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An Interview with Michael E. PorterNew CurriCulum: redefiNiNg HealtH Care

Harvard Business School Professor Michael E. Porter, a leading authority on competitive strategy, has now developed a comprehensive curriculum on health care strategy. Porter was recently interviewed by Heide Abelli of Harvard Business Publishing.

aBelli: What are the main themes and topics in your health care cases?

POrter: This curriculum is about how to deliver health care based on the value framework. It starts with the idea that the ultimate purpose of any health care system is to deliver excellent value and great outcomes for the patient, and to do so as efficiently as possible. To do that, though, we need to transform the way that health care is actually delivered, how it’s measured, and how it’s paid for.

Most of the cases are about providers, but there are also some cases about health plans, others about employers, and some that stress the role of government or examine influencers of the system. But ultimately, for us, the center of the universe in health care is the people who actually deliver care.

aBelli: What are the most difficult challenges for health care leaders of tomorrow?

POrter: This value framework represents a radical departure from past thinking. Health care leaders have not thought in this way about what defines success for their organizations. Given the flawed payment system in many parts of the world, there’s not a good correlation between the financial success of the provider and the success of the patient. The value framework starts to get us realigned around the fundamental purpose, which is, again, to deliver good outcomes efficiently.

The challenge is that the current structure is far from ideal to deliver value. Care delivery is siloed into fragmented specialties. Care is fragmented across too many

New! Online exercises in Operations Management

Five new online exercises, each illustrating a fundamental concept in Operations Management, can be used to reinforce key learning objectives in related cases, articles, and simulations. Each exercise is available entirely online and takes less than 30 minutes for students to complete. The discounted academic price for each exercise is $6 when delivered via an HBP digital coursepack. Exercises include:

Balancing Process CapacityStudents must maximize utilization and improve profitability by applying concepts of process analysis at a car wash. The first challenge assumes demand is constant and validates Little’s Law—the impact of WIP (work in process) on throughput time. The second adds demand and process variability to reveal the complex and realistic challenges of running an efficient operation. #4301

Inventory BasicsStudents can play 3 scenarios as they manage stock at a hardware store and experience a different demand pattern for wrenches, paint, and rock salt. They must balance holding costs against ordering costs and avoid running out of stock. Allows for discussion of the Economic Order Quantity (EOQ) model in different situations with demand variability. #4388

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teaCHiNg MATErIALSN e w s l e t t e r

An Interview with Michael E. Porter

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Online Exercises in Operations Management

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Cases, Articles, Chapters, and eLearning

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Add Outside Material to an HBP Coursepack

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2 | fall 2013 Teaching Materials Newsletter

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different providers. Too many people are providing too many services. Meanwhile, nobody is measuring outcomes. Nobody understands the actual cost of delivering care to the patient. They may understand the cost of the pathology department, but they don’t understand the cost of caring for a breast-cancer patient over that patient’s care cycle, and so on.

This curriculum really takes on those issues in a very practical, nitty-gritty way in the Harvard Business School tradi-tion. This approach captures the real problems in actual organizations and provides a platform for discussion of how they could do it better.

aBelli: There are numerous interna-tional health care cases in your collection. What are the key conclusions from your research on health care in other nations?

POrter: One thing we’ve found is that the insurance systems are very different in different parts of the world. That said, the problems of delivery are pretty much universal. And so we look for organizations in all parts of the world that really represent the best practice and the most innovative work in the area of delivering value.

We believe a real opportunity is missed by not exchanging ideas and understanding care-delivery models and outcome mea-surement approaches on a global basis. So we have many international leaders come here to Harvard Business School to take these courses. And we have formed

some deep relationships with providers around the world.

aBelli: Have your cases been devel-oped mainly for use with sophisticated health care practitioners in executive education settings? Or could a profes-sor feel comfortable assigning cases to first-year MBA students, for example, in a strategy course?

POrter: I would say that health care is enough of its own world that, if I were choosing strategy cases for a first-year course, I probably wouldn’t do a strategy case on the Cleveland Clinic. Because you just need to know so much about health care delivery to understand the strategic choices and how to think about them.

The very broad principles of strategy cut across any industry, whether nonprofit or for-profit. But health care is a very different kind of environment. There’s a lot of technology. There’s a lot of medical science. There’s a lot of specificity in terms of payment systems and regulatory systems.

Our cases are designed to serve students at all levels of seniority in or near the health care system. And so we regularly teach this material to medical school students.

We have a course now for residents and fellows who have their MD and are doing post-doctorate training. The courses are also valuable for people who are going into clinical practice or who are running departments, and, of course, for top management. We have nurses and other specialists participate in this, and they all get a lot out of it.

Because basically, the central idea in this body of work is this: if you want to deliver excellent care, high-value care, you have to deliver it as an integrated team that takes responsibility for the whole cycle of care for the patient’s condition. That’s going to involve lots of different specialties and lots of different skill sets. It’s also going to require the ability to have a deep understanding of what it actually costs to deliver care, so that you can learn how to do it more efficiently in ways that don’t detract from outcomes. This is why we have CFOs from health care institutions, as well as suppliers of medical technology and pharmaceuticals, participate in our courses. We also have participants from health plans because it’s their job to be purchasers of high-value health care. We have a lot of cases that explore this question: how can a health plan actually encourage the value transformation as opposed to work against it?

Michael Porter ... continued from p. 1

The Value-Based Health Care Delivery curriculum is based on the framework introduced by Professors Michael E. Porter and Elizabeth

Olmstead Teisberg in the book Redefining Health Care (2006).

#7782 iSBN 978-1591397786432 pagesHarvard Business review Press

See the full curriculum, including suggested cases and articles, sample topic modules, and course descriptions:

hbsp.harvard.edu/list/porter

See New artiCle:The Strategy That Will Fix Health Care by Michael E. Porter and Tom Lee #r1310BHarvard Business Review, October 2013

hbsp.harvard.edu 1-800-545-7685 | 3

01 An InTErvIEW WITH MICHAEL E. POrTEr

01 New! OnLInE ExErCISES In OPErATIOnS MAnAgEMEnT

04 nEW CASES, ArTICLES, CHAPTErS, & eLEArnIng

04 Accounting

05 Business & government relations

06 Business Ethics

07 Economics

08 Entrepreneurship

09 Finance

10 general Management

11 Human resource Management

12 Information Technology

14 International Business

15 Marketing

16 negotiation

17 Operations Management

18 Organizational Behavior

20 Sales

21 Service Management

21 Social Enterprise

22 Strategy

23 COnTACT InFOrMATIOn

BC New! eBOOkS

aBelli: What teaching advice would you give to an instructor who wants to use your materials to teach health care management?

POrter: Well, this material is power-ful. It’s so different from the health-management curriculum that you see in most schools.

All of our curriculum is fundamentally about clinical care for patients—not about the management part, the back office, the billing. It’s about the delivery of care and the delivery of value in that care.

We’ve had a tremendous resonance with this appeal. I would just encourage any faculty member to give these cases a shot. Even if you don’t know that much about health care, if you’re teaching health students, they will get this. And if you can help tee this up, to help the students understand the frameworks, these discussions will have a large

impact. These are some of the most fun case discussions we’ve ever had, when we get a bunch of doctors in the room talking about how to deliver health care better. It’s powerful material.

We also provide to an instructor some topic lectures, articles, and other support-ing conceptual material, and of course Teaching Notes. And we have aspirations to provide even more supporting content for the cases.

I think it’s a little intimidating for faculty who haven’t taught in a business school to teach cases. But we now have a bunch of MDs who are teaching this material successfully and having a great time doing it. So I would encourage faculty members in the medical field or public health field to try this out.

Our material, I think, is a great bridge between the business school and medical school. There’s an opportunity here for virtually every school—including medical schools, public health schools, and busi-ness schools—to embrace this material and add it to their curriculum.

See an extended version of this interview with Michael Porter:

academic.hbsp.harvard.edu/ tmnfall13

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Multiple-Server Queues Demonstrates how variability in arrival times, service times, and resource utilization can impact patient waiting times for a 4-bed hospital unit. A second scenario compares the average performance of 4 specialized 4-bed units to the performance of a pooled 16-bed unit. Illustrates the trade-offs among cost, patient experience, and clinical quality that arise from queuing systems. #4386

Push vs. Pull Production Set at a computer manufacturing supply chain, this exercise has students consider how production triggers are directly related to meeting demand, managing inventory, and maximizing capacity utilization. #4402

System Utilization in Service Management (available for course use in Spring 2014)Students analyze a service process—writing and renewing insurance policies—to understand the impact of capacity utilization on throughput time and WIP under demand variability. This exercise reinforces students’ understanding of Little’s Law. #4391

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Accounting for the iPhone at Apple Inc.Francois Brochet, Krishna g. Palepu, Lauren BarleyHarvard Business School Case#111003 (19 pages) tN

Apple initially recognized revenue associated with its iPhone product using subscription accounting. However, in 2008, the company started providing non-GAAP supplemental numbers where all of the revenue was recog-nized up front. Market participants’ reactions to the disclosure were mixed. Was Apple “right” in arguing that subscription accounting was inadequate for the iPhone?

Boston Children’s Hospital: Measuring Patient CostsRobert S. Kaplan, Mary L. Witkowski, Jessica A. HohmanHarvard Business School Case#112086 (28 pages)Spreadsheet Available

The case describes two pilot projects on applying activity-based costing to measuring the cost of treating patients. It presents process maps and financial data relating to the processes used during 1) an office visit to a plastic surgeon for three different diagnoses, and 2) application and removal of three different casts in the orthopedic cast room. Students calculate and compare the costs and margins of the three procedures at the two different sites using the hospital’s existing cost system and a proposed new system based on time-driven activity-based costing.

Diamond Foods, Inc.Suraj Srinivasan, Tim grayHarvard Business School Case#113055 (20 pages)

The Diamonds Foods, Inc., case describes the

major accounting blowup at the company in late 2011 that was triggered by a report by Off Wall Street (OWS), a prominent short-selling research firm. Diamond Foods, a high-flying growth company in 2011, grew from a walnut farmers’ cooperative in 2005 into a branded snack foods manufacturer on the strength of a series of acquisitions. The accounting scandal that involved improper accounting for walnut purchases led to Diamond’s dropping its high-profile acquisition of Pringles, an SEC and DOJ investigation, the departure of the CEO and CFO, and the grounding of a high-flying growth company. The case describes the history and growth of the company and the investigative and analytical work conducted by OWS, and allows students to understand implications of the growth strategy for finan-cial performance and valuation. Additionally, the case highlights the role of corporate boards and audit committees in managing strategic and financial reporting risks.

Encana Corporation: Accounting for Foreign CurrencyDarren Henderson, Chris Sturby, gillian Heisz Ivey Publishing Case#W12374 (25 pages)

Encana is reassessing its choice for functional currency and presentation currency. Histori-cally, Encana has used Canadian dollars for its functional currency and U.S. dollars for its presentation currency, but changes in Encana’s operations over the past several years have caused the company to revisit its choices. For functional currency, Encana must determine whether Canada continues to represent its pri-mary economic environment. Further, Encana must consider whether its reasons for using U.S. dollars as presentation currency remain valid. To make its decisions, Encana must apply the guidance in IAS 21, “The Effects of Changes in Foreign Exchange Rates.” Finally, Encana must determine the impact of its choices on the financial statements.

Granville Symphony OrchestraDavid W. Young, Robert N. AnthonyThe Crimson Group Case#TCG249 (5 pages) tN

This case provides a vehicle for discussing the presentation of a nonprofit’s financial statements. The presentation in the orchestra’s annual report is unusual. It focuses on contri-bution to fixed costs from operating activities, highlighting the operating deficit and how this deficit was, or was not, made up from endow-ment revenue and annual fund-raising. The case also includes an eight-year projection in the published financial statements, which is highly unusual.

