Blog #5 - Handling changes by creating shared value

               In "Twelve forces that will radically change how organization work" by Vikram Bhalla , one of the twelve forces he mentions is new customer strategies. It has been mentioned that almost 66% of consumers in 60 nations are willing to pay for more eco-friendly goods. Producing these goods may require special set of talents that most companies doesn't have in their arsenal. It would be a wise decision for companies to recognize in these kind of talents and hire them, since there may be a major shift in their strategies requiring these kind of resources. But since these resources are very limited, it is also important to have an edge over your competitors during recruitment of these resources.
               Creating a shared value will address this issue. If an organization have shared values , they focus on not just improving their revenue , but also give importance to their employees . This will help the company in outperforming their competitors , since the number of employees leaving the company would be far less. This reduces replacement costs for the company (After an employee left the company , another employee must be recruited to replace his position and recruitment costs time and money). This also means that very less time needs to be spent on knowledge transfers (After a new employee has been recruited for a position , the previous employee's tasks and responsibilities must be taught to the new employee. Usually employees have an slow value curve for the first 2 to 3 months , since they are in the knowledge gaining phase).
               Another advantage is that because of their employee relations, they would have an brand value , where employees with different talents wants to work. This would address the issue "new customer strategies" mentioned earlier. The organization with this brand value would also have an edge over other companies in recruiting the "special resources" mentioned earlier.
               Let's take an real life example of this scenario, lets take google or Facebook or Microsoft or any of the top performing IT companies. They outrank other companies because of their shared value. They not just focus on revenue generation but making sure they take employees happiness into account. They have competitive benefits which other companies are not willing to provide to the employees. This made them a brand value , among the employees. This helped them in recruiting some of the best talents out there. This made them outperform their competitors and generate more revenue , which made them even more capable of providing those competitive benefits to employees. Thus having a shared value helped them top the market on the long run. 

Blog Post #5

Porter and Kramer’s article, “Creating Shared Value,” was really evocative for me.  It called to mind the historical and social context of business over the past half-decade.  But history is different from lived experience, and I also thought about how business has been perceived in my lifetime.  In the 1980s—just before I came on the scene—greed was good.  Milton Friedman wrote an enormously influential paper about the true “social responsibility of business,” which he said was to increase profits, and characters like Gordon Gekko became a caricature of what was wrong with that mentality.  Yet, persuasive writers like Ayn Rand helped to amplify and propel the greed is good mentality.

That narrative is the afterimage we are dealing with today.  The debate about the role of business is particularly vicious within politics.  I think views have become more polarized between the camp that espouses the “greed is good” philosophy and the one that scorns it.  The ideological middle has become comparatively weaker.  Indeed, I think the intellectual foundation for the “middle road” in capitalism has become shakier, and I feel that Porter and Kramer are arguing for that foundation.  They claim that capitalism is “unparalleled” still as a foundation for society but that some things have gone wrong and some opportunities to do better have gone overlooked.

Specifically, they focus on the concept of “shared value.”  Currently, a problem companies face is in dealing with social responsibility.  If they follow the corporate norm, they will do the bare minimum to mitigate their liability.  In this case, the focus is on public relations, and observers may rightly criticize them for focusing on appearances rather than actual good.  On the other hand, if they instead invest seriously in solving a social issue that is not tied directly to profits, then the same observers (and shareholders) will accuse them of irresponsibility.  It’s a catch-22.  Porter and Kramer argue that this framing of the situation is itself the problem.  Social responsibility is, in fact, not as stark a tradeoff as it appears.  A realistic look at the company’s circumstances shows that the well-being of the community is tied directly to company success.  By focusing too narrowly on a profit-motive, the company misses opportunities to create value.  For example, Porter and Kramer suggest that corporate wellness programs can create value on both sides—the employee may become healthier, which help the employee and their family, and the company benefits because healthier employees mean less missed time and higher productivity.  From a behavioral economics perspective, I think such programs may be somewhat suspect if not designed correctly, but I think the motivation for such a program is also crucial.  Corporations will benefit by recognizing how such activities fall within the value chain.

