Updated Simulation: New Simulation: Cases, Articles, Chapters, Participant-Centered Learning Supply Chain Management Working Capital & eLearning Resources p. 2 p. 3 p. 4 back cover Teaching Materials Newsletter

fall 2012 New Online Tools for Building Coursepacks

Add personal and non-HBP material to coursepacks

Instructors now have more options for creating and delivering course Case Analysis Coach materials on the Harvard Business Publishing for Educators web site. Through a Ideal For Students New To Cases partnership with Study.Net, new online tools enable instructors to clear permis- The business case is a powerful learning tool. But sions for course material from outside the HBP catalog, upload self-authored for students, interpreting cases for the first time content, and deliver digital and print-on-demand coursepacks. can be daunting. The Case Analysis Coach is a self-paced tutorial that introduces the key concepts “We know that these are services that the academic community values and required for the analysis of case studies. It is ideally we think this will be a change welcomed by many,” said Maureen Betses, Vice assigned as students prepare to analyze a case for the first time. President of Higher Education at Harvard Business Publishing. “It will be easier Delivered entirely online, the Case Analysis Coach for instructors to choose and deliver course materials and student learning can shows students how to quickly establish a base remain their top priority.” of knowledge about a case. Short examples from cases in various disciplines illustrate multiple Now Premium Educators registered on the web site can create a coursepack types of case situations. The tutorial then walks that includes all their course materials, regardless of the source. Once an online the reader step by step through a structured case coursepack is activated, it contains a unique web link that students can use to analysis framework. The coach prepares students for case analysis situations including written access materials at a discounted price. One of the primary benefits of the new reports, presentations, “cold calls” during classroom tools is that the cost of content—which covers the material itself, permissions, discussion, and final exams. and delivery—will be clear. The program concludes with an optional in-depth exercise in which students apply the analysis As an academic publisher, HBP aims to partner with institutions and instructors framework to an included General Management on pedagogical issues and provide participant-centered learning materials that case. It requires students to interpret both enhance management education worldwide. qualitative and quantitative data and develop short- and long-term action recommendations. It also includes a Case Analysis Worksheet that students See a video overview of the new course-building tools: can use repeatedly to analyze actual cases assigned hbsp.harvard.edu for coursework. Premium Educators registered at hbsp.harvard.edu Not a Premium Educator? Apply now: can see a free trial of the Case Analysis Coach. educatoraccess.hbsp.harvard.edu

 visit the educators web site: hbsp.harvard.edu Supply Chain Management Simulation: Root Beer Game V2

The second release of this multi-player simulation retains the fast-paced nature of Learn more the original while adding an enhanced user interface, new customized debrief slides > Attend a webinar and, due to popular demand, a single-player option. Students assume 1 of 4 roles in a > See a Free Trial of the simulation (for registered Premium Educators) root beer supply chain and must examine their inventories and send orders to the adja- To see the webinar schedule or apply cent connection in the chain. All students share a common goal: minimizing inventory for Premium Educator access, visit: carrying costs while avoiding inventory shortages. hbsp.harvard.edu

Limited information, a lack of demand visibility, and shipping delays rapidly contribute Highlights of the updated to excessive overstocking of inventory or extreme stock-out situations at different points version include: in the supply chain. Students experience a dynamic known as the “bullwhip” effect as small changes in customer demand cause oscillations in ordering patterns moving New student interface down the supply chain away from the retail customer. n Enhanced animation allows students to understand the movement of orders and inventory in the supply chain.

n Notifications alert players when another player in the supply chain has not placed an order.

n Entering final demand estimates at the end of the simulation is easier and more precise.

New teaching materials

n Updated Teaching Note reduces the time required to learn the simulation.

New administrative tools

n Instructors can download presentation-ready debrief slides populated with class results ATED showing inventory and backlog, average UPD cost, and perceived vs. actual demand.

n New graphs compare the inventory and backlog for all four roles across one or more supply chains. Graphs can be easily customized to show only specific roles or chains.

n New simulation status alert appears at the top of the administration screens to indicate whether the simulation is open to students.

New Single-Player Option Instructors can assign any number of students as single players.

Ideal for introductory courses in: n Operations Management n Supply Chain Management

Seat time: 60 minutes Product #6619

 not a premium educator? apply online: educatoraccess.hbsp.harvard.edu

2 | Fall 2012 Teaching Materials Newsletter Working Capital Simulation:  Managing Growth in this issue

In this single-player simulation, students act as the CEO of Sunflower 01 NEW ONLINE TOOLS FOR Nutraceuticals, a distributor of dietary supplements. The firm operates on thin margins BUILDING COURSEPACKS with a constrained cash position and limited credit. In 3 phases over 9 simulated years, students consider investment opportunities in revenue and EBITDA growth 01 CASE ANALYSIS COACH and cash-flow improvements. Opportunities range from 02 UPDATED! SUPPLY CHAIN acquiring new customers and MANAGEMENT SIMULATION expanding into new distribution 03 NEW! WORKING CAPITAL channels to reducing inventory SIMULATION and capitalizing on supplier

discounts. Each opportunity 04 New Cases, Articles & Books has a unique financial profile 04 Accounting and includes a summary of incremental changes to the 05 Business Ethics NEW financial statements. 05 Economics

Students must understand 06 Entrepreneurship how the financial statements for the firm, including the statement of cash flows, are 07 Finance interconnected as they analyze the effects of each opportunity on working capital. The 08 General Management goal is to choose opportunities that balance the desire for growth with the need for 09 Human Resource Management maintaining liquidity. 10 Information Technology Learning objectives for this simulation include: 11 International Business n Developing intuition regarding a firm’s cash conversion cycle and the operating ratios associated with it. 12 Marketing n Learning the trade-offs between managing revenue and EBIT growth while also managing net operating working capital. 14 Negotiation

n Understanding the consequences of investing too much or too little in net working  14 Operations Management capital as well as of focusing excessively on the income statement rather than the balance sheet and statement of cash flows. 17 Organizational Behavior n Developing intuition for the relationships among the income statement, balance sheet, and statement of cash flows. 19 Sales

n Understanding the tightrope between growth and illiquidity. 20 Service Management n Learning to maximize a firm’s growth opportunities in a limited-credit environment. 20 Social Enterprise

Instructors can determine level of difficulty to meet course needs and can set the 21 Strategy amount of available credit and whether the simulation ends when students violate the credit restraint. Results are available immediately for class review and comprehensive 23 CONTACT information debrief. Summary results are provided for the entire class and detailed results are available for individual students. BC participant-centered learning resources

Ideal for introductory courses in: Learn more n Finance > Attend a webinar n Accounting > See a Free Trial of the simulation n Small Business Management (for registered Premium Educators) n Entrepreneurial Finance To see the webinar schedule or apply Seat time: 60 minutes for Premium Educator access, visit: Product #4302 hbsp.harvard.edu

hbsp.harvard.edu 1-800-545-7685 | 3  Cases newly  Articles  chapters released  e learning

ACCOUNTING on corporate balance sheets, it’s time to look is rejecting it. Students must analyze the honestly at precisely what affects the cost of proposal and determine whether it is as good capital. They offer specific examples of the as presented and if so, how to present it. AT&T Wireless: Text Messaging consequences of misidentifying the cost of Vaughan Radcliffe, Mitchell Stein, capital; a rigorous primer for how to calculate Import Distributors Michael Lickver terminal value, the number ascribed to cash James S. Reece Richard Ivey School of Business flows beyond a project’s forecast horizon; and Foundation Case The Crimson Group Case an online tool that allows you to input your Product #W11049 (16 pages) TN Product #TCG013 (2 pages) TN own rates to see how terminal-value growth The case examines AT&T’s wireless business assumptions affect a project’s overall value. The CEO of a retail distributor is trying to with a focus on its text messaging services. With this knowledge, you’ll be much better decide whether to keep or discontinue a prod- The industry features a high proportion of equipped to identify your true cost of capital. uct line. Students must undertake a tricky fixed costs in relation to acquiring spectrum differential cost analysis. and building a network. Variable costs are ECG Group: Fraud and Liquidation relatively low and are very low for SMS text of a Joint Venture in China LinkedIn Corporation messages. Pricing and margins in text mes- Neale O’Connor, Grace Loo Francois Brochet, James Weber saging have attracted regulatory scrutiny in University of Hong Kong Case Harvard Business School Case the Unites States, Canada, and elsewhere. Product #HKU964 (9 pages) TN Product #112006 (37 pages) TN The case requires the use of key concepts in cost behavior, cost volume profit analysis, and In 1994, U.S.-based building-control systems The purpose of this case is to help stu- product costing to understand the nature of specialist ECG US created a joint venture dents critically evaluate the market value of the business and the profit margins involved. with China-based CIG Ltd., Realton JV, in LinkedIn’s stock following its recent IPO. Many service or high-tech businesses exhibit order to manufacture and sell building-con- In the context of strong investor appetite similar cost behaviors and so the case gives trol system products such as air-conditioning for social media companies, LinkedIn is students insight into the management of valves and fire safety equipment on the main- the lamp bearer among U.S. companies in such enterprises. land. The joint venture was out of control that industry that are considering tapping from the beginning. Sales were weak and, into public markets. The case can serve to illustrate the challenges of valuing an early- Do You Know Your Cost of Capital? unbeknown to ECG US, the joint venture used complex maneuvers in order to gain stage high-growth company with a great deal Michael T. Jacobs, Anil Shivdasani contracts. With Realton unable to generate a of uncertainty about fundamental value and Harvard Business Review Article profit, ECG US decided to dissolve the ven- how quoted prices might reflect expectations Product #R1207L (8 pages) ture altogether by 2001. Nonetheless, the Chi- that are hard to justify. Regardless of which The Association for Financial Profession- nese partner was adamant about continuing valuation method is employed (e.g., residual als (AFP) surveyed its members about the its operation, maintaining that Realton was income, discounted cash flow, multiples), the assumptions built into the financial models profitable by Chinese accounting standards. case provides a platform (i) to map the firm’s they use to evaluate investment opportuni- As the two parties enter negotiation, how key success and risk factors into forecasts ties. Remarkably, no survey question received can they find a solution to this quagmire and and estimates for its future performance and the same answer from a majority of the more protect their interests at the same time? cost of capital, and (ii) to critically assess the than 300 respondents. That’s a big problem implied assumptions underlying the market’s expectations. The case is best suited for a because assumptions about the costs of equity Enager Industries course on business valuation at all levels and debt profoundly affect both the type and James S. Reece (undergraduate, MBA, executive programs). the value of investments that companies The Crimson Group Case make as well as the health of those businesses Product #TCG003 (4 pages) TN and the broader economy. Citing the AFP survey results in detail, Jacobs and Shivdasani A middle manager has an attractive new of the University of North Carolina argue product proposal that is expected to make a that with trillions of dollars in cash sitting lot of money. However, senior management

4 | Spring 2012 Teaching Materials Newsletter accounting — business ethics — ECONOMICS

