Winning the Digital War for Talent

Which Features Increase Customer Retention?

The sales practices of Europe’s leading consumer-goods companies

Our survey of more than 100 sales executives reveals best practices in customer and channel management.
The sales practices of Europe’s leading consumer-goods companies

‘Either play or shut up’: An interview with FrieslandCampina’s CEO

Under the leadership of CEO Roelof Joosten, one of the world’s largest dairy companies has made bold investments in sustainability, innovation, and digital channels.
‘Either play or shut up’: An interview with FrieslandCampina’s CEO

Three more reasons why US education is ready for investment

Shifts in the education landscape are opening doors for investment.
Three more reasons why US education is ready for investment

Free Webinar, Dec. 1: IoT and Developing Analytics-Based Data Products

Connected devices and the data and analytics that drive them are fundamentally changing how companies think about and plan for product development. In fact, many companies are establishing new revenue streams by capitalizing on the huge demand for analytics-based data products. And this new category of products requires a reworking of the traditional phases of product development.

On Dec. 1 at 11 a.m. EST, join MIT SMR coauthors Thomas H. Davenport and Stephan Kudyba in a free, live webinar, where they will discuss their recent article, “Designing and Developing Analytics-Based Data Products.” The authors will look at the ways in which the internet of things, market forces, and evolving technology are changing how companies plan the development of data products.

Register free now.

In the webinar, the authors will discuss:

• Why development of data products needs a structure
• The seven steps for development of data products
• How and why to involve stakeholders in the process
• Examples of companies that have redrawn their product development processes

Register free now.

See more live and on-demand events from our 2016 Data & Analytics Webinar Series.

Free Webinar, Dec. 1: IoT and Developing Analytics-Based Data Products

Why Innovation Isn’t Enough

Getting to know urban elderly consumers

Older customers will drive growth in developed markets. But few companies truly understand this segment—and its nuances.
Getting to know urban elderly consumers

The Downside to Full Board Independence

High-profile accounting and corporate governance scandals have resulted in significant changes in the structure of corporate boards of directors, especially the move to (nearly) fully independent boards — that is, boards on which the CEO is the only employee director. According to data from the proxy advisory firm Institutional Shareholder Services, 36% of S&P 500 companies had no other employee director besides their CEOs in 1999. The percentage of such companies has increased steadily since then, reaching an astonishing 75% in 2015. This dramatic trend raises the important question of whether board effectiveness improves or suffers with fully independent boards.

The Benefits of Full Independence

The potential benefits of an independent board are well known. Independent directors are usually leaders with few reasons to be beholden to the CEO. Boards dominated by independent directors are better able to oversee the CEO and protect the interests of shareholders and other stakeholders. Increasing their number can foster better board performance by enhancing a company’s access to external resources and connections. A larger number of independent directors also allows a board to ensure that its members are not overburdened with oversight responsibilities to the detriment of strategic counseling. A fully independent board enables a company to reap these benefits without enlarging its board, thereby avoiding the potential disadvantages of a large board.

The Disadvantages of Full Independence

However, full board independence is not without its costs. First, research has shown that the quality of managerial oversight and strategic advising by independent directors depends significantly on the quality and completeness of information they receive. Senior executives other than the CEO often have unique insights into different aspects of the company’s operations. While such insights can be transmitted to the board via the CEO, this can introduce systematic noise (or deliberate bias on the part of the CEO) that reduces the value of such information. Further, inviting non-director executives to board meetings on an ad hoc basis does not facilitate the ongoing information exchange between independent directors and executives that comes naturally with board membership. A fully independent board may thus become less effective because it works with relatively poorer information.

Second, a major responsibility of corporate boards is to replace the CEO when needed. Because no senior executives other than the current CEO are members of a fully independent board, independent directors on such boards do not regularly interact with, observe, and evaluate them as they contribute to important strategy development and execution decisions. A fully independent board thus may evaluate internal candidates for the CEO position less accurately due to less familiarity with them. The board may appoint an external candidate when an internal candidate would be the better choice. Even if it does choose an internal successor, a fully independent board’s reduced firsthand information on senior executives may mean that the candidate is not the best fit.

