HBR Nov 2016: Ecosystem innovation

Harvard Business Review
November 2016

Annotated table of contents

1. Adi Ignatius, Where are the women?

Adi Ignatius, the editor in chief of HBR, draws attention to the research behind the ranking of the best 100 Global CEOs published in this issue. He asks: why aren’t there more women in the top 100?

Idea Watch

2. HBR Team, Corporate VCs are moving the goalposts

Traditionally, the role of corporate VCs has been to invest strategically. Their role is to identify and help develop start-ups with potential strategic impact, usually in adjacent fields. Interviews with leaders of 16 corporate VC units, carried out by MIT researchers, have revealed however conflicting priorities as corporate VCs prioritize financial returns more than they seek strategic outcomes. The difficulty of measuring the latter is a major barrier. As the nonfinancial value of investments in start-ups is difficult to describe and quantify, VCs take refuge in managing what can be measured, i.e. financial performance.

3. Curt Nickish, Industrial espionage is more effective than R&D

Erick Meyersson (Stockholm School of Economics) and Albrecht Glitz (Pompeu Fabra University) have studied the archives of the East German Ministry for State Security (Stasi), analysing almost 190k informant reports and checking them against industrial sector economic data in East and West Germany during 1969-1989. They found that stealing industrial secrets from the West helped East German companies to stay ahead technologically at great savings in terms of spending on R&D. However, this has also helped entrench weaknesses due to underinvestment in long-term R&D capacity development.

How I Did It

4. Bill McDermott, CEO of SAP, on being the American head of a German multinational

From modest beginnings, McDermott took his first overseas assignment at 29, turning around performance at the Puerto Rico unit of Xerox where, through humility and willingness to learn from the people, he helped shift morale and performance. Today, he is the only American-born CEO leading a company listed at Germany’s stock exchange and the first foreign CEO of SAP in 45 years. He joined the company in 2002, as the chief executive of its North American business, where he was able to adapt the sales strategy to American expectations, emphasizing customer needs and the scalability of its software offerings. In 2010 he became co-CEO and then in 2014 CEO of SAP. Here he writes sensitively about the large implications of making fine cultural distinctions when interpreting behaviours and designing interventions.


5. HBR Staff: The best-performing CEOs in the world

HBR presents its 2016 ranking of the best-performing CEOs in the world. It is based on scores from three financial indicators and two environmental, social and governance scores, one more than last year. Intriguingly, the first few places are taken by European CEOs. A few other patterns stand out: 16 CEOs lead companies based outside their countries of birth; only 24 have MBAs, 84 are insiders, and collectively they buck the trend regarding the shortening of CEO tenure – on average they have been in office 17 years. The first three, Lars Rebien Sørensen of Novo Nordisk, Martin Sorrell of WPP and Pablo Isla of Inditex, are interviewed by Adi Ignatius on short-term performance pressures, compensation, managing Millenials and resisting populist pressure against business.

Spotlight: Ecosystem innovation

6. Ron Adner and Rahul Kapoor, Right tech, wrong time

Adner and Kapoor provide a robust and comprehensive framework for assessing whether new technologies will be adopted or resisted by incumbent firms. The framework is based on two dimensions: the ecosystem emergence challenge for new technology and the ecosystem extension opportunity for old technology. Adner and Kapoor then identify and describe four scenarios: creative destruction, robust coexistence, illusion of resilience and robust resilience. Examples illustrate each scenario and there is a diagnostic set of questions to allow both new and old technology firms to assess their position.

7. Maxwell Wessel, Aaron Levie, and Robert Siegel, The problem with legacy ecosystems

Wessel, Levie and Siegel argue that new information technologies now make available vast amounts of data that can change fundamentally customer relationships and partnerships. Since data is now scalable, defensible and reinforceable, its impact is strongly felt, as historically strong companies are increasingly displaced by digital natives. In response, they recommend several steps for historical companies as they attempt to refashion their supply chains and ecosystems: establish what you must do, develop better metrics, create commercial opportunities for partners. Examples from GE and Ford Motor offer insightful illustration and show that change can be beneficial for all concerned.

