Marina Gorbis's Blog, page 1577

Six Fundamentals Every Entrepreneur Needs to Succeed

As an entrepreneur who founded and runs a successful and growing business, Getaroom, I see many entrepreneurs with great ideas but no clue how the business will be profitable. For certain websites or apps, if the idea is good enough you can get lucky and sell the business after you get a spike in interest. However, most companies require considerable planning and need both a competitive advantage and a solid business plan in order to succeed. For my company, I focused on a big market and found a profitable and attractive niche.

If you're thinking about starting your own company, here's my advice:

Set realistic expectations.

While enthusiasm and faith are needed when planning out your business, you do want to temper those thoughts with realism. Your projections for the business should not be wildly optimistic so you can manage your expectations and those of any partners. Consider the type of business and industry. Are you selling a lower margin product that will take time to gain traction? Or are you taking a shot with an app that might be a dud or might attract 100,000 downloads a month? Plan for a realistic amount of sales and interest so you can conservatively manage your finances. Are you counting on advertising to bring in customers? Remember that most advertising simply does not work, and you'll need to attract customers through other channels and the power of word-of-mouth referrals.

With Getaroom, I understood the lodging market is massive and knew a niche player could capture a large amount of revenue, but my initial projections were modest and I watched expenses closely.

Have a clear value proposition.

Your product or service should offer true value. The value assessment has to go beyond your own biased opinion. You're invested in the business, so of course you'll feel it has value for your customers. Gather some outside counsel to be sure the value is clear and easily explained to your targeted audience. Envision someone referring your service to a colleague, saying "You need to get Service X because it will help you do A, give you B, and offer you insights into C." If the value proposition is unclear, then you're likely setting up the business for failure. Getaroom.com's value proposition is based upon superior pricing and service. In an environment with rate parity such as in lodging, companies that can offer consumers reduced prices and exemplary service are able to really stand out as valuable.

Offer unique attributes.

Does your intended service or product bring something new to the consumer? If they already possess what you are offering, can get it for free, or can an easily acquire it from myriad competitors, then how do you expect to stand out? Will customers be able to identify and discuss your competitive advantage? Getaroom stands out because it presents a new model for hotel room booking. It features an unpublished rate program which gives consumers typically 10 to 20% (but up to 70%) off standard rates at thousands of partner hotels who want to move room inventory. What is markedly different about the company is these rates are only available through the Getaroom.com call center. The model is also different because we tell the traveler the name of the hotel, but not the actual rate until they book, while other models offer the rate but not the hotel name. We serve a clear segment of travelers who are looking for deals, but who also want to control where they stay. That sets us apart from our competitors. What attributes would set your venture apart from the competition?

Find your niche in a sizable market.

Knowing your clear value proposition and your unique attributes will help you determine where you fit in the market. We don't offer every possible hotel, but we do offer unpublished rates for tens of thousands of the very best. Lodging is a $500 billion annual business, so for Getaroom, we don't require too much of a share of that market sum to reap considerable rewards. Travel is a good market for entrepreneurs, but it's not the place for copycats. You can't compete with big booking sites unless you have an angle. Several of the large online travel agencies have a model of offering access to all hotels in every location; their angle is the sheer breadth of coverage. Others travel sites outsource their call centers overseas and really push all interactions to be electronic.

At Getaroom.com, we are a deal and value site, where we use pricing and a well-trained call center to stand out. We built a U.S.-based call center staffed with highly trained agents so they can offer enhanced services and act more like a travel agent than just a process person.

In large and expanding markets, there is always a value proposition to be found with niche players who can provide a compelling service. In travel, there is always someone looking to help research it, track it, or provide services for certain areas or class of travel. As long as the niche service has a true value proposition and a reasonable market audience, it can pull in profits.

Design a sound business model.

An entrepreneur can have the most unique product offering, one that offers tremendous value, but if her underlying business plan is not sound she has nothing. A quality plan is the key "how" of a business: how you are going to move forward with your service while keeping costs down? How do you ensure there will be demand for your product that can be reasonably sustained over the long term? How will you market your product or service to the intended audience on a reasonable budget? You need to be a hawk on the bottom line and ruthlessly manage top line expenses. The hard truth is that most businesses fail, and not always because the idea itself was not sound. A well-constructed economic plan does not of course guarantee success, but it is necessary and can turn a failure into a learning experience instead of a catalyst for personal financial ruin.

