HBR April 2016: How platforms are reshaping business

Harvard Business Review

April 2016

Annotated table of contents

1. Adi Ignatius: The Best of HBR

Adi Ignatius, the editor-in-chief of HBR highlights the winner and the finalists of the 2015 HBR McKinsey article of the year award. See bellow –

Idea watch

2. HBR Team: Revolutionizing customer services

This is a review of experience and strategies employed by companies, such as Nokia Siemens Works, Lux Resorts and Air Mauritius. Needing to turn around their performance with little additional investment, they chose to focus on customer services. However, for customer services to become the area that turns the business around, four counter-intuitive shifts in approach are recommended. Additional training is needed not so much for customer-facing employees, but for the services deeper into the organization that support them. The skills and scripts approach is too constraining, so instead allow frontline customer service employees to exercise discretion in tailoring support for individual customers. Go full scale immediately, rather than wait to see the results of small, piece meal experiments. Discard traditional metrics that track past performance and capture information about intentions about future behaviour instead.

3. Nicole Torres: Ethical shoppers don’t inspire us – they bug us

Rebecca Walker Reczek defends her research into ethical shopping behaviour, carried out with two other business school professors, Daniel Zane and Julie Irwin. When shoppers are made aware of others having done the right thing – say inquire about labour practices behind certain products – they tend to denigrate these do-gooders by ranking them low on positive attributes (being attractive or stylish) and high on negative ones (such as odd and boring). More often than not, shoppers avoid finding out about unpleasant things, but will use ethical information if it is right in front of them. It’s unclear whether these effects persist outside of the experimental setting and for how long, but the research confirms some powerful insights from social comparison theory and self-perception theory.

How I Did It

4. Daren Huston, Priceline CEO on creating an in-house multilingual customer service operation

Priceline owns several online platforms including booking.com, which facilitates purchases of travel tickets worldwide. When Huston became the head of Booking.com, in 2011, the business was small and in order to grow it, he devised and implemented experiments to learn how to increase customer satisfaction and loyalty. Simple requests can be automated, but for complicated purchases providing native language support on the phone is crucial for about a fifth of customers, more in certain cultures. Today the customer service department employs 6,000 staff and provides assistance in 42 languages. Huston explains the business and intellectual case for multilingual assistance when competing on quality of customer service and describes the measures taken to make it a success.

5. 2015 HBR McKinsey Awards

The winner of the 2015 HBR McKinsey award is “Engineering Reverse Innovations,” by Amos Winter and Vijay Govindarajan (July/August), on how companies can create products for low-income countries and then adapt them into disruptive offerings for developed markets. The other finalists are: “Corporate Governance 2.0,” by Guhan Subramanian (March 2015); “Managing Your Mission-Critical Knowledge,” by Martin Ihrig and Ian MacMillan (January–February 2015); and “Customer Data: Designing for Transparency and Trust,” by Timothy Morey, Theodore Forbath, and Allison Schoop (May 2015).

Visit this page for links to all the articles.

The Big Idea

6. Blitzscaling, Tim Sullivan interviews Reid Hoffman, founder of LinkedIn and investor extraordinaire

Without effective scaling, businesses are in danger of becoming submerged by competition from other start-ups and from established incumbents. Reid Hoffman proposes a framework for understanding the tasks and priorities related to fast scaling up, what he calls blitzscaling, of the kind we have seen in the case of companies such as Google, Amazon, Facebook and LinkedIn. This is largely about the art of keeping in motion and holding together a bewildering array of issues, but Reid provides a more detailed analysis of the tasks and challenges of scaling up at five levels of organizational complexity he names after (somewhat) equivalent social groups: family (less than 10 employees); tribe (10 – 100 employees); village (100 – 1,000 employees); city (1,000 – 10,000 employees) and nation (over 10,000 employees). Hoffman addresses himself to entrepreneurs seeking world domination, of course, but he gives a good sense of the combination of dynamism, improvisation and realism necessary for surviving and thriving in the current business climate more generally.

Spotlight: How platforms are reshaping business

7. Marshall W. Van Alstyne, Geoffrey G. Parker and Sangeet Paul Choudary: Pipelines, platforms and the new rules of strategy

What are the main differences between businesses that have a pipeline business model and platforms? What are the main challenges following from these features of the business model that strategy would need to address? In this article, Alstyne, Parker and Choudary spell out the contrast between pipeline and platform businesses in terms of type of control over resources (outright ownership of assets versus orchestration), focus of operations (internal versus external) and the source of value (customer versus eco-system). Further they identify the players in the platform ecosystem – producers, consumers, providers, owners – and their relationships to clarify the implications for strategy. Forces within the ecosystem, forces exerted by ecosystems, business focus, metrics, access and governance, all take different forms or behave differently in a platform setting and effective strategies need to take account of these differences.