Sino-Forest (A) regulation. This article examines the external California Water Pricing David F. Hawkins, David Lane (both institutional and market), organizational, Dorothy Robyn and individual drivers of greenwashing and Harvard Business School Case Harvard Kennedy School Case offers recommendations for managers, policy Product #112004 (29 pages) TN Product #HKS537 (14 pages) TN B and C Cases Available makers, and NGOs to decrease its prevalence. In many parts of California, water districts A Chinese company listed on the Toronto set prices so that agricultural users pay far Stock Exchange is accused of fraud by a less than residential users and far less than hedge fund. ECONOMICS the true cost of water. While the adoption of a marginal cost pricing system would bring Todovino: Can Your Rival Be Your A New Approach to Funding Social enormous efficiency gains, it would inevitably Friend? Enterprises create losers as well as winners. To anticipate the problems of implementing such a pric- F. Asis Martinez-Jerez, Lisa Brem Antony Bugg-Levine, Bruce Kogut, Nalin Kulatilaka ing system in California, reformers need to Harvard Business School Case Harvard Business Review Article anticipate which regions and which crops in Product #111071 (20 pages) TN Product #R1201K (7 pages) California would be most affected. The case Todovino sells Spanish wines through wine provides the information necessary to do a An increasing number of social entrepre- clubs and web sites. Founder-CEO Gonzalo partial equilibrium incidence analysis, includ- neurs and investors are realizing that social Verdera has partnered with many companies ing data on the average factor share of water enterprises of all sorts, including many to create cobranded wine clubs, but now by crop, the average value created for each organizations regarded as charitable non- he is pondering a joint venture with one of crop by marginal applications of water, the profits, can generate returns acceptable to his rivals, a brick-and-mortar wine chain. degree of interregional variation in the ratio the financial markets. The key is to view the Todovino would provide the online presence of non-water inputs, and the role of each crop funding of social enterprises as a problem of for the chain. Should Verdera help his rival? in the California and worldwide markets. What are the risks and benefits for Todovino? financial structuring. If they treat charitable donations as a form of capital that seeks social, not financial, returns, organizations Intrinergy: Carbon Offsets (A) can then tap traditional sources of funding: Samuel E. Bodily, Brandon Ogilvie, BUSINESS ETHICS venture capital firms, banks, mutual funds, Brett Brohl bonds, and so on. And with access to these University of Virginia Darden School Case Cipla 2011 sources, they can make use of all the tools for Product #UV4312 (6 pages) B Case Available Rohit Deshpande, Sandra J. Sucher, transferring risk and return, allowing them to Laura Winig free up capital and grow. For this to succeed, The A case describes the decision the Bur- the social enterprise sector will need to create Harvard Business School Case Mills textile company will make regarding Product #511050 (25 pages) greater precision and transparency around whether to change from producing its own measuring and reporting social outcomes, steam to outsourcing its steam production to Dr. Yusuf Hamied, head of the Indian and policy makers must build the necessary Intrinergy. BurMills can calculate the present pharma and generics manufacturing com- market infrastructure and legal frameworks. value of cost flows for three alternatives: pro- pany Cipla, is weighing options for how to With these efforts, social enterprises could ducing its own steam from burning natural continue to support the global fight against have a larger universe of investors than gas or outsourcing to Intrinergy with either HIV/AIDS while positioning his company for conventional businesses do. This would be a a fixed price contract or with a price contract growth in a changing regulatory landscape. significant step toward a greener, healthier, that floats with the natural gas price at Henry and more equitable world. Hub. In addition to the standard costs associ- The Drivers of Greenwashing ated with steam production, the case adds Magali A. Delmas, Vanessa Cuerel A Note on Long-Run Models of depth by providing the possibility of revenue Burbano Economic Growth from carbon credits. These credits are earned California Management Review Case Peter Rodriguez because the energy in the Intrinergy plant is Product #CMR494 (24 pages) created from biomass. A proper analysis will University of Virginia Darden School Case include a Monte Carlo simulation based on More and more firms are engaging in green- Product #UV4282 (12 pages) an arithmetic random walk for carbon credit washing, misleading consumers about their This technical note prepares students to use pricing, a mean-reverting arithmetic random environmental performance or the environ- and analyze economic models of long-run walk for Henry Hub natural gas spot prices, mental benefits of a product or service. The growth. The technical note is particularly and other distributions. skyrocketing incidence of greenwashing can useful in introducing the Solow neoclassi- have profound negative effects on consumer cal growth model for discussing growth in and investor confidence in green products. emerging markets and developed economies. Mitigating greenwashing is particularly chal- lenging in a context of limited and uncertain

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 5 ECONOMICS — entrpreneurship

To Build a Different Model: The premium offers) business model. The case New Project? Don’t Analyze—Act Case for Preservation of Affordable recounts Dropbox’s history from concep- Leonard A. Schlesinger, Housing, Inc. tion through mid-2010, when founder and Charles F. Kiefer, Paul B. Brown CEO Drew Houston had to make strategic Alexander Von Hoffman Harvard Business Review Article decisions about new product features, how to Product #R1203R (6 pages) Harvard Kennedy School Case target enterprise customers, and whether to Product #HKS685 (29 pages) TN pursue distribution deals with smartphone In a predictable world, getting a new initiative This case study examines the business model manufacturers. off the ground typically involves analyzing the of the Preservation of Affordable Housing, market, creating a forecast, and writing a busi- Inc. (POAH), and its applicability to nonprofit Gupta Garments and Amit’s First ness plan. But what about in an unpredictable environment? The authors recommend looking housing providers. POAH is one of the pre- 100 Days mier socially conscious low-income housing to those who are experts in navigating extreme Ernesto J. Poza developers and owners in the United States. uncertainty while minimizing risk: serial entre- Thunderbird School of Global Its primary mission is to purchase large, preneurs. These business leaders act, learn, Management Case multifamily properties and refinance them and build their way into the future. Managers Product #TB0259 (9 pages) TN for long-term affordability. As of 2010, POAH in traditional organizations can do the same, had rescued and refinanced more than 4,900 This case captures the predictable tension starting with smart, low-risk steps that follow units of affordable rental housing in eight between the generations of a family in busi- simple rules: use the means at hand, stay states and the District of Columbia. Since its ness. The incumbent generation knows the within an acceptable loss, secure only the com- founding in 2001, POAH has been unique secrets to the business’s current success; mitment needed for the next step, bring along among preservation owners, not only for its the next generation joins the business with only volunteers, link the initiative to a business business model—which attends closely to the its own vision of what the future holds and imperative, produce early results, and manage bottom line of every transaction—but also the opportunities for change in technol- expectations. Momentum is gained by continu- for its commitment to policy and regulatory ogy, supply chains, the marketplace, and ing to act based on what is learned at each step. reform affecting a range of housing afford- the degree of globalization. Both legacy and The launch of Clorox’s Green Works product ability issues. This case invites the reader to opportunity (or tradition and innovation) line is discussed as an example. explore many dimensions of organizational are fundamental elements of the successful strategy for nonprofit housing companies. strategy for continuity of the family-owned PunchTab, Inc. business. Amit is returning to his family In the world of nonprofits POAH is unusual Ramana Nanda, William R. Kerr, in many ways, including its origins: it was business in India after successfully com- Lauren Barley pleting the requirements of a master’s in formed in order to complete an acquisition of Harvard Business School Case business administration in the United States. a significant subsidized low-income housing Product #812033 (20 pages) portfolio; its organizational structure, which How can he most productively rejoin the combines for-profit and nonprofit companies; family business and make the knowledge he PunchTab was a Silicon Valley start-up its financial model, which emphasizes return- has acquired abroad available and useful to its founded in 2011 that was developing an ing profits to the company and increasing owner-managers and the enterprise they lead? Internet-based turnkey customer loyalty cash flow as opposed to developer fees and program for web site owners, mobile appli- especially property management fees; and its Nashton Partners cations developers, and brands. Founder/ CEO Ranjith Kumaran must make strategic ability to influence government officials to Jocelyn Hornblower, David Dodson modify regulatory policies to suit the needs decisions about how to fund PunchTab’s Stanford University Case early operations and growth given the many of nonprofit housing groups. Finally, the case Product #E422 (15 pages) explores the larger importance of POAH for options available: individual angel investors, the low-income housing field. This case follows the story of Jay Davis and super angel funds, incubators, and seed Jason Pananos, classmates from Harvard funds inside traditional venture capital firms. Business School who started a search fund, Nashton Partners. The case covers their deci- Sheila Mason and Craig Shepherd ENTREPRENEURSHIP sion to launch a search fund, their investment (Abridged) objectives and goals, and then the search pro- Michael J. Roberts Dropbox: “It Just Works” cess over a two-year period. The core of the Harvard Business School Case Thomas R. Eisenmann, Michael Pao, case discusses two specific acquisition oppor- Product #810114 (13 pages) TN Lauren Barley tunities the fund is considering—United Harvard Business School Case Energy Services and Vector Disease Control, The case describes two individuals who Product #811065 (22 pages) Inc. There are clear advantages and draw- have met and are in the process of starting backs to both opportunities, and the partners a company together. Each is still at his or Dropbox is a venture-backed Silicon Valley must make a decision about what to do before her former employer, and each has signed start-up founded in 2006 that provides online the search fund runs out of money. a different employment agreement that on storage and backup services to millions of paper may prohibit some contemplated acts customers using a “freemium” (free plus (e.g., soliciting customers or employees). The

6 | Fall 2012 Teaching Materials Newsletter FINANCE

case focuses on how individuals should think Emergia: Driving Profitability on Hony, CIFA, and Zoomlion: Creating about leaving their employers in general and Help Desk Contracts Value and Strategic Choices in a how these specific legal agreements may F. Asis Martinez-Jerez, Lisa Brem Dynamic Market impact the situation in this case. In addition, Harvard Business School Case Josh Lerner, Yiwen Jin the case includes issues such as dealing with Product #111048 (24 pages) TN Harvard Business School Case venture capitalists, nondisclosure agreements, Product #811032 (26 pages) TN and how to select and work with a lawyer. Emergia wants to keep its customers happy with its contact center service, but The private equity group Hony Capital the margins on the help desk contract are considers what to do with its investment in FINANCE dangerously low. Can Miguel Neira, the COO, Zoomlion, which has been successful to date. increase margins while preserving the cus- The question is whether to take its money tomer relationship? off the table or to invest in its acquisition of a AQR’s Momentum Funds (A) large Italian competitor. Daniel B. Bergstresser, Lauren Golden Opportunity: Commercial H. Cohen, Randolph B. Cohen, Real Estate Valuation India: The Promising Future Christopher Malloy Craig Furfine, Sara Lo, F. John Mathis, Paul G. Keat Harvard Business School Case Daniel Kamerling Thunderbird School of Management Case Product #211025 (12 pages) TN B Case Available Kellogg School of Management, Product #TB0265 (17 pages) TN Northwestern Case This case is about a large U.S.-based manufac- AQR is a hedge fund based in Greenwich, Product #KEL595 (18 pages) TN Connecticut, that is considering offering a turing company considering whether it should Aurelia Dimas had been sent to investigate the wholly new line of product to retail inves- shift its production from China to India to various properties being offered by the state tors, namely the ability to invest in the price maintain its global competitiveness, particu- of California in the form of a sale-leaseback phenomenon known as momentum. There larly for selling in the U.S. market. This case agreement. The opportunity was perfect is a large body of empirical evidence sup- study examines in detail the recent (2003– for her firm, Orrington Financial Partners, porting momentum across many different 2010) economic performance of India, includ- which had recently expanded its fixed-income asset classes and countries. However, up ing changes in government policies toward portfolio to include real estate. The wide range to this point momentum was a strategy foreign investment in India. The case also of offerings in the Golden State Portfolio pro- employed nearly exclusively by hedge funds reviews recent financial market and product vided both diversification and stability over a and thus was not an investment strategy developments in India. Finally, the case study period of decades. She had spent the past week available to most individual investors. This also describes, illustrates, and applies a process walking the halls of each and every building case highlights the difficulties in implement- of country risk analysis for foreign companies to see the offering firsthand. Now the task of ing this “mutual funditizing” of a hedge considering investing in a rapidly growing valuing the portfolio rested on her shoulders. fund product. It also covers the challenges emerging market economy such as India. that the open-end and regulatory features of a mutual fund pose to many successful strategies implemented in other contexts. GENERAL MANAGEMENT In addition, it gives students the ability to calculate and interpret various horizons of What I Didn’t Learn in Business correlations between many popular invest- School: How Strategy Works in ment strategies using longtime series data. Students can then think about the potential the Real World complementarities of strategies in a portfolio By Jay Barney, University of Utah, and construction context. Patricia Gorman Clifford

A new MBA graduate quickly realizes that the tools Available in chapters Braddock Industries, Inc. he gained in school won’t help him grapple with the Product #12708 William E. Fruhan human side of strategy—including swirling political ISBN 978-1-4221-5763-3 forces within a company. Bestselling chapters include: Hardcover • 272 pages • $25.95 Harvard Business School Case Harvard Business Review Press Product #211061 (17 pages) TN • A Simple Problem: Real-World Strategies for Managing First Impressions, Scoping an Engagement, This case examines the drivers of economic and Performing Situation Analysis with Limited value creation for shareholders and how Information #7129BC these drivers are reflected in various incentive • A New Shirt: Real-World Strategies for Identifying Purchasing Criteria, compensation programs for management. Understanding Segmentation, and Using NPV Analyses Strategically #7136BC The case also looks at how the economic per- • A Moving Target: Real-World Strategies for Applying 5 Forces, Selecting and formance of business units can be evaluated Using Appropriate Tools, and Reacting to Feedback #7135BC using measures of economic value creation.

