Chris Voss, Professor of Operations and Technology Management, has recently completed a three year research programme with Advanced Institute of Management (AIM) funded by the Economic and Social Research Council (ESRC).

The research focused on one of the three AIM themes; the development, adaptation and impact of promising or best practices, contributing to the issue of how can and do management in the UK make a difference to organisational performance. The research within this theme consisted of a number of parallel projects in services, productivity and impact, and the evolution of promising practices. The research which is summarised in a final report was rated as outstanding by the ESRC.

To view the report, click here

Created: Friday 02 May 2008

This latest piece of research by Viral V. Acharya, Yakov Amihud*, Lubomir Litov proposes that stronger creditor rights in bankruptcy codes reduce corporate risk-taking.

Employing country-level data, the research finds that strong creditor rights are associated with a greater propensity of firms to engage in diversifying mergers, and this propensity changes in response to changes in the country creditor rights. Also, in countries with stronger creditor rights companies' operating risk is lower, and acquirers with low-recovery assets prefer targets with high-recovery assets. These relationships are strongest in countries where management is dismissed in reorganization, suggesting an agency-cost effect.

An interesting possibility that emerges from the research results is that strong creditor rights may have a "dark" side in terms of their effect on corporate investments and attitude towards risk. Employing several methods, the research finds that stronger creditor rights in a country induce firms to take less risk and prefer diversifying acquisitions. If these actions would not have otherwise been taken by the firms, it follows that creditor rights have real effect on corporate decisions whose value effects may be questionable.

To view the research, click here.

Created: Friday 02 May 2008

Existing evidence suggests that preferences are affected by whether a price is presented as one all-inclusive expense or divided into a set of mandatory charges.

Research by Assistant Professor of Marketing Marco Bertini explains this phenomenon by introducing a new mechanism whereby price partitioning affects a consumer's perception of the secondary benefits derived from a transaction.

The practice of price partitioning has become increasingly common. Instead of charging a simple, all-inclusive price, firms regularly post sets of mandatory charges attached to various attributes of an offer.

The paper looks at what the effects are of price partitioning on consumer behaviour and has introduced a new set of behavioural effects that result from price partitioning.

"We have shown that price format influences the amount of attention consumers invest in various product attributes: an all-inclusive price discourages a thorough assessment of the offer while a partitioned price sensitizes consumers to secondary attributes they might otherwise overlook".

To view the research paper, see attached 

Created: Thursday 01 May 2008

Michael G Jacobides, Associate Professor of Strategic and International Management talks about how firms can shape their environments to gain an architectural advantage.

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In a new podcast, Michael G Jacobides, Associate Professor of Strategic and International Management, and Sumantra Ghoshal Fellow at the Advanced Institute for Management Research, talks about how firms can shape their environments to gain an architectural advantage, and about the new rules for strategy and success through innovation.

Dr. Jacobides begins the podcast by considering how the very competitive landscape changes – and what firms can do to succeed. “Firms don’t only compete in a sector; they compete to shape the structure of the sector. Successful firms understand that a key driver for success is to shape their competitive environment, its about redefining who does what -- and that shapes who takes what.”

Drawing on his recent research, he goes on to discuss examples of how firms such as Google, IBM and Apple have gained (or lost) an architectural advantage. The podcast concludes by explaining how sectors are being redefined by innovative firm that change competition from a tactical confrontation to guerrilla warfare.

Listen to this podcast to hear more of Michael G Jacobides’ insights on architectural advantage and the new rules of competitive advantage.

The full length podcast is available on the podcast page.

Created: Tuesday 22 April 2008

Why the credit crunch took hold and what the authorities should do to avoid a repeat of the crisis and to quell the current economic turmoil.

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In a new podcast, Richard Portes, Professor of Economics, talks about why the credit crunch took hold and what the authorities should do to avoid a repeat of the crisis and to quell the current economic turmoil.

Portes begins the podcast by explaining who is responsible for the spread of problems across borders and markets. “The main players initially were the banks; they took loans, sliced them and diced them in various ways, then sold them on in the ‘originate to distribute’ model which is now in question”.

He goes on to discuss the central banks’ efforts to underpin the markets, monetary policy, the roles of accountants, auditors and the rating agencies, and what should be done.

Listen to this podcast to hear Richard Portes’s insights on the credit crunch.

Created: Tuesday 08 April 2008

Smart business leaders understand that confidence affects decision-making and ultimately a company’s earnings. But giving employees positive feedback in the hopes of promoting better decisions sometimes can backfire, suggests new research from the Kellogg School of Management, the psychology department at Northwestern University, and the London Business School.

Across several studies, the research examines how boosting self-esteem - whether contemplating one’s own accomplishments or receiving positive feedback from others - affects the face-saving impulse to justify and recommit to decisions whose outcomes seem dubious at best.

The authors find that some types of positive feedback can actually escalate perceived threats to the ego and increase the need to prove that a questionable decision was the right one.

The challenge is to instill confidence in people so they can change, rather than justify, the course of a failing strategy, concluded lead author Sivanathan. “Our work offers organizations a framework for systematically leveraging self-affirmation processes so that people will be less likely to recommit to decisions not producing optimal results.”

Gillian Ku, Assistant Professor of Organisational Behaviour collaborated and co-authored this article along with; Niro Sivanathan (Kellogg; joining LBS this Autumn), Daniel Molden (Northwestern University), and Adam Galinsky (Kellogg). The research will be published in an article titled “The Promise and Peril of Self-affirmation in De-escalation of Commitment,” currently in press at Organizational Behavior and Human Decision Processes (published by Elsevier).

