Marina Gorbis's Blog, page 1534

Do You Really Want to Bet Against China?

The book Asia Rising was a prescient 1995 forecast of East and South Asia’s continuing rise to economic power, written by the Economist’s first Asia editor, Jim Rohwer. It is also mostly forgotten because, two years after its publication, East Asia fell into a deep financial and economic crisis that seemed to discredit the thesis. And after that, when China and India’s spectacular growth in the first decade of the new millennium proved Rohwer right in spades, he wasn’t around to say I told you so because he’d died (in a sailing accident) in 2001.

I knew Rohwer slightly, and I thought of him a lot last week during my first visit to Shanghai, a city that played a central role in his book. He had forecast that it would be the epicenter of the Asian boom, with 27 million inhabitants by 2020 and a place alongside New York and London as one of the world’s top three financial capitals.  Rohwer — at the time a resident of Hong Kong — also predicted that he’d be living there, “in a district … that in imperial days was known as the French Concession.”

Obviously, and sadly, that last prediction can’t come true. But one night last week I found myself sitting in the garden of a sturdy old house in the lovely, leafy neighborhood that is again known as the French Concession, drinking excellent wine poured by the China-born executive at a U.S. company who lives there, and concluding that Rohwer really had been on to something. Shanghai stands a good chance of meeting or surpassing his population prediction — it’s already at close to 24 million. It’s not yet quite the financial center Rohwer envisioned, because China so far hasn’t been willing to take the plunge into full, unfettered participation in global financial markets (although a new free-trade zone in Shanghai amounts to a major dipping of toes in the water). It does have the feel of a soon-to-be-inescapable global metropolis, the kind of vibrant, affluent, stylish, bold place that will be setting trends and shaping the world economy for decades to come.

Am I utterly confident in that prediction after four days in Shanghai and just 10 total in China? (I also visited Beijing, where I spent most of my time stuck in traffic, and the port city of Dalian, where I spent most of my time in this crazy-looking new conference center.) No, I’m not, and the superficial impressions of short-term visitors to China should of course be taken with many grains of salt.

But a visit to China, or at least to a few of the big, booming cities on or near its coast, cannot help but reinforce the view that it is the inevitabilists like Rohwer who have gotten Asia in general and China in particular right, while the doubters have gotten things wrong again and again and again over the past couple of decades. Nothing truly is inevitable in this world, and China now faces huge pollution problems, dwindling resources, an aging workforce, and a harder road to economic progress with the potential gains from cheap-labor-driven export growth mostly exploited — not to mention the potential for conflict between a populace growing accustomed to economic freedom and at least partial freedom of expression and a ruling political party determined to stay in control. No country has risen to economic greatness without crises and backward steps along the way. But China’s forward momentum is remarkable, and it is so huge and so far along the road to joining the world’s wealthy nations that from now on its crises and backward steps will likely be ours, too.

A core prediction of Rohwer’s 1995 book was that by 2020 the center of global economic gravity would have shifted from the mid-Atlantic to somewhere in or near Asia — with Asia’s economy bigger than those of Europe and the Americas combined. With only six years to go and Asia still quite a few trillions of GDP dollars behind, that seems like a stretch. But the relative change in fortunes has nonetheless been dramatic, and betting against Rohwer on Asia has generally been a bad idea. If only he were around to collect.

One other superficial impression from my China visit: I’ve long been partial to the argument that India possesses a long-run advantage over China because while its hard infrastructure of highways and railroads and airports and power grids is clearly inferior, its soft infrastructure of laws and politics and a free press is vastly superior to China’s. But China’s physical infrastructure just keeps getting more impressive. (Fun fact, from a fascinating article by Keith Bradsher in Tuesday’s New York Times: “China’s high-speed rail network will handle more passengers by early next year than the 54 million people a month who board domestic flights in the United States.”) And over the past decade, with the rise of social media and an independent business media and the continuing development of its legal system, China has made real progress on the soft stuff—possibly as much as India has in building airports and subways and surely more than India has in improving its electrical grid.

Cheating Makes People Feel Good (When There’s No Victim)

In a series of experiments, cheating on tasks improved people’s moods, says a team led by Nicole E. Ruedy of the University of Washington. For example, participants who were shown the correct answers to an intelligence test and used them to improve their scores registered a bump from 2.42 to 2.71 on a five-step positive-affect scale, while noncheaters’ moods declined slightly. The researchers point out that this “cheaters’ high” applies only in contexts with no obvious victim.