A sound model doesn't mean you can't deviate from the model and innovate when it is the right call. For instance, we instituted flash sales, where travelers have a limited amount of time to book, typically up to 24 hours. We usually offer these sales at 10 to 60% off, which creates an incentive for immediate action. This model is also a great driver for traffic to the site, as these sales are not pre-announced, but just pop up whenever the timing is right.

Pull in customers cost-effectively

Once you have the product or service and a solid plan lined up, you need to drive customers to make purchases. As I mentioned before, advertising typically does not work. Look at inexpensive promotions or contests and your social media strategy as cost-effective ways to attract consumers. Encourage conversations about your brand by asking for reviews or finding a way for consumer-created content that shows off your product's unique features.

While none of this advice may seem particularly surprising, I'm always amazed by how many entrepreneurs have neglected to do this homework before they launch. If you want to beat the odds, make sure you've carefully thought through these non-negotiables before you start your business.

Reinvigorate a Disengaged Sales Force

A stunning 70% of U.S. workers say they are "not engaged" or "actively disengaged" with their work, according to Gallup's ongoing study of the American workplace from 2010 through 2012. Sales reps — the people who represent your firm with customers — are not an exception. What must you do, at a minimum, to regain the trust and recharge the talent of sales people? Two steps are foundational.

1. Understand and communicate, in the C-Suite as well as with the reps, the crucial role played by the sales force in strategy implementation. Some might say that sales forces have less relevance because customers are buying more online. In 2012, according to U.S. Department of Commerce data, online spending reached almost $200 billion. That may sound like a lot, but it's less than 5% of total retail spending (even in a recession) and less than half of what just one retailer, Wal-Mart, sells annually. In fact, if you peek behind the server farms of online firms themselves, you will find traditional face-to-face sales organizations as the engine of revenue acquisition and firm value. At Groupon in 2012, over 45% of employees were in Sales; at Google, it's over 50%; and at Facebook the sales force's ability to translate "likes" into advertisers will make or break that company's valuation and fortunes going forward.

The issue facing most sales forces is not disintermediation. What is true is that online options are realigning sales tasks. Consider the century-old practice of selling cars at dealers. Relatively few cars are actually bought online. But an estimated 80% of Americans first research the purchase via Edmunds.com and other online sources. They visit dealers less frequently and sales reps must be better at closing the sale with more-informed customers. Selling skills are now even more important. The options available to customers put greater pressure on the rep's value-add during the sales experience, and this engagement has implications for the next foundational element.

2. Redesign processes with sales tasks, not the technology, in mind. Many C-suite leaders, years removed from actual customer contact in the field, welcome "Big Data" but don't understand the realities facing their salespeople during an information revolution. It's estimated that each U.S. firm with more than 1,000 employees already has more data in its CRM system than in the entire U.S. Library of Congress. The role of data is not to make a manager sound "analytical." In business, it's more important to be contextually right and make decisions that people can execute effectively than it is to be school-smart or statistically significant.

New technologies can improve lead generation and qualification (through Search Engine Optimization techniques and tailored online communities), determination of specifications (the use of third-party websites, webinars, and online demo's), and price negotiations and closing (online tracking systems and pricing algorithms). But despite good intentions, many Big Data transformations are failing because firms haphazardly download data onto sales reps. Communication is mainly one way and there is too little of it. Smarter firms complement training with use of resources like Darwinator, a web-based tool that enables individuals to vote on ideas in a fast and effective manner. Others help reps cope with the growing analytical requirements of sales tasks through tools like visualizing.org, which helps to convert big amounts of spreadsheet or correlational data into value propositions that can be communicated to customers. Equally important, firms should use these capabilities to off-load administrative tasks from salespeople to increase selling time. And that's a managerial and organizational issue, not simply a data or sales issue. According to Gartner Research, chief marketing officers will soon spend more on IT than CIOs, increasing the need for coordination between marketing and sales throughout the buying cycle at many firms. At a minimum, these groups need a shared understanding of their firm's strategy, value proposition, key sales tasks, and relevant selling behaviors.

Ultimately, companies don't execute strategy; people do. And talented sales people remain the key lever for strategy implementation in most firms. But companies must be worthy of real talent and, to benefit from that talent, provide the right environment for those people to flourish.

