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In a recent interview with Ross School of Business professor Jeff DeGraff posted on the University of Michigan’s web site, DeGraff urges companies to consider downtimes the best for pursuing innovation, even if that means spending more money than on the surface seems wise during a recession.

He shares three key reasons why this is the case:

• Investing in innovation when costs are low will pay off in the future: “At some point, U.S.-based firms are going to come out of the recession. And there will be a shakeout of those who have invested in the last development cycle and those who have cut back,” says DeGraff. (more…)

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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…)

Don Sull of the London Business School spoke with me recently about his new book, The Upside of Turbulence: Seizing Opportunities in an Uncertain World.  In the first installment of our conversation, Sull defined “turbulence,” and in the second post he discussed how Nokia took advantage of turbulence to redefine itself as a company. Today he explains how managers at all levels of a company can take advantage of opportunities that arise from turbulence.

BNET: The are other books out there about surprising event and how they can affect business, including The Black Swan by Nassim Taleb.  What specific new angles does The Upside of Turbulence bring to the discussion?

The bulk of my book talks about “what do you do?” in turbulent markets. Taleb’s focus is: As an investor, how do you deal with turbulence?  The focus of my book is: as an executive or a manager or an entrepreneur, how do you deal with turbulence?  The thing about stock market trades is that you can reverse them overnight; there’s no stickiness.  But imagine if you are, say, Micky Arison running a cruise line.  Your cruise ships last 35 years.  Your brand takes you decades to build. You can’t reverse your decisions so quickly.  When you have long-lived assets like brands, technologies, patents, physical plants, and employees, it’s a very different dynamic.

There have been a lot of books about how you manage risk — how you cope with the potential downside of unstable markets.  But I don’t think there have been quite as many that focus on the opportunities that arise from turbulence.

BNET: How can a midlevel manager — who can affect company practices but is not necessarily “helming the ship” — take advantage of turbulence he sees?

Sull: I wrote this book to make it scalable to folks at different levels of an organization. Some lessons are focused on people in the C-Suite, but there are a set of things that you can do if you are running a business unit, a function, or a region.  One of the points I raise in the book is about the need for agility. There are three different types. The first is operational agility. Within your business unit there are steps you can take to seize opportunities to grow revenues and cut costs. The second type is what I call portfolio agility. That means pulling resources out of less productive or promising ventures and putting them in more productive opportunities. The third is strategic agility. Periodically the environment throws golden opportunities your way — to acquire a competitor or enter a new market, for instance — and you need to be able to see and seize those opportunities.

You see those opportunities at all levels of an organization. Even with portfolio agility, which some people say is a headquarters responsibility. But every manager is making portfolio decisions of some sort; they’re just smaller.  And you’d be surprised at how mid-level folks can affect strategic agility. They can often start the ball rolling for some type of acquisition when they see, say, a competitor on its heels.

If you rely on only the CEO to drive agility in your organization, you are dead. You’re not distributing both the responsibility and the decision-making to take the actions to thrive in turbulent markets.  And, if you’re a big, complex organization, you are dead.

When I teach these concepts in a boot-camp format, about one-third of the attendees are CEOs or managing directors of organizations — but two-thirds aren’t.  You can apply these tools at any level of your business quite productively.

We’ll conclude our discussion with Sull next week as focus on how managers can adapt their organizations to take advantage of turbulence and the role of luck in business.

In her forthcoming book Career GPS: Strategies for Women Navigating the New Corporate Landscape (available Feb. 9, 2010), Tuck School of Business at Dartmouth professor Ella Edmondson Bell discusses the challenges of today’s workplace and advises women how to succeed in the new corporate playing field. I recently spoke with her about some of these issues.

The challenges of today’s workplace…

For men and women alike, technology has changed the way we work, and not always for the better. “There is an expectation on everyone now that work is a 24/7 reality,” says Bell. “Everybody is supposed to work extraordinarily long hours, and even if you’re away from work, you still feel like you’re on call because people can get you, particularly in the world of MBAs.”

Also, Bell cites the turbulent environment in many companies, in which employees are getting blindsided by layoffs. “When people are fearful of losing their jobs, that makes the workplace a little more vicious, more competitive,” says Bell. Additionally, she names globalization as a force that has made the world smaller and, therefore, more competitive.