8. Nathan Furr, Kate O’Keefe, and Jeffrey H. Dyer, Managing multiparty innovation

O’Keefe, the managing director of Cisco Hyper Innovation Living Labs and two business school professors distil and present here Cisco’s process for identifying innovation opportunities and leading ecosystem innovation. This is a four-step process, each stage described in detail, with examples: identify the “focus zones” and partners; find and define the problem; convene the participants and prototype solutions; achieve commitment and follow-up. Three types of value are generated as a result: launch value (the profit generated by the new solutions), strategic value (the connections forged between participants) and exit value (knowledge, components and solutions that remain to be tapped in the future). Cisco has iterated this process several times achieving great success, with 75% of innovations generated gaining funding and expected additional revenue of $4.5 billion.


9. Stephen Heidari-Robinson and Suzanne Heywood, Getting reorgs right

This is a preview of the forthcoming book by Heidari-Robinson (a former Cameron adviser) and Heywood (the managing director of Exor Group) on company reorganizations. According to a McKinsey survey, the vast majority of reorganizations, four in five in fact, are deemed to have failed. Ignoring three preparatory steps is often part of the cause for failure, and Heidari-Robinson and Heywood walk us back to the process of designing reorgs to consider them in detail. First, there is the development of a clear profit and loss statement including what is hoped for and how it can be achieved in a particular reorg. Second, surprisingly perhaps, reorgs sometimes take the form of attempts to impose more or less arbitrary blueprints, without due consideration of existing strengths and weaknesses in organization. Third, thorough consideration of multiple options is also crucial in the preparation of reorgs, not least because a hybrid solution often emerges by pulling together the strengths of different approaches. Two further steps in re-orgs are to do with implementation – getting the plumbing and wiring right and then launching, with the proviso that even in the final stages it is important to adjust and correct.

10. Lori Goler, Janelle Gale, and Adam Grant, Let’s not kill performance evaluations yet

This article shares the experience with performance reviews at Facebook. Their processes are designed to make sure that reviews are ensuring fairness, transparency and people development. To enhance fairness, for instance, a team of analysts reviews anonymised evaluations for bias. Global, annual ratings, using categories such as technical, team, planning and execution contributions also facilitate comparison between people’s performances and remain useful, in addition to real-time feedback. To develop people, performance evaluations seek to identify areas of priority for improvement efforts. Seeing performance evaluation as a momentary balance of different trade-offs also leads to tolerance for variable performance, where high scores can follow low scores, or the reverse, in different years.


11. Monique Valcour, Beating burnout

Valcour suggests that there are three components to burnout, which can manifest to various degrees: exhaustion, cynicism and inefficacy. They may or may not be present at the same time, although, if present, they can reinforce each other. Her descriptions of these symptoms are clear and can help with the diagnosis. Having a more nuanced view of these dimensions of burnout can also help when thinking about recovery and prevention. She recommends prioritizing self-care, for instance, which might involve limiting exposure to negative people as well as practicing positive behaviours such as meditation, journaling and enjoying nature. To increase a sense of control and combat cynicism, question the underlying assumptions about what is possible and devise steps to change the situation. Finally, defining firmly your job to side-step or eliminate stressful elements and seeking out meaningful connections can help you play to your strengths and become more effective with less effort. The article also contains an inventory of ideas and actions to cultivate positive behaviours and help prevent burnout in your team, including how to watch for warning signs, set limits on workloads, insist on renewal, boost control, make recognition meaningful, build community, and so on.

12. Forest L. Reinhardt and Alison Beard, Case study: How would you save this farm?

Water has become scarce in California, with deep implications for farming there. This case study explores solutions to increased drought, including additional wells, the creation of a market for water, diversifying crops and building a solar power plant.

13. JM Olejarz, Understanding white collar crime

Two books on white collar crime explore the motivations of those who engage in it and the government’s options for prosecuting them.

14. Alison Beard, Life’s work interview with Marina Abramović

Marina Abramović is a dedicated performance artist who rose to prominence after many years of toil in obscurity. Here she shares her understanding of artistic practice, the convictions that underpin her extraordinary commitment and her teaching philosophy. To an exceptional degree, Abramović acts on her belief that ‘it’s very important to be vulnerable and to show the things you’re afraid and ashamed of to everybody – not just to people you love, but to the public. That way, we have a connection. We create trust.’