Why Large Companies Struggle With Business Model Innovation

Innovation success stories are all strikingly similar: a bright idea, supported by a zealot-innovator who sees it through. The windfall of goodies follows.

But failures happen for all sorts of reasons, and they often occur even when the idea is sound. This is especially true for business model innovations — when the new idea is not a product, service, or technology but a different way of engaging with the customers and earning revenue from them. Large organizations in particular struggle to implement these kinds of innovations, which is why you most often see them in the context of entrepreneurial ventures.

In our research on business model innovations in large companies, we’ve identified three common problems in executing or rolling out a new business model in large organizations.

Lack of top management support and attention 

Unlike other innovations, implementing a business model innovation often requires changes that affect multiple parts of the organizations. And while the R&D department can sponsor and push through a new product or technology, rolling out a business model innovation requires direct support from the top management.

This was a problem for one large financial services company we worked with. We developed dozens of new innovation ideas with managers in the company but the board, though initially enthusiastic, never took the time and energy to engage with the projects, directing their attention on day-to-day operational issues instead. As a result the innovation projects died on the vine.

The board of a large chemical company we also worked with took a very different approach. Here business model innovation projects were sponsored directly by the board member who would receive regular updates and who would fly in personally for interim reports.  The chief of HR personally tracked minor milestones of project implementations and personally followed up with groups falling behind schedule.

Reluctance to experiment

Even the most brilliant business model innovation idea is just that: an idea.  It relies on a lot of assumptions and judgments, and in the absence of a crystal ball, the best tool we have is experiments. But established companies are surprisingly bad at experimenting.

A large retail chain on the brink of bankruptcy refused to follow our advice to experiment with a drastic revision of its labor management practices in a few stores because the CEO was concerned about appearing “indecisive” and “unsure” about the correctness of the decision. The company did eventually go bankrupt.

This “all or nothing” rather than “experiment and decide” mindset reflects technology/product innovation paradigm in which a company cannot afford not to launch a full-scale support of one innovation because it requires a strong marketing message across all channels.  But business models are different: they often can be prototyped on the cheap by creating a “minimal viable business model” and experimenting with it.

Failure to pivot

Even when the company experiments with a new business model, it often fails to interpret the result of the test correctly and adjust an implementation plan accordingly. What may seem like a failed experiment might carry the message that an adjustment in the planned rollout of business model innovation is needed. And what looks like a successful test might not be really testing the most critical aspect of the business model.

Take the recent demise of the prominent startup Better Place, which promised to revolutionize electric cars by equipping them with switchable batteries.  During the test of the business model in Tokyo, Better Place replaced regular cabs with their electric battery-powered cars in order to demonstrate the viability of its switching station business model. The experiment was a success but the company went bankrupt shortly thereafter.

What the experiment had demonstrated was merely that battery switching stations work: it did not demonstrate that consumers would buy such cars, and people are understandably less finicky about taxicabs than about their own cars. One possible pivot after this test could have been to focus on selling to fleets (such as taxis), a route that Better Place did not appear to have taken. Another possibility ignored was to design a separate follow-up test to assess the likelihood of consumers actually buying Better Place cars. It might have told them that having just the one model to sell was unlikely to result in sufficiently large sales.

Business model innovation is a powerful driver of value and a surer way to succeed than technology, product, or service innovation.  Large companies have the resources and capabilities to create and exploit business model innovation ideas on an extraordinary scale.  But their failure rate is nonetheless unacceptably high because so far too many have not shown enough commitment and flexibility in the way they develop and roll them out.

Executing on Innovation

An HBR Insight Center




Innovation Isn’t Just About New Products
Three Signs That You Should Kill an Innovative Idea
We Need a New Approach to Solve the Innovation Talent Gap
Recognize Intrapreneurs Before They Leave

Lead Authentically, Without Oversharing

Lisa Rosh, assistant professor of management at the Sy Syms School of Business at Yeshiva University, explains how to build trust through skillful self-disclosure. For more, read the article, Be Yourself, but Carefully.

Download this podcast

In Praise of Humble First Jobs

Like many parents, I am troubled by the growing fixation with careers. We seem to be putting young people on the career treadmill at an earlier and earlier age. Choosing extracurricular activities, summer jobs, and even preschool is increasingly undertaken with a calculating eye towards securing career success.