Incentive Contracts for Financial Consultants at Private Client Services DivisionSuneel C. udpa North American Case Research Association#NA0172 (21 pages) tN

Paul Lui, executive president at Private Client Services Division (PCSD), had the difficult task of designing a new incentive compensation system for financial consultants at the wealth management division of a mid-tier financial services firm that had limited resources compared to its larger rivals. Lui had many objectives in mind in designing the new incentive compensation system: to motivate financial consultants to stay, perform, and excel; to attract new consultants to fill in the vacated positions; and to generate new business in the face of labor shortages and sig-nificant competition from larger firms. How did the current compensation plan at PCSD compare to those of rival firms? How could Lui change the compensation plan for PCSD, given the resource constraints his company faced as a mid-tier financial services firm? Beyond changing compensation plans, what could Lui do to recruit new experienced con-sultants, stop top producers from leaving, and more generally improve the morale at PCSD?

C a S e S a r t i C l e S C H a P t e r S e l e a r N i N g

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Investindustrial Exits DucatiFrancois Brochet, Karol MisztalHarvard Business School Case#113058 (30 pages)

In early 2012, Investindustrial, a European private equity group, publicly announced its intention to sell its 76.7% stake in Ducati Motor Holding S.p.A., an iconic Italian producer of sport performance motorcycles. The decision followed a six-year turnaround during which Ducati returned to profitability and significantly expanded its product line. Investindustrial’s team had the following exit alternatives: 1) a trade sale to an automotive buyer; 2) a secondary buyout, partial or com-plete, by a financial investor; and 3) a relisting in Hong Kong. Each option had its pros and cons, but all required a careful valuation of Ducati to maximize the investors’ return on their flagship investment.

Justin Anson Distillery, Inc.Richard F. VancilHarvard Business School Case#113122 (6 pages)

A distiller increases whiskey production and income declines because of accounting meth-ods in use. Questions are raised regarding the treatment of expenditures, which can be clas-sified as production, inventory, or period costs. The necessary aging process raises added questions about prior period restatements and needed financing. This is a rewritten version of an earlier case by R.F. Vancil and R.H. Deming.

NovaStar Financial: A Short Seller’s BattleSuraj Srinivasan, Amy KaserHarvard Business School Case#113120 (27 pages)

The NovaStar case describes the challenges faced by short seller Marc Cohodes of hedge fund Rocker Partners as he tried to expose what he thought was widespread fraud in mortgage lender NovaStar Financial. The case is set in the time period from 2001 to 2007 and tracks the growth of the subprime industry and its collapse leading to the financial crisis. The case describes the business model of NovaStar, a leading subprime mortgage lending company, and its accounting practices, with a focus on the key risks and opportunities facing the company. The case requires students to put themselves in the shoes of Marc Cohodes in order to understand the

business model and accounting numbers and to identify whether the financial performance is a good representation of the true economic performance. In particular, students learn accounting concepts related to securitization, gain on sale accounting, valuation of avail-able for-sale securities, and analysis of the statement of cash flows. The case also allows students to understand the roles and incentives of various capital market participants such as sell-side analysts, the media, auditors, and the Securities and Exchange Commission (SEC).

Why “Fair Value” Is the RuleKarthik Ramanna Harvard Business Review Article#R1303H (4 pages)

For the past two decades, fair value account-ing—the practice of measuring assets and liabilities at estimates of their current value—has been on the ascent, marking a major departure from the centuries-old tradition of keeping books at historical cost. Why has this happened? The author, an associate professor of business administration at Harvard Busi-ness School, offers one answer: the member-ship of the Financial Accounting Standards Board, which sets the standards for GAAP in the United States, has shifted over the decades to include more people from the financial ser-vices industry. Ramanna offers strong evidence that these executives prefer fair value and gives several possible motives for their preference. One, investment banks and asset managers are accustomed to using fair value in their day-to-day business. Two, GAAP profits defined on the basis of fair value rather than historical cost accelerate the recognition of gains, partic-ularly in periods of rising asset prices. Three, the use of fair value to determine impairment of goodwill from M&A activity may impose less drag on earnings, potentially boosting M&A activity—a major revenue source for investment banks.

BuSiNeSS & gOVerNmeNt relatiONS

AIG and the American Taxpayers (A)Karthik Ramanna, Matthew ShafferHarvard Business School Case#113124 (23 pages)

Explores the decision faced by AIG’s board

on whether to join shareholder and ex-CEO Maurice Greenberg’s lawsuit against the U.S. government. The suit, argued by super-lawyer David Boies (of Bush v. Gore and California gay marriage fame), claims that in September 2008 the U.S. arbitrarily set aside the rights of AIG’s shareholders—thus violating the Fifth Amendment by taking private property without just compensation—while preserving shareholder rights in other troubled financial institutions, including Goldman Sachs, whose ex-CEO was then treasury secretary. The U.S. government moves to dismiss the case, arguing that it has wide discretion in times of crisis, but a federal judge allows the suit to proceed. The case raises two issues central to understanding capitalism: 1) the importance of and limits to property rights; and 2) the role of the state in choosing between varieties of capitalism, here between oligarchic and entre-preneurial capitalism.

Kunshan, Incorporated: The Making of China’s Richest TownWilliam C. Kirby, Nora Bynum, Tracy Yuen Manty, Erica M. ZendellHarvard Business School Case#313103 (32 pages)

In 1980, the city of Kunshan was mere coun-tryside, registering on neither the Chinese government’s nor the international business community’s radar. By 2010, Kunshan had become the richest city per capita in China and a global technology powerhouse, home to com-panies such as Foxconn, Compal Electronics, and Wistron. Kunshan’s entrepreneurial, self-starting development combined with strategic location and high levels of local government support had been responsible for Kunshan’s tremendous growth and success. How could it continue to grow at a rate to maintain its lead-ership among Chinese entrepreneurial cities? And would the founding of an international, joint-venture campus with Duke and Wuhan University keep the city of Kunshan innovative and ahead of the curve?

Michelle Rhee’s IMPACT on the Washington, D.C., Public SchoolsLaura Winig Harvard Kennedy School Case#HKS694 (16 pages) tN

The case opens in 2007, when the Washington, D.C., public school system was failing. Parents, politicians, labor unions, and activists all

ACCOUNTING — BUSINESS & GOVERNMENT RElATIONS


BUSINESS & GOVERNMENT RElATIONS — BUSINESS ETHICS

agreed that reform was necessary due to abysmal student test scores and attendance records as well as safety concerns. But stake-holders disagreed sharply on how to achieve their shared goal of providing a good education to the city’s children. Reformers wanted to close failing schools, parents wanted to choose where their children attended school, and the teachers union wanted more compensation for teachers. Michelle Rhee, a former teacher and “outsider,” was hired by Mayor Adrian Fenty to institute sweeping and speedy reforms. As chancellor, Rhee came under fire by teachers and their union, parents, and the public for her swift move to close underperforming schools and, controversially, to fire teachers rated as “ineffective” by IMPACT, a value-added evalu-ation system designed to isolate each teacher’s unique contribution to his or her students’ educational achievement based on student test scores. The case discusses the steps Rhee took to reform the D.C. public schools and the support and opposition she encountered along the way, culminating with her November 2010 resignation.

Rough Justice: Stuart Eizenstat and Holocaust-era Asset Restitution (A)James K. Sebenius, Laurence A. greenHarvard Business School Case#913037 (26 pages)

Beginning in 1994, a series of articles and public disclosures indicated that Swiss banks may have retained assets belonging to victims of the Holocaust and also may have engaged in long-term attempts to block survivors’ ability to recover those assets after World War II. Stuart Eizenstat, a longtime government official and U.S. Special Envoy for Property Restitution, undertook a complex multiyear negotiation among victims’ representatives, advocacy groups, government officials, and the banks in an unprecedented attempt to obtain restitu-tion for the victims. Unifying fractious parties within an uncertain legal, social, and business landscape, Eizenstat used a unique approach of quantifying “rough justice” in order to enforce the accountability of corporate entities and governments for past injustices in Swit-zerland, which forms the basis of this study.

Turkey—A Work in Progress?Richard H.K. VietorHarvard Business School Case#713018 (31 pages) tN

For the past 10 years, Turkey has grown its real GDP at about 6% annually. This came after a huge debt crisis in 2001-02, wherein Turkey had to borrow $16 billion from the IMF and comport with its difficult conditionality. Today, Turkey is a middle-income country in search of an effective development strategy. It tends to run high inflation with a devalued currency, despite massive capital inflows and a huge cur-rent account deficit. At home, the government has carefully managed among Islam, democ-racy, and secularism. And abroad, it deals with a difficult neighborhood—Syria, Iran, Iraq, and Israel (not to mention Russia, Europe, and the USA). Prime Minister Erdogan is trying to rewrite the constitution before 2014, when the next election occurs.

BuSiNeSS etHiCS

Barclays and the lIBOR ScandalClayton Rose, Aldo SesiaHarvard Business School Case#313075 (22 pages)

In June of 2012, Barclays plc admitted that it had manipulated LIBOR—a benchmark interest rate that was fundamental to the operation of international financial markets and that was the basis for trillions of dollars of financial transactions. Between 2005 and 2009, Barclays, one of the world’s largest and most important banks, manipulated LIBOR to gain profits and/or limit losses from derivative trades. In addition, between 2007 and 2009, the firm had made dishonestly low LIBOR sub-mission rates to dampen market speculation and negative media comments about the firm’s viability during the financial crisis. In settling with U.K. and U.S. regulators, the firm agreed to pay $450 million in fines. Within a few days of the settlement, Barclays’ CEO, Robert Diamond, had resigned under pressure from British regulators. Diamond blamed a small number of employees for the derivative trading- related LIBOR rate violations and termed their actions “reprehensible.” As for rigging LIBOR rates to limit market and media speculation of Barclays’ financial viability, Diamond denied any personal wrongdoing and argued that, if anything, Barclays was more honest in its

LIBOR submissions than other banks—ques-tioning how banks that were so troubled as to later be partly nationalized could appear to borrow at a lower rate than Barclays. This case explains why LIBOR was an essential part of the global financial market, the mechanism used to establish the rate, and what Barclays did wrong. The case allows for an examination of 1) the consequences of violating the trust of market participants; 2) cultural and leadership flaws at Barclays; 3) the challenge of effectively competing in a market where systemic, and widely understood, corruption is taking place; 4) the complicity of regulators in perpetuating a corrupt system; and 5) what might, or might not, be effective remedies for the systemic flaws in LIBOR.

Clarence Hall University and the DonationBidhan Parmar, Jenny Mead, Mallory CombemaleUniversity of Virginia Darden School Foundation Case#UV6545 (9 pages)

Annalisa McGann, chair of London’s presti-gious Clarence Hall University, together with the university’s board must make a decision about whether to return a large monetary donation from the Natour Charitable Foundation, which was founded and run by a recent graduate who was also the son of the leader of a corrupt, authoritarian regime in an oil-rich region. Almost two-thirds of the money had already been invested in an innovative leukemia drug that could significantly increase patients’ chances of survival; the remainder had been earmarked for an endowment fund for low-income students. Each course of action—keeping the money, giving back the entire sum, or returning the unspent money—had complex consequences, particularly in the current environment, in which all British uni-versities were suffering financially and there was nationwide student unrest over rising uni-versity costs. The British press, by uncovering the connection between Natour and Clarence Hall, had forced the administration’s hand, and McGann and the board needed to make a quick decision after considering a number of complicating factors.

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BUSINESS ETHICS — ECONOMICS

Confronting a Pandemic in a Home Rule State: The Indiana State Department of Health Responds to H1N1David giles, Arnold Howitt Harvard Kennedy School Case#HKS728 (21 pages)

When Indiana State Health Commissioner Dr. Judy Monroe learned of the emergence of H1N1 (commonly referred to as “swine flu”) in late April 2009, she had to quickly figure out how to coordinate an effective response within her state’s highly balkanized public health system, in which more than 90 local health departments wielded considerable autonomy. Over the next several months, she would come to rely heavily on relationships she had worked hard to establish with local health officials upon becoming commissioner—but she and her senior advisors would also have to scramble to find new ways to communicate and coordinate with their local partners, who represented jurisdictions that varied consider-ably in terms of size, population demograph-ics, resources, and public health capacity.