…And why it can be harder on women

These conditions have posed unique trials for women, says Bell:

Men and women have duties at home, but for women, the second shift notion is becoming increasingly more complicated and harder to manage. As Maria Shriver has been talking about on NBC, many men have lost their jobs in this economy, so women are the breadwinners, but they’re still expected to also carry on the major household duties and raise the family.

It’s harder for women to see themselves actually rising up in a company and succeeding because of the amount of time and effort and because they have other responsibilities. I think it’s harder for women because they feel more alienated. They’re left out of valuable networks and social outlets. So it’s easier, particularly for women of color, to feel more isolated, more vulnerable.

Despite these challenges, Bell says it’s a great time for women in the corporate world. Next week, I’ll share her ideas why, as well as some tips for women to take full advantage of these favorable conditions.

Photo courtesy of Mark Washburn.

When you are considered an expert in your field, does it undermine your authority when you admit uncertainty in your opinion?

Absolutely not, according to new research from the Stanford Graduate School of Business. In fact, this might be a good strategy for increasing your persuasive abilities. Surprisingly, the study found that the opposite was true for non-experts: they can better persuade an audience by expressing a higher degree of certainty.

“We find that when the regular, everyday person is extremely certain, that’s surprising to readers,” said Zakary L. Tormala, an associate professor of marketing at Stanford who conducted the research. “Conversely, when the expert is not so certain, that’s surprising.”

So how does the element of surprise lead to the ability to better persuade your audience? (more…)

In the previous decades, most large corporations have practiced glocalization: developing products in rich countries, then distributing them around the world, adapting the products slightly for different local markets.

According to Tuck School of Business at Dartmouth professor Vijay Govindarajan, these days of glocalization may be drawing to a close. He wrote in the recent Harvard Business Review article, “How GE is Disrupting Itself“:

Glocalization worked fine in an era when rich countries accounted for the vast majority of the market, and other countries didn’t offer much opportunity. But those days are over — thanks to the rapid development of populous countries like China and India and the slowing growth of wealthy nations. (more…)

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The world’s population can be divided into two groups of people: the satisficers who find suitable options and quit searching, and the maximizers who may search indefinitely for that perfect option.

At least, that was the idea political scientist Herbert Simon came up with a half century ago, and according to the Columbia Ideas at Work article “The Pursuit of Happiness,” it recently informed research on job-seeking behavior by Columbia Business School professor Sheena Iyengar.

By studying graduating college seniors who were looking for jobs and classifying them as satisficers and maximizers, Iyengar found: (more…)

Don Sull teaches “International and Strategic Management” at the London Business School.  His new book is The Upside of Turbulence: Seizing Opportunities in an Uncertain World.  In the first part of our discussion last week, we discussed what “turbulence” is and how some firms have taken advantage of it to become industry leaders. This week, we’ll hear about how Nokia and others have survived turbulent times through a willingness to reconsider even their core business.

BNET: You’ve mentioned “active inertia” [the tendency for companies to intensify the activities that worked well for them in the past] as something that has led to great problems in the face of turbulence and different types of competitive threats. Could you give us an example?

Sull: People say IBM didn’t respond to changes in the computer marketplace — with the PC in particular.  That’s just demonstrably not true.  IBM had, very early on, two teams with very high level support building personal computers.  They quickly gained volume leadership in the PC segment. The problem was not that they “didn’t do anything.” The problem was that in the decade preceding the PC, they had committed themselves to a view of IBM as a mainframe company. So, the PC was viewed through this blinder. Over time, this frame of reference shaped all of their decisions and responses. “Why did they give away their operating system?”  Well, it didn’t work on a mainframe.  “Why did they give away the microprocessor?” Well, it didn’t work on a mainframe.  “Why did it take IBM so long to recognize the potential of the services business?” Well, mainframes don’t break down that often or need so much service. So, they were locked into a certain way of working even when the environment changed.

BNET: What are some companies who have saved themselves during times of turbulence and even learned to grab new opportunities?

Sull: The good news is there are a lot of examples. Nokia was for decades a successful Finnish conglomerate. The Berlin Wall falls in 1989 and sets off the worst recession in Finnish history. Nokia was in a lot of trouble. Ericsson offered to buy them and they turned it down. The chairman of Nokia killed himself. It was just a complete disaster.  A new leadership team came in, Jorma Ollila and some other young Finns, and they recognized that they needed to make dramatic changes.