Use Catalytic Questioning to Solve Significant Problems

For almost twenty years, I have refined a systematic approach to uncovering the right questions—those that start to unlock entirely different solutions and perspectives—with hundreds of teams around the world, from the C-suite to the shop floor. The method, which I now call Catalytic Questioning, incorporates five simple, unconventional steps to help change our questions — and creatively solve significant problems both in our personal and professional lives:

Step 1: Find a white board or flip chart where your team can do its question-centric work (for what it's worth, standing up seems to jumpstart better questions than sitting down). Step back for a brief moment, take a deep breath, and try your best to check your assumptions at the door. Question-centric leaders like Pierre Omidyar, founder and chairman of eBay, consistently work at "wiping the mental slate clean," tackling a problem with fresh eyes through fresh questions.
Step 2: Pick a problem that your team cares about intellectually and emotionally. Engaging head and heart matter—if your team doesn't care, the next steps will undoubtedly stall. Also, double check to make sure that the problem (or opportunity, for the optimists of the world) is one that you honestly don't have an answer to. It makes the quest much more intriguing.
Step 3: As disruptive innovators, from Albert Einstein to Jack Dorsey, put it, "Question everything!" Engage in pure question talk, with one team member writing down each question verbatim. This gives everyone the chance (especially introverts) to see each question, reflect a bit, and then create even better ones. Don't give preambles to the questions and don't devote any time or energy to answering them. Just ask. Ask as many questions as you can. Go for at least 50, perhaps 75. But don't give up when your mind goes blank around question 35. Savor the momentary dead space and continue the search for even better, more provocative questions, which will come with patience and persistence. It usually takes 10 to 20 minutes to exhaust a group's questioning capacity. Push for exhaustion.
Step 4: Step back and decide which questions on your list seem most "catalytic," or which ones hold the most potential for disrupting the status quo. Focus on a few questions that your team honestly can't answer but is ready and willing to investigate. Winnow your questions down to three or four that truly matter.
Step 5: Get to work! Find some answers. Questions alone might be clever, but as Jeff Dyer, Clayton Christensen, and I found in our research behind The Innovator's DNA , they rarely produce positive impacts. If you prefer observing the world to get answers, go out and make some systematic observations. If you love to network for new ideas, go talk to people who don't think or act like you (those from a different industry or country-of-origin are prime candidates) to get diverse responses to the questions. If you get new ideas by experimenting, go to work with a series of rapid prototypes—fast, cheap, virtual experiments to get instant feedback about which potential solutions matter most. After doing your homework as a team, regroup and use the best traditional brainstorming techniques to leverage all your new input into creating even better solutions to your problem. And if needed, engage the Catalytic Questioning process again to help deliver even deeper insight, and ultimately better solutions, to your challenge.

Becoming a Question Catalyst

At a recent World Economic Forum workshop, this five-step Catalytic Questioning process took 24 minutes. It rapidly engaged the group, turbocharged a subsequent brainstorming session (conducted right after by Tim Brown from IDEO), and helped identify several intriguing new areas of potential industry disruption. During the debrief, most participants agreed that asking nothing but questions was a surprisingly powerful tool for revealing innovative solutions. They left the session highly energized to become even better question catalysts within their everyday work.

Across the globe, I have seen the same process—and success—occur with thousands of executives and entrepreneurs, including Ahmet Bozer, president of Coca-Cola International, who realized, "if your questioning muscles have atrophied, it's time to start exercising those muscles." Catalytic Questioning ensures this essential leadership skill improves over time to unlock even better, more creative solutions. What you discover in this questioning quest might not only surprise you, but may also unearth an entirely new direction for your team, organization, or career.

Why You're More Deferential to Peers than the Boss (in Your Emails)

In emails, employees tend to show much more deference — using hedges and disclaimers such as "This may be a bad idea, but..." — to people at their own level than to higher-ranking employees, according to a study that included an analysis of hundreds of corporate emails. Employees load their messages to peers with deferential and polite language in order to avoid suggesting that they're trying to inflate their own status, say the researchers, who were led by Alison R. Fragale of the University of North Carolina. By contrast, employees' emails to bosses contain relatively few deferential phrases.

We Appreciate Your Business. Please Stay on the Line.

On a recent business trip I somehow left my credit card at a restaurant in San Juan. No big deal, I thought: Simply call the bank. When I got home, I eventually found, hidden on a remote corner of the web site, the number to call for lost cards. I was assuming this would be an important call for them, but I was left on hold to think about the power asymmetry between service provider and customer.

