Exercise: Lie Detector

dishonestyAre there cultural norms for telling the truth? Recent research by David Hugh-Jones suggests that this may be the case. In his coin flip experiment, respondents were asked to get a coin ready. On the next screen, they were asked to flip the coin and report the result. They were also informed that they would receive an incentive (either $3 or $5) if they reported “heads.” As such, respondents who flipped “tails” had to choose between telling the truth and receiving the money. This experiment allows honesty to be estimated at an aggregate level, by comparing the proportion reporting heads in any group to the 50% proportion expected. The figure above shows how the results for honest reporting differed by country. You may be able to repeat a version of this in your class. You may note that another coin flip exercise is recommended in the toolbox to explore luck and entrepreneurial success. You might run this in an earlier class with no incentive and record the proportion of people that report heads on each round. Then, in a class on ethics (or global strategy), repeat the exercise with an incentive ($20 should be enough). See if the proportions of heads reported differ. It may be that the class setting affords enough monitoring that cheating is not observed. Also, a large sample (100 or so per group) would generally be required to find significant differences in honesty. Even so, you can still present the results of the study (and, perhaps, argue that your class is more honest than average subjects in their country). You could also try to duplicate the lack of monitoring in the experiment by having students flip a coin at home or online and report the result. As such, there might be reasons to have students do this exercise outside of class and discuss the results in class.

Contributed by Aya Chacar and Russ Coff

Clowning Around About Time Compression Diseconomies

Students might be confused about time compression diseconomies as a foundational component of a resource-based advantage. However, Dierickx and Cool’s (1989) idea here is quite simple: It may take time to build a resource or capability and even if rivals know the source of an advantage, they may not be able to recreate the resource in a timely fashion. Of course, Barney (1991) captures this as history or path dependence being the barrier to imitation. This simple video illustrates the principle (in a darkly humorous way). Of course, in this case, our protagonist merely needs to incur some search costs to find a fully grown tree. There is no practical way to rush the process to get the tree to grow substantially faster.

Contributed by Russ Coff

Cutthroat Kitchen & Strategic Factor Markets

kt0201_alton-brown_s4x3_lgThis cooking competition show begins with an auction of resources needed to cook including space to work and cooking utensils. The contestants bid to preempt rivals by obtaining access to key resources while saddling them with inferior resources. This is ultimately quite similar to the egg drop auction exercise but it can be assigned as a “video case.” This is a nice way to introduce to students to the fact that fierce competition occurs in resource markets – an arena that they may be less familiar with. One can then explore different resources and how they are acquired (human capital, locations, technologies, etc.). It might even be an opportunity to assign them Barney’s original article on strategic factor markets.

Contributed by Isabel Coff

Bring Me Your Confusions!

Presenting material clearly and concisely may not be the best way to help students learn. In fact, presenting ambiguous information that leverages common sources of confusion may be a much better route to learning. This post is intended to serve as a BLEG to solicit examples of confusions that students experience. Accordingly, this is a starting point for developing new material that draws on confusion to teach strategy. We begin by understanding what confuses students. Here are some examples that come to mind (please add your own examples in the comments):

  • What does 5 Forces tell us about the firm’s advantage? Students often put a focal firm in the center and consider rivals to be substitutes. They don’t understand that the framework addresses the industry and not the firm.
  • What industry to choose for 5 forces? Students often choose an umbrella industry instead of the specific segment they are considering entering (e.g., beer instead of micro brews in South Africa). The result, then, is almost useless for making decisions and the analysis is not used to make recommendations.
  • Some resources are valuable while others are Inimitable (VRIO): Students think they are looking for some resources that fit in each bucket (V,R,I, & O) instead of a few resources that meet all of the criteria. They don’t understand that VRIO is a filter to evaluate all strengths in the value chain.
  • What is that “O” for anyway (in VRIO)? It seems to make sense but students often don’t really understand how a firm can have all of the pieces and still not execute. I use Xerox PARC as an example.
  • How do we make decisions using VRIO? Students often think they understand but don’t really know how to use it to make a decision. For example, how are capabilities relevant to decisions like entering new markets or fending off rivals?
  • Motivation for diversification: guilty until proven innocent. Students often suggest that a firm should acquire a successful target. They fail to see that future success is built into the acquisition price and don’t ask why the buyer could create unique value over other bidders.
  • Technology advantages erode rapidly. People see technology as key but miss that it can be easy to reverse engineer (leading to a temporary advantage). While the iPhone confers an advantage to Apple, Samsung has more market share.
  • Core competence is not what a firm does well if rivals can do it better. Core competence must refer to VRIO resources in order to create value.

