Dec 11, 2022
| FROM Insead Admissions Blog: The Problem With Being Too Easy-going |
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When choosing where to go for lunch with a colleague or what movie to see with a friend, do you often say you have no preference, thinking that it would make the decision easier and make you appear more easy-going? At work, do you keep your personal preferences, hobbies and opinions to yourself, hoping this would make you appear more neutral and open to the needs and preferences of your co-workers? If you answer yes to either of these questions, you may want to rethink your laidback approach. Across three separate papers featured in Harvard Business Review, we uncover the downside of withholding personal preferences in various interpersonal situations. People who do so are viewed as less likeable, especially by those who make the decision for them (e.g., the person who has to pick the lunch spot or movie). In fact, we found that people who don’t express a preference in other contexts, such as not indicating their favourite food or music in professional profiles, are “dehumanised” or seen as robotic. This can make it harder for others to relate to and coordinate with them at work. For individuals whose jobs require creativity and a human touch, withholding preferences can harm perceptions of their work quality and hurt their hiring prospects. Want to be likeable? Be more upfront In our first paper, we approached pairs of friends walking together and randomly selected one of them to text the other an invite to dinner, along with a request to pick between two restaurant options. We asked the requester to tell us privately whether they would want their friend (the responder) to pick a specific restaurant or not. We found that whereas requesters almost always wanted the responder to pick a specific restaurant, responders often said they would be fine with anything (even though they told us privately that they did have a preference). We found this mismatch in multiple other experiments, involving a total of 2,000 participants, examining a broad range of other situations such as going to the movies or to a museum. Why did this mismatch happen? We found that requesters are more focused on making a decision as easily as possible, whereas responders are more focused on appearing easy-going and hence likeable. As a result, responders express their preferences much less frequently than requesters want them to, claiming they have no preference when they in fact have one. Unfortunately, these white lies can lead to unintended consequences, such as the requester picking a restaurant neither party likes. Requesters are also less inclined to initiate future outings with “easy-going” responders. But there is hope: In one study, we found that if the requester explicitly said they disliked choosing, responders were almost twice as likely to indicate their preference. Double whammy Our second paper looked to build on these findings, by further exploring people’s attitudes towards those who express no preference, as well as other implications of this communication strategy. We theorised that when someone claims that they don’t have a preference, it might seem like they are actually hiding it for some reason – in other words, people don’t believe it when others say they have no preference. If this is the case, then the person tasked with making the decision may pick the option that they reckon is closest to their companion’s preferred option, even when the choice is far from their own favourite. Effectively, the decision maker ends up with a double whammy of decision stress and a lacklustre experience. Our hypotheses were supported by six studies involving more than 2,500 participants. In one study, participants were asked to imagine that they and a friend were trying to pick one of three nearby restaurants for dinner. Participants were randomly assigned to one of two conditions: Either their friend expressed no preference (e.g., “Let’s go where you want” or “You decide”) or explicitly expressed their preference (e.g., “I’m leaning towards option A” or “Let’s go to option A”). Participants in the no-preference condition reported significantly greater decision difficulty compared to those in the explicit-preference condition. They were also more likely to believe that the friend in fact had preferences that they were not disclosing. In other studies, participants had to choose snacks to eat or games to play with a partner. When the partner said that they didn’t have a preference, participants assumed that they must like something different to them – and ended up choosing an option that no one preferred. In addition, echoing the findings from the first paper, participants liked the partner less when they expressed no preference. Dehumanised and devalued In a third paper, across six experiments involving more than 2,900 participants, we found that people are dehumanised by others when they fail to express preferences in innocuous contexts, like food and music. This is because holding a preference is an expression of a person’s individual, distinct identity. For example, participants rated a person who was indifferent to various massage options or to a variety of ice-cream flavours as less distinct and less human than a person who indicated a preference between these offerings. People with preferences, regardless of whether the preference was positive or negative (i.e., having a “favourite” or “least favourite” option), were perceived as more distinct, and thus more human, than those who lacked a preference. Importantly, we also found that lacking preferences has implications for evaluations of workers and their work. In one of our studies, participants were less satisfied with an interior designer who indicated no preference about his favourite food and music. They also evaluated a room he designed less positively than one designed by a designer with personal preferences, despite viewing identical pictures of a room. Express yourself and everyone benefits The fact that people tend to mispredict the consequences of withholding their preferences in social situations means they can mistakenly think they are being helpful and contributing to a collaborative workplace. Employees may believe they come across as agreeable by not expressing themselves; managers may believe that they are creating an environment with less conflict. However, our findings suggest such reticence can weaken the quality of relationships among colleagues and compromise evaluations of our work. Both managers and employees should alter the way they present themselves and interact with colleagues, expressing their preferences as a way to achieve better team morale and better professional reputations. Our research points to inexpensive solutions for eliciting expressions of preferences in the workplace. The key is making members of an organisation aware of the potentially negative impact of staying silent and leaving decision making to others. For example, managers could administer surveys prior to meetings to draw out inputs from employees who would otherwise hold back from contributing to joint decision-making situations. Managers could also consider conducting team building exercises that help individuals overcome any professional concerns and be more open and honest about their personal preferences. Taking this concept further, our research reinforces the value of creating a company culture that actively encourages input from all employees. Managers, in particular, should be more honest about their own likes and dislikes rather than worrying about alienating other employees. New workplace norms In fact, this strategy may have particularly strong benefits for C-suite executives, who are often considered cold and aloof. By being open about their preferences, colleagues and employees will perceive them as more human and more likeable, which should in turn engender greater support and collaboration among their team members. Modelling the desired openness would also help establish new workplace norms where voicing personal preferences is expected, explicitly encouraged, and rewarded. An internal company website that publishes employees’ hobbies and tastes as “fun facts” could go a long way towards making the rank and file feel more comfortable actively voicing their preferences in the workplace. Similarly, organisations – especially those in the creative industries where creativity is deemed to be important to success – could take this idea further and highlight employees’ preferences in areas such as food, music and vacations to potential clients. Finally, job applicants could include information about their hobbies and lifestyle preferences on their resumes. Our research suggests that this may be a particularly effective signal for jobs requiring communication, warmth and likeability (e.g., sales). Whether it’s social interactions or workplace communications, expressing a clear preference is a win-win. Not only does it help the person seeking your feedback, it also makes you come across as more likeable, human and, in some situations, more competent. |
Dec 13, 2022
| FROM Insead Admissions Blog: Managing in an Unimaginable World |
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Every so often businesses face shocks that have unknown and unpredictable implications for the future performance of their existing strategy and business model. In an increasingly global world, the repercussions of a significant shock – such as the Covid-19 pandemic – simply cannot be imagined. When the virus first started circulating, nobody could begin to fathom all the ways in which it would impact their businesses and personal lives. In such instances, managers face a set of known unknowns (risks they are aware of) and unknown unknowns – a phrase popularised by former United States Secretary of Defense Donald Rumsfeld to describe the things “we don’t know we don’t know”. When known unknowns arise, managers have a good idea what their alternative strategy options look like, but don’t know which one will afford them future competitive advantage. But when managers face unknown unknowns, future strategic options are unclear and unknowable. In a recent research paper, my co-author Peter Williamson* and I propose a set of practical tools that managers can use to help their companies deal with unknown unknowns in the wake of external shocks. Uncertainty in an emerging, global world Many still consider globalisation to be a simple, linear and reversible connection of economies or aggregation of markets. According to conventional wisdom, as the world globalises, countries become more similar, borders disappear and the world becomes one market. But globalisation is no longer linear, nor predictable and it is certainly not reversible. We are living in an emerging, global world. While the flow of goods has slowed with more pronounced patterns of deglobalisation, the flow of information, ideas and data across borders is increasing like never before. Living through this new phase of globalisation means also coping with extreme uncertainty. The Covid-19 pandemic is a prime example of a shock to the business environment that left companies, customers, suppliers, consumers and even governments and regulators not knowing how they could – or should – respond. Yet it also led to unparalleled levels of international cooperation to develop efficient vaccines in record time. This kind of scientific breakthrough could only occur in a global world. But discovering unexpected opportunities to adapt to or shape the future market of the business is not an easy task. When it is unclear what the repercussions of a given shock will be, and who will change their behaviours and how, you need serendipity to point you in an unexpected new strategic direction. We have observed three ways in which a company can increase the odds of a serendipitous discovery following a significant shock: Look for serendipity in your operational responses to unforeseen events Operational staff are often forced to improvise when dealing with new challenges that established processes and procedures can no longer handle. Some of these “work arounds” may reveal serendipitous opportunities in the form of unexpected directions your future strategy could take. Swedish furniture retailer IKEA’s shift in strategy and business model after the shock of World War II provides a good example. In the 1960s, increasing industrialisation and urbanisation in Sweden had created a new class of customers setting up home in cities and needing to make empty apartments liveable quickly. As a result, IKEA’s first retail store in Stockholm in 1965 was an immediate success, drawing long queues of customers. The local manager improvised a solution by opening the warehouse and letting customers pick the products they wanted for themselves. Surprisingly, customers showed no hesitation or dissatisfaction in adopting this new, radical arrangement. While IKEA was looking for growth by opening a new store and exploiting its existing business strategy, it found something even more valuable: the novel and unforeseen possibility of changing its business model in a way that delivered more value to customers while improving profitability. Suspend your beliefs about the business environment In order to recognise the potential of serendipitous events, you need to discard assumptions about key relationships between the business environment and your business model. This is how Advanced RISC Machines (ARM) came up with its first break-through product. Today, ARM’s Reduced Instruction Set Computing (RISC) chip designs are found in over 95 percent of smartphones in the world, including Apple, Huawei, Samsung and Xiaomi. The business environment of microprocessors was hit by a shock in the 1990s when a potential mass market for digital handheld, mobile devices began to emerge. ARM, experienced in designing chips for low-price desktop computers, thought it saw an opportunity for its simple, cheap chips. It decided to pitch one of its existing designs to Nokia, then a leader in mobile phones. When Nokia pointed out a long list of deficiencies with the offering, ARM realised it had discovered something it had neither known nor expected: Nokia’s key problem wasn’t how to reduce the size or cost of the chip, but how to cut its power consumption and heat generated. ARM then launched a set of experiments with its partners to understand how to redesign its architectures and reconfigure its resources and processes to deliver such designs. ARM’s realisation that it could benefit from working with partners several steps removed in the value chain led to a profound shift in strategy. Following this serendipitous discovery, through search, experimentation and agile reconfiguration of its organisation, ARM was able to craft a systematic set of policies and processes to lead a global ecosystem of diverse partners, each with specific capabilities. Develop your business ecosystem as a source of serendipity Serendipitous opportunities are more likely to arise when businesses take steps to attract more diverse partners – possibly from different industries – to the ecosystem, promote connections between partners and launch initiatives to improve the quality of those connections. For example, when medical practice Athena Women’s Health faced a problem with customer payments, it developed a web-based billing system to track patients, handle medical billing and carry out insurance eligibility checks. When the founders approached potential venture capitalists to fund the growth of the clinic, they found that investors were more interested in backing the software than the medical practice itself. This discovery led them to launch a healthcare IT company, athenahealth, and eventually generate annual revenues of almost US$250 million. They then developed an ecosystem where partners would bring in new capabilities and knowledge from different businesses. Encouraging diverse partners to collaborate led the way to the creation of an array of innovative solutions for their client base, helping their revenues surpass US$1.2 billion. From serendipity to a new strategy When you discover something unexpected and surprising, instead of treating it as an outlier or a failure, try to understand what shifts in the market caused it and what implications they might have for your company’s future strategy. This will enable you to turn unknown unknowns into known unknowns. Then ask yourself where alternative responses to the serendipitous event might lead your strategy in the future. Now that you know what to look for, refine these alternatives through search and experimentation. These techniques of exploration, guided by risk management, will turn known unknows into known knowns. Now your new strategy can take shape. This will require strategic agility: the capability to quickly reconfigure resources, nimbly adapt the organisation’s structures and processes and possibly revamp the business model to deliver that new strategy. As businesses continue to face situations so uncertain that possible future scenarios can’t be articulated, foresight and flexibility alone are not enough. Managers need to embark on this process of strategic discovery to find a previously unimagined strategic path for the future. *Peter Williamson is an Honorary Professor of International Management at Cambridge Judge Business School. |
Dec 18, 2022
| FROM Insead Admissions Blog: In the US, Owning a Home May Not Lead to a Better Life |