During this time I was subjected to sales pitches for sundry credit-protection services and told it "only takes a few minutes to enroll." Clearly, this institution believes it's less important to meet your service needs than to get you to spend more. But what could I do? I couldn't hang up. I had to resolve the problem. So that's how I spent the next 31 minutes.

I experienced a similar asymmetry when a credit-card company informed me that the terms and conditions for claiming hotel rewards had changed. For example, the number of miles needed for a free night in a top-category hotel room had gone from 125,000 to 160,000. "If you're not satisfied with these changes you can cancel your account by calling us," the statement said — hardly an attempt at building customer satisfaction or loyalty. Just as before, I was stuck; I didn't want to cancel the agreement and forfeit my accumulated miles.

Customers — maybe even your customers — experience this kind of thing every day. They feel small compared to your bigness. They feel weak in comparison with your power. But it doesn't have to be that way.

Companies in a few industries have adopted policies of transparency and accountability that reduce some of the asymmetry. Airlines are a good example. JetBlue offers rebates under clearly stated circumstances: If your flight is delayed an hour and a half to an hour and 59 minutes, you get a $25 credit; if you're delayed six hours or more, you get a round-trip ticket.

But airlines did this in response to new government regulations establishing fines for companies that leave customers sitting for hours in planes on the ground. Those regulations themselves were the result of a push by customer-advocacy groups such as FlyersRights. If the airlines had assumed that consumers were weak and insignificant, they were wrong. Consumers got so mad that they figured out how to be powerful.

Your company shouldn't wait for customers to do that. The time to revisit your customer guarantees is now.

Here are a few proactive steps a company can take to reduce the asymmetry that customers despise:

Make it an ironclad policy to honor original contractual agreements, come what may. If you're a credit-card company or a hotel and you've told customers they need a certain number of miles or points or whatever to get a free room, keep the requirement at that level. If this becomes a burden for the company, make it harder for customers to earn future points. That way you're not punishing people you made a commitment to in the past.
Don't punish customers by manipulating the rules. Companies that play bait-and-switch not only create dissatisfied customers but generate resentment and end up with lower loyalty rates. For example, phone companies that promised unlimited data plans and then, at contract renewal, changed the mechanism to retain these functions are seen by customers as unreliable partners.
Explain why an action is being taken, and be trustworthy. If a call center is busy, don't tell customers the hold time is five minutes and then, after four minutes (as higher-priority customers enter the queue), revise that to 10 minutes. If the wait is going to be long, have the system take customers' numbers and call them back — and if you say you're going to call back, do call back.
Be there for customers when they need you. If you've explicitly or implicitly offered a certain level of service, just provide it. Don't try to nibble away at its corners or mindlessly try to turn each service encounter into a sale. Customers don't enjoy hearing recorded pitches when they're holding for your service reps.
Don't conceal important information. Don't take the phone number off your web site or hide critical service information deep in a site. FAQs are great, but customers still need to talk to your people. Open the person-to-person channel, and monitor it: Measure the call center's queue length, answering speed, and abandoned-call proportion, as well as customers' rate of zeroing out (hitting "0" repetitively to get an operator).
Empower your employees at all levels to change processes in customers' favor. Zappos CEO Tony Hsieh instills this approach into the company culture, with the desired aim of "wowing" customers.

If you don't take these steps, you're leaving yourself open to customer flight. Customers' memories of the times when they were poorly served tend to be a lot more vivid and longer-lasting than their recall of seamless service experiences. You also leave yourself vulnerable to possible retaliation through social media. Reacting to a social-media disaster is a much more expensive proposition than providing excellent customer service and first-time problem resolution.

In big companies, it's easy for managers to forget that the acquisition of each customer represents a real victory for product development, marketing, and sales. Don't squander that effort by letting customers slip away due to service failures. By fighting the slide to a power-asymmetry culture, you'll bind your customers closer to your company, a very desirable outcome in an environment of decreasing consumer loyalty.

IT Cannot Be Only the CIO's Responsibility

IT is not something that can be managed from a box on the organizational chart. Unfortunately, this is not the view in most C-suites. Just look at what most do: They appoint a CIO and give him or her a budget and a mandate to get on with it! Why? As one CEO said to us: "I just want to forget about IT and concentrate on my core business."

