<link>http://www.ominim.com/</link> <description/> <language>en</language> <item> <meta charset="utf-8"> <title>200401_A Wake-up Call for the Corporate world http://www.ominim.com/knowledge/wake-call-corporate-world <span>200401_A Wake-up Call for the Corporate world</span> <span><span>McCarville</span></span> <span>Wed, 04/01/2020 - 09:41</span> <div class="wysiwyg-wrapper"> <p>January 2020 was the warmest January since temperatures started being systematically recorded more than 140 years ago, according to both the US National Oceanic and Atmospheric Administration and Europe’s Copernicus Climate Change Service (C3S).<sup>1</sup>?Future generations may not only face more extreme weather conditions, such as hurricanes and floods, but also a worldwide sea level rise of around seven meters due to melting Greenland ice.<sup>2</sup>?Over the last years, the arctic region has been heating up two to three times faster than the rest of the planet.<sup>3</sup></p> <p>However, the international community struggles to find pathways to a more sustainable use of energy, the largest source of greenhouse gases, which are driving climate change. The 2015 Paris Agreement, intended to curb emissions and keep global warming to well below two degrees Celsius above pre-industrial levels, does not seem to have an immediate impact on national economies. On the contrary, many countries are emitting more global greenhouse gases; emissions rose by almost two percent from 2017 to 2018<sup>4</sup>?and are projected to increase by 0.6 percent in 2019.<sup>5</sup></p> <p>Future generations may not only face more extreme weather conditions, such as hurricanes and floods, but also a worldwide sea level rise of around seven meters due to melting Greenland ice.</p> <p>Yet, the foremost challenge that humankind currently faces – a “deep decarbonization” of national economies – may be tackled by three strategic options. The first is the use of carbon capture and storage (CCS), a technology which traps carbon dioxide emissions directly at the tailpipe of power plants and injects it into the ground. However, many CCS projects have been stopped because of resistance from local residents, environmental concerns, and doubts about its environmental and economic viability. The second option is a reduction of total primary energy consumption of humankind. However, only a few countries on Earth have succeeded in decoupling economic growth and energy consumption over longer periods of time, despite innovations and increases in energy efficiency.<sup>6</sup>?The third option and the most promising path of decarbonization is that of renewable energies supplying the?majority of electricity to our economies. Since 2009, the costs for solar energy based on photovoltaic cells decreased by around 80 percent, whereas wind turbine prices fell by 30 to 40 percent, according to the International Renewable Energy Agency (IRENA).<sup>7</sup></p> <p>?</p> <h2>Global energy supply?becomes renewable</h2> <p>The combination of emission reduction targets with a competitive,?market-oriented regulation of the electricity sector and incentives for green energies has led to an unprecedented rise of renewables. National governments have established regulatory systems that reward clean energy sources, and corporations and entrepreneurs have seized opportunities in liberalized markets. This has reduced the dependency on fossil fuels and has accelerated the deployment of decentralized, climate-friendly energy resources.</p> <p>For example, in Germany and Italy the availability of feed-in tariffs led to a boom in the deployment of photovoltaic power – much of this small scale and individually or community owned. Some countries, such as Denmark and Germany, which both have a long history of renewable energy deployment, have put renewables at the center of their energy and electricity policy. Emerging economies – such as China and India, characterized by rapidly growing power demand – have become global leaders in renewable technologies, including in manufacturing and deployment.</p> <p>The developing world is also leapfrogging into a decentralized energy supply infrastructure, comparable to the jump from no telephone service to handheld devices while bypassing the line-based telephony stage. Here, micro-grids and solar storage?kits for individual households co-exist at the periphery?of the central grid, substituting the further rollout of the public transmission network. This decentralized infrastructure, formerly perceived by rural residents as second-class service compared to an official grid connection, often provides more reliable and stable power supply than the central distribution network.</p> <p>High annual renewable installation rates may initially make small differences to the respective countries’ overall power mixes, given the size of the existing supply portfolio, but the scale of these investments has indeed affected technology adoption internationally by driving down the price. Progress in developing and commercializing new storage technologies – in particular solid-state batteries with a higher energy intensity than lithium-ion batteries – will be likely to accelerate the usage of batteries not only in automobiles, but also in stationary applications around the smart home.</p> <p>The least expensive solution to increase flexibility and efficiency during the transformation is demand-side response. As a platform model, it does not require an expensive supply infrastructure but builds on existing assets, exploits their flexibility potential, enables peak-shaving and thus brings down peak costs. It will counteract many of the issues raised by the intermittency of renewable energy resources, such as solar and wind, at much lower costs than installing new generating capacity with conventional sources of power. This strategy has succeeded in power markets such as in the US?with Pennsylvania-New Jersey-Maryland (PJM),?where almost 10 GW of active load management was used to reduce demand during the hot summer months – the equivalent of around ten units of conventional power plants.<sup>8</sup></p> <p>?</p> <h2>Regulatory flexibility as enabler of new business models</h2> <p>The conventional energy system tended to have separate sector regulation, for example in electricity and gas, and was top-down optimized with few incumbent players. As the energy system decarbonizes and decentralizes, the convergence of heat, mobility, and power on the distribution level allows for coordinated regulatory instruments and actions to create new markets and platforms in ways that are cost-effective to customers, but also nimble and adaptive enough to enable, rather than undermine or block, innovation, new business models, and customer wishes. For example, peer-to-peer trading and exchange between residential energy micro-producers and consumers still face regulatory hurdles in many countries.</p> <p>Notwithstanding, the new energy world offers a broad spectrum of opportunities to capture value for utilities, large corporations, and even startups. Based on our research, we found that the core competency to succeed in a decentralized system is expertise in digitalization – be it with artificial intelligence for predictive maintenance, granular weather forecasting, legacy?device recognition, or chatbots in customer interaction. It was also served by skills in data analytics for the optimization of decentralized assets and remote operating centers as well as deep tech knowledge, for example on trading platforms based on blockchain or other decentralized ledger technologies.</p> <p>Corporate leaders can prepare their companies (and society) for the energy market transformation by offering tailored services and value propositions. Technological advances and innovations can give start-ups and established companies an opportunity to create competitive differentiation. In a complex and highly dynamic market environment, no single company is able to provide all the elements of its value proposition by itself – entering partnerships and alliances can be key to survival.</p> <p>Corporate leaders can prepare their companies (and society) for the energy market transformation by offering tailored services and value propositions.</p> <p>The global transformation of the energy sector has just started. Major international institutions as well as many political and corporate decision makers across all continents are taking key roles and responsibilities in the process. However, if global emissions are to reduce at a pace that is at least in line with the Paris Agreement, then the role of decentralized renewable energy must significantly increase.??This will require new thinking in energy governance to enable the opportunities of innovation to be fully exploited and deployed.</p> <p><em>The companion book to this article, “Decentralised Energy – A Global Game Changer,” was edited by Christoph Burger and Jens Weinmann of ESMT Berlin and their co-editors Antony Froggatt (Chatham House) and Catherine Mitchell (Exeter University). The book is available for free via Ubiquity Press London at <a >https://www.ubiquitypress.com</a>.</em></p> <hr /> <p>This article was originally published by the <a >European Business Review</a> on March 29,2020, and republished with permission.?</p> </div> <a href="http://www.ominim.com/taxonomy/term/1316" hreflang="en">Energy industry</a><a href="http://www.ominim.com/taxonomy/term/1200" hreflang="en">Corporate responsibility and sustainability</a><a href="http://www.ominim.com/taxonomy/term/1316" hreflang="en">Energy industry</a><a href="http://www.ominim.com/taxonomy/term/1224" hreflang="en">Entrepreneurship and innovation</a><a href="http://www.ominim.com/taxonomy/term/1260" hreflang="en">Leadership development</a><a href="http://www.ominim.com/media/4425/edit" hreflang="en">Knowledge_A Wake-up Call for the Corporate World_energy</a><a href="http://www.ominim.com/node/5788" hreflang="en">Antony Froggat</a><a href="http://www.ominim.com/node/5792" hreflang="en">Catherine Mitchell</a><a >Original publication by The European Business Review</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=8037&2=field_comments&3=general" token="3YXnPlrha05Tt4g6lCUQRmXZqJIlx4B2omcZPABorJQ"></drupal-render-placeholder> </div> </div> </div> New regulations and opportunities in the decentralized energy market can be good for the planet and business.156352Internal Authors (From Faculty Research Site)<time datetime="2020-04-01T12:00:00Z">Wed, 04/01/2020 - 12:00</time> A wake-up call for the corporate world Wed, 01 Apr 2020 07:41:25 +0000 McCarville 8037 at http://www.ominim.com Controlling The Coronavirus Is Not A Medical Problem http://www.ominim.com/knowledge/controlling-coronavirus-not-medical-problem <span>Controlling The Coronavirus Is Not A Medical Problem</span> <span><span>McCarville</span></span> <span>Fri, 03/27/2020 - 10:11</span> <div class="wysiwyg-wrapper"> <p>We wanted to compare and contrast its actions against those of Doctors Without Borders over the same period to determine when public health officials should raise the alarm about a global health emergency. Even though the clinical characteristics of the coronavirus are different from those of Ebola, the way public health authorities currently approach and frame the problem of controlling the current epidemic seem quite similar. This should concern us.??