An Executive Guide to the Winter 2019 Issue

These summaries will help you navigate our terrific new slate of features.

Grow Faster by Changing Your Innovation Narrative

George S. Day and Gregory P. Shea (Wharton School, University of Pennsylvania)

Companies aspiring to be organic-growth leaders in their industries have abundant advice to follow. They can emulate the practices of giants like Amazon, Starbucks, and 3M, and adopt a host of popular innovation prescriptions — use design thinking, act more like a lean startup, cocreate with customers, and so on. Though much of this well-meant advice has its merits, it often leads to patchwork interventions with disappointing results.

It’s better to start with a coherent, affirming narrative about how the business is equipped to innovate for growth. Of course, once that message is in place, the company must reinforce it with action.

The authors tested 18 widely touted levers that companies could pull to support their innovation narratives and identified the four that organic growth leaders use most to stay ahead of competitors: (1) investing in innovation talent, (2) encouraging prudent risk-taking, (3) adopting a customer-centric innovation process, and (4) aligning metrics and incentives with innovation activity.


Key Words for Digital Transformation

Shantanu Narayen (Adobe), interviewed by Paul Michelman (MIT SMR)

By many rights, one might have expected to find Adobe on the register of companies disrupted by digital transformation. And yet the 35-year-old software developer has persevered — even excelled — by embracing the very technological forces (think cloud computing, mobile technology, platforms, IoT) that could well have been the harbingers of demise for a legacy producer of packaged software designed for the desktop.

In conversations that took place via videoconference and email, MIT Sloan Management Review editor in chief Paul Michelman asked Adobe chairman and CEO Shantanu Narayen to share his thoughts on several key words related to Adobe’s journey: communication, artificial intelligence, platforms, expectations, and uncertainty.


The Promise of Targeted Innovation

Marcel Corstjens (INSEAD), Gregory S. Carpenter (Kellogg School of Management, Northwestern University), and Tushmit M. Hasan (University of Texas)

The largest consumer goods companies each spend more than $1 billion annually on R&D. What have they gotten in return for their hefty outlays? On average, virtually nothing from a sales perspective. An industry analysis found that the sector’s biggest R&D spenders saw no appreciable impact on revenue. That’s troubling for companies whose growth has plateaued over the past five years. At the company level, however, the picture is more nuanced: Even though companies that spent heavily on R&D saw no measurable impact on sales, some outfits that focused on iterative improvements to products or services showed a significant positive correlation. Conventional management wisdom holds that across sectors, R&D productivity depends on industrial might. In the consumer products world, at least, the authors’ analysis suggests that’s not the case. This article explains why and provides guidance on how big spenders can improve their returns.


Bill It, Kill It, or Keep It Free?

Wolfgang Ulaga (INSEAD) and Stefan Michel (IMD)

In tough times, companies hunt for new sources of growth. Yet in doing so, many overlook opportunities to generate sales from services they’re already giving customers for free. Though it sometimes makes sense to stick with a free model, companies too often make that the default option. This article provides a framework for transitioning from free to fee. The research behind it focuses on B2B companies, but the takeaways also apply to B2C companies. The framework includes three steps: (1) Take stock of all the services you give away, (2) build action plans for pricing and selling services you’ve decided shouldn’t be free, and (3) manage the resistance to change, whether internally or from customers and distributors.


The Truth About Behavioral Change

Damon Centola (University of Pennsylvania)

People tend to assume that Twitter adoption spread virally through the internet, thanks to social contacts connected by weak ties and long bridges. That narrative is easy to grasp. Unfortunately, it is also inaccurate. Research shows that Twitter’s growth pattern was surprisingly geographic. Friends and neighbors adopted the technology from one another. It spread locally, like a grassroots social movement. The real story of Twitter’s success illustrates how social networks promote behavioral change. Unlike knowledge sharing, which is a simple contagion that spreads quickly, behavioral change is a complex contagion, which requires reinforcing ties and wide bridges to spread. This article, adapted from the author’s book How Behavior Spreads, explores these concepts.


