clair015

Some time ago, a London friend of mine in was diagnosed with a severe medical condition, which required urgent yet complex surgery. The condition is rare but, fortunately, there appeared to be several specialists both in Germany and France who had each treated hundreds of cases during their careers. When it comes to specialist operations, experience is key, so he was going to visit each of them and then make a decision. However, when I spoke to him again, he had just decided where he was going to have the operation: in the hospital in his hometown in Spain. I was surprised; there was no specialist in that hospital. But he explained to me that he had flown to his home country for another opinion and that the local surgeon had made a good impression and was very pleasant. Moreover – he added – after the surgery, he would have to stay in the hospital for two weeks and it would be nice to do that near his family. I was stunned. My friend is a rational guy, in charge of a large company. ...

For decades, strategy gurus have been telling firms to differentiate. From Michael Porter to Costas Markides and through the Blue Oceans of Kim and Mauborgne, strategy scholars have been urging executives to distinguish their firm’s offerings and carve out a unique market position. Because if you just do the same thing as your competitors, they claim, there will be nothing left for you than to engage in fierce price competition, which brings everyone’s margins to zero – if not below. Yet, at the same time, we see many industries in which firms do more or less the same thing. And among those firms offering more or less the same thing, we often see very different levels of success and profitability. How come? What explains the apparent discrepancy? To understand this, you have to realise that the field of Strategy arose from Economics. The strategy thinkers who first entered the scene in the 1980s and 90s based their recommendations on economic theory, which would indeed suggest that, as...

Last week I was interviewed by a journalist from Korea’s Maeil Business Newspaper (the local equivalent of the Financial Times). After quite a lengthy interview, he ended with the question “ How would you define a ‘great company’?” At the time I thought it was a bit of a lame question, but that my answer to him was at least as lame: I babbled something that I would 1) judge a company by its performance – a long-term record of above-average profits – and 2) that employees should really be enjoying being part of that organisation. As said, at the time I thought it wasn’t my sharpest answer of the day, but when I thought about it for a while, afterwards, I started to really like the question; and even appreciate my answer to it! This might be my memory playing dirty tricks on me – in a feeble attempt to protect my self-image – but, admittedly, if asked today, I would likely give more or less the same answer to that superb question. I think most would agree that you cannot say some firm i...

Richard Hunt and Mat Hayward fom the University of Colorado were interested in employees who asked their employer for a loan, because they had no money but, for instance, had to buy a car, pay for their daughter’s wedding, medical bills, buy food and utilities, or faced home eviction. Therefore, they undertook to survey and interview small and medium-sized building contractors in Colorado.   No fewer than 67 percent of companies lent at least one of their employees money, with an average of about $1,100. Hunt and Hayward looked at 83 of them in more depth. The first thing they found out was that, of the 459 loans that these 83 companies in combination handed out to one of their employees, no fewer than 57 percent were completely informal; meaning without any contract or any other formal enforcement mechanism. Why would firms do this? Even if they wanted to lend them money, why not give them a contract for the loan? This was puzzling because making it an informal, instead of form...

It is well-documented in the literature on labour markets that personal connections, friendships, and other types of networks matter a lot for finding a job. For example, applicants with friends in the recruiting organisation are more likely to get a job offer. This may be perfectly rational for the recruiting firm; the friends of the candidate in the organization can be a great source of information about the applicant. As a result, the firm can be more assured of the job qualities of the person. Put differently, the candidate will pose less of a risk – in terms of potentially turning out to be a hiring mistake – if he or she has friends in the firm who have provided inside information. Therefore, employers may be more eager to hire new people who already have friends in the firm. But professor Adina Sterling from Washington University suspected there might be another reason why job applicants with friends in the firm might be more attractive to an employer than those without. F...

Ample research has shown that informal connections between people have a substantial influence on economic life, in terms who deals with whom and how well they perform. We call this “social embeddedness”, meaning that we are all embedded to different degrees in various networks of people, which influences our behaviour and success. One dimension which in a business context has received a lot of research is whether people have a joint educational background, particularly whether they are alumni from the same academic institution. Guoli Chen , Ravee Chittoor and Bala Vissa thought that this embeddedness research that is focused on educational background could perhaps be especially valid in a Western context (where most of the research has taken place) but that in a different context, such as India, different types of affiliations might also play an important role. Specifically, they wanted to focus on the role of caste (i.e. people being of the same or different castes) and language (in ...

