This line of research is probably best known for its offshoot, behavioral economics. Its practitioners have played a major role in business, government, and financial markets. But that isn't the only useful way to think about making decisions. The academic arena alone contains two other distinct schools of thought, one of which has a formal name--decision analysis--and the other of which can be characterized as demonstrating that we humans aren't as dumb as we look. Each school of thought brings vital insights to bear. Managers need to understand when to make decisions formally, when to make them by the seat of their pants, and when to blend those approaches. This article briefly tells the story of where the three schools arose and how they have interacted, beginning with the explosion of interest in the field during and after World War II and continuing to the present day, when companies such as Chevron have hundreds of decision analysts on staff. Its aim is to make readers more-informed consumers of decision advice--which in turn should make them better decision makers. -
Two Keys to Sustainable Social Enterprise
Social entrepreneurship has emerged over the past several decades as a way to identify and bring about potentially transformative societal improvements. Ventures in this realm are usually intended to benefit economically marginalized segments of society that can't transform their prospects without help. But the endeavors should be financially sustainable, because there's no guarantee that subsidies from taxpayers or charitable givers will continue indefinitely. Grameen Bank is a famous example of a social venture that met both goals. In studying the winners of the Skoll Award for Social Entrepreneurship, the authors found that they all focus on changing two features of an existing system: the economic actors involved and the enabling technology applied. For example, the children's rights activist Kailash Satyarthi realized that reaching ethically concerned consumers through Rugmark (now GoodWeave International) could help foil exploitative labor brokers in India's carpet weaving industry. And through the Kiva platform, Matt Flannery and Jessica Jackley enabled small-scale lenders in wealthy countries to lend to small-scale borrowers in poor countries. Today GoodWeave operates globally, and Kiva is on track to facilitate more than $1 billion in microloans within the next couple of years. -
Customer Data: Designing for Transparency and Trust
With the help of technology, companies today sweep up huge amounts of customer data. But they tend to be opaque about the information they collect and often resell, which leaves their customers feeling uneasy. Though that practice may give firms an edge in the short term, in the long run it undermines consumers' trust, which in turn hurts competitiveness, say authors Morey, Forbath, and Schoop. In this article, the three share the results of a survey of 900 people across five countries, which looked at attitudes about data privacy and security. It examined what people knew about the information trails they leave online, which organizations they did--and did not--trust with their data, and which data they valued the most. The results show that the value consumers place on different data depends a lot on what it is and how it is used. In general, the perceived value rises as the data's breadth and sensitivity increases from basic, voluntarily shared information to detailed, predictive profiles that firms create through analytics, and as its uses shift from benefiting the consumer to benefiting the company. If data is used to improve a product, consumers generally feel the enhancement itself is a fair trade, but they expect more in return for data used to target marketing, and the most in return for data sold to third parties. To build trust, companies must be transparent about the data they gather and offer consumers appropriate value in exchange for it. Simple legal disclosures aren't enough, however; companies must actively educate their customers and incorporate fairness into their products and models from the start. Companies that get this will win consumers' goodwill and business and continued access to their data. Companies that don't will find themselves at a serious disadvantage, and maybe even shut out. -
The Art of Evangelism
The author was Apple's second software "evangelist" and is now the chief evangelist for Canva, an online design firm. He believes that all managers can adopt the practice, with great benefit to their organizations and their careers. No matter what your company, it probably offers something valuable and differentiated and therefore worth evangelizing about: if not goods or services, then corporate values, cutting-edge accounting practices, or flexible work-at-home policies. Kawasaki outlines three ways to effectively evangelize: (1) Schmoozing. This requires you to get out of your office, ask questions, unveil your passions, follow up with people, e-mail effectively, make it easy to get in touch with you, and do favors. (2) Public speaking. You need to deliver quality content, omit the sales pitch, customize the speech for your audience, focus on entertaining your listeners, tell stories, circulate in the audience beforehand, control scheduling and venue when you can, and practice and speak all the time. (3) Social media. When posting you should offer value, be interesting, take chances, keep it brief, be a mensch, add drama, tempt with headlines, use hashtags, and stay active. -
Life's Work: Brian Grazer