Although they had been a diversified conglomerate, they revisited their portfolio and asked in the early 90s “what are the things we can really make a go of?”  They had a relatively small mobile phone business representing about 10 percent of revenues and decided that this was the business they could make money on. It illustrates a couple of points about operating and prospering in volatile markets. First, you have to be willing to revisit your historical “commitments.” You can’t get trapped in the mode of “we are a conglomerate” or “we make toilet paper and rubber boots,” which they did back then. You have to be willing to change almost anything. The second thing is that there is a portfolio component of adapting to change and turbulence.  Sure, it is about getting into stuff — innovation new product development and so forth — and a lot of people talk about that. But it also means getting out of stuff, and they were quite disciplined about that, too. This pruning gave the mobile telephony business a lot of agility and the ability to seize opportunities.

BNET: What are some of the companies we are looking at today who are taking advantage of turbulence to make a mark for themselves? Who are the companies you might write about in a sequel to this book ten years from now?

Sull: I don’t want to dodge this question, but it’s a hard question to answer. The kinds of changes companies make to do well in volatile markets typically are changes in organization, leadership, compensation, kind of “organizational hydraulics” that you can’t observe from newspaper reports.  This is a pattern we see playing out over and over again. It’s a long gestation period where they are under the radar and then they kind of burst onto the scene. That said, I think there are some companies who, because they had that gestation period earlier, are well positioned for a volatile market. If you look at banking for instance, Santander has positioned itself quite well.  They did well with the ABN-Amro deal, and they’ve done very well in Latin America.  I think Royal Bank of Canada is an interesting case because they were very conservative in their core domestic market when everyone else was going crazy.  As the debris is clearing they are still standing strong.

Next week, we’ll talk about the lessons from his book that managers at many levels in organizations can put into daily practice.

When it comes to consumer buying behavior, there are often two contradictory forces at work. First, consumers believe that when a product is more expensive, it is of a higher quality and therefore, more desirable. Second, the Law of Demand (you may recall it from economics classes), which states that when something is more expensive, people will buy less of it. So which force ultimately has a bigger effect on purchasing decisions?

To answer this question, Ori Heffetz, an assistant professor of economics at Cornell’s Johnson Graduate School of Management, along with Moses Shayo of the Hebrew University of Jerusalem, conducted research examining the extent to which price influences a consumer’s perception of a food product and subsequent purchasing decisions. The result?

“When something is more expensive, consumers do think it’s better, but they also think it’s more expensive. With this specific set-up, economics won by a large margin,” Heffetz said during our recent conversation.

The research has implications for companies trying to determine the price point at which to place certain products. (more…)

This post has been updated since it was originally posted.

You’d like to think that even under pressure, your moral compass would keep you from doing anything unethical at work. Only unscrupulous types get caught up in things like backdating stock options and peddling subprime mortgages — right? But Babson College scholar Mary Gentile says acting ethically isn’t as easy as wanting to do the right thing; it’s about knowing how to do the right thing even when the stakes are high. Practice helps.

More than 80 business schools around the world are pilot testing a new approach to teaching ethics developed by Gentile, along with the Aspen Institute and Yale School of Management. The idea is simple: Teach MBAs to anticipate how they will be tempted to rationalize unethical behavior, and get them to practice countering the impulse. The goal: to make ethical choices come naturally, even in difficult situations.

Here are three case studies from the curriculum that are based on real-life dilemmas. In each case, the real subject successfully managed both the ethical issue and the internal politics. Vote for how you would handle each one and then click below for the real-life answer.

Situation #1:

You’re a rising executive just promoted to corporate controller. Shortly after you land the new job, several senior executives pressure you to distort the company’s restructuring charges in a way that would be misleading but not criminal.

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Situation #2:

You join a nonprofit firm in a junior accounting role. As you review the year’s corporate donations, you quickly realize that no standard procedure exists to determine the value of in-kind donations (gifts in the form of goods or services rather than cash). Some of your most prolific donors inflate valuations to deceive the IRS. Your overworked executive director makes a point of emphasizing relationships above data.

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Situation #3:

You’re a junior employee at a large investment bank. Hours before a client meeting, a portfolio manager tells you to review the portfolio of one of the bank’s smallest customers and find a new benchmark that will make it look like the portfolio had performed better than it really had. You know that the client remains with the bank as a favor to a friend who works there.

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Click to the next page to find out what really happened in each scenario.