We hear more and more talk about how the traditional model of business schools will be annihilated by the disruptive innovation of on-line education, so-called MOOC s (massive open on-line courses). An increasing number of voices can be heard to proclaim that business schools with their lectures and study groups are doomed, antiquated, overpriced, and that people who doubt that are just in denial and one day will wake up finding themselves obsolete and plain wrong. And, arguably, case studies on the effects of disruptive innovation conducted in industries ranging from airlines and newspapers to photography and steel mills, have shown that often the established players in the market are initially in denial, slow to react, suffering from hubris and, eventually, face crisis and extinction. Yet, when it comes to on-line education, and its potentially disruptive influence on higher education, including business schools, I doubt that on-line education will replace face-to-face lectures and ...

In our behaviour and beliefs, we are influenced by various hidden structures and characteristics of the people surrounding us. Over the past decades, for example, hundreds of studies on social networks and "small worlds" have shown that with whom you have had prior relationships, and how these people relate to each other, influences the information we receive, how much personal power we have, how likely we are to find a job, get promoted, how creative and innovatie we are, and so forth. This research on social networks basically draws lines between you and the people you know, and lines between those people you know who also know each other; lines between them and other people you don't know at all, etcetera, to reveal very different structures. We call these structures networks with or without "structural holes", with more or less "indirect ties", "network closure", and so on. Ample research has also revealed that, just like individuals, the...

Most corporations consist of multiple divisions. These divisions, which set their own strategy (what we generally refer to as “business strategy”), more often than not have very little to do with one another. Take Philips Electronics with its lighting, medical equipment, and consumer electronics; ThyssenKrupp with steel, elevators, and engineering services; or smaller companies such as Trinity Mirror with newspapers, printing, and digital services. They may not be like the conglomerates of the 1960s – you can see how their portfolio of somewhat related business came about – but, in reality, the various divisions and business units do operate completely independently from one another. Yet, corporate top management invariably tries hard to formulate an overarching strategy. It endeavors to stimulate cooperation across divisions (by repeatedly shouting really loudly that this should happen), sets up corporate shared services (which invariably are seen as a mere cost and nuisance by its...

For those of you out there who like to gleefully smirk about “strategy”; let me explain it immediately here at the start (and hopefully once and for all): Strategy is a necessary condition for success. But it is not a sufficient condition – we (strategy professors) are not that stupid. I’ll explain in a sec exactly what we mean by that – a necessary but not sufficient condition – but let me first explain the gleeful smirk. I again saw it last November, when the Monitor Group went bankrupt . The Monitor Group was a strategy consulting firm founded by Harvard Business School’s Michael Porter; seen by many as the founding father of the field of business strategy. When it went bankrupt I was gleefully approached by various people in various corridors making gleeful remarks that this strategy consultant’s strategy could not even save itself, and the famous strategy guru Michael Porter couldn’t even put together a company that made enough money to pay the rent. With the underlying ergo: se...

Diederik Stapel committed a truly massive fraud. And he wasn’t even very good at it. As we know now, he completely made up the data of many – and probably most – of his (very prominent) academic publications. I have written about him before , because obviously he forms both a fascinating and worrying case. It is worrying not because it makes me suspect there are probably more of such massive fraud cases that currently remain undetected – his fraud was so huge that I have trouble imagining – perhaps naively – that it is not unique. However, I have much less trouble imagining that for every case like Stapel’s, there are probably many more of much smaller fraud, which could easily add up to something even bigger. Stapel made up all his data regarding pretty much all his publications – and got away with it for a long time. How many people might there be out there who make up only parts of their data for some of their publications…? It is like cases of insider trading, or rogue investment ...

Earlier this week, I attended a seminar at the London Business School by Michaël Bikard – a PhD candidate at MIT – who presented his research on technological inventions. Such inventions are, of course, often patented. Examining these patents allowed Michaël to determine on which technological breakthrough discoveries these inventions were based. Hence, these inventions are basically commercial applications of the more fundamental discoveries. Fairly regularly, a university or a firm builds on and commercializes its own discoveries but, quite often, such an organisation may also be building on the discoveries of others. That is possible because such fundamental discoveries will often be published, in academic journals such as Nature or Science, and hence are accessible to everyone. And that’s when it gets interesting; because on whose discoveries are firms more likely to build when working on applied inventions: on the discoveries of universities or of other companies? It matters wher...