Created: Monday 31 March 2008

The sixth annual British Regulatory System report co-authored by Tim Ambler of London and Francis Chittenden of Manchester Business Schools, examines how the UK regulatory system works in practice and whether it follows the Government’s own guidelines. The report is published by the British Chambers of Commerce and begins with a brief review of previous recommendations and documents the progress made and where they stand now. It then focuses on the EU Impact Assessment process before turning to the UK.

Over the last decade regulation has become a major UK industry. Tens of thousands are employed not in commerce to grow GDP but to interfere in that process. Each regulation has a purpose and many contribute to national well being but “better regulation” in practice has come to mean “more regulation”. The Impact Assessment system designed to control the volume may have improved quality at the margins but the original purpose of Regulatory Impact Assessments, namely challenging the need for the regulation and the serious consideration of alternatives, has not been met. The National Audit Office has reached similar conclusions.

The report goes on to discuss how the weaknesses of the UK and the EU Impact Assessment systems are compounded by the lack of synchronisation between them.

The comparison of the EU and UK systems leads to a simple conclusion: the EU very rarely employs Impact Assessments for legislation, and even more rarely quantifies them thoroughly but, when it does so, the system works very well. Conversely, the UK goes through the motions with all relevant regulations but so superficially that the system does not work.

The research concludes that neither the UK nor the EU Impact Assessment systems are working effectively to challenge, inform and shape new regulations.

To view the report, click here

Created: Monday 31 March 2008

The challenges facing philanthropic and charitable investors today.

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The latest in a series of London Business School podcasts featuring members of faculty is now online.

In a new podcast, Elroy Dimson, BGI Professor of Investment Management, talks about philanthropic and charitable investors, and the unique challenges they face in the current economic climate.

Professor Dimson begins the podcast by discussing how market conditions have changed. “Markets have subsided but they haven’t gone down at the rate we experienced at the beginning of this decade”. He then talks about how one should be positioning a fund for 2008/9.

He goes on to discuss specific challenges for charitable investors and factors that they need to take into consideration that other investors may ignore. The podcast concludes by explaining the benefits of the Foundation and Endowment Asset Management programme held in June each year, at London Business School.

Listen to this podcast to hear more of Elroy Dimson’s insights on charitable investing

The full length podcast is available on the podcast page.

Created: Thursday 27 March 2008

How to get businesses on board with environmentally innovation

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The latest in a series of London Business School podcasts featuring members of faculty is now online.

Yiorgos Mylonadis, Adjunct Assistant Professor of Strategic and International Management, talks about how to encourage companies to find ways to beat global warming.

Mylonadis discusses how most companies are motivated by the fear of being penalised if they do not reduce their green house emissions, which often means that they will only do the bare minimum that is required by law.

Rather, he suggests that if there are ‘prizes’ to be gained for being environmentally friendly then companies will be more likely to develop environmental innovations.

The need to balance the demands of shareholders, who want to grow the bottom line, along with a company’s desire to adopt environmental practices is raised as is the work of Richard Branson to encourage innovation in this area.

Listen to this podcast to hear more about what businesses can do to ensure there is hope for our planet.

The full length podcast is available on the podcast page.

Created: Tuesday 18 March 2008

GIRY 2008 finds momentum trading can deliver big profits to investors

Momentum trading involves buying past winners and selling past losers. It sounds too easy to be worth doing. In a well-functioning stock market, it should be impossible to make consistent profits from such a simple system. But new research reveals large potential gains from momentum trading.

The research appears in the 2008 edition of the ABN AMRO Global Investment Returns Yearbook. The Yearbook is the most comprehensive and authoritative work of its kind. It analyses total returns since 1900 for stocks, bonds, cash, foreign exchange and inflation in 17 major markets, covering North America, Asia, Europe and Africa.

Professors Elroy Dimson, Paul Marsh and Mike Staunton, of London Business School—study all 17 stock markets to update the international evidence on momentum. And in a completely new investigation, they go back to 1900 to see whether momentum worked in a previously unresearched era.

For more information see press release and view the synopsis below

Created: Thursday 14 February 2008

Professor Leonard Waverman prepares report highlighting the need for action from governments and businesses

London Business School’s Professor Leonard Waverman recently released the first The Connectivity Scorecard report which suggests that neither the richest nor the poorest nations come close to exploiting communications technologies to their full potential.

The Connectivity Scorecard measures the extent to which governments, businesses and consumers in 25 nations – 16 innovation driven economies and nine resource or efficiency driven economies – make use of the technologies underpinning the information economy.

Professor Waverman described the results of the first scorecard as “surprising” and said that they highlighted a deficiency in the use of communications infrastructure and services and pointed to a clear need for action from governments and businesses.

The report places the United Sates at number one for the innovation driven segment and Russia for the resource and efficiency driven segment.  The US is supported by its strong performances on usage measures, especially by businesses and is closely followed by Sweden and Japan. 

Malaysia and Russia do well in the emerging segment due to their high literacy rates and usage scores.  India and Nigeria are the lowest scores on the emerging segment Scorecard, falling behind on both usage and infrastructure measures.