Finally, senior executives traditionally perfect their company-specific strategy development skills by serving on their companies’ boards. Fully independent boards deny them this significant opportunity. While the board can invite non-member executives to participate in its deliberations as needed, this is an inadequate substitute for the spontaneous exposure to board discussions that comes with regular membership. Regardless of whether they are the best fit for the position, internally promoted CEOs appointed by fully independent boards are likely to face a steeper learning curve that can result in costly mistakes, especially during the initial years of their tenures.

Do the Benefits Outweigh the Costs?

The ultimate goal of corporate boards is to create long-term value. Therefore, to evaluate whether the benefits of full board independence outweigh its disadvantages, I examined the effect of fully independent boards on operating profits and corporate value in a study published in the Journal of Empirical Finance. My sample consisted of over 20,000 annual observations for 2,900 S&P 1500 companies from 1998 through 2011. Of these observations, about 54% belonged to years when a company’s board was fully independent, while the rest occurred when the company had more than one employee director. I then compared the two groups on operating profits and market valuation. My tests controlled for factors such as company size, use of debt, growth opportunities, managerial equity ownership, and other board attributes.

I found that companies with fully independent boards earned significantly lower operating profits than other companies — up to 8.2% lower. Similarly, these companies deviated more from value maximization and attracted lower market values. These performance differentials were more pronounced during the initial two years following the promotion to CEO of a senior executive without prior service on the company’s board. This suggests that the lack of regular exposure to the board presented a particularly difficult learning curve for internally promoted CEOs and hurt their early performance.

Does One Size Fit All?

A common theme in recent corporate governance research is that one size does not fit all when it comes to structuring a board of directors. Some companies have relatively straightforward operations that are easy for outside directors to understand and oversee. A fully independent board may be beneficial (or at least not harmful) to such companies. Other companies invest heavily in R&D and have significant amounts of intellectual property. Such companies are more difficult for outsiders to understand, so overseeing them requires continuous access to the high-quality information provided by employee directors at regular board meetings. I evaluated whether fully independent boards had a worse effect on the latter type of companies. Results indicated that this was the case — companies with more complex operations showed an 8.2% decrease in operating profit on average, while ones with more straightforward operations averaged a 4.8% decrease.

Although the value of independent directors is well established, my findings suggest that setting up a fully independent board is counterproductive. Boards that did away with senior executives’ knowledge, skills, and company-specific information diminished their own effectiveness.

So what’s a company to do? The demand of regulatory agencies for greater involvement of independent directors in board oversight means that companies need more independent directors to spread out oversight responsibilities. Yet adding independent directors without reducing the number of employee directors means enlarging the board, which may create other problems. However, boards can balance the need for independent and employee directors without altering their current size.

The median S&P 500 board has 11 directors. I propose allocating three positions to employee directors and the rest to independents. With eight independent directors, a company can staff its audit, compensation, and nominating/governance committees so that only a handful of directors serve on more than one committee, optimizing their contribution to board oversight and strategic advising. At the same time, two additional senior executives on the board will allow independent directors regular access to their expertise and knowledge. This will eliminate the need to filter internal information to the board through the CEO and improve the CEO succession process.

The Downside to Full Board Independence

The secret to smarter fresh-food replenishment? Machine learning

With machine-learning technology, retailers can address the common—and costly—problem of having too much or too little fresh food in stock.
The secret to smarter fresh-food replenishment? Machine learning

Duped by Data

Tactics for Accomplishing your Sales Targets

Putting into action sales methods to profitably satisfy desired goals is most reliable when used as component of your sales plan. You will discover a lot of tactics to pick from, and even with experience, business professionals and the sales … Continued

The post Tactics for Accomplishing your Sales Targets appeared first on Mr Dashboard.