</p> <p>What the WHO failed to appreciate at the onset of the Ebola crisis is that controlling epidemics is not fundamentally a medical issue. The clinical aspects, such as the transmission rate or incubation time, are crucial because they define the constraints in which we can operate. However, no medical procedure or cure exists to stop the coronavirus. Our only chance at this time is to isolate it. The international community needs to do this with limited resources and under high uncertainty, while providing unambiguous messages to the population. This is, at its heart, a leadership problem.</p> <p>From a solely medical perspective, the WHO has handled the coronavirus outbreak impressively. After less than two weeks (with the help of their international network), they were able to sequence the genes of SARS-CoV-2, recognize it as a new virus, and publish its genome sequences. Just one week after that, they provided countries with the means to develop tests for the virus. Never in history was a new virus identified so quickly. It took a couple of months to do this for the SARS virus in 2003.</p> <p>But the WHO was not much celebrated for this early achievement. Its victory for medical science has been very quickly tarnished by the poor health crisis communications piece of the puzzle. In particular, many criticisms have been lobbed against the WHO regarding its deference to the Chinese government in the initial stages of the crisis. The ensuing suspicion of conflict of interest between the WHO and China raised serious doubts about the organization’s decision to keep the alert level below its maximum in the first weeks of the outbreak.</p> <p>As we explored in our Ebola research, raising the alarm is one of the most challenging decisions that a health agency faces. It is especially true for the WHO, whose effectiveness to influence actions on the ground solely rests on its credibility. And the organization has been struggling over the past two decades with maintaining its ability to influence a coordinated reaction.</p> <p>When the swine flu (H1N1) was spreading in 2009, the WHO raised the alarm very quickly, declaring it a pandemic of international concern. Anticipating high vaccination demand, contracting countries were faced with?<a >the choice to off-load or destroy excess vaccine doses</a>?at a considerable loss. The WHO was accused of “being in bed” with the pharmaceutical industry and contributing to a public health panic to enrich corporate partners. Factual or not, these suspicions hurt the reputation of the agency.</p> <p>This loss of credibility affected the WHO’s ability to react with appropriate and timely messaging later on. The West African Ebola virus epidemic of 2014–2016 resulted in more than 10,000 deaths. As our research suggests, the WHO’s cautious response and late declaration of the outbreak as a health emergency of international concern was, in part, due to the reputational blows suffered in 2009.</p> <p>How and when to raise the alert level is at its core a leadership decision problem. While the medical aspects are crucial, some of the key trade-offs faced by decision-makers are not clinical. For instance, agencies may want to raise the alarm gradually as a way to reflect their true assessment of the risk.</p> <p>But this creates ambiguity for the population, which may be counter-productive. In Germany, for example, people who had a small but reasonable suspicion of infection could be tested – but at their own cost. This could not be more ambiguous. On the one hand, these people had the right to be tested, which indicated that they should. On the other hand, they had to pay for it, which discouraged them from doing so. (The Federal Ministry of Health has since issued a new rule stating that German public health insurers must assume any testing costs for the coronavirus – at least where a doctor believes there is a reasonable cause).</p> <p>The coronavirus crisis is undeniably complex – for medical professionals and political leaders alike. The trade-offs between disclosure and reputational risk, between message simplification and open information flow, and between influencing public behavior and mandating public operations remain in dispute. But none of these are medical. The good news is that effective frameworks and knowledge in operations management, behavioral decision-making, and leadership do exist. We ignore them at our own peril.</p> <p>?</p> <p><em>This article was originally published by <a >Forbes</a> on March 18, 2020 and republished with permission.?</em></p> </div> <a href="http://www.ominim.com/taxonomy/term/1260" hreflang="en">Leadership development</a><a href="http://www.ominim.com/taxonomy/term/1168" hreflang="en">Analytics and business intelligence</a><a href="http://www.ominim.com/taxonomy/term/1180" hreflang="en">Business management</a><a href="http://www.ominim.com/taxonomy/term/1260" hreflang="en">Leadership development</a><a href="http://www.ominim.com/media/4341/edit" hreflang="en">Knowledge_Controlling the coronavirus is not a medical problem</a><a >Original publication by Forbes </a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=8009&2=field_comments&3=general" token="gu34qmztZkAFYfjicWi19jZyQiZlEvWI-M2hRGe2bPk"></drupal-render-placeholder> </div> </div> </div> In research that I undertook with my colleagues from Yale University and the University of Texas, we took a deep dive into the decision making of the World Health Organization (WHO) during the Ebola outbreak of 2014–2016. 380Internal Authors (From Faculty Research Site)<time datetime="2020-03-24T12:00:00Z">Tue, 03/24/2020 - 12:00</time> Controlling the coronavirus is not a medical problem Fri, 27 Mar 2020 09:11:22 +0000 McCarville 8009 at http://www.ominim.com Guiding through Corona – the 2020 outlook of German firms http://www.ominim.com/knowledge/guiding-through-corona-2020-outlook-german-firms <span>Guiding through Corona – the 2020 outlook of German firms</span> <span><span>McCarville</span></span> <span>Thu, 03/26/2020 - 16:55</span> <div class="wysiwyg-wrapper"> <p>To understand how German firms reacted to Corona and, especially, whether Corona changed their outlooks, Maximilian Müller, CFRA member and associate professor at ESMT, analyzed around 40 recent earnings conference calls by German listed firms held since the beginning of March. The analysis indicates two common themes: “Cash is king” because “we don’t know” yet how bad Corona will be.</p> <p>While not all firms are “in [the] state of emergency” declared by Lufthansa CEO Carsten Spohr, many firms indicate they are taking worst-case measures by reducing cash outflows (e.g., CapEx, dividends, short-time work, traditional cost-cutting), securing credit lines, and highlighting the robustness of their balance sheets. This is largely owed to the large uncertainty around the economic effects of the public health crisis. So what did companies have to say on how COVID-19 affects their outlooks for 2020?</p> <p>Most firms indicate potential negative effects, but emphasize they currently have “low visibility”, i.e., they face large uncertainty. Roughly half of the firms are making an attempt to reflect Corona effects in their financial outlooks for 2020 in <em>some</em> fashion (if they expect material effects at all). The other half provides outlooks that are essentially outdated because they exclude any effects from the global spread of the coronavirus. This pattern is largely similar across listing segments (with MDAX and SDAX reflecting mid- and small-cap firms).</p> <p>Take Volkswagen (VW), and BMW as an example to appreciate some of the issues involved. Right before the earnings release on March 19, BMW updated its forecast at short notice (as of March 16) with the assumption “that the sales situation will deteriorate in all major markets, [but] begin to normalize again after a few weeks” as BMW CFO Nicolas Peter noted. Several firms reflecting Corona in their guidance worked with a similar assumption of a V-shaped recovery in the second half of 2020. VW, however, in their earnings release on March 17 kept its forecasts at pre-crisis levels (as of February 26) arguing “it is near to impossible to provide reliable forecasts” (Frank Witter, CFO).</p> <p>Some of this divergence between BMW and VW reflects a peculiarity of the German reporting landscape: Firms’ 2020 outlooks are an integral part of their 2019 annual reports, which must be audited. While the audit was completed at VW by February 26, and VW released “preliminary” figures on February 28, the annual report was released on March 17 as part of VW’s “annual media conference”. This could have happened similarly at BMW, but Norbert Reithofer, supervisory board chair at BMW, reports that, <em>after</em> the board had approved the annual report, there were last-minute changes prior to its release to reflect an update due to the coronavirus (which had to undergo another audit and board approval).