8. Andrei Hagiu, Simon Rothman: Network effects aren’t enough

Despite the extraordinary success in the last decade of certain business marketplaces, such as Google, Amazon, Facebook, or Apple it remains the case that many such businesses fail. Drawing on their experience of advising hundreds of marketplace businesses, Hagiu and Rothman set out to describe some of the major pitfalls. For instance, although growth is usually the main objective, not all growth is good: figuring out the value proposition is more important than first-mover advantage; fast growth can endanger the business because flaws may be more difficult to correct later on; the wrong type of growth, by encouraging power sellers on platforms, for instance, can crowd out more desirable types of growth, such as encouraging a diversity of buyers and sellers to join. The authors then go on to address threats and remedies in the areas of trust and safety, disintermediation and regulation.

9. Feng Zhu, Nathan Furr: Products to platforms, making the leap

Are pipeline and platform businesses always such different beasts? Or could their business models be combined? Zhu and Furr argue that some of the most successful companies – including five in the top ten by market capitalisation in the US – rely in fact on hybrid income streams. Typically, they leveraged a particular product – say retail in the case of Amazon, mobile phones in the case of Apple – to develop a platform. To guide companies in this effort to assess whether it might be suitable to make the leap from product to platform, the authors provide four criteria and related advice and analysis. In brief, the starting point should be a defensible product and a critical mass of users; the hybrid business model should focus on creating and sharing new value; conversion to the new platform should be rapid; and it is imperative to identify and act quickly on opportunities to deter competitive imitation. Each of these points is illustrated with examples of both successes and failures, including Qihoo 360 Technology, a Chinese internet company, Valve and its Half-Life game, SF Express, a Chinese parcel delivery service, and MakerBot, a maker of 3-D printers.

10. Benjamin Edelman, Damien Geradin: Spontaneous deregulation

What are the main dangers to established businesses coming from platform, or marketplace businesses? This article explores the implications of the fact that new comers often skip on compliance with existing regulations. First, Edelman and Geradin offer three diagnostic questions as a guide to assessing the seriousness of the threat posed by platform businesses disregarding regulation: Are consumers being unnecessarily protected? Can business practices be codified, and thus copied? Are regulations protecting third parties? Second they discuss a range of responses, from litigation, to integration of some aspects of the new model, to emphasising your strengths to bowing to the inevitable and planning for a graceful exit.


11. Everett Spain, Boris Groysberg: Making exit interviews count

For this article, Spain and Groysberg have surveyed 188 executives and interviewed 32 senior leaders in 210 organizations in 33 industries, headquartered in 35 countries. On the whole, their conclusion is that the potential of the exit interviews is widely ignored. Even though many companies do have some sort of system for collecting views on the organization from departing employees, more often than not, that input stops with the HR department and fails to inform policies within the organization. Despite this, the authors argue that mining the data provided by exit interviews, when done well, could be invaluable, especially for professional services businesses. They go on to provide guidance on processes for setting overall goals, carrying out the interviews, through various tactics and techniques, and feeding back the information gained into the organization. In their view, exit interviews can contribute to continued good relations with former employees, who may act as ambassadors and customers for the company and become part of vibrant corporate alumni programs.

12. Jay W. Lorsch, Emily McTague: Culture is not the culprit

Organizational failures are often blamed on culture, but Lorsch and McTague argue that culture is often a by-product of underlying systems and processes in the organization. Aligning those systems and processes with core values is usually the starting point for the emergence of the culture that in turn sustains them. They develop this argument through discussion of four examples of high profile organizational change, following large mergers and restructurings and based on interviews with the CEOs who devised and led the integration processes. They are Doug Baker, CEO of Ecolab, an industrial-cleaning-products company; Richard Anderson, CEO of Delta, following their 2008 acquisition of Northwest, creating the world’s largest carrier; Alan Mullaly, CEO of Ford between 2006-2014, who turned around the fortunes of the company from loss-making to profit; Dan Vasella, former CEO of Novartis, who oversaw the integration following the merger of Sandxo and Ciba-Geigy in 1996, to create a company that has now become the largest producer of pharmaceuticals in the world.


13. Christine Porath: An antidote to incivility

Porath provides analysis and advice on how to tackle a widespread problem: being met with rudeness, even bullying in the work place. Strategies for confrontation and avoidance are considered, but she argues that thriving and individual well-being provide us with the necessary protective cushion and are most worthy of our attention. So how do we get to the point where rudeness directed at us is just water off the duck’s back? Porath recommends several cognitive and affective strategies.

14. Ethan Bernstein, Ryan W. Buell, Case Study: Can an airline cut “turn times” without adding staff?

This case study is based on a Japanese airline seeking to reduce the time for cleaning air planes between flights to 12 minutes, without hiring more people. The executive in charge goes undercover to find out how the work is carried out and devise a strategy for increased productivity.

15. Dan McGinn: Still trying to get more done

Dan McGinn reviews two books, by Charles Duhigg and Chris Bailey, on increasing productivity, i.e. ‘that professional-class nirvana getting more done.’ Sometimes getting out of the office and nurturing our private interests does it.

16. Life’s Work: Alison Beard Interviews Ruth Westheimer

Ruth Westheimer, 87, is a Holocaust survivor who made her way out of the theatres of war in Europe by training as a psychologist at Sorbonne and Cornell. She was an established academic when, at 50, she became the go-to TV doctor for all thinks sexuality and public sex education. What are the secrets of her success? Among other things, she believes ‘not in retiring, but in rewiring.’