Tactics for Accomplishing your Sales Targets

How tech-enabled consumers are reordering the healthcare landscape

Healthcare companies are developing new digital technologies to give consumers more control over the care they receive. That could upend the industry’s move toward greater consolidation and scale.
How tech-enabled consumers are reordering the healthcare landscape

Closing the digital gap in pharma

New research on the digital maturity of pharma, relative to other industries, reveals clear opportunities to improve performance by better connecting digitally with patients and physicians.
Closing the digital gap in pharma

The role of the chief transformation officer

The individual charged with leading change must have multiple capabilities.
The role of the chief transformation officer

Sustaining the momentum of a transformation

Five elements can keep bad habits from reasserting themselves.
Sustaining the momentum of a transformation

Changing the rules of the game to close California’s housing gap

To help solve California's housing shortage, real incentives and accountability should be added to the building and planning processes, write Jonathan Woetzel, Shannon Peloquin and Daniel Weisfield in The Los Angeles Times
Changing the rules of the game to close California’s housing gap

To continue stoking the world economy, cities must adapt to changing demographics

The decline in population growth in cities is forcing them to adapt in order to maintain a healthy global economy, write Jaana Remes and Jonathan Woetzel in The Globe and Mail.
To continue stoking the world economy, cities must adapt to changing demographics

Why many Americans feel worse off

U.S. household incomes remain flat, leaving many Americans worried about their economic future, write James Manyika and Anu Madgavkar in Forbes
Why many Americans feel worse off

The great income stagnation

In developed countries, income growth has slowed or fallen, with the potential outcome of younger generations being poorer than parents, write Laura Tyson, and Anu Madgavkar in Project Syndicate
The great income stagnation

Why China's cities will drive global growth

Urban Chinese population growth, as well as increases in urban incomes, and urban consumer spending is expected to drive growth, write Chang Ka Mun, and Jaana Remes, in Project Syndicate
Why China's cities will drive global growth

What digital finance means for emerging economies

In emerging economies, using a smart phone to provide access to financial services, could help boost the economy, write James Manyika, and Rodger Voorhies in Fortune
What digital finance means for emerging economies

Africa still rising

Despite slowed growth and development, Africa's potential, especially in high growth countries, remains massive, write Donald P. Kaberuka and Acha Leke in Project Syndicate
Africa still rising

The most digital companies are leaving all the rest behind

Companies that use digital technologies to innovate and transform the way they operate, have increased their productivity and profit margins by two to three times over their competitors, write James Manyika, Gary Pinkus, and Sree Ramaswamy in Harvard Business Review
The most digital companies are leaving all the rest behind

Europe has digital potential but it must act to close the gap with the US

European public and private sectors have to do more to digitize their businesses in order to remain competitive with the US, write Jacques Bughin, Eric Hazan and Sree Ramaswamy, in Europe's World
Europe has digital potential but it must act to close the gap with the US

Look out below: Why returns are headed lower, and what to do about it

Investment professionals may have been spoiled by a long run of exceptional returns. We will find out soon.
Look out below: Why returns are headed lower, and what to do about it

How a culture survives when a start-up merges with an incumbent

A seven-year-old start-up melds cultures with a centenarian—and is able to make it work. LearnVest CEO Alexa Von Tobel explains her company’s culture journey.
How a culture survives when a start-up merges with an incumbent

How impact investing can reach the mainstream

Clear measurement standards, high-grade operations, specialized products, and more training for entrepreneurs can make impact investing a more influential practice.
How impact investing can reach the mainstream

When Employees Don’t ‘Like’ Their Employers on Social Media

How the convergence of automotive and tech will create a new ecosystem

As the high-tech and automotive worlds merge—with four disruptive technology trends driving change—a complex ecosystem is creating new rules for success.
How the convergence of automotive and tech will create a new ecosystem

Please Go Away (and Spend More Time Somewhere Else)

Marketing’s Holy Grail: Digital personalization at scale

Personalization drives growth. But to scale it, companies need to do four things.
Marketing’s Holy Grail: Digital personalization at scale

The future of second-generation biomass

To make bioconversion commercially competitive, the industry needs swift advances.
The future of second-generation biomass

The role of the transformation office

Pace and rhythm are important in planning and execution.
The role of the transformation office

Setting aspirational targets

Companies should bear in mind four principles during the target-setting part of the transformation process.
Setting aspirational targets

Can the US economy return to dynamic and inclusive growth?

Slower economic growth in the United States has wrought a vicious cycle that has hobbled many American households. Targeted investment and policy action could turn it around.
Can the US economy return to dynamic and inclusive growth?