</p> <p>Even absent these seemingly “legal” issues, it is clear that CEOs and CFOs are confronted with a dilemma. On the one hand, the current situation is extremely atypical. Different scenario are extremely widely dispersed (e.g., back to normal soon vs. 1.5 years of interrupted lockdowns) and it’s unclear which scenario is the most likely (if likelihoods can be estimated at all) – implying that any guidance would yield a very wide range of possible outcomes. As a case in point, Karim Bohn, CFO of Patrizia AG, noted: “I wouldn't even know how to adjust the guidance […]. Or the only way to do it is to run 10 different scenarios with 10 different guidance outcomes”, which is something that would be very unusual – at least in normal times. On the other hand, Matthias Zachert, CFO of LANXESS AG, points out that after internal deliberations, they “decided it's better to […] give a financial corridor because, otherwise, you are left on the analyst side […] with complete uncertainty.” Consistent with capital markets appreciating <em>some</em> guidance, many analysts have applauded and thanked those companies that actively tried.</p> <p>Clearly, it is not trivial to come up with a structured forecast for different scenarios, let alone internally. Even economists are just starting to marry their models of economic activity with pandemic models (e.g., Eichenbaum et al. 2020) in a more sophisticated way than making ad hoc assumptions about the length of the pandemic and how strongly sectors are likely affected (e.g., as in a recent report by the Ifo Institute for Economic Research). Thinking through these interactions may be easier for some executives if they have (or reach out for) relevant crisis and non-business experience and expertise. For one, Lufthansa’s CFO Ulrik Svensson highlights that he was “CFO at SWISS [airlines] at its darkest moments in 2003 in the middle of the SARS crisis.” For another, Stefan Oschmann, heading pharmaceutical firm Merck with a doctorate in veterinary medicine, shared on March 5 that Merck had followed a sophisticated approach by “looking into more or less applicable historical models of other crises [including] disease threats [since] mid-February”. Ironically, while this time around Merck was one of the first firms quantifying the effects of the pandemic, in the last crisis of 2008/9, it refused to make <em>any</em> prediction, triggering complaints from regulators and legal disputes.</p> <p>In the upcoming weeks, it will be interesting when and how firms start revising their outlooks and strategy – especially those that currently focus on scraping cash to wait until they have better visibility.</p> <hr /> <p>This article was originally published by the Center for Financial Reporting and Auditing (CFRA) on the <a href="https://blog.www.ominim.com/rightonthemoney/guiding-through-corona-the-2020-outlook-of-german-firms/">Right on the money</a> blog, March 25, 2020.?</p> </div> <a href="http://www.ominim.com/taxonomy/term/1216" hreflang="en">Economics</a><a href="http://www.ominim.com/taxonomy/term/1216" hreflang="en">Economics</a><a href="http://www.ominim.com/taxonomy/term/1252" hreflang="en">Investment</a><a href="http://www.ominim.com/media/4337/edit" hreflang="en">Guiding through Corona – the 2020 outlook of German firms</a><a href="https://faculty-research.www.ominim.com/cfra">Original publication by Right on the money</a><a href="https://faculty-research.www.ominim.com/cfra">Center for Financial Reporting and Auditing</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7997&2=field_comments&3=general" token="GKXRpzPqij7vhOfeOlJdT-YZMvnaEbh_BBy-0_N3ncc"></drupal-render-placeholder> </div> </div> </div> Most firms were just fine towards the beginning of 2020 and their CEOs and CFOs were preparing to release their 2019 numbers and provide outlooks for 2020 to capital markets. Then COVID-19 hit globally, turning not just stock markets upside down, but also firms’ plans and outlooks for 2020.14100Internal Authors (From Faculty Research Site)<time datetime="2020-03-26T12:00:00Z">Thu, 03/26/2020 - 12:00</time> Guiding through Corona – the 2020 outlook of German firms Thu, 26 Mar 2020 15:55:35 +0000 McCarville 7997 at http://www.ominim.com How to help the right firms when (all) firms struggle http://www.ominim.com/knowledge/how-to-help-right-firms-when-all-firms-struggle <span>How to help the right firms when (all) firms struggle</span> <span><span>McCarville</span></span> <span>Thu, 03/19/2020 - 14:15</span> <div class="wysiwyg-wrapper"> <p>My research together with?<a >Inga Bethmann</a>?and?<a >Martin Jacob</a>?informs this debate by looking at how governments support struggling businesses – those that make losses – through tax benefits on a regular basis. Our?findings indicate that providing liquidity irrespective of firms’ prospects helps primarily “unhealthy” firms since, in normal times, capital providers do a fairly good job in helping “healthy” firms through a temporary setback. Therefore, measures that help capital providers handle the currently unusually high uncertainty about whether and when “healthy” firms will be “healthy” again are likely more effective than allocating capital directly.</p> <p>In some countries, loss firms can reduce their tax payments in the future when they make profits again. Other countries (incl. Germany) are less restrictive and provide loss firms with a refund of their past tax payments. The research compares how loss firms fare under these two systems. Essentially, one system helps loss firms if they have a healthy future, the other helps loss firms if they had a healthy past. Our?research shows that loss firms invest more under the latter system that grants direct cash injections. It?also finds, however, that especially “unhealthy” loss firms use tax refunds to fund their investment. Such “unhealthy” loss firms also survive longer in the product markets (which could hurt consumers, ultimately).</p> <p>One interpretation of these findings is that a system granting subsidies to struggling businesses without checking for their future prospects does help firms invest and stick around for longer but risks supporting “poor dogs” that capital markets would likely not fund. That is, the finding that primarily “unhealthy” but not “healthy” loss firms’ investment responds to direct cash injections implies that, in normal times, capital markets do a fairly good job in helping “healthy” loss firms weather their temporary crisis. So why and how would the government then need to help “healthy” firms with Corona?</p> <p>While capital providers (e.g., the Hausbank in Germany) are well informed about whether a business was “healthy” prior to Corona, they currently face high uncertainty as to whether and when they will be “healthy” again. Hence, by bearing some of the uncertainty lenders would otherwise face, the German emergency measures for example support their lending decision but don’t take it. This mechanism exploits the information lenders and firms have about the current situation and helps with the uncertainty that lenders would otherwise face (and likely not be willing to bear).</p> <hr /> <p>Learn more in "Tax Loss Carrybacks: Investment Stimulus versus Misallocation" by?Maximilian Müller, Inga Bethmann, and Martin Jacob (2018),?<em>The Accounting Review (2018,?</em>Volume 93, Issue 4, pp. 101-125) at?<a >American Accounting Association.</a></p> </div> <a href="http://www.ominim.com/taxonomy/term/1216" hreflang="en">Economics</a><a href="http://www.ominim.com/taxonomy/term/1216" hreflang="en">Economics</a><a href="http://www.ominim.com/taxonomy/term/1252" hreflang="en">Investment</a><a href="http://www.ominim.com/media/4325/edit" hreflang="en">Knowledge_How to help the right firms when (all) firms struggle</a><a href="https://faculty-research.www.ominim.com/centers/center-financial-reporting-and-auditing">Center for Financial Reporting and Auditing</a><a >Tax Loss Carrybacks: Investment Stimulus versus Misallocation</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7957&2=field_comments&3=general" token="RI2_wHELXFJmzIL3QBfqZ84vMKu-1o560HkwSyyb1sM"></drupal-render-placeholder> </div> </div> </div> With whole economies shutting down, policymakers around the world deliberate how to keep “healthy” businesses that temporarily struggle alive.14100Internal Authors (From Faculty Research Site)<time datetime="2020-03-19T12:00:00Z">Thu, 03/19/2020 - 12:00</time> How to help the right firms when (all) firms struggle Thu, 19 Mar 2020 13:15:54 +0000 McCarville 7957 at http://www.ominim.com In hiring, the less you know, the more you’ll grow http://www.ominim.com/knowledge/hiring-less-you-know-more-youll-grow <span>In hiring, the less you know, the more you’ll grow</span> <span><span>McCarville</span></span> <span>Tue, 02/18/2020 - 16:34</span> <div class="wysiwyg-wrapper"> <p>In the show, she is portrayed as one of the very few female tech talents at Mythic Quest and, as we learn throughout the series arc, one of the few female leaders in an industry known for its impressive “bro monoculture.” In episode 4, we watch Poppy at a convention as she struggles to have her ideas acknowledged by colleagues Ian Grimm, Mythic Quest’s creative director, and Brad Brakshi, head of monetization. It is when she has given up and headed off to grab one of those ubiquitous convention pretzels that we see her “spotted” by another industry talent, Dan Williams, the producer at the competing company Cold Alliance Studios. Dan is frank and to the point: The company has noticed Poppy‘s work, recognizes her talent, and wants her to abandon Mythic Quest for a senior creative position at Cold Alliance Studios.</p> <p>While played to comic perfection, this glimpse into talent poaching is as true to real-world corporate recruitment strategies as it is to this fictionalized gaming world. There is nothing new about stealing employees away from the competition. In R&D especially, “learning by hiring” is a long-recognized, top strategy for developing innovations and countering tendencies to organizational myopia. Companies rely extensively and increasingly on their employees’ networks (prior ties) as a channel to find recruits. Moreover, they believe that hiring via employee networks reduces the risk of bad hires. If you cannot innovate with your current human resources, the practice goes, bring in known talent from somewhere else. And why not cripple the competition in the process!</p> <p>While older research has documented the adoption of the strategy, new research raises important questions about its efficacy under diverse conditions. That is, researchers are asking if and how learning by hiring is affected by factors such as the age of the firm, among others. Researchers Vivek Tandon (Fox School of Business, Temple University), Gokhan Ertug (Lee Kong Chian School of Business, Singapore Management University), and I joined the debate with?