I was therefore excited when I came across the New York Times article, “Why a Summer as a Chambermaid Can Be More Valuable Than an Internship.” I thought the author would share character-building life lessons gleaned from a summer spent “cleaning toilets and changing sheets” — pride in doing a good job performing unglamorous and perhaps unpleasant duties, appreciation for those who toil away at resorts, restaurants, and other establishments for the comfort of the privileged, and so forth.

My heart sank when I realized that this article was fundamentally no different from the career-promoting columns you find elsewhere, except that the “lessons” were drawn from working at a picturesque resort instead of a glum office. According to the author, the highlights from her summer as a chambermaid included meeting people who proved helpful professionally down the road, developing good work habits (in this case, reading newspapers daily), and stumbling upon a “spark” that opened up or deepened a career interest. In terms of lessons, how is this different from a positive internship experience? And doesn’t it reinforce the career obsession that the article — going by its title — seemingly derided?

Similar to many Americans, I held part-time jobs during college. While I did pursue an internship related to my field of study, I also worked as a busboy in a fine-dining restaurant and as a cleaner in a luxury goods store in order to pay tuition, rent, and other living expenses. Looking back, there is no doubt that the non-professional jobs taught me more.

At the restaurant, working among a highly diverse group — the staff comprised a motley crew of varying ages, ethnicity/geographic origin, educational background, and “life” experience — helped me realize that people share important traits: Most of us had pride in our work, yearned to be liked and respected by peers, sought to behave decently, and nursed modest as well as grand dreams, if not for ourselves then for our offspring.

Equally instructive was narrowing “gaps” with some colleagues. The restaurant’s assistant manager — a tall, dignified man who was unlikely to move up the managerial ranks because he didn’t have a college degree — barely hid his contempt for me when I first started. Over time, as I worked hard to prove that I belonged, he eased up and signaled his approval through the occasional wink and pat on my shoulder. He even started sharing with me his love of wine.

At the luxury goods store, it surprised and upset me that some salespeople looked down upon me — and treated me as largely invisible — simply because my job entailed cleaning the windows, vacuuming the showroom, and polishing the brass door handles. That experience seared into my brain the importance of according everyone — irrespective of their occupation, stature or station in life — a modicum of respect and regard.

Perhaps the most important life lesson from that period — though not always remembered — was that it didn’t take much for me to be happy.

Young people certainly need to plan carefully to achieve professional success in today’s highly competitive environment. But we mustn’t forget that a life is distinct from — and lasts longer than — a career and equal attention should therefore be given to building the foundation for a successful life, including through jobs as a chambermaid, busboy, or store cleaner.

Defend Your Research: Are Entrepreneurs Really Pot-Smoking Rebels?

The study: Ross Levine of the Haas School of Business, University of California at Berkeley, and Yona Rubinstein of the London School of Economics’s Department of Management studied the traits associated with successful entrepreneurs, using longitudinal data that included individuals’ responses as teenagers. They found that “aggressive/illicit/risk-taking tendencies,” when combined with intelligence and other factors, helped predict success in entrepreneurship.

The challenge: The paper generated numerous mentions in the press, many of which dwelled on the connection between smoking pot and entrepreneurial success. But do pot smoking, run-ins with police, and other such “illicit” activity as teenagers really predict entrepreneurial tendencies? Professors Levine and Rubinstein, defend your research.

Levine: The main finding there is that it’s a combination of smart, which we measure as learning ability where people in the survey are given exams when they’re teenagers, and their willingness to bend and even break the rules and engage in aggressive risk-taking behavior, which is measured by an index of the degree to which they engage in illicit activities before they entered the workforce.

HBR: What are we actually talking about in terms of what it is this Illicit Index is measuring?

Levine: This index is based on the answers to many questions. Have you ever taken anything by force? Have you ever stolen anything of $50 or less? Have you stolen anything of $50 or more? Have you been stopped by the police? Have you been arrested by the police? Have you been convicted? Have you been suspended from school? Have you done marijuana? Have you done higher drugs? Have you sold drugs? So, many, many, many questions.

We don’t focus on the specific questions. We use this as an overall indicator of the degree to which people engage in risky activities, the degree to which they bend or break the rules. Also, some of the questions ask about whether respondents have taken things by force, so this provides information about the degree of aggressiveness. So, [to] us this as an overall indicator of a particular set of non-cognitive traits.

So the illicit index is capturing much more than just ‘Did you smoke pot?’.

