Back to B-School

Over the weekend, I had a chance to check out the recent CNBC program Warren Buffett and Bill Gates: Keeping America Great, which documented the pair’s recent appearance at Columbia Business School.

In a town-hall style meeting, Gates and Buffett fielded questions from Columbia MBA students. Not surprisingly, many of them asked two of planet’s most successful people for career advice. Among Gates and Buffett’s responses:

• Buffett advised students to put passion ahead of perceived financial gain when considering a career path.
• Gates told them to stay inquisitive and keep up with research on their topics of interest.
• Gates also helped students identify sectors in the U.S. economy that are continuing to grow, including information technology, health care and clean energy.

Buffett and Gates also shared their optimism about the future of the U.S. and our economic system. When moderator Becky Quick asked if there was ever a time that the pair had doubts about capitalism or America’s way of life, Buffett responded, “This country works, we’ve got 200 years of proof, and it’s going to continue to work.”

Gates added, “We have a complex financial system, and we’ve proven that we can make mistakes, but more fundamental than that is the innovation, the fact that you can create new companies, that people are willing to take risks and invest.”

Even in the fall of 2008 when the financial meltdown was at its peak, Gates said that there were “inventions that took place; even in our darkest hour, people were working on new drugs, new chips, new robots and things that will make life better for everyone in the decades ahead.”

Ahh, high school. The time in one’s life where buying the right sweater seemed just as important as having clean air to breathe. While most of us have at least some fond memories of high school, many are happy to leave those days of adolescent angst behind. So what happens when you find out that the business world is more like high school than you thought it would be?

New research from the Kellogg School of Management finds that in the world of VC firms, there are established cliques (the cool kids, if you will) and new kids, or new firms, trying to find their way into the cliques.

The research was conducted by Yael Hochberg, a professor at the Kellogg School of Management; Alexander Ljungqvist a professor at New York University’s Stern School of Business; and Yang Lu, an assistant VP at Barclays Capital. Here are some of the effects of VC cliques they found, as reported by a Kellogg Insight article: (more…)

When a business gives away its products for free and sustains itself through advertisements alone, how can rivals that charge for their products and services compete? This is one of the questions addressed in new research by Ramon Casadesus-Masanell, an associate professor at Harvard Business School, and Feng Zhu (pictured), an assistant professor at the Marshall School of Business at the University of Southern California. Through an email exchange, Casadesus-Masanell and Zhu discussed with me some of the concepts covered in their study “Strategies to Fight Ad-Sponsored Rivals.”

BNET: Your research looks at ways that companies charging fees for products and services can compete with other companies offering those things for free. This is a problem that has famously affected the entertainment industry and old media; what other sorts of businesses are being affected?

RCM & FZ: Ad-sponsored products and services are increasingly prevalent in many industries. In addition to traditional media industries such as newspapers and television, today we can find many free products and services in many different industries such as online services (e.g., social networking sites such as Facebook, content sharing sites such as YouTube, email services such as Gmail and Hotmail, and online searches such as Google and Microsoft Bing), software applications (e.g., many of the iPhone applications), paper cups from FreePaperCups.com and free phone calls (e.g., Blyk). (more…)

What would happen if you got rid of your sales staff’s quotas? Would they slack off and make your profitability plummet?

According to new research from the Stanford Graduate School of Business, the opposite very well may happen: eliminating quotas can provide a means of boosting your profits.

Quotas are generally seen as a way to encourage and pay off employees who work the hardest, but researchers Harikesh Nair, a Stanford GSB associate marketing professor, and Sanjog Misra of the University of Rochester found that quotas can actually encourage employees to make fewer sales. Nair explained how in a Stanford press release: (more…)

This year, fewer new Harvard Business School graduates took jobs on Wall Street, which may seem on the surface like a bad market indicator. But this is actually a positive signal, according to Ray Soifer.

In case you missed it, The New York Times reported that Soifer, a Harvard MBA and founder of Soifer Consulting, released his 2009 Harvard MBA Indicator, which draws its conclusions from looking at the jobs taken by each year’s Harvard MBA graduates. When too many end up with Wall Street jobs, Soifer says, this indicates that the market could be getting too hot and is therefore heading for a fall.

The Times explains: (more…)

Michael Norton is a professor in the marketing department at Harvard Business School.  His areas of interest include consumer psychology and social enterprise. Norton and his colleagues have researched the way consumers value products more when they have been involved in the labor of making them, a concept they call “The Ikea Effect.” I talked to Norton about why this works and how some companies are finding ways to capitalize on it.

BNET: Would you define “The Ikea Effect” for us?

Norton: The Ikea Effect is this notion that we had a few years back. The archetypal example is a horrible looking mug sitting on someone’s shelf.  Do they just have bad taste?  Why is that ugly mug there? A lot of people have ugly things lying around because they made them themselves; they went to some pottery class when they were 23 and made a vase that is lopsided and hideous and no one would ever buy it. But people hold on to these possessions like they are worth a million dollars.

There’s something about imbuing a product or an endeavor with your own labor that makes you come to overvalue it. It becomes part of you; the more labor you put into it, the more you value it. From a retailer’s or a marketer’s standpoint, that seems quite strange. The more labor a customer has to put into assembling something themselves, the less you can charge for it because people don’t like to assemble things themselves. Think about the nightmare of assembling a bicycle on Christmas morning.

It would appear like you would have to charge less, but after the fact, people seem to have really enjoyed assembling these products. So, now they overvalue them compared to what other people would pay for them.

