NOVEMBER 2014 47 The Big Idea The HBR List of Best-Performing CEOs 2014 edition 100 Spotlight The New Deal on Data An interview with Alex “Sandy” Pentland 133 Case Study Do Business and Politics Mix? Brian K. Richter THE INTERNET OF EVERYTHING Smart, connected products will transform your business PAGE 64 HOW AMPLIFIED IS YOUR ENTERPRISE? Learn more at: steelcase.com/amplify ©2014 Steelcase Inc. All rights reserved. Trademarks used herein are the property of Steelcase Inc. or of their respective owners. We work with the world’s leading organizations to create places that amplify the performance of their people, teams and enterprise. ©2014 Cartier ©2014 TANK® MC TWO-TONE SKELETON 9619 MC DISPLAYING A PERFECT BALANCE OF POWER AND ELEGANCE, THE TANK MC TWO-TONE SKELETON WATCH BOASTS A UNIQUE MOVEMENT WITH SKELETON ROMAN NUMERAL BRIDGES. THIS CREATIVE SIGNATURE IS THE EXPRESSION OF OUR SWISS MANUFACTURE’S EXPERTISE. ESTABLISHED IN 1847, CARTIER CREATES EXCEPTIONAL WATCHES THAT COMBINE DARING DESIGN AND WATCHMAKING SAVOIR-FAIRE. Discover the new movie on cartier.us November 2014 Contents SPOTLIGHT ON MANAGING THE INTERNET OF THINGS ABOVE Chris Labrooy 64 STRATEGY & COMPETITION 90 INFORMATION TECHNOLOGY 100 MANAGING TECHNOLOGY Shrinkwrap How Smart, Connected Digital Ubiquity: With Big Data Comes Stills, Hoover Products Are Transforming How Connections, Big Responsibility Competition Sensors, and Data Are Allowing people to control their Smart, connected products are Revolutionizing Business own data may actually benefit changing how value is created The digitization of tasks and companies in the long run. The MIT for customers, how companies processes has become essential Media Lab’s Alex “Sandy” Pentland, compete, and the boundaries of to competition. Marco Iansiti and interviewed by Scott Berinato HBR.ORG competition itself. Michael E. Porter Karim R. Lakhani Big data and and James E. Heppelmann analytics, explained. hbr.org/ video/data November 2014 Harvard Business Review 7 HBR.ORG Features November 2014 47 106 116 THE BIG IDEA INNOVATION HEALTH CARE The Best-Performing Turn Your Science How Not to Cut CEOs in the World into a Business Health Care Costs HBR looks at the 100 chief Inventors face a host of Five mistakes that keep executives who have delivered potentially fatal traps when treatment costs too high the highest returns to commercializing their innovations. Robert S. Kaplan and shareholders over the Here’s how to avoid them. Derek A. Haas long term. Reddi Kotha, Phillip H. Kim, and Oliver Alexy ANGUS GREIG ANGUS 8 Harvard Business Review November 2014 ©2014 Canon U.S.A., Inc. Canon, DIGIC and EOS are registered trademarks of Canon Inc. in the United States and may also be registered trademarks of Canon Inc. in the United States and may also be registered trademarks ©2014 Canon U.S.A., Inc. Canon, DIGIC and EOS are registered trademarks Images simulated. owners. of their respective names are trademarks in other countries. All third party logos, product and brand or trademarks SEE BEAUTIFUL IMAGERY | SEE A HOLLYWOOD RENAISSANCE | SEE BETTER DIAGNOSTICS THERE’S MORE TO THE IMAGE THAN ANYONE THOUGHT POSSIBLE. | SEE SELF-PUBLISHING | SEE ADVANCED EYECARE HBR.ORG Departments November 2014 “I never thought of the shows as groundbreaking, because every American understood what they Innovation is a were all about.” mindset. page 126 144 AUDIO IN EVERY ISSUE For Lear’s thoughts IDEA WATCH EXPERIENCE on managing egos, 14 From the Editor visit hbr.org/lear. 28 TALENT 126 MANAGING YOURSELF 22 Interaction How Companies Can Profit Where to Look for Insight 36 Vision Statement from a “Growth Mindset” The insights that feed innovation can be found through seven 38 Strategic Humor A key psychological concept applies to organizations, too. PLUS Why channels. Mohanbir Sawhney 141 Executive political ties don’t always pay off and Sanjay Khosla Summaries in China, the true cost of “patent trolls,” and more CASE STUDY 133 Playing cards depict Do Business and Politics Mix? the 1720 financial 34 DEFEND YOUR RESEARCH When the super PAC to which scandal. page 36 Cooks Make Tastier Food Natural Foods has contributed backs When They Can See Their a candidate with controversial views, consumer and employee protests roil Customers Does transparency the company. Brian K. Richter improve the customer experience? HOW I DID IT 138 SYNTHESIS 41 Who’s responsible for your continued The U.S. Chairman of PwC on growth—you or your employer? Keeping Millennials Engaged Lisa Burrell Millennials want job flexibility in the here and now, along with more- 144 LIFE’S WORK frequent feedback and rewards. Bob Moritz Norman Lear The man who reinvented American TV in the 1970s has been happy to stay behind the scenes. DAVE LAURIDSEN; MATT CHASE; COURTESY OF BAKER LIBRARY CHASE; COURTESY MATT LAURIDSEN; DAVE 12 Harvard Business Review November 2014 TO BREAK THE RULES, YOU MUST FIRST MASTER THEM. THE VALLÉE DE