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'Millennials': el reto de integrar a la quinta del videojuego

Ya representan el 32% de la población mundial y se prevé que en 2025 supondrán el 75% de la fuerza laboral global. Los millennials ya han empezado a tomar posiciones en las organizaciones. Y muchas de ellas, sobre todo las más avanzadas, están adaptando su cultura corporativa a la idiosincrasia de esta generación, con el propósito de atraer y retener a lo más granado de esta importantísima bolsa de talento.

¿Cómo son? ¿Qué les atrae y qué les desmotiva? ¿Cuáles son sus expectativas profesionales? ¿Dónde y cómo tienen previsto realizarlas? ¿Cómo se relacionan con los miembros de otras generaciones? ¿Qué pueden aportar a las organizaciones?

El profesor del IESE Guido Stein lleva años formulándose esas y otras preguntas. Y ahora ha recopilado los hallazgos de diversas investigaciones en Líderes y millennials: un meeting point de generaciones.

Se trata de un libro que, según él mismo confiesa, ha escrito por la necesidad de entender mejor a sus propios hijos, a sus alumnos y a un número creciente de los empresarios y directivos con los que colabora.

Teoría, práctica y reflexión

La obra está dividida en tres grandes bloques. La primera parte, esencialmente descriptiva, aborda los rasgos generacionales comunes y, en especial, la influencia de la tecnología en sus relaciones personales, sociales y empresariales. Este primer bloque se complementa con una serie de reflexiones acerca de cómo dirigir a los millennials, qué tipo de dirección demandan o incluso qué prácticas adoptar para hacer más atractiva la organización a los ojos de esta nueva remesa de profesionales (más información en el artículo "Cinco prácticas que atraerán a los millennials").

La segunda parte despliega tres casos reales, basados en las experiencias de Microsoft, Salesforce.com en Europa y otra empresa. En ellos, se observa la convergencia de las distintas generaciones en las empresas y las decisiones que convendría adoptar para que ese "meeting point de generaciones" al que se refiere el autor en el título del libro deje de ser una amenaza y se convierta en una oportunidad.

En la tercera parte, el profesor Stein concluye, a modo de epílogo, con una visión muy personal sobre la importancia de educar la inteligencia y el carácter.

La inteligencia es fundamental porque la tecnología nos proporciona unos medios fantásticos, pero que no pueden constituir un fin en sí mismos, ya que "su mera instalación o empleo no aumenta el conocimiento o la felicidad", advierte Stein.

En cuanto a la necesidad de educar el carácter, el autor señala que es lo que nos dará "la capacidad de aguantar ante las adversidades que presenta la vida a todo el mundo". Un mensaje válido para cualquier generación, pero especialmente dirigido a los millennials, muy diestros con la tecnología al ser los primeros nativos digitales y que no se distinguen precisamente "por su capacidad sostenida de aguantar lo que no les gusta", apunta Stein.

A partir de todos los materiales analizados, el autor realiza una completa radiografía de los millennials en el entorno laboral, al tiempo que ofrece un buen número de claves para aquellas organizaciones que deseen mejorar su encaje y extraerles todo el potencial.

Sobre la investigación
El libro se apoya en las investigaciones previas de Guido Stein, incluyendo los resultados de una encuesta a 22.000 directivos y otra a centenares de universitarios y participantes en el programa Executive MBA del IESE, así como a algunos de sus superiores.

Authors Stein, Guido

Publisher EUNSA. Ediciones Universidad de Navarra

Language: Spanish

How to Optimize Your Assortment Strategy to Reduce Suppliers' Prices

How do retailers' decisions about their product assortment affect the competition between their suppliers and, consequently, their prices? A study by Sebastian Heese and IESE's Víctor Martínez de Albéniz examines this question.

According to the authors, the manufacturers vying for space on retailers' shelves or in distributors' catalogs face two different competitive pressures: on the one hand, there's the external threat of being excluded from the assortment; and on the other, there's the internal competition among the selected suppliers for more market share.

Which of these two effects is greater? According to this study, it depends on the degree of differentiation between products offered in the retail setting.