HBR: To what extent is it possible that the Illicit Activity index is measuring, because it’s self-reported, as much the person’s perception of themselves as the activity?

Levine: The illicit activity index asks very specific questions. It doesn’t ask to what degree did you engage in illicit activities? Rank this 1 to 5, which I think would be very prone to a different interpretation such as the one that you gave. [It asks] have you ever been stopped by the police? Yes or no? Have you ever been arrested by the police? Have you ever been convicted? So, it’s possible, but given the specificity of the questions, we don’t think that that’s what it’s capturing.

HBR:  We know that the successful entrepreneurs of incorporated businesses tend to rate higher on the illicit activity index when they’re teenagers. Do we know anything about there being a level of activity on the illicit index that is so high that it starts to become detrimental?

Rubinstein: You can see from the details that it’s more about circumventing the rules rather than becoming a criminal. It’s not that they’re more likely to be arrested and [be] jailed. They are more likely to steal less than $50, but it’s not so high a proportion of them stealing more than $50 in ’79 dollars. So, you can see it’s breaking the rules but not being professional criminals. Strictly following all of the rules when in high school is not the best predictor of a future as a successful entrepreneur.

Levine: It’s not that if you go around in the population and you simply say AHA, here’s somebody who engages in lots of illicit activities, this guy’s going to be an entrepreneur. It’s not that illicit activities by themselves exert this strong predictive power. It is the combination of “smarts” and illicit tendencies that predicts both entry into entrepreneurship and the comparative success of entrepreneurs.

HBR: What if people who are both smart and break the rules just are more likely to succeed at whatever they do and it’s incidental that they succeed as entrepreneurs?

Rubinstein: No, that is not quite right. The combination of “smart” and “illicit” traits is very powerful at explaining success as an entrepreneur, but this combination is not as powerful at accounting for success as a salaried worker.

HBR: One of the responses to your paper said that essentially what had been identified was entrepreneurship as “the ultimate white privilege”. Is that a fair assessment based on what you found? 

Levine: I would put it differently because focusing only on color misses the broader results of the paper. Entrepreneurs tend to be white, male, come from higher-income families with better-educated mothers, and [have] high levels of self-esteem. Moreover, entrepreneurs tend to be both smart and exhibit illicit tendencies as youths. Different from salaried workers and other business owners, entrepreneurs have a unique mixture of cognitive and non-cognitive traits.

Rubinstein: So, to the extent that the home environments are important in developing this unique mixture of traits, then people don’t face equal opportunities. But it’s this particular mixture of traits that makes them successful. It’s not purely the family income or purely their race or purely the education of their parents.

HBR: I was really interested in the way that you resolved the definition of entrepreneurship because self-employment is recognized to be an imperfect measure. Why is incorporated versus non-incorporated the better measure?

Levine:  The legal definition of what it means to be incorporated was created over many centuries with the very explicit goal of facilitating investment in innovative, risky, large, long-gestation investment projects. Although there are more costs, informational disclosure requirements, and accounting regulations associated with incorporating, people establishing innovative, risky, and large businesses find the legal characteristics of the corporation worth the extra cost. But people opening up opening up businesses that doesn’t involve what we would call entrepreneurial characteristics — that is, people opening up businesses that are not that innovative, risky, large and that do not involve long-gestation investments — are going to tend to organize such businesses in an unincorporated form because of the extra costs and organizational hassles of incorporating. Of course, some skeptics of our approach might ask doesn’t somebody just start as unincorporated and then if they’re successful, they become incorporated? What we find is that exceedingly few businesses change from unincorporated to incorporated, or from incorporated to unincorporated. All of this evidence points toward the view that people choose the structure of their business, i.e. whether it is incorporated or unincorporated, based on the planned nature of the business.

Rubinstein: Our work concerns a very particular set of people that are being attracted to this type of business organization. It’s a very particular mix of traits that were determined many years before they even were dreaming about joining the labor market.

Innovation Isn’t Just About New Products

The innovation mindset isn’t just about product innovation.

Some organizations have focused on product innovation for so long they don’t know how to innovate in any other areas. For example, in 2010, Microsoft —one of the world’s best product innovators for the last two decades — launched a social phone called Kin. The product was a complete disaster. Within six weeks of the launch, the entire product group was shut down, and, according to their earnings reports, Microsoft took at least a $240 million write-off.