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 7 finance — general management

Jefferson Multimedia Company years of financial success and dominance in must make several decisions that will change David W. Young the building-toy market. the direction of the business. The Crimson Group Case Product #TCG015 (6 pages) TN Pierre Frankel in Moscow (A): Transforming Verizon: A Platform Unfreezing Change for Change The CEO of a multimedia company is trying to determine the cost of each of the com- Rosabeth Moss Kanter, Matthew Bird Rosabeth Moss Kanter, Matthew Bird pany’s products to improve pricing. Harvard Business School Case Harvard Business School Case Product #312070 (11 pages) TN Product #312082 (20 pages) TN B and C Cases Available A new CEO steps into the shoes of his long- GENERAL MANAGEMENT A young and upcoming French executive serving predecessor, who had created the in a global technology company is sent to U.S. telecommunications giant via a series of Moscow as deputy managing director to turn acquisitions and before departing had initi- Cancer Treatment Centers of around the Russia subsidiary. He must report ated the company’s strategic repositioning. America: Scaling the Mother to the subsidiary’s managing director (a The new CEO reflects on Verizon’s recent Standard of Care large reason for the organization’s under- successes, some of which he led, and consid- Rosabeth Moss Kanter, Matthew Bird performance) and to corporate. In his first ers how to ensure that the team can continue Harvard Business School Case three months, he took steps to prepare the to rise to new challenges. He knows change Product #312073 (23 pages) TN organization for change. Yet the lack of more is both energizing and difficult and that every tangible actions and results leaves him open victory has to be followed by the next play. He The CEO of a private and growing national to criticism from subsidiary employees and pauses in his New York City office to think network of specialty-care hospitals focus- pressure from corporate executives. How can about how his team handled recent chal- ing on advanced-stage and complex cancer the young executive unfreeze the situation lenges and whether the culture was in place treatments reflects on the firm’s past phase and get movement? to continue Verizon’s transformation from a of growth before meeting with the company’s traditional telecommunications provider to a chairman and founder. They will discuss how global services and technology firm. to further scale what they call the Mother Student Cars PTY Ltd. Standard of Care and in the process change Elizabeth M.A. Grasby, Marsha Watson the face of cancer care. Richard Ivey School of Business Yahoo: Relationship Crisis with Foundation Case Alibaba in China LEGO Group: Building Strategy Product #909M03 (10 pages) TN Zhigang Tao, Penelope Chan Darren Meister, Paul Bigus Three MBA students at Bond University in University of Hong Kong Case Product #HKU970 (34 pages) TN Richard Ivey School of Business Australia form a partnership in 2006 to rent Foundation Case vehicles to international students studying In October 2005, Yahoo! Inc. formed a part- Product #W11169 (12 pages) TN in Australia for short periods of time. The nership with Alibaba Group Holding Limited, partnership operates by capitalizing on each The world-famous toymaker LEGO Group the country’s biggest e-commerce firm. The partner’s key competency. When one of the assembles an internal management team to company invested US$1 billion in Alibaba partners is offered a promising position by create a strategic report on LEGO’s different for a 40% stake and transferred the owner- a large company, the partners are faced with product lines and business operations. In ship of Yahoo! China to Alibaba. However, losing one of the company’s key players and recent years, numerous threats had emerged some media outlets have described the two against LEGO in the toy industry. The acquisi- tion of Marvel Entertainment by The Walt Disney Company created major implications for valuable toy license agreements. LEGO general management also recently lost a long legal battle with major competitor MEGA Brands, makers Harder Than I Thought: Adventures of a of MEGA Bloks, with a European Union Twenty-First Century Leader court decision that removed the LEGO brick By Robert Austin, Dean of Business, University trademark. Furthermore, new competition of New Brunswick; Richard Nolan, HBS and is preparing to enter the marketplace from University of Washington; and Shannon Hasbro, the second-largest toymaker in the O’Donnell, Copenhagen Business School world, with the company launching a new rival product line called Kre-O. It is critical Walk alongside Jim Barton from Adventures of an IT Product #10332 for the management team to identify where Leader as he enters the role of CEO of Santa Monica ISBN 978-1-4221-6259-0 Hardcover • 336 pages • $30.00 to expand LEGO’s product lines and business Aerospace in this fictional narrative that puts this Harvard Business Review Press operations in order to develop a competitive increasingly complex job in context. strategy to continue the organization’s recent

8 | Fall 2012 Teaching Materials Newsletter human resource management

companies’ relationship since 2005 as being Building a Well-Networked employees in terms of their broader collab- anywhere from rocky to downright ugly. Organization orative contributions to the organization. The authors show how applying a network lens Yahoo’s decision in mid-2009 to switch to Margaret Schweer, Dimitris Microsoft’s Bing search technology prompted Assimakopoulos, Rob Cross, reveals a significant number of key players Alibaba to adopt a search engine from Robert J. Thomas (including marginalized talent, hidden talent, Yahoo’s local competitor Sohu.com. Then and underutilized talent) that traditional per- MIT Sloan Management Review Article Alibaba collaborated with eBay Inc. instead Product #SMR410 (10 pages) formance management systems miss. They of Yahoo! in entering the U.S. business-to- identify best practices for nurturing networks business market. Meanwhile, Yahoo directly Leaders and human resources professionals through talent management initiatives, illus- competes with Yahoo! China for advertisers are searching for ways to generate more value trating them with examples from organiza- by soliciting companies in southern China from their employees. Recent studies show tions including IDEO, Nokia, Dow Chemical, to advertise on Yahoo’s Hong Kong Web site. that companies perform at a higher level Best Buy, Gallo, and the U.S. Army. Alibaba has been taking a loss in its opera- when they have integrated talent manage- tions since 2006, and the search revenue ment programs that are aligned with business Employment Vignettes share of Yahoo! China has dropped from 27% strategy and operations. Organizations can Lena G. Goldberg, Chad M. Carr in 2005 to an insignificant level in 2010. But get more from their investments in talent Harvard Business School Case Yahoo! has turned down Alibaba’s offer to buy management, the authors argue, by focusing Product #311021 (13 pages) TN back its stake because it would like to wait for on collaboration. Job design and performance the IPOs of Alibaba’s two major subsidiaries management are typically based on individual Six vignettes drawn from decided cases before any exit. In light of growing tension accountability despite the fact that most work explore legal and business issues in hiring, with Alibaba, Yahoo’s board would like to today is collaborative. Talent management firing, promoting, and demoting employees, review its approach to managing this partner- practices tend to focus on individual com- with emphasis on protected classes, pretext, ship and figure out what should be done to petencies and experiences, while overlook- and antidiscrimination laws in the setting of mend the ties. ing the importance of employee networks. start-ups and privately held companies. By examining individual performance data together with the results of organizational Foxconn Technology Group (A) network analysis, the authors say, senior man- Robert G. Eccles, George Serafeim, HUMAN RESOURCE agers can look at talent along two important Beiting Cheng MANAGEMENT dimensions. In addition to looking at indi- vidual employee performance for the purpose Harvard Business Review Case Product #112002 (21 pages) Arck Systems (A) of succession or workforce planning, they B Case Available Ian I. Larkin can take a network view to assess the same Harvard Business School Case Product #911056 (6 pages) TN B, C, D, E, and F Cases Available GENERAL MANAGEMENT The Arck Systems series of cases describes the dilemmas faced by a senior sales manager Being the Boss: The 3 Imperatives for in determining a sales compensation plan at Becoming a Great Leader an enterprise software company. The existing compensation plan is aggressive and highly By Linda A. Hill, Harvard Business School, rewards “star” performers. The cases track and Kent Lineback a series of changes the manager makes to Named one of Five Best Business Books to Read the sales compensation plan in response to for Your Career in 2011 by the Wall Street Journal negative and unintended consequences of Available in chapters the existing system. The cases illustrate the “A modern classic.” —Financial Times Product #12285 ISBN 978-1-4221-6389-4 trade-offs inherent in incentive plans (even Becoming a great boss is a journey that requires Hardcover • 304 pages • $25.95 outside sales environments) and presents a students to master three imperatives: manage yourself, Harvard Business Review Press framework for the design and management manage your network, and manage your team. of incentive systems. It also is useful in Bestselling chapters include: addressing employee response to incentive • Your 3 Imperatives as a Manager: Making Sense of Your system change. Journey—Mastering the Challenges of Being a Great Boss #7311BC • I’m the Boss!: Don’t Depend on Your Formal Authority—Why Recognizing the Benefits and Pitfalls of Power Is Essential to Being a Great Boss #7310BC • I’m Your Friend!: Beware the Pitfalls When You Create Relationships That Are Too Personal—Why Being Both Boss and Friend Won’t Work #7309BC

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 9 human resource management — information technology

The case describes the challenges that Foxconn systems can collect and share information software movement and sought to carve out faced after a series of suicides took place at its with ease, but Airbnb must decide which a significant role for itself in the open source plants. The response of Foxconn’s manage- information guests and hosts should have to marketplace. The company reported $177 ment is presented and the associated implica- provide and how much flexibility each should million in non-GAAP operating income in tions for Foxconn’s stock price are discussed. have in selecting whom to do business with. FY2010, based on revenues of $748 million. A full-featured system could provide all the Red Hat’s market capitalization was set at $8 The Rise of the Supertemp information users have been requesting, but billion as of January 25, 2011. It operated 65 would it be too complicated for routine use? Jody Greenstone Miller, Matt Miller offices worldwide, including 12 global support service centers, and employed 3,580 people. Harvard Business Review Article The Red Hat brand is most closely associated Product #R1205B (11 pages) Body Scans and Bottlenecks: Optimizing Hospital CT with Linux even though its stable of product Full-time, permanent jobs with large Process Flows offerings grew to include a number of other organizations are quite possibly an artifact noteworthy system software and middle- Sunil Chopra, Flamm Scott, of a particular moment in economic his- ware products, such as JBoss and Red Hat Sachin Waikar tory—about 60 or 70 years ago. For elite Enterprise Virtualization. As Red Hat’s Linux Kellogg School of Management, executives and professionals, such jobs are product line came to be widely accepted as an Northwestern Case now in many cases far less attractive than enterprise software platform, the company Product #KEL592 (6 pages) TN independent, project-based work, say the transformed its thinking about and delivery authors, who are “supertemps” themselves. A Midwest hospital purchases new CT scan- of customer support. This case study explores Independent professionals are making ners that are much faster than the existing the innovative ways that Red Hat went about inroads in law, consulting, and even man- technology. Processes in the radiology depart- this transformation. agement roles, sometimes earning more ment are optimized to the older, existing than they did in their previous positions scanners, and technicians are unable to take Successfully Navigating the full advantage of the new scanners’ speed. while escaping 80-hour work weeks, endless Turbulent Skies of a Large-Scale internal meetings, and corporate politics. The hospital finds itself working to change ERP Implementation And they’re achieving a gratifying work/life the processes to suit the new scanners’ capa- balance. Corporations are learning how best bilities and take full advantage of their speed. Benoit Aubert, Simon Bourdeau, Brett Walker to tap the supertemps’ skills; organizations may soon come to look less like pyramids Online Marketing at Big Skinny HEC Montreal Centre for Case Studies Case Product #HEC035 (29 pages) and more like jigsaw puzzles. Intermediary Benjamin Edelman, firms that broker independent talent are Scott Duke Kominers Enterprise resource planning (ERP) systems growing rapidly. But social biases against Harvard Business School Case introduce changes on a larger scale than most temporary work persist and—especially in Product #911033 (13 pages) TN other systems. They link various components the U.S.—the health care and tax systems of the organization and modify its structure are unfriendly to project workers. Rising This case describes a wallet maker’s appli- by deploying standardized processes and data numbers of highly paid independents will cation of seven Internet marketing tech- models, which can lead to higher efficiency be motivated to overcome those obstacles: nologies: display ads, algorithmic search, and significant cost savings. This case shows health coverage could become portable; tax sponsored search, social media, interactive the adjustment dynamic between an ERP rules could be rewritten. The result would be content, online distributors, and A/B testing. system and the other components of the not just more-rewarding careers but a more It provides concise introductions to the key organization. The project is a very large one, innovative economy. features of each technology and asks which involving an investment of several hundred forms of online marketing the company million dollars. The results are impressive. should prioritize in the future. Also discussed Bombardier implemented new processes are similarities and differences between INFORMATION through the use of the system, changed the online and off-line marketing as well as roles of its employees, created a different way TECHNOLOGY issues of marketing campaign evaluation. of looking at the organization and its activi- ties, and established new value indicators that Airbnb (A) Red Hat Global Support Services: helped crystallize the new behaviors. Benjamin Edelman, Michael Luca The Move to Relationship- Harvard Business School Case Based Customer Servicing and Tata Consultancy Services: Product #912019 (7 pages) TN Knowledge-Centered Support Sustaining Growth Momentum B Case Available Richard M. Kesner in China in 2010 After widely publicized complaints of Richard Ivey School of Business Beng Geok Wee, A. Lee Gilbert, destructive guests and unreliable hosts, Foundation Case Ivy Buche Product #W11543 (19 pages) TN online apartment rental site Airbnb explores ABCC Nanyang Tech University Case mechanisms to facilitate trust between In the 1990s, Red Hat established itself Product #NTU017 (19 pages) TN guests and hosts. Flexible online reputation as a leading proponent of the open source