Professor Waverman said: “We hope that The Connectivity Scorecard proves useful to governments assessing how ICT policy can be advanced; to telecoms operators considering how they can assist the customers and countries they operate in; to businesses considering how to invest in network capabilities; and to consumers addressing choice among connectivity options.”

Professor Waverman is an expert on the communications sector and its impacts on society, economic growth and productivity.   He has completed research into the impact of mobile phones on economic growth in developing countries and the links between telecommunications infrastructure and economic growth.

View further information on The Connectivity Scorecard

Created: Wednesday 13 February 2008

Largest individual research grant ever received by London Business School faculty

Professor of Economics, Helene Rey, has received funding of €1.34 million as the European Research Council (ERC) awards its first prestigious grants to top researchers in Europe.

Professor Rey’s grant is one of only three per cent of successful applications and will go toward a five-year research programme on countries’ external balance sheets, dynamics of international adjustment and capital flows.

Professor Rey’s research aims to develop new theories and construct new datasets to understand the determinants of net and gross foreign asset positions, the trade balance and exchange rates and will quantify their respective roles in the dynamics of countries’ external deficits. She will also work on modelling international portfolio flows.

The research funding was made under the ERC’s first competition for the Starting Independent Investigators scheme open to up-and-coming research leaders based in Europe, and Professor Rey’s grant is one of only 10 awarded to economists in Europe.

View press release

Visit the European Research Council website

Created: Tuesday 12 February 2008

Freek Vermeulen explains how luck really does exist in the business world

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The latest in a series of London Business School podcasts featuring members of faculty is now online.

Freek Vermeulen, Associate Professor of Strategic and International Management, explains how luck really does exist in the business world.

Vermeulen begins his podcast by stating that through examining the strategies of successful companies it occurred to him that there was an element of luck involved in most, if not all, cases. In fact, the initial idea to start a business is often the result of a “lucky” or “chance” event.

This observation has led Vermeulen to ponder why some companies are “more lucky” than others. He notes that the key lies in being open to the opportunity, realising it and then developing it into a successful strategy.

Two well known companies are cited as business that “got lucky”, South West airlines and Hornby.

To hear more about the role that luck and chance play in business, listen to this podcast.

You can also visit Freek Vermeulen’s blog.

Created: Tuesday 12 February 2008

Marco Bertini talks about Marketing and how the principle of 'knowing your customer' applies to all professions.

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The latest in a series of London Business School podcasts featuring members of faculty is now online. Marco Bertini, Assistant Professor of Marketing, talks about Marketing and how the principle of ‘knowing your customer’ applies to all professions.

Bertini begins the podcast by explaining why marketing is so important. He comments that marketing, just like the basic fundamentals in accounting and finance, is one of the core disciplines that students should learn about before entering the workforce.

“Marketing is very relevant for all students as the principle of knowing who your customer is and pleasing them is important whatever field you work in – be it accounting, finance, consulting or marketing,” Bertini says.

‘Knowing you customer’ is the golden rule of Marketing. Bertini says that although this sounds intuitive, it is doesn’t actually come that easily to companies. “Companies need to explain the benefits of their products to their customers and the right marketing tools can help to increase the success of products,” Bertini says.

Bertini elaborates on London Business School’s unique first year marketing course where students get the opportunity to compete against each other with practical case studies after learning the theory.

He believes that the course provides students with the excitement and incentive to go on and do more study in Marketing which is available at the School.

Listen to this podcast to hear more about Marco Bertini’s insights into Marketing and the core course taught at London Business School.

Created: Monday 21 January 2008

Innovation, Universities and Skills Select Committee invites Steve Currall to present

Visiting Professor of Organisational Behaviour and Entrepreneurship Steve Currall presented remarks to the Innovation, Universities and Skills Parliamentary Select Committee on 9 January.

Currall was invited to speak about the real role of universities in maximising the UK’s competitiveness and to examine the demand for Science, Technology, Engineering and Mathematics (STEM) graduates.

Other speakers to the Committee included Lord Sainsbury of Turville, former Minister for Science and Innovation and Chair of the London Business School Board of Governors, and Professor Sir Roy Anderson, incoming Rector (chief executive) of Imperial College London.

In his presentation, Currall discussed the importance of having more school and university graduates in the STEM areas in order to fuel knowledge-intensive industries such as financial services, information and communication technology, biomedicine and creative industries.

Currall proposed that the audience consider precisely which skills of STEM students are most valuable and suggested what the government can do to enhance the effectiveness of its STEM education and knowledge transfer programs.

View Steve Currall’s Faculty Profile

Created: Friday 11 January 2008

Freek Vermeulen launches his business commentary blog

Freek Vermeulen, Associate Professor of Strategic & International Management, has launched a blog which will regularly address topics pertinent to corporate strategy.

The blog, which will be updated at least twice a week by Vermeulen, will call upon his research and that of his peers.  It will examine a variety of topics relevant to the current business environment, such as M&A, CEO succession, strategic innovation and board effectiveness.

Vermeulen’s work focuses on strategic management and he has a special interest in how companies can stimulate profitable growth.

Visit Freek Vermeulen’s blog

Created: Monday 07 January 2008

Visiting Professor of Organisational Behaviour Michael Frese contributes to new report

Most international government meetings put Africa in the foreground because Africa has been the only continent whose wealth has not consistently increased, but often decreased during the last 25 years.

Most economists assume that one of the most important functions of good governance in developing countries is to increase the number and the quality of enterprises that exist in those countries. London Business School’s Visiting Professor Michael Frese et al. now look at one important missing piece in this equation: what can business owners in African countries do to increase their chances of success?

