Strategy

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Why Making Money Is Not Enough

The authors, who include Ratan Tata, the former chairman of the Tata Group, argue that that “it is possible to build and lead companies that retain a deeper purpose.” Tata calls for companies to launch “corporate lifeboats” — such as new business experiments in next-generation clean technologies and serious business initiatives in the underserved space at the “base of the pyramid” — to transform their operations for sustainability.

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The Trouble With Stock Compensation

Research suggests that paying outside board members with equity grants leads to companies with less socially responsible behavior. That’s the conclusion of Yuval Deutsch and Mike Valente (both of Schulich School of Business, York University), who looked at social performance ratings and director compensation data for more than 1,100 U.S. public companies between 1998 and 2006. “Our findings suggest that there is a need to investigate more creative compensation arrangements,” they write.

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Can High-Frequency Trading Drive the Stock Market Off a Cliff?

Much of the time, high-frequency trading firms play a benign role in financial markets. These firms use fully automated computer systems to buy and sell stocks very rapidly, making thin profits by being ahead of human orders. But in a nervous market with downward price pressure, high-frequency trading can create fierce volatility. A computer simulation of high-frequency trading behavior showed that a complex system “may turn into an unfamiliar monster when an invisible tipping point is passed.”

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Free Article

Sustainable Finance: 7 Steps in Managing Reputational Risk

Financial institutions’ funding decisions makes them gatekeepers for sustainable development. But how do they develop the policies and procedures that will guide how they make decisions and satisfy stakeholders? According to Olivier Jaeggi of ECOFACT, effective decision-making for sustainability can be summed up in a set of seven best practices.

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New Energy Policies for the World’s Sixth Largest Bank

Crédit Agricole, the sixth largest bank in the world, puts its money where its principles are in its recently released social and environmental policies. In keeping with its stated policy of supporting projects that are “sustainably vitalizing,” the bank’s policies prohibit funding energy projects that rely heavily on unsustainable fuels.

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Competing in the Age of Omnichannel Retailing

Recent technology advances in mobile computing and augmented reality are blurring the boundaries between traditional and Internet retailing, enabling retailers to interact with consumers through multiple touch points and expose them to a rich blend of offline sensory information and online content. In response to these changes, retailers and their supply-chain partners will need to rethink their competitive strategies.

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Free Article

A View from the Peak: Balancing Our Carbon Budget

Earlier this year, the financial services company HSBC came out with a report in which their analysts calculated that taking climate change seriously could cut share prices of major oil companies by up to 60%. That report, Peak Planet: The next upswing for the climate agenda, held some sobering news for business. Now that it has been made freely available on the company’s website, executives concerned with managing risks may want to read it.

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How Analytics Can Transform Business Models

There are 52 million Latinos in the United States, with $1.5 trillion of purchasing power. Entravision Communications Corporation, a Spanish-language media company, reaches about 96% of that U.S. Latino audience through its television and radio stations and digital platforms. And it's using that extraordinary reach to provide media solutions to marketers interested in tapping into the Latino consumer market.

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How Starbucks Has Gone Digital

  • Interview
  • Read Time: 15 min 

Starbucks chief digital officer Adam Brotman and chief information officer Curt Garner explain how they collaborate closely. The two constantly seek to improve customer experience through technology and to unify marketing efforts across channels. Their partnership has forged a fast-paced rollout of new digital efforts, from faster payment processing to mobile ordering, across Starbucks’ 17,000 stores.

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Why Managing Consumer Privacy Can Be an Opportunity

How many privacy policy updates does your credit card company send you each year? Companies often “manage privacy” and “keep consumers informed” by drafting their privacy policies as broadly as possible and consider their job done if they change the policy 10 times a year to fit with changing practices. However, managing privacy should not be seen by businesses as a burden. Instead, it can be a valuable way to generate and maintain a good relationship with your customers.

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The Trouble With Too Much Board Oversight

The high-profile scandals of the late 1990s have increased the oversight duties of independent directors. Has the increased focus on board oversight improved the quality of board monitoring? And can board oversight become detrimental to desirable objectives? This article focuses on three aspects of oversight: design and implementation of suitable executive compensation packages; removal of underperforming CEOs; and disclosure of earnings that reflect the company’s true financial conditions.

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Bringing Opportunity Oversight Onto the Board’s Agenda

Boards have two broad responsibilities: overseeing the protection of existing value and creating new value. Even though most boards take growth seriously, in practice board oversight has become unbalanced. The imbalance between risk and opportunity is a potentially serious problem. Correcting the imbalance will require an active, constructive partnership between the board and senior leadership — and a board that understands how the company maintains a high level of value-creating performance.

Image courtesy of Flickr user BenLucier.

Optimizing Your Digital Business Model

A company’s digital business model describes how the enterprise interacts digitally with its customers to generate value. If you lack a good digital business model, your customers may leave you behind. This article presents a framework to help enterprises compete digitally with three capabilities: their content, customer experience and platform. The framework is illustrated with case studies of top performers like Amazon, Apple, LexisNexis and USAA and results from an effective practices survey.

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Video: Sustainability: The New Business Model Opportunities

Since 2010, MIT Sloan Management Review and The Boston Consulting Group (BCG) have been charting how organizations are responding to sustainability as a source of competitive advantage. This year we found that nearly 50 percent of companies have changed their business model because of sustainability opportunities. In this video, David Kiron, executive editor at MIT SMR, and Eugene Goh, a principal with BCG, discuss highlights of the report and specific company examples.

Image courtesy of Wal-Mart.

Rebuilding the Relationship Between Manufacturers and Retailers

In the tug of war between manufacturers and retailers, retailers seem to be winning. Retailers control market access and influence consumer behavior. Their power has moved downstream. What can be done to improve the situation? While manufacturers are locked into fixed investments and products with long payback cycles, retailers have a variety of ways of making money. This article explores how manufacturers can benefit by tailoring their approaches to a retailer’s specific business model.

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The Benefits of Sustainability-Driven Innovation

Results from the fourth year of MIT SMR’s research collaboration with the Boston Consulting Group have found that managers who say sustainability has caused their organization to change its business model are also more likely to say that the organization’s sustainability activities have added to profits. Respondents to the survey who changed their business model also generated profits from their sustainability-related activities.

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How to Change an Organization Without Blowing It Up

Too often, organizational change occurs all at once, on a large scale, and often in response to crisis. Yet we know from a great deal of experience that such transformation attempts often fail, fostering employee discontent and producing mediocre solutions with little lasting impact. Continuously pursuing smaller-scale changes — and weaving them together — offers a practical middle path between large-scale transformation and small-scale pilot projects

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The Role of the Chief Strategy Officer

The Chief Strategy Officer (CSO) is a comparatively new but increasingly important role in many organizations. This article proposes a typology of four CSO archetypes – Internal Consultant, Specialist, Coach and Change Agent – who carry out a variety of responsibilities in the CSO role. By understanding how the duties of the CSO can vary significantly from organization to organization, boards and CEOs can make better decisions about which type of CSO is necessary for their leadership teams.

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The Messy Business of Management

In a period of rapid technological and business change, successful executives particularly need the ability to think critically — and to be aware that some of their most cherished assumptions may, at any point, be challenged or invalidated by changing events. Business schools excel at teaching young managers well-structured models, theories and frameworks but need to spend more time helping their students surface, debate and test the assumptions underlying each model, theory or framework.

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