Defining the Purpose for Borussia Dortmund GmbH & Co. KGaAurs Mueller, ulrich Linnhoff, Bernhard Pellens ESMT—European School of Management and Technology#ES1341 (14 pages)

In its 100th year of existence in 2009, Borussia Dortmund (BVB) was the only German soccer club listed on the stock exchange. With three days to go before the annual shareholders meeting on November 24 of that year, the club’s managing directors, Thomas Tress and Hans-Joachim Watzke, went through the year-end figures one more time. Although the situation had improved since 2005, when the club was on the brink of insolvency, the closing accounts once again showed a negative net income. After nine years as a publicly traded company, the BVB had to report its fifth loss, this time for 5.9 million euros, which added up to a cumulative loss of more than 145 million euros. After the passing of a century, many stakeholders were concerned about the way forward. What was the organization’s purpose? What was more important, finally making a profit and meeting shareholders’ expectations or playing for the fans and the club’s honor? What could the managing directors offer to

The Next Emerging Giants Take FlightAlicia garcia Herrero IESE-Insight Magazine Article#IIR058 (8 pages)

Move over BRICS, Next 11, and CIVETS: the EAGLEs have landed. A new formulation by BBVA Research, which conducts economic analyses for the international banking group, reveals a special group of markets that it feels deserves closer investor attention. The author refers to these countries as EAGLEs, which stands for Emerging and Growth-Leading Economies. These 10 emerging countries will contribute more to global growth than the G7 average in the next 10 years. On top of this, this article identifies a dozen other countries to watch in the so-called EAGLEs’ Nest. Though the opportunities for investors depend on many factors, there are two key areas that are common across all EAGLEs: the rise of the middle class, presenting opportunities for the retail and household service sector; and vast infrastructure needs, of special interest to con-struction companies in the developed world looking for new opportunities to boost their production capacity.

Preparing for the Pitfalls of InterconnectivityIan goldin IESE-Insight Magazine Article#IIR068 (8 pages)

Recent decades of globalization have created a more interconnected, interdependent, and complex world than ever witnessed before. While policy makers have focused on facilitat-ing integration, the implications of growing

their shareholders, who had seen the value of their shares drop from 11 euros at the IPO to less than 1 euro in November 2009?

eCONOmiCS

Flexicurity: Riding into the FutureTon Wilthagen IESE-Insight Magazine Article#IIR063 (7 pages)

One of the most urgent problems confronting European governments today is high unem-ployment. At the same time, global companies are finding it harder to find experienced and qualified professionals who can help them compete in a global business environment. The creative and collaborative approach to employment known as “flexicurity,” seemingly offers a solution to both these problems by emphasizing flexible work arrangements and comprehensive lifelong learning schemes, thereby helping firms and employees thrive in volatile business contexts. In this article, the author highlights two areas of flexicurity that stand out for reaping immediate benefits and unleashing powerful societal effects: more diverse contractual arrangements and lifelong learning for all categories of workers. But flexicurity involves more than formulat-ing policies; it’s an entirely new conception of work. It needs to be understood as a dynamic phenomenon and monitored through a careful examination of the different conditions of each unique labor market and culture.

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ECONOMICS — ENTREPRENEURSHIP

interdependence have been largely ignored. Global integration has brought many benefits, but it has also created fragility by produc-ing new kinds of systemic risks. This article provides an understanding of these new 21st-century systemic risks and the challenges they pose. The 2008-09 financial crisis is used to illustrate the failure of even sophisticated global institutions to manage the underly-ing forces of systemic risk, which have been amplified by our growing interdependence. At the same time, technological change has greatly increased the power of individuals to destabilize powerful systems. Urgent reform of global governance structures and institu-tions is essential to improve the mitigation and management of such global risks. Likewise, significant changes in risk management and risk culture are required to ensure that businesses are better prepared. This article suggests the first steps to take.

eNtrePreNeurSHiP

Amici’s East Coast PizzeriaNaeem Zafar, Jack Fuchs, Victoria Chang California Management Review Case#CMR533 (14 pages)

The Amici’s East Coast Pizzeria case study presents the history of Amici’s East Coast Pizzeria, started by Peter Cooperstein and Mike Forter in 1987. It allows students to evaluate the company’s launch in terms of opportunity identification and also evaluate the company’s scaling and growth strategy and options, all in the context of an entrepre-neurial start-up environment.

Entrepreneurial Finance in Finland?William R. Kerr, Ramana Nanda, Alexis BrownellHarvard Business School Case#813068 (24 pages) tN

This case describes a new venture attempting to bring early-stage entrepreneurial financing to Finland and other Nordic countries. Entre-preneurship is taking off in Finland, an area that historically has had little venture capital or high-growth start-up activity, but a gap remains for seed-stage financing. The founders are evaluating the best way to structure their pri-vate equity fund to reflect their own assets and abilities and the needs and resources of the entrepreneurial scene in the Nordics. The case

evaluates whether to organize as an accelera-tor, a micro-VC fund, an incubator, a normal VC fund, or a hybrid.

EverTrue: Mobile Technology Development (A)William R. Kerr, Alexis BrownellHarvard Business School Case#813122 (25 pages) tN

Brent Grinna is evaluating different options for the technology development of his start-up’s iPhone app, including hiring local programmers, finding a CTO, and outsourc-ing. He has just over two months before he presents his alumni networking app to Brown University, in the hope that they will adopt it and fund his company, EverTrue. He lacks the technical knowledge necessary to make the prototype himself and so has to quickly decide on the best option. He is considering multiple ways to find a developer, including hiring a local programmer or making use of a local app-development company; using an outsourcing platform like oDesk; contracting with Dashfire, a friend’s company that charges low fees for product development in exchange for equity; or finding and hiring a CTO or technical co-founder. Grinna must weigh issues like cost, speed of development, equity retention, proximity and ease of collaboration, and control of intellectual property. The case further provides an opportunity for discussing the business models of global firms like oDesk and Dashfire.

ExerciseAppBarbara L. Marcolin, Ning Su, Corey Rochkin Ivey Publishing Case#W13025 (10 pages) tN

The CEO and founder of ExerciseApp decided to take the plunge and spec out the features of his new iPhone mobile application and sup-porting website. He planned for ExerciseApp to stream exercise workouts from pro athletes to followers who wanted to “Train. Play. Be. Like the Pros” and get an edge to their workouts. As he envisioned the application, he realized he would need a lot of help with the technology and the setup of this entrepreneur-ial venture in order to successfully bring it to market. With limited funding, he must decide on the next steps for the business, including the application’s features, business model, and market strategy.

MakerBot: Challenges in Building a New IndustryRuth gilleran, Erik Noyes Babson College Case#BAB706 (17 pages) tN

Like Apple, MakerBot Industries offered its first product in the form of a kit. Enthusiasts who wanted to build their own 3-D printer and enter the brave new world of personal manufacturing could create any object in their imagination—as long as it was no bigger than a coffee cup. The founders of MakerBot—Bre Pettis, Adam Mayer, and Zach Smith—were each passionate about bringing affordable 3-D printing to the masses. Moreover, they would not betray their commitment to open technol-ogy and open innovation. Above all else, they wanted to make their 3-D printers understand-able to and modifiable by users. They did this by keeping every aspect of their 3-D printers’ hardware and software open and adaptable. Through the creation of Thingaverse.com (a universe of things), an expanding army of MakerBot enthusiasts could upload, share, and modify a growing array of 3-D objects, including toys, small inventions, medical devices, and even architectural models. What advantages did MakerBot’s strategy of open-ness bestow? How was MakerBot positioned for future battles in the emerging personal manufacturing industry with Hewlett-Packard and others? Lastly, how did MakerBot turn a unique research endeavor into a powerful idea attracting venture funds from Jeff Bezos, The New York Times, and venture capitalists?

SaferTaxi: Connecting Taxis and Passengers in South AmericaPeter A. Coles, Benjamin EdelmanHarvard Business School Case#913041 (10 pages) tN

SaferTaxi, a taxi booking service in South America, must develop its mobilization strat-egy; that is, it must attract enough passengers and drivers to make its service worthwhile for all. Drivers hesitate to pay for SaferTaxi’s smartphones and service unless these will deliver passenger bookings—and passengers have no reason to sign up unless drivers are available. Meanwhile, regulators question the permissibility of online taxi booking in light of regulatory requirements, and some existing taxi booking vendors feel threatened by Safer-Taxi’s efforts to enter the market. As SaferTaxi attempts to satisfy these diverse constituents,

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international competition looms. What should SaferTaxi’s founders do next?

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Brazos Partners and the Tri-Northern ExitMatthew Rhodes-Kropf, Nathaniel BurbankHarvard Business School Case#813157 (26 pages)

Randall Fojtasek, a partner at the Dallas-based Brazos Private Equity Partners, must decide whether now is the time to sell his firm’s investment in Tri-Northern Distribution. Brazos, a middle-market leveraged buyout group, created the company two years earlier through the acquisition of two electronic secu-rity distribution companies: Tri-Ed Distribu-tion and Northern Video Systems. Twenty-four months after successfully integrating the two companies, Brazos has received two attractive offers for the combined distributor. With the company’s management projecting double-digit growth for 2012, however, it is far from clear that now is the optimal time to exit from the firm’s third fund.

Conscious Capitalism Firms: Do They Behave as Their Proponents Say?Chong Wang California Management Review Case#CMR528 (27 pages)

Proponents of the Conscious Capitalism (CC) movement claim that CC firms should demonstrate a lower gross margin, a higher profit margin, a lower SG&A (Sales, General,

and Administration), and a lower marketing expense than do non-CC comparable firms. Using a sample of industry-year-size-matched control firms as the CC firms’ benchmark, this article shows that empirical evidence largely disagrees with these conjectures. It further shows that in contrast to the implications of the CC movement, CC firms neither demon-strated superior stock performance relative to the S&P 500 in recent years nor responded less to the pressures from the equity market.

Gold as a Portfolio Diversifier: The World Gold Council and Investing in GoldPedro Matos, Evans RichardUniversity of Virginia Darden School Foundation Case#UV6524 (14 pages) tN

Spreadsheet Available

The global head of investment research at the World Gold Council (WGC) had finished his presentation “The Strategic Case for Gold as an Asset Class” at the 2012 Bloomberg Precious Metals Conference in New York. As a result of the market collapse in 2008 and the ongoing euro-area crisis, investors worldwide had safety and security on their minds, and many in the room were wondering whether gold would provide capital preservation and improve the overall risk-return trade-off of their portfolios. At the same time, the sustained run-up in the price of gold since 2001 that was mentioned in the presentation was a cause for concern. Was gold the safe haven that it had proved to be in 2008 and 2009, or was it an asset class at the peak of a bubble? The investment case for gold deserved closer examination.

India Faces a Power Failure: U.S. Financial Service Company Expansion PlansF. John Mathis, Frank Tuzzolino Thunderbird School of Global Management Case#TB0311 (13 pages) tN

The case deals with U.S. Financial Service Company (USFSC) and its CEO, John P. Lewis, and their consideration of whether the company should open operations in India. USFSC would either partner with a local financial service company or invest in a new start-up bank branch or representative office in India. Although Lewis is conducting this analysis in 2012, the case covers the time period from 2005 to 2012 to provide back-ground and to review the economic develop-ments and political policies undertaken by the Indian government to recover from the global financial crisis of 2007-2009. The case requires a performance analysis of the finan-cial ability of USFSC to undertake expansion into India and/or requires an assessment of the economic and political risks of investing in India and how to mitigate those risks.

lin TV CorpDavid S. Scharfstein, Erik Stafford, Joel L. HeilprinHarvard Business School Case#213065 (6 pages)

This case considers the valuation of Lin TV, a publicly traded company with 30 TV stations. The case highlights how a change in operating strategy can enhance the firm’s value, and it considers the effect of consolidation within the industry on firm value.