The answer, in short, is to plan more in detail and to plan more proactively. Planning proactively means that one prepares for future opportunities in the market and for future problems now. Planning more in detail means to think of the most important issues of one’s long term goals. It is often argued that in the chaotic environment of African economies it is not that useful to plan. This seems to be wrong, however.

Quite clearly planning is related to success in three African countries, as Frese et al. have shown in one of the most sophisticated analyses of African business people – a three country study in South Africa, Zimbabwe, and Namibia. Often planning may enhance dealing with unexpected events because planning helps business owners to know more about what can happen and therefore look out for these problems and maybe prepare for these problems so that they can deal with them once they appear.

Who are the people who plan well and plan for the future? It seems to be mainly people, who have the right motivation, the right mental preparation, as well as the right cognitive abilities. Economists often assume that once the economic conditions of a country are right, firms will prosper. Frese et al. show that the psychological conditions have to be right as well.

How often does the World Bank give money to entrepreneurs in Africa without knowing whether the right psychological conditions are met? The paper also quotes an article in preparation that shows that planning well and planning for the future can be taught profitably to owners in Africa and in Germany. Thus, while planning may lead to bureaucracy in big firms, it is something that is very useful in small business in difficult economic environments.

The report, ‘Business owners’ action planning and its relationship to business success in three African countries’, appeared in the Journal of Applied Psychology, 2007, 92, 1481-1498. 

It was written by Frese, M., Krauss, S.I., Keith, N., Escher, S., Grabarkiewicz, R., Luneng, S.T., Heers, C., Unger, J., & Friedrich, C. 

Created: Wednesday 19 December 2007

Chris Higson's paper for treasury committee tackles discrepancies in Walker Report

Chris Higson has recently submitted a paper to the treasury committee challenging the recommendations of Sir David Walker, who, in his recent report into the Private Equity industry, argued vigorously for the right to privacy, particularly about the rewards of senior managers and the partners in private equity firms.

Higson argues that Walker’s philosophy is inconsistent with modern notions of accountability and is not grounded in GAAP or company law; and subsequently that if it was to be widely accepted it would turn the clock back a generation.

“We need companies that are acquired by private equity to disclose the same information as would public companies of similar size, and the private equity firm itself to report as if it was a public company”, says Higson.

He goes on to reassert the central role of transparency and disclosure in a shareholder-capitalism economy, arguing, “There is also a need for a well-resourced process of oversight and scrutiny, if disclosure is not going to regress to tokenism and boilerplate.”

For more information on Chris Higson’s paper please visit the Private Equity Institute website

Created: Friday 14 December 2007

The Strategic Dynamics of Industry Architectures

Associate Professor of Strategic and International Management, Michael G Jacobides, presented at the Nobels Colloquia held on 3 and 4 December in Trieste.

The Nobels Colloquia event, which is now in its seventh year, aims to create a forum for leading international representatives from industrial and academic areas to meet with Nobel Laureates and world renowned economists and management scholars.

The topic of this year’s event was, ‘Debating Globalisation: Challenging ideas for a common destiny’.

Jacobides presented a keynote speech on the strategic dynamics of industry architectures which provided advanced material on the challenges facing firms in rapidly shifting environments. 

The presentation focused on how the landscape of competition is changing and what firms can do to succeed, as well as how changes in “who does what” within the sector may affect “who takes what”.  Furthermore, Jacobides looked at how firms, like Google, Microsoft and Intel, are able to shape their environments and gain architectural advantage.

For further information visit the Nobel Colloquia website

View a recent industry briefing on the topic by Michael G Jacobides

Link to Michael G Jacobides’ website

Created: Tuesday 11 December 2007

Phanish Puranam examines knowledge management in offshore service delivery

It is widely held that how easy it is to offshore a business process depends on how well documented and standardized the process is. A recently completed study by Dr Phanish Puranam, Assistant Professor at London Business School and his former PhD student Dr. Kannan Srikanth (now at the University of S. Denmark) challenges this view. In their study ‘Knowledge Management in Offshore Service Delivery’  the authors statistically analysed data on a 127 offshoring projects involving call centres, IT maintenance and back office services. They concluded that whether a process is standardised or not matters little for its being offshored successfully- what mattered was whether the links to other processes were standardised or not.

The authors explain that there are two key knowledge management problems that come up in the offshoring of services. When moving a software maintenance process from London to Bangalore, for instance, not only must the Indian employees learn to do what the maintenance engineers in London were doing (the knowledge transfer problem), but also how to connect with other employees in London whose work is interdependent with software maintenance – such as the software users (the coordination problem). When processes are standardized and documented, knowledge transfer is easier; when the links between processes (such as hand-offs and specs) are standardized, coordination is easier.

While potentially both knowledge transfer and coordination related challenges can eat into the cost savings from offshore service delivery, Puranam and Srikanth find that the current state of the industry is such that that coordination related problems are the critical ones. Through extensive transition/migration processes, most firms in their sample seemed to have learnt how to deal with knowledge transfer issues fairly effectively, even when the processes were not very standardized. The authors suggest that knowledge transfer may in fact become moot if the off-shoring of services begins to move away from a model of “service delivery” towards “content development”- where the client cares about the outcomes, not about high fidelity replication of how processes used to be run onshore.
The study’s results have broader implications for what is potentially “offshore-able”.  Many think that offshoring is pertinent to “routinized and standardized” tasks- in which knowledge can be transferred easily, and that “high value added creative work” is immune. However, industry practice seems to have evolved towards dealing with knowledge transfer issues quite effectively, so that “lack of standardization” no longer poses the critical hurdle to offshoring.