How could such a great product innovator strike out so fast? In today’s climate, it happens to the best.

Most organizations focus on building short-term product innovation engines. However, most products have little sustainable competitive advantage and never generate a profit; those that do are often quickly copied by the competition, negating any long-term advantage. The result: a significant investment in product development, without a commensurate return on investment.

To achieve sustainable growth, companies must better integrate product innovation with business model, process, and service innovations.

Transforming a company requires a dedicated process for nurturing and commercializing valuable ideas. This type of commitment to innovation — the surest way to achieve meaningful and lasting differentiation — requires a dualistic mindset: the organizational ability to deliver near-term results and also prepare for perpetual results year after year.

Barriers and Risk

Based on our field work with Global 2000 size companies, we have identified five barriers to organizations achieving the dualistic mindset:

Absence of a required mindset to harvest and manage great ideas: Sony had the ideas and engineering competence to build the first iPod equivalent, but it couldn’t commercialize those ideas because of its own internal battles.
Lack or misalignment of resources available for investment in innovations: In a matrix environment, many organizations compete for the same funds, which leads to duplication of resources and results in inefficiencies and waste. The challenge is not that an organization has insufficient resources to invest in innovation; the challenge, instead, lies in where to most effectively funnel those resources, and how to do it.
Human capital assets which are under-utilized and disengaged from an organization’s creative capacity:  When organizations become huge, their pace of change and pace of action often slows down. This leads to lack of urgency. Larger organizations with many people focused on execution can be slow to take risks and design new experiments.
Broad product and delivery capabilities which dilute focus on emerging and disruptive opportunities: In the financial services industry, since the mid-1980’s the typical company has gone from handful of delivery channels (branches, relationship managers) to 15-20 channels (branches, direct mail, internet, national sales force, affinity marketing, etc.) while expanding its product offerings tenfold. “Anytime, Anywhere” banking has become the price of entry as providers strive to meet the need of large and diverse customer bases.
Organizational orthodoxies that hold on to the past and discourage risk-taking: Every organization has organizational memory which can create complacency and prevent forward progress. When memory becomes a way of life, it obstructs innovation and out-of-the-box solution development.

Large organizations have more resources, more talent, and more market reach than the smaller players. But we often see new start-ups coming in, and in due time, dominating an industry. Why does this occur? Because the large-organization leaders have done little to remove the barriers and risks above. They lack clear innovation intent.

Innovation Intent

Innovation intent answers the question, “What will innovation give me that nothing else will?” It clarifies strategic direction for your innovation focus and efforts. It is top management’s directional mandate on how the firm is going to win using innovation, articulated by organizational leaders and the senior executive team (and sometimes the Board).

Here are five indicators of authentic innovation intent:

Innovation is considered as a clear differentiator for long-term growth and success.
Innovation is already part of the strategic vision and value-defined, and there is a strong desire to make it part of everyone’s job.
There is clear, authentic sponsorship from the C-Suite for innovation and strategic investments.
There is balance between the innovation and performance engines.
Senior leaders are committed to role-model innovation behaviors – in spite of pressure to stay focused on the performance engine.

To help clarify innovation intent, pose these questions to your most senior leaders:

How much more cost savings can we squeeze out of our current business? Are the incremental savings worth the time spent by managers?
How much more top-line growth can we achieve out of our current business? Is the cost of new-customer acquisition going up?
To generate real wealth, how many share-increasing-tactics remain to be tested beyond the ones already tried, such as buy-backs, spin-offs, and other forms of financial engineering?
To achieve scale, how many more mergers and acquisitions can be absorbed before altering the business model and losing strategic focus?
How different is the business model and the value proposition it offers compared to others in the marketplace?

Innovation intent must be vividly clear for everyone in your organization, especially at the top. The intent must be concise to help drive alignment to business initiatives and must help articulate specific employee behaviors necessary at all levels for an innovation climate to take root. When designed correctly, innovation intent is clearly linked to and driven by the business strategy.

Executing on Innovation

An HBR Insight Center




Three Signs That You Should Kill an Innovative Idea
We Need a New Approach to Solve the Innovation Talent Gap
Recognize Intrapreneurs Before They Leave
The Right Innovation Mindset Can Take You from Idea to Impact

How We Revolutionized Our Emergency Department

How does an emergency department (ED) go from the 6th to the 99th percentile in patient satisfaction, while improving dramatically in virtually every performance and efficiency category? If it were a Toyota vehicle-manufacturing plant, a key enabler would be a rope strung along each production line above team members, the Andon Cord. The cord can be pulled by anyone encountering a quality problem or needing assistance from the team leader. When the Andon Cord is pulled, music and lights alert the team leader, and everyone’s attention is turned to collaborate and solve the problem.