Of course, this response would be fine if the challenge were merely to deploy technology (on time and to budget) and ensure it continues to function properly for as long as required. It would also mean that outsourcing to a proven tech provider would be a legitimate response to perceived problems with IT (get someone with more experience and knowledge to run it for you). Or that the cloud is the remedy for IT's perceived inability to deliver, its inflexibility, tardiness, and questionable return. (By portraying IT as a utility like water and electricity, with apps on demand, a pay-as-you use model, and unparalleled scalability, what could be more attractive?)

The reality is somewhat different. This approach may work for business functions like manufacturing or logistics, but it definitely won't work for IT.

For one thing, what a manufacturing director is and is not responsible for is very clear. So what can a CIO be held responsible for? Technology? This only results in technology being deployed on time and to budget and works. What about being held to account for the benefits and value from IT spend?

This raises the fundamental question as to whether a CIO can really be held accountable for something that will only emerge when their colleagues step up to the plate. For example, successfully deploying CRM software on time and to budget will deliver little unless sales, customer services, and fulfillment processes are redesigned, staff trained to have the right conversations with customers, data quality improves, and marketers build the right competencies to use all the data that will now be available to them.



Let's say that a company's sourcing strategy calls it to move all IT requirements to best-of-breed cloud-based providers. Infrastructure and IT-based services will now be provisioned and delivered directly from the cloud. The question is, will problems with IT go away, particularly the challenges around delivering business value? Of course not! Why? Because the problems with enterprise IT have generally nothing to do with IT. They never have!

What the cloud does is make the technology-supply side more efficient and perhaps more agile. It may make costs more predictable and shift investments from CapEx to OpEx. It may even lead to access to leading-edge technologies. But these are generally not where the challenges lie when we look at the situation in most companies regarding return from IT spend.

The reality is that the organization still requires a strategy for information and systems. It still needs to make choices around process standardization and the extent of digitization, define the degree of integration required, and think about innovation opportunities enabled by IT, whether they be process innovation, business model innovation, management innovation, or innovation in the customer experience. And the organization still needs to prioritize IT spend, run programs and projects, manage the IT investment portfolio, orchestrate the organizational change to deliver expected business benefits, and make sense of information.

Accountability for some of these areas reside with the CEO and the other members of the C-suite (we are assuming CIO is a member of the c-suite), for others with LOB manager, and some will be shared. What is clear is that they are not the sole responsibility of the CIO. All members of the C-suite needs to recognize and embrace their fundamental roles.

What is therefore required is strong governance of IT. Be clear about the decisions concerning IT that need to be made, who gets to make them, how they are made, and the supporting management processes, structures, information, and tools needed to ensure that they are effectively implemented, complied with, and are achieving the desired levels of performance. Unfortunately, we have found that the focus of governance around IT continues to be on the more operational IT issues of delivering technology capabilities and IT services.

The basic requirement for success with enterprise IT has changed little over the decade. There is no magic bullet. The bottom line is that executives need to get their hands dirty and actively engage with their CIO and IT. Decisions about IT today really have little to do with technology!

Reinventing Corporate IT
An HBR Insight Center





CIOs Must Lead Outside of IT
You, Too, Can Move Your Company Into the Cloud
The CIO In Crisis: What You Told Us
How to Compete When IT Is Abundant

Big Brain Theory

An interview with Adam Waytz and Malia Mason, authors of the article Your Brain at Work.

Download this podcast

A written transcript will be available by July 25.

Three Priorities for the Digital CMO

The principal role of a CMO has always been to be a great storyteller. Once upon a time, this meant waxing eloquently about the brand's promise, giving people a hero to cheer for and something to relate to and believe in. And the process of storytelling used to be fairly simple: create an ad, place it in a magazine, newspaper or on the radio or TV, and you were done. Today, we live in an entirely different world — one in which brand narratives are often co-opted, molded and even created by consumers.

This means the journey now taken by brands and consumers together is filled with many more twists and turns. It spans the web, social networks and mobile devices, a dazzling array of digital means to access information, make decisions, buy products and then share purchases, opinions and ideas about brands.

Each of these stops along the journey is a point of light in the digital mosaic that creates a brand narrative built on billions of interactions. As we've seen, the brand narrative can become something wildly different from the one the CMO envisioned.

How can today's digital CMO navigate this new landscape? Here are a few simple steps you can take to chart the best course for your brand story.