<a href="https://faculty-research.www.ominim.com/publication/how-do-prior-ties-affect-learning-hiring">our research on prior ties and how it affects learning-by-hiring strategies</a>. Do you gain more when you already know the person you are recruiting? How close is too close?</p> <p>Our research suggests a surprising paradox about learning-by-hiring strategies in corporate R&D: the more you know your future employees, the less you will learn.</p> <p>Let me explain.</p> <p>When we hire, the most fundamental reason is because we’re looking to fill some knowledge gap. In our research on R&D hiring, we identify two types of knowledge that new recruits bring to the table: what we know (shared knowledge) and what we don’t know (unique knowledge). In the Mythic Quest example, Poppy is working in the same sector as Cold Alliance Studios, yes, but she otherwise has no prior ties to the company or its team. In seeking to poach her from Mythic Quest, producer Dan believes Poppy will bring unique knowledge — fresh perspective, skills, etc. — to his company’s creative direction.</p> <p>We similarly posit in our research that hiring R&D scientists with no prior ties brings greater R&D value than hiring those that do.</p> <p>To test our hypothesis, we looked at patents filed in the field of electrical and electronic goods between 1985 and 2000. From those records, we identified R&D scientists and their firms and tracked the career movement and patent activity of these scientists across the field. We wanted to see how much a prior connection affected their later patent activity, especially as indicated by co-patenting — a widely validated approach to measuring R&D-based collaboration because of its indication of strongly shared knowledge. We asked, did these scientists innovate more or less after moving to the new firm?</p> <p>What the data revealed was that the greater the number of ties, the less the scientists relied on unique knowledge. That is, where companies hired people with whom there was already great familiarity due to past collaborations, the results in new patents showed that there was more focus on already shared knowledge and resources. Moreover, the new hires did not reach far beyond the borders of that shared knowledge, resulting in what we noted as “lower-impact knowledge.”</p> <p>Perhaps this is unsurprising on an intuitive level — the idea that furthering a relationship based on shared knowledge is unlikely to result in lots of new knowledge. However, counterintuitively, this data suggests that learning-by-hiring strategies are less effective, because the new hires with prior ties are focusing on what the company already knows. This defeats the purpose of using hiring by learning for R&D innovation and growth goals and makes questionable the utility of prioritizing it as a recruitment strategy.</p> <p>In that respect, the data on learning by hiring offers a cautionary tale and suggests valuable alternatives to companies wanting to employ poaching strategies. If you want to poach, reach farther afield — away from the people you already know and with whose work you’re well familiar. Otherwise, you’re just too close.</p> <p>?</p> <p><em>This article was originally published by <a >Forbes</a> on February 18, 2020.?</em></p> </div> <a href="http://www.ominim.com/taxonomy/term/1284" hreflang="en">Organizational behavior</a><a href="http://www.ominim.com/taxonomy/term/1180" hreflang="en">Business management</a><a href="http://www.ominim.com/taxonomy/term/1284" hreflang="en">Organizational behavior</a><a href="http://www.ominim.com/media/4260/edit" hreflang="en">In hiring, the less you know, the more you’ll grow</a><a >Original publication by Forbes </a><a href="https://faculty-research.www.ominim.com/publication/how-do-prior-ties-affect-learning-hiring">Research "How do prior ties affect learning by hiring?"</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7796&2=field_comments&3=general" token="3unQtF1X54IHt67xTj5NDz031Qjb9J_AWmA0zPDh-X8"></drupal-render-placeholder> </div> </div> </div> Poppy Li is the lead engineer at the fictional gaming company at the center of the new Apple TV+ series Mythic Quest: Raven’s Banquet.72Internal Authors (From Faculty Research Site)<time datetime="2020-02-26T12:00:00Z">Wed, 02/26/2020 - 12:00</time> In hiring, the less you know, the more you’ll grow Tue, 18 Feb 2020 15:34:05 +0000 McCarville 7796 at http://www.ominim.com The Current Frontier in Industrial Manufacturing: Bringing Software Systems to Market http://www.ominim.com/knowledge/current-frontier-industrial-manufacturing-bringing-software-systems-market <span>The Current Frontier in Industrial Manufacturing: Bringing Software Systems to Market</span> <span><span>McCarville</span></span> <span>Wed, 02/05/2020 - 15:22</span> <div class="wysiwyg-wrapper"> <p>European industrial manufacturers have opened a new battleground. While they traditionally competed by selling machines along with machine operation software, they increasingly try to bring software systems to market that provide information and process automation to help customers optimize their value chain. Consider the following three examples:</p> <ul> <li><em>EcoStruxure Machine Expert</em>?by Schneider Electric (France) is a software system for developing, configuring, and commissioning machines, including logic, motion control, robotics/mechatronics, simulation, diagnostics, intelligent motor and load management, among other functions.<sup>1</sup></li> <li><em>Fleetboard</em>?by Daimler Trucks (Germany) collects and analyzes data from trucks, such as location, driving style, and maintenance requirement. Customers such as logistics companies can use the software to monitor their truck fleet, save on fuel consumption, and ensure the fleet’s uptime.<sup>2</sup></li> <li><em>ON!Track</em>?by Hilti (Liechtenstein) is an asset management system. Customers such as construction companies can use the software to keep track of their tools.<sup>3</sup></li> </ul> <p>Over the last nine years, we have discussed manufacturers’ move toward such software systems with hundreds of managers. Interestingly, most of them are far from satisfied with their sales performance. This observation intrigued us, as managers of industrial manufacturers are typically very proud of and satisfied with the performance of their?<em>hardware</em>?offerings.</p> <p>For this reason, we have scientifically examined potential challenges and success factors of industrial manufacturers’ software businesses through focus groups, interviews, and surveys with about 150 experienced managers from global B2B companies. Our analyses revealed that to improve the success of their business with software systems, manufacturers need to answer three key questions:</p> <ol> <li><em>Why</em>?bring software systems to market?</li> <li><em>What?</em>kinds of software systems should you?bring to market?</li> <li><em>How</em>?should you bring software systems to market?</li> </ol> <p>?</p> <p><strong><em>Why</em>?bring software systems to market</strong></p> <p>Many managers complained that their employer’s business rationale for moving toward software systems is not clear, but targets are high. Their companies just seem to follow today’s?<em>zeitgeist</em>?of “digital transformation” and hype up their own revenue and profit expectations. This is dangerous, as exaggerated objectives can lead to dissatisfaction as well as errors in the implementation phase.</p> <p>To approach the right business rationale, it is useful to first ask: “What happens if we do not expand our product range to include software systems?” Many established manufacturers are nowadays attacked by competitors from emerging markets. These often copy some parts of existing products but have lower costs, thus increasing price and competitive pressure.<sup>4</sup></p> <p>Established companies can counteract this by offering software systems to optimize the customer’s value chain. After all, the know-how required for the successful implementation of such offerings requires extensive process expertise and a trustful relationship with customers. It is difficult for new competitors to copy both. Consequently, markets for software systems exhibit entry barriers that – for the time being – can keep out exactly those competitors that are stirring up hardware markets.</p> <p>In addition, software systems allow established manufacturers to expand their knowledge of customers and intensify customer relationships. To illustrate, imagine an industrial manufacturer that has implemented a complex manufacturing execution system (MES) for a customer, which steers all production-related processes. By tracking the customer’s capacity utilization, the manufacturer will know well in advance when the customer needs to purchase a new machine. In addition, the manufacturer’s machines may be easier to integrate in the MES than machines bought from their competitors. Both the manufacturer’s advance in knowledge and technical advantage may eventually increase hardware sales.</p> <p>Against this backdrop, successful manufacturers use software systems to defend and sustain their bread-and-butter?<em>hardware</em>?business against growing global competition in increasingly commoditized markets. They have realized that the true value of their business with software systems does not lie in making a fast buck. Only as a second priority, they look at additional profits through software systems. Notably, these can develop very positively, because after high fixed costs at the beginning, software systems are associated with relatively low variable costs.</p> <p>Gaining clarity on the strategic rationale for building up software businesses is crucial because it determines how to make implementation decisions. For example, how should success be measured? What budgets should be allocated to software businesses??How many human resources with which capabilities should be allocated? How should software systems be priced? To find answers to questions like?these, manufacturers need to clarify their rationale and priorities for bringing software systems to market – and make this clear to their staff.</p> <p>?