In 2009, we pulled the Andon Cord.

We provided care for 57,532 patients that year, and our quality and safety metrics were excellent. Our patients, though, on average, had to endure a wait of more than one hour to see a physician. More than 3 percent of our patients simply walked out, reasonable by academic medical center standards, but by no account desirable. Although patients rated the quality of care by physicians and nurses as very high on standardized surveys, overall patient satisfaction with our emergency department experience ranged between the 6th and 40th percentile when compared to similar sized academic emergency departments.

We were also overcrowded. A 2007 analysis showed that for the volume of patients we served, our physical footprint was undersized by nearly 50%. Patients deemed sick enough to be admitted to the hospital spent hours in the emergency department “boarding,” or awaiting transfer to an inpatient bed that was already occupied, further burdening already insufficient resources.

A planned doubling of our square footage was derailed by the financial crash, which depleted capital, but in some ways this turned out to be a blessing in disguise. With funding available for only few additional beds, it was clear that we couldn’t just get bigger; we had to get better. And to achieve our aim of “VIP care for every patient, every time,” we not only had to re-engineer our processes; we had to fundamentally change our culture.

Rethinking the time-honored processes upon which our daily operations depended would require overcoming the complacency that pervades many large academic medical centers. To foster a common sense of urgency, every member of our leadership team was provided a copy of John Kotter’s “Our Iceberg is Melting.”  By the time we got to work, no one was under the illusion that we could continue on with business as usual.

We enlisted experts in operational effectiveness and service excellence, and both leaders and front line staff were trained on the principles of lean manufacturing. Initially described by John Krafcik at MIT in the late 1980s, lean principles build upon the quality improvement processes of the Toyota Production System (TPS). Healthcare institutions began to experiment with lean in the early 2000s, and some emergency departments were among the early adopters.

Over the next 18 months, our team embraced lean principles, looking to improve value and reduce waste at every step along the patient journey, from arrival to ultimate disposition.  We identified key stakeholders: front line staff including physicians, nurses, resident physicians, physician assistants, technicians, and administrative personnel, who formed “work out” teams dedicated to process redesign. Teams were supported by analysts, who provided detailed analysis of arrival rates, process times, census, and staffing.  We found, for example, that at key times of day nursing triage was a significant bottleneck to patient flow, even when beds were available in our patient-care areas. But by adopting an “any-patient-to-any-bed” approach we were able to largely eliminate the need for traditional triage, except during periods of substantial patient surge.

During rapid-improvement events, teams mapped processes and designed Ishikawa diagrams to aid in identifying cause and effects of waste. Teams conducted dozens of tabletop and live walk through trials of new pathways and innovations. Ideas succeeded and failed in equal numbers; the bar for success was high and immovable. Standard work processes designed to ensure reproducible, predictable outcomes and minimize variation were defined collaboratively. We painstakingly studied, measured and learned from each trial. Then we did it again.

Streamlining our front-end processes and reducing “door to bed” time allowed us to cannibalize much of our waiting room and triage area for badly needed patient care space.   Combining this with the modest additional space provided by the hospital created a new patient care unit with 12 beds.

We began to see improvements almost immediately, and the results have been largely sustained.  From a baseline of 65 minutes in FY09, the average “door to bed” time has declined to 22 minutes in FY13, with more than half of our patients in a bed within 9 minutes of arrival. Walkouts have declined by more than 50%, from an average of 3.3% per month to less than 1.5%.  Our patient satisfaction scores have risen from the lowest quartile to as high as the 99th percentile, and have remained at or above the 90th percentile for 7 of the past 9 quarters. Patient comments confirmed that we were hitting our targets.  “Best experience I ever had in the ER.  Keep doing what you’re doing!” “I was surprised at how fast I was examined & treated”, “Excellent care – was always kept informed of what was happening, why all decisions made…No delays.” In the interim, our volume has increased to over 60,000 visits annually.  One area where we have yet to see improvement: inpatient boarding hours have also increased, an ongoing stress test for our new systems.