1. Craft Narratives Around the Right Digital Storytelling Tools

There is no pun intended when I say, "don't leave customers to their own devices." Every digital CMO should devise ways to guide the consumer to connect with the brand story on different platforms. Think about where your brand fits into all that pinning, posting, sharing, filtering, and tagging. Help consumers engage with your narrative by making it easy to digest and share it, using the tools that matter most to your audience.

At the same time, take into account that your narrative needs to be designed to succeed across multiple devices — sometimes simultaneously, sometimes sequentially. Consumers are using the iPad and other tablets in very different ways than a desktop or smartphone. In comparison, while the smartphone is a very small landscape, if executed thoughtfully, brand stories can be delivered there in a simple and compelling way.

For example, Sephora, the beauty and cosmetics retailer, offers a mobile app to help customers navigate their stores, a website for more traditional e-commerce, and an iPad experience for inspiration and discovery. They've also enabled their fans and followers to actively share and solicit advice via Facebook and Pinterest. Each digital experience, while created for different channels, speaks to a common storyline: they are the "Beauty Insiders" — with the latest and greatest in beauty trends to share with you, one of their best friends.

2. Build Bendable Storylines

Because the feedback loop can completely re-shape a brand story, the digital CMO must be ready to embrace a new course. One way is to design a brand discourse that is flexible from the start. By building these bendable storylines, CMOs will be ready to co-opt a better narrative if one emerges.

Agile narratives can allow you to take advantage of positive trends or even a world-changing event. Being prepared is of the utmost importance. Be sure to free up resources after a campaign hits the marketplace so that if something resonates with your customers, you can allocate funding accordingly and focus aggressively on what — unexpectedly or not — is taking root.

Airbnb, a service enabling people to rent out their spare rooms or entire homes, is a great example of a company that understands the new age of shapeable storylines. For example, during Superstorm Sandy Airbnb's local community base in New York City rallied to launch a microsite that allowed people living nearby the storm-ravaged region to donate a room or couch and help Sandy victims find a place to stay at no charge. This required a fast redesign of their booking and payment system to accommodate the emergency free shelter option. No doubt it was an investment well worth the effort, not only aligning with the community-powered notion at the core of the company's brand story, but taking the narrative in an entirely new direction.

3. Create Content Worth Sharing

Before the digital age it didn't much matter if content was worth sharing because there wasn't usually the option to do so. "Sharability" is now a key ingredient of any successful brand narrative that has a chance of resonating with the consumer. Connect to emotions and ideas that are bigger and more interesting than selling your products, and they will speak for themselves.

TED, the non-profit conference organization, has perfected this model. Their tagline is of course, "Ideas Worth Spreading" and they've hit the nail on the head. Instead of stacking their site with the thousands of talks that they have tape each year, they choose only the most compelling and interesting talks to highlight and put all their resources, including social channels and blog, behind promoting one outstanding talk per day. This highly curated approach to creating genuine content that is worth sharing is what has made the brand so successful — and it's the reason that TED talks surpassed one billion views worldwide last year.

Today's digital CMO has a harder job than the CMO of the past. But ultimately it's a more exciting one. As chief storyteller, you have more opportunities to develop compelling and relevant brand identities by including your customers in the narrative creation process right from the start. And consumers have shown time and time again that they trust brands that trust them. And while sometimes scary, that can't be a bad thing.

The Two-Minute Game that Reveals How People Perceive You

We often write about B-school research findings in this space. Now we're going to let you take part. This video, presented by Harvard Business School associate professor Michael Norton, is a game. In fact, it's the same game Norton used in research he recently conducted, so when you play the game here, you'll be doing exactly what Norton's subjects did. The game is simple and doesn't take long.

To play it, you'll need a friend. Once you have a friend with you, just play the video and listen to Norton's instructions. When you're done, Norton will walk you through his findings.

For more, read Norton and co-author Evan P. Apfelbaum's full article in our July-August issue.

The Case for Paying People More

McDonald's and Walmart, the two biggest private-sector employers in the U.S., don't pay their workers much. This more or less eternal truth is making one of its increasingly frequent appearances in the news this week. McDonald's is catching flak for a "sample monthly budget" for employees that sets aside $20 a month for health insurance and no money at all for heat. (Hey, it's July.) Walmart, meanwhile, is threatening to cut back on plans to open stores in Washington, D.C., after the D.C. council voted to impose a "super minimum wage" of $12.50 an hour on big retailers.

