About two years ago I visited a friend in NYC who was part of a team doing a mobile shopping app. He gave me a link to download the beta app to my iPhone. To login to the app I had to use either my Facebook or Twitter account, both of which I had at that time. I asked him why I had to use either of those accounts to login and he told me that the company did not want users who did not have social media accounts. I said I thought that was a bit presumptuous, especially for a startup, but he assured me that the special login requirement would not affect customer adoption of the app. An historical note, the app never caught on and my friend moved to a different startup.
Yesterday I read a story, "Users Are Growling About Apps That Require Facebook", where they describe a dog app where you have to login with Facebook. Given that dogs are not allowed to have Facebook pages and friends (which I personally think is very unfair), the writer points out that requiring a Facebook login for a dog app is illogical. This story made me think of my friend in NYC.
If the login does not facilitate ease of use or increase the value of the app to the user, keep it as simple as possible.
Harvard Business School (HBS) has long been the worldwide leader in business and management education. I think that they deserve much of the credit for the awareness and development of advances in strategy, process management and productivity improvement. However, these fields are now almost completely developed and understood.
For HBS to maintain their leadership position they must find a new field to explore, study and document. Such a field must also be of interest to the readers of the several HBS publications or else that publishing empire is also under threat. I think the new field that HBS has chosen is the "role of the corporation". Many of the most prominent and the newer faculty are taking old concepts such as creating value, morality and economics and applying it to better explain the role of the corporation in a new world with large social and environmental problems. Perhaps another way to explain where HBS looks to be going is "what is the role role of the corporation in sustainability".
"The combination of larger corporations that exert more power over society and the separation of ownership and control led to shareholders surrendering their right that the corporation should be operated for their sole interest (Berle and Means 1932). In the words of Walter Rathenau (1918), ‘The depersonalization of ownership, the objectification of enterprise, and the detachment of ownership from the possessor leads to a point where the enterprise becomes transformed into an institution which resembles the State in character.’ "
The concept that these large corporations are accountable to their shareholders is no longer valid. These corporations are accountable to their management, but Serfafiem and I would both prefer that these corporations have responsibility to society. However, Serafiem goes to great lengths to explain that this is not a normative point but in fact just good business.
Eleven pages into the article Serafiem comes out of the closet, with this definition of sustainability:
"While there are many definitions of sustainability, broadly speaking it represents a portfolio of environmental, social, and governance (ESG) considerations upon which company performance can be evaluated. " [my emphasis]
Serafiem concludes the article by showing that there is a positive correlation for large corporations between support for sustainability and financial performance. In other words, supporting sustainability does not lower financial returns. Serafiem:
"At this point, a conversation is warranted about whether sustainability has a positive, negative, or irrelevant effect on future financial performance. If it is the case that sustainability destroys financial value, then an implication from the previous discussion is that large firms are at a competitive disadvantage compared to smaller competitors. .....The evidence seems to support a positive relationship between sustainability and future financial performance (Orlitzky, Schmidt, and Rynes, 2003). Very little evidence exists to suggest that sustainability can be an impediment to corporate profitability."
I think the type of research Serafiem is doing is in the early days but very interesting and worthwhile. Proving that saving the world produces better financial returns ties in perfectly with this post on social entrepreneurship from yesterday (just a coincidence), "Another reason to explain social entrepreneurship". The Corporate 1000 can provide the capital for social entrepreneurship to accelerate addressing social problems...and it will improve their financial performance....according to HBS. Sounds perfect!
I have some concerns about the notion that the 1000 largest corporations are "states" unto themselves. I have known this for a long time, but now I need to really think about what it means for society and the role of government.
Social entrepreneurship, using commercial business models to solve social problems, emerged about ten years ago and became very popular in the last 2-3 years. Reasons for the emergence of social entrepreneurship might include:
Better information made the scale of the social problems so dramatic that people were motivated to act
The Gates Foundation and others brought new attention and management concepts to address social problems
The morality of capitalism was called into question by the 2008 financial crisis and social entrepreneurship was part of the effort to show capitalism in a better light
While all of these reasons sound logical and perhaps admirable, maybe they were all just a coincidence.
Maybe social entrepreneurship emerged because of robots. No, robots are not yet managing society. I would have heard at MIT if that were true. Rather, as robots, automation and AI increasingly take over routine low value-added jobs there will still be work to be done by many. many humans both in the U.S. and abroad. Humans will still be required to solve complex problems such as social issues. Complex social problems do not lend themselves to resolution through computational approaches, even assuming the data were available and correct.
Social problems lend themselves to the types of approaches that are being tried in social entrepreneurship. By the time we refine our understanding of effective social entrepreneurship, there should be a large workforce displaced by robots ready to work on social problems. Social entrepreneurship may have emerged because humans need a new model to work from. So the bad news is that you are most likely going to lose your job to a robot. The good news is that you are going to be paid to save the world.
This post was inspired by an article at RobotEnomics, "Robots may take your job but it could lead to a more humane society". I love the blog tagline, "Tracking the march of the robot economy". I recommend you subscribe to the blog. Until the robots start blogging, this is the next best read on the subject.