In the current healthcare climate, we face increased numbers of complex or seriously ill patients, an aging population, greater costs, declining reimbursement and waning resources. Looking at our care through the eyes of our patients compelled us to pull our Andon Cord.  Will you?

Follow the Leading Health Care Innovation insight center on Twitter @HBRhealth. E-mail us at healtheditors@hbr.org, and sign up to receive updates here.

Leading Health Care Innovation

From the Editors of Harvard Business Review and the New England Journal of Medicine




Leading Health Care Innovation: Editor’s Welcome
How to Get Health Care Innovations to Take Off
Value-Based Health Care is Inevitable and That’s Good
The Downside of Health Care Job Growth

The Case for Letting Alibaba Ignore Its Shareholders

When the prototype of the modern publicly traded corporation, the Dutch East India Company, was established in 1602, its outside shareholders didn’t have a lot of say in the matter.

They were welcome to put in money — and to take it out by selling their shares to others. But the company was chartered by the Dutch parliament not as a vehicle for investment but to promote the country’s interests. Those who bought shares in 1602 and after were to play no role whatsoever in its governance. They didn’t choose directors, who were appointed for life by the mayors of five Dutch cities. They were supposed to get dividends, but it turned out to be quite unclear when they’d be paid or how big they’d be.

In fact, as J. Matthijs de Jong details in a fascinating 2010 paper on the subject, no dividends were paid for the first eight years of the company’s existence. The cost of equipping a ship and maintaining a base of operations in what is now Indonesia, and the conservatism of the directors, meant no rewards for the shareholders. A payout finally came in 1610 — in mace (a spice), not cash — only after a short-selling campaign by a disgruntled former investor.

After that the company did start paying occasional cash dividends, but didn’t do much else to accommodate its outside shareholders. It was only when its charter came up for renewal in 1623 that a real opportunity presented itself for change. A group of dissident shareholders, angry about the low dividends and the growing wealth of the company directors, published a series of pamphlets blasting governance at the company and demanding a big payout, in cloves. The Dutch government listened, and the new charter ended up providing for regular audits of the company’s books, limited terms for the directors, annual dividends, and the appointment of a second board (still appointed by the cities, not the shareholders) to oversee the inside directors.

There are two ways to look at this. One is as part of an inevitable progression toward a truly modern corporate form in which shareholders reign supreme and corporate managers efficiently do their bidding. Another is an indication that the governance of corporations is about compromise and conflict, and different structures are most appropriate for different kinds of companies and different stages of their development. By neglecting shareholders in its early years, the Dutch East India Company was able to hold onto and reinvest its profits, allowing it to build itself into a formidable economic and political force. Later on that structure lent itself to abuse, and it was good for shareholders to get more say. But there is not one right way to organize a corporation.

This brings us to Jack Ma and his company, Chinese Internet giant Alibaba. Ending months of speculation, the privately held company broke off negotiations this week with the Hong Kong Stock Exchange and began moving toward an initial public offering in New York. The reason: the Hong Kong exchange was not willing to bend its rules against dual-class shares, while Ma and his management team want a share structure in which they maintain control of the company even if they sell the majority of it to outside investors. The models he reportedly has in mind are Google and Facebook, whose founders have used special shares with extra voting rights to maintain tight control even as the companies have waded into public markets. But it could just as well be the Dutch East India Company.

The Hong Kong Exchange doesn’t allow this kind of thing because it follows the modern British model in which outside shareholders are to be protected and catered to at all costs. The U.S. is more conflicted, and allows for multiple classes of shares and lots of other violations of the shareholder-first ethos — although laws and regulations here have been headed in a more shareholder-oriented direction for the past couple of decades.

This difference in rules has been depicted in some quarters as reflecting poorly on the U.S. As “deal professor” Steven Davidoff wrote in The New York Times, “the United States has become the place to avoid more stringent regulation.” But are the Hong Kong rules really more stringent, or just less imaginative?

Davidoff cites evidence — a paper by Paul Gompers of Harvard Business School, Joy Ishii of Stanford Business School, and Andrew Metrick of the Wharton School — that dual-class shares lead to inferior share-price performance. In fact, there is a ton of evidence that pretty much any governance structure or rule that entrenches current managers and makes it harder for outside shareholders to throw them out depresses share prices. The question is whether that’s really the only metric we should be paying attention to.