How cement companies create value: The five elements of a successful commercial strategy

As the dynamics of the cement industry change, successful companies are creating value by focusing on their micromarkets. Here’s how they do it.
How cement companies create value: The five elements of a successful commercial strategy

Transforming government through digitization

By digitizing processes and making organizational changes, governments can enhance services, save money, and improve citizens’ quality of life.
Transforming government through digitization

Reorganization rules that work

Companies should view reorganization as a routine practice essential to remain competitive and keep pace with technological change and disruption.
Reorganization rules that work

What Makes a Supply Chain Sustainable?

Miles to go: Stepping up progress toward gender equality

There are 10 gender "impact zones" that need to be addressed in order to accelerate progress toward gender parity, write Kweilin Ellingrud, Mekala Krishnan, and Anu Madgavkar in Global Daily.
Miles to go: Stepping up progress toward gender equality

Bracing for seven critical changes as fintech matures

The fintech sector is being shaped by shifting market conditions, new regulations, and changes in consumer demands and behaviors.
Bracing for seven critical changes as fintech matures

Developing products for a circular economy

Cross-functional collaboration and customer-focused design thinking can help companies reap more value from the energy and resources they use.
Developing products for a circular economy

Why Big Data Isn’t Enough

Starting at the source: Sustainability in supply chains

By working closely with their suppliers, consumer companies can lessen their environmental and social impact and position themselves for strong growth.
Starting at the source: Sustainability in supply chains

Digital innovation in consumer-goods manufacturing

Consumer-goods companies have begun to capture value by applying digital tools to manufacturing. Here’s a look at how they’re doing this today—and how they might do so tomorrow.
Digital innovation in consumer-goods manufacturing

Is Your Company Winning the Race to Digital Transformation?

Platform Strategy and the Internet of Things

In their book Platform Revolution (W.W. Norton & Co., 2016), authors Geoffrey G. Parker, Marshall Van Alstyne, and Sangeet Paul Choudary write that the platform model is the basis of some of the most successful companies operating today, from Google and Amazon to Uber and eBay. “No matter who you are or what you do for a living, it’s highly likely that platforms have already changed your life as an employee, a business leader, a professional, a consumer, or a citizen — and are poised to produce even greater changes in your daily life in the years to come,” they write.

The platform business model uses technology to connect people, organizations, and resources in an interactive ecosystem. As defined in Platform Revolution, “A platform is a business based on enabling value-creating interactions between external producers and consumers. The platform provides an open, participatory infrastructure for these interactions and sets governance conditions for them. The platform’s overarching purpose: to consummate matches among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.”

On October 13, 2016, Van Alstyne, the Everett Lord Distinguished Faculty Scholar at Boston University, participated in a webinar about platform strategy hosted by MIT Sloan Management Review and made possible with sponsorship support from Xively. The presentation focused on the crucial role of the emerging Internet of Things as a component of platform strategy. The webinar was moderated by Steven Paul, a contributing editor at MIT SMR, and highlighted on Twitter at the hashtag #MITSMRevent. Among Van Alstyne’s key points:

Architecturally, the IoT redefines how devices communicate and offers significant economies of scale.

Before the Internet of Things, each participant in a network had his or her own device, with each device having a full stack of the functions that they use. In this architecture, “each device has to communicate with each of the other devices,” said Van Alstyne. The Internet of Things presents a competing architecture view, which “might be to put everything into a single box,” he said. “Here you get economies of scale. Everyone has access to all of the functions, and you save and economize on some of the connectivity and communications that take place.” There is a downside to going completely in this direction, he said: “While this model scales beautifully, it makes making changes more difficult.”

Folding IoT onto a platform strategy is a more architecturally ideal solution.

In contrast to the two architectural models above, Van Alstyne presented a hybrid platform model. The services that everyone uses is the shared core in an open platform. Limiting how much activity takes place on the platform has advantages: Functions have less efficiency loss, Van Alstyne noted, if they are interacting with fewer parts. Some duplication costs are made up by execution gains in speed and in modification. “If an architecture shares some of the functions, then you can also swap some modules more easily and more cost-effectively in this kind of architecture,” he said.

Companies can gain competitive advantage by focusing on how they help clients network.