For decades, most discussions of pay levels and income disparity in the U.S. have been accompanied by a pronounced economic fatalism. Pay is set by the market and the labor market has gone global, the reasoning goes — and when a Chinese or Mexican worker can do what an American can for less, wages have to go down. In explaining what's happened to autoworkers, say, that story makes some sense (although it doesn't explain why German autoworkers have for the most part kept their high pay and their jobs while Americans haven't).

But McDonald's burger-flippers and Walmart checkout clerks can't be replaced by overseas workers. Instead, both companies were able to build low pay into their business models from the beginning — McDonald's because so much of its workforce was made up of living-at-home teenagers who did not in fact have to pay for heat, Walmart because of its roots in small Southern towns where wages were low and "living wage" laws unheard of. Now McDonald's is increasingly staffed by grownups (teens have gone from from 45% of its workforce in the 1990s to 33% recently), while Walmart is trying to conquer the big cities of the North. Both companies have been understandably loath to depart from their low-pay traditions, so conflict and criticism are pretty much inevitable. Which is an extremely healthy development.

That's because it's becoming clear that pay levels aren't entirely set by the market. They are also affected by custom, by the balance of power between workers and employers, and by government regulation. Early economists understood that wage setting was "fundamentally a social decision," Jonathan Schlefer wrote on HBR.org last year, but their 20th century successors became fixated on the idea of a "natural law" that kept pay in line with productivity. And this idea that wages are set by inexorable economic forces came to dominate popular discourse as well.

Since 1980, though, overall pay and productivity trends have sharply diverged in the U.S.. And since the 1990s, research on the impact of minimum wage laws has demonstrated that there clearly is some distance between the textbook versions of how wages are set and how it happens in reality. It's not that minimum wage laws work miracles, but they also don't have nearly the downward effect on employment levels that a pure supply-demand model would predict. Not to mention that decades of research at the organizational and individual level have shown the link between pay and on-the-job performance to be extremely tenuous.

If pay levels at Walmart, McDonald's, and elsewhere are at least to some extent a societal choice rather than the natural outcome of economic law, it raises a lot of interesting questions. One is whether the doldrums the U.S. economy has found itself in since the early 2000s might to at least some extent have been inflicted by corporate executives committed to keeping labor costs down. In 1914, Henry Ford famously more than doubled wages at his factories, mainly to fight attrition but also so that Ford's assembly line workers could afford to buy the cars they were making. By that standard, McDonald's and Walmart are doing okay — their workers can afford to buy their (remarkably inexpensive) products. But Ford's workers could buy a lot of other things, too, and they and their counterparts at other automakers went on to form the bulwark of a giant new American middle class that helped drive economic growth for decades.

Economic analysis of Ford's decision has focused on the efficiency gains of paying higher-than-market wages — less turnover and more-productive workers led to higher profits and higher market share, the reasoning goes. That in itself is a big deal. But the even bigger argument that by raising wages Ford might have led a shift in societal norms that put more money in average Americans' pockets, thus boosting consumer spending and economic growth, hasn't had much appeal to mainstream economists in the U.S..

In fact, most of the interest has instead been in how hyperefficient operations like McDonald's and Walmart boost living standards by delivering their products to consumers at ever-lower cost. A few years ago, Jason Furman — recently tapped to become Chairman of President Obama's Council of Economic Advisers, argued that Walmart was a "progressive success story" because it had driven retail prices down so much. "Even if you grant that Wal-Mart hurts workers in the retail sector — and the evidence for this is far from clear," he wrote, "the magnitude of any potential harm is small in comparison."

It's a provocative argument, and it might even be right. But it's unlikely that it's the whole story. For all its productivity innovations, Walmart has also been a key player in a "race to the bottom" that has tamped down wages and dismantled worker protections in the U.S. in recent decades. It's at least worth asking if the economy would be better off with a race in the opposite direction.

The most outspoken and visible (visible to me, at least) proponent of this view over the past couple of years has been, interestingly enough, Business Insider editor-in-chief Henry Blodget. As he put it on May Day this year, corporate America's penchant for putting short-term shareholder interests above those of workers "is actually starving the rest of the economy of revenue growth." Can Blodget prove this? No. Is it a valid topic for economic research and political debate that ought to be getting more attention? You betcha.