A New Playbook for Diversified Companies

Ulrich Pidun (BCG), Ansgar Richter (Surrey Business School, University of Surrey), Monika Schommer (BookingGo), and Amit Karna (Indian Institute of Management Ahmedabad)

Scholars have argued for years that large amounts of diversification hurt performance and value creation. But the authors’ research shows that high levels of diversification aren’t necessarily bad for performance and that diversified firms aren’t a dying breed.

In recent years, the risk of value-destroying behavior seems to have been reduced by new trends such as increased efficiency of capital markets, a stronger focus on corporate governance, and improved transparency and steering due to advances in information and communication technology. Diversified companies tend to reap such rewards when they limit the number of business models in the portfolio and support them with a strong, cohesive operating model; tailor the corporate parenting strategy to the portfolio; and allocate resources on the basis of clear portfolio roles.


Think Critically About the Wisdom of Experts

Andrew A. King (Tuck School of Business, Dartmouth College)

Expert analysis informs the decisions we make as managers and in our lives. Almost daily, however, some expert’s previous certainty is discredited by new analysis. So how should we treat the next piece of advice we get?

Philosophers of science generally recommend that we trust what we hear from well-credentialed people. But we can and should think critically about what we read and hear. In particular: Don’t hesitate to challenge experts. When an expert links a cause to a supposed effect, ask whether it’s a story to make sense of the past or a theory to forecast the future. Unearth assumptions that experts have used to get from the raw data to a set of conclusions. Identify alternative explanations for a particular conclusion, and ask why each one is not a better answer.


How Should Companies Talk to Customers Online?

Brent McFerran (Beedie School of Business, Simon Fraser University), Sarah G. Moore (University of Alberta School of Business), and Grant Packard (Lazaridis School of Business and Economics, Wilfrid Laurier University)

More people are engaging with customer service through digital channels, including websites, email, texts, live chat, and social media. Despite the convenience and speed of such interactions, they lack some of the most important aspects of off-line customer service. For example, nonverbal expressions and gestures can signal engagement, and tone of voice can convey empathy and focus. Over time, these interpersonal touches help companies build and sustain relationships with customers. The authors explain how simple shifts in language can enhance customer satisfaction and purchase behavior.


Deriving Value From Conversations About Your Brand

Brad Fay (Engagement Labs), Ed Keller (Engagement Labs), Rick Larkin (Engagement Labs), and Koen Pauwels (D’Amore-McKim School of Business, Northeastern University)

In studying more than 500 leading consumer brands, the authors found that there was little correlation between what consumers said about brands online and what they said off-line, even though both can have big effects on a company’s sales. The authors asked consumers to recall the product and service categories and brands they talked about the day before, then compared the two types of conversations. Based on their analysis, the authors concluded that managers need to avoid relying solely on social media to represent the ecosystem that affects brand success.


Driving Sustainability-Oriented Innovation

Thijs H.J. Geradts (Erasmus University and Nyenrode Business Universiteit) and Nancy M.P. Bocken (Lund University and Delft University of Technology)

Faced with mounting pressure from governments, investors, and employees to be more aware of the environmental and social impacts of business activities, companies are searching for ways to do things differently while also seeking opportunities for growth. As a result, many are encouraging their employees to develop new products, services, or business models that create value for both the company and society. To learn what leading companies are doing to address that challenge, the authors conducted interviews with managers at seven multinational companies recognized for their sustainability activities.


The Public Sector Can Teach Us a Lot About Digitizing Customer Service

Alireza Nili, Alistair Barros, and Mary Tate (Queensland University of Technology)

Digital customer service agents — also known as virtual assistants, chatbots, or softbots — are poised to transform customer service over the next decade. Most companies that use digital agents rely on them to sift through incoming customer requests and to process the most straightforward issues. More complex issues get passed along to human agents.

But digital agents can actually handle more. Public service agencies in Australia are already using them to handle complex inquiries from citizens regarding services. In most countries, government entities are slower than businesses to adopt new technologies. Companies worldwide stand to learn valuable lessons from these Australian public service agencies.