Learning and creativity are both best achieved in a model which is self-directed, with a director or teacher at best in the role of mentor. Computer technology has fostered a return to this concept since the 1960s and recent advances have accelerated the trend. MOOCs might be an example.
The better thinkers exploring new ways for students to learn ask the question "what society will these children live in?" This question opens up an exploration of personal relationships in the future and the nature of work, to name just two key considerations. Gradually and grudgingly the world is coming to realize that an education system designed in the early 19th century is in need of overhaul. Soon perhaps more people will come to realize that democratic government is in need of an overhaul or perhaps a return to its original concepts.
One group exploring these issues is Exobase. They describe themselves:
"A place to figure out life, to learn, to build life-long friendships and partnerships, to do extraordinary things with your unique talents, and to learn how to make an independent income."
Exobase is part of a trend that I plan to follow and write about more. Exobase is an "alternative education" provider, an alternative to traditional degree granting universities. These alternative providers potentially could also serve the mid-life student who needs to learn new subjects that did not exist when they went to school (AI comes to mind).
Thank you to @Mariana_Lud for the heads up on Exobase.
This quote is from this article in Inc. on crowd funding. Crowd funding, venture capital, angel rounds and seed money were never about "cheap capital". Factoring, bank loans, mezz money and sub debt were never about "cheap money". If you think about the cost of money you miss the point.
Capital is about growth for expansion. If you properly create additional value in the business from the expansion capital, that economic benefit should dwarf the cost of the capital. (One caveat: the cash cost of the cost of the capital needs to be less than the gross margin. For example, paying a factor 6% per month when the gross margin is 5% probably does not work. Paying a factor 6% per month when the gross margin is 70% probably works.)
Crowd funding was never about cheap money. Crowd funding is a new way for entrepreneurs to access capital from around the world (web). Crowd funding is about early stage investment capital. Crowd funding is about not having to go through some government program to get startup capital. Crowd funding is about capital for entrepreneurs in Des Moines, Portland and Miami.
Now you just have to figure out how to make your investment opportunity stand out from the other 100,000 investments on a zillion sites that offer crowdfunding opportunities. That might be a challenge.
Since I began teaching social entrpreneurship, one of the earliest themes I establish in every course is:
"Government is not the default"
Most students have not thought about why we have government, what the role of government is and what services should government provide. How you define the role of government determines the domain of the private sector and capitalism. Within this domain of the private sector is where social entrepreneurship operates. Perhaps the larger the scale and effectiveness of social entrepreneurship, the less we need government.
A post on Cafe Hayek this morning made me realize that perhaps I need also to define capitalism for my students. Amongst the many benefits of capitalism, choice is one that does not get enough attention. This quote from Yale Brozen in the article ”The Revival of Traditional Liberalism", makes the point about choice clear and points out one inherent weakness in any government.
"The modern “liberal,” the reactionary in disguise, suspects every businessman of an intent to bilk him. On the other hand, he trusts every bureaucrat and trade union officer to look out for his interest. I, on the contrary, suspect everybody of looking out for his own interests, be he businessman, bureaucrat, union officer, consumer, Congressman, workman, or the ordinary citizen. I am somewhat willing to trust a businessman to serve me well since any attempt to bilk his customers will mean that he will lose business to competitors. This, at least, means that it is to his self-interest to serve me well.
The average politician I trust a great deal less since he is quite willing to serve my interest badly if the support he gains at my expense is crucial to his election. Besides, he can confuse the issue by offering a few items in his platform which have some appeal to offset the other things which are distasteful. In every election, I have had to choose either the grab bag of proposals offered by one party, 95 per cent of which are distasteful, or the grab bag offered by the other party, 97 per cent of which are distasteful. That is hardly a choice. At least, when I buy a General Motors automobile, I do not have to buy GM gasoline, GM schools for my children, GM garbage collection service, GM old age annuities, or GM anything else. In a free market, I can separate my decisions on what automobile I buy from my choice of what gasoline I consume, which service station I patronize, which mechanic I go to for repairs, or which company insures my car or administers the funds I save for my retirement income." (my emphasis added)
Recently I witnessed some professionals value a regulated company. For discussion, let's say the experts came up with $100 million or about $50 million more than the company's license alone would sell for. The seller only wanted $50 million for the company and the experts were gloating that they were getting the company cheap.
Now let's apply the "smart man" hypothesis, first explained in this post from 2009.Why would a smart man sell his company only for the value of the license. Answer: because the seller knows the customers and related cash flow are going away soon, very soon. The cash flow has no value.
Beware a deal that looks too good. Apply the smart man hypothesis, understand the deal from that perspective and then go back in and do more due diligence.
"Too often we are entangled in short sightedness. We need to adopt a more far-reaching view. We forget our basic human values. If we want to live in a better world, who do you think is going to bring it about? Only we human beings. Such change won't come about if we wait for government or the UN to take action, but if we take initiative as individuals. What we need is confidence and determination." (my emphasis)
Do you know who said this? Was it Friedrich Hayek or Ayn Rand? Was it some wacko Republican?