BNET: Then how does a company get consumers to value the process of labor rather than dread it, so it can make its products more popular?

Norton: Prospectively, people try to avoid labor, but retrospectively they really like the experiences they’ve had.  People are making a mistake; they believe they want to avoid labor, but they really like doing it more than they thought than they would. So, the challenge for the marketer is to make them value that experience prospectively.

It’s that way with many things in life. In general, people don’t want to try new things…they want to sit home and watch TV. But if you interview people, the things that are most meaningful in their life are the things they really had to try very hard for, like doing well in an extremely difficult class that they did not want to take.

Some companies are trying to make the self-creation process more fun. Converse, for example, has a strong design-your-own-shoe component on their website.  The labor that you are engaged in is virtual. You are getting some of the same aspects of self-assembly and self-expression that you would get if you had to make something on your own. But Converse removes some of the difficulties of working with tools and makes it more fun, so customers are willing to engage in it.

Some companies don’t have you do the labor, but they make sure to show you the labor they engage in on your behalf.  People not only value their own labor highly, they value the notion of people laboring for them. Effort equals value. On the travel site Kayak.com, when you search for flights, they show you every airline they are looking through for you over time. Orbitz just shows you a progress bar and then pops out the results. We’ve done research that shows that when Kayak reveals this exhaustive process on screen, users think Kayak is working harder for them and they like the search results better.

BNET: How do you create a convenient consumer experience while still getting the buyer to appreciate it?

Norton: There’s a tension between services that happen really quickly versus those that take longer. My graduate student Ryan Buell has looked into the fact that when service occurs instantaneously, you lose the ability to signal that you are providing a valuable service. People receive their money from an ATM machine instantaneously — and they do value the convenience factor, inherently — but they also seem to place a separate value on the work a teller does for them when they get cash, even though it takes longer. We’re researching this balance of providing service quickly but still slowing it down enough so customers realize the value of what you are doing for them.

In general, when encouraging customers to take on some of the labor involved, you shouldn’t just think rationally about what they should value but really look at what they do value.  If they value their time at all, they should value you assembling things for them. They should always favor fast over slow. But slowing things down so they understand the value being provided is a little bit of a strange concept.

When is the last time you gave serious thought to keeping your top performers engaged and happy? If you answered “before the recession,” you’re not alone. Many managers have faced more immediate concerns about keeping their companies afloat, and this paired with the fact that there aren’t a lot of jobs out there right now means that employee job satisfaction might have slid down the list of priorities.

A recent article from the MIT Sloan Management Review warns managers that once conditions improve, the number of executives leaving their companies for new opportunities historically spike.

Elizabeth Craig, John R. Kimberly and Peter Cheese write in “How to Keep Your Best Executives” that now is the time to get serious about employee retention strategies. They list three keys to keeping employees satisfied and happy within your company: (more…)

When New York City mandated last year that chain restaurants had to label the calorie content of items on the menu, many assumed that restaurants would lose business as customers saw how many calories were in their burgers and fries and opted to stay home and eat a lighter meal instead. At the very least, it seemed that lower calorie options would gain popularity.

However, a study from the Yale School of Management found that this hasn’t necessarily been the case.

Victoria Brescoll, an assistant professor of organizational behavior at the Yale School of Management, and Brian Elbel, Rogan Kersh and L. Beth Dixon, all from New York University, studied the fast food purchases of participants before and after the calorie labeling mandate. They focused the study on low income and minority neighborhoods in which residents face a greater risk of obesity.

Here’s what they found: (more…)

If you’re worried about whether or not your employees behave ethically, a pair of MBA professors have come up with a simple solution: spray a little citrus-scented Windex in their work environments.

TIME reported recently about new research finding that clean smells promoted good behavior. The research was conducted by Katie Liljenquist, a professor at Brigham Young University’s Marriott School of Management, and Adam Galinsky of Northwestern University’s Kellogg School of Management.

The researchers conducted experiments testing subjects’ honesty and generosity. One group was tested in a room cleaned with citrus Windex, and one group was located in an unscented room. In one experiment, each group was given a set of tasks to complete. In their packet was a flyer asking for charitable donations. Of those in the clean-smelling room, 22 percent said they wanted to donate money; only 6 percent in the other room agreed to give.

“Economists and even psychologists haven’t been paying much attention to the fact that small changes in our environment can have dramatic effects on behavior. We underemphasize these subtle environmental cues,” Galinsky said in TIME.

As someone who can’t concentrate when my desk gets too messy, to me this makes a degree of intuitive sense. However, others are skeptical that clean smells specifically trigger more moral behavior. TIME also spoke to Brown University psychologist Rachel Herz, who said that participants who liked the smell of citrus might have simply been in a more positive mood, not necessarily a more ethical one.

What do you think?

Image courtesy of Flickr user zsoul, CC 2.0.

 Loading ...

For a long time, marketers have assumed that when consumers fail to gamble on a new product or service in place of their regular one, it’s because of their fears of loss. However, research from the Kellogg School of Management at Northwestern University finds this may not be the whole story.

The recent Kellogg Insight article “Should I Stay or Should I Go” details the research of Kellogg marketing professor Alexander Chernev, in which he asked people if they would consider investing in funds with higher yield potential than the funds they already owned. He categorized respondents as prevention-focused, those who more often stayed with the status quo, and promotion focused, those who would try something new if it seemed profitable.

With the prevention-focused group, Chernev found that their reluctance to try new products couldn’t be solely attributed to simple loss aversion; if that were the case, then they would have chosen the higher-yield investment. (more…)