The study results also point to the surprising idea that managing coordination across onsite-offshore locations may be done more effectively by managing intangible shared understanding – “common ground”- rather than investing in business process reengineering (to black-box processes) or investing in the latest communication technologies (to simulate face to face communication). The “soft factors” underlying mutual understanding and a shared world view among onsite/offshore personnel may in fact have fairly “hard” economic consequences, by limiting the need for travel and avoiding costly coordination failures.

Created: Monday 10 December 2007

Professor Andrew Likierman examines how to measure the success of executive performance related pay

A recent paper from Andrew Likierman explores how to determine the success of performance related pay by identifying the measurement problems, solving some of these and mitigating those that cannot be solved.

Professor Likierman identifies the major challenges to the successful measurement of executive performance related pay as; the existence of unclear objectives, the absence of the counterfactual and clear comparators, the inability to fully identify costs and benefits, and the quality of evidence.

In response to these problems, Professor Likierman proposes several ways to tackle them which can be broken down into three main categories of objectives.  The first category includes aligning interests; matching rewards offered by competitors and identifying priority measures.  The second category consists of objectives designed to improve performance by influencing those outside the organisation.  The third category looks at reducing the fixed cost base which aims to decrease the risk associated with a fixed cost by aligning some remuneration to the company’s ability to pay.

Professor Likierman acknowledges in his paper that not all problems can be solved and some may only be mitigated.  It is suggested this be done through the use of a ‘first-class’ commentary which is defined as lucid, focussed and jargon-free.  Other ways problems can be mitigated is in the manner the scheme is implemented and the extent to which feedback is embraced.

Created: Monday 10 December 2007

Michael G. Jacobides explores entrepreneurship and firm boundaries

A paper from Associate Professor Michael G. Jacobides, with Wharton’s Sid Winter, just published in the Journal of Management Studies, examines how a better understanding of entrepreneurial activities can help explain how firm and industry boundaries change over time.

It also provides fresh set of descriptions (and prescriptions) on how entrepreneurs chose (or should chose) what they do, and what they contract out. Finally, it highlights the role of asset appreciation in driving entrepreneurial decisions.

Starting with the observation that entrepreneurs believe in their superior ideas, yet are usually short of cash and find it hard to convince others, the authors focus on the role of “returns on available cash”, sometimes to the neglect of superior but more cash-consuming solutions.

Entrepreneurs thus rationally focus on the segments (or technologies) with the highest cash leverage; yet, as success begets operating profits, and as the financing constraint is relaxed, they often consider shifting into more segments or adopting integrated solutions.  

The authors also shed some light on the value of assets under an entrepreneur’s control. Observing that an entrepreneur’s objective is to maximise their wealth, the paper stresses the fact that entrepreneurs do not only make their money through their operating profits but also from the appreciation of the assets the firm accumulate. This can lead to counter-intuitive prescriptions: Entrepreneurs should consider not only where they will have the highest leverage in terms of profits, but also what will lead to more wealth creation through asset appreciation. It might even be that entrepreneurs who lock in valuable assets in a new technology or market segment may even invite competition in an innovative segment: While this might reduce profitability through competition, the scarce assets in an entrepreneurs’ control may appreciate so much from the influx of imitators that the entrepreneur might be better off being copied.

Created: Monday 10 December 2007

Competing on knowledge: the UK's global innovation challenge

Professor of Strategic and International Management, Julian Birkinshaw, has co-authored the most recent Advanced Institute of Management (AIM) research report.

Entitled ‘Competing on knowledge: the UK’s global innovation challenge’ the report examines the UK’s innovation performance and presents ways in which the UK can improve its innovation performance. 

Suggested methods include; opening up innovation, mastering high-order innovation, developing innovation networks and making the most of international firms in the UK.

To read more download the AIM Report – Competing on knowledge: the UK’s global innovation challenge.

Created: Monday 10 December 2007

Professor Richard Portes presents report for the Icelandic Chamber of Commerce

Professor Richard Portes recently presented the findings of a report he jointly wrote for the Icelandic Chamber of Commerce. 

The launch of the report on the Internationalisation of Iceland’s Financial Sector took place at a luncheon in London on 21^st November for 200 guests, including Icelandic Prime Minister Geir H. Haarde. 

The report analyses the extent of economic imbalances in Iceland and the potential effect on the financial system, as well as the development of Iceland’s financial sector since the ‘mini-crisis’ of early 2006. 

Summing up the report, Professor Portes said, "The Icelandic banks have exploited strong competitive advantages to expand at a remarkable rate over the past five years, most of this in northern Europe, including the UK. They are highly resilient, as shown in their response to the shock of early 2006 and their stability in the current financial turmoil. The current risk premium on Icelandic banks is excessive relative to their risk exposure and in comparison with their Nordic peers. If this is a country risk premium, it is not justified by Iceland’s economic situation. The internationalisation of the Icelandic financial sector is an exceptional success story that the markets should better acknowledge."