10 | Fall 2012 Teaching Materials Newsletter information technology — international business

In 2002, Tata Consultancy Services (TCS) set in “market expansion services.” This novel sary and inevitable, Neeley’s research shows up operations in China, following its major market expansion services company works that implementing such a policy is fraught client, GE Medical Systems. TCS China opera- with global “clients” (e.g., major pharmaceuti- with complications. English-only policies tions also supported the software needs of cal companies) to help them get access to and can create job insecurity and dissatisfac- multinational and regional companies expand- accelerate growth in different Asian markets tion and generate strife between native and ing in China, while providing the company and with “customers” (e.g., Asian distributors nonnative English speakers in cross-national with a platform to grow its local clientele. In and retailers) to provide them with access teams. Companies can anticipate and plan 2006, TCS announced a new global business to the goods and services from the global for inevitable challenges and resistance when initiative that included plans for large-scale clients. To effectively achieve this corporate adopting an English-only policy. Using Japa- operations in China. The aim was to grow transformation, Wolle worked with several nese Internet services firm Rakuten as a case its China operations to become TCS’ second other senior executives to create integrated example, this article outlines guidelines for global delivery center after India, functioning IT, logistics, and market intelligence capabili- proper implementation. as its offshore IT outsourcing hub for the Asia- ties. The case focuses on the growth strategy Pacific region. In addition, China’s growing and associated challenges, mostly people- and The Global Family Business: domestic software market presented attractive leadership-related, to bring DKSH to the next Challenges and Drivers for opportunities for IT services. TCS shifted its level of profitable growth. Cross-Border Growth focus to China’s financial sector, as many of Vijay K. Patel, Torsten M. Pieper, China’s domestic banks were then undergoing Global Business Speaks English Joseph F. Hair, Jr. a period of major organizational transforma- Tsedal Neeley tion. Given that, in 2007 the company set a Business Horizons/Indiana University Case Harvard Business Review Article Product #BH474 (9 pages) target to increase its China-based manpower Product #R1205H (10 pages) strength from 800 to 6,000 by 2011. However, Globalization has become an imperative and the tight supply of IT talent in China was a Like it or not, English is the global language is no longer avoidable as a strategic choice major challenge and in early 2010 TCS’ man- of business. Today 1.75 billion people speak for family businesses. However, globalization power strength reached 1,100. The company English at a useful level—that’s one in four of strategies are far from the norm among small set a new target to quadruple its manpower us. Multinational companies such as Airbus, and midsized family enterprises. This article strength to 5,000 by 2014. Product/service Daimler-Chrysler, SAP, Nokia, Alcatel-Lucent, reviews the main drivers for globalization, innovation was an essential catalyst to sustain and Microsoft in Beijing have mandated highlights the distinct characteristics of family its growth momentum and to maintain a English as the corporate language. And any businesses that may enhance or constrain their competitive edge in the Chinese market. What company with a global presence or global global expansion, and provides a framework steps should the company take to tap the aspirations would be wise to do the same, for strategically evaluating business capabili- rising demand for outsourcing services while says HBS professor Tsedal Neeley, to ensure ties and global market opportunities. tackling the problem of achieving service excel- good communication and collaboration with lence in a resource-tight situation? customers, suppliers, business partners, and other stakeholders. But while moving toward a single language at work is neces- INTERNATIONAL BUSINESS INTERNATIONAL BUSINESS DKSH in 2011 Robert A. Burgelman, Martina Managing Global Innovation: Ludescher Frameworks for Integrating Stanford University Case Capabilities Around the World Product #SM204 (32 pages) By Yves Doz, INSEAD, and Keeley Wilson, The case describes the history and trans- INSEAD formation of DKSH, a privately held global In this practical new book, Yves Doz and trading company headquartered in Zurich, Keeley Wilson show how to build and leverage Product #2589 Switzerland, that has been doing business in ISBN 978-1-4221-2589-2 a global innovation network. Drawing on the Far East for 150 years. The case focuses on Hardcover • 256 pages • $35.00 extensive research and a wealth of real company Harvard Business Review Press the efforts of CEO Joerg Wolle since 1999 to examples, the authors walk students through a bring together several independent family- set of practical frameworks for acquiring and owned Swiss-based trading houses under integrating innovation-critical knowledge from one corporate roof and to transform success- multiple far-flung sources. ful but steady old-fashioned trading houses individual Chapters available for into a new type of company specializing Spring 2013 semester use

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 11 international business — marketing

Recruiting for a Multinational Apply online for educator access and receive: Enterprise in China Educator Copies • Teaching Notes • Course Planning Tools Sara Preusse, Diana Krause Student Pricing • Preview Access to Online Courses & Simulations Richard Ivey School of Business Foundation Case  educatoraccess.hbsp.harvard.edu Product #W12047 (12 pages) The CEO of a multinational company wanted a new human resources team that operated The Growth Opportunity That How to Win in Emerging Markets: in Guangzhou, China, to recruit and select 85 individuals for different positions through- Lies Next Door Lessons from Japan out the enterprise. These positions included Geoffrey Jones Shigeki Ichii, Susumu Hattori, finance managers, production managers, Harvard Business Review Article David Michael security guards, workers for the factories, Product #R1207P (6 pages) Harvard Business Review Article secretaries, and interns. The members of the Product #R1205J (6 pages) How will the logic of globalization change for human resources team that dealt with these corporations from countries such as India, In the 20th century Japanese multinationals tasks were highly diverse in terms of their China, Indonesia, Brazil, and Turkey if the established themselves as powerhouse export- educational backgrounds (e.g., marketing, growth opportunities in emerging markets ers in developed markets. Names like Sony, law, human resources, public relations, gen- continue to far outpace those in developed Toyota, and Honda became commonplace. eral business administration) and countries markets? Natura Cosmeticos, a Brazilian But in this century, growth in developed of origin (e.g., Canada, China, Germany). The beauty giant, has considerable experience markets has slowed. Goldman Sachs forecasts team had to deal with a series of challenges in with that question. For some 30 years the that these markets will grow at an average order for the project to be successful. These company has been attempting to move, with annual rate of 2% until 2020, whereas the issues included a decision about task-specific decidedly mixed results, into developed mar- BRIC economies are expected to grow at an job requirements, methods to assess these kets even as the opportunities in its region average annual rate of nearly 7%. To pros- job requirements, strategies for recruitment, have grown stronger and stronger. Markets per now Japanese companies must win in and methods for personnel selection and final like the United States exert a strong pull on developing markets—which they’re failing decision making. The team also had to deal emerging-market multinationals, but Natura to do. They face four key challenges: distaste with diversity within the team and cross- must contend with a changing economic for the middle and low-end segments of the cultural issues as well as with the leadership equation: the U.S. beauty market grew by market; aversion to mergers and acquisitions; behavior of its CEO. an anemic 1.1% in 2010, whereas demand reluctance to commit, financially and organi- in Argentina, Chile, Colombia, and Peru zationally, in emerging markets; and a failure increased by 10.9%. Ultimately, Natura has to properly allocate talent. Two Japanese MARKETING moved beyond stereotypes of globalization, multinationals stand out for their success recognizing that winning in Argentina, Chile, in overcoming the challenges: Unicharm, a 7-Eleven in Taiwan: Adaptation of and Mexico can be an entry onto the world manufacturer of personal care products, and Convenience Stores to New Market stage that is every bit as effective as conquer- Daikin, one of the world’s largest air-condi- Environments ing Paris or New York. tioning manufacturers. This article explains what they’ve done. Shih-Fen Chen, Aihwa Chang Richard Ivey School of Business Foundation Case Product #W12804 (24 pages) TN

INTERNATIONAL BUSINESS The case portrays the expansion of 7-Eleven into Taiwan and the adaptation of the store format by its local franchisee to a new market Project Management for Profit: environment. The core issue in this case is A Failsafe Guide to Keeping Projects the balance between standardization and On Track and On Budget localization in business-format franchising By Joe Knight, Roger Thomas, Brad Angus, across national borders. Keeping only the with John Case store logo and the convenience concept that was well-established in the United States, No more headaches, hypertension, or heartburn. individual Chapters available the local franchisee of 7-Eleven in Taiwan for Spring 2013 semester use If your work involves projects, then this book is reformatted almost all aspects of the store for you. It will show every student and project Product #10840 ISBN 978-1-4221-4417-6 chain, including its positioning, location, manager—at businesses large and small—how to Hardcover • 192 pages • $25.00 layout, product offerings, etc. In addition, run projects differently. Harvard Business Review Press 7-Eleven in Taiwan introduced a wide variety

12 | Fall 2012 Teaching Materials Newsletter marketing

of new services to handle daily chores for its brand awareness among online shoppers. In Northwestern Case customers, ranging from e-commerce (train the upcoming executive meeting, the market- Product #KEL619 (8 pages) TN or movie tickets), e-payment, mobile commu- ing department head would like to persuade This case features Old Spice’s efforts to repo- nications, and pickup/delivery to taxi services. the chief executive officer to dedicate more sition Glacial Falls after sales stagnated in the The local franchisee, President Chain Store resources to social media to increase both United States. The challenges in this case are Corp., seemed to have struck the right bal- online sales in the short term and market twofold. First, it sets the stage for deciding ance between standardization and localization share in the long term. whether and how to reposition a brand after a that allowed it to use service differentiation period of significant stagnation. This entails to gain competitive advantages over its rivals. How to Get Your Messages a targeting dilemma about whether to keep In about three decades it grew from zero to Retweeted existing customers or take the risk of losing nearly 5,000 stores in Taiwan with more than Arvind Malhotra, Claudia Kubowicz them to go after a new target. Second, this 50% of the market while expanding its reach Malhotra, Alan See case examines whether the company should to China and Thailand. MIT Sloan Management Review Article make a sensory change in the product (i.e., Product #SMR406 (8 pages) the scent) or whether it should undertake a Airwide International-China (A) cognitive change in the positioning of the Many companies are trying to leverage the Key Account Selling product instead. power of Twitter to connect with customers John Zerio and promote their brands and products. The Thunderbird School of Global authors studied the marketing communica- Positioning the Tata Nano (A) Management Case tion between 47 companies and their follow- Alice M. Tybout, Natalie Fahey Product #TB0277 (6 pages) TN ers for about three months. Their research Kellogg School of Management, Airwide International was one of the top identifies factors that increase the likelihood Northwestern Case suppliers of commercial and residential of “retweeting” so that a company’s tweets air-conditioning systems in Europe, with a will be shared with recipients’ networks and Product #KEL602 (12 pages) TN B Case Available growing presence in the attractive markets of identifies which activities should not be pur- Asia. Increasing competition from Chinese sued. Retweeting is desirable both because The case focuses on positioning a new brand, and international manufacturers coupled the original tweet reaches more people and the Tata Nano. The car has been widely with a sales organization built primarily by because a retweet is essentially an endorse- publicized as the world’s cheapest car at Rs.1 hiring (from other industries) and retraining ment from the first recipients to their follow- lakh (approximately $2,564). Students must have produced a pattern of uneven sales. At ers. That said, since tweeting by companies consider the gap between the ultimate target, a recent national sales meeting, the perfor- is basically a marketing function, there are the huge emerging middle class of Indian mance of the Shanghai region surfaced as an several practices that don’t work well. The consumers, and the limited capacity and area of concern for senior management. The most important to avoid is blatant hard-sell distribution available in choosing a target. transition from product selling to key account messages. In addition, neither using hashtags They also must select between alternative selling has met with obstacles; primary nor embedding links increased retweet- competitive frames and the various points of among them is the insufficient commitment ing. Finally, announcing contests or other difference they highlight. The case unfolds of some area sales leaders. A review meeting promotional techniques also did not increase in two stages. The first decision point is in with a Shanghai sales leader reveals some retweeting. The authors did find nine prac- 2009, at the time of the product launch. The of the problems and provides the sales VP tices that increase retweetability, including second decision point is 18 months later, after an opportunity to go over the essence of key keeping messages short so there is room production capacity has increased and some account management. for retweeters to add their own messages. product safety issues have arisen. Opening with an attention-grabbing headline Decathlon China: Using Social Media is important, as is simply asking the recipi- Pricing to Create Shared Value ent to pass the message on. Humanizing the to Penetrate the Internet Market Marco Bertini, John T. Gourville Nicole R.D. Haggerty, Raymond brand has the highest likelihood of causing retweeting, increasing the odds by as much Harvard Business Review Article Pirouz, Grace (ChunXia) Geng Product #R1206F (10 pages) as 70%. The authors also suggest providing Richard Ivey School of Business Foundation Case information that people can use and act on, Many companies are in competition with Product #W11503 (14 pages) TN offering a deal that can save people money, their customers to extract as much value as and making the message relevant and topical. possible from every transaction. Pricing is After successfully establishing more than And the best practice of all is when organiza- their weapon of choice, and consumers fight 33 retail stores in large cities across China, tions combine several of these practices to get back by rooting out and disseminating pricing Decathlon, a large sporting goods manufac- the most out of their marketing messages. policies that seem unfair. The problem is that turer and retailer, planned to open its official companies generally think of value as a pie online shopping Web site in China. The Old Spice: Revitalizing Glacial Falls that is rightfully theirs. But value is not fixed, marketing department head of Decathlon and it neither originates with nor belongs China has experimented with several new Derek D. Rucker, David Dubois solely to the firm. Without a willing customer, social media in China in order to increase the Kellogg School of Management,