</p> <p><strong><em>What</em>?kinds of software systems should you?bring to market</strong></p> <p>Many managers are not at all convinced by the software systems they intend to market. One of the key reasons is that manufacturers too often neglect customer needs in their software development. As one manager in our study put it: “What is the acceptance rate of the customer? Less than 1%. Why? Because it has been built by engineers that have never, ever spoken to any customer.”</p> <p>Successful manufacturers have realized that their software is a means to an end, helping customers solve an important problem. Thus, they start by deeply understanding which problems their target customers have, for example by intensely working with pilot customers. Only then can they develop software systems that customers can use to solve these problems.<sup>5</sup>??Take the construction industry as an example. Some construction companies easily lose track of their tools or miss to maintain them properly, which leads to costly replacements. As described previously, industrial manufacturer Hilti helps solve this problem with its cloud-based ON!Track software system, which allows customers to catalog where tools are and when maintenance is required.</p> <p>To make sure software systems and markets are aligned in this way, manufacturers need to employ the right?<em>people</em>?and the right?<em>methods</em>?in their business with software systems. First, some manufacturers have hired their core team from their own customers, hereby making sure that customers’ view is at the center of all actions.<sup>6</sup>?Second, successful manufacturers in our study have stressed the importance of customer-centric methods, such as co-creation, design thinking, or other agile methods of innovation to develop software systems.</p> <p><strong>Developing a software system that effectively solves customers’ challenges is a necessary condition for success.</strong></p> <p>Developing a software system that effectively solves customers’ challenges is a necessary condition for success. However, it may not suffice. Even target customers who share a particular problem can have a variety of more specific needs. For example, some customer segments may put particular emphasis on ease of use, design of the user interface, or particular license agreements. Thus, establishing a new customer segmentation might be a smart step, as hardware-related segments may not sufficiently differentiate between software-related needs.<sup>7</sup>?If manufacturers aim for extensive market coverage, they should even consider differentiating their software systems by customer segment.</p> <p>?</p> <p><strong><em>How</em>?should you bring software systems to market</strong></p> <p>Even when the business rationale is clear and their offerings are aligned with customers’ needs, the actual selling of software systems is no sure-fire success. Many industrial manufacturers have tried to sell software systems through their existing hardware sales representatives. However, many hardware sales representatives do not seem to be capable and motivated enough.</p> <p>First, as to capability, sales representatives require in-depth IT understanding to consult customers on software systems. What functionalities does the software system have? To what extent can it be customized? How is data protected? How can it be integrated into existing IT architectures, such as ERP systems? Enabling hardware sales staff to answer such questions on eye-level with a customer’s IT or legal department may be a stretch. As one manager we spoke to posited: “You can’t teach a hardware guy to sell software. Forget it.”</p> <p><strong>Adopting a “software mindset” requires employees to change, which has been shown to be a key obstacle to digital transformation.</strong></p> <p>Second, even if hardware sales representatives were able to consult customers on software systems, many do not seem to be sufficiently motivated. Selling software systems requires substantial consulting to large buying centers, resulting in relatively long sales cycles. Selling hardware is easier and quicker – and often generates higher revenue. Seeing that sales representatives are typically incentivized on short-term sales revenue, they focus on the low-hanging fruit of speaking to customers about hardware.<sup>8</sup>?Another, more subtle issue is the culture among industrial manufacturers. Managers frequently describe their employees as exhibiting a “machine mindset”, learned through years or decades of selling high-quality equipment. Adopting a “software mindset” requires employees to change, which has been shown to be a key obstacle to digital transformation.<sup>9</sup></p> <p>Against this backdrop, managers increasingly build up separate sales forces that exclusively focus on selling software systems. Some manufacturers operate these sales forces as separate sales channels that sell in parallel to hardware salespeople. This gives software sales representatives flexibility, but evokes conflicts if they visit customers who are “owned” by hardware sales representatives.</p> <p>For this reason, more successful manufacturers in our study team up hardware and software sales representatives. Specifically, once hardware sales representatives see an opportunity for selling software systems, they take their software colleagues along while formally staying in the driver’s seat. Such a team approach can reduce conflicts between channels and is also preferred by many customers, as they retain a single point of contact with the manufacturer. However, the approach requires that hardware sales representatives are capable and motivated to generate software opportunities. Achieving this can be difficult, no question. But we have seen manufacturers succeed through dedicated training, targeted change management, and the alignment of incentives.</p> <p>?</p> <p>References<br /> 1.?<a >https://www.se.com/ww/en/product-range-presentation/2226-ecostruxure-ma…</a>.<br /> 2. <a >https://www.fleetboard.info/software/</a>.<br /> 3.<a >https://www.hilti.group/content/hilti/CP/XX/en/services/tool-services/o…</a>.<br /> 4. Ploetner, Olaf (2012),?<em>Counter Strategies in Global Markets</em>. London: Palgrave Macmillan.<br /> 5. For further information on this approach, see Christensen, Clayton M., Taddy Hall, Karen Dillon, and David S. Duncanc (2016), “Know your customers’ jobs to be done,”?<em>Harvard Business Review</em>, 94 (9), 54-62.<br /> 6. For an overview of research on customer centricity, see Habel, Johannes, Roland Kassemeier, Sascha Alavi, Philipp Haaf, Christian Schmitz, and Jan Wieseke (2019), “When do customers perceive customer centricity? The role of a firm’s and salespeople’s customer orientation,”?<em>Journal of Personal Selling & Sales Management</em>, forthcoming.<br /> 7. In our study, some managers also emphasized that manufacturers should take different regions into account when segmenting their customers. For example, Asian customers preferred lean products at low prices including perpetual licenses, whereas US customers put a stronger focus on a modern appeal and floating licenses.<br /> 8. For an overview of incentive systems required for selling solutions see Habel, Johannes and Olaf Ploetner (2017): “From products to solution – mastering sales force incentives,”?<em>The European Business Review</em>, September-October, 33-35.<br /> 9. Freimark, Alexander Jake, Johannes Habel, Simon Huelsboemer, Bianca Schmitz, and Matthias Teichmann (2018),?<em>Hidden Champions- Champions der digitalen Transformation?</em>?München: IDG.</p> <p>?</p> <p>This article was originally published by <a >The European Business Review</a>.?</p> </div> <a href="http://www.ominim.com/taxonomy/term/1304" hreflang="en">Technology management</a><a href="http://www.ominim.com/taxonomy/term/1304" hreflang="en">Technology management</a><a href="http://www.ominim.com/media/4148/edit" hreflang="en">The Current Frontier in Industrial Manufacturing: Bringing Software Systems to Market</a><a href="http://www.ominim.com/node/5748" hreflang="en">Johannes Habel</a><a href="http://www.ominim.com/node/7708" hreflang="en">Viktor Jarotschkin</a><a >Original publication by The European Business Review</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7712&2=field_comments&3=general" token="jDO-nYT4GmpW8r4SLArmQb9spOwPoApwtXv53c_4i84"></drupal-render-placeholder> </div> </div> </div> Industrial manufacturers increasingly market software systems that help customers optimize value chain processes. However, many manufacturers are dissatisfied with the sales performance of these systems. Current research shows that to improve their success manufacturers need to answer three key questions.392344Internal Authors (From Faculty Research Site)<time datetime="2020-02-05T12:00:00Z">Wed, 02/05/2020 - 12:00</time> The current frontier in industrial manufacturing: bringing software systems to market Wed, 05 Feb 2020 14:22:38 +0000 McCarville 7712 at http://www.ominim.com Three Lessons Leaders Can Learn From Don Quixote About Strategizing http://www.ominim.com/knowledge/three-lessons-leaders-can-learn-don-quixote-about-strategizing <span>Three Lessons Leaders Can Learn From Don Quixote About Strategizing</span> <span><span>McCarville</span></span> <span>Thu, 01/23/2020 - 15:47</span> <div class="wysiwyg-wrapper"> <p>The Spanish writer Miguel de Cervantes penned?<em>Don Quixote</em>?in the early 1600s. He could have little imagined how relevant its lessons would remain today, in an age of big data and machines. Yet the story of a quixotic figure who undertakes battles – within and without – to achieve an impossible dream continues to resonate.</p> <p>Effective leadership is about homogenizing the visions and actions of team members. It usually results from convincing members to sacrifice their own benefit for the greater good. If a goal is noncontroversial and involves no trade-offs, there is no need for a leader. Success is determined by who can lure the best talents and then leave them alone to get things done.?</p> <p>Strategy, on the other hand, is about being different. Competitive advantage usually results from doing what your rivals cannot or do not want to do. If an opportunity is obvious and easy to capture, there is little scope for strategizing. Success is determined by who has the deepest pocket to buy off and deter competitors.?</p> <p>When we conceptualize strategizing as being contrarian and leadership as orchestrating the pursuit of a contrarian goal, Don Quixote offers at least three lessons for you to become an effective strategic leader.?