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working Capital Simulation: managing growth

In this single-player simulation, students consider investments for growth and cash-flow improvements at a small company. They must understand how financial statements are interconnected and consider the possible effects of each opportunity on working capital.

“My undergraduate students thoroughly enjoyed this simulation. The key was seeing the interaction of factors and the impact of any one strategic decision. This simulation drove home those concepts better than any other method I have tried.”

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lockheed Martin’s Acquisition of NationScape, Inc.Susan A. White North American Case Research Association Case#NA0178 (21 pages) tN

Defense is big business, especially for companies like Lockheed Martin. Lockheed Martin, formed in 1995 through the merger of Lockheed Corp. and Martin Marietta, was one of the largest defense contractors in the world, employing about 140,000 worldwide. Lock-heed Martin was considering the acquisition of NationScape, Inc., a firm that supports U.S. military readiness; diplomatic and develop-ment efforts; and peacekeeping, stabilization, and nation-building activities in more than 65 countries around the world. The acquisition could increase Lockheed Martin’s overseas defense support operations and expand its capabilities to provide diplomatic and develop-ment services to complement its existing defense business. The corporation needed to determine an appropriate price for the acquisi-tion and also evaluate whether the acquisition would be a good strategic and cultural fit for the corporation.

Melco Crown Entertainment: Rolling the Dice and Other Ways to Raise CapitalStephen Sapp, Matthew gray Ivey Publishing Foundation Case#W12210 (15 pages) tN

The case deals with how the investment banker advising the chief financial officer of Melco Crown Entertainment Limited (MCEL), a casino and entertainment company based in Macau, suggests that the company finance two new gaming resorts currently under construc-tion. The development of these properties has stopped because of insufficient funding, and project timelines have started to be questioned. A decision regarding the best means to raise the necessary capital needs to be made quickly or MCEL may not be able to capitalize on the lucrative, growing gaming market in Macau. The advice must consider the immediate need to raise capital to get the projects back on track and the need for long-term financial flexibility to take advantage of future opportunities. The case considers a variety of domestic and inter-national options to determine what best meets MCEL’s needs.

The Naini-Itarsi Railway Electrification ProjectRavi Anshuman, Narang Tapsi, Anand SharmaIndian Institute of Management Bangalore Case#IMB395 (14 pages) tN

Spreadsheet Available

This case exposes students to financial decision making in government enterprises and the concepts of financial and economic rates of return. It is based on actual electrification projects being undertaken by Indian Railways, one of the largest government organizations in the world. Electrification projects require large capital outlays with significant financial and welfare implications. The case analysis involves 1) estimating incremental cash flows under alternative scenarios, 2) calculating the financial rate of return, and 3) conduct-ing a sensitivity analysis to identify the key value drivers. It also provides opportunities to discuss nominal vs. real cash flows, differences between internal rate of return and net present value, and the choice of different discount rates. The case is suitable for a course on Cor-porate Finance and Valuation.

The Real Value of Say-on-PayMireia gine IESE-Insight Magazine Article#IIR092 (7 pages)

In light of the financial crisis, shareholder activism is growing around the globe, leading to Say-on-Pay policies, which give sharehold-ers the opportunity to voice their opinions on executive pay and put pressure on boards to justify and explain pay packages more clearly to shareholders, if not redesign them com-pletely. In several high-profile cases, large com-panies have failed to obtain approval of pay packages for their CEOs due to such activism. Given the trend toward implementing Say-on-Pay in the United States and several European countries, the author collaborated on research to determine the real effect of such policies on companies and their performance. The research shows that while Say-on-Pay may not curb excessive remuneration, it does provide a host of other measurable, positive benefits for companies and their shareholders, both in the immediate and longer terms. Apart from these benefits, the author argues that Say-on-Pay can be an effective way to strengthen corporate governance and accountability within the firm, outweighing the time and costs they require.

geNeral maNagemeNt

Clayton Industries, Inc.: Peter Arnell, Country Manager for Italy (Brief Case)Christopher A. Bartlett, Benjamin H. BarlowHarvard Business School Brief Case#4199 (12 pages) tN

Clayton Industries, a 60-year-old U.S.-based firm in the HVAC (heating, ventilation, and air conditioning) industry, with nearly $1 billion in revenues, has gradually built a presence in a number of countries, including several in Europe. Peter Arnell, previously Clayton’s suc-cessful country manager for the U.K., has been asked to take over the Italian subsidiary, which has recently been struggling on several fronts. Arnell must juggle the strategic objectives of his manager (the head of Clayton Europe) and of the firm’s Wisconsin-based CEO while overseeing the day-to-day activities of the business in this new setting. Many of Arnell’s challenges derive from his dual responsibilities of handling manufacturing as well as sales of Clayton products in his new home country.

Hillary Clinton & Partners: leading Global Social Change from the U.S. State DepartmentRosabeth Moss Kanter, Ai-Ling Jamila MaloneHarvard Business School Case#313086 (24 pages) tN

As U.S. secretary of state, Hillary Rodham Clinton acted on a long-standing interest in public-private partnerships to elevate and activate an Office of Global Partnerships reporting directly to her. One major initiative that also addressed her interest in women’s empowerment was to create an alliance for clean cookstoves, a significant environmental and public health issue in developing coun-tries. This case examines the change process within the State Department and across the federal government as well as the process of developing partnerships, and looks at what happens on the ground to deploy resources. It raises the question of whether the alliances will be sustainable when Secretary Clinton leaves office.

FINANCE — GENERAl MANAGEMENT


Qantas Airlines: Twitter NosediveJana Seijts, Paul Bigus Ivey Publishing Foundation Case#W12338 (6 pages) tN

The executive of Government and Corporate Affairs at Qantas airlines faced a communica-tion situation that was spiraling out of control. Qantas had launched a contest through the social media service Twitter, asking partici-pants to use Twitter to describe their “dream luxury in-flight experience.” However, the competition dissolved as thousands of people used the opportunity to express negative comments about Qantas. By the second day, nearly 15,000 people worldwide had used social media to vent their frustrations with the airline. The executive needs to devise a plan of action before additional damage is incurred by one of Australia’s strongest brands.

Research In Motion: The Mobile OS Platform WarAlan MacCormack, Brian Dunn, Chris F. KemererHarvard Business School Case#613001 (22 pages)

The case describes competition in the market for smartphones in the U.S. and the position of one player, Research in Motion (RIM), which manufactures the popular BlackBerry line of products. Early in 2011, RIM is in trouble. Its stock price has plummeted amid poor busi-ness results, and its future as an independent company is in doubt. A new chief executive officer, Thorsten Heins, must decide how to position the company for the future. The case

allows students to understand the strategic dynamics in platform-based industries in general and to explore more specifically how a firm that led the industry in 2007 could fall to earth so dramatically four years later. The case is based on data and information from public sources.

Sony PlayStation: Security BreachJana Seijts, Paul Bigus Ivey Publishing Foundation Case#W12309 (12 pages) tN

In April 2011, Sony’s PlayStation and Qriocity services were attacked by an illegal and unau-thorized intrusion into the company network, compromising user account information. For five days, the corporation turned off both its PlayStation Network and Qriocity services while it conducted a full and complete inves-tigation with the help of an external security firm. Although brief statements about the issue were posted on the PlayStation blog, Sony did not publicly disclose the full extent of the security breach or the expected date when network services might return to normal, leaving many people speculating whether personal or financial information had been illegally obtained. The timing was complicated by the imminent announcement of the launch of Sony’s first tablet computer. With its public statement, Sony intended to communicate key points of information about, explanations of, and solutions to the network interruption. With Sony having over 70 million PlayStation Network and Qriocity services user accounts worldwide, customers, industry analysts, investors, consumer protection

groups, and government officials were all waiting for answers.

Sugar BowlRichard g. Hamermesh, Alisa ZaloshHarvard Business School Brief Case#913537 (14 pages) tN

Shelby Givens, a recent business school gradu-ate, returned home to Raleigh, North Carolina, to help rescue her family’s ailing and outdated bowling alley, Westlake Lanes. Although she cut costs and addressed inefficiencies, moving the business from near-bankruptcy to profit-ability in nine months, market conditions threatened the long-term viability of the busi-ness. Givens then sold her family on a new, more youth-oriented concept, an urban lounge called Sugar Bowl that could generate sizable revenues from the food and beverage busi-nesses already embedded in Westlake Lanes. The case follows Givens as she builds Sugar Bowl into a turnaround story through shrewd decision making in finance, operations, and marketing while contending constantly with challenging surprises and disappointments. The case also captures Givens’ reflections on how the entrepreneurial drive has motivated her. Sugar Bowl may be taught alone or after “Westlake Lanes” (4431), which follows Givens through the initial turnaround process.

HumaN reSOurCe maNagemeNt

Honeywell’s CEO on How He Avoided layoffsDavid Cote Harvard Business Review Article#R1306A (5 pages)

When David Cote arrived at Honeywell in 2002, the company had gone through three CEOs in four years. It had repeatedly missed earnings, and it had environmental liabilities that had never been dealt with. Virtually no pipeline of new products existed, because managers had been disinvesting to boost profits. Over the next five years Cote worked to fix many of those problems, and by the end of 2007 the company’s credibility had been reestablished with investors and its share price had more than doubled. Then the recession hit. Cote’s view was that any restructuring Honeywell did in response should have been what was best for business efficiency and

GENERAl MANAGEMENT — HUMAN RESOURCE MANAGEMENT

fiNaNCe

#4805multi-player Seat time: 90 minutes

Newly uPdated

finance Simulation: m&a in wine Country V2

The second release of this simulation adds an optional valuation exercise that introduces students to the valuation techniques used in the simulation. Students play the role of management at 1 of 3 publicly traded wine producers. Two companies consider a merger-of-equals while a third considers acquiring 1 of the other 2. Students review confidential information to determine value and set reservation prices before negotiating deal terms with each other and accepting or rejecting final offers.


profitability over the long term—not solely a reaction to the recession—and should not have had any impact on the company’s ability to outperform in recovery. The leadership team settled on furloughs, and this is the story of how they worked.

Massachusetts Financial Services (Abridged)Brian J. Hall, Karen HuangHarvard Business School Case#913036 (23 pages)

This case describes the compensation and performance evaluations at an investment management company. The senior man-agement team of Massachusetts Financial Services (MFS) Investment Management was contemplating an introduction of hedge funds at the firm, but many believed that typical hedge fund manager pay (20% of the upside) would harm the MFS culture, which glorified “star performance but not star egos.” The case presents the MFS compensation philosophy and plan (including the plan’s emphasis on subjective compensation), the types of people it attracted, the resulting culture, and how the senior management team approached the hedge funds question. It includes side discus-sion on firm-specific human capital. This is an abridged version of an earlier case.

Say-on-Pay at The Walt Disney CompanyIan D. gow, gaizka OrmazabalHarvard Business School Case#113052 (18 pages)

This case focuses on the lead-up to Disney’s 2012 annual meeting, where Disney would face a vote on the compensation package of its CEO, Robert Iger. Leading proxy advisory firms were recommending that shareholders reject the proposed compensation.

Southfield PackagingMichael Beer, Alisa ZaloshHarvard Business School Brief Case#913562 (13 pages) TN

Southfield Packaging provides packaging materials and services to medical device manufacturers. The case examines the rela-tionship between a corporate vice president, Mark Sanders, and one of his direct reports, Regional Manager Frank Belby. Sanders’ preparation for Belby’s annual performance review provides a foundation for discussing the common challenges and difficulties associ-ated with performance reviews. Specific issues include the need to clearly define criteria for evaluation and the question of whether Belby’s physical health should play a role in his perfor-mance review. Overall, is Southfield’s appraisal process a fair and effective way of evaluating employee potential?