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To many people, purchasing a home is one of life’s key milestones. Having a place to call your own not only confers stability and status, it is often also a store of wealth for you and even your children. But homeownership doesn’t always lead to prosperity in the United States, my colleagues* and I found. First, some background: Although slavery, segregation and other explicitly discriminatory policies and practices have long been officially consigned to history, wealth and income disparities between Black and white Americans remain stark. White households are on average six times richer than Black ones and earn twice as much. The gap between white and Black homeownership rates is ironically wider now than it was in 1960. This begs the question of whether policies intended to close the racial gap in homeownership and wealth are effective. Our analysis shows that a long-standing mortgage scheme that enables Black households to purchase homes may lead to unintended consequences that perpetuate racial wealth disparities. Unintended consequences The scheme, underwritten by the Federal Housing Administration (FHA), enables cash-strapped households to obtain loans covering as much as 96.5 percent of home prices. In 2020, 42 percent of Black borrowers applied for an FHA mortgage, compared to 15 percent of white applicants. This is not surprising if you consider that first-time white homebuyers come up with US$25,000 for downpayment on average whereas Black buyers, who are generally less well-off, can only afford US$600. But the FHA mortgage scheme has a drawback: Borrowers are subject to loan caps which limit them to cheaper homes. Properties eligible for FHA loans cost US$200,000 on average, only a third of the typical home. Unfortunately, cheaper homes are usually not located in areas with better-paying jobs. You would hardly expect Detroit, for example, to offer similar opportunities for upward mobility as New York City. We investigated whether the difference between how much Black and white homeowners borrow, or the leverage gap, contributes to persistent wealth disparities between Black and white Americans, and by how much. To do so, we developed a model that simulated the leverage gap and its associated outcomes, including where people live, their incomes and long-term wealth accumulation. Even without factoring in explicit discrimination such as racial bias in loan decisions, our model generated a substantial Black-white wealth gap: White households were on average 3.25 times richer than Black ones, a gap equivalent to more than half of the disparity in real life. Moving to opportunity Next, we conducted counterfactual experiments to uncover how alternative policies could affect the racial wealth gap. First, we relaxed the leverage requirement in high-opportunity areas, enabling borrowers to purchase homes at loan-to-value ratios of 95 percent instead of the prevailing 80 percent. The result: average home ownership in the desirable areas increased by 2.5 percent across all races, and more than 25 percent among Black households. This in turn bolstered Black incomes by nearly 5 percent and Black wealth by 18 percent. What if policies were aimed at reducing frictions of moving between high- and low-opportunity areas instead of enabling homeownership? Our model shows that such policies would substantially increase Black wealth by 50 percent and income by 6 percent, thus reducing Black-white wealth gaps. The flip side is that Black homeownership would decline by 4 percent overall, as some households choose to rent in high-opportunity areas – and reap benefits like better jobs – than purchase homes in less desirable locales. These households would then consume and save more, such that should they eventually purchase homes, they would be richer and borrow less than they would have to otherwise. Homeownership is no sure way to wealth Believed to be one of the stepping stones to a better life, homeownership has long been one of the underpinnings of the American Dream. But our study shows that it may not be the best way to amass wealth for Black Americans and other minorities, since existing housing mortgage policies constrain their ability to live in high-opportunity areas. Might tweaking the FHA scheme be the solution? As demonstrated in our study, one (potentially risky) way might be to remove the loan cap to enable borrowers to buy homes in desirable areas with high leverage. But this would increase the level of debt in the economy, possibly with dire consequences. The 2008 financial crisis is a salutary lesson. What about simply phasing out the FHA mortgage scheme? This would require all homebuyers to pay 20 percent of the price upfront. Interestingly, we found that this would help Black Americans save more and accumulate more wealth than if they had access to high leverage loans. But they would also consume less, so this solution is not ideal from a welfare standpoint. From our perspective as economists, the best way to close the racial wealth gap is to help Black households move to high-opportunity areas by reducing their moving costs. This could take the form of paying for their relocation expenses, providing them with information about the benefits and opportunities in other locations, and assisting them with their search for new homes and the associated paperwork. The drawback, as our study shows, is that more households end up renting rather than buying, thus foregoing certain benefits – not least psychological ones – that owning a home brings. Whether this tradeoff is worth it depends on the individual, but our work serves to highlight to policymakers that wealth, homeownership, income and welfare are far from synonymous. *Arpit Gupta, NYU Stern School of Business, and Christopher Hansman, Imperial College London. |
Dec 20, 2022
| FROM Insead Admissions Blog: How to Break Free From Herd Mentality |
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We have all been in situations where it is easier to follow the crowd than to go against it. We change our mind and succumb to group pressure just by being told that most people think about an issue in a certain way. By unconsciously internalising the opinions, feelings and moods of others, we can end up thinking these ideas are our own. Even though we treasure our individuality and like to imagine that we are in control of our lives, we are hardwired to imitate others and follow the herd. And when stressful situations arise, we are even more likely to acquiesce to other people’s suggestions without taking much of a critical stand. Worryingly, our brains maintain the illusion that whatever we’re doing is based on our independent judgement. Herd mentality or “sheeple” behaviour can be found everywhere from the financial sector to outbursts of mob violence, political movements, religious gatherings, sporting events, riots, strikes and even consumer preferences such as fashion trends. In each of these instances, individuals adopt opinions based on what other people say and do without considering the evidence for themselves. Many threatening situations – real or imaginary – can provoke sheeple behaviour. These are not just circumstances of physical danger, but also the fear of being different, uncertain or the odd one out. For example, people will make irrational or non-optimal decisions and behave in a herd-like fashion when motivated by the desire to fit in, which can result in groupthink. When following the crowd is dangerous Without herd instinct, our ancestors would not have banded together to fight off animals or help each other collect food. While there are many benefits to be gained by living and working cooperatively in groups, sheeple behaviour also makes us easily susceptible to manipulation. This is particularly the case in the context of leadership, where neo-authoritarian leaders exploit herd mentality to rise to power. The dark side of sheeple behaviour manifests when individual judgment and opinion-forming processes shut down. Essentially, a process of social contagion takes place, meaning a tendency to automatically mimic and synchronise expressions, words, postures and movements with other people, which contributes to behavioural convergence. It only takes 5 percent of what scientists call “informed individuals” to influence the direction of a crowd, mobilising the other 95 percent to follow without even realising it. Historic leaders including Hitler, Stalin and Mussolini and their contemporaries Bolsonaro, Trump and Xi have exploited this behaviour among populations. Today, we can clearly see how Putin is manipulating and indoctrinating the Russian people with disturbing propaganda material to rationalise his disastrous war. This sheeple programming in our brains explains why otherwise sane and sensible people can reject common sense. It should therefore come as no surprise that in times of uncertainty, we will always look to strong leaders to guide our behaviour. How do we stop regressing into herd mentality? Probe your personal beliefs Fostering independent thought and reflection can reduce the risk of sheeple behaviour. We need to ask questions, consider our options and educate ourselves in order to make well-informed decisions, even if that means running the risk of looking foolish. Just because everyone else is making a quick decision doesn’t mean that they know best. It will always be the easier option to follow the herd rather than make independent judgements. Thus, when making a choice, we should examine the biases we may have and question their sources. Evaluate and justify your options Realising the need to justify our choices will make us less likely to blindly mimic other people. It will prevent us from living in an echo chamber and accepting ideas without further scrutiny. It is our task to evaluate our personal beliefs when they contradict what others are doing. We should welcome different opinions, but at the same time try to understand why they are so different. Large numbers of people can be wrong Whatever position we take, there will always be much (conscious and unconscious) pressure to belong to a group. Hardwired as we are to blend in, it will be difficult to oppose the opinion of the majority. We will always have to struggle with the belief, irrational as it may be, that large numbers of people cannot be wrong. It is our challenge, however, to oppose this idea. We should never assume that something is right simply because the majority of people agree on it. Instead, we should ask ourselves whether the choices that we make are really our choices, or whether we have fallen into a sheeple pattern. Reflect and delay taking action We also need to be aware of the degree to which stress affects our decision-making capabilities. Reflective decision-making is more important than ever when we feel pressured to act quickly. It is wise to delay taking action until we have assessed the situation and are fully aware of what’s happening. Whenever we feel the pull of sheeple behaviour, we should remind ourselves that it is our capacity for both independent and dependent thought that has made humankind so successful and allowed our species to progress. It has helped us learn new things, as well as discover, develop and advance ideas. Of course, this doesn’t mean that we should ignore our evolutionary heritage. After all, a society of people all working off completely different scripts – with no common themes – would be dysfunctional. Humans are socially wired, meaning that we are looking for common ground when we get together as a group. Our brains will therefore always rely on a certain degree of groupthink. At the same time, we should not forget that stimulating independent thought is the only way to reduce the risk of collective madness. It is thus our challenge to distinguish between the wisdom and the madness of crowds. |
Dec 20, 2022
| FROM Insead Admissions Blog: Confronting Climate Change in Africa |
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Climate change is having a devastating impact on the African continent – creating food insecurity, stressing water resources, depleting human health, displacing populations and impeding socio-economic development. Like elsewhere on the planet, its consequences are felt the most by those who can afford it the least. To better understand these challenges, the Hoffman Global Institute for Business and Society collaborated with the Africa Business Club to host Climate Change: Impact on Africa on 3 November as part of SDG Week 2022. It was a timely event, given that – only days later – COP27 explored how progress on the African continent will impact global development in the next decade. This year’s United Nations climate change conference introduced initiatives such as the Friends of Greening National Investment Plans in Africa and Developing Countries, Africa Just & Affordable Energy Transition and African Women’s Climate Adaptive Priorities, while also scrutinising the finer points of climate change’s impacts on Africa. The INSEAD panel, which featured four experts from diverse industries, explored the impact of climate change on Africa and possible solutions. Its impetus was to identify actions and innovations coming out of Africa that would benefit the continent, as well as provide ideas to other parts of the developing world reeling from similar problems. The panellists’ conversation led to several important takeaways, as highlighted below. Climate challenges interlinked with development challenges Panellists began by discussing how Africa’s climate challenges are interlinked with both local and global development challenges, and how potential solutions to these challenges must take this connection into account. Growth that is climate resilient and environmentally sustainable, for instance, has a positive impact on both global development and the planet. Hania Dawood, Manager for Climate Finance & Economics at the World Bank, pointed to several statistics that affirm the linkages between climate and development. In Africa, she said, 50 million people are on the brink of falling below the poverty line for reasons connected to climate change, 100 million people are at risk of being displaced by climate change, and about 600 million people lack energy access. Forty-five African economies are dependent on commodity exports, including fossil fuels. At the same time, more than 30 percent of the continent’s population lives in extreme poverty. “As we think about tackling and supporting countries in their climate development journey, ensuring a low-carbon and resilient pathway for development is critical,” said Dawood. While there are “opportunities to tackle climate change on the continent,” she observed, development challenges are inhibiting progress. These include barriers to private sector investments due to weak business environments that cover property rights to dispute resolution to bankruptcy and insolvency legislation. Climate change is also amplifying economic development challenges in Africa and worsening socio-economic inequality. Africa has only contributed 3 percent of greenhouse gasses worldwide, and yet it is experiencing some of the worst impacts of climate change, such as drought and desertification that has left 20 million people on the brink of death due to starvation and thirst. By 2050, the continent’s population will have doubled, exacerbating the problem unless remedial actions are immediately implemented. James Mwangi, Executive Director of Dalberg Group and Founder of Climate Action Platform for Africa, explained that Africans have been driven into survival mode in part because they were so close to the line to begin with. “I cannot think of a single product value chain in the world in which Africa receives raw materials and engages in value addition, which is where a lot of value and wealth is created for citizens, and then exports back out,” he explained. “It all flows the other way. So long as that is true, the poverty trap continues.” Mwangi argued for shifting greater amounts of value addition to the continent to help transform Africa into an economic engine of growth. “What we need is commercial investment into Africa that's good for the planet and good for the continent,” he said. “That translates into the resilience and the growth that we need.” Solving climate challenges for Africa and the world Rather than focus on Africa as a victim of climate change, the panellists emphasised Africa’s potential to serve as a provider of climate solutions that benefit the continent and broader world. With its young and growing population, large workforce, huge land mass, abundant natural resources and untapped renewable energy, Africa has an opportunity to steer away from business-as-usual and go green from the start. Seizing this opportunity could motivate global capital to drive decarbonisation, enable Africa to produce more value-added products for the globe, elevate the continent for its climate competitiveness, and create jobs for the world's largest workforce. Perhaps most importantly, it could help Africa deploy its workforce “towards stewarding, supporting nature and building new approaches to sequestering and capturing carbon at scale,” said Mwangi. The nation of Gabon, designated as a High Forest, Low Deforestation (HFLD) country, serves as a model for aligining climate action and development to advance socio-economic progress. By preserving its rainforests, Gabon has effectively safeguarded the Congo Basin, also known as the world’s largest carbon sink or the “lungs of Africa”. The Congo Basin captures 140 million tonnes of CO2 each year, contributing to an ambitious, global goal: According to the National Academics of Sciences, Engineering and Medicine, approximately 10 billion tonnes of CO2 must be removed from the atmosphere each year to limit global warming to 1.5°C. Gabon’s carbon credits programme is also regarded as a model of environmental policy. The programme stems from more than 50 years of investment and commitment to environmental protections; Gabon created its first Ministry of Environment in 1960, first environmental law in 1992, and a network of national parks in 2006. In 2010, the country banned the timber industry from exporting unprocessed logs, bringing positive impact to the economy, environment and wellbeing of citizens over the following decade. Within eight years, Gabon had reduced its annual deforestation rates to 0.1 percent and significantly reduced its emissions. Meanwhile, workers who had once served as log cutters moved up the industrial value chain and improved their livelihood. Today, Gabon has 90 million carbon credits – that is, credits for the CO2 emissions it has saved – which it is now in the process of selling. “We are able to monetise carbon credits, and we are absorbing more carbon than we are emitting every day,” explains Akim Daouda, CEO, Fonds Gabonais d’Investissements Stratégiques (Sovereign Wealth Fund of Gabon), adding that Gabon only emits 35 million tonnes of CO2 each year. A market fit for purpose? Daouda cautioned that the carbon market is still in its infancy and has yet to accelerate progress in carbon capture. Dawood, however, was more optimistic. “I believe that high integrity and transparent carbon markets have the potential to unlock capital for climate action,” she said. She pointed to recent estimates about the expected growth in voluntary carbon markets, driven in part from corporations that have met net-zero goals. Corporations’ voluntary commitments in addition to progress made on Article 6 of the Paris Agreement have the potential to drive significant growth carbon markets. She also noted the creation of Frontier Climate, an advance market commitment that aims to accelerate the development of carbon removal technologies, as a good example of how demand for emission reduction credits can unlock investments in new mitigation areas such as carbon removal. Mwangi agreed carbon markets need to work better, citing the problem of too much intermediation. “By some estimates, for every dollar spent to buy a carbon credit on the global markets from Africa, 20 cents might make it to the local communities or the people on the ground doing the work,” he said. Young Africans, he added, should consider starting carbon-verification businesses to address this problem. Indeed, there is both risk and opportunity at hand, Daouda said. “Centuries ago, someone put a price on the dead tree, and that was the beginning of the timber industry,” he said. “Now, we have to ensure that we are putting a fair price on the living tree so that we can keep those trees alive.” Bringing inclusion to solutions To create impact, climate action and development solutions need to meet another important criterion: They must be inclusive – engaging the entire population, and never leaving anyone behind. In Africa, women and youth are often overlooked in business and society, said Pauline Koelbl, CEO of AfriProspect GmbH, and Founder and Managing Partner of ShEquity. “We are excluding the majority of the population that could be contributing to solving the challenges,” said Koelbl. “They are the future of the continent, but we’re not looking at them.” The impact investor cited research indicating that climate change is impacting women more negatively than men, and the fact that women entrepreneurs face an unfair disadvantage when trying to raise capital. “African women on the continent face a US$42 billion gender funding gap,” noted Koelbl. “At the same time, they're driving 40 percent of SMEs (small and medium enterprises) on the continent.” To help close this funding gap, ShEquity invests in women-led businesses that address environmental and sustainability issues. One company is producing an insect protein and organic fertiliser, another company is helping to reduce the number of cars on the streets by creating a bus pool for professionals, and yet another is developing a superfood that only grows in desert areas like the Sahara. “African women are driven to solve a challenge, and their businesses intersect with the [problem of] climate change,” says Koelbl. Collectively, we can lead solutions that are good for Africa and good for the planet. We don’t need to follow the narrative from the rest of the world.” |
Dec 23, 2022
| FROM Insead Admissions Blog: Twitter's Remarkable Mission in a Divided World |