</p> <p>First, you need to?<strong>encourage "foolishness"</strong>?in your team. Being foolish, according to the late management guru?<a >James G. March</a>, is to become less sensitive to the immediate consequence of an action, just like Don Quixote, who remained undeterred by the numerous setbacks that occurred while pursuing his dream.?</p> <p>Being a contrarian does not guarantee success. Most ideas that deviate from the conventional are bad ideas, but it is almost impossible to tell which is which before engaging some of them. If you cannot tolerate the likely failures and performance declines when your team tries something novel, you will likely give up brilliant ideas prematurely. To encourage foolishness,?<a >my research</a>?shows that you should consider punishing the wrong types of successes (the successes that are familiar and predictable) and rewarding the right type of failures (the failures that sustain your searches of the contrarian approach that is both different and viable).</p> <p>Second, you need to?<strong>create a romantic identity?</strong>for your team. A strong identity helps the team to differentiate themselves from the rest and isolates them from the social backlashes when being contrarian, just like Don Quixote, who romanticize himself as a knight and pursues unrealistic goals that are beyond crowds' imaginations.</p> <p>A contrarian strategist can underperform for a long time before succeeding. Without the shield of a strong identity, your team is unlikely to survive the self-doubts and ridicules from outsiders.?<a >My research</a>?indicates that you should design a romantic story that defines your team's identity. The story may appear foolish to the uninformed but meaningful to your followers; your team may appear to be losers by conventional standards but is perfectly convinced that they are the noble knights who run where the brave dare not go.?</p> <p>Third, you as the leader need to<strong>?know when to stop dreaming</strong>. This is where effective leaders depart from the analogy of Don Quixote, who is an inspirational but imperfect role model because he did not make any difference in the end.?</p> <p>Don Quixote is inspirational because most of us tend to dream and explore less than we should. But good leaders need to remain sober when preaching romantic foolishness to followers.?<a >My book</a>?on the unconventional wisdom of luck for leaders shows that you need to touch base with reality and recognize when you have explored enough to know that a once-promising dream is turning into a nightmare. The willingness and ability to let go of ego, give up a bad romance, and create another inspirational dream differentiate bad leaders from good ones. The former's stubbornness can unite a team or even a country but lead them to nothing but ruin and despair. The latter know when to admit being genuinely foolish and to start the next romantic pursuit.?</p> <p>?</p> <p><em>This article was originally published on December 10, 2019 by <a >Forbes</a>.</em></p> </div> <a href="http://www.ominim.com/taxonomy/term/1260" hreflang="en">Leadership development</a><a href="http://www.ominim.com/taxonomy/term/1260" hreflang="en">Leadership development</a><a href="http://www.ominim.com/media/4084/edit" hreflang="en">Knowledge_Three Lessons Leaders Can Learn From Don Quixote About Strategizing</a><a >Original publication by Forbes </a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7632&2=field_comments&3=general" token="AXtr0ckE_cqTk4wxT7QWNGFOKxiAydB1OK2Sa5MQMCc"></drupal-render-placeholder> </div> </div> </div> What can a literary classic teach us about modern leadership? Perhaps more than we care to admit.13380Internal Authors (From Faculty Research Site)<time datetime="2020-01-23T12:00:00Z">Thu, 01/23/2020 - 12:00</time> Three lessons leaders can learn from Don Quixote about strategizing Thu, 23 Jan 2020 14:47:34 +0000 McCarville 7632 at http://www.ominim.com The luck bluff http://www.ominim.com/knowledge/luck-bluff <span>The luck bluff </span> <span><span>Coles</span></span> <span>Tue, 01/07/2020 - 11:39</span> <div class="wysiwyg-wrapper"> <p>In his 2005 bestselling book, Blink, Canadian journalist Malcolm Gladwell noted a seemingly bizarre fact about his work with Fortune 500 leaders. “In the U.S. population, about 14.5 percent of all men are six feet or taller. Among CEOs of Fortune 500 companies, that number is 58 percent. Even more striking, in the general American population, 3.9 percent of adult men are six foot two or taller. Among my CEO sample, almost a third were six foot two or taller.”</p> <p>Were the fortunes of multibillion-dollar corporations really being left to the luck of the genetic draw?</p> <p>Some ten years ago, <a href="https://faculty-research.www.ominim.com/person/chengwei-liu/bio">ESMT Associate Professor Chengwei Liu</a> was undertaking his graduate work in management studies at Cambridge when, by chance, he too fell into the path of luck. “When I asked entrepreneurs in the area to explain their successes, they always referred to this idea of luck,” recounted Liu. “They were very lucky at one point in their career, and that enabled their success.” Liu wanted to study the phenomenon more closely but struggled to imagine the practical implications of his research in the real-world business landscape. “What should we tell managers?” he asked, “That they should be lucky?”</p> <p></p><div data-embed-button="media" data-entity-embed-display="view_mode:media.embed" data-entity-type="media" data-entity-uuid="054ca0f0-edc2-4ed8-823a-9535c4d96bc0" data-langcode="en" class="embedded-entity"> <div class="polaroid"> <a> <img src="http://www.ominim.com/sites/main/files/2019-12/Chengwei.jpg" width="2998" height="2001" alt="Chengwei Liu, ESMT Berlin" /> </a> </div> </div> <p>Still Liu decided luck was worth a closer examination. His research into the impact of luck showed that, one, and somewhat counterintuitively, luck could be studied in systemic ways and, two, that business leaders can strategize with luck. The key, however, is not to pursue luck. “Luck by definition is an unsystematic factor beyond our control or foresight,” said Liu. “So, if we take the definition of luck seriously, there should be no way to get luckier than others, right?” Instead, the power of luck is in using others’ belief in luck to your own advantage.</p> <h2>Baseball, before and after Moneyball</h2> <p>This year, the Washington Nationals claimed their championship in the World Series, their first in the Major League Baseball franchise. But well before the Nationals secured its place in baseball lore, the Oakland Athletics – more fondly called the Oakland A’s – changed baseball forever.</p> <p>As the story goes, the A’s had far less to spend on player recruitment than their franchise peers. Rather than accept their down-on-their-luck circumstances, the Athletics general manager, Billy Beane, approached the problem in ways that seemed at least unconventional if not wrong-headed. Rather than relying on talent scouts to trust their instincts in the selection of players, focusing on perceived skills in fielding or batting, the A’s began drafting players with prowess in other areas. Rather than batting averages, they asked how often the hitters were getting to base.</p> <p>The turn to using sabermetrics, the empirical analysis of baseball statistics that measure in-game activity, paid off handsomely for the Athletics. Their high game victories and low payroll payouts set them apart in baseball because, at the time, no other teams were using such statistically driven methods. This all changed with the publication of Moneyball by financial journalist Michael Lewis. The 2003 report on how the A’s had successfully used sabermetrics ripped away the magic veil to reveal the power of analytics. The A’s exploited the biases that other teams had for players with similarities to previous star players and their pursuit of luck – the chance that a scout could “spot a winner.” And what they proved is that even players who don’t have “the look” could win the day on the baseball diamond.</p> <h2>The diamond in the rough</h2> <p>Luck has important implications for business and for society. Should the richest be taxed? In the US, belief in the American Dream holds powerful economic sway. Why punish a worker who has made their wealth with the blood, sweat, and tears of hard labor? Don’t they deserve to reap what they have sown?</p> <p>“The conventional wisdom of luck is that if you work harder, you’ll get luckier. But some of my research actually demonstrates that may not always be the case,” said Liu.</p> <p>For the average entrepreneur, skill, effort, and persistence will lead to good product design outcomes and sustainable business models. Chance favors the bold, so the saying goes, but often where other systemic factors have cleared the path ahead. According to a 2005 report by Wojciech Kopczuk and Joseph P. Lupton of the National Bureau of Economic Research, nearly 50 percent of wealth is inherited and not self-made. “These pre-success dynamics means there’s very little we can learn from outlier or exceptional performance,” said Liu. “You can imitate everything Bill Gates did for Microsoft but you cannot imitate his initial fortune by being born in a rich family or having the connection to the IBM president through his mother. If you imitate Gates or other billionaires, the consequence will likely be systematic disappointment.”</p> <p>Liu’s research into the performance of similar cases of “brilliant randomness” delved into the music industry’s production of stars. Someone with a hit among the top three singles on Billboard would be considered by most people to be a star, worthy of pursuit by the average music producer. What Liu’s research found, however, was that these top artists performed poorly with each subsequent single released – dropping from the top to a mid-range position on Billboard. Those climbing the charts were, by contrast, the musicians who had previously only achieved a modest position.</p> <p>If you’re a producer, instead of focusing on the luck of the stars who landed among the top of the charts, says Liu, invest your bets in the mid-level performers. “They have better future performance and, predictably, they are ignored or underestimated by your rivals.” As with the Oakland A’s, the return on investment is higher where data and analytics – not luck – reveal actual value.