What Monetary Rewards Can and Cannot Do: How to Show Employees the MoneyHerman Aguinis, Harry Joo, Ryan K. gottfredson Business Horizons Case#BH525 (9 pages)

Monetary rewards can be a very powerful determinant of employee motivation and performance, which, in turn, can lead to important returns in terms of firm-level performance. However, monetary rewards do not always lead to these desirable outcomes. We discuss in this installation of Human Performance what monetary rewards can and cannot do, and reasons why, in terms of improving employee performance. Also, we offer research-based recommendations, including the following five general principles to guide the design of successful monetary reward systems: 1) define and measure performance accurately, 2) make rewards contingent on performance, 3) reward employ-ees in a timely manner, 4) maintain justice in the reward system, and 5) use monetary

and nonmonetary rewards. In addition, we offer specific research-based guidelines for implementing each of the five principles. In short, our article summarizes research-based findings and offers recommendations that will allow managers and other organizational decision makers to understand when and why monetary reward systems are likely to be successful in terms of enhancing employee motivation and performance.

iNfOrmatiON teCHNOlOgy

Beyondsoft IPO (A)Ning Jia, Hong Zhang Tsinghua University Case#TU0032 (24 pages) tN

B Case Available

Beyondsoft, a leading software outsourcing enterprise in China, began to make prepara-tions for its overseas listing in 2004, including establishing a red-chip structure needed for overseas listing and introducing overseas insti-tutional investors. However, a global financial crisis broke out when Beyondsoft was going to submit its listing application to the U.S. Securities and Exchange Commission in 2007. As a result, Beyondsoft had no choice but to temporarily shelve the listing plan and whole-heartedly cope with the sudden crisis. Only after Beyondsoft showed steady performance and cash flow in 2009 did its listing get put on the agenda again. However, the U.S. capital market after the peak of the crisis was no longer as booming as it had been in the past, making it difficult to reopen a window for the listing in the U.S. The question was whether to wait patiently, looking forward to the next boom in the U.S. capital market to come soon; turn to other overseas markets; or resolutely give up the overseas listing plan and go back to the domestic A-share market. Beyond-soft President Ben Wang fell into repeated comparisons and options. Finally, Beyondsoft chose to return to the domestic A-share market and was successfully listed at the SME board of the Shenzhen Stock Exchange on January 6, 2012. The cases of Beyondsoft IPO include part (A) and part (B). (A) is used mainly for classroom discussion and (B) is an after-class reference for students.

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EZ-link and NETS E-Payment: Creating a Standard and Building a Platform InnovationChristina Soh, Yvonne Chong ABCC at Nanyang Tech University Case#NTU036 (19 pages) tN

The e-payments landscape in Singapore was previously dominated by two major card issuers with non-interoperable cards. The Infocomm Development Authority launched an initiative to develop an innovative standard that would provide an interoperable platform in order to boost local micropayments and open up e-payment services for consumers. The result was a pioneering ISO standard—the Contactless e-Purse Application Standard (CEPAS). This open standard, with unique security and high-performance features, enabled multiple payment applications offered by different issuers to be on a single smart card, which consumers could use for bus, taxi, and rail transport; car park and road usage charges; and retail micropayments. The case examines the significant challenges and trade-offs in the development and deployment of this platform innovation, such as orchestrating the efforts of multiple stakeholders and balanc-ing various stakeholders’ legitimate interests, incentivizing investment in supporting infra-structure and complementary innovations, and promoting the adoption and diffusion of the cards by consumers and merchants. The CEPAS platform was also being leveraged for the next generation of e-payment innovations, such as payments via near field communication– enabled mobile phones.

San Francisco International Airport and Quantum Secure’s SAFE for Aviation SystemDaniel Diermeier, Evan MeagherKellogg School of Management Case #KEl720 (12 pages) tN

ROI Calculations Available

In 2008 San Francisco International Airport (known by its three-letter airport code, SFO) had announced a $383 million plan to renovate and reopen Terminal 2. Assistant Deputy Director of Aviation Security Kim Dickie and her team had selected Quantum Secure’s SAFE software suite as the new Terminal 2 credentialing system, but she needed to develop a business case quickly that would convince senior management to give the green light to fund the purchase. The case describes

a scenario that occurs frequently in the real world, in which a decision offers some real but qualitative value in ways that are difficult or impossible to quantify. The discussion and analysis give students the opportunity to consider the factors that will drive the internal rate of return (IRR), net present value (NPV), and discounted payback period calculations without constructing comprehensive spread-sheet models. Analysis of the case suggests the limits of such approaches in cases where perceived value is difficult to quantify. The case prepares students to evaluate and justify purchasing requests when interacting with financial gatekeepers such as CFOs and CEOs by introducing a framework to analyze the quantifiable benefits of a capital expenditure while keeping in mind important intangible benefits.

Why IT Fumbles AnalyticsDonald A. Marchand, Joe Peppard Harvard Business Review Article#R1301H (9 pages)

As managers seek to exploit the tremendous amounts of data now available from internal and external sources, they’re likely to use the approach they use with all their IT projects—that is, they’ll focus on building and deploy-ing technology on time, to plan, and within budget. That works for projects designed to improve business processes and increase efficiency, but when it comes to extracting valuable insights from data and using infor-

mation to make better decisions, managers need a different approach and mind-set. A big data or analytics project is likely to be smaller and shorter than a conventional IT initiative, such as installing an ERP system. It’s also more like scientific research. Commissioned to address a problem or opportunity, such a project frames questions, develops hypotheses, and then experiments to gain knowledge and understanding. The authors have identi-fied five guidelines for taking this voyage of discovery: 1) place users—the people who will create meaning from the information—at the heart of the initiative; 2) unlock value from IT by asking second-order questions and giving teams the freedom to reframe business problems; 3) equip teams with cognitive and behavioral scientists, who understand how people perceive problems and analyze data; 4) focus on learning by facilitating information sharing, examining assumptions, and striving to understand cause and effect; and 5) worry more about solving business problems than about deploying technology.

Wooqer: Making Business Social (A)Shankar Venkatagiri, Yalla Veera Prakash Indian Institute of Management Bangalore Case#IMB411 (21 pages) tN

B Case Available

Information technologies enable key divisions of an organization, such as HR, training, operations, and legal, to achieve operational

INFORMATION TECHNOlOGy

geNeral maNagemeNt

Complete Course #4337 Seat time: 18–22 hours

writing in Business Section #4341 Seat time: 12–14 hours

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Sample syllabus available

management Communication Online CourseWilliam Ellet, Brandeis University and Harvard Business School

The Management Communication Online Course covers three key topics—planning, writing, and presenting—through the scenario of 2 managers as they face various communication challenges on the job. Includes more than 30 expert videos, 50 interactive exercises, writing and audio examples, and checklists and templates, and each section concludes with an exam. Available as a complete course or in sections.


efficiency. In addition, IT can and must be used to enhance the company’s strategic posi-tioning by “socially” engaging an ecosystem of stakeholders: employees, suppliers, and cus-tomers. For this, the company’s back-end IT infrastructure must be linked up with the front line so that information can flow smoothly and important decisions can be made in real time. In this context, we make a distinction between systems of record and systems of engagement. The latter category of IT is now emerging and will change the business landscape in substantial ways. This case is about one such platform of engagement called Wooqer, which business heads can harness to tackle a variety of problems. Wooqer facilitates communities of users to function independently, without requiring constant assistance from IT. The case begins by describing the information systems that drive business at Madura Fashion & Lifestyle, India’s largest apparel retailer. In a rapidly expanding retail environment, Madura’s strategy head has to decide between implementing point solutions to different technology problems and rolling out a system of engagement.

iNterNatiONal BuSiNeSS

Hedging Currency Risk at TT TextilesRajesh Chakrabarti Indian School of Business Case#ISB009 (15 pages) tN

This case highlights the impact of currency rate fluctuations on the profitability of an export-oriented textile manufacturing firm, TT Textiles. Against the backdrop of the economic crisis of 2007-08, when the Indian rupee (INR) was expected to appreciate to an unprec-edented high of 35 INR per U.S. dollar (US$), the company had entered into a swap deal based on the historical stability of the Swiss franc (CHF) against the US$. At the time of its making, the deal had looked relatively safe and very lucrative. But once the global financial crisis struck in 2008, it started making sizable mark-to-market losses. The unexpected behavior of the supposedly steady exchange rate between the US$ and the CHF was perplexing. Fortunately, things turned around in 2009 and TT Textiles was no longer in the red. Yet there was uncertainty about the future. In March 2009, with three months left on the contract, Sanjay Jain, the managing director,

was faced with the dilemma of whether to quit then and there or hold the deal till maturity.

Innovation Clusters in the Global Economy: The Welfare Technology Region in DenmarkLaura Winig, Juma Calestous Harvard Kennedy School Case#HKS722 (23 pages) tN

In February 2012, Lars Kolind, chairman of Welfare Tech Region, a cluster organization in Southern Denmark that promotes the use of technology to assist people with daily living activities, considered the challenges that the cluster organization’s member companies face in developing and commercializing new prod-ucts on the global market. The case explores whether regional innovation strategies can help foster the global competitiveness of small countries. It focuses on critical issues related to the development and commercialization of new products, influenced by factors such as national innovation culture, product choice, access to capital, human resources, and ability to attract talent.

l’Oreal Masters MulticulturalismHae-Jung Hong, Yves L. Doz Harvard Business Review Article#R1306J (6 pages)

As the cosmetics company L’Oreal has trans-formed itself from a very French business into a global leader, it has grappled with the tension that’s at the heart of every global enterprise: achieving economies of scale and scope requires some uniformity and integration of activities across markets. However, serving regional and national markets requires the adaptation of products, services, and busi-ness models to local conditions. Since the late 1990s, the L’Oreal Paris brand—which accounts for half the sales of the consumer products division—has dealt with that tension by nurturing a pool of managers with mixed cultural backgrounds, placing them at the center of knowledge-based interactions in the company’s most critical activity: new-product development. L’Oreal Paris builds product development teams around these managers, who, by virtue of their upbringing and experi-ences, have gained familiarity with the norms and behaviors of multiple cultures and can switch easily among them. They are uniquely qualified to play several crucial roles: spot-ting new-product opportunities, facilitating

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communication across cultural boundaries, assimilating newcomers, and serving as a cultural buffer between executives and their direct reports and between subsidiaries and headquarters.

The New, Improved “Keiretsu”Katsuki Aoki, Thomas Taro Lennerfors Harvard Business Review Article#R1309J (6 pages)

During the past decade, some of Japan’s most dominant companies have been quietly turning their supplier relationships into a tool that helps them innovate faster while radically cutting costs. This is the new “keiretsu”—a modern version of the traditional system in which buyers formed close, collaborative associations with suppliers. Toyota provides a compelling example of how keiretsu, which lost luster during the cost-cutting of the 1990s, is being revived and reinvented. The company today has vendor relationships that are more open, more global, and more cost-conscious than traditional keiretsu ever were and that provide even stronger bonds of trust, coopera-tion, and educational support. The authors examine the evolution of Toyota’s keiretsu and explore the numerous lessons for developed-world and emerging-market companies seeking to improve their supplier relation-ships for lasting gain. Such companies should think short term and long term, know their suppliers well and develop trust with them, balance implicit and explicit communication, identify the suppliers most worth improv-ing, and involve suppliers in developing new products. Those elements are critical even in a hypercompetitive, cost-obsessed environment, because as they speed production and boost innovation, they reduce the hidden costs of the arm’s-length supplier relationships prevalent in the West.