Created: Monday 26 November 2007

Tim Ambler authors 'The Handbook of Advertising'

Tim Ambler, Senior Fellow in the Marketing faculty, has joined forces with Professor Gerald J Tellis, USC, to edit The Sage Handbook of Advertising. The book, which includes contributions from leading academics based in both the UK and the USA, aims to set advertising and the theory that underpins it in its historical and societal context, show-casing the most significant advertising research questions of our time and pointing readers in the direction of future avenues for fruitful investigation.

Martin Sorrell, CEO, WPP and member of the Governing Body at London Business School says of the book, ‘When trying to make sense of the mystifying world of advertising, academics and practitioners often seem to inhabit separate universes.  Not in this Handbook.  For once, the best brains from each side genuinely collude – with constructive results.  Wise agencies will read it before their clients do.’

For more information, please visit www.sagepub.co.uk

Created: Friday 23 November 2007

New research from Helene Rey analyses international adjustment

One of the most important challenges facing international economists today is understanding the dynamic process of adjustment of a country's external balance. For example, how will the US large current account deficit be resolved?

Recent research from Hélène Rey, Professor of Economics, explores the implications of a country’s external constraint for the dynamics of net foreign assets, returns and exchange rates.

The study, which uses a new data set on US gross external positions, presents a general framework to analyse international adjustment. It shows that a country can use two channels of adjustment to decrease its external deficits: the trade channel (running trade surpluses vis-à-vis the rest of the world) and the valuation channel (having high returns on its net foreign assets). The study is the first one to explore the valuation channel of adjustment. It finds that for the US, a remarkably high 30 per cent of the process of adjustment comes from valuation effects while the remainder comes from the more traditional trade channel.

Exchange rate depreciation episodes play a very important role, as they both boost net exports (with a lag) and also increase the dollar value of US external assets. The dollar exchange rate is key in the adjustment mechanism. This also implies that data on gross external asset and liability positions and on trade flows can help forecast its movements. One of the most surprising findings of the study is that the dollar exchange rate can be forecast from short horizon (one quarter ahead) to long horizons (three years ahead).

This report, entitled "International Financial Adjustment", was published in the last issue of the Journal of Political Economy (Journal of Political Economy 2007 115:4, 665-703).

Created: Monday 19 November 2007

Don Sull speaks with Akin Ongor about forming round table groups so that top managers would work together to align the priorities of the organisation

Watch now | View all School podcasts 

In this discussion, Akin discusses how Garanti Bank introduced round table discussions to ensure that all senior managers were informed about all aspects of the bank.

The round table discussions were implemented so that the priorities of the organisation became aligned and staff would work together to ensure that they were achieved.

Ongor reveals that there was a strong reaction from staff at first and some areas were not confident that people from other departments would be able to comment on their area of expertise.

A deliberate recruitment process was followed to ensure that the right top managers with strong leadership skills were in place so that the round table theory would work.

This resulted in success for Garanti Bank as the top management team worked collaboratively, prioritising what they needed to do in order to continue improving and remain focused. The bank focused on teamwork and Ongor as CEO was not responsible for making all the decisions. Rather his role was to harmonise the people in the senior roles to ensure that they remained committed to their priorities.

Created: Wednesday 14 November 2007

New book explores how to make innovation happen

Julian Birkinshaw, Professor of Strategic and International Management and Co-founder of London Business School’s Management Innovation Lab, has released a new book entitled “Giant Steps in Management”.

Co-authored with Michael Mol, Research Fellow in Strategic and International Management, the book contains useful lessons for any company confronting new management problems for which there are no existing solutions.

Professor Birkinshaw says: “Our book will put our readers in a position to create tomorrow’s best practice today.  It illustrates how to make innovation happen and examines the process through which management innovation comes about.”

“Describing 50 past innovations, including those of companies like Toyota, Procter and Gamble and GE, the book details how management has evolved over the last 150 years and how our readers can make it continue to evolve by being management innovators themselves,” Professor Birkinshaw said.

Created: Thursday 08 November 2007

Greater performance outcomes for firms that train more

Workplace learning and development is today widely recognised as being essential for organisations to remain competitive and has not surprisingly become a multi-billion dollar industry worldwide.  Despite this, training is often criticised as being faddish, too expensive and not improving the bottom line.

New research by Celia Moore, Assistant Professor of Organisational Behaviour, reviewed 67 prior empirical studies of the relationship between training and organizational-level outcomes and concludes that training is positively related to human resource outcomes, organisational performance outcomes and financial outcomes. 

When analysing employee attitudes, there was overwhelming evidence to conclude that in firms with greater training, employees reported collectively more job satisfaction which may be attributed to the enhancement of their competencies and career opportunities and the support they gained from management.

With regard to organisational performance, greater training by organisations was found to be related to greater organisational performance and, in particular, work quality including customer responses.  Overall, there is not enough evidence to conclude that training is related to a firm’s financial performance, but its relationship to organizational performance measures means that training may well influence the bottom line over time.

Created: Thursday 08 November 2007

Don Sull speaks with Marcel Telles of InBev about how organizations can go about revising strategy when the unexpected happens.

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In this, the last instalment of a four part series on ‘closing the gap between strategy and execution’ Don Sull, Associate Professor of Management Practice speaks with Marcel Telles of InBev about how organizations can go about revising strategy when the unexpected happens.

When the world shifts and strategy must be revised, the most important thing to remember says Telles is that it is the responsibility of the chief executive to lead. As ‘captain of the ship’ he has to steer the organization in a new direction. The success of the new course will depend on how quickly he reacts to change in the environment and how fast he starts to steer boat in new direction.

