Marina Gorbis's Blog, page 1586

Microsoft Blew It on the Price of Xbox One

At last week's Electronic Entertainment Expo (E3) conference and show, both Microsoft and Sony unveiled their new gaming consoles which will be released this holiday season. While both systems support a wide variety of games, they each have unique differentiating features. Microsoft's Xbox One, for instance, provides strong integration with television, Internet, and Skype. Sony's PlayStation 4 (PS4) is less restrictive in its digital rights management, which makes sharing games easier and renting games possible.

The most striking difference, however, is their prices. Perhaps feeling cocky because its sales consistently trump those of the PlayStation, Microsoft set the Xbox One's price at a 25% premium over the PS4. The Xbox will sell for $499, while the PS4 has a retail price of $399.

Now for the folks at Microsoft, here's a brief pricing history refresher:

King C. Gillette started selling razors and razor blades in the early 1900's. To get razors in the hands of consumers, Gillette set prices low and made his profit from the ensuing sales of high priced blades. This pricing strategy has been successful and emulated by many other products (printers and cartridges, for instance).

Facebook is the indisputable champion of social networking. How did it gain over a billion members to use its site monthly? It made the price of entry cheap — in this case, free.

Why remind Microsoft of these strategies? Like the Pledge of Allegiance, these two stories should have been recited before every meeting that discussed the price of the Xbox One. The foundation for the battle of the next generation of console-based gaming will be set by this holiday season's sales, and lessons from each example above reveal the importance of setting a relatively low price for the system in order to maximize overall profits.

Due to the make-or-break importance of these head-to-head initial sales, there are two key reasons why Microsoft should lower its Xbox price, matching or even beating the price of the PS4:

The Razor/Razor-Blade Pricing Strategy. Game console manufacturers have long followed King Gillette's pricing strategy: They create game customers by selling consoles as cheaply as possible and then profit from game sales. In fact, consoles are often sold at a loss on the faith that manufacturers will reap hefty profits from the licensing fees they charge game manufacturers to run games on their hardware. On a game created by an outside developer that retails for $60, for instance, it is estimated that the console manufacturer receives a $7 platform licensing fee. Since the profit comes from games and ancillary sales, the pricing strategy is straightforward: Set prices low to get consoles in the hands of gamers. The more consoles purchased, the higher the potential profit upside.

Role of Price in Creating a Network. A growingly important decision factor in selecting a console is the breadth of its associated online community. Both Xbox and PlayStation have closed networks — meaning that if you own an Xbox One, you won't be able to play online against others (friends, expert players, etc.) who have a PS4, and vice versa. In these types of closed networks, the more people who join, the more valuable the network becomes. At a 25% price premium, Xbox is not doing itself any favors in terms of growing its gaming network.

Console prices will drop over time. It's standard practice for new technology to start prices high and then discount in the ensuing months and years. But this strategy may not work for the Xbox. Its premium price is receiving so much publicity that the notion of "it's too expensive" is becoming embedded in consumers' minds.

I get that Microsoft believes its new Xbox provides more value, and hence deserves a higher price. But historically, consumers haven't been willing to pay a premium for the "razor," even if it ultimately provides higher value. In 2007, for instance, Kodak bet the company on a new printer pricing strategy. While Kodak charged a premium for its laser printers, the upside for consumers was that ink cartridge refills were priced at $9.99. While a seemingly attractive value proposition, the strategy did not catch on with consumers; in 2012 Kodak filed for Chapter 11 bankruptcy.

The Xbox One is already starting at a disadvantage: A recent poll by Amazon.com found that over 94% of respondents favored the PS4 over Microsoft's gaming console. This sentiment, coupled with the backlash from its premium price, has created a pall of gloom that Microsoft needs to overcome. The good news is there is still plenty of time to gracefully lower price (or offer a discounted version with less functionality) before consoles go on sale.

Don't Let Paper Paradigms Drive Your Digital Strategy

The web isn't print.

The way we publish on the web — our process and workflow — is mostly derived from what we know about putting ink on paper. Which makes sense, because for most of human history, print was all we had. In a world of connected devices, we need to publish digital content onto all kinds of different devices, screen sizes, and form factors. Right now, our challenge is dealing with PCs, smartphones, and tablets. Tomorrow, who knows where our content will need to go? As we adapt to a world of connected devices, the way we think about our content publishing process and workflow must adapt too.

Watches and glasses and fridges, oh my

A majority of Americans now own a smartphone. While mobile phones are currently the most common new device type — and the most limiting form factor — it doesn't take a futurist (or a fortune-teller) to know that smartphones are just the start of our problems. Tablets are poised to overtake PCs in sales. Handheld devices span a range of screen sizes and resolutions, forcing us to figure out how to take web pages and adapt them for different form factors.

Beyond smartphones and tablets, we know we'll continue to invent new devices. Smart TVs may be the next major wave of new devices in the home (and you can't talk about the future without mentioning the long-rumored yet never-quite-primetime internet refrigerator.) Wearable devices, like internet watches or Google Glass, offer wildly different interfaces for interacting with digital content. At some point, speech-based interfaces, like Siri or in-car audio systems, will offer up content without a visual presentation layer. Who knows? The next innovation in web content might be something we haven't even dreamed up yet.