When products are very similar, the risk of being excluded from the assortment leads manufacturers to reduce how much they markup prices to optimize profits. That is to say, the threat posed by the best manufacturer to be omitted from the assortment dominates the competing manufacturers' pricing strategies and that can be beneficial to the retailer. As a result, there's an incentive here for the retailer to limit the assortment of similar products -- and to let the manufacturers know about it.

Conversely, when manufacturers offer distinct products, the external threat is minimal and manufacturers set their prices primarily to optimize their market share. In this case, those excluded from the assortment do not put much pressure on pricing, so inventory reduction does not make much sense for retailers or distributors.

The Case of a Shrinking Supermarket Inventory
The results of this research are in line with what has occurred in recent years in retailing. One good example, say the authors, is seen at Spain's largest supermarket chain, Mercadona.

In 2009, Mercadona announced it was dropping 600-800 products from its shelves, out of a total of 9,000. In this assortment reduction, the supermarket chain said it was eliminating products that were very similar to each other, an approach consistent with the findings of this study.

This rationalization of its assortment intensified the competition between manufacturers to keep their products on Mercadona's many shelves (not even the leading brands were safe), which led to a price war and a general decrease in the manufacturers' margins.

With the threat of being left out of its assortment looming, Mercadona was able to negotiate more advantageous agreements with suppliers and benefit from prices that were significantly lower than its competitors'.

Methodology, Very Briefly
The authors propose a theoretical model in which the retailer controls the assortment and final retail prices, while manufacturers set their wholesale prices competitively, and customers make their purchase decisions based on the logit choice model.

Authors Heese, Sebastian;  Martínez de Albéniz, Victor

Publisher Informs

Language: English

Can Elephants Learn to Dance? Unlocking Organizational Agility in Large Companies

Innovation units are on the rise: In a new study of large companies, 70 percent of executives surveyed said they were increasing investment in these units, 60 percent of which were created in the past five years. Within established companies, from Google to Nissan, these units are tasked with scouting the next trends and generating novel ideas, products and models.

So far, so good. But there is another trend, running in parallel: high-profile companies -- such as Coca-Cola, Ogilvy Group and the New York Times -- are quietly closing the costly innovation units they had so recently established. Over the past five years, high investment in these types of units has produced some new products and initiatives. But relatively few innovations get scaled across the entire organization -- and even fewer contribute significantly to the business overall. Clearly, something is not working.

The authors of a new white paper ask why this is so. IESE's Mª Julia Prats and Josemaria Siota, working with the consultancy Oliver Wyman's David Gillespie and Nicholas Singleton, analyze the topic and survey executives at 29 large companies in various industries to better understand the challenges organizations face in adopting their innovations. And their common answer? It's all about organizational agility. Many large companies simply do not have the right balance between efficiency and agility. As a result, they are not flexible enough to incorporate innovations in a timely way.

Agility Advantages
So, how important is agility to surveyed executives? Nearly 90 percent said agility was "highly" important to the future success of their companies, and 96 percent indicated that they needed to become more agile in the future. Note that an oft-cited MIT analysis found that agile companies grow revenue 37 percent faster and generate 30 percent higher profits than non-agile companies.

If it's clear that organizational agility is important, why don't more companies have it?

The authors summarize that agile companies must be able to move in new directions rapidly, adapting to new information. Importantly, agile companies execute at this pace without having to radically overhaul the existing structures and practices. The authors list the three main capabilities required:

  • Sensing: Being able to detect, identify and develop opportunities as they emerge in relation to customer needs

  • Securing: Being able to mobilize and/or get hold of resources from across different levels of the organization to exploit these new opportunities

  • Shifting: Being prepared to adopt new practices, without incurring huge internal costs of change.

Agile Innovation
Companies know that innovation units are one way of increasing agility and design them to break out from existing business models to explore new, competing ways of working. But for these innovation units to be effective, companies must learn how to incorporate the changes they come up with.

Here it's helpful to drill down to the authors' survey results. We mentioned that 70 percent of the executives surveyed were increasing investment in their innovation units, but just 23 percent said their investments had delivered a significant innovation so far -- defined as one that accounts for at least 10 percent of revenues.

Obstacles to Innovation
What's going awry? Surveyed executives described several major factors that contributed to poor adoption of innovations in their companies, summarized below:

Q: What do you believe are the top three reasons innovation units fail to get their initiatives adopted by the company?
(Here, the top five answers, by priority)


Source: Authors' report, p. 13.