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Advertising Analytics 2.0Wes Nichols Harvard Business Review Article#R1303C (10 pages)

Most marketers think they know how their advertising affects consumer behavior and drives revenue. They correlate sales data with a few dozen discrete variables, and they rely on consumer surveys, focus groups, media-mix

models, and online last-click attribution. But to treat advertising touch points as if each works in isolation is to misrepresent the way today’s complex combination of marketing efforts influences purchasing outcomes. MarketShare CEO Wes Nichols explains how many big com-panies are now deploying analytics 2.0, a set of capabilities that can chew through terabytes of data and hundreds of variables in real time to accurately reveal how advertising touch points interact dynamically. The results: 10% to 30% improvements in marketing performance. Firms of various sizes can make the shift to analytics 2.0 by engaging in three broad activities: 1) attribution: quantifying the contribution of each element of advertising, 2) optimization: using predictive-analytics tools to run scenarios for business planning, and 3) allocation: redistributing resources across marketing activities in real time. Nichols argues that implementing analytics 2.0 means building the required infrastructure and entwining it in organizational culture, strategy development, and operations. Any company can begin that journey; businesses that don’t will be overtaken by those that do.

Amazon, Apple, Facebook, and GoogleJohn Deighton, Leora KornfeldHarvard Business School Case#513060 (18 pages) tN

Four businesses had, by 2012, grown to dominate the infrastructure that all firms rely on to reach online customers. Will the balance of power among the four persist, will one take command at the expense of the other three, or are all four more vulnerable than they seem to outside forces? What are the implications for the pace at which consumers go online? Amara’s Law claims that we tend to overesti-mate change in the short run and underesti-mate it in the long run.

Bosch in IndiaSeema gupta Indian Institute of Management Bangalore Case#IMB409 (24 pages) tN

The case describes the brand migration from MICO to Bosch in India. The case elaborates the integrated communication strategy for change in corporate identity—advertising, public relations, and media strategy. It details the communication strategy adopted for differ-ent stakeholders—employees, opinion leaders,

and aftermarket and original equipment manufacturers. The metrics for measurement of effectiveness of communication strategy allow for a rich discussion of the extent to which brand migration can lead to transfer of equity. The case invites students to discuss the extent to which brand equity of Bosch has been built and the way forward.

Burberry’s CEO on Turning an Aging British Icon into a Global luxury BrandAngela Ahrendts Harvard Business Review Article#R1301A (5 pages)

As her top 60 executives arrived in London for the first strategic planning meeting after Ahrendts took the helm, she noticed that not one of them was wearing a Burberry trench coat, despite the damp, gray weather. It was a sign of the challenges the company faced. Even in a burgeoning global market, Burberry was growing at only 2% a year. It had lost focus in the process of global expansion: each of the 23 licensees around the world was doing something different. Ubiquity was robbing the brand of its luster. Ahrendts realized that if Burberry was going to be a great, pure, global luxury brand, it needed to have one design director—a “brand czar”—and it needed to capitalize on its historical core: the trench coat. The company decided to innovate at the core to attract the luxury customers of the future: millennials.

Juan Valdez: Innovation in CaffeinationMichael I. Norton, Jeremy DannHarvard Business School Case#513090 (24 pages)

Corporate entrepreneurs attempt to revive Colombia’s famous Juan Valdez brand, in the age of Starbucks, with café chain and packaged coffee ventures. In the 1970s and ’80s, the iconic Juan Valdez ingredient brand was the most recognized in the world of coffee. The success of advertising based on this character garners the Colombian coffee industry price premiums in international markets, especially the U.S. By the 2000s, Colombia’s coffee sector is being battered and its branding power diminished as café chains such as Starbucks increasingly capture profits in the value chain. In reaction, Colombia’s coffee federa-tion develops a semi-independent, for-profit

MARKETING


branding arm, Procafecol, to rebuild the Juan Valdez brand. Procafecol launches the first Juan Valdez cafés and a packaged coffee line, putting Colombian coffee into competition with many of its traditional customers. The case examines the successes and failures of the first five years of the new strategy, encouraging discussion of what changes must be made to Procafecol’s innovation program.

Online Ad Targeting at ThunderbirdJohn Zerio, Arvind Deshmukh Thunderbird School of Global Management Case#TB0313 (13 pages) tN

Thunderbird has built a strong and efficient Internet presence in the past five years. The effort was supported by a consistent effort to develop its internal online marketing capabili-ties, resources, and technical infrastructure. As the MBA recruitment process becomes increasingly dependent on its online market-ing strategy, the ability to buy media effectively, measure performance, and adjust plans quickly acquires incredible relevance. Kelly Santina, the school’s online marketing director, must assess the Google Analytics data covering the past seven months of website activity. Thunderbird’s online marketing goals are defined as follows: 1) to improve the effectiveness of display/ sponsored ads placement; 2) to increase traffic to the program’s pace by 25%; and 3) to improve conversions, measured by the downloading of an application form, by 30%.

Royal Reels: Enhancing the Customer Experience for Slot Machines and BeyondKent grayson Kellogg School of Management Case#KEl723 (14 pages) tN

CEO Richard Gedman has suddenly found himself running two separate but potentially related businesses: the slot manufacturing and marketing business that he has been running for years and a new online and mobile gaming business that has grown incredibly fast over the past couple of years. To sustain success in both businesses, it seems clear that each one will require significant R&D investments. Should he invest in only one or in both?

To Tweet or Not to Tweet: What Business Can learn from Social MovementsPaula goldman Rotman School of Management Article#ROT199 (5 pages)

Social media has created widespread confu-sion in many organizations. Some all but beg people to “like” them on Facebook, while others badger consumers to follow them on Twitter. The fact is, hundreds of millions of dollars are spent each year on social media marketing strategies, and most of it achieves very little in the way of creating a sustained following. Successful social movements, by contrast, have long managed to capture and sustain followers over long periods of time—for a tiny fraction of what private companies spend on marketing. The authors describe five lessons businesses can learn from social move-ments and their organizers.

Understanding the Arab ConsumerVijay Mahajan Harvard Business Review Article#R1305l (6 pages)

A growing middle class in the Arab world yearns for progress and modernity but has no interest in abandoning its religious tradi-tions. Companies that gloss over the interplay between culture and religion ignore a critical factor for success in the region.

NegOtiatiON

Carolina for KiberaKathleen L. Mcginn, Beth-Ann Kutchma, Cailin B. HammerHarvard Business School Case#913701 (18 pages) tN

Carolina for Kibera (CFK) is an international nonprofit organization whose mission is to promote youth leadership and gender and ethnic cooperation in Kibera, the largest unstructured settlement situated in the heart of Nairobi, Kenya. CFK’s programs construc-tively leverage the power of the community, acting as an exemplar of participatory develop-ment. CFK’s affiliation with the University of North Carolina offers a new model of social enterprise. After eight years of success under the founding leadership of Salim Mohamed, Rye Barcott, and Kim Chapman, CFK is at a critical juncture. Mohamed, executive director of all operations in Kibera, is leaving to go to graduate school. Barcott, founder and presi-dent, has a new career and a growing family and can no longer play an active role in CFK’s operations. Chapman, chair of the U.S. board of directors, has accepted a full-time faculty position and must step down from her roles at CFK. These departures come at a time when the Gates Foundation has just awarded CFK a two-year, $1 million grant. The case ends as CFK begins to grapple with impending changes in organizational leader-ship and activities.

MARKETING — NEGOTIATION

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Fighting Bonded labor in Rural India: Village Activist Gyarsi Bai Tackles an Entrenched System of CoercionKalpana Jain, Kessely Hong Harvard Kennedy School Case#HKS736 (19 pages)

In October 2010, the beating of a 30-year-old bonded laborer—his punishment for staying home sick from work—in India’s northwest-ern state of Rajasthan triggered a movement to end the practice of bonded labor in the area. A holdover from feudal times, bonded labor was outlawed in India in 1976 but was still prevalent in some pockets of rural India. Entrenched power systems protected the prac-tice, with the lower castes most affected. In this case, the bonded workers were members of an indigenous tribe called the Sahariyas. The case explores the negotiating strategy used by Sahariya village activist Gyarsi Bai and her allies to fight a powerful landowning community and a local government adminis-tration unresponsive to appeals from the poor. It describes how Bai built coalitions with larger activist groups and worked with them to gain media visibility and secure support at the state and national levels. These alliances pressured village authorities to make changes. Two years later, bonded labor continued to exist in the area, but a growing number of laborers had sought and received official freedom. In addi-tion, a set of modest options—a local grain bank, a village-run system of microcredit, and an expanded government work guarantee—gave bonded laborers viable alternatives to the debt trap of the past. The case also shows how larger activist groups were effective at finding strategies that enabled the Sahariyas to be agents for their own change.

How to Negotiate with VCsDeepak Malhotra Harvard Business Review Article#R1305F (8 pages)

VC-entrepreneur partnership agreements often contain flaws that become highly damag-ing as the parties come up against issues of power, trust, and much more. Yet many of the flaws are systematic and predictable—and hence preventable. The author, a longtime consultant to the VC industry, outlines recom-mendations for entrepreneurs sitting down at the table with prospective funders. 1) Under-stand your leverage. Your leverage is not only a

function of your alternatives; it has a lot to do with the VCs as well. Seek to understand them, and be prepared to educate the VCs about why their exercising too much power could hurt both parties in the long term. 2) Maximize trust. Beneath all the financial projections, the VC negotiation is a process in which people are deciding whom they want to associate with for years to come. If the VC is vulnerable, use the opportunity to build trust rather than to take advantage. 3) Focus on value—not just valuation. Nonfinancial considerations such as control are also important. 4) Strive for under-standing. Seemingly abstruse provisions can be highly consequential. And bear in mind that the choices a VC makes when negotiating can contain important clues about her assessments and expectations. Above all, when you’re nego-tiating with a VC, think not only about what will look good in a press release today but also about what will help you create and capture value over the long run.

Negotiating with EmotionKimberlyn Leary, Julianna Pillemer, Michael A. Wheeler Harvard Business Review Article#R1301G (9 pages)

Some people are practically phobic about going to the bargaining table. If their minimum needs are met, they’ll sign on the dotted line just to end the stress of dealing with people who have different agendas and styles. But that can be an expensive aversion, the authors write. When you’re facing an important negotiation, rigorous preparation—running the numbers, scouting the marketplace, developing a plan B—is essential. But it’s only half the story. The truth is that your passions matter in real-life deal-making and dispute resolution. You need to understand, chan-nel, and learn from your emotions in order to adapt to the situation at hand and engage others successfully. The authors studied 20 seasoned negotiators to explore their thoughts and feelings about the process. They invited their participants to find and combine pictures that metaphorically depicted those feelings and to describe in in-depth interviews the collages they’d created. Three reasons for the stressfulness of the negotiation experience emerged: lack of control, unpredictability, and the absence of feedback. This article includes a six-step warm-up exercise to help you prepare emotionally to negotiate effectively.

The Virginia Carlton–Hunter MorganSherwood C. Frey, Lucien Bass, Mahmood Hassan University of Virginia Darden School Foundation Case#UV6341 (7 pages)

Hunter Morgan had looked at several apart-ments over the past week, and Taylor Hayden’s apartment in the Virginia Carlton topped the list. The Virginia Carlton was a newly constructed and well-maintained apartment building on Jefferson Park Avenue, located fairly close to the central grounds of the University of Virginia. If there were an available space in the building’s underground parking garage, Morgan’s car could be left there, and the bus would be the principal mode of transportation for the summer. In addition, the newness of the building made for a bright and pleasant ambiance. The big unknown was the cost, which would be discussed tomorrow morning during a meeting with Hayden. This case and its companion case, “The Virginia Carlton–Taylor Hayden” (UVA-QA-0781), describe a predominantly distributive bargaining situa-tion to which additional issues can be added for the mutual benefit of both parties.