Whether you think any one of these new devices is the future, a fad, or a flop doesn't get around the reality of the challenge we face in publishing content to these new form factors. We don't even need to predict which one of these new technologies will capture the public's imagination. Some will fail, but certainly some will succeed. Whichever new devices become mainstream, we will need to get our content onto them.

Publishing content to a variety of devices and platforms is fundamentally different from print. This wave of new connected devices means it's time we accept that the web isn't just a glorified print document. The way we think about content needs to change.

The page is dead, long live the chunk

"The page" as a container is so fundamental to how we think about reading, it's hard to break away from thinking about our content that way. On the web, we've repurposed that model, treating all of our content (text, but also graphics, videos, and other interactive elements) as through they "live" on a particular page. Our editorial processes and content management tools encourage us to treat web pages just like the familiar model of a print document.

You don't have to spend too much time thinking about all these new form factors and device types to realize that the very notion of a page doesn't hold up. Content will "live" on many different screens and presentations. The amount and type of content that's appropriate for a PC screen isn't the same as what would work best on a smartphone or a smart TV. The way content gets laid out, styled, and presented must be different for different platforms.

The future of connected devices is content in "chunks," not pages. Smaller, discrete content objects can be dynamically targeted to specific platforms and assembled into new containers on the fly. Which content and how much content appears on a given screen or interface will be defined by a set of rules, informed by metadata. Content will break free of the page and "live" in lots of different places.

Separating content from presentation

When all we had was a print document (or a web page) it was easy to get away with mixing presentation and styling with content. Problem is, decisions made for one platform about what something should look like don't necessarily translate when the content needs to live on multiple platforms. Anyone who's managed a print-to-web workflow knows that styling decisions made for print need to be stripped out and then re-applied to be appropriate for the web. We might have gotten away with that when it was just print and web, but that just won't work in the future.

A world of connected devices means we must start enforcing better separation of content from form. Our content can't have embedded presentation markup that was intended for only one platform. Instead, we need to ensure that styling decisions are made with platform-agnostic semantic metadata.

It's a people problem

We need to change the way we think about our process and workflow. Specific development approaches — whether it's responsive design or another technique — are useful technical solutions, but they don't solve the underlying problem.

As with all major technology innovations, the heart of this challenge is the people side of the problem. People who create and publish content need new tools and new approaches to help them understand how digital publishing is different from print. Our content management technology and workflow need to adapt and evolve too, so that users can envision how their content will be consumed on different devices. We need new ways of thinking about content publishing that make it clear to content creators what it means that the web isn't print.

Innovations in Digital and Mobile Marketing
An HBR Insight Center





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Reinvent Your Company Through Culture

In both C suites and boardrooms, discussions about business performance usually center on topics like market momentum, M&A opportunities, capital management, and productivity enhancements. While these factors are important, in my experience they are best leveraged when employees are engaged, aligned, and motivated to win.

In the course of leading six successful turnarounds and transformations at Schering-Plough, Pharmacia, Pharmacia and Upjohn, Wyeth, and two operating units within Novartis, I've learned that culture can be powerfully leveraged to enhance long-term success. Yet many executives don't make culture a priority. It was this disconnect that prompted me to write my recent book, Reinvent: A Leader's Playbook for Serial Success.

Every individual on every team in a company can strive, together, to deliver beyond what is deemed possible. For employees to do that, they need to feel a powerful sense of purpose, reinforced by a culture of ownership, accountability, and continuous learning.

In 1997, when I first took over as the new CEO of Pharmacia & Upjohn, the company had just undergone a merger that had gone very bad. One reason was a disjointed leadership structure — comprised of three "business centers" in Stockholm, Milan, and Kalamazoo, Michigan, and one new "management center" in Windsor, near London — that had been negotiated as part of the 1995 merger. Internal tribalism was hurting the company.

To align and motivate employees to work together, we eliminated all four centers and created one new streamlined operation in New Jersey. We also shrank the corporate management team by half. This also helped us get rid of a few "culture resisters," senior people who opposed constructive change. Pharmacia & Upjohn made a startling turnaround and then merged with Monsanto in 2000 to triple its size to a $52 billion market cap.

These are some of the steps that helped me reinvent through culture:

Set clear expectations

Show the path of the journey, set an ambitious strategy, and get a mandate for change from the people, so they become ready to make the necessary sacrifices.

Role model positive attitudes and behaviors

Leaders, starting with the CEO, must consistently act with the same business authenticity that they want to see in their teams.

At all the companies I led, we published five or six behaviors we all expected of each other so that we could share, learn, innovate, and grow as individuals and as members of a team. I remember visiting our Schering-Plough team in Seoul, South Korea, in 2009 and was impressed with how well our local team had built ownership and resonance with this list of behaviors. They told me they wanted to do this because they sensed authenticity within the top ranks.