Best Practices
To summarize the agile organization's best practices, the authors present the following table:


They conclude that sensing opportunities, securing the right resources and shifting the organization, as required, are three crucial sets of actions to ensure that investments in innovation units really work.

Methodology, Very Briefly
The authors surveyed Chief Innovation Officers and related roles at 29 large companies across 11 industries and four countries. They combine survey insights with an analysis of previous publications on business innovation and agility in order to help explain why innovation fails -- and to suggest how companies can avoid common traps and increase agility for successful innovation. The white paper is a co-production of IESE's Entrepreneurship and Innovation Center and the consultancy Oliver Wyman.

Authors Prats, Mª Julia;  Siota, Josemaria;  Gillespie, David;  Singleton, Nicholas

Publisher IESE; Oliver Wyman

Language: English

El lento avance de la mujer en las cotizadas españolas

La presencia de la mujer en los consejos de las sociedades cotizadas del mercado continuo español se ha incrementado un 15% durante el año 2017, hasta sumar 258 consejeras, lo que supone algo más del 19% de sus 1.347 miembros.


Con ser significativo, este aumento aún deja a la mujer lejos del 30% de representación en los consejos que recomienda el Código de Buen Gobierno de la CNMV para 2020.

Así se desprende del informe Mujeres en los Consejos de las empresas cotizadas, que ha contado con la dirección académica de la profesora Nuria Chinchilla, titular de la Cátedra Carmina Roca y Rafael Pich-Aguilera de Mujer y Liderazgo del IESE.

El informe, elaborado por Atrevia y el IESE, incluye la I Radiografía del mercado continuo al completo y el VI Informe de mujeres en el Ibex.

Mucho por hacer
Según el estudio, hay 15 empresas del mercado continuo sin ninguna consejera y otras 47 que cuentan con una única mujer en el consejo. Esto supone que casi la mitad de las compañías aún tienen una presencia femenina mínima o inexistente.

Además, el avance de la mujer en números absolutos y en peso relativo en los consejos de las cotizadas no se traduce en un aumento significativo de las funciones ejecutivas. De hecho, menos del 5% son consejeras ejecutivas.

Las empresas del sector financiero son las que más fomentan la presencia femenina (3 mujeres por empresa). Las que menos son las sociedades de servicios inmobiliarios, con apenas una mujer de media en cada consejo.


El Ibex 35, más feminizado

La radiografía de situación es distinta si analizamos por separado las integrantes del Ibex 35 y las restantes 98 sociedades del continuo. En el selectivo existen 106 consejeras (casi el 24%) de un total de 448 miembros. En el resto de empresas el porcentaje de mujeres no alcanza el 17%.

En cuanto al número de consejeras por empresa, el Ibex 35 tiene de media casi el doble que el resto del continuo, aunque las únicas compañías con más mujeres que hombres son Realia y Ezentis, que no forman parte del selectivo.

Por primer año, todas las sociedades del Ibex 35 tienen mujeres en sus consejos y se confirma una clara tendencia alcista en representación femenina: a inicios de febrero ya había 106 consejeras, 14 más de las que recogía el V informe de mujeres en los Consejos del Ibex 35 el año anterior.

Por lo que se refiere al peso relativo de las mujeres en los consejos del selectivo, se acerca al 24%, lo que significa que casi se ha duplicado en siete años, pues en 2011 era del 12%.


Los síntomas de mejoría en el Ibex 35 son claros, ya que 12 empresas han aumentado la presencia de mujeres y ocho (el doble que el año anterior) cumplen la recomendación europea, al incluir al menos un 40% de consejeras no ejecutivas.


Tal y como recoge el informe, existen cuatro consejeras ejecutivas, una más que el año anterior: Ana Botín (Santander), María Dolores Dancausa (Bankinter), Cristina Ruiz (Indra) y Vanisha Mittal (ArcelorMittal).

En cuanto a las presidentas del consejo de Administración, se ha incorporado una más, Rosa María García García (Siemens Gamesa), que se une así a Ana María Llopis (Dia) y Ana Patricia Botín (Santander).