“The product business model is broken,” Van Alstyne said. “Most companies compete by adding new features to products,” he said. “They haven’t been in the business of asking how to add network effects.” And that doesn’t mean just looking at technology and interfaces; it also means looking at economics. Van Alstyne cited the work of Sanjay Sarma, the vice president for Open Learning at MIT and a developer of many of the technologies behind radio-frequency identification (RFID) standards worldwide. “He has this wonderful observation, that you really need to start thinking about when things start to buy things. It’s not about interaction, but when they actually buy things.” As examples, he cites washers that refill themselves with softener or soap, printers that buy ink when they’re low, and the Nest thermostat which can buy energy on its owner’s behalf.

When “things buy things,” it changes the nature of business in fundamental ways.

“One element is basic marketing,” said Van Alstyne. “The point of interaction is no longer necessarily the person, but the platform. How are you going to coupon when it’s already been the machine that makes a decision to purchase or refill the soap or the paper?” Product manufacturers — of objects that include coffeemakers and printers — may now find themselves in the business of selling their customers a service: a coffee service, a printer service. “Each of these things becomes an interesting business challenge,” said Van Alstyne. “It’s not just the design of the device — it’s the design of the ecosystem around the device.”

Companies built on a platform strategy can create amazing value.

Van Alstyne showed the market cap value of competitive companies, where one is traditional and one is built on platforms. They included BMW (US$50B) and Uber (US$60B), Marriott (US$25B) and Airbnb (US$21B), and Walt Disney (US$146B) and Facebook (US$366B). “Facebook is now twice the value as Disney,” noted Van Alstyne. “You and I create the content for Facebook, where Walt Disney has hired these fantastic designers and storyboard artists and others to create the iconic culture we have today.” Platform companies can scale really quickly, he said, because companies “don’t bear even the marginal costs of production.” Airbnb has 40,000 listings in Paris and 8,105 in Berlin, and “it’s simply impossible for Marriott, Hyatt, or InterContinental to grow at that scale because they’d have to own the assets. It’s a different business model.”

“The transition to Internet Era firms is both like and unlike the previous transition to Industrial Era firms.”

Thirteen of the top 30 global brands, he said, are now platform companies — meaning they have the presence of a market or an external ecosystem — including Apple, Google, Microsoft, IBM, Samsung, and Amazon. And if you look at companies that are Internet-based, it’s even more stark: The dominant names, including Google, Facebook, and YouTube, are overwhelmingly platform companies. Manufacturing brands that rank as top global brands, including GE, BMW, and Nike, are adding sensors and other IoT features and capabilities to their products. What all this means is whereas the Industrial Era was defined by giant monopolies created by supply economies of scale, the Internet Era is seeing comparable monopolies being created by demand economies of scale, where users create value for users. These demand economies of scale take advantage of technological improvements on the demand side, including efficiencies in social networks, demand aggregation, and app development, to create these giant companies.

One new reality from all this: In any market with network effects, the focus of attention must shift from inside to outside the company.

“The reason for this is simple,” said Van Alstyne: “You cannot scale network effects inside the firm as easily as outside the firm, for the simple reason that there are more people and devices outside the firm than inside.” He said that while existing businesses need to adjust their strategies, new business managers must be versed in thinking about this new kind of ecosystem. “As a business school professor, almost everything we teach, whether it’s marketing, or strategy, or operations and logistics, architecture, any of these things, our training for inside the firm must now take on training for outside the firm as additional perspectives.”

“Strategy is different in the Internet Era than it was under the product-based or supply-side economy of scale.”

The traditional view of strategy, he said, is to look at the forces that are coming into the market, look at the threat of entrance, look at the substitutes, and to compete on either cost leadership or product differentiation. Companies also strive to own their core assets so that no one else can make what they make. “That’s not how platforms work,” Van Alstyne emphasized. “In platforms, the real goal is as many interactions as possible. You want to increase engagement.” It’s the demand side economies of scale that creates both the sustainability and the barrier to entry. As well, the boundaries of the ecosystem can be altered as consumers become producers — as with Airbnb wanting its riders to become drivers and Uber wanting its guests to become hosts. When this happens, Van Alstyne noted, a company’s demand becomes its supply.