This paper was written in 2011, and I can’t help but consider how corporate thinking has changed since that time.  In fact, in August of this year, the top business leaders in the country put out a statement that loudly echoes the sentiment in Porter and Kramer’s paper.[1]  Jaime Dimon, CEO of JPMorgan Chase & Co. wrote, “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”  It takes time for changes in business principles to permeate day-to-day operations, but I would say this is progress towards the vision outlined in “Creating Shared Value.”

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[1] https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans

Revolution In How Organizations' Function

The average tenure of a company on the S&P 500 is forecasted to shrink to 12 years by 2027. This week’s readings made me realize the important trends and factors that have emerged and are taken up by many companies to strive and succeed in the era of creative destruction.

The three trends in technological and digital productivity have created the most significant changes in the market. The advancement in big data and advanced analytics has led to the decision making process becoming completely data-driven. Be it targeted advertising by google, facebook, amazon or be it used by movie streaming websites such as netflix to show more relevant show to what their users prefer, data analytics is everywhere. Automation is another aspect that's changing businesses. With advancement in machines and technology, it helps cutting manual processes in a business. Manual data entries and collection have been replaced by automated scripts or chunks of code that no longer need manual intervention. Moreover, with every piece of information becoming available to everyone everywhere, a company needs to reinvent itself in order to succeed amongst perfect competition. Big companies like facebook, google have access to information regarding the startups that are making progress or doing something better in any domain that they seem interested in, and as a consequence, just buy them out or merge with them.

Business processes to generate values these days have also become so fast paced majorly due to the creative disruption phenomena becoming ubiquitous. Many companies as a consequence have adopted the agile methodology of iterating, inspecting and adapting as situations and business requirements change very rapidly. Moreover, businesses are becoming more customer centric and personalized so as to achieve the competitive edge these days.

I was aware of the part where the businesses and the technology is changing, but reading about how resource distribution has advanced made me more aware. Since the demand of digital skill-set is growing, it made me realize that it was one of the major factors that were one of the motivating factors for me to move to a country 8000 miles away to learn more, thrive more and get equipped with the digital transforming market. The problem is not only on the demand side (where fewer people, let alone the older people who might want to grow the digital skill-set), but also on the supply side. That is why many universities and companies across the world are devoting resources and time to equip the workforce with the ever-changing digital skill-set in demand.

It's because of the shift in the above phenomena, that diversity and inclusion have become an important aspect of workforce culture and values. With everything available anywhere and everywhere, every person wants to find a purpose, feel cared for and thrive for more to succeed. As a result, digital innovation and disruption has occupied the heart of every strategy of every industry.

- Deepak Chawla

References :

https://www.bcg.com/en-us/publications/2017/people-organization-strategy-twelve-forces-radically-change-organizations-work.aspx

https://www.innosight.com/insight/creative-destruction/

Blog #5: The Future of Strategy

As the world becomes more and more technologically advanced, firms have access to data in quantities bigger than ever before. This data can be about their products, their business as a whole, or even their customers. With the emergence of big data has come the critical importance of consumer analytics, and some businesses in the music industry in particular have taken advantage of this development. For example, Spotify has created an algorithm that is notoriously successful at curating new music content to help it's listeners, a strategy that Vikram Bhalla, Susanne Dyrchs, and Rainer Strack, authors of  "Twelve Forces That Will Radically Change How Organizations Work", would find to be appropriate and necessary in the modern world.

Spotify has solidified itself in the music streaming industry as a leader when it comes to customer retention and music discovery. The algorithm that they have curated allows listeners to stream new content instantly from a variety of perspectives. They can listen to a radio station based on a particular song, artist, or album, and they can also see brand new content outside of their "liked songs" library in a "Discover Weekly" playlist that is uniquely produced for every listener on a weekly basis. Spotify is capable of doing this for its massive network of over 217 million users because of its focus on collection of big data. According to Bhalla, Dyrchs, and Strack, this allows them to "improve marketing, productivity, and other essential aspects of their existing operations, lower costs, and gain real-time insights into promising new approaches and opportunities"(Bhalla, Dyrchs, and Strack). 