Más cerca de Europa
Las empresas del mercado continuo están acortando distancias con Europa en materia de paridad, pero aún les separan más de seis puntos respecto a las grandes cotizadas de la Unión Europea, donde uno de cada cuatro asientos del consejo ya lo ocupa una mujer.

La distancia de las compañías del Ibex 35 respecto a la media europea es mucho menor, ya que no llega a los dos puntos porcentuales.


En cuanto a la situación en otros países europeos, el 2017 Report on Equality between Women and Men in the EU muestra que la presencia de las mujeres en los órganos de gobierno de las grandes empresas está liderada por Francia (41%), Suecia (37%) e Italia (32%).

Sobre la investigación

El informe analiza los consejos de administración de 133 empresas cotizantes en el mercado continuo español en el ejercicio 2017. Los principales datos de las empresas del Ibex 35 se actualizaron con fecha 8 de febrero de 2018, mientras que los datos del resto se terminaron de recopilar el 22 de enero.

Authors Atrevia;  IESE

Publisher Atrevia

Language: Spanish

Why the Presence of Common Shareholders in Rival Companies Looms as a Threat

Index funds offer investors a chance to diversify while keeping investment costs low. That's good for investors.

But there may be a dark side: Index funds are a key reason competitors within a market are commonly owned, i.e., have the same powerful shareholders if their shares trade publicly. Consider this: BlackRock, the largest investment company in the world, was the single largest shareholder of about 20 percent of all American publicly traded firms. Add rivals Vanguard and State Street, and the top three asset management companies were collectively the largest shareholders of at least 40 percent of all American publicly traded firms last year. And as index funds continue to gain in popularity, their reach continues to grow.

So, why does common ownership have the potential to cause harm? In short, common ownership reduces market competition, evidence shows. That can be bad for consumers and for the economy as a whole. In their widely discussed and cited paper, José Azar of IESE, Martin C. Schmalz and Isabel Tecu find that common ownership within the airline industry goes hand in hand with higher ticket prices -- even when passenger numbers dwindle.

Sudden Impact
When Azar et al. shared the first draft of their working paper, it caught the attention of many economists, journalists and regulators. The U.S. Justice Department launched an investigation into the matter in 2016. The Atlantic magazine's provocatively titled "Are Index Funds Evil?" summarized in 2017: "Azar, Schmalz and Tecu's paper went viral among academics, launching a whole new field of inquiry and many heated debates." And from there, attention only grew, with more articles appearing in the New York Times, Wall Street Journal, the Economist, Financial Times, New Yorker, Bloomberg BusinessWeek, and other media outlets. Prominent columnists, regulators and other op-ed writers called for action. The OECD held hearings, European antitrust enforcers took note, and academic conferences dedicated special sessions to the topic.

BlackRock, for one, issued a response in a 2017 white paper, calling the mechanism by which common ownership raises prices "vague and implausible." At the same time, the research and responses, described as "third-party commentary citing concerns about the growth of index investing, as well as perceived competition issues associated with... 'common ownership'" now appears among the risks in BlackRock's most recent annual report. The concerns raised by Azar et al. are obviously on the radar of the world's largest investment company as well as regulators and writers.

How Much Did You Pay for That Seat?
So what are the supposed mechanisms at work here?

After analyzing over 10 years of airline industry data -- which included the before-and-after results of a merger between investment companies with common ownership of certain airline stocks -- the co-authors conclude that the link between higher market concentration levels and higher ticket prices is statistically significantly. In the case of BlackRock's acquisition of Barclays Global Investors (BGI), increased market concentration lifted certain airline route prices by 10 to 12 percent. And the first mechanism the co-authors point to was "the indirect channel: doing nothing."

In other words, common shareholders, like BlackRock, and the management of companies in their portfolios seem to lack the impetus to start the (potentially painful) game of undercutting the competition. And so, product prices float upwards, and profits within a given market do, too. It's not that management and their most important shareholders are colluding to hurt consumers, it's more like the rising prices reflect the path of least resistance. Management doesn't have to work too hard initiating price wars, pouring money into R&D, pioneering new markets and improving operations -- these are projects that take a personal toll.

