R & D
Download This : HBS associate professor Felix Oberholzer-Gee
How Nonprofits Dilute Their Efforts : HBS professor V. Kasturi Rangan
The Ambidextrous Organization: HBS professor Michael L. Tushman
An Ethical Fitness Quiz for Negotiators: HBS professor Michael A. Wheeler
Downloading music from the Internet doesn’t kill CD sales after all, concludes a surprising new study by HBS associate professor Felix Oberholzer-Gee and Associate Professor Koleman Strumpf of the University of North Carolina at Chapel Hill. “The Effect of File Sharing on Record Sales” is the first study that directly compares actual downloads of music files with store sales of CDs, covering the last half of 2002.
“While downloads occurred on a vast scale during this period — 3 million simultaneous users shared 500 million files on the popular network FastTrack/KaZaA alone — most people who shared files appear to be individuals who would not have bought the albums that they downloaded.”
The study suggests that the music industry’s lawsuits against individuals who make files available for downloading may not have the desired effect on boosting CD sales. “Our analyses show that there is no relationship between the number of downloads of a particular album and sales of the album. Even in our most pessimistic statistical model, it takes 5,000 downloads to reduce the sales of an album by a single copy. If this worst-case scenario were true, file sharing would have reduced CD sales by 2 million copies in 2002. To provide a point of reference, CD sales actually declined by 139 million copies from 2000 to 2002.”
In fact, the study finds that downloads of the most popular CDs actually boost sales. “For the top 25 percent of albums (with sales of more than 600,000 copies), we find a positive effect: 150 downloads increase sales by one copy. This effect is particularly important because the profitability of the music industry depends almost entirely on the success of the most popular albums.”
Another surprise involved the origin of the files being downloaded. “Only 45 percent of the files downloaded in the United States come from computers in the United States. Sixteen percent of music files are downloaded from computers in Germany, 7 percent from Canada, 6 percent from Italy, 4 percent from the United Kingdom. A legal strategy that focuses mostly on the United States is unlikely to change the supply of music files.”
The full study is available as a PDF download at www.unc.edu/~cigar/papers/FileSharing_March2004.pdf.
How Nonprofits Dilute Their Efforts
“Most of the nonprofits operating today make program decisions based on a mission rather than on a strategy,” writes HBS professor V. Kasturi Rangan in Harvard Business Review. “In fact,” he notes, “many nonprofits don’t have a strategy at all.” An excerpt follows.
Nonprofits rally under the banner of a particular cause, be it “Fight homelessness” or “End hunger.” And then, since that cause is so worthwhile, they support any program that’s related to it — even if only tangentially. While it is hard to fault people for trying, this approach is misguided. Acting without a clear long-term strategy can stretch an agency’s core capabilities and push it in unintended directions.
If a nonprofit doesn’t develop (its) operating mission and strategy platform in a disciplined way, its management tends to think every program is important. After all, each addresses the core mission in some fashion, so each is justified. But that kind of thinking causes a non-profit to drift from its original goals. It also contributes to the burnout of executives and staff, who feel as though they are working as hard as they can but see few results for their efforts. They may resist asking the following questions, but it’s crucial that they do:
- How effective are our programs?
- How efficiently are they executed?
- Which programs should we drop?
- Which should we seek to add?
If it doesn’t ask these tough questions, a nonprofit risks spreading itself too thin. While all programs may address the core mission in some way, their collective impact is severely diluted by a lack of coherence and consistency.
Instead of trying to be all things to all people, nonprofits should pick a niche, craft an operational mission, and, flowing from it, formulate a coherent strategy platform.
Excerpted from “Lofty Missions, Down-to-Earth Plans,” Harvard Business Review, March 2004. See the HBR section of the site: http://www.alumni.hbs.edu/what_we_offer/publications.html.
In the April 2004 issue of Harvard Business Review, HBS professor Michael L. Tushman and coauthor Charles A. O’Reilly III discuss what they coin the “ambidextrous organization.” A synopsis of their article follows.
Corporate executives must constantly look backward, attending to the products and processes of the past, while also gazing forward, preparing for the innovations that will define the future.
This mental balancing act is one of the toughest of all managerial challenges — it requires executives to explore new opportunities even as they work diligently to exploit existing capabilities — and it’s no surprise that few companies do it well. But as every businessperson knows, there are companies that do.
These organizations separate their new, exploratory units from their traditional, exploitative ones, allowing them to have different processes, structures, and cultures; at the same time, they maintain tight links across units at the senior executive level. In other words, they manage organizational separation through a tightly integrated senior team. Such “ambidextrous organizations” provide a practical and proven model for forward-looking executives seeking to pioneer radical or disruptive innovations while pursuing incremental gains. A business does not have to escape its past to renew itself for the future.
Of utmost importance to the ambidextrous organization are ambidextrous managers — executives who have the ability to understand and be sensitive to the needs of very different kinds of businesses. They possess the attributes of rigorous cost cutters and free-thinking entrepreneurs, while also maintaining the objectivity required to make difficult trade-offs.
A clear and compelling vision, relentlessly communicated by a company’s senior team, is also crucial in building ambidextrous designs. These aspirations provide an overarching goal that permits exploitation and exploration to coexist.
Almost every company needs to renew itself through the creation of breakthrough products and processes, but it shouldn’t do so at the expense of its traditional business. Building an ambidextrous organization is not easy, but the structure itself, combining organizational separation with senior team integration, is not difficult to understand. Given the executive will to make it happen, any company can become ambidextrous.
See the HBR section of the site: http://www.alumni.hbs.edu/what_we_offer/publications.html.
An Ethical Fitness Quiz for Negotiators
Shady dealings at the negotiating table may work in the short term, but in the end, you’ll undermine trust and tarnish your reputation, warns HBS professor Michael A. Wheeler in the March issue of Negotiation, a newsletter from HBS Publishing. “It’s important to calibrate your values before you sit down to craft a deal or settle a dispute,” says Wheeler. “Your character is one thing you shouldn’t make up as you go along.”
Wheeler presents three cases that test ethical negotiating behavior. The “steal deal” scenario involves an elderly couple offering their house for sale at under market value. The “something like the truth” scenario involves one party not being totally candid about facts that could negatively affect the outcome of a deal. The “doing the devil’s bidding” scenario pits one’s personal values against the expectations of an employer.
To see your way through such difficult negotiating situations, Wheeler cautions against making ethical choices on the fly. He advises asking yourself in advance five important questions that can help illuminate the boundaries between right and wrong at the bargaining table. In the process, you’ll discover your own ethical standards:
- Reciprocity: Would I want others to treat me, or someone close to me, this way?
- Publicity: Would I be comfortable if my actions were fully and fairly described in the newspaper?
- Trusted friend: Would I be comfortable telling my best friend, spouse, or children what I am doing?
- Universality: Would I advise anyone else in my situation to act this way?
- Legacy: Does this action reflect how I want to be known and remembered?
Concludes Wheeler: “Doing the right thing sometimes means that we must accept a known cost. But in the long run, doing the wrong thing may be even more costly.”
For information on Negotiation, visit HBSP Newsletters.