Build trust

Trust in the senior leadership team is an important indicator of organizational health. To build trust, CEOs must actively show employees that they make fair decisions, value people, and value good work.

This also means valuing integrity. When I joined Schering-Plough as CEO in 2003, the company was in trouble with authorities over alleged marketing practices. We subsequently cut the commission structure, and I had to face 3,000 employees, most of them unhappy, at the national sales meeting.

I knew my methods were controversial, but I wanted these employees to consider themselves medical information providers, not just commission-driven sales representatives. I told them, as their new CEO, to walk away from any sale that would undermine their integrity and encouraged them to choose long-term trust building over short-term financial gain. Many were surprised at the resulting standing ovation.

The meeting was a game changer. We went on to deliver 17 consecutive quarters of double-digit sales growth.

Execute via a high-performance culture

A culture of ownership, accountability, and continuous learning leads to powerful execution. Leaders should keep encouraging employees to take ownership of both the problems and the solutions.

In 2004, when Schering-Plough had to go into a clean-up mode after severe compliance challenges in manufacturing and marketing, our compliance team, led by Brent Saunders (now CEO of Bausch+Lomb), put mirrors throughout the global network of sites with a phone number to call if they witnessed any wrongdoing. The mirrors signaled our new culture in which employees looked at themselves in fixing compliance and turning the company around.

In today's era of accelerating — and even lurching — change, culture can still lead to unexpectedly strong performance. The good news is that while it requires time, commitment, and a strong CEO leader, a high performance culture can be built into almost any business. And serial success can follow.

Becoming a Better Judge of People

In business and in life, the most critical choices we make relate to people. Yet being a good judge of people is difficult. How do we get better at sizing up first impressions, at avoiding hiring mistakes, at correctly picking (and not missing) rising stars?

The easy thing to do is focus on extrinsic markers — academic scores, net worth, social status, job titles. Social media has allowed us to add new layers of extrinsic scoring: How many friends do they have on Facebook? Who do we know in common through LinkedIn? How many Twitter followers do they have?

But such extrinsic credentials and markers only tell one part of a person's story. They are necessary, but not sufficient. What they miss are the "softer" and more nuanced intrinsic that are far more defining of a person's character. You can teach skills; character and attitude, not so much.

Judging on extrinsic and skill-based factors is a relatively objective and straightforward exercise. Gauging softer traits such as will or attitude is much, much harder, and takes one-on-one contact, attentive listening, and careful observation. That's why it's important to approach a job interview more as an attitudinal audition than a question-and-answer period around skills.



Over the years, I have been collecting and reflecting upon questions that have helped me improve my people judgment, especially around personality and attitude. Here are ten key questions to help you better understand the intrinsic "why" and "how" behind a person:

1. What is the talk-to-listen ratio? You want people who are self-confident and not afraid to express their views, but if the talk-to-listen ratio is anything north of 60%, you want to ask why. Is it because this person is self-important and not interested in learning from others — or just because he is nervous and rambling?

2. Is this an energy-giver or -taker? There is a certain breed of people who just carry with them and unfortunately spread a negative energy. You know who they are. Alternatively, there are those who consistently carry and share a positivity and optimism towards life. There is a Chinese proverb that says that the best way to get energy is to give it. Energy-givers are compassionate, generous and the type of people with whom you immediately want to spend time.

3. Is this person likely to "act" or "react" to a task? Some people immediately go into defensive, critical mode when given a new task. Others jump right into action and problem-solving mode. For most jobs, it's the second kind you want.

4. Does this person feel authentic or obsequious? There is nothing flattering about false praise, or people trying too hard to impress. Really good people don't feel the need to "suck up." Those who can just be themselves are more pleasant to work with.

5. What's the spouse like? One of my business partners gave me a great tip for interviewing a super important hire — go out with their spouse, partner, or closest friend. We are known by the company we keep.

6. How does this person treat someone she doesn't know? At the other end of the spectrum, observe how a person treats someone she barely knows. This is what I call a "taxi driver or server test." Does the person have the openness and yes, kindness, to have a real conversation with a waiter at a restaurant or the driver of a taxi? Does she ignore them or treat them rudely?

7 Is there an element of struggle in the person's history? History matters. In our research for the book, Heart, Smarts, Guts, and Luck (Harvard Business Review Press, 2012), my co-authors and I found that around two-thirds of people who were "Guts-dominant" — those who had the desire to initiate and the ability to persevere so crucial in entrepreneurial ventures — had some financial hardship or other challenges in their formative years. Early failures and hardships shape one's character as much or more than early successes.

8. What has this person been reading? Reading gives depth, helps one understand one's history, frames ideas, sparks new thoughts and nuances to existing perspectives, and keeps you apprised of current events. It's a generalization, but the more interesting people I have met tend to read a lot — it's a mark of intellectual curiosity.

9. Would you ever want to go on a long car ride with this person? This is a variant of the "airport test." Years ago at my first job, I was told about the thought-experiment of asking if you were stuck at an airport with a candidate, how would you really feel? In a similar fashion, is this the type of person with whom you could imagine going on a cross-country drive?