What they have done is exactly that. Spotify has grown from 96 million users and 30 million paid subscribers in 2016 to 217 million and 100 million users and subscribers in 2019 respectively. This growth tops Apple Music, doubling their users in 2018 and having nearly 50 million more subscribers in 2019. Even internally, Spotify identifies itself as a tech company that specializes in audio interfacing. This embrace of technology and of big data has helped set them apart from their competitors, a strategy that has allowed them to stay on the forefront of the music streaming industry and grow alongside of the technology it embraces, rather than falling behind the big data revolution.

Blog 5 - Rippen Liu

The Future of Strategy

I strongly resonate with the concept of shared value, especially when I read this line: "Shared value, then, is not about personal values. Nor is it about “sharing” the value already created by firms—a redistribution approach. Instead, it is about expanding the total pool of economic and social value.". This is a beautifully composed definition of what the concept really is. Shared value is far broader and farsighted than just "showing gestures" by donating a small amount of money or resources to show kindness, which by no means is wrong, but the effect is very limited. 

A great example is Adidas with its line of "Parleys". Normally, an easy way of dealing with ocean plastics is to donate money to some organizations to show gestures, or even spend money yourself to collect the plastics and then hand off to someone else. These are good gestures, but never tackle the problem from the root. What Adidas did with Parleys is that they are innovating a way to reuse the plastic materials to make the shoes! Will this save costs? The R&D involved is far more than just keeping making shoes the existing ways. However, as the initiative kept developing, the "Parley" line actually became really popular among the consumers. In the end, everyone involved is better off: Adidas is paid off with the revenues that come with it, consumers are happy with the products, everyone is happy for the devoted and ongoing efforts in eradicating ocean plastics. 

Personally, I have read a great book on very similar concepts when I was around 18. The book is called Built to Last, and it had a profound impact on my perspective toward businesses in general. In the book it explores why some corporations could last for several decades while the majority just crumble within years, even a few decades. One critical criterion realized is that these "built-to-last" corporations always have higher "sense of purpose" other than just making money. And that sense of purpose always brings value to society, although that might mean some moves do not make sense in terms of business. One example is a medical company that has spent billions on a vaccine that was to aim to cure disease in a developing country, which has been plagued by the disease for so long. The medical company eventually decided to give it to everyone, for free. Does that make any sense in business perspective? No. But it is this sense of bigger goods that kept this company grow larger and stronger.

These perspectives help shape my view on doing business, and life in general. There needs to be a sense of purpose that one is serving, higher than just the profits up front. It doesn't always make sense right away, or even for years, but the mindset of "contributing for overall goods" always pay off. After all, this is a society of humans. 

Blog #5 - Leveraging Digital Technology and Data

The disruptive forces that have a high probability of affecting the strategy of companies for the next few years is discussed in this week’s readings. Two of the key disruptions listed are digital technology and data analytics to improve the services offered to the customer. Let us examine how Disney makes use of these two aspects in their theme parks.

               Visiting a theme park by Disney is often like a mini vacation and this involves a lot of planning and effort by the consumer. This includes managing a hotel stay, not losing the tickets and using a map to determine which attractions to visit. After performing all these steps, consumers may need to spend a lot of time on a line for popular attractions.

               Disney has managed to digitize most of this experience resulting in almost a seamless consumer experience by leveraging the fact that consumers are often willing to spend a little extra to make their experience a lot more comfortable. The Magic Band by Disney is a wearable wristband that makes use of RFID technology. This band can be used to control entry to the park and hotel rooms, premium access to rides and attractions as well as to pay at shops and restaurants in the park.

               The premium access to rides is controlled by an initiative called FastPass that allows consumers to make reservations for a limited number of attractions to avoid the wait time. All of this can be performed on a mobile phone along with planning routes based on your selections digitally. This also provides a customizable experience to the consumer that is more tailored to their needs.

               The Magic Band also provides park usage data to Disney to better allocate resources and make improvements to their attractions. This is also used for dynamic pricing based on the demand throughout the year. All this information provides is being leveraged to continuously tailor and improve the experience provided to the customer.

               If used appropriately, data analytics could be game changer in understanding market and customer needs and even future trends to an extent.

References:

https://medium.com/@randerson112358/how-disney-world-uses-big-data-24de9c1175a5

The Future of Strategy

In this week’s reading, Michael Porter and Mark Kramer lay out the case for shared value. Porter and Kramer define shared value as a new form of capitalism that will spur innovation and growth for companies and also improve the communities they do business in. Shared value is an alternative to corporate social responsibility, which is the current response of companies to the prevailing view that corporations should do good and impact the communities they operate in, in positive ways.

