HBR Nov 2015: Digital customer engagement

Harvard Business Review

November 2015

Annotated table of contents

1. Adi Ignatius: Economic health and the 2016 elections

HBR’s editor-in-chief, Adi Ignatius, suggests that arguments put forward in the magazine are echoed in the presidential campaign in the US, especially in regards to taxation and better ways of holding companies accountable. HBR will continue to reflect on the ‘big economic themes emerging during this election cycle.’

2. HBR Team: Smaller, safer robots

Robots used in manufacturing are not all alike. We tend to picture robots as huge, rigid, and, for co-workers, quite dangerous machines on assembly lines. The new generation of robots, however, are anything but big and dangerous. Equipped with sensors, much smaller and adaptive, they are likely to work alongside people in the future. An unexpected benefit will be increased employability of older workers and others who might have physical limitations.

3. Bhaskar Chakravorti and Ravi Shankar Chaturvedi: Digital fairness versus Facebook’s dream of world domination

Many people who have mobile phones cannot use them to access the internet. This research maps the gap between mobile phone and internet penetration in 50 countries and helps to highlight the huge unmet potential demand for internet in India (80%), Brazil (50%), and China (45%) among others. Who and how will step into this breach is a controversial matter. Should internet access be the responsibility of states and regarded as a public good? Or should companies, such as Facebook, with its year old initiative internet.org, be allowed to take advantage of this opportunity?

4. Walter Frick: Do regulators go easier on socially responsible firms?

Research shows that there is indeed significant correlation between high scores on social responsibility measures and comparative lenience of regulators. Specifically, the Department of Justice and the Securities and Exchange Commission in the US charged much lower fines for giving bribes to partners abroad to firms perceived as socially responsible, during 1990-2013. How does this ‘halo’ effect around virtuous firm help absolve them of other crimes?

5. HBR Team: “Inoculate” buyers against disappointment

How do customers react when their loyalty to a particular brand is challenged? Interestingly enough, even when they are let down by the product or service, customers may rally to defend it anyway. Some of these arguments are similar to the article in the September issue by Zakary L. Tormala and Derek D. Rucker who discuss our tendency to stick harder to our convictions when challenged (How uncertainty transforms persuasion https://hbr.org/2015/….

6. Alison Beard: CEOs with daughters run more socially responsible firms. An interview with Henrik Cronqvist

Research on 379 CEOs – 14 of whom are female – of S&P 500 companies suggests that CEO’s who have at least one daughter also tend to measure higher on diversity, employee relations, and environmental stewardship. We don’t know whether there is any positive or adverse effect on the performance of the firm as a whole. So how does having a daughter contribute to other pro-social behaviours?

7. HBR Team: How machines learn (and you win)

This is a very useful chart which illustrates machine learning: how data sets can be processed to generate actionable insight. The example is about a cable company trying to identify people about to leave its service. These potential quitters would then be given additional offers to persuade them to stay. The illustration starts with two customers and 5 questions are asked about each. The answers, together with knowledge about the behaviour of the loyal customer, allow the machine to identify them as potential quitters or not.

8. Martha Samuelson: Analysis Group’s CEO on managing with soft metrics

Analysis Group is a consultancy providing applied economics, finance and statistics analysis in litigation cases, and analysis of health economic outcomes. It has 700 employees and 45 partners. Unlike most professional services firms, it does not rely on formulas for contribution-based remuneration. The article explains why this is necessary and how the company developed its own method for determining salaries. This method is based on self-evaluation, which includes ‘not only what business they sold, but also whom they hired, whom they mentored’ and other activities that build the company for the future, and on detailed discussion of each person’s contribution and next developmental steps.

9. HBR Team: The best-performing CEOs in the world

This is a fascinating exercise in evaluating the performance of CEOs serving the S&P Global 1200 companies, who have been in the job for more than two years (907 CEOs from 896 companies). Previous editions were published in January-February 2010, January-February 2013 and November 2014. This year the methodology is changed to include CEOs whose tenure started before 1995 and to include environmental, social and governance (ESG) indicators alongside financial performance. It’s fascinating to see who made the top 100 list and how the rankings have changed. For instance, while Amazon’s Jeff Bezos was number 1 last year, he is 87 on this occasion, due to low ESG values. These are not perfect measures, of course, but there are all sorts of further questions that one may ask. How many UK companies make the cut, for instance? Are there any patterns in terms of industry, education, density per country?

10. Adi Ignatius and Daniel McGinn: Novo Nordisk CEO Lars Sørensen on what propelled him to the top

The surprise no 1 CEO this year is Lars Sørensen of Novo Nordisk, a Danish producer of insulin and other diabetes medication. It’s quite clear from the interview that industrial relations are quite different in Denmark. Sørensen is not only paid much less than top American CEOs, but his leadership style is much more collegial. About his ranking, he says: ‘I’m leading a team that is collectively creating one of the world’s best performing companies.’ The business strategy is also long-term oriented: ‘corporate social responsibility is nothing but maximizing the value of your company over a long period of time, because in the long term, social and environmental issues become financial issues.’