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While the world continues to hotly debate climate change, there’s another change that should be on our radar: a “societal climate change” fuelled by people and technologies, mainly the internet and artificial intelligence (AI) that can spin truth from fiction and erode trust in each other as well as our political institutions. What if a global “digital town square”, as Elon Musk calls Twitter, divides us further and erodes civilisation towards its demise? To liberally paraphrase the Chief Twit: It no longer matters whether our existence is threatened by climate change if civilisation has already collapsed. A collapse may happen, not because of AI killer machines or another bad tech as many fear, but because people are losing sight of reality. In a virtual world, haphazardly run by both humans and AI algorithms – now also ChatGPT – creating filters, people can turn against each other and destroy the common good –us all. As Musk concluded, “Human consciousness is [then] gone”. Musk may be terrifyingly right about the existential risks arising from technologies. People now question whether we can afford to put such a responsibility in the hands of a single company or any single person. However, the more pertinent question is: Regardless of ownership, how can we collectively govern this risk? While we watch corporate change unfold at Twitter with Musk moving at dizzying speed, our polarised world is regrettably taking sides for or against the new and old Twitter. Both sides miss the point, not only about what’s at stake, but that governance done right matters more than most people imagine, irrespective of ownership. Extraordinary challenges require good governance at different levels – corporate and government, national, and international. This is necessary to ensure success for every individual, company and country is sustainable. Both the old and the new Twitter, and governments, have so far failed at this; the point has been buried in a debate overtaken by emotions. Sadly, poor governance is the reason why we collectively fail to ensure that remarkable people, organisations and countries (the US, Russia China, and all others) realise their full potential – to imagine and build a better world. But what does good corporate governance look like in the face of new existential risks? Saving the world’s town square? Musk should be commended for correctly assessing the huge societal risks that can arise from platforms like Twitter. Purchasing and delisting Twitter allows him to govern without attacks from parties such as minority shareholders arguing that his risky and sometimes reckless experiments hurt their interests, the corporation and Twitter’s share price. Twitter’s Musk does not have to face the same shareholder challenges as Tesla’s Musk. Privatisation is often an effective way for a company in turmoil to realise its noble purpose, particularly in a divided country with divided shareholders. There's always the possibility to go public again. Musk now faces arguably his greatest test ever: Can he lower the societal climate temperature to a healthy level, bring together a divided world, ensure freedom of expression and safety for all, save democracy and strengthen global peace through more meaningful conversations? Musk’s challenge is ours. It is futile and even harmful to split into pro and anti-new Twitter or Musk camps. With so much at stake, we need to ask: What support does Twitter – and its owner, whoever that may be – need to succeed in an endeavour that affects us all? Musk on a Twitter mission impossible? Musk is arguably one of the greatest entrepreneurs of our time, having pioneered electric vehicles, privatised spacecraft for NASA and outpaced all governments and businesses to connect Ukrainians with Starlink, his satellite internet service. Twitter, too, is a remarkable organisation trying to "strengthen our communities through our platform, people, and profits." The mission is laudable, but executing it well may prove illusory and executing it poorly will lead to undesirable outcomes. One month after becoming Chief Twit, Musk delivered on his promise of reinstating previously banned individuals – Trump included, after an open poll. He also demonstrated his commitment to “full transparency” by publishing the now notorious Twitter Files: internal communications highlighting the firm’s previous processes and challenges in making major decisions with severe socio-political impact. Musk’s transparency is hailed by many. While we of course support transparency, it alone does not equate to good governance; it may not even be desirable if poorly managed. Indeed, the Twitter Files have raised the social temperature, pointing not only to the potential perils of transparency without strong processes – a key feature of good governance – but also the difficult questions companies like Twitter face. Whether the files succeed in supporting Twitter’s mission remains to be seen. Corporate governance failures at the new and old Twitter A laudable mission requires an equally laudable corporate governance that takes responsibility for executing it and is accountable to all stakeholders. Moreover, the key lesson often missed is that getting governance right is a constant work in progress involving continuous conversations, feedback, learning and refinement. The legislative and regulatory changes implemented by banks following the 2008 financial crisis clearly demonstrated this. Major corporate disasters – such as Theranos and FTX – also remind us how “simple” lessons are often missed. For example, it is well established that responsibility needs to be placed with a group of people – the corporate board of directors – and not any single person. This generally leads to better outcomes, although there can be rare, and typically short-term exceptions. However, the group needs to perform as part of the “Governance Tripod” that includes owners, directors, and management. Unfortunately, the Tripod isn’t always effective. For example, the chair and the board of the old Twitter could have done more to explain to all stakeholders, Musk, Democrats, Trump supporters and the entire US public that the responsibility for Twitter lay with its board, including overseeing and possibly managing the impact of major decisions from the Trust & Safety Council and the Legal and Policy teams. Society demands a responsible Twitter that doesn’t take sides, but instead, unites the world by involving all sides, however divided. Perhaps most importantly, Twitter needs to continuously remind those that disagree with its decisions that it is ready to listen and engage, with the commitment to improve in line with its mission and values. Good governance requires an open mindset and is a continuous conversation – with all stakeholders. Twitter’s leadership also needed, and still needs, stronger and more active governance to support, empower and leverage its potential. The information in the Twitter Files shows the seriousness with which management tried to deal with complex issues under difficult circumstances. They also point to significant decisions taken by the Trust & Safety Council together with Legal and Policy, without the knowledge of the CEO, let alone the board. It might be a reasonable policy not to involve the CEO to shield this person from outside pressure. The board – perhaps with the support of another “Trust & Safety Board” including representatives from opposing stakeholders sides and civil society – could review the policies and processes leading to major and possibly systemic decisions such as Trump’s dismissal. Ultimately the board bears the responsibility and accountability for the company and how it carries out its mission, and should bear the brunt of the pressure. Governance at the new Twitter hardly seems to be better. To begin with, Musk has become a single owner, chair and CEO, allowing him to appoint himself as the sole board member with nearly unlimited power. Musk has done away not just with a central Trust & Safety Council, but more importantly with an independent Board of Directors. While power-of-one can work for some time, it is a risky proposition – not only for Twitter, but also for Musk and society because of Twitter’s systemic externalities. Given what is at stake, we may not wish to take this risk. When it comes to executing its mission, the decision-making processes at the new Twitter seem far from fair process practice, which could hurt its corporate standing. Those who support the new Twitter applaud the innovative and transparent approach of “going direct” to people. Few would argue that major decisions, such as the appointment of a company’s CEO, be taken through a public poll without deep knowledge of the role’s responsibilities, the market landscape or the capabilities of the candidates. These are decisions for the board, and in this case Musk as chair, not as CEO or owner. What next for Twitter and the global virtual world? Musk is in a precarious position. He bought Twitter to make it stronger but now risks making both himself and the company weaker, possibly bankrupt. Good governance would protect and strengthen Musk and Twitter. It requires Musk (as owner) to possibly replace Musk as chair and install and monitor a new board. More critically when it comes to corporate missions linked to existential risks and global technologies like the internet, corporate governance is not enough. The need for regulations, government and international governance bodies is critical. Only strong governance at the corporate, government and global level can leverage remarkable entrepreneurs like Musk, and make remarkable missions like Twitter’s a success. However, when national and global governance are ineffective, corporate governance shoulders an even bigger burden and needs to lead the way. Interestingly, Musk’s initial response to EU Commissioner Thierry Breton has been positive, asserting that Twitter will abide by the Digital Services Act. It represents a powerful endorsement of a European regulation by a powerful US technopreneur and proves that the two may co-exist and even agree. We cannot afford to let exceptional people and organisations pursuing critical missions fail. We certainly should not miss the extraordinary opportunities created by good tech, which cannot be dissociated from good governance. Instead of fighting and dividing further, let’s unite and fix this agenda – and ensure civilisation does not fall off the cliff. This is the second article in our series on ‘Good Tech’. Read the first article on how to develop and implement Good Tech. |
Jan 3 at 01:00am
| FROM Insead Admissions Blog: In Times of Chaos, Know Yourself |
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We are entering a time of catastrophe, a time marked by momentous, tragic events of a destructive nature. For mathematicians of chaos, catastrophes are bifurcations of the dynamics of a system. Instead of evolving linearly, the system presents an increasing number of bifurcations, inevitably leading to chaos. For those who take a step back, chaos is not an absence of order. Like in the fractal patterns of a snowflake, we can see order and beauty in chaos within the natural universe. It is, however, much harder to approach disrupted situations with the same lucidity in the world of business. This is because business leaders have long been thinking linearly – choosing the best course of action to get the best results. For decades, the backbone of rational leaders’ thinking has been about predicting consequences and doing what is necessary to maximise value. Alternatively, we can think in terms of process and believe that doing good business boils down to choosing the right course of action, regardless of what the consequences are for ourselves or others. This is also a linear way of thinking. The reality is that most of the time, we have to compromise and choose between doing the right thing and striving for the biggest reward. Take the tragic water shortage in Cape Town in 2018, when the city was counting down to “Day Zero” – the day it would effectively run out of water. As the cost of water became increasingly expensive, companies responded by raising the price of bottled water. It is tempting to justify that raising the price of bottled water during a drought is necessary because supply is constrained and demand is high. However, the situation should not be reduced to an opportunity to capitalise on a crisis and maximise profits. By exploiting circumstances at the expense of their customers, companies will face ethical risks – unexpected negative consequences such as a boycott by angry customers. The alternative way of thinking would be to simply lower the price. The risk is then to transfer the margin to speculative resellers and lose it all. Dealing with dilemmas These are the dilemmas of decision-making in a time of chaos. There is no obvious solution but an inherent paradox at the heart of what we think good business is. In the face of such an issue, decision-makers should acknowledge the problem, identify the risks and strive to create business opportunities. We need to combine the two linear models by accepting the dilemma and transcending it. For example, retail business Pick n Pay decided not to increase the price of the water sold by the company. General Manager of Online & Mobile, Michael Cotterell (MBA ’04D), put in place a well-designed system to limit the selling per IP address and avoid speculative behaviour. In three months, the business experienced a loss of its profit, but by the end of the year they had recovered their eroded margins and more than doubled their market share. This company did not abandon traditional business thinking altogether but enriched it by acknowledging the ethical risks of exploiting the situation and upholding the value of consumer sovereignty. In one of the most unequal countries in the world, raising the price of water would benefit the rich at the expense of the poor. Likewise, not putting any restrictions on the amount of water a person could buy would result in panic buying and hoarding among the wealthy. The importance of knowing yourself In my teaching, I encourage leaders to think about business in terms of who they are. Strategy focused on the attainment of objectives is simply not enough. Nor is simply doing the right thing. Knowing who you are, and being anchored in your values, not only helps you be true to yourself – it becomes a strategic imperative in a time of chaos. To make better decisions, we need to build self-awareness and consciously open our heart and soul to other avenues of thinking. This involves harnessing a way of thinking, feeling and dreaming that I call "wise power". By being curious about the multiple sides and layers of a situation, acknowledging our emotions and connecting to our dreams and aspirations, we can overcome entrenched beliefs and find meaningful solutions to crises. In Taoism, the notion of yin and yang describes contradictory but inseparable forces. Drawing from this, attaining a business objective is yang, while introspection and self-awareness is yin. The answer is not shunning rational business thinking but balancing and enriching that thinking. When we face chaos, we are confused, vulnerable and blinded by the fear of losing control. In the cognitive confusion created by the absence of an absolute truth, we need to become alchemists of our own solutions. Instead of reacting from a place of fear, we can recognise and identify opportunities and seize the right moment for a leap of faith. In the same way we understand the beauty of a snowflake, so we can change our perception of the chaos by taking a step back and finding the beauty in it. |
Jan 3 at 11:00pm
| FROM Insead Admissions Blog: A Career in the Family Business: Duty or Choice? |
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The career choices made by members of a family enterprise tend to be fraught with tension. Most experience unspoken pressure to join the family business, which becomes a problem when dreams and family expectations are at odds with each other. How do they decide whether to work in their family enterprise? And when they do dive in, are there winning strategies or paths that lead to leadership roles in a family business? We spoke to five members of family enterprises: Katherine (Gabbie) Diaz and Marco Limcaoco from the Philippines, Shiraz Akbarally from Sri Lanka, Emilie Mellerio from France, and Andreas* from Argentina. During these conversations, we were struck by the emergence of common themes that recur in family-business careers: family identity, values and culture, emotions, attitude to change and communication. 1. Identity of family vs. self The family “name” – in the form of family figures, mentors and aggressors, as well as the intangible but ever-present sense of belonging and parental pressure – impacts members both externally and internally. For Andreas, both his father and grandfather had a strong doctrine about what it meant to be part of a family business empire, frequently repeating the adage that it was both an honour and a duty to be included. When Andreas joined his family’s construction business, he was initially motivated by the need to carve out a name for himself – to work hard, learn more and prove himself. But he eventually left his family business for an MBA at INSEAD followed by a consulting role in BCG. That distance allowed him to create healthier relationships and boundaries with his relatives and “reconnect” to his true, inner self. Yet, it is not impossible to preserve the identity of the family and the self or even develop them together. In Marco’s family, the assumed path was to “do your time, succeed in big corporations, climb the ladder, and prove yourself first”. When Marco eventually joined the family business, he injected energy to bring people together across the family group via best business practices and to push the organisation into new areas. He developed a long-term vision of many new ventures that are more aligned with his interests, while maintaining the fundamentals of the business. 2. Values and culture The right values and culture can provide one with a deep sense of meaning at work. But when the values and culture of a family member diverge from those of the family business, it can cause tension. When Emilie’s efforts to convince her family of better management initiatives were pushed back systematically, she resigned. She was disappointed and frustrated by the fact that she would not see the fruits of her labour. “Nobody ever actually said that I could not stay, but I could not accept holding a role without being aligned with their values. I always wanted to put the general good first, and avoid an environment of conflict,” she said. For Shiraz, he loved learning by doing and treasured the freedom to make the odd mistake. When he joined his family’s tea export business in Sri Lanka, his family was very open to his learning style. “They are happy to support you, but they do believe that you have to do your own learning and take your own risks,” he said. He took the opportunity to exercise his entrepreneurial instincts by creating an innovative tea extract company three or four years into his role. 3. Keep emotions in check Emotions tend to be heightened in family-business environments, mostly stemming from the tension between freedom of choice and the sense of honour and duty. Moreover, interpersonal dynamics make it tough to separate rationality and emotions. Whether the family member is in the family business, will be joining or has already left, the sense that “you never really leave” is universal. Gabbie was fortunate to enjoy the freedom to pursue a 14-year-long career outside of her family empire, although keenly aware of the expectation that she would, at some time, become part of it. In a light-hearted way, there is a running family “joke” that Gabbie’s corporate career is “just a kind of entertainment” of which she will inevitably tire one day. For Emilie, her experience was more intense. To her, family business is an environment where “it is impossible to remove the emotional aspect”. Having experienced the tensions in her family business, she has learnt that nothing matters, strategically, if conflicts are not ironed out along the way, and that there is no value in logic if no one is listening. She believes the most common challenge to overcome is the lack of self-confidence, which needs a positive approach with the intention to “put the wind beneath the wings of each and every member”. 