10. Do you believe that this person is self-aware? My colleagues and I believe the most important pre-requisite to great leadership is self-awareness. Does this person have an intellectual honesty about who he is and his strengths and weaknesses? Does she have a desire to learn and take appropriate actions based on that awareness? It is usually a more difficult question to answer than the rest — but look for humility, and congruence between what the person thinks, says, and does.



Ask these ten questions about someone, or even a subset of them, and you'll be on a path to being a better judge of people.

Activist Hedge Funds Often See Their Gains Wiped Out by Costs

Because of the high cost of mounting a proxy fight, the average hedge fund makes less money on its activist investments than on its nonactivist portfolio, Nickolay Gantchev of the University of North Carolina discovered in a study of 1,164 campaigns by 171 hedge funds. A few do score big: A small minority of firms earns twice as much through activism as from nonactivist investments. But on average, the mean $10.71 million cost of a campaign ending in a proxy fight (think of all that printing and mailing) wipes out abnormal gains.

Embrace the Complexity of Cyber Defense

Traditionally, cyber security research has focused on technical solutions to specific threats: for example, how to filter spam or protect PCs and mobile devices against the latest malware. This approach has greatly enhanced our ability to defend information systems against attack. Widespread use of antivirus, intrusion detection technologies, improved cryptography algorithms, and methods for blacklisting infected web sites are just a few examples of how technical advances have improved cyber defense.

Such technical improvements will not be sufficient, however. Today's cyber-issues involve systemic social, economic, organizational, and political components. Ordinary people have little incentive to secure their home computers using available technology; Internet censorship and surveillance is intertwined with questions of free speech and privacy; and concern over Chinese cyber-espionage is now a high-priority diplomatic issue. The mismatch between speed-of-light electronic communications and the time required for human institutions to respond to data privacy concerns is large and growing. These types of cyber-issues must be addressed not only with technological solutions, but also on the social, political, and policy levels.

This task is more challenging than it sounds. Most computation today occurs on the Internet, one of the most complex human artifacts ever devised. Developing appropriate solutions requires understanding networks comprised of multitudes of heterogeneous layered subnetworks managed by organizations around the world, each with their own policies and incentives.

We can tackle this problem using tools from the growing field of Complexity Science.

Complexity science seeks to find the universal principles and mathematics underlying and unifying a wide variety of complex systems, including the Internet, biological systems, ecologies, markets, and economic systems, political systems, and societies. Such systems consist of many independent and self-interested agents (biological cells, firms, nations, computers, and people), each adapting their behaviors in response to their environments and other actors in the system. Global patterns and trends emerge from these low-level interactions that cannot be predicted by a study of the individual components in isolation.

Malicious elements are ubiquitous in complex systems. Just as there are cyber security threats in the Internet, there are viruses, parasites, and bacteria in biology; bullies in social networks; and rogue nations in the international community. Studying the general principles that complex systems use to manage such threats can suggest techniques for tackling the problem of cyber security.

In particular, biological systems have evolved to cope with a multitude of threats such as proliferating pathogens, autoimmunity, arms races, deception, and mimicry. One design strategy that helps biological systems achieve robustness to these threats is diversity — genetic diversity in a species, species diversity in an ecosystem, and molecular diversity in an immune system. Its opposite, uniformity in design, allows us to achieve economies of scale but also leaves us vulnerable to widespread and targeted attacks that exploit homogenous infrastructures.

Cyber infrastructure today resembles biological monocultures, and recent market trends towards vertical integration (Apple), cloud storage (Google), and computing (Amazon's Compute Cloud) will worsen the situation.

Diversity is just one of many strategies that biological systems have adopted to protect themselves and continue functioning in the face of attack. Complexity Science can help us understand how malicious agents affect the growth and functioning of complex systems and suggest how to influence them to mitigate damage.

Complex systems are often regarded as a group of abstract nodes linked together to form a network. The study of these networks, called network science, has successfully identified tipping points in disease epidemics and cascading failures in power grids. In the case of the Internet, network science can provide important guidelines for policymakers — for example, by determining that security interventions by the 20 largest Internet Service Providers (ISPs) in the world will be considerably more effective than relying on interventions by thousands of ISPs chosen at random.

Although network science enables us to understand important common properties of complex systems, it is too abstract to capture the unique factors influencing the dynamics of specific systems. For that we rely on other approaches, such as agent-based modeling (ABM), which allows us to incorporate domain-specific knowledge into a computer model. With ABM we can explore the consequences of allowing each abstract node in the network to adapt or learn, reacting to local conditions. ABM differs from the traditional modeling used in science, such as the mathematical models in climate science, which are based on physics where the primitive elements are not adaptive. ABM is well-suited for modeling systems where economic self-interest and politics intersect with technology, such as in the Internet. In fact, we have shown that when self-interested agents are included in a model of the Internet, policies that seem to be effective in the short-term actually exacerbate the cyber security problem in the long-term. This effect is similar to the overuse of antibiotics promoting antibiotic resistance in bacteria.