Consider the fact that when all airline prices are higher, many common owners remain happy with higher stock prices. But consider the fact that the co-authors found higher prices co-existing with slightly lower passenger traffic, suggesting that common ownership translates into decreased economic efficiency, or, "deadweight loss for the macro-economy." So, both the economy as a whole and consumers pay a price here.

The authors note how unregulated increases in common ownership have had stronger effects on product prices than the mergers that have been thoroughly scrutinized by antitrust authorities. The research begs the question as to whether governments should try to restrict the holdings of diversified mutual funds. That debate is still very much open.

Methodology, Very Briefly
The researchers analyze over 10 years of market-firm-level panel data from the U.S. airline industry between 2001 and 2013. They also look at BlackRock's acquisition of Barclays Global Investors' equity portfolios in 2009 to observe a sudden change in market concentration on certain prices.

See also "The Toxic Side of Mutual Funds" in IESE Insight Review

Authors Azar, José;  Schmalz, Martin;  Tecu, Isabel

Publisher American Finance Association (AFA); John Wiley & Sons

Language: English

The Impact of Cultural Identity on Effective Global Leadership and Teamwork
In self-managed teams working across borders, how do team members' unique cultural identities boost or hinder output? This research points to some answers.
 

Based on: "Navigating between Home, Host, and Global: Consequences of Multicultural Team Members' Identity Configurations" by Yih-Teen Lee, Aline Masuda, Xin Fu and B. Sebastian Reiche, Academy of Management Discoveries, vol. 4, no 2. Used with permission from the Academy of Management.




Authors Lee, Yih-Teen;  Masuda, A.;  Fu, Xin;  Reiche, Sebastian

Publisher Academy of Management

Language: English

Más dinamismo laboral, pero menos bajas voluntarias
El indicador de dinamismo laboral Meta4 IDL se situó en el primer trimestre de 2018 en un 23,5%, con lo que alcanza un nuevo máximo histórico y mantiene su tendencia al alza iniciada a principios de 2011.

Esto significa que, durante el primer trimestre del año, prácticamente uno de cada cuatro empleados experimentó un cambio en su estado laboral ajeno a la creación o destrucción de puestos de trabajo.

Este índice, medido por Meta4 y analizado por el IESE, vuelve a reflejar un elevado y creciente dinamismo en el mercado de trabajo, que ha aumentado más de 19 puntos porcentuales entre principios de 2011 y comienzos de 2018.

El aumento de los cambios internos en las plantillas revela que, en esta fase de aparente ralentización de la mejora económica, las empresas están apostando con más fuerza por la implantación de diferentes formas de flexibilización del empleo.

Según el informe, el número total de nuevas contrataciones y bajas se ha estabilizado alrededor del 30% de los puestos de trabajo, de los cuales un 23,5% son consecuencia del dinamismo laboral, es decir, no están vinculados a la creación o destrucción de empleo.

Estos datos ponen de manifiesto que el motivo por el cual las empresas siguen contratando y prescindiendo de trabajadores no obedecería tanto a necesidades de ampliación o reducción, sino a la necesidad de renovación o cambio de sus plantillas, a menudo con contratos de corta duración. Adicionalmente, los datos sobre los tipos de contratos sugieren que los trabajadores temporales son menos estables que anteriormente.


Las bajas voluntarias, en retroceso

El Meta4 IDL indica que las bajas voluntarias, cuyo porcentaje había ido aumentando paulatinamente desde 2010, disminuyeron ligeramente durante los últimos seis meses analizados y no muestran señales de recuperación.

Este leve retroceso, que se ha producido tanto en empresas con una política de flexibilización de las plantillas como en compañías con un número reducido de contratos temporales, podría interpretarse como un enfriamiento del mercado de trabajo, que ofrece menos oportunidades de cambio a los trabajadores.


Según la profesora del IESE Marta Elvira, directora de la investigación, "las cifras globales se pueden interpretar como una reducción en las oportunidades de movilidad externa para los profesionales, quienes sin embargo encuentran nuevos encargos dentro de sus empresas". Y añade que "podríamos estar viendo el comienzo de la tan anunciada evolución en la estructura ocupacional", con la desaparición de ciertas labores que dejan paso a tareas más adaptadas a las necesidades económicas futuras.