4. Be ready for change As younger generations bring new ideas and desires, change is inevitable. Family members who acquire knowledge and experience from outside the family business often become champions for change – although the value they bring is perceived differently across the different generations. Andreas gained new insights about his family’s construction-materials business when he left it to pursue an MBA at INSEAD, followed by a role in BCG. “When you have always been in a family business, you don’t see some things that need to be seen, so getting out has taught me so much,” he reflected. Recognising that the script the family had been following did not work anymore, he said, “We need to create new assumptions, to avoid missing out on new opportunities – and I want to shape that in a new way.” When a part of the family’s tea company was sold, Shiraz knew change was needed. He aspired to go beyond Sri Lanka and learn from the world. Therefore, he pursued an MBA to learn how to inject professionalism and quality into the business. After a period of distance and reflection, Shiraz returned with increased confidence, abilities and energy to instigate change, with the goal of expanding the business into new markets across the world. 5. Communicate, communicate, communicate In communication, the “unspoken” prevails and encompasses many aspects. These include assumptions about joining or staying in the business, alongside the associated notion of duty and honour. In Andreas’ experience, his challenge was in sharing ways to improve the family business without appearing arrogant, as well as learning from family members. He reflected that “respecting each other’s journey requires a lot of humility, transparency and communication, which most families don’t have”. He is aware that his narrative is not “right” and the only way to make divergent narratives meet is through conscious and radical communication. In instituting change, it is critical to communicate clearly. As Shiraz’s family enterprise has experienced considerable growth, new members from the younger part of his generation continue to join the business. Shiraz is careful to communicate a clear talent strategy they are working on regarding how family members may and may not engage, to ensure that the company will be around in generations to come. He made clear that the family values of “honesty, integrity and fair dealing” must be maintained at all costs. Dos and don’ts for your career inside a family business Dos 1. Understand the stakes and smartly play with the tribal codes, traditions and spoken or unspoken rules, while being willing to challenge using the “right” language. 2. Distinguish the value and values that each generation brings or has brought, and play on the strengths of each, while recognising the need to evolve. 3. Communicate to clarify the unspoken and build alignment and trust with all family stakeholders. 4. Understand that there is no absolute correlation between being a family member and being able to make a sound contribution to the business, but look for where you can make one. 5. Recognise that time outside the business will be valuable for experience, perspective and innovation. 6. Consider your tie and contribution to the family both within and outside the “business” aspects. Don’ts 1. Assume that your belief about “how things happen around here” (i.e. culture) is the only or correct one. Consider the perspectives of other family stakeholders. 2. Make moves that are not inclusive. Expectations will differ, and feeling seen, heard and listened to is crucial for all family stakeholders. 3. Assume that your ideas about the longevity and sustainability of the company are widely held. What motivated your grandmother may not be motivating your father or aunt now. 4. Associate value for the company with blood ties. 5. Leave for a period without establishing the value of so doing and what your eventual return will look like. 6. Leave rifts and misunderstandings undealt with, no matter how painful. Keeping the spark alive Recognising these themes and seeing them objectively can bring clarity to family members and help non-family members navigate their entry into a family business. In other words, they can help make family enterprises more viable for the people working in them. Peugeot, Kikkoman, Tata Group and Ford Motor Company have shown that it is possible for family-owned businesses to survive hundreds of years – some more than a thousand years. Today, family-owned businesses continue to play an important role in the economy. If the people working in them are allowed to thrive and sufficient efforts are invested into succession strategy and planning, family businesses will continue to be an engine for growth in many economies. *Name has been changed. Read an extended version of this post. |
Jan 4 at 07:00pm
| FROM Insead Admissions Blog: Healthy Eating Interventions That Work |
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The global food industry is a US$2.5 trillion behemoth that contributes to the twin pandemics of obesity and climate change through its impact on what, when and how much we eat. A special issue of the Journal of the Association for Consumer Research contributes new insights to our understanding of effective ways to promote healthy eating that could be adopted by food marketers. Examining this topic through a broad lens, the special issue focuses on interventions conducted in the field rather than lab-based studies, as there is often a large gap between what people self-report about their eating choices and their actual behaviour. Most of the studies in this special issue that we co-edited expand on healthy eating interventions that can be mutually beneficial for business, consumers and public health. This win on multiple fronts is key, as it is unlikely that we can create meaningful and sustained improvements without getting the food industry – the ones producing, distributing and cooking our food – on board. Covering topics ranging from the effectiveness of nudges to food-logging apps, these papers reflect on what healthy eating means through the lens of consumers’ perceptions, increase our understanding of the methods used to test healthy eating interventions and examine whether and when various interventions effectively lead to healthier eating. Healthier eating through pro-environmental nudges Attempts to persuade people to make healthier eating choices often focus on health and nutritional benefits. But these factors are not actually major motivators, especially for those who have problems with weight and obesity. In fact, nutritional labelling is most effective for health-oriented consumers who already make a habit of reading food labels. In “Increasing the Selection of Low-Carbon-Footprint Entrées Through the Addition of New Menu Items and a Social Marketing Campaign in University Dining”, Hannah Malan and her co-authors discovered that emphasising the effect of food selection on climate change can help foster healthy eating choices. In their field study conducted at a university dining hall, low-carbon footprint dishes were promoted to students through new plant-based menu items and a social marketing campaign. The researchers saw a significant increase in the proportion of low-carbon footprint entrée sales from 13.9 percent to 21.4 percent following the intervention. These results suggest that promoting the climate benefits of tasty plant-based meat alternatives can shift food-choice patterns in a university towards generally healthier options. This study makes a case for finding roundabout ways or implementing “stealth” health interventions – which go beyond emphasising calories or nutritional benefits – to motivate people to make healthier choices. Beyond focusing on the environment, other roundabout ways to motivate healthier choices could include promoting animal welfare or highlighting the importance of food security. Healthier eating through social influence Amid growing obesity concerns, certain establishments have taken to adding calorie information to their menus. Many states in the United States have even introduced mandatory calorie-posting laws for restaurants. But given that results on the effectiveness of calorie posting on lowering total meal calories have been mixed, it is important to understand the conditions under which calorie posting will lead to reduced caloric consumption. Melis Ceylan, Nilüfer Aydinoğlu and Vicki Morwitz found in “Embarrassed by Calories: Joint Effect of Calorie Posting and Social Context” that calorie posting is more effective in lowering the total calorie content of orders when food is ordered in the company of others. This improved effectiveness of calorie labelling occurs because ordering an indulgent, high-calorie meal in this specific dining setting adversely affects the image consumers want to project and leads to feelings of anticipated embarrassment that prompt lower-calorie meal choices. Their paper suggests that calorie posting can be more beneficial in a social context – an important and practical insight for policy makers. There is a need for alternative ways to increase consumers' motivations to select lower-calorie meals when they order food alone –such as via delivery apps – or with those with whom they are not worried about having to project a certain image. One potential way to increase the effectiveness of calorie posting even when people are ordering and eating alone is to leverage gamified restaurant apps that let consumers gain more rewards by ordering lower-calorie meals. Presenting lower-calorie items with hashtags on these apps might encourage individuals to share this information on social media and increase the perceived social nature of the dining experience. Healthier eating through size-based nudges In another article, “Misunderstood Menu Metrics: Side-Length Food Sizing Leads to Quantity Underestimation and Overeating”, Thomas Allard and Stefano Puntoni found consumers are often unable to accurately gauge the quantity of food when basing their estimations on side-length metrics (e.g., a 12-inch pizza). Such measurements are ubiquitous in food-marketing promotions and on menus. The researchers conducted a series of experiments that show that describing food using side-length metrics leads to food-quantity underestimation and subsequent food intake misaligned with consumers’ objectives. For example, participants believed that one nine-inch pizza was less food than two six-inch pizzas, when the former is actually 13 percent more food. This underestimation occurs because people do not adequately adjust for the exponential difference in the surface area associated with linear changes in side-length metrics. Instead of using side-length information, the research proposes adopting metrics such as surface area and serving amounts on menus as interventions to nudge consumers towards better food-consumption decisions without relying on complex training interventions. This is a great example of a win-win situation: It empowers consumers to make more informed choices aligned with their goals and reduces the likelihood of food waste or overeating, while companies can charge more for smaller food portions. Healthier eating through habit-forming nudges Ultimately, healthy eating choices, like other health-related decisions, only work if the behaviour is repeated. It is therefore crucial for policy makers and companies to nurture habit-forming behaviour. Besides removing frictions to adoption, they should emphasise the positive effect of healthy eating in the present instead of dwelling on future benefits. Timing also matters, as it can be easier for people to adopt new habits when they are taken out of their comfort zone or begin a new chapter in their lives. Health-geared apps can harness fun gamification strategies – such as streaks – or financial incentives to provide people with immediate rewards for making healthier choices. Implementing a social element, so that consumers feel a sense of external pressure, can also help. As an example, an INSEAD case study written by Pierre Chandon and Shilaan Alzahawi shows how the Carrot Rewards app helped provincial governments in Canada make their citizens significantly more active by rewarding them for walking or taking gamified knowledge quizzes with points from their favourite loyalty programmes. This special issue emphasises that there are many ways people define healthy eating and multiple ways to encourage healthy food choices: from interventions that target cognition by supplying consumers with information, to those that appeal to their emotions or directly change behaviour. Targeted interventions that don’t merely address what we eat, but also how much, where and when can be the most effective in nurturing healthy eating habits that benefit business, consumers and public health. |
Jan 9 at 01:00am
| FROM Insead Admissions Blog: Putting a Price on Private Data |
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Private data is perhaps the most commonly traded asset today. While technology platforms claim to provide their services for free, users are in fact exchanging browsing and purchase histories, geolocation, content preferences and other personal, private information for access to social media, search results, streaming platforms or other goods and services. But are consumers being fairly compensated for the value they provide to these companies? Our recent research article, forthcoming in the Journal of Marketing Research, found that people put a higher price on their private data when they exchange them for cash than if they trade them for goods. As tech companies almost exclusively pay people in goods – such as search results or social networks – our findings suggest that firms may not be sufficiently compensating consumers for their data. A series of 11 experiments revealed that consumers demand two prices for their data: a higher one in cash and a lower one in goods. We also provide experimental evidence that consumers place a lower value on their private data when bartering for goods because they focus more on the value of their data in cash exchanges. A higher price for privacy In one valuation task, we measured how much cash we would need to offer participants so that they would be willing to give us three hours of their geolocation data. This measure provided us with a direct valuation of their private data. In a second valuation, we had them tell us the number of units of a good (e.g. Amazon movie rentals, months of access to Netflix streaming, Kindle eBooks, or Shell gasoline, among others) they would demand in exchange for their data. In a third valuation, they indicated how much cash they would be interested in receiving instead of that quantity of good, that is, the cash value they ascribed to these units of the good. This measure provided us with an indirect valuation of their private data via goods. We compared their direct cash valuation of their data to their indirect valuation. As predicted, participants placed a higher value on their private data when considering exchanging them for cash than for goods. To establish whether this discrepancy in valuations extended beyond geolocation data, we asked participants in one of our experiments to evaluate ten different types of private data. For instance, we asked them to value data of varying degrees of personal sensitivity, such as ten hours of browsing history, a list of all the apps on their phone, or a sample of their saliva. Again, valuations of private data were higher when measured in cash than goods, and this effect generalised across different data types. Markets for private data Consumers’ uncertainty about how to value data may be driven by the lack of well-defined market prices for private data. Therefore, in another experiment, we asked Amazon Mechanical Turk (MTurk) workers to value either their private data or their MTurk labour, for which there is a well-defined wage rate. We again found that participants valued their private data more in cash than in goods, but there was no such discrepancy in how they valued their labour inputs. This demonstrates that the absence of well-defined market prices brings about the discrepancy in consumers’ valuations of their data. Next, we directly manipulated uncertainty about the value of private data by informing some participants of a clear market price for their data (US$51.50 for three hours of GPS data). As predicted, the presence of the market price reduced participants’ uncertainty about the value of their data, which led them to value their data equivalently in cash and goods. For the remaining participants, the absence of an established market price meant they were less certain of the value of their data and therefore placed a higher value on their data in cash. Protecting consumer welfare Our findings marked a violation of an essential requirement of rational decision-making: procedure invariance. Procedure invariance requires that a rational person’s preference between different choice options must not depend on the underlying method used to elicit their preference. In other words, the procedure should not impact someone’s preference. In all our experiments, participants violated procedure invariance as their private data valuations were dependent on the medium of exchange (cash or goods). The existence of two different prices, depending on the exchange medium, reveals a systematic psychological bias in how consumers value their private data. Our findings suggest that technology platforms may be able to exploit this bias. This raises the question of whether these companies are adequately compensating consumers for their data. The prevailing practice on technology platforms contrasts with most other markets, in which goods are bought and sold for cash instead of being bartered for other goods. Our findings therefore also point to a possible psychological account of how technology platforms have been able to build their dominant market positions. To protect consumer welfare and remedy possible inefficiencies in markets for private data, policymakers could explore methods through which consumers could sell, rather than trade, their private data to technology companies. The EU’s General Data Protection Regulation and the California Privacy Act provide consumers with a degree of control over their data but stop short of granting legal ownership. A potential solution could be to assign explicit property rights to consumers’ private data. While numerous technical challenges have to be overcome, enabling consumers to sell or rent their data for cash would force companies to compete for the data at more clearly defined market prices, much like they compete for labour. Doing so would address the lack of efficiency in markets for private data that our findings suggest. It might also dampen the market power that big tech companies amass from obtaining private data. When designing strategy around data collection, managers should consider that they may not be compensating consumers fairly. Above all, consumers need to realise that they’re giving away something of economic value when they’re bartering their data. Understanding this might make them rethink whether they're getting a fair deal. Protecting consumers from falling victim to this fundamental psychological bias in privacy valuations should also be a goal for policy makers and regulators to protect consumer privacy and, at the same time, ensure healthy competition between technology platforms. |
Jan 12 at 01:00am