OPeratiONS maNagemeNt

Asterand: learning from FailureAnne Snowdon, Hannah Standing Rasmussen, David MaslachIvey Publishing Case#W12286 (11 pages) tN

This case chronicles the challenges of estab-lishing an innovative tissue bank service to accelerate the research and development processes of biotechnology and pharmaceutical companies worldwide. Asterand’s two major challenges involved achieving a standardized approach to collecting tissue samples in hospitals all over the world and achieving the highest possible quality of tissue samples shipped to its primary customer, Amgen. Despite the identified need for high-quality tissue samples, Asterand was experiencing multiple quality control problems in their pro-cesses and procedures. Tissue samples were being packaged poorly, labeled incorrectly, or delivered at the wrong time or to the wrong place. Additionally, there were quality issues with the RNA analysis of the samples, which was a critical factor in the usability of the

NEGOTIATION — OPERATIONS MANAGEMENT


tissue sample for research and development of new therapies and drugs. The head of pathology at Amgen’s California facility was threatening to terminate Asterand’s existing order and communicate the failure of Asterand to all company employees, which would have had a devastating ripple effect across the industry and likely destroyed oppor-tunities for any future orders with Asterand. If this happened, Asterand would not have been able to secure contracts with customers and would’ve been at risk of losing investors and going bankrupt.

Five Keys to Prepare for the Business of AgingMarta Elvira, Lluesma Carlos Rodriguez, Nuria Mas IESE-Insight Magazine Article#IIR077 (8 pages)

Economic and demographic forecasts reveal the unsustainability of health care systems in industrialized countries. The rising proportion of elderly and chronically ill people is putting serious pressure on existing systems, which were not designed to support long-term depen-dents. This situation makes current systems more inefficient and costly. Yet it also presents more opportunities for employment, entrepre-neurship, and improvements in the quality of care. This article identifies best practices in the organization and management of care services for chronic patients and elderly people, based on an ongoing transatlantic research project spearheaded by IESE. A change in the health care model is multidimensional and cannot be reduced to the mere introduction of isolated formulas, such as copayment, say the authors.

Instead, it requires comprehensive solutions. They recommend five key areas where efforts need to be focused: using valid and open indicators, creating legitimate jobs, develop-ing better professional profiles, taking an integrated approach, and involving everyone to make the overall system better and more efficient.

Harvest: Organic Waste Recycling with Energy Recovery (A)Deishin Lee, Baris Ata, Mustafa H. TongarlakHarvard Business School Case#611033 (14 pages) tN

B Case Available

This case describes the waste management industry and a clean technology solution for landfill diversion and renewable energy production. The (A) case focuses on the operational characteristics of waste manage-ment and waste to energy as well as the charac-teristics of the waste management industry. The intent of the (A) case is to have students perform operational analysis on the organic waste-to-energy process to evaluate whether a potential new plant is economically feasible and attractive. The (B) case focuses on the sourcing dilemma: pre-processing vs. source separation. To ensure that its waste input fuel is of sufficiently high quality (i.e., low level of inorganic contaminants), the company can either build a pre-processing facility to sort incoming waste to filter out contaminants or work with suppliers to source-separate their waste stream.

Intel: Strategic Decisions in locating a New Assembly and Test Plant (A)Juan Alcacer, Kerry HermanHarvard Business School Case#713406 (2 pages) tN

B Case Available

In mid-2005, Intel is examining its options for where to locate its next assembly and test plant. Its short list of potential sites includes locations in China, India, Thailand, and Vietnam. Each country has its own unique benefits and risks related to infrastructure, governance, education, business culture, intellectual property protection, labor markets, experience working with Western firms, and tax breaks and other incentives. Intel’s general manager for assembly and test, Brian Krzanich, has to consider all of these factors as well as Intel’s criteria for its new facility’s location and make his recommendation to the company’s board of directors. Which country and location should Intel choose?

Inventory BasicsHarvard Business Publishing Exercise#4388 (30 minutes) tN

An exercise illustrates a fundamental concept in Operations Management and can be used to reinforce key learning objectives in case stud-ies and readings. In this single-player exercise, students are responsible for managing stock at a small, franchised hardware store. The exer-cise includes 3 scenarios for 3 items stocked in the store: wrenches, environmentally friendly paint, and rock salt. Students play 1 scenario at a time over 12 simulated weeks. Each product has a different demand pattern, and students must decide how many units to order to meet

OPERATIONS MANAGEMENT

OrgaNizatiONal BeHaViOr

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the anticipated weekly demand. The exercise allows students to develop an intuitive strategy for balancing holding costs against ordering costs while avoiding a stockout. Faculty can use the exercise to launch a discussion of the Economic Order Quantity (EOQ) model in dif-ferent situations with demand variability. This exercise can be used for courses in Operations Management for both MBA and undergradu-ate students. It is delivered entirely online and requires 1 class meeting or less for students to run the exercise and discuss the results.

Konys, Inc.Deishin Lee, Tunay I. TuncaHarvard Business School Case#613065 (7 pages) tN

Spreadsheet Supplement Available

This case describes the sourcing policy for a consumer electronics company. The company must decide how to structure contracts with its supplier—by using a purchase contract, an option contract, or a combination of the two. The company can also buy from the spot market. The students use a spreadsheet model with Monte Carlo simulation to analyze the contracting options.

Managing with Analytics at Procter & GambleThomas H. Davenport, Marco Iansiti, Alain SerelsHarvard Business School Case#613045 (20 pages)

Senior management at P&G has put a strong emphasis on using data to make “better, smarter, real-time business decisions.” The Global Business Services (GBS) organization

has developed tools, systems, and processes to provide managers throughout P&G with direct access to up-to-date data and advanced analytics. In addition, GBS has embedded analysts within the business units to work alongside leaders and managers in driving real-time information-based decision making. Equipped with the tools provided by GBS, Alan Torres, vice president of North America Fabric Care, must finalize the forecast for P&G’s laundry detergent sales. Results for the two months since the introduction of concentrated powder laundry detergent in select retailers show a surprising jump in sales of over 10%. But would the trend continue as the concen-trated detergents were introduced across North America?

The Performance Frontier: Innovating for a Sustainable StrategyRobert g. Eccles, george Serafeim Harvard Business Review Article#R1305B (10 pages)

Too often, companies launch sustainabil-ity programs with the hope that they’ll be financially rewarded for doing well, even when those programs aren’t relevant to their strategy and operations. They fail to understand the trade-offs between financial performance and performance on environmental, social, and governance (ESG) issues. Improving one typi-cally comes at a cost to the other. But it doesn’t have to be this way. It’s possible to simultane-ously boost both financial and ESG perfor-mance—if you focus strategically on issues that are the most “material” to shareholder value and develop major innovations in prod-

ucts, processes, and business models that pri-oritize those concerns. Maps being developed by the Sustainability Accounting Standards Board rank the materiality of 43 issues for 88 industries and can provide valuable guidance. And broad initiatives undertaken by three companies—Natura, Dow Chemical, and CLP Group—demonstrate the kinds of innovations that will push performance into new territory. Communicating the benefits to stakeholders is also critical, which is why integrated reports, which combine financial and ESG reporting, are now gaining in popularity.

Upgrading the Supply Chain Management Strategy at Sichuan TelecomChen Xu, Zhang Du, Li Zheng, Ding Yichao, Liu YingIvey Publishing Foundation Case#W12148 (7 pages)

In the process of business development, many enterprises have to deal with issues from all dimensions of operations management including inventory management, distribution management, and network design. Sichuan Telecom, a branch of China Telecom Co. Ltd., which was a Fortune Global 500 company, achieved its highest market share in its broad-band business and maintained strong growth momentum in this segment. However, there was a serious inventory management problem concerning ADSL modems, a component that most broadband users required. The problem was that Sichuan Telecom’s ADSL modem inventory was either too high or insufficient. To reduce inventory costs and improve the service level, the procurement manager

OPERATIONS MANAGEMENT

OPeratiONS maNagemeNt

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The second release of this simulation adds a new scenario with multiple unanticipated events and the ability to add prototypes to the project plan. Students take on the role of a senior project manager and manage a team tasked with developing a new product for an electronics manufacturing company. The primary objectives are to execute a project plan successfully and deliver a competitive product on time and on budget.


conducted a comprehensive analysis of the company’s sales and demand forecasting, pro-curement and suppliers, distribution manage-ment, warehouse management, and inventory management. This case follows the procure-ment manager in analyzing the company’s existing operational management system for ADSL modems in order to discover the cause of the inventory problem and develop an effec-tive plan to improve operations management.

OrgaNizatiONal BeHaViOr

Andrew Ryan at VC BrakesFrank V. Cespedes, Sunru YongHarvard Business School Case#913552 (11 pages) tN

An aftermarket brake component manufac-turer, VC Brakes, is bought out by a global automotive parts corporation after the 2008 financial crisis. Unlike its previous parent company, the new owner attempts to change VC Brakes’ autocratic management style and finger-pointing culture with a Total Quality Management (TQM) program. Andrew Ryan is a senior manager at VC Brakes. With the guidance of a strong mentor and a reputation as a successful change agent, he is selected as a TQM site instructor. His initial excite-ment turns to concern when organizational challenges cause the quality initiative to falter. A subsequent restructuring puts Ryan on the wrong side of politics, and he must decide whether to leave VC Brakes or stay with the losing initiative.

Give Me a Break: The Role of Work Breaks in the Quest for Optimal ProductivityJohn Trougakos Rotman School of Management Case#ROT191 (5 pages)

Stress, exhaustion, and burnout have become increasingly problematic for employees and organizations alike. Understanding how employees recover from the demands of work is therefore increasingly important. The author focuses on a little-discussed area of resource renewal: within-workday breaks. He argues that not all work breaks are created equal: an individual’s personality and job design deter-mine whether a break will lead to increased productivity.

Hess CorporationJay W. Lorsch, Kathleen DuranteHarvard Business School Case#413126 (3 pages)

On January 29, 2013, Elliott Management, a hedge fund run by Paul E. Singer that owned 4.5% of Hess Corporation stock, put forward a slate of five independent directors it wanted elected to improve the company’s perfor-mance. Elliott argued that Hess lacked focus and was distracted by ventures outside its core exploration and production business. Further, it argued that John Hess, CEO and son of the founder, was more interested in “maintaining a family dynasty than instilling accountability and addressing chronic underperformance.”

Operation Greenwash Gold: Rio Tinto and the Tainted MedalsJana Seijts, Benjamin Bigio Ivey Publishing Case#W13217 (21 pages) tN

Rio Tinto, a major multinational mining company, signed a contract with the London Organizing Committee of the Olympic Games and the International Olympic Committee to supply all the gold, silver, and copper for medals to be awarded at the London 2012 Olympic Games. Just three months before the opening ceremonies, a coalition of nongov-ernmental organizations, titled Operation Greenwash Gold, combined with labor unions in Canada, Australia, and around the world representing millions of workers to protest Rio Tinto’s alleged environmental, human rights, and labor relations abuses. A number of dam-aging social media campaigns aimed to get the Olympic committees to cancel Rio Tinto’s contract were supplemented by street protests in front of the company’s headquarters during its annual general meeting. Rio Tinto’s chief executive officer must decide on a communica-tions strategy in order to respond to its already tarnished reputation.

Robin Ash and Printzhof PressFrank V. Cespedes, Lynda St. ClairHarvard Business School Brief Case#913554 (14 pages) tN

Robin Ash has just been promoted to chief operating officer of Printzhof Press and vice president of its parent company, Education and Entertainment Holdings, Inc. Her first objec-tive is to create an action plan that will achieve two seemingly contradictory corporate objec-

tives: transform Printzhof into an aggressively competitive 21st-century educational publisher and maintain its close-knit and collaborative culture. Because of new technologies chang-ing how information is delivered and used in higher education, the need for the company to evolve along with the publishing industry is obvious to Ash and other company leaders. However, Printzhof’s history of success has resulted in resistance to organizational change among many longtime employees and senior managers. Still, Ash must revitalize Printzhof without destroying employee morale and loy-alty. How far and how fast should she move on the critical priorities she has identified?