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 13 marketing — negotiation — operations management there is no value. Instead of using pricing in Tchibo Ideas: Leveraging the NEGOTIATION a way that turns customers into adversaries, Creativity of Customers companies can use it to enlarge the pie. That Sven Petersen, Francine Espinoza, Fiji Versus FIJI: Negotiating means viewing customers as partners in value Luc Wathieu Over Water creation—a collaboration that increases cus- European School of Management and Francesca Gino, Michael W. Toffel, tomers’ engagement and taps their insights Technology Case Stephanie van Sice about the value they seek and how firms could Product #ES1291 (19 pages) deliver it. The result can be new revenue, Harvard Business School Case increased customer satisfaction and loyalty, In 2008, the German coffee and consumer Product #912030 (18 pages) TN goods corporation Tchibo launched Tchibo positive word of mouth, and cost savings. The This case examines negotiations between Ideas, an Internet platform where custom- multiyear process to price the 8 million tickets a company and a government over natural ers can share their product/design ideas to the London 2012 Olympic Games suggests resources. The Fijian government proposed with the company. The tension in the case five principles for using pricing to create a substantial increase in its water extraction emerges from the uncertainty regarding shared value: focus on relationships, not on tax that would apply only to large extractors Tchibo’s intentions with Tchibo Ideas. While transactions, by using pricing to communicate and thus to FIJI Water and not to its com- some people perceive this move as a genuine that you value customers as people; set prices petitors. FIJI Water responded by calling the attempt by the company to establish closer proactively to discourage detrimental behavior increase “discriminatory” and threatening to interactions with customers, some people and to encourage behavior that is beneficial shut down its operations. But in the end its see it simply as a marketing gimmick. The to both your firm and your customers; allow negotiations resulted in its agreeing to pay case describes the challenges and potential prices to change in response to shifting the tax increase. customer needs; promote transparency by benefits that Tchibo Ideas is encountering providing the rationale for your pricing; and to foster a discussion on the value of a co- V-Cola: General Instructions make sure that prices and the processes by creation strategy. which they are set meet consumers’ expecta- Ian I. Larkin tions about what is fair. Waltraud Ziervogel at Konnopke’s Harvard Business School Case Imbiss: Reinventing a Berlin Icon Product #912043 (4 pages) The Saffola Journey Urs Muller, Veit Etzold V-Cola is a six-party exercise that simulates Srinivas Prakhya, Rochna Poddar European School of Management and a negotiation between a boutique advertis- Technology Case Indian Institute of Management ing agency and a beverage company that is Product #ES1261 (10 pages) TN Bangalore Case launching a new product. Each of the six par- Product #IMB359 (12 pages) TN The case describes a critical external incident ties has different incentives and information, which leads to a complex, realistic simulation This case critically analyzes the positioning that will have fundamental consequences about agency issues, misaligned incentives, journey traversed by Saffola, one of India’s for a small but very successful family busi- and the (mis)use of contingent contracts. leading cooking oils. For nearly half a century ness. At the beginning of 2010, Konnopke’s Saffola was strongly associated with the health Imbiss was considered to be one of the, if of the human heart, with its visual language, not the, most famous snack bars in Berlin. communication strategy, and brand position- This family-owned business was especially OPERATIONS ing all revolving around heart-related risks. famous for the legendary “Currywurst,” a MANAGEMENT With changing trends and market sentiments Berlin invention that consists of a sausage Saffola became painfully cognizant of its fried in hot oil and served with ketchup, chili sauce, curry powder, and French fries. The Does America Really Need shrinking relevance as a brand, indicated by Manufacturing? stagnating sales, thus posing a unique conun- Konnopke Imbiss main branch was located in drum: how should Saffola expand its user the Berlin district of Prenzlauer Berg, which Gary P. Pisano, Willy Shih base to include non-heart patients while still was considered to be one of the “coolest” Harvard Business Review Article being relevant to its current, loyal user base? districts of Berlin. Konnopke’s had become a Product #R1203G (9 pages) Berlin fast-food icon, winning critical acclaim In order to address this, the marketing team at Too many U.S. companies base decisions in almost all major Berlin travel guides. But Saffola undertook two repositioning exercises, about where to locate production largely on at the same time the snack bar did not any one in 2001 and the other in 2004. This case narrow financial criteria. They don’t consider longer seem to fit its environment, which studies both these efforts in detail, analyzing whether keeping manufacturing at home had changed from a working-class district to the dynamics of the brand’s image, identity, makes more sense strategically or take into a posh neighborhood mainly consisting of and positioning in tandem with changing account the impact it might have on their abil- young freelancers and tourists. consumer trends and market conditions. ity to innovate. The result has been an exodus of manufacturing from America, which has weakened the capabilities that domestic firms need to keep inventing high-quality, cost- competitive products. One problem is that it’s hard to tell when moving production far from

14 | Fall 2012 Teaching Materials Newsletter operations management

R&D will do damage. To make that determina- tion, say Harvard Business School’s Pisano See Teaching Notes and Educator Copies and Shih, executives need to examine two things. The first is modularity, or the degree Faculty registered as Premium Educators on our web site receive: to which product design can be separated from manufacturing. When modularity is low, ƒƒEducator copies of cases, articles, books, and chapters product designs can’t be clearly specified and ƒƒFree trials of online courses and simulations design choices affect manufacturing pro- ƒƒTeaching Notes that provide an instructor’s guide to teaching with a case cesses in subtle, difficult-to-predict ways (and ƒƒOnline tools for building coursepacks that can include non-HBP content and vice versa). The second is the maturity of the personal material manufacturing process. Immature processes ƒƒStudent pricing up to 60% off are ripe for innovation, but over time opportu- nities for improvement become incremental. These benefits are available to teaching faculty at academic institutions. Viewed through the modularity-maturity APPLY NOW educatoraccess.hbsp.harvard.edu lens, relationships between manufacturing and innovation fall into four quadrants: pure product innovation, pure process innovation, process-embedded innovation, and process- on the environment and FIJI Water’s brand a job shop”), students have to determine the driven innovation. In the first two quadrants, image. The company also faced decisions probability of succeeding in this new venture locating design near production isn’t critical, regarding how to best manage its relationship and the financial viability of the controller but separating the two functions is risky in with the Fijian government, which recently project. Sufficient data is provided in the case the third and fourth quadrants. This frame- dramatically raised imposed export taxes to carry out a quantitative analysis, assess the work will help business leaders make better and could limit FIJI Water’s access to water, success of earlier initiatives, and justify or sourcing decisions and reinvigorate America’s its primary raw material. The case enables reject investments in the new project. Also innovation-driven economy. students to better understand the challenges sufficient information is given on earlier of implementing an environmental strategy process improvement initiatives to obtain DHL Supply Chain and of negotiating with parties that control deeper insights into softer issues and to Singfat Chu, David Ringrose raw materials, and it invites discussion of provide justification for the success or failure the effectiveness of various approaches and of future projects. Richard Ivey School of Business Foundation Case the general lessons for the management of Product #W12888 (3 pages) TN companies seeking to operate in an environ- Four Star Industries Singapore— mentally responsible manner. The degradation of the environment has led Matching Supply with Demand many governments and customers to pres- S. Viswanathan, D.G. Allampalli Flow Line in a Job Shop: sure businesses to make their operations ABCC at Nanyang Tech University Case The Story of Ace Designers more nature-friendly. The case illustrates an Product #NTU001 (12 pages) TN effective example of corporate social respon- Haritha Saranga, Sulakshana Sarathy, In 2002, Neo Sia Meng took over as execu- sibility. Specifically, it demonstrates how a Mario Gonsalves tive director of Four Star Industries Private small increase in a supply chain budget can Indian Institute of Management Limited, founded three decades earlier by his drastically reduce carbon dioxide emissions in Bangalore Case parents. After joining the family business as the transportation of LCD TVs from manufac- Product #IMB329 (20 pages) TN director in 1996, Sia Meng saw several local turing bases to a distribution center. Ace Designers, a machine tool company and foreign mattress manufacturers enter in India, is debating whether to invest in the Singapore market. This intensified the FIJI Water: Carbon Negative? production of an in-house CNC control- competition in the local market, which was Francesca Gino, Michael W. Toffel, ler. Currently Ace is fitting imported CNC already seasonal and volatile. The increased Stephanie van Sice controllers into its machine tools, which competition resulted in a proliferation of Harvard Business School Case account for 50% of the material cost. The in- product offerings from all the manufacturers. Product #611049 (22 pages) TN house controller’s cost is significantly lower The local dealers who dominated the retail and also reduces the company’s exposure mattress market sought an exclusive range Seeking to go beyond global best practices in to exchange rate fluctuations. However, of in-house models from the local manu- reducing environmental impacts, FIJI Water, convincing customers about the quality and facturers. As Four Star depended heavily on a premium artesian bottled water company in reliability of an indigenously developed CNC local dealers, it tried to accommodate their the United States, launched a carbon-negative controller is a major challenge and could demands to increase its product range and campaign that would offset more greenhouse affect sales in the short run. Given the history service level. However, as Four Star substan- gas emissions than were released by the of successful product introductions for the tially increased the variety of its mattress company’s operations and products. The case low-cost segment and process improvement offerings, its operations became chaotic, and examines the controversies surrounding this initiatives (like Ace Designers’ “flow lines in matching demand with the correct inventory program as well as the program’s impacts