</p> <p>?</p> <p><em>Chengwei Liu joined ESMT Berlin as an associate professor of strategy and behavioral science in 2019. Liu’s forthcoming book, <a >Luck</a>, will be published by Routledge in December.</em></p> </div> <a href="http://www.ominim.com/taxonomy/term/1284" hreflang="en">Organizational behavior</a><a href="http://www.ominim.com/taxonomy/term/1180" hreflang="en">Business management</a><a href="http://www.ominim.com/taxonomy/term/1284" hreflang="en">Organizational behavior</a><a href="http://www.ominim.com/media/3988/edit" hreflang="en">crossing fingers for luck</a><a href="http://www.ominim.com/node/5740" hreflang="en">Tammi L. Coles</a><a href="https://faculty-research.www.ominim.com/person/chengwei-liu/bio">Bio of Chengwei Liu</a><a >Luck by Chengwei Liu</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7468&2=field_comments&3=general" token="3vFyP9ryT2Zj3G9B81xetopiWr__Eod6NEQGW2x0WOo"></drupal-render-placeholder> </div> </div> </div> What others misattribute to luck can become our own good fortune. External Authors (Manuel Maintenance)<time datetime="2020-01-29T12:00:00Z">Wed, 01/29/2020 - 12:00</time> The luck bluff Tue, 07 Jan 2020 10:39:08 +0000 Coles 7468 at http://www.ominim.com The data duels of decision making http://www.ominim.com/knowledge/data-duels-decision-making <span>The data duels of decision making</span> <span><span>Coles</span></span> <span>Tue, 01/07/2020 - 10:25</span> <div class="wysiwyg-wrapper"> <p><strong>You are teaching students about decision science to affect leadership decisions. How well has it been received?</strong></p> <p>The research on decision science has become more and more popular. We have learned that when we make decisions, we are subject to what is called decision traps or decision biases – we are making mistakes without being aware of it. Our brain is making inconsistent choices for us – sometimes these are choices against our values or assumptions that contradict each other. The idea then is to use math to try to protect ourselves against these decision traps. Mathematical frameworks impose consistencies on our choices, helping us to approach decisions in coherent ways.</p> <p>But that’s not the only approach. You could use a team to constrain your decisions, to de-bias yourself. You have your beliefs but, in a team, someone who has different beliefs can readjust your beliefs or challenge your assumptions.</p> <p>In the same way, you can use math. And you can use other kinds of processes that constrain you to question your assumptions and to be consistent. That’s how I teach it.</p> <p></p><div data-embed-button="media" data-entity-embed-display="view_mode:media.embed" data-entity-type="media" data-entity-uuid="44da723b-f3c8-4adb-974c-1ff00be4f648" data-langcode="en" class="embedded-entity"> <div class="polaroid"> <a> <img src="http://www.ominim.com/sites/main/files/2020-01/Francis_de_Vericourt.jpg" width="400" height="328" alt="Francis de Véricourt" /> </a> <div class="polaroid__caption"> Francis de Véricourt </div> </div> </div> <p><strong>In a recent interview with Brand Eins, you spoke about the impact of AI and machine learning on decisions. You shared an example from a doctor’s office and the diagnosis of a mole on the skin. How are we achieving this? Is medical science already moving ahead with AI-driven decision making?</strong></p> <p>In the medical sphere, there has been success and there has been failure. What seems to be working in machine learning is the diagnostic aspect, not the treatment aspect. IBM, for example, has tried to develop big computers to cure cancer. There is a lot of data but it is not working as well as in diagnostics.</p> <p>There are deeper questions to raise about healthcare and machine learning. Are you giving up your decision making power to a machine that makes a diagnosis or (at some later point) a recommendation for your treatment? The choice for a machine versus a human creates other big questions. Is it ethical? Is it better? When should you do it? Does it mean that future doctors are only going to be there to make you feel good – to be warm and caring – while the treatments will be done by your iPhone or centralized somewhere else?</p> <p>This is a question that will be true for all of us, not just doctors. For me, will it mean students don’t need professors? Will we only provide some coaching sessions? Maybe machine learning will mean they learn in front of their computers. And what about falling in love? Do you need algorithms that match you or do you still need human social networks?</p> <p>The main question that healthcare issues illustrate is “What’s going to be our role as humans?” There’s no going back. What is sure is that machine learning will take over more and more of the tasks that we are doing now, in the same ways that computers took over much of what our parents and grandparents did before. The difference between machine learning and computers, however, is in decisions. Computers helped us with writing, calculations, presentations, and many other tasks. But what is new with the advancement of machine learning is that algorithms and machines are slowly starting to take over some of our most important decisions.</p> <p><strong>Is this because the machine is setting aside some of the biases and focused only on the optimal answer in a way that we humans aren’t capable of? </strong></p> <p>A machine is not a living entity. The efficiency of the machine is, in the end, the data not the algorithm. Of course, the algorithm helps. But it is the data on which it is trained that matters more. For instance, we have biases – strong biases – that the machine doesn’t make disappear.</p> <p>For instance, the social biases we have are often captured by the data on which computers are trained. The more data you have and the better quality of your data, the better it’s going to be. But the machine is not going to tell you “these are the best things to do,” rather “this is the conclusion from the massive amount of data I have.” That’s the closest that there is. Why? Nobody knows. The machine does not know. Even the programmer does not know.</p> <p>A great example of that is AlphaGo. Three years ago, this Google/DeepMind machine learning program won against amazing players – Go grandmasters. They use their intuition to play. There is no way to be a Go grandmaster without having deep intuition and creativity. Gameplay is so complex that you cannot program all of the possible moves. Yet Google machine learning beat the best players in the world. Just using data and game simulations, AlphaGo won. The thing is, nobody understands the strategy of this machine. There are no explanations for the underlying strategy – there is none, just the data.</p> <p>Humans still have an advantage, though. Our computing capacity and ability to handle large amounts of data is no match for a computer. Yet we have the ability to use representations, to develop models of problems. We managed to put a man on the moon on almost our first attempt, and we found what we were expecting to find. No big surprises. Yet, we did not have any firsthand data point since nobody had gone there before. We could do that because of our ability to create representational models about how the universe works. A machine would have had to learn by much trial and error and likely killed billions of humans in the same attempt.</p> <p><strong>There’s so much talk these days about data privacy. Concerns about data quality – “garbage in, garbage out” – also undermine public trust in machine learning and artificial intelligence. How do we address this resistance?</strong></p> <p>If there’s resistance, it’s also for good reasons. Machine learning is a tool. We use “artificial intelligence” as a metaphor. It makes it seem more alive than it is. But in the end, what matters is what we do with it.</p> <p>There are applications that I find extremely scary – China’s application of facial recognition, for example. You can also cheat the machine – you can use another machine to create a fake image of yourself, to make believe that you are someone else. I think we haven’t even scratched the surface of what is possible, yet.</p> <p>In terms of business models and the economic side of things, data has become gold. As a researcher 15 years ago, you could approach a company, try your best, and have a reasonable chance that they give you some data to work with. In the eyes of the company, they worried a little about what you might find or about data leakage. But then it was “it’s okay, it’s just data.”</p> <p>But, now, it’s much harder to get to the very same data. There is an awareness that data used for research can be used for other purposes. You can use it to make money. Or to learn something that you didn’t know before. The rise of machine data has propelled the notion that any data you have – even if you do not know now what you’re going to do with it – should be stored away in a treasure chest. How do I get the data? How do I protect it? The more data you have, the wealthier you are. Don’t give it away because, who knows, there may be value there that you can exploit or sell later.</p> <p>When we consumers use Google, we give away a lot of our data. If I gave you the dollar value of this data, you might actually realize that the services of Google are particularly prohibitive. Google Maps is in fact extremely expensive because we’re giving up a lot about ourselves.</p> <p><strong>If you move people away from being machine reliant, what’s left? In the AlphaGo situation, you mentioned the role of intuition. Can you develop someone’s trust in their intuition?</strong></p> <p>Yes, thank God, you can! [Laughs]</p> <p>The key to develop your intuition is to have unambiguous and immediate feedback about your decisions. And that’s why it’s very hard, in fact, for managers to develop good intuition, despite some of their own beliefs.</p> <p>If you’re an emergency room doctor who sees many, many patients, your decisions have immediate consequences. So you see right away, if you were wrong or if you were right. It’s sometimes ambiguous, but often if you say, “Oh, we need to do xyz,” and it fails, you have immediate feedback.