Agent-based modeling is particularly useful for studying complex systems that exhibit "long-tail" behavior, where there is huge variability in outcomes. In such systems, real-world experiments with limited sample sizes are often misleading and can misdirect policymakers. Using ABM we can study a large number of simulated scenarios, giving a clearer picture of which cyber security policies will work best in the long run, even with highly variable outcomes.

Game Theory is useful for understanding strategic interactions when parties have competing interests. It is relevant to the Internet, where we see an ongoing arms race between attackers and defenders, between those trying to spread information and those trying to censor it, and so forth. Game Theory can help us understand how better to defend the system, or conversely, how better to evade it. Important concepts such as the "Price of Anarchy" measure how the efficiency of a system degrades through selfish behavior (cyber attacks) and how much cooperation might help. Game Theory is also useful for studying how cooperation can evolve among independent parties, which can guide the choice of policies to encourage desirable behavior. Complex systems rarely eliminate malicious threats permanently. Rather, they develop strategies for managing and coexisting with them in a way that minimizes damage to the overall system.

The best approach to cyber security will emphasize defenses that are robust to unforeseen perturbations, evolvable in response to changing conditions, and self-repairing in the face of damage. By embracing the complexity of today's technological networks and their linkages to human behavior, social norms, and economic incentives, we can make our online world safer and freer.

Data Under Siege
An HBR Insight Center





Why Businesses Should Share Intelligence About Cyber Attacks
Why Your CEO Is a Security Risk
Beware Trading Privacy for Convenience
Four Things the Private Sector Must Demand on Cyber Security

Ten Charts That Show We've All Got a Case of the Mondays

If you're in a workplace in America right now, chances are most of the people around you are pretty checked out. You might even be plodding through the day yourself, counting down the hours until you can fly out the door. Or you're doing your very best to make your unhappiness known to anyone within earshot.

This type of disengagement is outlined by Gallup's latest "State of the American Workplace" report, which has implications for you, your financial bottom line, and the well-being of your company, so I pulled out some charts from the report that I found striking.

First, though, a couple of things to know about the poll: Over the past few decades, Gallup has interviewed over 25 million people across a wide variety of industries and organizations. As for the terms used:

"Engaged employees work with passion and feel a profound connection to their company. They drive innovation and move the organization forward."



"Not engaged employees are essentially checked out. They're sleepwalking through their workday putting time — but not energy or passion — into their work."



"Actively disengaged employees aren't just unhappy at work; they're busy acting out their unhappiness. Every day, these workers undermine what their engaged coworkers accomplish."

Let's begin with the most constant and depressing graphic from the Gallup report: two-thirds of working Americans have been disengaged in some form or fashion for the past 12 years.

Not exactly a promising trend. Worse, people who aren't engaged spend much more time experiencing emotions like worry, stress, and pain. According to Gallup, when workers spend more time using their strengths to do work they enjoy or find valuable, the less likely they are to find time to be unhappy. In general, better engagement also leads to less absenteeism and more productivity and profitability.

Pay attention to the turnover numbers, too: the actively disengaged say they're more likely to jump ship if the economy improves.

So aside from making people angry and wanting to flee if not for the recession, Gallup slices engagement by industry, gender, location, and generation, among other segments. The gender breakdown is pretty even, with women being slightly more engaged than men (33% to 28%, respectively). As for how states shake out, Louisiana has the most engaged employees while Idaho has the least.

More startling, however, is what's happening across industries. While managers and executives are the most engaged, they're apparently not doing a great job engaging others. Particularly troubling are the bottom three sectors — service, transportation, and manufacturing or production. Although those workers are the most actively disengaged, it's those very sectors that are either experiencing strong growth in a weak economy (like the service industry) or being hawked as the future of U.S. growth (like manufacturing). And even though managers are doing the best in terms of their own engagement, more than half still aren't especially engaged.

When you look at how the generational numbers break down, the differences appear negligible: millennials and traditionalists are slightly more engaged, while the group in the middle (boomers and Gen X) are the least.

To top that off, American workforce is largely made up of the two least-engaged groups.

And while Gallup reports that 52% of Americans work for companies with 500 or more employees, these aren't the places where engagement is rife.

One other interesting tidbit: it seems that the sweet spot of being engaged involves employees working remotely part of the time.

This brings us to the report's most important point (and biggest "duh" moment): supervisors who focus on an employee's strengths have more engaged employees than those who focus on weaknesses or neglect to focus on much of anything at all.

"Gallup research... shows that these managers from hell are creating active disengagement costing the U.S. an estimated $450 billion to $550 billion annually," writes Gallup chairman and CEO Jim Clifton in the report's introduction. "If your company reflects the average in the U.S., just imagine what poor management and disengagement are costing your bottom line."

Imagine, indeed. Maybe it's time, one more time, for this old chestnut.

How Long Would You Wait to Be in Charge of Goldman Sachs?