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 15 operations management

of mattresses became a significant challenge. than simply monitoring Chinese suppliers’ industry with a 30% market share. Nonethe- The order fulfillment problems created signif- compliance with local environmental, health, less, between 2007 and 2009 it failed to meet icant pressures on the manufacturing opera- and safety standards, leading companies its profit targets for three consecutive years. tions and Sia Meng was worried that these are giving suppliers tools and incentives A number of factors contributed to this fail- operational problems might provoke some to independently improve environmental ure, some internal and some associated with of his long-serving employees to consider performance. They are helping suppliers use the challenges of working in an emerging leaving the company. Sia Meng pondered the energy, water, and materials more efficiently economy. If Shanghai Inteva is to stay com- short- and long-term options for Four Star to and reaching deeper into their supply chains petitive it has to start making its targets. move toward a responsive but cost-effective to where the greatest environmental damage operations model. occurs. At the same time they are overcom- Sugar and Spice Desserts: ing their traditional reluctance as competi- Strategic Position Defensibility tors to cooperate in monitoring and fixing Green Rules to Drive Innovation Gad Allon, Stephanie Kahn, problems at common suppliers. The authors Daniel C. Esty, Steve Charnovitz Mark Skeba describe innovative approaches that compa- Harvard Business Review Article Kellogg School of Management, nies such as Nike are taking. More gener- Product #R1203L (5 pages) Northwestern Case ally, the authors’ recommendations include Product #KEL623 (10 pages) TN Incoherent U.S. energy and climate policies working closely with suppliers and providing have cast a pall over the entire economy and incentives for identifying, disclosing, and Sugar and Spice and Sparkles are two com- are putting U.S. companies at a serious global addressing problems; establishing collabora- panies in the high-end cupcake market that disadvantage. The authors offer 10 prescrip- tive relationships with NGOs and industry have chosen two different competitive and tions for reforms, two of which they describe groups; and finding ways both to learn from operating strategies. Sugar and Spice has in detail. First, they argue that the U.S. should suppliers’ best practices and to facilitate configured its operations to emphasize a high impose a gradually increasing carbon charge, learning among suppliers. level of customization. Sparkles has a strategy which would help internalize environmental that emphasizes a narrower range of prod- costs, drive investment in energy efficiency, Riverside Hospital’s Pharmacy ucts. Based on data collected by Sugar and Spice, the question is whether its position is encourage innovation in renewable power, Services and raise substantial revenues that could at risk. The case focuses on Sugar and Spice Anne Snowdon, Hannah Standing reduce the national debt. Second, they say the and the defensibility of its position using its Rasmussen government should curb or redirect unwise current operating system. The issue requires Richard Ivey School of Business energy subsidies and increase funding for students to compare the competitive and Foundation Case clean-energy R&D. Environmental steward- operating strategies of both companies and Product #W11646 (16 pages) TN ship need not be an economic burden, they to identify and evaluate the sources of cost emphasize; on the contrary, investing in Riverside District Memorial Hospital differences in their operations. sustainability can enhance corporate and (RDMH) is a small rural hospital that must national competitiveness. work within an operational budget that is Supply Chain Optimization at determined by the Ministry of Health and Madurai Aavin Milk Dairy Long-Term Care in a Canadian province. This Improving Environmental Unnikrishnan Dinesh Kumar, case identifies the emergence of concerns for Performance in Your Chinese P. Arun Pandian, Nachiappan SP patient safety related to medication admin- Supply Chain Indian Institute of Management istration and the challenges of ensuring that Bangalore Case Erica Plambeck, Hau Lee, professional services are maintained by the Product #IMB341 (9 pages) TN Pamela Yatsko pharmacy department to serve patients admit- MIT Sloan Management Review Article ted to the hospital. The chief nursing execu- The Madurai District Cooperative Milk Produc- Product #SMR408 (11 pages) tive must decide what steps should be taken ers’ Union Ltd., also known as Madurai Aavin Milk Dairy (MAMD), has been one of the Multinational corporations are under growing to reduce this exposure in the context of the largest dairies in the southern part of Tamil pressure to make sure that their contractors complex relationships in which RDMH exists. Nadu, India. One of the major activities in and subcontractors in China meet environ- MAMD’s supply chain was to procure milk mental standards in their operations. Yet Shanghai Interior Automotive Door from farmers and also to provide necessary traditional approaches to ensuring environ- System: Running a Manufacturing technical input facilities to them. The procure- mental, health, and safety compliance such as Operation in China ment was carried out by forming village-level checklist audits have proved problematic. The Neale O’Connor, Grace Loo milk producers’ cooperative societies. The authors conducted research over a one-and- University of Hong Kong Case supply of raw milk to MAMD from the farm- a-half-year period with leading multinational Product #HKU966 (5 pages) TN ers around Madurai is decreasing, whereas the buyers (mostly in the apparel and foot- demand is increasing. Several strategies are wear industries) as well as with NGOs and Shanghai Inteva Automotive Door System Co. explored by MAMD to meet the demand for its industry groups active in China. Based on Ltd. (formerly Shanghai Delphi) was a lead- main product, “premium milk.” MAMD faces their research, the authors report that rather ing player in China’s automotive component two challenges: 1) forecasting the demand for

16 | Fall 2012 Teaching Materials Newsletter organizational behavior

premium milk and 2) meeting the demand integration process are robust indicators that processes; identify “influencers” who can in an optimal manner that would maximize invite exploration into what was done and bring other employees along; 5) Measure and MAMD’s profits. how it was done. monitor cultural evolution. Otherwise you can’t identify backsliding or correct course. Cultural Change That Sticks When the leaders of Aetna applied these rules while implementing a new strategy in the ORGANIZATIONAL Jon R. Katzenbach, Ilona Steffen, Caroline Kronley early 2000s, they reinvigorated the com- BEHAVIOR pany’s ailing culture and restored employee Harvard Business Review Article pride. That shift was reflected in the business Product #R1207K (9 pages) A Zero Wage Increase Again results, as Aetna went from a $300 million Karen MacMillan When a major change initiative runs loss to a $1.7 billion gain. Richard Ivey School of Business aground, leaders often blame their compa- Foundation Case nies’ culture for pushing it off course. They Daiichi Sankyo’s Acquisition Product #W11154 (5 pages) TN try to forge ahead by overhauling the cul- of Ranbaxy—Cultural Issues in ture—a tactic that tends to fizzle, fail, or back- The owner of a large hardware, furniture, Integrating Business Models and fire. Most cultures are too well-entrenched to and building center faced a dilemma regard- Organizations be jettisoned. The secret is to stop fighting ing how to manage the upcoming wage your culture and to work with and within Beng Geok Wee, Ivy Buche, review process. After two consecutive years it until it evolves in the right direction. Geraldine Chen of frozen wages, employees were impatient Today’s best-performing companies, such ABCC at Nanyang Tech University Case for financial progress, but there was no as Southwest Airlines, Apple, and the Four Product #NTU027 (26 pages) TN spare money in the budget. It was possible Seasons, understand this, say the authors, to pump savings from upcoming process When Daiichi Sankyo, an established three consultants from Booz & Company. improvement initiatives into wage increases. Japanese pharmaceutical firm, acquired the These organizations follow five principles for However, the owner had limited motivation to majority stake in Ranbaxy, India’s largest making the most of their cultures: 1) Match channel hard-won funds to underperforming generic drug company, it signaled a move strategy to culture. Culture trumps strategy employees. On the other hand, he was eager into uncharted territory. Daiichi Sankyo was every time, no matter how brilliant the plan, to reward the people who added value. A plan the first Japanese innovator drug company to so the two need to be in alignment; 2) Focus that rewarded only some employees could acquire the majority share in a global generic on a few critical shifts in behavior. Wholesale result in an angry backlash. He had to decide drug manufacturer and exporter. In doing change is hard; choose your battles wisely; 3) whether he wanted to divert the savings into so, it had entered the generic drug business, Honor the strengths of the existing culture. compensation, and if so, he needed an effec- which operated on very different premises Every culture is the product of good inten- tive distribution plan. from the large multinational firms that domi- tions and has strengths; put them to use; nated the global pharmaceutical industry. 4) Integrate formal and informal interven- Furthermore, Daiichi Sankyo was acquiring Bancolombia: Talent, Culture, and tions. Don’t just implement new rules and another Asian company that had emerged Value Creation Management in Mergers Juanita Cajiao Richard Ivey School of Business organizational behavior Foundation Case Product #W11579 (20 pages) TN Talk, Inc.: How Trusted Leaders The case presents a review of the main facts Use Conversation to Power Their related to the merger process experienced by three companies, Bancolombia, Conavi, Organizations and Corfinsura, in the Colombian financial By Boris Groysberg, Harvard Business School, market during 2005 and 2006. The merger and Michael Slind decision emerges from directors and senior “In Talk, Inc., Boris Groysberg and Michael Slind Teaching Resource available executives visualizing an incoming signifi- offer a set of truly original insights supported by this fall hbsp.harvard.edu/syllabi cant market transformation—adjustment a collection of in-depth case studies that will help in industry regulation, improvement in leaders surface the best ideas from the widest Chapters available for international competence, and consolidation variety of people in their organizations. The most Spring 2013 semester use of main players—and their further response successful companies don’t just outcompete their Product #10616 in order to adapt to the new economic condi- rivals, they outthink their rivals.” ISBN 978-1-4221-7333-6 Hardcover • 256 pages • $30.00 tions. Considering the fact that the success — William C. Taylor, Cofounder, Fast Company; author, Harvard Business Review Press rate of merger processes is not above 30%, Practically Radical: Not-So-Crazy Ways to Transform the sustained financial results achieved by Your Company, Shake Up Your Industry, and Challenge Bancolombia from the very beginning of the Yourself

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 17 organizational behavior

from very different national cultural roots Integrative Research Centers, is novel in this he has seen that when teams map their own and corporate history. This presented a new field and presents a substantial challenge communication behavior over time and then dimension in the management of change to the institute’s culture, which had previ- make adjustments that move it closer to the arising from a major acquisition initiative. ously allowed faculty scientists complete ideal, they can dramatically improve their The case examines the rationale for the acqui- autonomy over their research. Center leaders performance. sition, its immediate aftermath, and the cross- are required to develop a business plan, cultural challenges ahead for the leadership adhere to agreed-upon performance metrics, Steve Jackson Faces Resistance of both companies as they work to implement and undergo regular progress reviews con- to Change a new hybrid business model. ducted by a peer-led oversight committee. Andrew C. Inkpen, Christine Pearson The Center for Nanotechnology in Cancer, a new but crucial center in the program, has Thunderbird School of Global Creating Sustainable Performance Management Case failed to meet almost all its objectives in the Gretchen Spreitzer, Christine Porath Product #TB0275 (3 pages) TN first year. Furthermore, a heated dispute Harvard Business Review Article between two faculty members in the center Jackson, a project professional at Western Product #R1201F (9 pages) has complicated matters significantly. Rollins Construction (an international construction What makes for sustainable individual and is flummoxed by these problems because conglomerate), is attempting to introduce organizational performance? Employees who he thought he had provided resources and BSO, a new software package. Engineers at are thriving—not just satisfied and produc- clear objectives to all the centers. He must Western who would be using BSO seem to tive but also engaged in creating the future. urgently diagnose the main reason(s) for the support the change, and BSO has already The authors found that people who fit this center’s shortcomings and develop a plan been adopted successfully by Western’s com- description demonstrated 16% better overall of action so that this center’s problems do petitor. However, Mike Barnett, a long-term performance, 125% less burnout, 32% more not undermine the whole initiative toward Western employee of undisclosed hierarchi- commitment to the organization, and 46% greater scientific collaboration. cal status and strong personal ties to the top, more job satisfaction than their peers. Thriv- is leveraging every opportunity to kill the ing has two components: vitality, or the sense The New Science of Building BSO project. Knowing that he must find a of being alive and excited, and learning, or the Great Teams way to win Barnett over, Jackson attempts a growth that comes from gaining knowledge variety of approaches to overcoming resis- Alex “Sandy” Pentland and skills. Some people naturally build vitality tance to change, including turning to his own and learning into their jobs, but most employ- Harvard Business Review Article boss for assistance. Product #R1204C (11 pages) ees are influenced by their environment. Four mechanisms, none of which requires heroic Why do some teams consistently deliver high Unintended Acceleration: Toyota’s effort or major resources, create the condi- performance while other seemingly identical Recall Crisis tions for thriving: providing decision-making teams struggle? Led by Pentland, researchers David Austen-Smith, Daniel Diermeier, discretion, sharing information about the at MIT’s Human Dynamics Laboratory set out Eitan Zemel organization and its strategy, minimizing to solve that puzzle. Hoping to decode the “it Kellogg School of Management, incivility, and offering performance feedback. factor” that made groups click, they equipped Northwestern Case Organizations such as Alaska Airlines, Zing- teams from a broad variety of projects and Product #KEL598 (16 pages) TN erman’s, Quicken Loans, and Caiman Con- industries (comprising 2,500 individuals in In late 2009 Toyota became the subject of sulting have found that helping people grow total) with wearable electronic sensors that media and U.S. government scrutiny after and remain energized at work is valiant on its collected data on their social behavior for multiple deaths and injuries were attributed own merits, but it can also boost performance weeks at a time. With remarkable consistency to accidents resulting from the unintended in a sustainable way. the data showed that the most important and uncontrolled acceleration of its cars. predictor of a team’s success was its com- Despite Toyota’s voluntary recall of 4.2 mil- Ganging Up on Cancer: Integrative munication patterns. Those patterns were as lion vehicles for floor mats that could jam significant as all other factors—intelligence, Research Centers at Dana-Farber the accelerator pedal and a later recall to personality, talent—combined. In fact, the Cancer Institute (A) increase the space between the gas pedal and researchers could foretell which teams would Heidi K. Gardner, Edo Bedzra, the floor, the company insisted there was no outperform simply by looking at the data on Shereef M. Elnahal underlying defect and defended itself against their communication without even meet- Harvard Business School Case media reports and regulatory statements that ing their members. In this article, Pentland Product #412029 (16 pages) TN said otherwise. As the crisis escalated Toyota shares the secrets of his findings and shows B Case Available was further criticized for its unwillingness how anyone can engineer a great team. He to share information from its data record- Dr. Barrett Rollins, chief scientific officer of has identified three key communication ers about possible problems with electronic the Dana Farber Cancer Institute, attempts dynamics that affect performance: energy, throttle controls and sticky accelerator pedals, to engender cross-scientist collaboration by engagement, and exploration. Drawing from as well as about braking problems with the applying project management principles to the data, he has precisely quantified the ideal Prius. By the time Toyota Motor Company medical research. The resulting innovation, team patterns for each. Even more significant, president Akio Toyoda apologized in his