Telles identifies four key factors needed for successful revisions of strategy. The first is having fast access to information on the market, and the organisation’s position relevant to it and its competitors. You can do this, says Telles, by having the right people and partnerships around you to ensure you are know the whole story.

The second, which is imperative, he argues, is for senior management to have an understanding of what is happening in the field. Leaders need to be close to the operations and have a solid understanding of what is happening on the ground as well as a strategic overview in order to know best how to adapt to changes.

Regular revisions of strategy also help to mitigate change – Telles reveals that at InBev there are process in place which mean that strategies and budgets are regular revised (on a monthly basis), and small changes can be calibrated as a result, which can avoid big changes in direction.

Finally, it’s about having the right mindset to be able to adapt. As Telles puts it, ‘if you have to adapt, adapt, and if you have to change, do it fast’.

Created: Wednesday 07 November 2007

Professor Richard Portes co-authors Ninth Geneva Report on the World Economy, which finds financial markets better regulated and more stable than 20 years ago

Professor Richard Portes has jointly written the new Geneva Report on the World Economy which was launched at the CEPR today,  Monday, 12 November. It brings the latest research to bear on the key issues of international financial stability that have become so prominent since summer 2007.

The report examines the main threats to financial stability in the major industrial economies and the emerging markets, focusing on the major changes in the global financial system over the past two decades. It finds that, in many respects, financial markets are better regulated and more stable now than 20 years ago.

But new institutions and new market phenomena also pose risks to financial stability. The report analyses these risks, concludes that they are manageable and outlines measures that would make the system work better and underpin stability, including:

• Regulators and market participants should pay particular attention to tail risk
• New regulations could require originators to retain equity pieces of their
structured finance products.
• Regulators need aggregate information on structured finance instrument
holdings and on the concentration of risk to assist in the regulatory process.
• Industry bodies should promote product standardisation and accurate pricing
in the structured finance market.
• Credit market transactions that do not definitively transfer risk should not be
treated by regulators or risk managers as if they do.
• Regulators should insist that prime brokers and investors know better the
positions and strategies of the hedge funds with which they transact.
• Ratings firms should provide a range for the risk of each instrument rather
than a point estimate or should develop a distinct rating scale for structured
finance products.

Richard Portes is a Professor of Economics at London Business School and President of the Centre for Economic Policy Research.

Listen to Richard Portes speak about the Report in an interview on the BBC World Service.

View the Ninth Geneva Report on the World Economy.

Created: Tuesday 06 November 2007

Helene Rey examines the US current account deficit

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Helene Rey, Professor of Economics, begins her podcast by discussing the macroeconomic issue of the day - the US current account deficit.

Examining the $850 billion deficit, Rey elaborates on how it has become so large and how while most foreign countries have invested in the US, oil-exporting economies and some Asian countries are the main creditors.

Rey comments that the US cannot continue to borrow indefinitely and at some point will need to address its debt, but at this stage no one knows when that will happen. As Rey states, as long as market participants are willing to lend money to the US, the situation will continue. Rey’s advice to international investors is that they should be diversifying and she goes on to say that the Euro is gaining ground and is the main competitor to the dollar.

Rey then discusses her recent research which concludes that the international adjustment for the US has been eased by the fact that the dollar is an international currency. She explains this as meaning that the situation of the US as the centre of the international monetary system has helped the US economy to go to more balanced levels.

Created: Tuesday 06 November 2007

Don Sull speaks with Marcel Telles of InBev about how best to get people to deliver on their promises

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In this, the third in a four part series on ‘closing the gap between strategy and execution’ Don Sull, Associate Professor of Management Practice speaks with Marcel Telles of InBev about how best to get people to deliver on their promises.

Telles argues that setting processes to target and measure deliverables is the best way to achieve execution. Target setting here is especially effective, and he points to the system implemented at InBev where targets are ‘cascaded down the organizational structure’, so that there are company targets, business unit targets, and personal targets to deliver on.

This multi-level approach means that cause and effect comes into play. Telles explains; everyone must achieve his or her personal targets to succeed individually. Likewise, the sum of individual achievements of targets allows business units to succeed. Similarly, all business units must achieve their targets for the whole organization to succeed. Because the targets are interconnected, collaboration becomes imperative, and this is what drives forward successful execution

Telles recognizes that the target setting process is one that is easy to explain, but which does take a lot of work to implement. Targets must be correctly set and aligned to appropriate objectives; they need to interact with each other, and be connected to each other for this process to work. It’s also vitally important, Telles notes, to be able to measure them; and they must be regularly reviewed.

Overcoming the danger of target setting - the risk of becoming too narrowly focused on individual business areas - is one which InBev has mitigated. By ensuring that employees have ownership in the company - be it through stock options or simply feeling ‘cultural ownership’ - there is a sense of personal investment. ‘If people are investing their own net worth in the company, they will pay close attention, not only to their immediate area, but also to others’ he says. And it is this personal investment that is imperative to promoting innovation and collaboration, and delivering on promises to execute.

Created: Wednesday 31 October 2007

Srikumar Rao talks about his unique Creative and Personal Mastery course

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The thirteenth in a series of London Business School podcasts featuring members of faculty is now online. Srikumar Rao, Adjunct Professor of Marketing, talks about his Creativity and Personal Mastery course and the overwhelming response he’s had.