Again, please add your own examples in the comments below. The following TED talk by Derek Muller describes the technique in teaching science.

 You can find a string of educational videos that leverage this “confusion” technique to teach principles of science here.

Contributed by Rich Makadok and David Kryscynski

Research Chatter: Coffee talk for geeks

Ronnie Chatterji and Charlie Williams have put together an excellent research podcast series. They describe it as “Big ideas from business school professors.” It offers an excellent bridge between cutting edge business research and the world of practice. The podcast is sponsored by the Strategic Management Society (publisher of the Strategic Management Journal, Strategic Entrepreneurship Journal, and Global Strategy Journal). You can find the podcasts at iTunes, Soundcloud, and YouTube among other places. Want a quick taste? Here are some of the topics that this reviewer found especially interesting in the realm of entrepreneurship and innovation:

Contributed by Russ Coff

JebBush.com & Late Mover Disadvantages

DillonEdwardsEarly movers stand to lose if late movers learn from their mistakes and enter with better product offerings or better strategies. Classic early movers who lost include Osborne Computer Company  (subsequently overtaken by Compaq) or EMI’s exit from the CT Scanner business. Myspace and AoL might also be counted among early entrants that ultimately fizzled.

That said, early movers can can gain key assets that make it hard for rivals to enter and compete. You may have noticed that “JebBush.com” takes one to Donald Trump’s home page and there are numerous other political misdirections along these lines for other candidates. Similarly, Tesla Motors has only just gained ownership of the Tesla.com domain (probably at a handsome price). In this way, there can be a race to secure resources and capabilities to take advantage of an opportunity and others are in competition for those resources even if the resources are firm specific (as candidate domains tend to be). From a scholarly standpoint, such resources can be approached from a variety of perspectives including strategic factor market theory, Coasean bargaining, or first mover advantages. Of course, there is a humorous side to all of this. SNL has captured this nicely in their spoof commercial for Dillon Edwards Investments (note that this may be a bit “saucy” for many classrooms but we’re all adults here).

https://video.yahoo.com/dillon-edwards-investments-000000517.html

Contributed by Peter Klein

Lego Industry Ecosystem

Lego profits have more than doubled in the last five years. The company has sold non-core businesses and doubled down on the core building block products. They are the undisputed king of building toys. A recent New York Times article describes the lay of the land brick by brick. Lego has focused on more wholesome building themes (Star Wars, etc.) while rivals have sought space where they don’t have to directly compete. For example, Mattel’s MEGA unit has a series of much more realistic building sets (Sponge Bob, Terminator, and Star Trek). Similarly, McFarlane toys has a very successful series of “Walk Dead” building sets that deviate from the image Lego prefers to maintain. In addition to competitors seeking to differentiate, many complementors have emerged such as Pley which offers Lego set rentals (the “Netlix” of the Lego world) or numerous used Lego trading businesses (here is one in Madison). Interestingly, research suggests that these Lego sets may actually reduce creativity — especially compared to the older version that involved a simple bucket of bricks rather than a kit to build a specific thing. Of course, their move into Lego films brings in an interesting discussion of diversification.

Contributed by Russ Coff

Having your IP Stolen is a Real Beach

Knowledge and intellectual property inherently complicate exchange (e.g., property rights are poorly defined, the value is unclear, there are high transaction costs). One manifestation of this is the disclosure problem (Arrow’s 1962 information paradox). Figuring out the “price” for an idea requires revealing data which intrinsically reduces its value. Entrepreneurs often have ideas stolen by larger corporations that have significant complementary assets. Accordingly, they often try to go it alone despite the fact that their lack of such resources may ultimately create less value (for example, Tony Fadell tried to go it alone before bringing the iPod idea to Apple). His alliance with Apple turned out very well. However, this is often not the case. This clip illustrates what happened to Kramer (on Seinfeld) when he approached Calvin Klein with his idea for a new cologne called “beach” hoping to access their resources while gaining a signal of the idea’s value. He reveals the idea in an effort to obtain both. While it is funny, it will also kick off a serious discussion on this issue.