18 | Fall 2012 Teaching Materials Newsletter organizational behavior — sales

testimony to the U.S. Congress, Toyota’s performance, and he proposes that some As the largest cadre, core performers typically stock price had declined by 20% in just over a firms eliminate commissions altogether. represent the greatest opportunity, but they’re month—a $35 billion loss of market value. often ignored by incentive plans. Contests The End of Solution Sales with prizes that vary in nature and value (and don’t all go to stars) will inspire them to ramp Why “Good Jobs” Are Good for Brent Adamson, Matthew Dixon, Retailers Nicholas Toman up their efforts, and tiered targets will guide them up the performance curve. Laggards Zeynep Ton Harvard Business Review Article need quarterly bonuses to stay on track; when Product #R1207C (10 pages) Harvard Business Review Article they have only annual bonuses their revenues Product #R1201L (9 pages) In recent decades sales reps have become will drop 10%, studies show. This group is Too many retail managers believe that they adept at discovering customers’ needs also motivated by social pressure—especially must offer bad jobs to keep prices low. As a and selling them “solutions.” This worked from new talent on the sales bench. Stars result, almost one-fifth of American workers because customers didn’t know how to solve tend to get the most attention in comp plans, suffer low wages, poor benefits, constantly their own problems. But the world of B2B but companies often go astray by capping changing schedules, and few opportunities selling has changed: companies today can their commissions to control costs. If firms for advancement. The author’s research readily define their own solutions and force instead remove commission ceilings and pay reveals, however, that the presumed trade-off suppliers into a price-driven bakeoff. There’s extra for overachievement, they’ll see the sales between investment in employees and low some good news, though, according to the needle really jump. The key is to treat sales prices is false. To meet short-term perfor- authors, all directors at Corporate Executive compensation not as an expense to rein in mance targets, many retailers cut labor. The Board. A select group of reps are flourishing but as a portfolio of investments to manage. unmotivated and poorly trained employees in this environment, and lessons from the Companies that do this will be rewarded with who remain often cannot keep up with their playbook they’ve devised can help other reps much higher returns. tasks in a complex operating environment. and organizations boost their performance. The result is a vicious cycle in which lower These star reps look for different sorts of Selling into Micromarkets sales and profits tempt managers to cut even organizations, targeting ones with emerging Manish Goyal, Maryanne Q. Hancock, rather than established demand. Instead of more employees. Retailers such as QuikTrip, Homayoun Hatami Mercadona, Trader Joe’s, and Costco instead waiting for the customer to identify a prob- Harvard Business Review Article create a virtuous cycle of investment in lem the supplier can solve, they engage early Product #R1207F (9 pages) employees, stellar operational execution, on and offer provocative ideas about what the higher sales and profits, and larger labor customer should do. They seek out a differ- Sophisticated sales organizations now have budgets. They also make work more effi- ent set of stakeholders, preferring skeptical the ability to combine, sift, and sort vast troves cient and fulfilling for employees, improve change agents over friendly informants, and of data to develop highly efficient strategies customer service, and boost sales and profits they coach those change agents on how to for selling into micromarkets. While B2C through four practices: simplifying operations buy rather than quizzing them about their companies are typically adept at mining the by offering fewer products and promotions, companies’ purchasing processes. High- petabytes of transactional and other purchas- training employees to perform multiple tasks, performing reps are still selling solutions, but ing data that consumers generate as they eliminating waste in everything but staffing, more broadly they’re selling insights. And interact online, B2B sales organizations have and letting employees make some decisions. in this new world that makes the difference only recently begun to use big data to both between a pitch that goes nowhere and one inform overall strategy and tailor sales pitches that secures the customer’s business. for specific customers in real time. Micromar- ket analyses involve five steps: defining the SALES Motivating Salespeople: optimal micromarket size, determining the What Really Works growth potential for each, gauging market A Radical Prescription for Sales share in each, understanding the causes of Thomas Steenburgh, Michael Ahearne Daniel H. Pink variation in market share across them, and Harvard Business Review Article Harvard Business Review Article prioritizing high-potential markets to focus Product #R1207D (7 pages) Product #R1207E (3 pages) on. Exploiting new-growth hot spots will be No sales force consists entirely of stars; sales successful only if salespeople have a solid A best-selling author and behavioral science staffs are usually made up mainly of solid understanding of how micromarkets work and and business thinker, Pink writes in this performers, with smaller groups of laggards the simple tools for selling into them. Sales essay that as sales becomes less formulaic and rainmakers. Though most compensa- leaders must coach their teams in developing and more about creative knowledge work, tion plans approach these three groups as sales “plays” for groups of structurally similar extrinsic motivators (e.g., commissions and if they were the same, research shows that micromarkets. That requires cross-functional bonuses) are becoming less relevant. The new each is motivated by something different. collaboration—in particular between sales and breed of inventive, insight-selling reps wants By accounting for those differences in their marketing. To sustain early wins, companies challenging, meaningful, intrinsically reward- incentive programs, companies can coax also need to change their approach to sales ing work. Pink suggests that having reps better performance from all their salespeople. force management in three ways: they must work on commission may actually undermine

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 19 sales — service management — social enterprise

rethink performance management, open new tion. In addition to building prospecting into a client-facing revenue stream. This is channels between sales and marketing, and networks, they can set up keyword alerts and made especially difficult by the fact that the invest in talent development. use tools such as HootSuite to pick up signals parent company is a manufacturing firm and of need. At the back end of the cycle, social InterfaceRAISE is a professional services firm Teaching Sales media tools are invaluable for maintaining (consulting). InterfaceRAISE is not being relationships, which are often neglected in staffed by a traditional consulting firm model, Suzanne Fogel, David Hoffmeister, the pursuit of new sales. Organizational Richard Rocco, Daniel P. Strunk relying instead on the part-time availability of support can help, not just with training on employees in the parent company. At the time Harvard Business Review Case mechanics and etiquette but also by providing of the case, InterfaceRAISE was grappling Product #R1207H (7 pages) engaging content to share. Yes, there are risks to identify the appropriate business model A well-staffed sales function is vital to busi- to using social media. But with clear policies for the type of consulting firm it wants to be, ness success, but most MBA programs fail those risks can be mitigated. And as your to determine what its client portfolio should to offer any sales-related courses at all. As customers increasingly come to expect social look like, and to set its pricing structure. selling becomes more sophisticated and solu- network engagement, the biggest risk of all is InterfaceRAISE needed to decide how to tions-oriented and good sales jobs go unfilled to stay on the sidelines. accelerate its growth while better achieving for lack of qualified applicants, the value of its three objectives: improving its clients’ university-based sales education programs sustainability performance, enhancing its rises. But such programs face substantial bar- SERVICE MANAGEMENT parent company’s brand image and sales, and riers in gaining funding and recruiting talent. increasing operating profits. This in turn leads to a frustrating lack of scholarly research relevant to improving sales China Automotive Finance: capabilities. The authors, members of the Service Operations Redesign SOCIAL ENTERPRISE marketing department at DePaul University, Neale O’Connor, Grace Loo demonstrate that partnering with industry University of Hong Kong Case LabourNet: Empowering Informal is the surest route to success in establishing Product #HKU960 (9 pages) TN sales programs and enhancing their effective- Sector Laborers In the mid-2000s, an American automaker ness. They offer the experience of DePaul’s Sourav Mukherji, Caren Rodrigues, opened an auto financing company in China, Center for Sales Leadership to demonstrate Sridhar Pabbisetty Shanghai-based C Automotive Finance Com- that when businesses provide input to cur- Indian Institute of Management pany (China) Ltd. (CAF). CAF grew rapidly ricula and encourage their salespeople to con- Bangalore Case and broke even in three years. Nonetheless, tribute to classroom discussions, the benefits Product #IMB355 (9 pages) TN the long cycle time of its application pro- flow both ways. Furthermore, demand for cess led to rampant dissatisfaction among This case chronicles the evolution and chal- sales courses is rapidly increasing. When the dealers and also lowered the number of car lenges faced by LabourNet, an organization center was founded in 2004 it hoped to enroll purchases financed by CAF as a percentage that was conceptualized as a social enterprise 90 students a year. Today about 700 per quar- of total cars sold. The auto financing industry to create and enhance income opportunities ter enroll in its various sales courses. in China held great potential but was also for workers in the Indian urban informal becoming increasingly competitive as more sector—workers who are typically poor, Tweet Me, Friend Me, Make Me Buy and more foreign companies entered the exploited, and disenfranchised. LabourNet Barbara Giamanco, Kent Gregoire market. In order stay on top of the game CAF endeavored to establish linkages between Harvard Business Review Article must improve the efficiency of its financing informal-sector laborers and potential Product #R1207G (7 pages) application process. What actions could CAF employers through an Internet-based portal undertake to achieve this objective? and cellular phones, bringing about efficiency It stands to reason that sales, the most social in the search process as well as reducing the of business activities, would make use of role of intermediaries who typically exploited InterfaceRAISE: Sustainability social media. But few organizations have the laborers and reduced their shares of Consulting figured out how to do so in a smart, produc- wages. Realizing that informal-sector laborers tive way. The authors—veteran salespeople Michael W. Toffel, Robert G. Eccles, were mostly migrants from rural India who and now sales trainers—offer insights to Casey Taylor did not possess any proof of identity, Labour- help companies and reps get maximum Harvard Business School Case Net worked with banks and insurance com- value from sites like LinkedIn, Twitter, and Product #611069 (19 pages) TN panies to provide the registered laborers with Facebook. Social media’s greatest potential, InterfaceRAISE is a sustainability manage- proof of identity, insurance, bank accounts, they note, is at the start of the sales cycle, ment consulting firm created to leverage the and ATM facilities. Further, LabourNet during prospecting, opportunity qualification, capabilities of its parent company Interface provided the registered laborers with training and presales-call research. Short messages Inc., a carpet manufacturer recognized as so that they could command better prices for sent via social media produce a much greater a global leader in corporate environmen- their services. However, LabourNet struggled response than cold calling and, even better, tal sustainability. This case illustrates the to earn revenue and to become financially reps don’t always have to start the conversa- challenges of turning an internal capability self-reliant because of difficulties in scaling