Patience Is a Virtue


Oh, to be that close. Succession planning, we know, is often a fraught and/or ignored task. But the case of Goldman Sachs is rare: It's pretty clear that the bank's president, Gary D. Cohn, is ready in the wings. Except, of course, for a tiny problem: Lloyd Blankfein, the current CEO, ain't going anywhere (except for global speaking engagements and parties), joking that he's going to die at his desk. So what are Cohen — who reporter Susanne Craig calls the "Prince Charles of Wall Street" — and Goldman to do? Craig paints a picture of the men as friends whose ambitions might become increasingly conflicted as time rolls on. We know, for instance, that coups have happened before (Paulson versus Corzine), and that the longer Blankfein is in charge, the messier succession planning is likely to become as more candidates enter the fray. So can the company keep everyone happy and keep a solid succession plan in place? Time will tell, but a successful outcome is pretty important: “You can’t understate the importance of the person who runs Goldman,” says Michael J. Driscoll, a former senior trader at Bear Stearns who now teaches at Adelphi University. “The head of Goldman is the de facto head of Wall Street.”

Ruby on Rails, For Now

Are Coders Worth It? Aeon

To write or code? That is the $120,000 question (quite literally, along with cushy perks and a signing bonus) that James Somers, a writer and programmer, ponders in this essay on the state of creative work. Tracing his path from freelance journalist to in-demand developer, he investigates why he and others like him have such ease in finding jobs in such a terrible economy. The short answer is that creating a successful start-up (versus just having an idea) means pushing a few hundred thousand dollars in the direction of coders, who "are the limiting reagent of every start-up experiment, we’re the sine qua non, because we’re the only ones who know how to reify app ideas as actual working software." The value of a start-up, Somers writes, is based on how many developers a company has on its payroll. This is all well and good (maybe), but why does this value exist in the first place? Somers points to this growing entrepreneurial mind-set: "If you’re not technical, you’re not valuable." America demands: “Be a specialised something — fill your head with the zeitgeist, with the technical — and we’ll write your ticket." It's hard to say no to that.

Unless You're Unemployed

Retirement Will Kill You Bloomberg

Like Lloyd Blankfein, I've often joked that I'm probably going to work forever (though perhaps unlike Lloyd Blankfein, I’m thinking as much as about economic necessity as the satisfaction of working). Peter Orszag thinks keeping at it might not be a bad thing. According to a whole bunch of recent research he's collected, there are health benefits to being employed for long periods of time. In one that focused on white American women between the ages of 45 to 84, a key factor in life expectancy was working (in addition to being educated and not smoking). And a British study found that depression rises the longer someone has been retired. While neither of these studies proves Orszag's thesis conclusively, he still puzzles over the fact that life expectancy goes up during recessions. Could it be, he writes, that while some people still work, many don't, thus reducing traffic fatalities and pollution and improving nursing home staffing? This, of course, allows people who are working to reap the benefits of better health, thanks to those who aren't. Disturbing and problematic, yes. Orszag stresses: "Yet the next time you think your job is killing you, just remember that the evidence, if anything, suggests the opposite. Your job may be saving your life."

Dancing to Death for Free

Unpaid Interns Win Major Ruling in ‘Black Swan’ Case — Now What? ProPublica

You've probably got at least a few interns roaming around your office this summer. Now's probably a good time to make sure you understand exactly what they're doing – and whether their work is actually legal. A U.S. court ruled this week in favor of two unpaid interns who worked on the film Black Swan. Essentially, the interns did the same type of work an employee would have done, deriving little to no educational benefit from it (other than, you know, learning what it's like to have an actual job), thus violating U.S. and New York minimum-wage laws. In this piece, Blair Hickman and Jeremy B. Merrill dig into one of the key phrases bandied about by those arguing over the value of internships: the "perceived beneficiary" test. This basically means that an unpaid intern should gain more from the experience than the employer. But the judge in the case called this test "subjective and unpredictable" and questioned whether receiving college credit as replacement for a wage is fair.

3-D Printing Is No Joke

Who Says Jay Leno Isn't Cutting Edge? Wall Street Journal

If you're not convinced about the disruptive power of 3-D printing, consider Jay Leno, who no longer has to prowl junkyards looking for parts for his 1906 Stanley Steamer or the 200 other cars and motorcycles in his collection of vintage vehicles. When he needs a part, he makes it. He uses an industrial-grade 3-D printer and other equipment to make exact copies of worn-out components. He scans an old part, creates a digital image of it, modifies the image if there are defects in the existing part, and creates a mold that lets him cast a new one. He can even cast his own engine blocks. Leno's shop tells you a lot about where manufacturing is heading, says the Wall Street Journal. — Andy O'Connell

BONUS BITS:

PRISM, With Pictures and Things

How Much Is Your Personal Data Worth? (Financial Times)
A Designer Overhauls the NSA’s Atrocious Powerpoint Presentation (Fast Company)
Using Metadata to Find Paul Revere (Kieran Healy)

The Most Overlooked Part of Your Data Security

Organizations constantly replace outdated computers, servers, laptops, copiers, and countless other types of electronic devices to keep up with technology and enhance worker productivity. This rush to upgrade, however, creates a challenge: large numbers of excess electronics must be managed and disposed of properly.

During a recent IT asset disposal project for a large New York bank, a chain-of-custody audit revealed three computers were untracked. An IT director was suspected of taking them.