Sobre la investigación
El índice Meta4 IDL analiza los movimientos en la fuerza laboral que no implican creación ni destrucción de puestos de trabajo.

Para ello, el índice mide el porcentaje de contratos que han experimentado algún cambio motivado exclusivamente por el reemplazo de personal. De este modo, el estudio incluye los movimientos derivados de jubilaciones, bajas (voluntarias o por decisión empresarial) y las modificaciones en el tipo de contrato (como la transición de uno temporal o por obra y servicio a indefinido y viceversa; por variación en las funciones o traslado entre departamentos, etc.).

El indicador está elaborado sobre una muestra que en este trimestre suma 335 empresas con unos 59.000 trabajadores.

Authors Visintin, Stefano;  Elvira, Marta

Language: Spanish

Why Was the Sovereign Debt Crisis in Europe So Severe?

For Greece, Italy, Ireland, Portugal and Spain -- together known as the GIIPS countries of Europe -- the sovereign debt crisis of 2009-2011 resulted in a 37 percent spike in unemployment and a 190 billion euro drop in investment. And the spill-over effects spread well beyond the GIIPS nations. So, how might such a crisis be prevented from happening again?

In search of the answer, Viral V. Acharya, Tim Eisert, IESE's Christian Eufinger, and Christian Hirsch together studied syndicated bank loans amid the debt crisis, the subsequent credit crunch (when bank lending dried up), and how that credit crunch negatively impacted the economy -- namely, wiping out jobs, investment and sales growth. Their research concludes that an effective bank recapitalization could significantly boost economic recovery -- now or next time crisis strikes.

A Double Whammy Hits Lending
First, to understand why the Eurozone credit crunch happened, the co-authors conduct an in-depth analysis of the bank lending channel and find two important factors:
  • Bank health / the balance sheet hit: The banks that held risky government bonds at the beginning of the debt crisis -- when investors feared Greece et al. would default -- took a direct hit to their balance sheets. GIIPS banks lost an average of 10.8 percent of their equity while other European (non-GIIPS) banks lost 6 percent. As a result of equity losses, many banks were forced to deleverage -- i.e., reduce their loan supplies.
  • Risk shifting / crowding out of bank lending: At the same time, risky sovereign bonds started to look more appealing to some banks, because their yields were so high (in return for taking on a higher level of default risk). The mostly weaker banks that sought out these higher-yield bonds then shifted their portfolios away from corporate lending. This also led to a reduction in loan supply for firms.

As a result, companies that had pre-crisis relationships with weakened banks had less financing to work with. Overall, the probability that European firms would be granted new syndicated loans fell by up to 53 percent. Firms, in turn, then reduced their investments, fund flows and their sales growth suffered. Employment opportunities also dried up.

How significant were these reductions in lending? The co-authors estimate that the credit crunch alone explains about half or more of the economic damage suffered by European firms. More specifically, for GIIPS countries, the authors estimate that the credit crunch explains 61 percent of the sales decline, 62 percent of the investment drop-off, and 66 percent of the decrease in employment. Meanwhile, for non-GIIPS European countries, the credit crunch explains 44 percent of the sales decline, 46 percent of the investment drop-off, and 49 percent of the decrease in employment. Yes, those figures are significant.

Only the companies who did not need any bank financing managed to evade some of these effects.

Looking to the future, the authors suggest that effective bank recapitalization is key to help boost to bank lending next time it flags, and thus aid economic recovery.

Methodology, Very Briefly
The co-authors analyze syndicated loans data in Europe between 2006 and 2012, considering bank-firm relationships in the years just before the recession hit in 2009 and during the peak of the crisis. They control for bank characteristics, macroeconomic shocks (such as lower demand for bank loans) and more in order to home in on the effects of the bank lending channels themselves.

Authors Acharya, Viral V.;  Eisert, Tim;  Eufinger, Christian;  Hirsch, Christian

Publisher Oxford University Press

Language: English

5 Keys to Business in the Digital Age

Back in the year 2000, Blockbuster rejected various offers to buy up Netflix for $50 million. Bad decision. The video-rental giant filed for bankruptcy eight years later, while the market value of Netflix has since topped $150 billion -- 3,000 times higher than that year-2000 offering price.