In his book Firm Commitment and in a piece he wrote for HBR.org, economist Colin Mayer, the former dean of the University of Oxford’s Saïd Business School, argues that extreme attention to shareholder rights may be partly responsible for the sorry state of the British economy and the weakness of the country’s corporations. He writes:

Exemplary as a form of control the British financial system might be, it systematically extinguishes any sense of commitment — of investors to companies, of executives to employees, of employees to firms, of firms to their investors, of firms to communities, or of this generation to any subsequent or past one.

It may be that all Jack Ma and his fellow Alibaba executives are looking for is a lax regulatory environment where they can keep their jobs and fill their pockets without constant harping from outside shareholders. But it may also be that they’re trying to carve out space for the kind of commitments that can make their company endure. The evidence from the Netherlands 400 years ago suggests that it’s probably a bit of both.

Update: A couple of well-informed readers have told me on Twitter that my claim that the Hong Kong exchange “follows the modern British model in which outside shareholders are to be protected and catered to at all costs” is a bit of an overstatement. It just doesn’t happen to allow dual classes of shares.

The Three Tribes of Social Shopping

Do people share what they plan to buy, or buy what they share?

That’s the question my colleagues and I had to ask after discovering that a significant number of Pinterest users go on to buy the items they have pinned.  As we reported in Harvard Business Review, 21% of Pinterest users say they have purchased an item in-store after pinning, re-pinning, or liking it on Twitter, and 36% of users under 35 said they had done so. Look beyond in-store purchases, and the numbers are even bigger:

29% of Pinterest users have purchased something (in-store or online) after sharing or favoriting it on Pinterest
22% of Twitter users have purchased something after tweeting, retweeting, or favoriting on on Twitter
38% of Facebook users have purchased something after liking, sharing, or commenting on it on Facebook

There are two possible explanations for why so many social media users report buying items they have previously shared or favorited online. One is that customers are sharing items they are already planning to purchase. The other is that the social discovery and sharing process is helping drive customers towards the cash register.

As it turns out, both dynamics are at play. Vision Critical asked social purchasers two different questions to help us understand how much of social media-inspired purchasing represents new sales, and how much is accounted for by purchasers customers probably would have made anyway: Were you already thinking of making this purchase when you shared it on social? And how long did it take to go from sharing to purchase?

Together, these questions helped us identify three discrete tribes of social media shoppers:

Questers share items on social when they are in the process of actively researching a purchase. These are the people who share what they already planning to buy. All three platforms have roughly the same proportion of questers: they make up 20-25% of social purchasers on each of the three platforms.
Leapers share items they had not previously thought about purchasing. These are the people who represent genuinely new sales for the retailer. Among the three platforms we focused on, Pinterest purchasers are the most likely to be leapers.
Thinkers share purchases they are vaguely contemplating, but aren’t actively researching. Some of these purchases may have been eventually made anyhow, but social can help nudge the customer towards purchasing one product rather than an alternative. Twitter is the platform with the highest proportion of thinkers.

Underlining the relationship between sharing and sale is the timing of sharing relative to purchase. About half of social-inspired purchases are made within a week of sharing, and 80% are made within three weeks. Not surprisingly, questers are the tribe most likely to make an immediate purchase: more than a quarter of questers purchase within 24 hours of sharing, while less than 15% of thinkers and leapers move that quickly. That’s good news for marketers — you have a little time to reach those thinkers and leapers, and get them into your store rather than your competitor’s.

While thinking about the three tribes can help us understand the different paths from sharing to purchase, it’s important to recognize that people can move between tribes. Someone may be a “thinker” when it comes to making an electronics purchase (and indeed, we see the highest prevalence of “thinker” behavior when it comes to making tech purchases), and a leaper when it comes to food or fashion.

For marketers, the opportunity of social lies in the ability to reach and inspire the “thinkers” and “leapers” — to find and drive sales from people who might never otherwise move from interest to commitment. And you have two different ways to do that: by creating social media campaigns and social media-friendly content that inspires people to share your products and services, and by undertaking the kind of social media monitoring that allows you to identify the thinkers and leapers at the moment of sharing, so that you can move them towards a purchase during the window in which they are most likely to buy.

To accomplish either goal, you need to understand the specific way social sharing triggers or signals the decision to purchase. That means asking your customers about their own social media-sharing habits, how sharing affects their intent to purchase, and how they move from sharing to purchase across each social media platform they use. But that is only possible when you take social media seriously not only as a signal of purchase intent, but as a way of driving it — all the way to the cash register.