No, it was the Dalai Lama, one of the most revered spiritual leaders in the world. The Dalai Lama is advocating that individuals and the private sector solve the social problems today. Good enough for me.
On Friday I taught in the program I cannot talk about. After almost every event within a day, whether it be a panel, lecture, case, etc., we have a period of reflection and sharing. First students consider alone the theme and content of the event and then they share their thoughts with each other in a moderated discussion. A few observations on reflection and sharing:
Students demonstrate the most understanding of the subject after reflection
Students frequently offer more sophisticated points than raised by the teacher
Students are more likely to show their weaknesses and real concerns about a subject
If you would like to try this in a learning setting, this article by two professors at HBS provides some research and findings to support the use of reflection and sharing. An abstract of the paper referenced is below.
"Research on learning has primarily focused on the role of doing (experience) in fostering progress over time. In this paper, we propose that one of the critical components of learning is reflection, or the intentional attempt to synthesize, abstract, and articulate the key lessons taught by experience. Drawing on dual-process theory, we focus on the reflective dimension of the learning process and propose that learning can be augmented by deliberately focusing on thinking about what one has been doing. We test the resulting dual-process learning model experimentally, using a mixed-method design that combines two laboratory experiments with a field experiment conducted in a large business process outsourcing company in India. We find a performance differential when comparing learning-by-doing alone to learning-by-doing coupled with reflection. Further, we hypothesize and find that the effect of reflection on learning is mediated by greater perceived self-efficacy. Together, our results shed light on the role of reflection as a powerful mechanism behind learning."
I plan to continue to use reflection and sharing in my traditional classrooms starting in the fall.
One of my favorite stories about customer service comes from Nordstrom.
A lady comes into Nordstrom and asks for a refund because she is dissatisfied with a car tire she bought there. The clerk immediately refunds her the amount she "paid". Nordstroms, the upscale department store, has never sold car tires.
On Saturday I called Crocs. A pair of their wonderful shoes had worn out prematurely...in my opinion. Each shoe had a hole after ~90 days of wear. The clerk who answered the call confirmed my purchase online through their systems and immediately offered to send me a replacement pair of Crocs. After my short description of my problem, he only asked my name and then offered the replacements. No questions or comments from the clerk. The perfect customer experience.
Turns out that Crocs has a product warranty policy. I did not know that before I called or I would have researched it beforehand. The clerk from Crocs never mentioned the warranty. Why did the clerk not mention the warranty? Answer: I have a better customer experience. The call was like two people just discussing an issue, with no need for legal mumbo jumbo. Just two reasonable people solving a problem.
Makes one wonder whether companies need a warranty policy for customers. Maybe just train the staff to honor reasonable requests. While everyone worries about customer complaints appearing on social media, maybe everybody should just train staff to be reasonable regardless in lieu of corporate policies. Nordstrom's has had some success with a similar policy.
Note: perhaps for accounting purposes a policy is required in order to properly expense warranty cost, but you probably do not need to inform customer service.
This really interesting article on Brain Pickings referenced a quote from NPR:
"NPR recently shared a survey that found 40% of the American public doesn’t believe the world is more than 6,000 years old."
Of course, when was the last time you saw a reference to something older than about 2000 BC or about 4,000 years ago? Given the peculiar nature of Americans, we rarely reference anything that pre-dates the founding of the U.S. All of this just points out that we have a predjudice in the Kahneman sense with respect to time or perhaps more precisely history. The brain conserves energy by considering a very short timeline compared with the actual time that humans have walked the earth.
What this suggests is that we do not study and understand sufficiently the basic nature of humans, which may be constraining our abilityto really understand consumer problems and develop new business concepts.
If we go back about 40,000 years, two interesting things happened which enabled early humans to advance beyond their then current status as hunter gathers. First humans learned to trust beyond their immediate family and tribe and technology appeared for the first time. Technology allowed abundance and scarcity, fundamental economic concepts, to appear, which led to sharing (which required trust) and specialization. Specialization led to barter and the emergence of those efficient organizations called "firms", another economic term. However, as specialization and firms succeeded and made lives better, barter broke down and the more efficient money emerged. Congratulations, we have now reached approximately 12,000 BC.
Now we can argue about whether trust preceded sharing or not and whether firms came before specialization, but what is clear here is that the fundamentals of civilization include:
trust
sharing
firms
money
You might ask why this is important. The reason is that every time you change one of these four concepts a huge new market opportunity emerges. A huge new market opportunity emerges! For example, look at this abridged list of changes in money:
gold coins
paper money
bank accounts
credit cards
Pay Pal
Bitcoin
Every single change created a huge market opportunity and large companies that recognized the opportunity.
If you can insert trust or sharing into a new situation, one spawns a huge market opportunity. Ebay succeeded when it solved the issue of buyers trusting sellers, Airbnb allowed us to share our real estate. Amazon redefined the retail "firm".
Not a lot has been written about the techniques to identify the large market opportunities. Change one of the four fundamentals of civilization and you may have a large opportunity.