Spotlight: Digital customer engagement

11. Scott Magids, Alan Zorfas, Daniel Leemon: The new science of customer emotions

This article synthesizes eight years of research to identify universal motivating emotions and to test, using demographic and actual purchase data, how particular high-impact motivators are linked to purchasing behaviours. Each step in this process is presented in detail: from singling out ten high-impact motivators, to illustrating how the intensity of emotional connection, when the motivators are activated, can increase the value of a customer for a firm. Further, there is a guide to implementing this type of analysis to shape strategy, shown through the example of a national fashion retailer.

12. Peter Horst and Robert Duboff: Don’t let big data bury your brand

The strength of this article is that it builds on the insight of Chief Marketing Officers who have dealt concretely with the problem of balancing promotions (and short-term sales) and the pursuit of marketing campaigns that enhance the allure and long-term attractiveness of a brand. The authors make several recommendations: make every marketing message do double duty, short and long-term; use insights from data to make the long-term case for brand investments; don’t pursue sales offers you cannot defend in brand terms; ensure productive collaboration between data analysts and brand professionals. Each of these is illustrated with testimony from named CMOs who draw on their long, outstanding careers.

13. David C. Edelman and Marc Singer: Competing on customer journeys

This article builds on earlier research on digital journeys at McKinsey (and published in HBR). The novelty here is the evidence that some companies have used the potential of new technologies, especially in terms of automation, proactive personalization, contextual interaction and journey innovation to make customer journeys much stickier. In these new journeys, a large part of deliberation and consideration of other brands is eliminated and the loyalty loop, where customers not only buy but also enjoy, advocate and bond with the product is much stronger. Examples are presented in detail, including the L’Oréal Makeup Genius app and the installation of solar panels on a house by Oakland-based Sungevity, in the US. Organizationally, this has led to the emergence of the role of journey product manager, who draws on multidisciplinary ‘scrum teams’ made up of specialists from all functions – design, development, analytics, operations, marketing.


14. Nathan Furr and Daniel Snow: The Prius approach

Disruption seems to be everywhere, as new technologies challenge businesses to re-think their offerings and business models. A common response to disruption is to try to develop a hybrid product or service which combines features of the old and the new. Taking account of how advanced the disruption already is – well under way, just begun, or a long way off – Furr and Snow offer a guide to combining features of the old and new to generate hybrids that can best serve business strategy. They identify seven kinds of hybrids, link them to specific business objectives and illustrate with examples, including historical examples, from a range of industries, such as photography, computers, and cars.

15. Francesca Gino and Bradley Staats: Why organizations don’t learn

Francesca Gino and Bradley Staats provide an inventory of four biases that undermine learning. Each is discussed through the challenges it represents and corresponding remedies. So the four biases against learning are: bias toward success, which ties us to past recipes for good performance and a reluctance to learn from failure; bias toward action, which, as well as being potentially exhausting does not leave enough time for reflection; bias towards fitting in which could leave many of our strengths unused and untested; and a bias toward experts, with expertise often understood in a narrow sense and leading to a tendency to ignore our own experience and the insight of those in our organizations who are on the front line of delivery.

16. Adi Ignatius interview with Larry Fink, CEO of BlackRock: ‘I am not talking about this to win a popularity contest’

BlackRock is an investment fund controlling assets approaching $5 billion and its CEO, Larry Fink, is also on the best 100 CEOs list (number 25). Fink gets additional space in this interview because the finance industry has been the focus of much public attention since 2008, and also because he is staking out a somewhat unpopular position. In April 2015 he wrote to CEOs in large financial companies to ask them to ignore activist shareholders and focus on the long-term health of their companies. Read this for his views on the role of government and the financial industry, rethinking fiduciary responsibility and what makes companies great.

17. Deborah M. Kolb: Be your own best advocate

This is a great discussion of how to think about everyday negotiations and how to spot opportunities to advance your work and career that may arise outside formal processes, such as hiring, promotion, appraisal. Kolb gives detailed, practical guidance on how to recognize, prepare, initiate and navigate these kinds of situations, including a repertory of ‘moves and turns’ to overcome resistance. For instance, ‘when he challenges your ability – “I don’t think you’re ready” – correct his impression: “I understand why it might appear that way. But here’s the experience I have that shows why I’m capable of managing it…”

18. Ramana Nanda and Liz Kind Case Study: Should this start-up take VC money or try to turn a profit?

The start-up in question matches start-ups with potential funders, venture capital or angel investors. The service is free and has built a large customer base. Should it remain committed to its generous ethos of helping the community, and stay free? And if so how could it raise funding for the next stage of expansion and development? What can be monetized and how without alienating its customer base?

19. JM Olejarz: The evolving cyber threat

This review looks at three recent books about the security risks involved in our internet lives. According to this assessment, the books are very good at identifying the risks but remain behind the curve when it comes to offering remedies. To fight fire with fire, something like a Wikipedia for cybersecurity issues, continually updating information on mutating threats, might be necessary.

20. Dana Lissy and Alison Beard: Interview with Bill T. Jones

Bill T. Jones has revolutionized modern dance and here he gets a chance to share thoughts about his leadership style, his struggle with depression and his hot temper.