Contributed by Michael LeibleinMarcel Bogers and Marcus Holgersson

J. Crew’s “Great Man” Problem

The NYT Deal Professor notes: “J. Crew, Michelle Obama’s sometime clothing retailer, is yet another struggling private equity buyout. J. Crew’s owners, TPG Capital and Leonard Green & Partners, are stuck, tied to the bargain they struck with the company’s chief executive, Millard S. Drexler. Call it the ‘great man’ problem.” In other words, is the strategic asset a single individual or a set of organizational routines that are robust to key individuals leaving? In this case, J. Crew investors and the board were bound to go with CEO Millard S. Drexler’s recommendations and take the company private. Current struggles suggest limitations to this great man’s capabilities. Indeed, in Leonard Barton’s terms, he is looking more like a core rigidity. This has become a recurring theme. We have explored (in the toolbox) the implications of this for Steve Jobs at Apple but more recently for Jony Ive as Apple’s product development guru. This mini-case may encourage a discussion of strategic human capital, capabilities, organizational routines, and how these relate to corporate governance. Do such key individuals reduce or enhance sustained competitive advantage? Then, along the lines of my own work (Coff, 1999), there is the question of implications for rent appropriation. Clearly Drexler has done well on that front…

Contributed by Russ Coff

Simon Says: PhD Student Survival Tips

Most PhD students feel overwhelmed or lost at times. I sometimes think that “tolerance for ambiguity” is the single most important attribute for a successful PhD student. The clip below is a preview of ‘The PhD Survival Video’ which follows “Simon” through a series of challenges and discusses how to manage the stress and pressure of a PhD. This is the latest part of Angel Productions’ series to support doctoral students. It is valuable for anyone undertaking a PhD or supervising one. The full video is available for sale to universities, colleges and other organisations. To preview the full video or enquire about licensing, email enquiries@angelproductions.co.uk.

Contributed by Russ Coff

Fly Like an Eagle: Dynamic capabilities in the wild

American Eagle Outfitters has shown strength among teens at a time when hipster Abercrombie & Fitch is struggling (see this WSJ article for details). The company credited their “Don’t Ask Why” collection in part for its 3% increase in revenue. They referred to the collection a cost-effective “testing lab” to spot trends. By experimenting with new fabrics, washes and styles, they believe they can gauge which styles are gaining favor and add them to the regular collection. American Eagle said the process was key to turning around the company’s tops business, which is now one of the best-performing segments. For example, one of the trends is to abandon the logo covered clothing that was popular in the 1990s. For class, this might make a discussion of dynamic capabilities much more tangible than the academic literature has so far achieved. How do they do it? Does this confer an advantage? If so, to what extent is it sustainable? Of course, this is also an opportunity to bring research into the classroom. For example, one might have students discuss whether this example looks more like Eisenhardt & Martin’s view or dynamic capabilities or those of Teece, Helfat, Peteraf, Winter or others (even Coff had something to say about this ;-).

Contributed by Aya Chacar

I Can’t Write No … Dissertation

If Mick Jagger were a PhD student, we might have gotten a very different song. In the spirit of yesterday’s dissertation defense humor, today we have a musical number on writing a dissertation. Really, how often do people write songs about this? Of course, the fact that they put this together probably explains why their dissertations weren’t completed…

Contributed by Russ Coff

Rejection Therapy: For PhDs, entrepreneurs & other failures

What is the most significant thing that differentiates entrepreneurs from others? Somehow, in the face of overwhelming odds that they will fail, they still manage to push forward. Rejection, almost inevitable, doesn’t deter them. The rest of us kill inventive ideas before we even test them because we fear rejection. This NPR story explores a new form of therapy where rejection is turned into a game: how many times can you get rejected in a day? Could desensitizing people to failure create more entrepreneurs? This also has important implications for academics who typically face many rejections from journals for each manuscript that gets accepted. Without “rejection therapy,” they may avoid sending papers to journals because they are concerned that the work will be rejected. Like would be entrepreneurs, they kill ideas before they have had a chance to test the waters.

Contributed by Don Hatfield

Food for Thought: PhD seminar syllabi

SeminarFoodWhile the toolbox is focused mostly on teaching strategy at the MBA and BBA levels, there is also room to provide some resources for PhD programs as well. Below are some strategy PhD seminar syllabi that may be useful. Please send me your most recent syllabi and I will add them to this post. Some specialized strategy seminars are pulled out below (innovation and research methods).

Innovation

Research Methods

Contributed by Russ Coff (and all the folks above!)