Platform Strategy and the Internet of Things

Strategy and the art of motorcycle maintenance

What I learned about empirical analysis, dominant hypotheses, and the value of a clean workshop while crossing Australia on my bike
Strategy and the art of motorcycle maintenance

Making your marketing organization agile: A step-by-step guide

Everyone wants to be “agile” these days. Here’s how successful companies put together the teams and the capabilities to actually make it happen at scale.
Making your marketing organization agile: A step-by-step guide

The changing market for food delivery

Online food-delivery platforms are expanding choice and convenience, allowing customers to order from a wide array of restaurants with a single tap of their mobile phone.
The changing market for food delivery

A better way to M&A: Zeroing in on telecom value

With organic growth opportunities narrowing, telecom players need a better way to screen potential M&A targets. A data-rich, heat map–based approach can help.
A better way to M&A: Zeroing in on telecom value

Transforming HR and culture: An interview with Banco de Crédito del Perú’s Bernardo Sambra

An HR leader describes how an effort to increase his bank’s efficiency meant challenging the bank’s culture—and himself.
Transforming HR and culture: An interview with Banco de Crédito del Perú’s Bernardo Sambra

How retailers can improve price perception—profitably

New methodologies, powered by big data and advanced analytics, can help retailers attract value-conscious consumers without sacrificing margins.
How retailers can improve price perception—profitably

How to Develop a Great Digital Strategy

Creating a Data-Driven Enterprise: Real-Life Cases

Over the past few years, the MIT SMR team has delved deeply into how data and analytics are changing companies’ processes, products, and business models. In a new video panel, the editors leading that exploration, joined by the chief analytics officer at EY, discussed key insights from a recently completed series of in-depth case studies on how prominent organizations are using data and analytics to transform their operations.

In this live discussion, panelists discussed efforts by Intermountain Healthcare, GE, Nedbank, and the city of Amsterdam to become more data driven. This set of diverse organizations in a range of industries and geographies offers a unique perspective on the challenges and opportunities associated with becoming a data-driven organization.

Creating a Data-Driven Enterprise: Real-Life Cases

Energy 2050: Insights from the ground up

How will the world satisfy its need for energy? McKinsey research offers a perspective.
Energy 2050: Insights from the ground up

Engineering the future of maritime trade

Lessons from the expansion of the Panama Canal.
Engineering the future of maritime trade

Transformation with a capital T

Companies must be prepared to tear themselves away from routine thinking and behavior.
Transformation with a capital T

How private equity adapts: A discussion with Don Gogel

A longtime private-equity CEO reflects on the advantages of pure-play firms, how to deploy virtual expertise, and why general partners are like wineries.
How private equity adapts: A discussion with Don Gogel

Energy 2050: Insights from the ground up

How will the world satisfy its need for energy? McKinsey research offers a perspective.
Energy 2050: Insights from the ground up

Digital music’s Asian beat

The heady growth of new music-streaming services in the region may contain lessons for other industries.
Digital music’s Asian beat

IoT Can Drive Big Savings in the Post-Sales Supply Chain

How “Smart” Is Your R&D Spending?

A mixed 2015 for the global payments industry

While strong fundamentals continued, slower growth left payment revenues essentially flat in many regions last year.
A mixed 2015 for the global payments industry

A winning partnership: Financial institutions and strategic suppliers

For financial institutions, working with truly strategic partners is, and should be, very different from managing other supplier relationships.
A winning partnership: Financial institutions and strategic suppliers

Engineering the future of maritime trade

Lessons from the expansion of the Panama Canal.
Engineering the future of maritime trade

A culture of improvement: Defining the role of scale and sustainability in building big projects

An interview with Jacqueline Hinman
A culture of improvement: Defining the role of scale and sustainability in building big projects

Taking conservation finance to scale

Environmental projects are woefully underfunded. Improving their risk-return profiles and structuring larger investment products could unlock private capital to narrow the gap.
Taking conservation finance to scale

How IT can drive agile development

A simple idea: update your operating model to be able to build small, self-contained teams that create change quickly and efficiently.
How IT can drive agile development

As gasoline demand booms, don’t sleep on diesel

In 2015, gasoline-diesel differentials favored gasoline for the first time in many years, but the longer-term future favors diesel, and meantime refiners need to be able to swing between the two.
As gasoline demand booms, don’t sleep on diesel