The Oscar-winning producer of "Splash" and "Apollo 13" on curiosity, delegation, and rising to the top. -
A High Performance Computing Cluster Under Attack: The Titan Incident
At the University of Oslo (UiO), CERT manager Margrete Raaum learned of a network attack on Titan, a high-performance computing cluster that supported research conducted by scientists at CERT and other research institutions across Europe. The case describes the incident response, investigation, and clarification of the information security events that took place. As soon as Raaum learned of the attack, she ordered that the system be disconnected from the Internet to contain the damage. Next, she launched an investigation,which over a few days pieced together logs from previous weeks to identify suspicious activity and locate the attack vector. Raaum hopes to soon return Titan to its prior safe condition. In order to do so, she must decide what tasks still need to be completed to validate the systems and determine if it is safe to reconnect it to the Internet. She must also consider further steps to improve her team's ability to prevent, detect, and respond to similar incidents in the future. This case is designed for an undergraduate or graduate information security (infosec) class that includes students with varied technical and business backgrounds. The case supports discussion of technical and managerial infosec issues in interorganizational systems - a topic that is currently underrepresented in major case collections. -
Banco Sabadell Acquires Banco CAM: Leveraging a Cloud Computing Strategy
CAM for the price of €1. The President of Banco Sabadell Josep Oliu announced at a press conference on the 8 December 2012 that BCAM, a similar size to its acquirer, must be integrated in less than 1 year. Banco Sabadell management expected €331 million in synergies from 2012 to 2014. The case focuses on Miquel Montes, the new CEO in Banco CAM, and his team; Federico Rodriguez, new Chief Operations Officer; and Carles Abarca, new Chief Information Officer. Banco Sabadell had developed a cloud computing architecture never tested before in mergers and acquisitions (M&A). Despite Sabadell management's strong and proven experience of M&As, there were risks associated with the benefits. Students need to understand both in order to understand how to plan in such situations -
Sync&Share North Rhine-Westphalia: A Case on a University-Based Cloud Computing Service Provider
Raimund Vogl is the project leader of a large-scale project that aims to introduce a university based cloud storage service to major German universities. He needs to convince other universities to join the project. The case is based on a real situation and shows real challenges. The university-based scenario helps students to better put themselves in the context of the case. Furthermore, the case serves to teach the basic principles, risks, and benefits of cloud computing. The main challenge faced by the protagonist is to come up with a plan for organizational and user adoption. Accordingly, several technology-related theories can be used. In addition to user adoption theories such as the technology acceptance model, this case demonstrates the need of Sync&Share NRW to be perceived as a trustworthy provider. The case helps to understand the concept of trust, the relationship between trust and cloud computing acceptance, and ways to gain trust in the context of cloud computing. -
Managing the Move to the Cloud: Analyzing the Risks and Opportunities of Cloud-Based Accounting Information Systems
The accounting industry is being disrupted by the introduction of cloud-based accounting information systems (AIS) that allow for a more efficient allocation of work between the accountant and the client company. In cloud-based AIS, the accountant and the client company as well as third parties such as auditors can simultaneously work on the data in real time. This, in turn, enables a much more granular division of work between the parties. This teaching case considers Kluuvin Apteekki, a small pharmacy business whose owner faces critical management decisions on how to embrace this new opportunity to move to the cloud. Students are guided to evaluate the advantages and drawbacks of cloud computing in the specific context of accounting services. Also, the owner must make a set of critical decisions concerning which tasks to outsource. The accounting process comprises of several tasks and sub-tasks, adding to the complexity of the decision making problem. The main learning outcome of the case is related to the development of the skills and competencies needed in creating a strong business case for implementing IT-enabled business processes. -
KBC Mobile Banking
When KBC Bank introduced their mobile banking application in 2011 they delivered much more than a piece of software. Mobile banking was a way to focus on their customers and rebuild trust. Yet, this case is not so much about what they delivered but how they delivered it. Agile development brought along both challenges and opportunities for KBC. The case explores how agile compares to traditional ways of ICT development. Can banks, given the new digital challenges, really build their future ICT portfolios on agile development? -
Competition and Strategic Dilemmas in the Telecommunications Industry: Making the Triple Play