Corporate social responsibility has existed in some form for decades and became part of public discourse in the 1970s with Milton Friedman’s polarizing article, The Social Responsibility of Business is to Increase its Profits. Now, corporate social responsibility programs are an entrenched part of many corporations and seem to be almost a requirement for large, public facing companies.

The widespread adoption of corporate social responsibility programs is a response to public sentiment, but is also bolstered by findings that corporate social responsibility programs benefit companies. These programs improve company efficiency, productivity and profitability. A joint literature review on corporate social responsibility by Arabesque Asset Management and The University of Oxford highlight this point. 88% of studies found companies with socially responsible business practices had higher operational performance than their less socially responsible peers. In addition to improvements in operational performance, socially responsible business practices have a positive correlation to a company’s stock price. (Fink and Whelan, 2016).  

Many companies have bought into findings like the ones mentioned above and have devoted a significant amount of time and resources to corporate social responsibility programs. Adopting Porters and Kramer’s shared value approach will require a reallocation of time and resources. It might also mean dismantling longstanding corporate social responsibility programs that are the result of years of work and may be viewed by some people within the company as a source of growth and a contributing factor to strong performance. Porter and Kramer make a compelling case for shared value and support their claim that in the long run this approach will lead to robust and sustainable growth, which surpasses that of today’s socially responsible business practices. It will be interesting to see whether companies incorporate principles of shared value into their business practices because although a shared value approach does promise a large return, it could be years before a companies sees that return. This may be important to many companies since our current system of evaluating companies reacts so quickly and does not leave much room for long-term projects.       

References

Fink, C., Whelan, T. (2016, October 21). The comprehensive business case for sustainability [Web blog post]. Retrieved from

https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability

Blog #5 - Future of Strategy

Blog #5 – Future of Strategy

In the readings for this week, the Twelve Powerful Forces Will Revolutionize How Operations Function by Boston Consulting Group really speaks to me, and I can see how these factors have influenced the art industry in the past years. Among the 12 forces, access to information & ideas and diversity & inclusion is certainly two of the major trends that lead future strategy development for arts organizations. The channels to access information and ideas have been broadened, especially with the help of technology. Art museums’ approaches to gather visitor information and feedback are no longer restricted to surveys and feedback post-its. The Cleveland Museum of Art launched its ArtLens Gallery with a corresponding mobile app in 2017, aiming to engage the audience in an immersive and transcendent way. When using the ArtLens mobile app in the gallery and in the entire museum, it will record the visitors’ moving pattern: what visiting route did they take, what artworks did they see, how long did they stay in each of the galleries, and which artworks attract the most visitors in the museum. With these quantitative data collected through the app, the art museum is able to curate their future strategies based on visitors’ experience in the museum.

Moreover, diversity and inclusion are other issues that arts organizations have been addressed more and more frequently in recent years, especially about the racial, gender, and ethnic diversity among the board members as well as in their staff. For the largest arts organizations in the U.S., like the Metropolitan Museum of Art, the board members are consisted of a majority of white males with a few female and African American members. However, it is hard for a huge organization like the MET to shift its board member construction in a short time. While arts organizations strive to have all the voices represented in their board of directors, they also try to avoid tokenism that they elect a really diverse board just for the sake of diversity instead of what they can contribute to the organization. This dilemma requires the arts organizations to come up with more diverse and inclusive programs to serve different groups of people so that the voices from the diverse board and staff members can be heard and serve a purpose.

While technology has helped arts organizations attract more and more visitors, especially through social media and the technology involved engagements and activities, digitization also created a disruption that drove the visitors away from visiting the museums. With all the high-quality images of the artworks online, people can easily have access to the arts through their mobile devices, which makes it imperative for the arts organizations to come up with programs and events for the target visitors that are irreplaceable by digitization.

References:
Twelve Powerful Forces Will Revolutionize How Operations Function, Boston Consulting Group.
2018 Corporate Longevity Forecast: Creative Destruction is Accelerating, Innosight.