For many decades, newspapers were big; printed on the so-called broadsheet format. However, it was not cheaper to print on such large sheets of paper   – that was not the reason for their exorbitant size – in fact, it was more expensive, in comparison to the so-called tabloid size. So why did newspaper companies insist on printing the news on such impractical, large sheets of paper? Why not print it on smaller paper? Newspaper companies, en masse, assumed that “customers would not want it”; “quality newspapers are broadsheet”. When finally, in 2004, the United Kingdom’s Independent switched to the denounced tabloid size, it saw its circulation surge. Other newspapers in the UK and other countries followed suit, boosting their circulation too. Customers did want it; the newspaper companies had been wrong in their assumptions. When I looked into where the practice had come from – to print newspapers on impractically large sheets of paper – it appeared its roots lay in England. In 171...

About a year ago, a journalist asked me: “The current crisis; you could see it as the failure of corporate governance in general, and boards of directors in specific. What radical new ideas do we see coming out of business schools in terms of how we could organise governance and boards better?” I answered him what I thought was the truth: “Ehm…. not much really”. Last week, I was in Prague, for the Annual Meeting of the Strategic Management Society ; a bunch of business school professors talking about their research. I attended a session which featured a panel of five senior professors who specialise in governance and boards. I couldn’t resist asking them the same question as the journalist had posed to me: “What radical new ideas do you have in terms of how we could perhaps organise governance and boards better?” Their answer was basically the same as mine, with equal levels of eloquence: “Ehm… not much really”. In fact, after a slightly stunned silence, one professor replied to me: “...

“ Steve Jobs – the man was fallible ” is what I wrote in October 2011. I guess it seems pretty innocent now – although there may some remnants of people who still feel offended by it – but, believe it or not, one year ago it actually triggered a small barrage of hate mail . Since then, I have read or heard others describe him as a terrorist, an asshole , and a psychopath  (which, given that many US presidents have been shown to have had psychopathic tendencies may not even be unlikely). Hey, all I said was that he was “fallible”! But all these people, in the wake of calling him a terrorist, an asshole, or a psychopath, without exception, also described him as a genius. And a person who built the greatest company on earth, changing all of our daily lives in the process. But, in fact, I am not so sure of that either… I don’t mean this as some lame attempt at a final insult – suggesting that he wasn’t even responsible for building this great company – but as a genuine question: Would...

I recently discovered I am an academic fraud. Now, I am sure there must be people out there whose immediate response is “of course you are”, “knew it” or “I am not surprised”, but I was. Admittedly, what amounts to fraud when publishing as an academic isn’t always entirely clear to me – which, to some, is enough to be suspect (if not guilty-till-proven-innocent) already. I do get the extremes; I’m not that daft: If one writes up a truly new academic study giving the full account of the research underlying it, it ain’t fraud. If you make up the data – emulating the now infamous Diederik Stapel – it is. But sometimes in between, I am not always sure… Let me give you a few potential examples. • Last month, at the Editorial Board Meeting of the Academy of Management Journal , the editor reported that the journal would now start screening every submitted article for plagiarism. The software turns up whether parts of the text have been copied from earlier publications, including articles by...

When Laura d’Andrea Tyson was the Dean of London Business School – some years ago – she put together a committee to examine and reformulate the School’s strategy. Several professors sat on that committee. When I once asked her, having a drink at her home, why none of them were Strategy professors, she looked at me for about 5 seconds baffled. Eventually, she stammered, “yes, perhaps we could consider that in the future….”. It was clear to me, from her stunned silence (and she wasn’t easily lost for words), that she had never even considered the thought before. I, in contrast, thought it wasn’t such an alien idea; putting some strategy professors on the School’s strategy-making committee. We had – and still have – people in our Strategy department (e.g. Costas Markides , Sumantra Ghoshal ) who not only had dozens of top academic publications behind their names but who also had an eager ear amongst strategy practitioners, through their Harvard Business Review publications and hundreds o...

Stevie Spring, who recently stepped down after a successful stint as CEO of Future plc , the specialty magazine publisher, once told me, “I am not really the company’s CEO; what I really am is its Chief Story Teller.” What she meant is that she believed that telling a story was her most important task as a CEO. Actually, she insisted, her job was to tell the same story over and over again. And when she said ‘a story’, she meant that her job was to tell her representation of the company’s strategy: the direction she wanted to take the business and how that was going to make it prosper and survive. She felt that a good CEO should tell that kind of story repeatedly, to all employees, shareholders, fund managers and analysts. For, indeed, a good strategy does tell a story. All successful CEOs whom I have seen were great storytellers. Not necessarily because of their oratorical skills, but because the characteristics of the strategy they had put together lent themselves to being told like a...