When first questioned about the missing systems the IT director — let's call her "Robin Hood" — denied any knowledge. Next she blamed the disposal vendor for taking an inaccurate inventory. Then she accused a truck driver of stealing the systems en route to the recycling facility.

Finally, when confronted with evidence, Robin admitted that her daughter's elementary school was in desperate need of computers — but insisted that, as a 12-year veteran of the firm, she would never intentionally harm her employer. She said she had ensured the hard drives were erased, and pointed out that the bank had historically donated used computers to nonprofit organizations. But what she viewed as a trivial act was in fact a serious data security threat that created massive liability for her company.

A Rising Threat

Securing sensitive data is a daunting task for any business. Today more than 550 US laws now affect IT asset disposition. Data security laws mandate that organizations implement "adequate safeguards" to ensure privacy protection of individuals. And the penalties for data breaches are tough. Under a proposed data protection law, European firms could face fines of up to 2% of their annual turnover for a breach. The HITECH Act enacted in 2009 extended provisions surrounding information handling and increased penalties for HIPAA violations. Today, American companies are subject to unprecedented sanctions following HIPAA security violations.

Governments are not the only ones eager to punish violators. The effect of a punitive privacy class action lawsuit can be far worse than a government fine. Following the loss of a backup data tape in 2011, US healthcare benefits provider TRICARE was hit with eight separate privacy lawsuits, including one seeking an astounding $4.9 billion in damages. The company was accused of "intentional, willful, and reckless disregard of plaintiffs' privacy," and for failing to respond to "recurring, systemic, and fundamental deficiencies in its information security." Similarly, Sutter Health was hit with a billion dollar suit, and Emory Healthcare faced a $200 million suit.

Historically, privacy class actions have faltered due to the plaintiffs' inability to prove recoverable damages; however, this provides little consolation for a company being sued. The cost of defending privacy suits can cost millions. The average litigation defense now exceeds $500,000 and the average settlement is over $2 million. Moreover, corporate risk managers should take note of recent decisions in the US Eleventh Circuit Court of Appeals that bring punitive class actions closer to becoming big payoffs for plaintiffs (and, of course, their attorneys).

Savvy plaintiff attorneys are also shifting legal tactics. In addition to defending themselves against claims for damages, violators must now defend against claims that they unjustly profited by skimping on security safeguards that could have prevented a breach in the first place.

Soft Underbelly of Data Security

Without question, most large organizations take data security seriously. Corporations will spend an estimated $68 billion worldwide this year on IT security measures including firewalls, network monitoring, encryption, and end-point protection. When an organization spends millions guarding against hackers, it is tempting to feel confident.

But the most overlooked aspect of corporate data security may be simple IT asset disposition — in part, ironically, because so many businesses now rely on expert assistance. The fact that certified electronics recyclers are transporting retired IT assets to vendor facilities to be processed and sanitized can create a false sense of security that blinds executives to the biggest threats. First, there is still the possibility that assets can be lost or stolen in-transit. (Increasingly, companies are learning to destroy data in-house, prior to disposal; that way, any loss or theft, while unfortunate, won't result in the financial disaster that would come from an actual data breach.) Second, there is the threat we saw with our Robin Hood IT director: Trusted insiders can take retired assets any time before the handoff to the outsourcer, and before data is destroyed.

For the past eight years, Retire-IT has been tracking how effective security-conscious organizations are when it comes to accounting for retired assets.

At a high-level, organizations might seem to do an adequate job with chain-of-custody. On average 97.2% assets were tracked.

Detailed tracking data, however, reveals a troubling fact: four out of five corporate IT asset disposal projects had at least one missing asset. More disturbing is the fact that 15% of these "untracked" assets are devices potentially bearing data such as laptops, computers, and servers.

Chain-of-custody is not a catchphrase: It is the foundation for indemnification and transfer of liability. It only takes a single missing item to cause a breach. Only a careful, objective examination of tracking data can confirm chain-of-custody — or reveal potential liability.

How can a business keep a Robin Hood from taking retired computers, and potentially making a plaintiff attorney's dream come true? Acknowledging the risks and inherent conflicts-of-interest surrounding retired assets will result in more effective ITAD policies and adequate safeguards. Applying established incident-response procedures to the process of ITAD can help raise awareness of unappreciated vulnerabilities. Educating senior management about the risks will hopefully secure IT asset managers the resources needed to prevent an ITAD-related breach.

A critical aspect of every major data security law is that organizations must minimize segregation-of-duties conflicts that create opportunities for theft and fraud. Treating IT asset disposal as a "reverse procurement" process will deter insider theft.

There will always be people and places, like Ms. Hood's local elementary school, that could use free computers. Make sure the way they obtain them doesn't cost your company billions.

Data Under Siege
An HBR Insight Center





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Four Things the Private Sector Must Demand on Cyber Security

Make Your Brand Story Meaningful

It's not easy for brands to get their message across in a world of highly fragmented media and dangerously short attention spans. The brands that are able to forge connections with their customers are the ones who are the most gifted storytellers. What makes a story good enough to captivate and motivate your audience?