SaleS

What Entrepreneurs Get WrongVincent Onyemah, Martha Rivera Pesquera, Abdul Ali Harvard Business Review Article#R1305D (7 pages)

Salesmanship is central to a start-up’s success, but many entrepreneurs ignore this simple fact. They may believe that their idea will sell itself or that there’s no point in visiting a pro-spective customer without a finished product in hand. Those who search for sales advice find mostly tools and techniques for established companies. In a study of 120 entrepreneurs in six countries, more than half fully developed their products before getting feedback from potential buyers. Looking back, most said that was a mistake. Those who did start selling early did not spend enough time listening to prospects’ reactions. Other mistakes included offering discounts to close initial deals, making early sales to family and friends, and failing to choose first customers strategically. When they did go on sales calls, the entrepreneurs fielded tough questions about the efficacy of their products, their credibility and experience, the size of their companies, their prices, and the cost of switching to an unproven offering. A sales model geared to entrepreneurs accounts for the fact that information gleaned during the sales process can be crucial in designing (or redesigning) the product itself. The model calls for meeting with prospects as soon as an idea is conceived, to learn if it has broad appeal. The answer to that question deter-mines whether the entrepreneurs jettison the idea, return to the drawing board, or proceed to prototype development and further testing with potential customers.

ORGANIZATIONAl BEHAVIOR — SAlES


SerViCe maNagemeNt

Agero: Enhancing Capabilities for CustomersRobert L. Simons, Natalie KindredHarvard Business School Case#113001 (22 pages)

Cross Country (renamed Agero in 2011) operated call centers that coordinated with thousands of small, independent towing companies—Cross Country’s “service provider network”—to deliver roadside assistance ser-vices, such as vehicle towing and tire changes, to motorists covered by automakers’ warran-ties and insurers’ policies. The case describes Cross Country’s evolution from 1972 to 2012 in three phases. This allows students to, at various stages, grapple with defining Cross Country’s business (what business is it, and should it be, in?) and its primary customer (vehicle makers and insurers? motorists? service providers?). The answers to these questions have important implications for organization design. During the first phase, from 1972 to 1998, founder Sidney Wolk built the business through personal relationships with clients. He is a passionate entrepreneur, and his approach to growth—secure custom-ers first, figure out how to make money later—was remarkably successful, if sometimes chaotic. Facing an increasingly commoditized marketplace, in 1998 Wolk hired professional managers who implemented formal perfor-mance management systems and invested in sophisticated data analytics. From 1998 to 2007 (phase two), these investments allowed Cross Country to quantify service providers’ impact on motorist satisfaction, monitor

service providers’ performance, and introduce programs to strengthen top-performing service providers’ loyalty to Cross Country. Concur-rently, the company undertook a two-step organization redesign to focus more resources on service providers (the new primary cus-tomer?), improve market-focused innovation, and increase client satisfaction. In phase three, from 2008 to 2012, Cross Country entered the high-tech telematics/connected-vehicle business, invested in additional innovations to strengthen its service provider network, and rebranded itself as “Agero.” Wolk and his team believed Cross Country had “more driver information than any other company.”

SOCial eNterPriSe

First Green Bank: Bringing Bloom to Desert landscapesChristopher Marquis, Juan AlmandozHarvard Business School Case#413073 (17 pages)

First Green Bank is a bank start-up in the midst of the financial crisis that aims to promote sustainability while making money as a bank. The case presents an ethical dilemma as the bank considers a loan to an arms manufacturer.

iBakery: How a Hong Kong NGO Ventures into Social EnterpriseSammy Fung, Florence Chan, W.H. Lo University of Hong Kong Case#HKU995 (22 pages) tN

iBakery is the name of two social enterprises (SEs)—a bakery shop and a café—established

by Tung Wah Group of Hospitals (TWGH) of Hong Kong with a social mission to train and employ people with disabilities through the production and retailing of bakery products and the operation of a café. The SEs originated from a bakery workshop that trained people with disabilities. In running the SEs, more business elements have been introduced to try to fulfill both social and economic goals. iBakery is unique among SEs operated by Hong Kong’s nongovernmental organizations (NGOs) in that it has a group of business pro-fessionals, called “iBakery Angels,” forming an advisory board. With TWGH as their strong backup, the iBakery SEs are striving to meet the double bottom line. The SEs’ performance in meeting the economic goal is far from satisfactory, as they are presently loss-making operations; however, they are achieving good performance in meeting the social mission when measured in terms of the Social Impact Assessment Tool. This case sheds light on the operations of SEs, how they attempt to strike a balance on both economic and social goals, and how performance measurement of social enterprises may be conducted. It also allows students to examine what the SEs should do to achieve sustainability in the future.

Micawber Capital: For Mission or Profit?David Austen-Smith, Jeffery C. Burrell Kellogg School of Management Case#KEl712 (12 pages) tN

In July 2010, Robert Drake, senior director at Micawber Capital, one of India’s largest micro-finance organizations, needed to recommend a corporate structure and organization for

SERVICE MANAGEMENT — SOCIAl ENTERPRISE

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zappos.com 2009: Clothing, Customer Service, and Company Culture

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Micawber after its scheduled IPO in August 2010. The IPO would bring to Micawber new stakeholders, primarily financial institutions. Drake was skeptical that the new investors shared Micawber’s commitment to help allevi-ate poverty in rural India through microcredit loans; he assumed Micawber’s primary inter-est was a good return on its investments. The two objectives—increasing ROI and meeting the financial needs of the poor—seemed at odds with each other. Drake had to consider how the interests of clients and investors would be represented in strategic decisions so that they balanced the conflicting values of the stakeholders.

Omidyar Network: Pioneering Impact InvestmentMichael Chu, Lauren BarleyHarvard Business School Case#313090 (26 pages)

Omidyar Network (ON), having deployed over $500 million in ways ranging from donations to commercial equity capital, must decide whether to back Anudip, an Indian organiza-tion dedicated to rural employment. The social impact of Anudip is high, but its financial performance is lackluster. As Anudip is able to deploy all the tools along the capital curve of impact investing, which tool, if any, is optimal? The case recounts the transition of eBay founder Pierre Omidyar and his wife, Pam, from the Omidyar Family Foundation (OFF) to ON, going from a traditional grant-making organization to a pioneer of impact investing: the application of investment practices in the delivery of high-impact social interventions, with the intent of providing positive financial returns to investors.

PATH and the Safe Water Project: Making Safe Water Products More AffordableStefanos Zenios, Lyn Denend, Tim Elliott Stanford University Case#OIT109 (16 pages)

This case provides an overview of the nonprofit organization PATH and its Safe Water Project—a five-year effort launched in late 2006 with $17 million in funding from the global development unit of the Bill and Melinda Gates Foundation. The purpose of the grant was to evaluate to what extent market-based approaches could help accelerate the

widespread adoption and sustained use of household water treatment and safe storage products by low-income populations. One of the key objectives of this effort was to explore how the private sector could help make hazard-ous waste tracking system (HWTS) products more affordable. By conducting a portfolio of field-based pilots in collaboration with com-mercial partners, the PATH team sought to better understand the effect of different pric-ing, consumer financing, and subsidy models on demand within the low-income population in developing countries. Over several years, the Safe Water Project team experimented with different affordability models, includ-ing microfinance loans for water filters and a layaway program. Although specific results varied across the pilots, which spanned India, Cambodia, and Kenya, they collectively gave rise to a series of important insights about the affordability of HWTS products.

Progressive Education Network (PEN): Creating Social Impact in PakistanArif Butt, Shezeen Hemani North American Case Research Association Case#NA0204 (16 pages) tN

The case documents a boardroom scenario where the directors of PEN, a nonprofit organization, have met to reconsider an important decision: whether to wait for the city government’s approval regarding allotment of government schools or consider other options,

such as building its own schools. Having completed several rounds of unsuccessful negotiations with the City District Government of Lahore (CDGL), the founders are feeling agitated and disappointed. Hence, at this point, the members are considering the organiza-tional models of CARE and TCF, two well-known NGOs of Pakistan, and aim to finalize the strategic decision, based on the assessment of the two organizational models, given PEN’s mission and vision and its organizational, human resource, and financial capabilities.

Strategy

The Basque Country: Strategy for Economic DevelopmentMichael E. Porter, Christian H.M. Ketels, Jesus M. ValdalisoHarvard Business School Case#713474 (25 pages)

The Basque country, with a population of 2.1 million and covering 7,233 square kilometers, is an autonomous region located in the north of Spain, physically separated from Spain by the Pyrenees mountains. This case presents the history of the region, which was highly prosperous at the turn of the 20th century but nearing bankruptcy by the 1950s. By 2001, the Basque GDP per capita had risen to a level well ahead of that of Spain and most European countries. At the same time that the region was enjoying the spoils of admirably executed cluster initiatives, it was being threatened

SOCIAl ENTERPRISE — STRATEGy

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by the destabilizing violence of the Basque separatist extreme, a slowing global economy, and an always-precarious balance of power between the Basque’s own government and the government of Spain.

Home Plus: Riding the Korean Retailing Roller CoasterYoungwoo Lee, Martin Hemmert Ivey Publishing Case#W13140 (12 pages) tN

In the late 1990s, multinational retailing giant Tesco selected a joint venture with the Samsung Group as its market entry strategy into South Korea and created a new brand, Homeplus. Subsequently, the management of Homeplus implemented various policies aimed at localizing the business while also introducing business practices from Tesco’s British headquarters. It invested in growth and diversification through large discount stores offering an “all in one spot” shopping experience, small-sized super-supermarkets, private brands, and online shopping. At the same time, the Korean retail industry had become much more dynamic as competition intensified between various types of market players, including strong competitors affiliated with local business groups. Homeplus needed to rethink its position in a highly challenging market environment.

Inside Coca-Cola: The Evolution of an Iconic BrandNeville Isdell, Karen Christensen, David Butler Rotman School of Management Case#ROT211 (5 pages)

In a wide-ranging interview, the former CEO and chairman of The Coca-Cola Company, Neville Isdell, discusses his decision to take on the role of CEO after he had already retired from the company; the inherent challenges of working with a world-famous brand; and how Africa is the final frontier for business. In a sidebar to the interview, Coca-Cola’s VP of innovation, David Butler, describes the wide variety of global initiatives Coca-Cola is under-taking to make Isdell’s vision of “Connected Capitalism” a reality.

describes the uproar and the lessons it offers: 1) that “open” does not mean “easy” or “free” and 2) that you need to get the crowd working with you, not against you. TED did that, turning things around by adopting three practices: “listening loudly,” realigning the community through shared purpose, and being strategic about the parts of the business it opened to the crowd and the parts it kept under tight control.

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Jamba Juice (A)J. Bruce Harreld, Christian KaregaHarvard Business School Case#713536 (14 pages)

James White, the new CEO of Jamba Juice, has successfully averted bankruptcy and must now decide the future path for Jamba Juice, the leader in the smoothie and fresh bar industry. This two-part case presents the various strategic options White is considering. It then asks participants to determine the best strategic path and how this path should be specifically implemented. The follow-on (B) case describes what White actually did and presents the results.

lEGO (A): The CrisisJan W. Rivkin, Stefan Thomke, Daniela BeyersdorferHarvard Business School Case#713478 (11 pages)

As this case opens, iconic toymaker LEGO stands on the brink of bankruptcy. Jorgen Vig Knudstorp, LEGO’s young and newly appointed CEO, must size up changes in the toy industry, learn from the company’s recent moves, and craft a strategy that will put LEGO back on track.

When TED lost Control of Its CrowdNilofer Merchant Harvard Business Review Article#R1304E (7 pages)

In 2009, TED, an organizer of highly respected conferences on “ideas worth spreading,” threw its doors open, allowing anyone, anywhere, to manage and stage local, independent events under its banner. In the next few years, an army of volunteers produced some 5,000 such TEDx events in more than 130 countries. The brand extension and new content TED gained through these gatherings would have cost millions to produce by tradi-tional means. But they came with a risk: TED no longer completely controlled its brand, and an extended community of people who didn’t work for TED were now capable of damaging it. And when TEDx licensees began putting dubious pseudoscientific presentations on their programs, that risk became a real threat. The blogosphere trashed TED for producing dumb content and questioned its overall cred-ibility. In this article, Nilofer Merchant.

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