What explains the demise of Blockbuster and rise of Netflix? One key has been the capacity to perceive and attend to what customers really want. This is one of the five forces that Josep Valor, holder of the Indra Chair of Digital Strategy at IESE, considers fundamental in the new digital economy.

In addition to analyzing these five concepts, the professor poses questions for reflection, to help evaluate how each presents risks or opportunities for your company.

1. The Power of Platforms
Many successful companies in the new economy -- like Amazon, Airbnb, Facebook and TripAdvisor -- are platforms. The simplest platforms facilitate communications and business transactions between two distinct groups of customers and capture value by charging one or both of these populations.

A large part of the perceived value for users lies in a platform's complementary offerings. That's why its operators have to ensure that a sufficient number of providers are investing their time and money to make the platform truly valuable to its user bases.

Which is what Blackberry, for example, overlooked. Once the iPhone and Android-based handsets were able to manage email and calendars as well as a Blackberry, the latter's decline was inevitable. Users grew more interested in iPhone and Android apps.

"In some circumstances, network externalities are so strong that large platforms become the winners who take all, capturing most of the value in an industry," Valor writes. A platform like Airbnb has many more places to stay than a small competitor, which makes it more useful for travelers. As such, it continues to attract more guests and more hosts, with the potential to dominate its industry.

Q: Have you considered if a platform-based business model could disrupt your industry?

2. The Viability of Long-Tail Business Models
Digital technologies have made possible a large number of niche -- or "long-tail" -- businesses. This is thanks to a drastic reduction in transaction costs, including cheaper search and information gathering, bargaining, as well as policing and enforcement.

Before, it was not profitable to advertise certain niche or low-demand products in newspaper classifieds. Most likely, they would have to be announced several times in order to find a buyer, which was expensive and time-consuming. But internet ads are extremely efficient in terms of money and time. This efficiency moved many advertisers online, greatly reducing the income of print newspapers.

Q: Do you believe your firm is prepared to serve long-tail markets?

3. The Need to Capture Value When It's Created
Digital technologies increase the danger of breaking down a value chain, which makes it essential to capture value just as soon as it is created.

Consider the 1990s stockbrokers and wealth managers, who would offer free financial advice and charge more than $100 per trade. When online brokerages appeared and offered $10 a trade, clients could game the system by getting free advice and then carrying out their transactions online, paying a tenth of the old price. As a result, professional brokers began charging for their advice, capturing value in the moment it was added, and lowering trading fees -- in some cases even eliminating them.

Bear in mind that if you lose control of your bundled value-adding activities, you run the risk of going out of business.

Q: What can you do to capture value as soon as it's produced?

4. The Threat of Envelopment Strategies
When a company with a limited product line shares its customers with another that could offer the same products for less (thanks to lower fixed costs), that first company is at risk of falling prey to an aggressive envelopment strategy.

Here we have the case of Snapchat, challenged by Instagram, who had many users in common. When Facebook (Instagram's owner) saw Snapchat as a threat, it launched a copycat version of Snapchat's core offering as a supplement: Instagram Stories. Thanks to their deep pool of resources, Instagram Stories quickly surpassed Snapchat's volume of daily users.

Instagram Stories vs. Snapchat daily active users
Source: the companies

Something similar may be happening with Spotify, which shares many of its customers with Apple (Music) and Amazon (Prime). Clearly, those bigger players could offer music to Spotify's paid customers and do it for less. This could undermine Spotify's model, unless it can offer something Apple and Amazon are unable to replicate.

Q: Have you thought of which companies share customers with you -- and could undercut you, thanks to lower fixed costs? Could you use the envelopment strategy on another company?

5. Attention to What Customers Really Want
A firm must understand what the customers really want and work to alleviate any pain points while also, if possible, increasing the perceived gain. In this sense, digital technologies offer new and expanded opportunities to serve customers creatively, as demonstrated by Netflix, which beat out the incumbent giant Blockbuster.

Blockbuster customers had to go to a store, pay a fixed fee to rent a DVD and, if they didn't return it on time, pay a penalty, to the consternation of many. Netflix came along and charged a fixed monthly fee for two DVDs to be sent by mail. When a DVD was returned to Netflix via a prepaid envelope, the next DVD on the customer's wish-list was sent within 24 hours. Customers could keep DVDs for as long as they wanted, with no penalties applied.