| FROM Insead Admissions Blog: When Feeling Good Feels Morally Wrong |
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After watching a heart-breaking movie, we might be tempted to lift our spirits by flicking to a comedy show or engaging in a frivolous, pleasurable activity. But there are instances when moving from something distressing to something trivial just doesn’t feel appropriate. While previous research suggests that people might enjoy seeing a comedic ad after a tragic news story if they believe it will effectively boost their mood, we found that this is not the case when it comes to stories around human suffering. Our research, published in the Journal of Marketing Research, found that people believe it is relatively immoral to engage in mood repairing consumption after viewing content related to human suffering, even if it makes them feel better. Instead, they find it morally appropriate to prolong their negative feelings in response to content concerning the welfare of others. It is important to understand why people may be motivated to experience these emotions in the face of human suffering. Research indicates that showing negative emotions signals good moral character and concern for others, allows for an appropriate amount of reflection and may lead to prosocial action like helping victims or punishing perpetrators. Thus, we suggest that people are motivated to sustain their negative emotions when they are exposed to human suffering. The moral choice We set out to explore whether participants would have a stronger moral response to content related to human suffering relative to other moral values. Participants were asked to imagine watching documentaries related to five different moral foundations – harm/care, ingroup/loyalty, fairness reciprocity, authority/respect, purity/sanctity – as well as negative control films without moralised content. For instance, documentary descriptions indicated a film about a boy who was abused by his foster parents (harm/care) and a violent slasher horror film (negative non-moralised). Participants answered questions about how watching the film would make them feel, the moral appropriateness of continuing to feel those emotions and the film’s moral relevance. Results indicated that people find it more morally appropriate to sustain emotions after engaging with negative moralised content – especially content related to harm/care (human suffering) – compared to other negative content. In our next study we asked participants to imagine watching a war documentary or a fictional war film to determine the effect of experiencing real or fictional human suffering on consumption. Participants considered how morally appropriate it would be to engage in mood repair activities (watching a slapstick comedy or listening to upbeat music), neutral activities (watching a maths tutorial or going grocery shopping) and mood-maintaining activities (listening to slow, melancholic music or sitting in silence). As predicted, participants believed it was more appropriate to sustain their negative emotions following the war documentary depicting real human suffering than the fictional war film, and that it was morally inappropriate to distract themselves with mood-repairing content. Mood repair and moral duty Next, we pitted people’s motivation to do their perceived moral duty against the competing motivation to avoid negative feelings in real choice behaviour. In this study, participants read a passage about a real genocide (the Rwandan Genocide) or a fictionalised version of the same passage and selected a subsequent activity – either sitting in silence for 30 seconds or watching a clip from America’s Funniest Home Videos. Just 16 percent of participants chose to watch the funny video after reading about real human suffering compared to 31 percent of participants who read the fictional passage. Furthermore, participants who read the real version believed it would be more morally inappropriate to view America’s Funniest Home Videos than those who read the fictional piece. But is there a way to offer mood-repairing content that consumers would feel comfortable with after viewing human suffering content? We thought this might have to do with how trivial the mood-repairing content seemed. In our next study, after watching a clip from a documentary about bullying or watching a sad fictional clip from ET, we gave participants a choice between sitting in silence for 30 seconds or viewing a Cheetos ad. In another condition, participants again viewed either the bullying clip or the clip from ET, but this time we gave them the choice between sitting in silence for 30 seconds or watching an ad about a social movement to encourage kindness. Participants considered the positive ad about kindness to be more moral than the positive ad about Cheetos. So, in this instance we found that participants did not find mood-repairing consumption to be inappropriate following content about human suffering if the content is morally relevant (about kindness). Finally, we wanted to see if a person’s perception of how moral they are had any effect on consumption choice following human suffering. In line with previous results, our final study found that participants thought watching a mood repairing ad for Bud Light after witnessing human suffering would be morally inappropriate than after witnessing a fictional sad film and chose to sit in silence instead. Importantly, we found these effects were strongest among individuals who perceived themselves as highly moral. But are people avoiding mood repairing consumption to avoid looking bad to others or just to themselves? Our results suggest that the motivation is at least partially due to wanting to be self-consistent, rather than a performative act of self-presentation. Feeling good or feeling right Taken together, our findings provide strong evidence that people believe it is their moral duty to avoid mood repairing consumption following content about human suffering. While previous research indicates that emotional responses automatically give rise to moral judgments, our results raise the possibility that there may also be a reverse causal effect: The emotions people experience in response to moralised situations may sometimes be motivated, not just automatic. Furthermore, people may be motivated to maintain their empathy for others’ suffering instead of avoiding or downregulating it. Future research should investigate whether other moral domains elicit the same behavioural consequences and if positive mood-repairing content in the same domain (such as the kindness ad after the bullying video) is considered more acceptable than unrelated, frivolous content. It also remains to be seen how long people strive to feel negative emotions after exposure to human suffering. Regardless of how long people might want to sit with their feelings, our findings have important implications for marketers and the media. By taking human suffering into consideration, marketers should strive to provide experiences that allow pensive mood maintenance and sustained focus, as this may seem more appropriate than pleasurable mood-repairing experiences. More generally, consumers may feel uncomfortable seeing ads or being recommended content based on their past search behaviour or interests, and this could even discourage them from buying the advertised products. During devastating world events, media should consider taking more control over advertising and auto-suggested content so as not to disrupt consumers’ experiences. Interrupting morally relevant and negative content with advertising about frivolous products could be jarring and could even spill over to negative perceptions about the brand or media organisation. Media practitioners need to be aware that after consuming distressing news, consumers prefer neutral or mood-consistent products. People need to be given the space to feel bad for a little while in order to pay respect to suffering victims and help create a more compassionate society. |
Jan 16 at 01:00am
| FROM Insead Admissions Blog: 3 Key Global Strategy Challenges Companies Face |
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The future of multinational corporations hinges on their ability to address three main forces affecting globalisation today: geopolitical tensions, sustainability and digital transformation. It is no surprise that these challenges are also high on the agenda at the World Economic Forum Annual Meeting in Davos this year. Until recently, multinationals have adapted their global strategies in response to changing consumer preferences, competitive landscapes and economic conditions. As I outline in the Fifth Edition of Global Strategic Management, all companies currently operating across different countries now need to put geopolitical issues, sustainability and digitalisation at the heart of their strategies for how to compete globally. The Covid-19 pandemic and Russia’s invasion of Ukraine have further accelerated these pressures, forcing multinationals to re-examine their global strategies. Geopolitics issues impact more industries than ever Recent geopolitical issues, translated into commercial wars, are affecting the globalisation process. The constraints put on Huawei’s development of its 5G network, the ban on export to Iran enacted by the United States and the economic and financial sanctions imposed on Russia are but three examples. While geopolitical problems are certainly not a new phenomenon, they have become increasingly prevalent and pertinent for many different industries. Governments, in the interest of national sovereignty, are intervening more than before. As a result, firms are changing tactics and considering “friendshoring” or “ally shoring” – relocating supply chains to trusted countries with shared values. One company that has taken great strides to diversify geopolitical risk is Taiwan Semiconductor Manufacturing Company (TSMC). As the world's largest contract chipmaker, it manufactures chips for tech giants including Apple and Alibaba. In response to China-Taiwan tensions and the US-China trade conflict, TSMC began building factories in the US and Japan. It recently outlined a US$40 billion plan to expand the US production hub it is building in Arizona, and is in advanced talks with suppliers about setting up its first European plant in Germany, according to media reports. By taking geopolitical concerns into account, TSMC recognised the need to be present in several key regions to mitigate political risks and increase supply chain resilience. Indeed, when it comes to developing and implementing a global strategy, geopolitical tensions can be as important as cost considerations and customer demand. But it is not only sensitive industries such as chipmaking that are subject to geopolitical tensions. In the wine industry, for instance, research shows recent trade disputes between the US and the European Union, as well as China and Australia threatened to reduce wine trade by nearly US$340 million annually. Another clear example is how the Ukraine war’s impact on energy prices is being felt by companies across several different industries. Global enterprises need to move away from having one single strategy for the world to more regional strategies that are better equipped to deal with the local impact of political tensions. That is not to say that multinationals require individual strategies for each country they operate in, but rather that different ecosystems may be required for some regions that simply cannot be replicated in others. Sustainability considerations need to drive strategy Multinationals have taken different approaches to addressing pressing sustainability issues. While some simply comply with regulations and standards in each country, others recognise the need to completely integrate sustainability into their overall strategy. Forward-looking firms demonstrate a commitment to sustainability by aiming to set the highest standards everywhere, even if governments and regulatory bodies aren’t pressuring them to do so. Energy giant Enel, for example, made sustainability a pillar of growth and aligned its strategic plans with the UN Sustainable Development Goals (SDGs). As outlined in the book and my case study, Enel’s aim was to create long-term sustainable value for all its stakeholders by adhering to the SDGs in its investment decisions. The multinational used open innovation to incorporate novel products and ideas from outside its own business units. “Innovability teams” – which blend innovation with sustainability – were integrated into each business line. The company then began pulling external innovation into the firm with a crowdsourcing platform where thousands of “solvers” were able to contribute solutions to important challenges. Multinationals have a huge advantage when it comes to identifying and scaling sustainable solutions. A well-established idea in multinational management is that some foreign subsidiaries become “centres of excellence” with leverageable capabilities and expertise. By pinpointing subsidiaries that could become centres of excellence for sustainable solutions – such as European countries – multinationals can develop local, sophisticated solutions and scale them. Multinationals have the potential to move the needle on sustainability through their operations and their influence on the wider business community. By learning what works and what doesn't work in different parts of the world, these firms can come up with tailored and deployable global solutions for global problems. Digital transformation has disrupted traditional business models On the technological front, the world has fully entered a digital era that permeates nearly all segments of human activities: health, industrial production, entertainment, communication, research, development and more. Digital technologies have revolutionised consumer behaviours, impacted core business models and blurred borders between industries and sectors. Digital technologies have brought major structural change to how business is done and how global companies operate. The Covid-19 pandemic further accelerated digital transformation, forcing multinationals to quickly move their operations online and implement digital strategies. For instance, FC Barcelona built on its digital presence through its Barça Innovation Hub to help generate revenues when Covid-19 struck. The club launched the Hub in 2017 with the aim to attract companies, research institutions and entrepreneurs to develop innovative technologies to increase the visibility and impact of the Barça brand and create new revenue streams. Key domains of the Hub include healthcare and well-being, sport performance, big data and fan engagement, smart facilities and social impact. My recent case study details how FC Barcelona accelerated its content-sharing strategies and training platform during the pandemic in a push to become even more digitally affluent. For example, the club launched a freemium TV streaming service, film studio, digital magazine and entered a strategic partnership with Spotify. A truly digital global enterprise has a competitive edge thanks to the data it collects. Multinationals can use data to better understand their customers, identify trends, pinpoint gaps in the market and evaluate the potential for new products or services. Digitalisation has also paved the way for “born global” companies – such as Airbnb, Netflix, Spotify and Uber – that become multinational very soon after their creation. In order to stay competitive, traditional global firms are feeling the pressure to adapt and innovate. In the current uncertain environment, I hope my book can help business leaders understand and respond to the new pressures global companies face. In the last 15 years that I’ve spent teaching global strategic management, much of the conversation has been about executing global strategy. Now it has shifted to revising and redesigning those strategies. Firms looking to compete globally need to tear up the rulebook and go back to the drawing board. |
Jan 16 at 02:00am
| FROM Insead Admissions Blog: Three Key Global Strategy Challenges Companies Face |
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The future of multinational corporations hinges on their ability to address three main forces affecting globalisation today: geopolitical tensions, sustainability and digital transformation. It is no surprise that these challenges are also high on the agenda at the World Economic Forum Annual Meeting in Davos this year. Until recently, multinationals have adapted their global strategies in response to changing consumer preferences, competitive landscapes and economic conditions. As I outline in the Fifth Edition of Global Strategic Management, all companies currently operating across different countries now need to put geopolitical issues, sustainability and digitalisation at the heart of their strategies for how to compete globally. The Covid-19 pandemic and Russia’s invasion of Ukraine have further accelerated these pressures, forcing multinationals to re-examine their global strategies. Geopolitics issues impact more industries than ever Recent geopolitical issues, translated into commercial wars, are affecting the globalisation process. The constraints put on Huawei’s development of its 5G network, the ban on export to Iran enacted by the United States and the economic and financial sanctions imposed on Russia are but three examples. While geopolitical problems are certainly not a new phenomenon, they have become increasingly prevalent and pertinent for many different industries. Governments, in the interest of national sovereignty, are intervening more than before. As a result, firms are changing tactics and considering “friendshoring” or “ally shoring” – relocating supply chains to trusted countries with shared values. One company that has taken great strides to diversify geopolitical risk is Taiwan Semiconductor Manufacturing Company (TSMC). As the world's largest contract chipmaker, it manufactures chips for tech giants including Apple and Alibaba. In response to China-Taiwan tensions and the US-China trade conflict, TSMC began building factories in the US and Japan. It recently outlined a US$40 billion plan to expand the US production hub it is building in Arizona, and is in advanced talks with suppliers about setting up its first European plant in Germany, according to media reports. By taking geopolitical concerns into account, TSMC recognised the need to be present in several key regions to mitigate political risks and increase supply chain resilience. Indeed, when it comes to developing and implementing a global strategy, geopolitical tensions can be as important as cost considerations and customer demand. But it is not only sensitive industries such as chipmaking that are subject to geopolitical tensions. In the wine industry, for instance, research shows recent trade disputes between the US and the European Union, as well as China and Australia threatened to reduce wine trade by nearly US$340 million annually. Another clear example is how the Ukraine war’s impact on energy prices is being felt by companies across several different industries. Global enterprises need to move away from having one single strategy for the world to more regional strategies that are better equipped to deal with the local impact of political tensions. That is not to say that multinationals require individual strategies for each country they operate in, but rather that different ecosystems may be required for some regions that simply cannot be replicated in others. Sustainability considerations need to drive strategy Multinationals have taken different approaches to addressing pressing sustainability issues. While some simply comply with regulations and standards in each country, others recognise the need to completely integrate sustainability into their overall strategy. Forward-looking firms demonstrate a commitment to sustainability by aiming to set the highest