Southern Bell Corporation, now AT&T, decided to upgrade its existing networks by extending its optical fiber network only to the neighborhood nodes and use existing telephone twisted pair copper wires to connect nodes with households. Leaders of Verizon Communications, on the other hand, decided to extend their optical fiber network all the way to homes at much higher cost. The choice of which of the two approaches was a better business decision is the main dilemma in the case. The network upgrades were necessary to keep telecommunication operators competitive with cable television companies, which after they upgraded their networks started offering the 'triple play,' a combination of video programming, telephone, and Internet services. The case reviews the history of telecommunication and cable industries in the United States, which leads to exploration of the key issues including (i) whether, and if so how competition in the telecommunication industry is even possible, (ii) how much bandwidth do we really need, and (iii) what is the effect of various compression techniques, convergence of digital technologies, and what other countries are doing. The case (describing the state of the industry at about the start of 2011) addresses an issue affecting all of us as we decide what services to select for our entertainment and communication needs. -
The Columbus Partnership
The Columbus Partnership, a civic alliance bringing together the heads of roughly 50 leading organizations in central Ohio, has made strides in developing the region's economy. But a stinging defeat at the ballot box has set back the Partnership's efforts to improve local public education. As the case opens in May 2014, the Partnership's leaders must decide whether to continue to try to improve public education and, if so, how. -
Target Stores: The Hunt for "Unvolunteered Truths"
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Youreka Hotel, Amritsar
The management of the Youreka Hotel in Amritsar, India, was concerned about the hotel's overall returns relative to its annual operating cost and large initial investment. The new five-star hotel was now up and running and customers had started checking in, but occupancy levels were low. The hotel industry in India was making double-digit margins, but the hotel had not even achieved operational breakeven yet. Of key importance for the operations head was choosing the best seafood supplier - based on selling price, transportation cost and other factors - for supplying the hotel's restaurants. A poor decision could have a negative impact on room occupancy and profitability. Among management, there were also concerns that the location of the hotel might be unfavourable. When could the operations head expect the hotel to match the profitability of the industry? What could he do to improve the hotel's profitability? -
NephroPlus
Starting with a small pilot centre in Hyderabad in 2010, a chain of quality dialysis centres had grown to 25 centres by mid-2014, with plans to expand to 100 by 2017. As they planned for this growth, the three co-founders had several questions with respect to NephroPlus's business model, partners, staff, systems, processes and culture playing on their minds. With the threat of competition looming large, they knew that they had to work hard to achieve both high quality and affordability as they continued with their fast-paced growth. -
Box. Inc.: Preserving Start-Up Culture in a Rapidly Growing Company
This is a case organized around the theme of preserving an entrepreneurial culture in the face of rapid growth, including over 800 employees and several offices. Founded by four friends, all still under age 30, the company has reached over $124 million in annual sales. As of January 23, 2015, when the company went public, its market valuation was over $1.5 billion. The company is particularly conscious of wanting to preserve the open, action-centered, fun culture that has been created. In some ways it is a highly representative Silicon Valley technology company, and the case tries to capture the flavor of such an organization. There is an excellent video available that was made for Inc. magazine when it named Box CEO Aaron Levie as entrepreneur of the year in 2013,[1] as well as several video interview clips done for the case with Dan Levin, COO. -
Tesla's Not as Disruptive as You Might Think
An investor in the electric car company Tesla recently issued a friendly challenge to HBS professor Clayton Christensen, the father of the theory of disruptive innovation: Does Tesla represent a new model of disruption, in which products start at the high end and move down? Christensen's research associates investigated by posing five questions used to evaluate disruptive innovations, concluding that Tesla is actually a classic sustaining innovation--a product that offers incrementally better performance at a higher price. But the research did point to something that could disrupt the auto industry. "Neighborhood electric vehicles"--low-speed vehicles that resemble souped-up golf carts--are adding some features of automobiles and could, the team believes, eventually steal significant market share. This reprint contains three additional Idea Watch articles. "Why Job Postings Don't Equal Jobs" visually depicts hires and postings for select industries, showing that in some (typically tech and other white-color industries) there are many more postings than actual jobs, while in others (typically low-skill, blue-collar roles) the pattern is reversed--meaning that this economic indicator is a poor proxy. "How Power-Hungry Bosses Keep Their Power" describes insecure managers who tend to isolate subordinates for fear of being challenged and suggests how companies can curb this tendency. "Financial Rewards Can Spur Innovation" highlights research showing that the right incentives can boost creative, conceptual work.