20 | Fall 2012 Teaching Materials Newsletter social enterprise — strategy its operations and its inability to monetize The Robin Hood Foundation STRATEGY the services that it provided, as well as its Alnoor Ebrahim, Catherine Ross inability to command any price premium for Harvard Business School Case A Tampa “Town Hall” Forum its laborers from the markets. The case ends Product #310031 (24 pages) TN Goes Awry: Anatomy of a Public at a point where LabourNet had to decide its future course of action because the donor Created by hedge fund and financial man- Meeting Fiasco funds on which it was relying were becoming agers, the Robin Hood Foundation fights Pamela Varley, Archon Fung exhausted and LabourNet was unsure about poverty through grants to nonprofit organiza- Harvard Kennedy School Case the strategy it should adopt in order to create tions. As the global financial crisis continues Product #HKS676 (8 pages) TN a business model that was both inclusive and to impact the poor disproportionately, the This case describes a health care town hall financially sustainable. foundation needs to ensure that its funds are meeting that was derailed by vocal protest- being spent on the most effective poverty- ers. The case was designed for a very specific fighting programs. The organization’s senior The Cambodian National HIV/AIDS teaching purpose: to discuss a variety of vice president, Michael Weinstein, has devel- Program: Successful Scale-Up alternatives to the tried-and-true town hall oped a benefit-cost (BC) approach to analyze through Innovation meeting format that, the sponsoring profes- the performance of program grants. How sor believes, is not only quite vulnerable to Robert C. Wolcott, Alex Hurd, effective is the method? Is funding programs Stephanie Wolcott disruption but is not a terribly effective or with the highest BC ratios a good way to fight democratic way to involve the public in local Kellogg School of Management, poverty? In three or five years, how will Robin Northwestern Case decision making to begin with. Underlying Hood know whether it is succeeding? Product #KEL606 (19 pages) TN the case is a belief that those who organize public engagements should be deliberate In January 2005, Dr. Mean Chhi Vun, Wastewater Recycling: Public about: 1) the purposes of a public meet- director of the Cambodian National Center Relations for a Controversial ing: what a public meeting aims to do; 2) for HIV/AIDS, Dermatology, and STDs Technology the strategy of recruiting participants: who (NCHADS), needed to decide how to control Kenneth W. Shotts, Ashish Jhina, participates; 3) the organization of discussion the spread of HIV/AIDS and save the lives of David W. Hoyt and decision making; and 4) the extent to thousands of Cambodians who were dying which conclusions of the meeting will influ- from it each year. In the seven years since Dr. Stanford University Case Product #P73 (14 pages) TN ence policy or public action. The case itself Vun was appointed director, NCHADS had provides a lively starting point for the con- built an organization that was transparent A reliable, safe supply of drinking water is versation by describing how a modest Tampa and efficient, had implemented a nationwide essential to the survival of communities. In meeting about local health care was overtaken 100% condom use program, had estab- many places the water supply is under stress— by opponents of national health care reform. lished a system that allowed individuals to a condition that is expected to get progressively The case also provides as context background voluntarily seek confidential counseling and more challenging in the future. There are sev- about the decision by Democrats in 2009 testing, and had instituted a set of guidelines eral ways that municipalities can improve their to sponsor health care town hall meetings and procedures for staff at health facilities drinking water supply, including conservation, across the country in an effort to boost public to refer HIV-positive patients to treatment purchases from external suppliers, desalina- support for health care reform—an effort that clinics and link them with NGOs providing tion, and recycling. Recycling wastewater into was subverted when the meetings became the financial and psychosocial support. Now, potable water is attractive in many situations. target of large, vocal, anti-health care reform however, Dr. Vun faced decisions about three However, this alternative has not always been protesters. initiatives that were critical to expanding care successful. In some cases public opposition and treatment programs in his country. First, has defeated recycling plans, while public he needed to decide how to quickly and cost- concerns have been successfully addressed in China Merchants Bank in Transition effectively improve the national HIV/AIDS others. This case gives an overview of water F. Warren McFarlan, Guoqing Chen, laboratory support infrastructure. Second, Dr. supply issues and examples of successful and Ziqian Zhao Vun needed to improve logistics and supply unsuccessful attempts to implement recycling Tsinghua University Case management in order to get the best prices programs. Programs in Singapore and Orange Product #TU0017 (25 pages) TN and ensure that patients had access to lifesav- County, California, are profiled as examples This case depicts China Merchants Bank’s ing medicines. Finally, he needed to figure of successful recycling efforts, while failures second strategic transformation. In the ’90s, out how to provide sustainable care and in San Diego, California, and Toowoomba, China Merchants Bank creatively introduced treatment to the thousands of Cambodian Australia, are described. an all-in-one-card and an all-in-one-net based children living with HIV/AIDS. on IT systems and a network, enabling it to expand nationwide. By successfully entering the emerging credit card industry, the bank confirmed its retail banking strategy in 2004, followed by its great success in occupying one-third of the credit card market share. The market share-driven strategy didn’t last

TN Teaching Note Available hbsp.harvard.edu 1-800-545-7685 | 21 strategy

forever. Recognizing business environment and hires workers from Eastern Europe to by Reed to return the bank to a well-managed changes, the company changed its strategy do lower-end work. The decisions appear not and stable institution. focus to profit-driven in 2009. It’s the second to warrant exhaustive analysis. At the same time that information technology enabled time managers ignore substantial hidden eBay, Inc., and Amazon.com (A) business success. costs associated with non-U.S. locations and Ramon Casadesus-Masanell, overlook the benefits they could reap were Anant Thaker they to invest instead in local communities. Choosing the United States Harvard Business School Case This article examines the strengths and weak- Michael E. Porter, Jan W. Rivkin Product #712405 (18 pages) TN nesses of U.S. locations, identifies the kinds Harvard Business Review Article B Case Available of activities the U.S. must compete for, and Product #R1203F (13 pages) outlines an agenda for action for government This case has been designed to explore A location decision is in many respects a and business leaders. strategic interactions among organizations referendum on a nation’s competitiveness. with different business models. The case When a company decides, say, to build a Citibank: Weathering the considers how a competitor successfully chal- new plant in China rather than in the United Commercial Real Estate Crisis lenged the incumbent in a platform market defined by strong network effects and high States, it is effectively voting on the ques- of the Early 1990s tion of which country can best enable its switching costs. The case allows students to Julie M. Wulf, Ian McKown Cornell success in the global marketplace. Over the assess the advantages and disadvantages of past three decades business activities have Harvard Business School Case eBay’s platform business model in com- become increasingly mobile, and more and Product #712446 (17 pages) TN parison to Amazon’s retail business model; more countries have become viable contend- As the commercial real estate market began evaluate business model performance when ers for them. But new data—including the to crash in early 1990, heavily exposed banks value loops of two industry players interact; results of an unprecedented survey of 10,000 like Citibank and Chase Manhattan were left analyze how Amazon expanded its business Harvard Business School alumni—suggests largely undercapitalized. John Reed, Citibank model and overcame barriers to entry in a that the U.S. is not winning its appropriate chairman and CEO, was caught off guard by platform market that generates winner-take- share of location decisions, even for high- the sudden market plunge. While Reed strug- all effects for first movers; discuss how eBay value business activities such as R&D that it gled to maintain the capital reserve of his can respond to the new competitive dynamic, has traditionally been able to attract. In part bank, further weaknesses within Citi began exploring both tactical and strategic interac- this is because U.S. policy makers are not to emerge. In addition to missing the coming tions; and assess the strategic implications of addressing weaknesses in the national busi- of the real estate crisis, Citi had poorly man- eBay’s 2011 acquisition of GSI Commerce. ness environment. There are also problems at aged internal operations, overvalued acquisi- the corporate level: many location decisions tions, and grown heavy from organizational Haier in India: Building Presence are incremental shifts of activities offshore; excess. The poor management left Citi in in a Mass Market Beyond China imagine a bucket with many small pinholes. the care of federal regulators, worried about Nikhil Celly, Penny Lau For instance, a software firm promotes the bank’s solvency. The case examines the University of Hong Kong Case American developers to high-end positions roots of these problems and the steps taken Product #HKU978 (19 pages) TN

For Chinese corporation Haier Inc., the biggest seller of major appliances in the strategy world, entering India as an emerging market multinational is like having a double-edged sword. Its global presence gives it cred- Build, Borrow, or Buy: Solving the ibility to offer more sophisticated products Growth Dilemma that warrant a premium price, but Indian By Laurence Capron, INSEAD, and Will consumers have yet to develop the willing- Mitchell, Rotman School of Management at ness to embrace its China-made, high-priced University of Toronto and Duke University products. Seven years into its Indian business endeavors, sales remained sluggish and “Laurence Capron and Will Mitchell have written Teaching Resource available a valuable book on how to think through the Includes a list of suggested market share minimal. The company then question of securing the capabilities that a chapter/case pairings undertook a swift change in pricing strategies company needs in order to win. Full of helpful hbsp.harvard.edu/list/syllabi and overhauled its marketing infrastructure

checklists and frameworks, Build, Borrow, or Buy Chapters available for to save its market. The case provides an over- brings what could be abstract concepts down to Spring 2013 semester use view of the situation and lends a discussion earth for practicing executives.” Product #10808 of marketing and localization strategies of ISBN 978-1-4221-4371-1 — Roger Martin, Dean, Rotman School of Management, emerging market multinationals in India. It Hardcover • 256 pages • $33.00 University of Toronto Harvard Business Review Press also gives insights into the challenges these multinational corporations face. The case also

22 | Fall 2012 Teaching Materials Newsletter strategy

explores issues of product offerings, brand nant incumbent in the MMO market that communication, pricing strategies, market Turbine enters, World of Warcraft. The case CONTACT US capture, and latecomer disadvantages. The encourages students to explore the nature of comparison between Haier’s behaviors in the competition in the MMO market and to India and other markets also points to the define characteristics of a successful business Customer Service level of localization/globalization the com- model. is available Monday–Friday pany adopts across markets. 8 am–6 pm, ET Reality Check at the Bottom Phone 800-545-7685 iPierian of the Pyramid +1 617-783-7600 Robert Chess, Sara Rosenthal Erik Simanis (outside the U.S. and Canada) Stanford University Case Harvard Business Review Article Product #E393 (26 pages) TN Product #R1206J Tech Support The iPierian case profiles a start-up bio- There’s a fatal flaw in the low-price, low- is available Monday–Friday technology company leveraging the recent margin, high-volume strategy that multina- 8 am–8 pm, ET development of induced pluripotent stem tionals have been pursuing at the bottom of Phone 800-810-8858 cells (iPSCs)—adult stem cells that have the economic pyramid for the past decade. In +1 617-783-7700 been reprogrammed to a “pluripotent” state order to cover the built-in costs of doing busi- (outside the U.S. and Canada) whereby they can differentiate into approxi- ness among low-income customers scattered mately 200 different cell types in the body. in rural villages and urban slums, penetration EMAIL The science in this field is in the nascent rates must be impractically high—often 30% [email protected] stages, but the pace of change is rapid as new or more. Erik Simanis of Cornell University’s WEB discoveries are made and as companies devise Johnson School of Management argues that hbsp.harvard.edu applications for the technology. iPierian has companies seeking to improve the lives of the established itself as an early leader in the world’s poor should focus on a more realistic space by creating a consistent way to create route to profitability: they need to elevate high volumes of high-quality iPSCs and sub- gross margins far above the company average sequently differentiate those cells into motor by pushing down variable costs and boost- neurons. The company must decide between ing the price consumers are willing to pay three major directions—tools, drugs, and for a unit of product. They also need to raise development of therapeutics—in which it can the price point for a single transaction. This steer the business and continue to develop combination of higher margins and higher its technology. iPierian must also make this price points increases the contribution—the decision in the context of the role of large amount of money that goes to covering fixed pharmaceutical players in the industry with and operating costs—generated from every which it can either partner or potentially transaction. Achieving sustainable margins in compete against in the race to find successful low-income markets requires a margin-boost- applications for iPSC technology. ing platform that integrates three common approaches—bundling products, offering an One Game to Rule Them All: enabling service, and cultivating customer “Lord of the Rings Online” and peer groups—into a coherent strategy. In the MMO Market this way, companies can launch flourishing ventures capable of transforming the lives Hanna Halaburda, William Collis, of millions of low-income people across the Rob McKeon, Ivan Nausieda developing world. Harvard Business School Case Product #712434 (8 pages) TN

Turbine, Inc., is releasing a massively multi- player online (MMO) game, Lord of the Rings Online, based on the popular film trilogy. The firm’s CEO needs to consider market conditions and game characteristics to build a business model for the game, decide which type of consumers to target—the hardcore EDUCATORS gamers or the casual gamers—and form the Get updates from us at optimal pricing scheme. One particular chal- Twitter@HarvardBizEdu lenge he needs to face is that there is a domi-

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