R &D
Extra! Extra! Newspapers Miss the Story: Assistant Professor Clark Gilbert
"Speed Trap" Can Snare Companies: Associate Professor Leslie Perlow
Danger: Too Much Knowledge: Associate Professor Morten Hansen
Award-Winning Book:Associate Professor Scott Snook
Do the Right Thing: A Decision-Making Guide:Associate Professor Constance Bagley
Extra! Extra! Newspapers Miss the Story
Newspapers are missing an opportunity to boost revenues by barely tapping the online market, according to a new study by Assistant Professor Clark Gilbert and Borrell Associates Inc. In “Newspapers Miss Out on $300 Million in Online Advertising” (October 1, 2002), Editor & Publisher reported that the study of some 250 American dailies found that newspapers are forgoing nearly $300 million annually by failing to use the Internet to serve new advertisers.
“Despite an intense commitment from the industry, most online newspapers are missing 40 to 45 percent of the categories of revenue when compared with other online content sites. In an effort to defend their print businesses, newspapers have failed to realize that a new business is growing all around them,” says Gilbert. For example, he adds, “the Internet is the only media that allows you to provide rich content in a targeted way, and yet less than 5 percent of the newspaper industry offers any targeted advertising products.” The irony, he notes, is that “the Internet will eventually eat into traditional print revenue, but the overwhelming effect will be net growth.”
Unfortunately, “newspapers now appear to be focused on replacing their high-margin business of print classifieds with the lower-margin business of online classifieds,” Gilbert told Editor & Publisher. “If that's all they're doing with their online operations, we'd suggest that they shut them down tomorrow.” Instead, he advises, the papers need to tap deeper into the advertising options that the Web enables — using banner ads and e-mail notifications for classifieds, for example — to generate revenue.
“Speed Trap” Can Snare Companies
The worst you might think you'll suffer from a speed trap is a hefty ticket, but research by HBS associate professor Leslie Perlow suggests that another kind of speed trap could run your whole business into the ground.
Perlow's work with colleagues Gerardo Okhuysen of the University of Utah and Nelson Repenning of MIT draws on firsthand observations of the meteoric rise and ultimate bankruptcy of a disguised Web-based company referred to as Notes.com.
Using information gathered at management meetings during the company's brief, nineteen-month life, Perlow documented striking changes in the decision-making process of its leadership. Comparing several months in early 1999 with a period in late 1999 through early 2000, she found less and less time being taken to make decisions even as the company's circumstances became more and more rocky. This vicious cycle, born of urgency for growth and exacerbated by accelerating expectations, mounting problems, and a finite supply of venture capital cash, is what Perlow and her colleagues diagnose as the “speed trap.”
The trap is particularly insidious because analyzing an individual decision may not reveal a problem. Each choice could arguably be “right,” but the context created by past decisions means it unwittingly perpetuates a harmful, speed-oriented pathology. “What happens is that we look at our decisions in isolation instead of recognizing how they've contributed to the bigger cycle,” says Perlow, whose article on speed traps appeared in the October Academy of Management Journal.
While some may see the story as a phenomenon of the Internet business environment, Perlow believes it sounds a cautionary note for any business. The pace of decision-making at Notes.com, she argues, had as much to do with the actions and expectations of those within the company as it did with the pressure of outside factors.
“Everyone assumes that the faster you go, the better,” says Perlow, “but at some point the speed itself can become dysfunctional.”
Danger: Too Much Knowledge
Conventional wisdom holds that sharing knowledge across subunits of the organization is beneficial. But knowing too much may be counterproductive in certain business situations, according to a study by HBS associate professor Morten Hansen and Cornell University's Martine Haas.
In their working paper, “Too Much Knowledge Sharing?,” the two researchers looked at management-consulting teams as they prepared bids and proposals designed to win contracts from potential new clients. Hansen and Haas found that having more knowledge was no guarantee that these task-units would have greater success in landing new business; indeed, higher levels of knowledge were sometimes associated with diminished task performance.
What seemed to matter most was how persuasively the task-units, working with varying degrees of experience and received information, fashioned their bids: Less sometimes outdid more. For example, as the authors observed with the management consultants' proposals, enhanced knowledge flows (in the form of electronic documents culled from the firm's database of internal and external information) “may diminish competitive performance by reducing the uniqueness of the work produced.” A key was combining the right information, knowledge, and personal advice (from experienced colleagues within the firm) in a way that would differentiate a task-unit's bid from those of competitors.
As the authors note, “Knowledge that is valuable in one situation may be a liability in a different situation. For future organizational research, this suggests that the focus should be less on how much organizations know than on how they use what they know.”
Award-Winning Book
Associate Professor Scott Snook recently received the Academy of Management's 2002 George R. Terry Award for his book Friendly Fire (Princeton University Press, 2000). This honor is granted annually to the book that is judged to have made the most outstanding contribution to the advancement of management knowledge during the past two years. Friendly Fire is a study of the accidental shootdown of U.S. Army Black Hawk helicopters over northern Iraq in 1994. Snook, a former colonel in the Army and Academy Professor at West Point, joined the Organizational Behavior faculty this year.
Do the Right Thing: A Decision-Making Guide
How do you get beyond the rhetoric of corporate ethics and truly promote ethical behavior? This is a question that HBS associate professor Constance Bagley takes up in a new working paper, “Rhetoric and Independence Are Not Enough: Empowering Managers and Directors to Do What Is Right.”
Reacting to “Principles of Corporate Governance,” a paper published in May by The Business Roundtable, Bagley observes that exhorting directors and managers to be ethical is not enough. Many of the actions that today's leaders are calling for, she asserts, will not solve the problems of corporate malfeasance. “Structural reform designed to make directors more independent is certainly important,” she writes, “but it is not going to be enough to prevent the next Enron disaster.” What is needed, she says, is “an environment in which directors and managers feel empowered to use their own sense of right and wrong when acting on behalf of the corporation.”
To facilitate this sense of right and wrong, Bagley created a simple decision tree to help managers at all levels decide whether to take action. Beginning with a very straightforward question — “Is the action legal?” — Bagley shows that sometimes actions that do not maximize shareholder value should be made. Bagley believes that moral reasoning can be taught and points to medicine and law as examples of professions that have well-developed codes of ethics. She concludes by saying that boards need to empower employees to do the right thing: “Warren Buffett did exactly that when he gave managers at Salomon Brothers his home phone number after he took over Salomon in the wake of its Treasury auction scandal and told them to call him if they spotted a problem.”