standards everywhere, even if governments and regulatory bodies aren’t pressuring them to do so. Energy giant Enel, for example, made sustainability a pillar of growth and aligned its strategic plans with the UN Sustainable Development Goals (SDGs). As outlined in the book and my case study, Enel’s aim was to create long-term sustainable value for all its stakeholders by adhering to the SDGs in its investment decisions. The multinational used open innovation to incorporate novel products and ideas from outside its own business units. “Innovability teams” – which blend innovation with sustainability – were integrated into each business line. The company then began pulling external innovation into the firm with a crowdsourcing platform where thousands of “solvers” were able to contribute solutions to important challenges. Multinationals have a huge advantage when it comes to identifying and scaling sustainable solutions. A well-established idea in multinational management is that some foreign subsidiaries become “centres of excellence” with leverageable capabilities and expertise. By pinpointing subsidiaries that could become centres of excellence for sustainable solutions – such as European countries – multinationals can develop local, sophisticated solutions and scale them. Multinationals have the potential to move the needle on sustainability through their operations and their influence on the wider business community. By learning what works and what doesn't work in different parts of the world, these firms can come up with tailored and deployable global solutions for global problems. Digital transformation has disrupted traditional business models On the technological front, the world has fully entered a digital era that permeates nearly all segments of human activities: health, industrial production, entertainment, communication, research, development and more. Digital technologies have revolutionised consumer behaviours, impacted core business models and blurred borders between industries and sectors. Digital technologies have brought major structural change to how business is done and how global companies operate. The Covid-19 pandemic further accelerated digital transformation, forcing multinationals to quickly move their operations online and implement digital strategies. For instance, FC Barcelona built on its digital presence through its Barça Innovation Hub to help generate revenues when Covid-19 struck. The club launched the Hub in 2017 with the aim to attract companies, research institutions and entrepreneurs to develop innovative technologies to increase the visibility and impact of the Barça brand and create new revenue streams. Key domains of the Hub include healthcare and well-being, sport performance, big data and fan engagement, smart facilities and social impact. My recent case study details how FC Barcelona accelerated its content-sharing strategies and training platform during the pandemic in a push to become even more digitally affluent. For example, the club launched a freemium TV streaming service, film studio, digital magazine and entered a strategic partnership with Spotify. A truly digital global enterprise has a competitive edge thanks to the data it collects. Multinationals can use data to better understand their customers, identify trends, pinpoint gaps in the market and evaluate the potential for new products or services. Digitalisation has also paved the way for “born global” companies – such as Airbnb, Netflix, Spotify and Uber – that become multinational very soon after their creation. In order to stay competitive, traditional global firms are feeling the pressure to adapt and innovate. In the current uncertain environment, I hope my book can help business leaders understand and respond to the new pressures global companies face. In the last 15 years that I’ve spent teaching global strategic management, much of the conversation has been about executing global strategy. Now it has shifted to revising and redesigning those strategies. Firms looking to compete globally need to tear up the rulebook and go back to the drawing board. |
Jan 24 at 07:00pm
| FROM Insead Admissions Blog: Solving Grand Societal Challenges Through Creative Organisation Design |
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When commercial enterprises want to replicate a product or service at scale, they often turn to franchising as a path to growth. This involves recruiting independent partners, or franchisees, who grow the business as independent yet interlinked entities. McDonald’s, 7-Eleven and Marriott Hotels are among numerous companies to pursue such a model. It should come as no surprise that social enterprises are taking a page from the same rulebook. Indeed, the hope is that social franchising will enable the non-profit sector to fill critical gaps in reach and resources while retaining essential control over the product or service delivery. But one organisation in South Africa has gone a step further. Combining non-profit and for-profit models, Unjani Clinics – a network of clinics owned and operated by local nurses – is growing rapidly by pursuing its mission to bring affordable healthcare to the masses. What’s more, it is empowering professional nurses to become entrepreneurs in the process. In a paper published in the Journal of Organization Design, we take a closer look at Unjani Clinics to glean critical insights on how organisations driven by a social mission can sustainably scale through creative organisation design. Clinic in a container Founded in 2014, Unjani Clinics aims to meet the basic medical needs of South Africans in a country where the public sector is underfunded, and private care or health insurance is inaccessible for most people. Unjani – which means “how are you” in Zulu and Xhosa – is the brainchild of Dr Iain Barton, the then-Managing Director of the consumer healthcare supply chain services company Imperial Health Sciences. His unique insight was that doctors– an expensive and rare resource – could be replaced with trained nurses. Not only would this increase access to affordable, standardised baseline health services in local communities, but it would reduce the burden on public healthcare providers. The clinics are housed in converted shipping containers and run by professional nurses embedded in each locality. They offer affordable, easy-to-access local services such as basic health screening, antenatal and postnatal care, and HIV testing and counselling. The non-profit company (NPC) oversees a network of clinics owned and run by carefully selected independent nurse-entrepreneurs. Here’s how the scheme works: Unjani NPC recruits and trains experienced nurses to run primary healthcare clinics set-up by the NPC in locations identified by the nurses during the recruitment process as the most “in need”. The nurses sign a five-year agreement that obliges them to meet financial targets, submit regular financial reports to Unjani NPC and comply with regulations and procedures. They also pay an upfront fee – giving them “skin in the game”, as the organisation’s CEO, Lynda Toussaint, puts it – as well as a monthly network fee. In return, the nurse-entrepreneur gets the container clinics with the necessary equipment and funding for the first 24 months of operations, during which the clinic is expected to become financially sustainable (i.e., profitable). The nurse covers all operating expenses but keeps the revenue from consultations and sales of over-the-counter products and nutritional supplements. After five years (when the clinic is expected to be profitable or at least break even) the nurse-owner can choose whether or not to remain in the network. If they decide to go, the clinic is theirs to keep. Under a novel funding scheme being piloted, ownership of the clinic will be partially secured through a loan to be repaid to the NPC before the nurse can take full ownership of the clinic. To date, Unjani Clinics has logged more than 1.6 million consultations. By mid-2022 the network had grown to more than 100 clinics and aims to reach 650 by 2030. Recipe for a successful social franchise What sets Unjani apart is its hybrid organisational design – a creative blend of central authority with entrepreneurial autonomy, its recruitment process and a supportive culture. Hybrid organisation design Instead of a classic franchising model of cookie-cutter clinics run by managers, Unjani recruits professional nurses and trains them to become nurse-entrepreneurs. In line with its mission of providing quality care at affordable prices to the underserved, it offers a standard menu of services at uniform prices across its network. Regular financial audits help Unjani keep tabs on the clinics’ performance and operational sustainability, making sure that struggling nurses are given the help they need. If a nurse breaches the franchising agreement (for instance by deviating from standardised pricing), they risk being replaced and even excluded from the network. Beyond the norms on prices, premises and standards of care, in all other matters the “nursepreneur” is in charge. They are free to hire staff, assistants and guards, run marketing campaigns and is responsible for the clinic’s profit and loss. In short, they develop into a fully-fledged entrepreneur. Some of the nurses have grown into the role so well that they have opened a second clinic. Talent discovery and incubation Besides bringing affordable healthcare to the masses, Unjani supports South African women who want to become entrepreneurs. Applicants are required to submit a business plan that includes securing a suitable site for a clinic and conducting a community survey to assess the healthcare needs of the local community. They are also asked to set out their business and financial plans for the clinic. This helps Unjani assess applicants’ entrepreneurial ambitions and resourcefulness, how well they engage with local communities and their commitment to the mission. Only a select few make the cut. One out of five applications are invited for interviews, and about one in three interviewees join the network. By taking on only the best and most committed, Unjani has an enviably low attrition rate: Only seven nurses have decided to run their clinics outside the network after completing the five-year stint, and a handful of other clinics have closed for other reasons. Supportive culture A strong organisation culture characterised by common objectives, values and norms helps to boost employee engagement, reduce turnover rates and enhance performance. At Unjani, members are almost like a family. Nurses are encouraged to have frequent and informal contact with the CEO and the Network General Manager to raise any questions or concerns (even private ones) that might affect their obligations. Regular conferences are organised for members to discuss and give feedback on practices such as price controls. A strong sense of community and mutual support among the nurses means they are accompanied in their individual journey by peers at a similar stage. That’s also a great wellspring of motivation. Becoming self-reliant The Unjani model remains a work in progress. For one thing, it aims to become financially sustainable rather than relying on donations from foreign corporations. The network fees that each nurse pays are crucial in achieving that objective, and so is the ability of the entire organisation to scale up. The organisation has piloted a new financing scheme with the help of INSEAD students, which will see incoming nurses take out a loan as part of the set-up cost in addition to paying the upfront and annual network fees. Unjani Clinics demonstrates that a creative organisation design – combining for-profit and non-profit elements in a novel way – can go a long way to address today’s societal challenges such as providing affordable primary care. Moreover, it may play a role in mitigating the inevitable tensions related to social impact and financial sustainability as an organisation grows. This model of building on the untapped entrepreneurial ambitions of professional nurses and aligning incentives through organisation design may serve as an inspiration for social entrepreneurs worldwide seeking to address societal needs at scale. This work was supported by the INSEAD Healthcare Management Initiative. |
Jan 29 at 08:00pm
| FROM Insead Admissions Blog: Five Global Trends in Business and Society in 2023 |
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Forecasts are rarely perfect, but last year our predictions for global trends in business and society proved to be fairly accurate. As expected, extreme weather events revealed the immediate impacts of climate change. The growth rate of the global economy remained well below average. And the lingering effects of Covid-19 hit the poorest hardest. Yet our forecast did not predict the most disruptive event of the year: Russia’s invasion of Ukraine, which sparked a series of new crises and exacerbated existing ones. The intersecting and compounding challenges of a warming planet, weakened economy, geopolitical conflicts and social instability ushered in problems of skyrocketing inflation, food insecurity, an energy crisis, a cost-of-living crisis and a potential global recession. Volatility and uncertainty remain high this year, clouding our view as to what lies ahead. We recently conducted a survey to capture the INSEAD academic community’s perspective on the top threats facing businesses this year and the greatest opportunities to act as a force for good. Between 16–31 December 2022, a total of 46 INSEAD faculty members from nine academic areas and three campuses participated in the survey. The participating faculty members identified the following five issues as critical, with recent reports from the World Economic Forum, Edelman, World Inequality Lab and other key institutions underscoring their importance. Climate change A quarter of survey participants cited climate change as the number one societal issue for businesses to address in 2023. A further nine percent ranked climate change as the fourth biggest societal threat to business this year. These results are in line with the World Economic Forum’s Global Risks Report 2023, which highlights the urgency of the climate emergency and compares its impact in the short and long term. Among the top 10 risks identified by the experts surveyed, “failure to mitigate climate change” is the fourth greatest risk in the next two years, and the number one risk in the next 10 years. According to the Intergovernmental Panel on Climate Change’s Climate Change 2022 report, the planet has already warmed by 1.1°C, leaving approximately 3.6 billion people dangerously exposed and vulnerable to climate impacts. The world is currently on track to warm by 2.5°C by the end of the century, far exceeding the 1.5°C target set by the Paris Agreement. An issue intimately connected to climate change is biodiversity loss and ecosystem collapse, something the Global Risks Report identifies as one of the “fastest deteriorating environmental risks”. The interplay between nature loss and climate change – in conjunction with other parts of the “polycrisis”, as the report calls it – means that as natural ecosystems are increasingly burdened, climate change will continue accelerating, and vice versa. Fortunately, nations across the world are taking bold steps to address this mounting risk. At the UN Biodiversity Conference (COP15) in December 2022, 188 governments agreed to the “Kunming-Montreal Global Biodiversity Framework” (GBF). Regarded as a historic package, the GBF outlines four goals and 23 targets for addressing biodiversity losses and restoring natural ecosystems by 2030. These include cutting food waste in half, protecting 30 percent of lands, oceans, coastal areas and inland waters on earth and reducing annual government subsidies that are harmful to nature by $500 billion. The GBF also requires large companies and financial institutions to monitor and disclose their risks, dependencies and impacts on biodiversity in a transparent manner. Income and wealth inequality According to the INSEAD survey, the second-most important societal issue for businesses to address this year is income and wealth inequality. The World Inequality Report 2022 indicates that global progress on inequality is mixed. According to the report, inequalities within countries have grown significantly over the last two decades – the gap between the average incomes of the top 10 percent and bottom 50 percent of individuals has nearly doubled. However, inequalities between countries have declined. The gap between the average income of the richest 10 percent of countries has dropped from being approximately 50x higher to less than 40x higher than the poorest 50 percent of countries. Meanwhile, both income inequality and wealth inequality among individuals remains staggeringly high. Currently, the richest 10 percent of the global population earn 52 percent of global income and possess 76 percent of all wealth, while the poorest 50 percent of the global population earn 8.5 percent of global income and possess only 2 percent of wealth. Who is responsible for addressing the wealth gap? Of the 32,000 people surveyed in the 2023 Edelman Trust Barometer, 77 percent say they expect CEOs to take a stand. Social instability About one-fifth (18 percent) of INSEAD faculty cited social instability as the biggest threat for business this year. Indeed, 2022 saw a significant uptick in civilian protests worldwide, affecting developed and emerging economies alike. Many protests were triggered by economic woes caused by inflation, while others were political in nature, such as the riots in Peru following Pedro Castillo’s ousting and the more recent storming of Brazil's government buildings in a scene eerily similar to the 6 January 2021 attack on the United States Capitol. In America, there is continued talk and questions about the prospect of a civil war. Many of the factors contributing to social instability are expected to persist in 2023. Economic optimism is continually declining; the Edelman report finds 24 of 28 countries are experiencing all-time lows in the number of people who think their families will be better off in five years. More than half of those surveyed said their country was more divided today than in the past, and 65 percent said the lack of civility and mutual respect is the worst they have ever seen. The report also suggests citizens expect businesses to take on greater responsibility in addressing these issues, as many have lost faith in governments. While business is perceived as competent and ethical, government is viewed as unethical, incompetent and a source of misleading information. Inflation and recession risks In the INSEAD survey, 17 percent of faculty indicated that inflation and recession risks are the greatest threat to business this year. Up until very recently, other institutions hinted at a similar outlook. On 1 January 2023, the IMF’s Managing Director announced that the fund expected a third of the world economy to fall into a recession in 2023 as a result of the Russia-Ukraine war, inflationary pressures and rising costs of borrowing. The cost-of-living crisis was cited as the top risk to the global economy for the next two years in the Global Risks Report 2023. And 74 percent of participants in Edelman's survey shared fears about inflation. In the last several weeks, however, the economic forecast has started to improve. Economists point to several contributing factors including supply-chain improvements, a robust labour market, lower energy prices and the reopening of China’s economy. While some caution that a recession remains a possibility, the broad consensus is that any downturn will be mild and brief. At the World Economic Forum, an IMF spokesperson announced the fund would upgrade its economic forecast to reflect this sunnier outlook. That said, inflation remains high and interest rates continue to climb. In the absence of further government intervention, these variables have the potential to create headwinds to growth. Geopolitical crises A quarter of INSEAD faculty flagged geopolitical crises as the top threat facing business in 2023. Another 11 percent cited it as the most important area for firms to address to serve as a force for good. Currently, geopolitical tensions are prevalent in virtually every corner of the globe. Earlier this month, the Council on Foreign Affairs’ annual Preventive Priorities Survey identified 30 potential conflicts for the year ahead, including spillovers from the Russia-Ukraine war, rising tensions between China and Taiwan and ongoing nuclear threats in North Korea and Iran. Meanwhile, the World Economic Forum highlighted the emergence of “geoeconomic warfare” as an offshoot to geopolitical fragmentation, ranking geopolitical confrontation as the third biggest risk in the short term. Tensions are also running high within countries. According to the Edelman survey, six countries – Argentina, Colombia, the United States, South Africa, Spain and Sweden – are in the “severely polarised” category. Though the consequences of these threats largely fall on the shoulders of governments, businesses have a responsibility to step in and help mitigate them. Public-private partnerships are four times more likely to yield optimal results for society than if government or business work alone, according to the 2023 Edelman Trust Barometer. The Global Risks Report 2023 reinforces this point, emphasising that the time to act is now. “Concerted, collective action is needed,” the report says, “before risks reach a tipping point." |