Netflix understood very well that customers ultimately wanted to watch movies at home, so they started experimenting with and investing in a streaming service -- even as they continued to invest in classification centers for their mail-based service.


Q: Does your company have processes in place to analyze what customers do to get what they want -- and to look for innovative ways to reduce their pain points and increase perceived value?

Maybe that's the key to preventing your company from becoming the next Blockbuster.

Authors Valor Sabatier, Josep

Language: English

How Not to Lose Your Head in a Bidding War

Remember the tale of Ulysses and the sirens? Heeding sage advice from the goddess Circe, Ulysses had his crew plug their ears with beeswax and tie him tight to their ship's mast in order to resist the enticing call of the sirens as they sailed by. Although Ulysses had been warned that the alluring sirens were really monsters ready to kill, he was wise to listen to Circe when she said that he might not be able to resist their call in the moment he heard it.

She was right, of course, and the preventative measures saved Ulysses and his crew. Executives facing the dangers of competitive escalations might want to heed similar advice (fit for the business context, of course). That is to say, savvy executives should not only prepare for a competition -- e.g., set their own price limits for an auction -- but also acknowledge how escalating pressure could change their frame of mind as the bidding unfolds.

This is according to research by IESE's Sebastian Hafenbrädl with co-author Jan K. Woike from the Center for Adaptive Rationality. Via a series of experiments involving competitive escalations, the co-authors conclude that an understanding of what really happens in these escalations -- when there's adrenaline running -- can help save managers from costly mistakes. The experiments also show that either direct experience or vicarious learning from those who have faced similar situations can help managers get better outcomes in bidding wars or other corporate "arms races."

What You Think You'll Do vs. What You Do
Here's an interesting question: How much would you bid for a $20 bill -- if you faced competition in the auction and both the winning and the losing bids had to be paid out in full? Yes, this variant of a traditional auction simulation requires not only the winning but also the losing bids to pay their respective highest bid. Losing hurts here.

Note that this auction game was invented by an economist to help illustrate the paradox of competitive escalations. In this game, when players have a hard time quitting -- feeling trapped by sunk costs and egged on by competition -- end payments of $40 to $50 are not uncommon (In a very extreme case, the bidding in an executive class even reached $2,000). In other words, all too often, everyone loses.

So, how might managers prepare themselves to win, even amid competitive escalation, in this $20 auction simulation game? Hafenbrädl and Woike find that simply pre-setting bidding limits before the competition starts is not enough. Instead, more effective interventions acknowledge that most managers don't truly anticipate a competitive-escalation experience before they enter it. And what they don't know can hurt them. To avoid pitfalls, managers without previous direct experience should seek out the advice of those who have experienced competitive escalations before.

Here's a quick run-down of the auction simulation game results, in four circumstances:
  • (+) With direct experience in a similar situation with competitive escalation, participants fared better in the dollar auction game.
  • (-) But if participants' direct experiences lacked escalation, there was no improvement in their results.
  • (-) Setting oneself a goal or limit re: where to exit the competition was not enough when faced with escalation.
  • (+) Learning from others with experience handling a competitive escalation did improve results.

So, why is past experience and vicarious learning from others so important here? The authors turn to prior research that says there's a "cold-hot empathy gap" that prevents people from anticipating how they will experience a "hot" situation before entering it. When you're level-headed, rational and cool, you may fail to understand what will happen when, say, hunger strikes or adrenaline is pumping.

Which is why the tale of Ulysses is cited here. If he didn't have Circe's advice, Ulysses and crew might have listened to the lovely song of the sirens without preventative measures in place, thinking they'd be strong enough to sail on. They would have been wrong.

Methodology, Very Briefly
The dollar auction game is used as a proxy for other competitive escalation situations in business, such as patent races or bidding wars for corporate mergers. The authors combined lab and online auction experiments -- with a combined 1,229 participants (including experienced executives) -- to test how direct and indirect interventions affected players' outcomes (i.e., winning or losing money).

Authors Hafenbrädl, Sebastian;  Woike, Jan K.

Publisher John Wiley & Sons

Language: English