The best stories are designed to get the audience to care.

Stories that start with "why" — that articulate the organization's purpose and passion — are able to get more consumers tuning in to the brand and what it stands for. For instance, Intel's "Sponsors of Tomorrow", Apple's "Think Different", and Google's "Don't Be Evil" taglines helped to articulate their corporate strategy, consequently getting people to care about and subscribe to their brand promise. Nescafe Philippines decided to tap into the strong community spirit of the Filipinos, and articulate that "why" around the passion point of music. This evolved into Nescafe Philippines' "Red Mug Sessions," which served up warm stories and inspiring music over great coffee.

Heartwarming videos from Red Mug Sessions chronicled the meaningful stories, experiences and live performances of Filipino musicians, which were shared on Nescafe Philippines' social media platforms. These sessions emphasized Nescafe's engagement with promising local talent, and gave the musicians an outlet to showcase their music. Commendably, the focus of Red Mug Sessions was never on the attributes of Nescafe's coffee — it simply functioned as the beverage in the background that was facilitating meaningful experiences. The "Red Mug Sessions" generated over 74 million online impressions, chalked up 500,000 views on YouTube, and engaged a Facebook community of over 1.8 million fans. Now that's a powerful story.

The best stories empower and motivate audiences.

But it's not enough just to tell a good story. Today's connected consumer embraces a two-way dialogue. Brands that actively listen to social networks and respond with real-time content have exploded in popularity recently. Oreo's now-famous "You Can Still Dunk in the Dark" Super Bowl tweet has received over 16,000 retweets and 6,000 favorites on Twitter so far. Calvin Klein, not to be outdone, produced a Vine to maximize the 30-second TV spot. These are two examples where real-time marketing empowered audiences to co-write a brand story in collaboration with the brand. In this social era, the best stories are a reflection of the brand's willingness to give their audience a say in the brand story — to capture hearts and minds, and to meaningfully engage in a social ecosystem.

The best stories embody purpose and relevance.

But what is a good story without purpose? The best stories have a key message — a driving force that underpins the "why" and builds the connection of why the audience should care. Purpose is about relevance. Relevance is about creating meaning out of the influx of experiences with the audience by listening to them. Zappos is a brand that epitomizes that. The "heartware" of Zappos was their customer service, thanks to stories shared by loyal Zappos customers. As CEO Tony Hsieh once said, "We're a service company that just happens to sell shoes." The astute brand will co-create this brand purpose with the consumer, and know how it connects to a more relevant brand promise.

SingTel, Singapore's oldest telecommunications company, decided to take this idea one step further. In their first real-time marketing experiment, SingTel took to Twitter and asked its followers to describe situations in which a high-speed 4G mobile connection would be useful, employing the hashtag #Need4GSpeed. Over the course of nine hours, the best suggestions were turned into improvised comedy skits, published on YouTube, and tweeted as a reply to the respective Twitter follower. To further humanize the story, SingTel partnered with a Singaporean icon, Hossan Leong — a well-loved, multi-talented comedian — to tweet as @SingTel, hence allowing the audience to (very importantly) put a face to the brand.

Here's one of the videos created as a response to the similarity of the real-time marketing campaign with the Old Spice man:

Responding with real-time, dynamic content within a specific timeframe certainly took considerable courage and required making instant calls of judgment when executing the creative production. SingTel took a big risk, and their brave step is commendable. They wanted to listen, co-create, and deliver on a more relevant brand promise — that a high-speed 4G mobile connection will facilitate better consumer experiences. Their experiment with co-creating a brand story of purpose exceeded expectations, and as a result, the significance of the brand experience for many of @SingTel's followers increased, driving massive audience engagement. The hashtag #Need4GSpeed trended for more than 24 hours, captured more than 64% share of voice on Twitter in Singapore that day, and increased traffic to SingTel's dedicated 4G website by 39%. This spike in traffic was not just a one-day blip — overall volume was sustained at an increase of 30% for the month of March.



Case Study Video for #Need4GSpeed

Miguel Bernas, Director of Digital Marketing at SingTel, shared his take on the company's efforts to engage using #Need4GSpeed. "Given the short response window of only nine hours, we wanted to show a lighter side of SingTel, spark people's imaginations, and prompt swift action. We also made sure that Hossan brought to the table the perfect balance of Singaporean-ness, wit and irreverence that would make the movement spread like wildfire."

From Story Tellers to Meaning Makers

The most successful brand storyteller is a meaning maker who tells the story with the savvy of Don Draper, the cheeky cleverness of Dr. Seuss, and the data fluency of Barack Obama's re-election campaign team. After all, consumers are inspired by having 1,000 songs in their pockets; not by having a gigabyte of memory in their iPods. People will congregate around ideas and stories, not data points and spreadsheets. Even as our modes of storytelling evolve and adapt across time (from our ancestors painting on cave walls to our teenagers writing on Facebook walls), stories will never stop being the emotional glue of society. So make your own brand story one that will inspire and motivate your audience.