Feb 1 at 12:00am
| FROM Insead Admissions Blog: ChatGPT and the Future of Business Education |
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Over a million users have tested the potential and limits of ChatGPT – a chatbot developed by AI research company OpenAI – to write emails, poems or code, or even produce entire research papers. The chatbot recently passed a Wharton School MBA exam, prompting further admiration and alarm. Several academic journal publishers have banned authors from using ChatGPT, and professors are changing exams and assignments in response to the tool. But is ChatGPT a tipping point that will change business schools as we know them? While many of us are stunned by how impressive and natural the output can be, it doesn't mean it's useful for everything we do. Here’s what we’ve found are the major implications for research, teaching and learning. A useful sparring partner Phanish Puranam, Professor of Strategy I personally find ChatGPT serves as a useful copy editor and translator (including into programming languages) but I don’t trust it as a search engine or source of knowledge – the answers it produces that I cannot easily verify are suspect until proven otherwise. However, it is useful when I can quickly verify if the copy is sensible or if the code works. It is also a useful sparring partner when writing – even the “mistakes” it makes are helpful for me, and it can generate a lot of variations on a theme rapidly. I have clarified my thinking on topics as diverse as delegation and Occam’s razor by interacting with it. When it comes to assignments with open-ended components, I have started to ask students to submit the ChatGPT response to the theme they picked and include an appendix telling me how they used it. I can’t be in the business of policing whether they use it or not, and this is a tool they need to learn how to use (my views would be different if I was teaching younger students – high-schoolers for instance). I tell them they should worry less about ChatGPT making them redundant and more about being made redundant by somebody who can effectively use such technologies. Only good with narrow queries Pushan Dutt, Professor of Economics When I got ChatGPT to take a microeconomics exam, the results were underwhelming. It only got one ludicrously simple question about a recent OPEC+ move correct. Out of 20. As of today, it cannot reliably add or take derivatives, has no fundamental understanding and is only able to auto-complete sentences. This means I can merrily hand out open-book exams and that my job is safe. For now. ChatGPT is analogous to John Searle's Chinese room argument. Searle imagines himself in a room, following a computer programme to respond to Chinese characters that are slipped under the door. Searle understands nothing of Chinese, but by following the programme for manipulating symbols and numerals, he sends appropriate replies as strings of Chinese characters back out. People outside the door mistakenly assume that Searle is a Chinese speaker. This passes the Turing test. But syntactic rules manipulating symbol strings have no real understanding of meaning. That is the essence of ChatGPT. ChatGPT seems to have three goals: Be helpful, be truthful and be inoffensive. However, in its attempt be helpful (and inoffensive), it occasionally makes stuff up. When it tries to be helpful and truthful, it can say things that are offensive. Will OpenAI’s reinforcement learning with human feedback catch and correct this? Punishing unhelpful answers may push the AI to give false answers; punishing false answers may make it give offensive ones; and punishing offensive answers may make it give unhelpful ones. OpenAI needs to grapple with this impossible trinity. An incremental improvement from Siri Phebo Wibbens, Assistant Professor of Strategy Given all the hype, I was actually a bit underwhelmed by ChatGPT. At first sight it is impressive what it can accomplish, but on closer scrutiny it is a rather incremental improvement from virtual assistants such as Siri. While it has improved upon things that AI is already good at, such as writing grammatical sentences and translation, it is still poor at things AI has never been good at, including writing longer coherent texts and developing new ideas. It is also long-winded and non-committal in its answers, and when it is committal (i.e., a definite yes or no) it is often wrong. While I don’t see immediate use cases for research, the most important implication may be AI plagiarism, for example in student assignments and manuscripts for review, because ChatGPT can write plausible-looking text. It doesn’t usually stand up to scrutiny, though, and a major issue is that it is not good at sourcing its texts. Dramatically different (and possibly incorrect) answers to the same question Anton S. Ovchinnikov, Visiting Professor of Decision Sciences When I got ChatGPT to sit an Uncertainty, Data and Judgement exam (a core course in the MBA and the Global Executive MBA programmes), I found it was only able to answer simple questions requiring textbook-type answers. However, when the questions were harder and required more of a conceptual understanding, ChatGPT provided elegantly written answers, but completely missed the totality of the situation and therefore reached the wrong conclusion. For an exam question about the probability of winning a running race, I asked ChatGPT the exact same question three times and got three dramatically different answers with different logic and different conclusions. All three answers were wrong. Interestingly, ChatGPT made a logical comparison mistake – it assumed that, like other sports, a higher score would beat a lower score, whereas in a running race the winner has a lower time. It also made an algebraic mistake in its calculation, which is shocking for a computer model. Perhaps in future exams we will give students AI solutions and ask them to identify and correct errors, instead of getting them to solve the problems from scratch. Another option could be to get students to identify when ChatGPT provides an incorrect answer and get them to rephrase their prompts and questions in order to get a better answer. A complement to what we do, not a substitute Victoria Sevcenko, Assistant Professor of Strategy For simple coding tasks, ChatGPT can speed up the initial stages of writing and debugging Python code. I often start with simple prompts and build from there, or paste code that I need help debugging. The output still needs editing, but it is a useful complement to reading documentation and reviewing advice on Stack Overflow. I also use ChatGPT in class to help students interpret code and edit it. However, because the output can at times be wrong, it is not a substitute for what we do in class, but rather a useful tool for tasks where students can check the accuracy of the output directly. I am also looking forward to new apps built on GPT-3 that might help us speed up systematic literature reviews and locate additional relevant papers. Useful for generating alternative perspectives Theodoros Evgeniou, Professor of Decision Sciences and Technology Management ChatGPT can be useful for compression, such as providing summaries of articles, emails and books, but only if users apply critical thinking to weed out misinformation. It can also help generate “alternative perspectives” to understand how various groups of people perceive things such as product descriptions, political statements, mission statements or the news. For example, you could ask ChatGPT for an ambitious, complimentary, cynical or culture-specific summary of a piece of text as a way to discover new ways of thinking, raise new questions and also improve the original text. This has implications for our education system. Instead of answering questions, students of the future might be asked to write 10 questions for AI and assess its answers based on the different versions and perspectives requested. In this sense, AI may indeed prove valuable for education much like the printing press was. "Supercreativity” – a concept we outlined a few years ago – is around the corner. In the words of Sebastian Thrun, the academic, entrepreneur and founder of Google X: “We have not even begun to understand how creative AI will become. If you take all the world’s knowledge and creativity and put it into a bottle, you will be amazed by what will come out of it.” By using ChatGPT to generate multiple texts on a topic, one can also distinguish that volume of text from those written by humans to identify possible differences and potential gaps for research. This ability to work together with AI to create better content, ideas and innovations will become increasingly important. Going forward, we also need to develop innovative and strong processes for humans to work together with machines and oversee AI to ensure what it generates or does is safe and trustworthy. Narrow in scope and singular in output Philip M. Parker, Professor of Marketing There’s been some panic that a more evolved version of ChatGPT will put academics out of business. The question is whether this tool will eventually be able to write academic research that has a higher quality or a more diverse nature than what we have now. GPT-based systems are narrow in scope and singular in output, but, like IBM Watson, make news and fascinate people, which is only a good thing. In the future, I believe there will be algorithmic journals and people will vet an algorithm and accept whatever it produces or not. These algorithms will be the brand – just like Deep Blue, IBM Watson and ChatGPT – and the “author” will be the person who programmed it. Articles will be automatically generated and modified as new data comes in. And if we go a little bit further, code now writes code, which means we don't even need the engineers anymore. We’re either going to be in the game of generating these algorithms ourselves or using them. |
Feb 5 at 08:00pm
| FROM Insead Admissions Blog: China’s Internet Giants: The Nuts and Bolts of Going Global |
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Having revolutionised how millions of people in China shop, socialise and play, it did not take long for Chinese internet firms to repeat the feat outside of China. In social media, TikTok rules the world with its short videos; in e-commerce, Shopee and Lazada have cornered the South-east Asian market; in fast fashion, Shein dominates the United States, ahead of established players such as Zara and H&M; and in smartphones, Chinese makers led by Xiaomi have the lion’s share in India, which is poised to have 1 billion smartphone users by 2026. How have they done it? In this article, we size up Chinese internet firms’ overseas successes and the challenges they face. Much of it is distilled from our new book, Seeing the Unseen: Behind Chinese Tech Giants' Global Venturing, a culmination of our research and expertise as well as extensive interviews with investors, entrepreneurs and executives with intimate knowledge of Chinese internet companies’ global ventures. Our aim is to help companies, entrepreneurs and executives draw valuable lessons from some of the most exciting players emerging from China in recent years. In an earlier article on the book, we looked at the key factors behind the phenomenal success of these firms. Now, we turn to their strategy for overseas expansion, and hope to deliver insights to decision makers who are venturing beyond their home ground. The nuts and bolts of conquering the world Few elements are as integral to the very survival and growth of companies as what we call POP-Leadership. Short for people, organisation, product and leadership, POP-Leadership provides a framework from which to analyse firms’ strategies and identify the successes and pitfalls. Leadership The success of Chinese internet firms belies the fact that many of them are still in their formative years, during which the person in the driver’s seat is of utmost importance. While many American tech giants including Microsoft, Apple and Google have experienced succession at the top, in China only Alibaba and Pinduoduo have had a change in leadership. In fact, when Pinduoduo founder Colin Huang decided to step down as the e-commerce giant’s chairman in March 2021, the company’s share price plunged by almost 23 percent in a week, reflecting the strength of the founder CEO effect in the Chinese firm. By contrast, when Jeff Bezos announced only two months later that he would step down as Amazon’s chief executive, the company’s share price barely budged. To succeed overseas, top executives and companies must have the mental space to juggle the demands of both the home market and the complexity of adapting to a new one. Leaders need to have a clear understanding of themselves and their organisations, as well as the commitment they are willing to make. Case in point: If ByteDance founder Zhang Yiming had not made the decision in early 2020 to switch his attention to overseas expansion, TikTok might not have become the world’s leading social media app. Zhang will certainly need all his wits about him to deal with the fresh political challenges that TikTok is facing in the United States. Xiaomi founder Lei Jun likewise devoted outsized commitment to the Indian market. Lei visited India as early as 2001 and kept a diary of his visits. Over the years, he built up a comprehensive understanding of India’s economy, culture and software industry dynamics. People More so than the average firm, multinationals need abundant talent to formulate, execute and adapt strategy. Capable lieutenants are especially in high demand to run local operations, tackle challenges, expand outposts as management’s proxies and sometimes even serve as the CEO’s cheerleader. Undoubtedly, people are the core of the organisation. While there is no shortage of applicants, top talents remain in short supply. The competition for the best talent in China is intense, with major internet firms dedicating significant money and resources to recruiting, marketing and employer branding. One shared trait among Chinese tech firms is a preference for young employees i.e. new graduates, as they are deemed easier to train, more motivated and easier to incentivise. At ByteDance, for example, 63 percent of employees are below 31 and only 3 percent are older than 40. Young recruits are brought in on a regular basis and put through a demanding work environment. Those proven capable are quickly promoted while the rest are left behind. In fact, there is recent evidence that many companies layoff older employees as young as 35 if they are deemed to have plateaued. But the ones who do make it often find that it’s worth their trouble. At ByteDance, outstanding employees have been known to receive bonuses equal to 100 months of their salaries while good performers stand to get 20-month bonuses. The CEO of a company worth more than US$100 billion summed up why star workers are showered with outsized rewards: “People at the middle level and below will not differentiate us from the competitors. The top-level people are the ones who can help us build a winning edge.” It must be noted, though, that people in different countries may have very different aspirations and motivators. Companies setting up overseas operations should actively identify what strings to pull to build the right employer branding, attract the appropriate talent and align the new hires’ goals with the company’s success in those markets. Organisation In a nutshell, organisation issues revolve around decision rights, information communication and resource allocation. While it makes intuitive sense that local teams be empowered to make decisions in order to stay nimble, in practice it is hard to define the business and operational scope of local teams and delineate their decision rights and accountability. A key question is whether overseas teams should have control over technology and products. Both TikTok and Hong Kong-based logistics platform Lalamove separated their international and Chinese products early on, with separate apps, data centres and teams working on different lines of business. This enables local teams to respond quickly to conditions in their respective markets. At Xiaomi, for example, Lei empowers his India leadership team to decide on product matters. This results in Xiaomi smartphones that are designed for local needs, such as more cooling modules and thicker coating on ports and charging cables. This leads to the issue of communication. Our interviews uncovered problems in communication between overseas teams and headquarters due to Chinese firms’ notorious practice of constant restructuring. At Alibaba, for instance, major group-wide reshuffles happen every year. Our interviewees lamented that they barely knew who at headquarters they should report to, let alone ask for resources. The upshot is that decision-making at Lazada, Alibaba’s South-east Asia platform, is overly complicated. This hobbles consistent strategy execution in the face of strong competition from Shopee, allowing the latter to catch up even though Lazada had first-mover advantage and possesses better technology, operational experience and expertise. The final problem around organisation is resource allocation. One executive told us of an overseas unit that, despite 200-percent growth in sales in the Thai market, still contributed less than 1 percent of the parent company’s total sales. As a result, it was sidelined by the various departments that were supposed to contribute resources. A related downside is weak guanxi or interpersonal connections among overseas executives and those at headquarters. In Chinese companies, guanxi plays an important role in getting resources and information about what is going on behind the scenes. If guanxi is not handled well or is weak, it might be hard for overseas executives to secure the support and resources they need. They might not even know how decisions are made and who influences decisions at headquarters. Product In overseas expansion, the product offered is based on a series of decisions: what to offer, when to enter, where to enter and how to enter foreign markets. Companies need to negotiate the trade-off between localisation and standardisation of their products, and decide what to adapt to local markets. Let’s use WeChat as an example. The messaging platform used by more than 1 billion Chinese people failed to gain traction in India despite a major marketing campaign featuring Bollywood stars. While WeChat attracted 25 million new subscribers within weeks of its launch in May 2013, most of them did not stick. Analysts argue that WeChat’s super app design – which combines messaging, social media and e-commerce on one bulky, memory-guzzling platform – was too much, too soon for India. What Indian users wanted was simply a tool to communicate quickly and easily, and they got it from https://gmatclub.com/chat. Ultimately, the product offered in specific markets needs to match what the market needs and is willing to pay for. Lessons for future ventures The POP-Leadership framework can be a useful guide for companies to think systematically in identifying potential pitfalls and bottlenecks in planting their own stakes around the world. Through this framework, we go behind the scenes to uncover the leadership thinking, strategy, organisation, strengths and weaknesses of top Chinese internet firms such as ByteDance and Shein, which remain little studied. Whether you’re a competitor, potential partner, hopeful employee or other stakeholder, we hope you will gain a better understanding of how these companies operate and learn from both their successes and failures. Seeing the Unseen: Behind Chinese Tech Giants’ Global Venturing is available on Amazon. |