JOUX. FOR MILLENIA, A PLACE OF RAW NATURE AND UNFORGIVING CLIMATE. FIRST SETTLED IN THE SIXTH CENTURY BY MONKS WHO SAW IN THIS AUSTERE ENVIRONMENT A RARE SERENITY AND SPIRITUALITY; MORE RECENTLY, SINCE 1875, THE HOME OF AUDEMARS PIGUET, IN THE VILLAGE OF LE BRASSUS. WHILE MAN HAS LEFT HIS MARK HERE, IT IS A MARK SOFTLY PLACED; AS OUR FOREFATHERS BELIEVED THAT TO MASTER NATURE ONE MUST FIRST LEARN TO RESPECT HER. OUR PHILOSOPHY AS WATCHMAKERS IS DERIVED FROM THESE TIMELESS VALUES. THE EXCEPTIONAL COMPLEXITY, DETAIL AND HAND-FINISHING OF OUR MOVEMENTS ARE AN EXPLORATION OF THE DYNAMICS OF NATURE, CELEBRATED THROUGH HUMAN CRAFT, DEDICATION AND INGENUITY. CALIBRE 2860. GRANDE COMPLICATION MOVEMENT WITH PERPETUAL CALENDAR, SPLIT TIME CHRONOGRAPH AND MINUTE REPEATER. THE AUDEMARS PIGUET FOUNDATION PROUDLY SUPPORTS GLOBAL FOREST CONSERVATION. HBR.ORG From the Editor On a Long-Term Roll eople warn you about Jeff Bezos’s laugh. It’s a surprising, high-pitched out- burst (think Tom Hulce’s Mozart in Amadeus) that can throw off an interviewer. But Amazon’s CEO has earned the right to guffaw. Sure, authors have accused him of being a bully in the company’s battles with publishers, and the new Fire Phone has yet to catch on. But Bezos is still on a roll. He has Pconsistently defied skeptics and delivered for investors—to such an extent that he’s number one on HBR’s 2014 list of the world’s 100 best-performing CEOs. The list measures long-term performance according to a formula that tracks a company’s shareholder return over an executive’s tenure. Although the rankings can’t reliably take account of many hard-to-measure attributes that are critical to executive performance— customer satisfaction, employee engagement, community relations, and so on—they are a valuable guide to who is delivering results year after year. Amazon has produced a total See page 47 for our shareholder return (industry adjusted) of 14,917% in the 18 years since Bezos was officially best-performing-CEOs named CEO. package, which was Meanwhile, at HBR we’re taking steps of our own to enhance long-term performance. overseen by HBR senior We’re about to relaunch our website, hbr.org, to deliver a more premium reading experience editor Daniel McGinn. and better functionality. For example, subscribers and registrants can take advantage of It includes a profile My Library, a new feature that will let them seamlessly save, organize, and share their of Jeff Bezos and an interview with him at favorite articles. Amazon headquarters. We’re tweaking the magazine as well. The front and back sections have been redesigned to make things (we hope) cleaner, clearer, and more appealing. We will be routinely connecting newly published pieces to our archive of timeless ones, and we’re adding elements, often presented by business leaders on the front lines, that focus on how to put our ideas into practice. We’ve also introduced a contributors page, to let you know more about our authors and to supply some context for their research and ideas. Over the coming months we’ll be incorporating other changes online and in print. We look forward to hearing what you think of them. Adi Ignatius, Editor in Chief JOHN VON PAMER JOHN VON 14 Harvard Business Review November 2014 Transform Your Business Create new value with smart, connected products By 2020, the “Internet of Things” will include more than 50 billion products that can communicate with their users, with each other, and with the businesses that create, operate and service them. With a smart, connected product strategy you’ll experience true closed-loop product lifecycle management, and new opportunities for revenue, innovation - and competitive advantage. ∙ Monitor, control, optimize and automate products in real time ∙ Innovate faster, more effectively and with lower market risk ∙ Extend capabilities within and alongside the product Get smart. Get connected. Visit us at PTC.com/topics/scp HBR.ORG Contributors An assistant professor at the University of Texas at Austin’s McCombs School, Brian Richter Chris Labrooy, the artist works to improve our whose work appears in this collective understanding month’s Spotlight section of companies’ interactions (p. 63), started out as a with governments and product designer in the UK, other nonmarket actors using computers to bring and institutions. He is his ideas for chandeliers the author of this month’s and other furnishings to Case Study (p. 133). life. He then lost interest in furniture and focused instead on creating images with digital tools. The thinking behind this month’s cover story (p. 64) began well over a year ago, during conversations between Michael Dave Lauridsen, who shot the portrait of Norman Porter and his coauthor, Jim Heppelmann, Lear for Life’s Work (p. 144), and they have been refining it ever since. learned quickly that the TV legend isn’t comfortable in They saw that the emergence of smart, front of the camera.