</p> <p>But let’s say you are a doctor working elsewhere in the same hospital but not in the emergency room. You believe that one of your patients has pneumonia, so you order an X-ray. But then you go home because you are done with your day. In the meantime, someone else was responsible for the care of that patient. You may never even know the result of the X-rays you ordered. Or, if you do get that feedback some days later, you will have forgotten what made you reach the pneumonia conclusion at that time.</p> <p><strong>Are there processes that companies can put in place to create more opportunities for this kind of feedback?</strong></p> <p>It is less a definitive process than an approach: we need to be extremely careful not to simply reward outcomes.</p> <p>We tend to evaluate our decisions based on the success or failure of our results. CEOs know that they need to show success, whatever the reasons. The results of the decisions matter more than how you make the decisions. So, if you’re successful in whatever you do, you get your bonus and, with it, the implicit message that you will be rewarded regardless of the why. You may have been successful for all sorts of other reasons than your decisions. It could have been luck, for example. The reward creates the wrong incentive and prevents you from learning from your mistakes in the decision-making process.</p> <p>When we do look, we look at the decisions when something has gone wrong. In a crash, you really want to know what’s going on and, along with it, who is to blame – usually the wrong person. Bad outcomes sometimes force you to go deeper. But with good outcomes, we do not care much. We celebrate and move on. Yet, we may have just been lucky this time and failing to recognize this possibility makes us unduly overconfident for the future.</p> </div> <a href="http://www.ominim.com/taxonomy/term/1148" hreflang="en">AI and machine learning</a><a href="http://www.ominim.com/taxonomy/term/1148" hreflang="en">AI and machine learning</a><a href="http://www.ominim.com/taxonomy/term/1208" hreflang="en">Digital society</a><a href="http://www.ominim.com/taxonomy/term/1304" hreflang="en">Technology management</a><a href="http://www.ominim.com/media/3984/edit" hreflang="en">Machine human</a><a href="http://www.ominim.com/node/5740" hreflang="en">Tammi L. Coles</a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7464&2=field_comments&3=general" token="vnaxD19wS5a8cRoZ1x1c4llEMpeUn1yHKWXDCYecGvo"></drupal-render-placeholder> </div> </div> </div> In this interview with ESMT Update, Francis de Véricourt, professor of management science at ESMT Berlin, tests the claims of AI superiority to human creativity. Can data-mining machines outperform their human masters? Not in decision making. At least, not for now.External Authors (Manuel Maintenance)<time datetime="2020-01-07T12:00:00Z">Tue, 01/07/2020 - 12:00</time> The data duels of decision making Tue, 07 Jan 2020 09:25:10 +0000 Coles 7464 at http://www.ominim.com 191125_Dreaming up a world – how luxury brands create desire http://www.ominim.com/knowledge/dreaming-world-how-luxury-brands-create-desire <span>191125_Dreaming up a world – how luxury brands create desire</span> <span><span>McCarville</span></span> <span>Wed, 11/20/2019 - 13:30</span> <div class="wysiwyg-wrapper"> <p>You could argue that “if you can’t afford this, then it is a luxury.” But that’s not so much a statement about the object or its value as it is about the person who is buying it. Will it work to simply put a million-dollar price tag on a product to master the art of creating a luxury brand? Unlikely. What you need to master first is creating desire for something extraordinary.</p> <p>As a strategy consultant, I worked with clients from different luxury sectors like automotive, fashion, and jewelry. What I found was that the creation of desire, the process of longing and passionate imagining, is crucial to building successful luxury brands. Yet creating it is far from easy. The main challenge in managing luxury brands is the constant trade-off between growing the brand while remaining exclusive and guaranteeing high quality. This managerial challenge is unique to luxury brands. If you grow too fast, you risk losing your desirability.</p> <h2>Creating the extraordinary</h2> <p>Luxury is about the extraordinary – this creates desire. In my <a >research</a>, I look at the processes of creating the extraordinary from different perspectives. Economically, it’s all about price and value; culturally it’s about the magical aura the brands radiate; socially, it’s about status and exclusivity; psychologically, it’s about how the brand makes you feel special; and managerially it’s about creating a culture of excellence. Understanding these mechanisms is crucial to creating desire and seducing consumers into your brand story.</p> <p>Luxury brands have long known this. In their advertisements, they generate desire by relying on three principles: enrichment, distancing, and abstraction. The differences from mass-market and premium brands are striking. Through enrichment, such as storytelling, luxury brands take us on a journey towards the destination of desire. We rarely desire what we can have immediately. That’s why we seldom desire the ordinary world. Desire is created when something is just out of reach.</p> <p>Customers desire what they have to work for, what is almost out of their reach but still reachable. This becomes obvious when you look at luxury brand advertising. The difference between premium and luxury brands is that luxury brands position themselves in an extraordinary world. A mass-market fashion brand might stage its ad campaign in the middle of Berlin or in a city that might look like the one you live in; its models walk through the city wearing clothes you can buy in any shop. So this is just an ordinary, casual purchase. Luxury brands, by contrast, aim to transform an ordinary purchase into an extraordinary one. They do this by building distance between client and product. In <a >our research</a>, we have determined four mechanisms they use to create this gap.</p> <h2>Creating distance</h2> <p>First, luxury brands play with social distancing. The advertisement depicts an <a>aspirational group</a><a href="#_msocom_1">[CT1]</a>?, a target group that people would like to be part of. For premium brands, this means referring to status symbols like fast cars, helicopters, a lifestyle that ordinary people associate with the lifestyle of the brands’ target group. For luxury brands, this can even mean going into the grotesque, violating social conventions, or replacing real personas with fictive ones, such as characters from a fairytale. This is what we term social distancing.</p> <p>Second, they use temporal and spatial distancing by positioning their products in a different time and place. They could, for instance, give their advertisement the look of a work of art or stage them in a remote and fictional place. They can refer to the product’s heritage but also serve to “de-place” it somewhat from the world we live in today.</p> <p>Third, and perhaps most interestingly, luxury brands use hypothetical distancing. They create situations that are hardly or just not conceivable. One example is an advertisement by the brand Hermès. It features a woman who lives in Paris with a horse, a key symbol for Hermès that alludes to its heritage in saddlery. In one campaign, a woman is shown living together with a horse in Paris. The horse is depicted as the faithful companion – they walk down the streets of Paris or look out of their apartment window together. You immediately know that this is the creation of a big dream. They create a desire in the customer to be part of that dream by engaging with the product. Part of what makes a strong brand is that they have their own vision and a unique story that draws people in.</p> <p>?</p> <h2>Building a dream</h2> <p>Lastly, there is the principle of abstraction, the many layers of interpretation there are in an ad. With most ads, what you see is what you get – the dress, the bag, the look, the lifestyle. The trick is to create an ad that leaves room to construct your own view and that references more substantial questions. One example is the image of a tree and a butterfly, which is a recurring motif for Hermès. A butterfly is a very fragile, ephemeral animal; the tree is a long-standing, substantial part of nature. A discourse between permanence and ephemerality evolves. To create desire, you need to make consumers dream and invite them to a fantastic journey that only imagination can spark. Enrichment and distancing, especially hypothetical distancing and abstraction, are the ingredients of this successful recipe.</p> <p>Luxury brands give consumers the space to project their own fantasies onto the product. This is how they create a lasting story in the minds of their consumers. Hence, the product becomes something that lives longer than the commercial counterparts that are designed to be quickly replaced. That’s when customers are willing to pay a higher price. They will gladly invest in an extraordinary experience that potentially lasts their whole lives. Only if you get all dimensions right, will you be able to translate the desire and high price into a successful business model.</p> <p><em>This artcice was orginally published by <a >Forbes</a>.?</em></p> </div> <a href="http://www.ominim.com/taxonomy/term/1192" hreflang="en">Consumer goods and retail</a><a href="http://www.ominim.com/taxonomy/term/1192" hreflang="en">Consumer goods and retail</a><a href="http://www.ominim.com/taxonomy/term/1268" hreflang="en">Marketing and PR</a><a href="http://www.ominim.com/media/3864/edit" hreflang="en">Dreaming up a world – how luxury brands create desire</a><a >Original publication by Forbes </a> <div class="wrapper--background__grey wrapper--knowledge wrapper"> <div class="tile--limited tile"> <h2> Add new comment </h2> <div class="tile__content"> <drupal-render-placeholder callback="comment.lazy_builders:renderForm" arguments="0=node&1=7036&2=field_comments&3=general" token="DG67yYIALyh4l7XTGpEZnKbLahkEr9has1wEy4I7KrM"></drupal-render-placeholder> </div> </div> </div> There is no luxury that comes cheap. But is the price really what makes a product valuable?308Internal Authors (From Faculty Research Site)<time datetime="2019-11-27T12:00:00Z">Wed, 11/27/2019 - 12:00</time> Dreaming up a world – how luxury brands create desire Wed, 20 Nov 2019 12:30:48 +0000 McCarville 7036 at http://www.ominim.com 男女做爰高清免费视频-骚虎视频-4虎视频