Feb 9 at 02:00am
| FROM Insead Admissions Blog: China is Back: What Its Reopening Means for the World |
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From zero-Covid to zero restrictions, the speed of China’s return to normalcy took the world by surprise. Two months after the world’s second-largest economy signalled that it would end its self-imposed isolation, manufacturing and services have rebounded from pandemic-induced slumber, travel is resurgent, and hope is that “revenge spending” will turbocharge the country’s growth this year. INSEAD professors weigh in on what the reopening could mean for businesses, supply chains and investors, as well as what lies ahead for China. China needs to rebuild investor confidence Lily Fang, Dean of Research, Professor of Finance and the AXA Chaired Professor in Financial Market Risk China’s reopening will impact commodities prices. This would give oil prices some support, though I won’t necessarily predict a price surge because too many other factors, including on the supply side, affect oil prices. Intermediate input prices such as transportation and shipping could be affected as supply chain reopens. I expect Singapore being a big beneficiary of China’s reopening due to the freedom of capital and human movement. If China wants to slow or reverse the investment outflow, it has to rebuild global investor confidence. The signals that the government sent recently in easing the crackdown on Big Tech are much more important than the country’s reopening. Less clout in global supply chains Chengyi Lin, Affiliate Professor of Strategy Going forward, companies are paying increasing attention to their supply chain resilience. China re-entering the global economy gives companies opportunities to leverage the country’s manufacturing capabilities, logistic infrastructure and labour force. Nonetheless, executives are cautious about the increasing geopolitical tension between the United States and China. Over the past couple of years, many companies and industries have built or rewired their supply chains in different ways as a response to the supply chain challenges that they encountered during Covid-19. Three chief executives of large global manufacturing companies told me recently that 70 to 90 percent of their supply chains were based in China before the pandemic. Now, that figure is around 40 to 60 percent, as regional supply chains in Europe and Latin Americans have picked up the slack. Such companies may be less willing to go back to the old way of doing things as regional supply chains can offer more resilience despite the costs. Still, China continues to boast lower costs, better infrastructure, more advanced digitalisation and more skilled workers. It also remains one of the largest potential markets that can spur companies’ growth. Important to re-stimulate domestic demand Guoli Chen, Professor of Strategy Beijing is shifting its focus from managing the pandemic to reviving the economy. However, there is a lack of trust between China and the United States and between private-owned enterprises and the Chinese government. The former is going to take some time to rebuild; there is no clear signal that the relationship will get better soon. To me, the more important thing for Beijing for now is to motivate and encourage entrepreneurship and re-stimulate domestic demand. Sizeable investment opportunities Xiaowei Rose Luo, Professor of Entrepreneurship and Family Enterprise China’s reopening policy suggests that the country is prioritising economic growth, and this will lead to sizeable economic growth and investment opportunities. In the past weeks, Morgan Stanley analysts, for example, have been predicting a 5.7 percent GDP growth this year. Chinese Vice-Premier Liu He’s speech at the recent World Economic Forum annual meeting in Davos also suggests that government policies will be adjusted to encourage growth. More positive surprises in store? Bart Zhou Yueshen, Assistant Professor of Finance There is room for the Chinese economy to revert, at least in part, to its normal trajectory this year, now that the restrictive measures are all removed. Whether this translates to a "buy" in the stock market now is a more nuanced question. I do not see any particular reason why the competitive market would have left out any profitable investment opportunities – overall the market is quite efficient. The MSCI China index has risen significantly since the low in November 2022, and it is likely that the market has already factored in the expectation of a better economic outlook for China. As such, to justify a particular bet in China (relative to alternatives), one would need to come up with an argument for what positive surprises might materialise. For example, might the government relent further in its crackdown on tech industries? Might the central bank stimulate the market with extraordinary measures? These are much harder to speculate at this stage. China at inflection point Antonio Fatás, Professor of Economics There is no doubt that the removal of Covid-related restrictions is good news for the Chinese economy but it is unclear how much of a rebound we will see. First, unlike other countries (say the US) China has not accumulated large savings during the last year. There is no obvious boom in consumption expected with the reopening. Second, the slow movement of companies away from China to diversify geopolitical risk will continue. While this does not mean a large change to the status quo, it does affect growth prospects. Third, the Chinese government seems to have run out of ideas to rebalance the economy from investment to consumption. This is a fundamental structural issue that needs to be addressed. And, finally, the reforms that the Chinese economy needs have not happened. If anything, we have seen a reversal of some of them. Without reforms, China cannot become a rich economy. This is not just about 2023, this is about the potential long-term growth for China. Without growth we will see increasing social discontent. The Chinese political system has been stable in a scenario where growth instead of votes validated policy choices. Without growth the system will start showing its weaknesses. |
Feb 13 at 01:00am
| FROM Insead Admissions Blog: Cutting Through the Metaverse Hype |
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The metaverse is an ambitious, untested technology with incredible potential and a host of limitations. While most people think of immersive, virtual worlds as places to socialise or play, several business applications – and pain points – have begun to emerge. In 2026, an estimated 25 percent of consumers will spend at least an hour a day in the metaverse for digital activities including work, shopping, education, social interaction and entertainment. In addition, 30 percent of global businesses are projected to have products and services ready for the metaverse by then. The first big business application is metaverse marketing. Nike, Balenciaga and Hyundai are just three examples of brands that have entered the metaverse to experiment and engage with customers. The next big wave will be organisations training, incentivising and engaging their employees in virtual worlds. Global consulting firm Accenture, for example, has already onboarded thousands of employees using its metaverse. While there is much hype around a fully immersive metaverse, we are not quite there yet. The dream of the metaverse is to merge our physical and digital worlds, but the gulf is still too wide. Investment in metaverse technologies and infrastructure may be high, but adoption is slow and somewhat limited. To explore how the metaverse and extended reality (XR) ecosystem is developing in Europe, we (Chelcie, Nikita and Cameron) conducted interviews with start-ups, venture capitalists (VCs) and industry experts in seven European countries. As part of the INSEAD Summer Startup Tour, we spoke with insiders working to bring the best of the metaverse to every industry, from democratising the quality of medical care available worldwide to enabling immigrants to access work that matches their skillsets. Here are some of the questions we asked and answers we found on our journey. What are the biggest hurdles for mass adoption? It needs to add value: Slapping a 3D store onto your existing e-commerce site without much modification does not make for a quality metaverse experience. Companies need to steer away from gimmicks and towards value-added experiences that are better achieved using immersive digital technologies. User experience (UX) needs drastic improvement: The UX of metaverse experiences is still a work in progress. As soon as there are high-resolution, quality experiences that are easy and seamless to access, people will have fewer mental obstacles about using it regularly. It needs to be accessible: The high cost of VR headsets, unfamiliar user controls and lack of knowledge prohibit many people from partaking in metaverse experiences. For mass adoption, access to the technologies and acceptance of their usage will be required. When will metaverse experiences become mainstream? Software professionals predict mainstream adoption will take anywhere from three to 10 years, and that early adoption will predominantly come from enterprise and Gen Z users. Many believe adoption will take place in a phased approach, with AR reaching the masses first as the hardware for VR and haptic technology progresses. On the other hand, hardware professionals estimate it will take 10 to 15 years before the metaverse goes mainstream. Key reasons include high costs and timelines of R&D, less availability of funding for hardware start-ups and development required across the technology ecosystem – including infrastructure, streaming, graphics processing and headset size. How badly do we need Big Tech? While competition is high in software and winners are yet to emerge, it is in hardware and computing infrastructure where Amazon, Apple, Google, Meta and Microsoft will really have to flex their muscles if the metaverse is to have a future. Hardware development is a long and costly game, requiring deep pockets and much patience. The success of every software-focused start-up we interviewed depends on the success of hardware, yet none of them had the resources nor fiscal capacity to build expertise in this space. Big Tech has the funds, risk appetite and track record to invest in, develop and distribute accessible products. What are the key challenges? The concerns around the metaverse are predominantly ethical – including privacy, social and economic inequalities, accessibility and identity. As one founder we spoke to said, “Few VCs are going to ask you … what are your regulations or where are your moderators for this if there is no risk of liability due to the lack of laws. It is your responsibility as a decent human being to anticipate this before you are legally required.” How will it be regulated? The metaverse has the potential to literally become another world, and without regulation it truly is the Wild West. Already there are reports of sexual assaults on Meta’s platform. Who do we trust to police the metaverse, which is bound by no physical geography? How will people be held accountable for harm they commit? How will users be identifiable and traceable, or will that not be the case? Unfortunately, we are left with more questions and concerns than answers. Gone are the days when we could assume tech was always for good. In Web2, particularly on social media platforms, we have seen untended negative consequences on individuals and on society more generally. As a result, expectations have shifted. Entrepreneurs, business leaders and regulators must proactively anticipate and mitigate the potential dangers of shifting human activity to the metaverse. While the future applications of the metaverse are still hazy, one thing is clear: it is up to us to ensure it brings more value than harm to the way we live. ‘SSUP! is an INSEAD MBA student-led (ad)venture that aims to explore the top entrepreneurial hotspots around the world. Find out more here. Register for our upcoming Tech Talk X “Metaverse: A Revolution in the Making?” on 21 February 2023. |
Feb 14 at 02:00am
| FROM Insead Admissions Blog: Why Managers are Kinder to Women in Workplace Reviews |
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Women are more likely than men to receive positive feedback from their managers. But an overly enthusiastic performance review is not necessarily a good thing. Prior research shows female employees are often told white lies while their male equivalents are dealt the harsh, honest truth. This is problematic because inaccurate, inflated feedback can hurt a woman’s ability to receive important job assignments, raises or promotions. But why are women reviewed differently? Do managers think female employees can’t handle the truth? Is hostile or benevolent sexism at play? We set out to investigate what drives gender bias in workplace reviews and found that managers aim to be kinder to women because of the gender stereotype that women are warmer and “nicer” than men. In a recent paper published in Personality and Social Psychology Bulletin and summarised in Harvard Business Review, we theorise that people make kindness a higher priority when giving feedback to a woman versus a man, due to the association of women with warmth. This can in turn motivate them to exhibit greater positivity. Kindness and candour can go hand in hand We tested our argument that warmth drives gendered positivity biases in two ways: directly by assessing perceptions of warmth and indirectly by testing whether people see kindness as more helpful for women. We first checked for real-world evidence of this in the evaluations of high-performing MBA students. A sample of 423 students nominated supervisors, mentors, peers, and subordinates to offer feedback on their performance. We asked evaluators to consider how kind and candid their responses were and checked if they were aware of how positive their feedback was. Evaluators indicated that they prioritised kindness more in feedback to women, but there was no significant difference in the priority placed on candour. While evaluators did not self-report giving more positive feedback to women than men, analysis of their qualitative answers revealed that their comments to women had a more positive tone, included a higher percentage of words associated with positive emotions and included a lower percentage of words associated with negative emotions. We then took an experimental approach and conducted multiple studies to test whether MBA students, experiment participants and managers would prioritise kindness more when anticipating giving developmental feedback to a woman versus a man. Participants were asked what their top priorities were in a hypothetical scenario where they had to give feedback to an underperforming employee whose name implied their gender (they were either called “Andrew” or “Sarah”). As predicted, participants prioritised kindness significantly more for Sarah than for Andrew. Further, we found that both male and female evaluators exhibited this differential tendency to an equal degree. Put simply, whether the participant was a man or a woman had no influence on how they rated Sarah or Andrew. Is sexism at play? Interestingly, participants prioritised candour when it came to giving feedback to both Sarah and Andrew about their performance. This indicates that hostile sexism, in that evaluators have hostile intentions and don’t want women to succeed, is not driving this effect. Alongside hostile sexism, we tested other possible mechanisms. These included stereotypes that women are less competent, benevolent sexist instincts that women need protection, lower standards of judgement among women compared to men, concerns about appearing prejudiced, and stereotypes about men being more disagreeable. To investigate these alternative drivers, participants rated how much they saw the employee as competent, how strongly they believed women should be cherished and protected by men, how surprised they were by the poor performance and how comfortable they felt about giving the feedback. In addition, they were asked how the feedback might be received, how concerned they were that the employee would disagree and how they thought the employee would feel after the feedback. None of these gender condition differences emerged from the results. Participants were simply motivated to be kinder to women because of the stereotype that women are warmer. Nevertheless, future research should address questions about how intersections of race and gender shape feedback, and also explore intersectional and gender-nonbinary dynamics. For example, evaluators may prioritise kindness and at the same time not want to appear racist, transphobic or simply a bigot, which could exacerbate biases. Who “wins” at the end of the day? In our final study, we measured warmth indirectly by asking real-world managers how helpful they see kind feedback as being. Consistent with the earlier studies, we found that people rated kind feedback as more helpful for Sarah than Andrew, and candour as equally helpful for them both. These findings raise important questions about who loses – and how – when managers prioritise kindness towards women, especially if honesty is equally prioritised. If greater kindness and positivity towards women shrouds the candour of the feedback, it may inhibit women’s ability to learn and predict their future outcomes. However, harsher feedback to men may foster cultures that reduce men’s dedication and well-being at work. This could potentially contribute to fostering cultures of toxic masculinity that are constrain all genders. Our results indicate that managers need to reflect on what they prioritise when giving feedback and how this is shaped by the recipient’s gender. At the end of the day, kind feedback is not the issue. All employees could benefit from a little positivity and enthusiasm. The problem arises when managers assume kindness is necessary based on an employee’s gender alone. Managers may need to work on providing positive feedback across the board, or to keep kindness in check when reviewing female employees. There’s benefit in going in both directions or finding a happy medium. Leaders need to find ways to operationalise kindness in workplace reviews and turn the power of positivity into something that’s helpful for all. Only then can we begin to achieve the broader social goal of gender equity in the workplace. |
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