Rao discusses his personal experiences and how he had an ‘intellectual realisation’ that he could not separate his personal and professional life - hence his decision to turn around his life.

In his course, Creativity and Personal Mastery, Rao teaches people that if they are not deeply fulfilled by their career then they are wasting their time. He says that the course includes many exercises which encourage people to channel their attention to the positive aspects of their life rather than focusing on the things that are going wrong. As people start to acknowledge this they move into a more positive space and experience the world around them in a very different way. Rao describes the results as ‘flabbergasting’.

Rao admits that people, including students, are often sceptical about the course which he accepts as a challenge of his job. Despite sceptics, the response and uptake of the course speaks for itself as it is the only business school course in the world that has its own alumni association and many students profess that it has changed their life.

Listen to this podcast to hear about Rao’s teachings on how to change your quality of thinking and hopefully change your life.

View an article about Srikumar Rao that appeared in the Financial Times on 27 August 2007.

Created: Monday 22 October 2007

Don Sull and Marcel Telles discuss InBevs strategic discipline of focusing on a small amount of priorities each year

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In the second of a four part series Don Sull, Associate Professor of Management Practice speaks with Marcel Telles of InBev about ‘closing the gap between strategy and execution’.

In this podcast Professor Sull and Telles discuss InBevs strategic discipline of focusing on a small amount of priorities each year; and Telles reveals how he makes choices about which objectives to pursue.

As part of the explanation for this disciplined approach to strategy, Telles’ again points to his background in investment bank trading. Here, he argues, there were many choices in terms of potential strategies, but only one that would prove to be ‘essential’. Once in a while, he says, a ‘sure thing’ will pass and his experience has shown that it’s better to capture the great opportunity and focus on executing it, than to waste time chasing after possibilities.

The need to commit and focus in terms of strategy execution is imperative, Telles argues. Once a strategy has been set, he says, unless something major happens, you can’t get distracted. If you are sure you are going in the right direction, then you’re better off executing to excel in that direction.

He uses the analogy of hunting to explain further arguing; if you go hunting for lions, don’t get distracted by kangaroos. His point being that you can’t kill every animal – you must have a focused objective and target.

Telles concludes by stating that, as in all business, objectives must be set and prioritised by the most important directive - shareholder profitability. The other very important thing in terms of setting objectives, he argues, is to ensure that you have set targets, which can be measured, reviewed, and, if necessary corrected, over time.

Created: Wednesday 17 October 2007

Don Sull speaks with Marcel Telles of InBev about 'closing the gap between strategy and execution'

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In the first of a four part series Don Sull, Associate Professor of Management Practice speaks with Marcel Telles of InBev about ‘closing the gap between strategy and execution’.

Telles began his career with Brahma Beer in 1989. Over his ten year span as CEO of Brahma he oversaw its growth to become the number one brewer in Brazil and merged it with the second largest brewer in the country to create Am-Bev. Most recently he oversaw another merger, with Belgium’s Inter-Brew, to create In-Bev, the largest brewer in the world.

Telles illustrates the challenges of developing strategy in a new, and volatile, environment. His most important lesson, in terms execution, came via the sage advice of a colleague on his appointment as CEO of Brahma, which was to ‘concentrate on doing the things you know how to do for two years’.

Telles’ previous career in investment banking had taught him that the most important asset of any organisation is its people. So he focused on strategies to ensure that the people at the heart of the organisation were the best they could be. These included recruiting, training and keeping the best people, by nurturing talent through pay; investing in personal development; instigating a trainee programme; setting and regularly reviewing personal targets; and increasing the visibility of the senior management ‘on the road’ at plants.  

These were big and impactful changes at Brahma. But Telles’ changes went beyond mere policies. By moving people out of segregated offices into open office spaces and communal tables - another trick learned from the trading floor - an informality and open culture was fostered within the company, which had an immediate and positive affect.

‘The power of doing that was gigantic’, says Telles. ‘Not only did it give a huge spirit to the company, but also people begin to understand the problems and difficulties they can impose on other areas’.

Focusing on the ‘things he knew’ also meant that by the time he turned his attention to other parts of the business, he had a better understanding of the strategic imperatives. Telles says, ‘Most of the things which I thought about doing to the business in the first six months turned out to be wrong, so I’m glad I didn’t actually execute on them!’ Taking the time to absorb and understand an organisation is vital in order to formulate the right strategy and execute it effectively.

Created: Wednesday 10 October 2007

Julian Franks shares his view that increasing shareholder activism is a positive development

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Julian Franks, Professor of Finance, begins his podcast recording by stating that shareholder activism in principle is not a new trend.

Recent activism is however different from the way it was done in the past.  According to Franks, the “New” activism is much more aggressive than it has been, the activists now have large personal positions in the company they’re targeting or if they’re fund managers they have remuneration packages that are closely tied to success.  

Throughout the podcast discussion Franks states that there is evidence that shareholder activists are adding value for all shareholders, but the answers as to where the added value comes from and whether it is at the expense of other parties is still uncertain.

Does shareholder activism add as much value as private equity? Franks states that this is unclear but he believes that shareholder activism can be a good alternative to private equity buyouts and other forms of takeovers as it is cheaper and may achieve positive change in management or strategy.

Franks also explores the legal advantages of shareholder activism in the UK compared to the US, illustrating how it is easier for shareholders to demand an extraordinary general meeting and attempt to induce change in the UK.

In conclusion, Franks reiterates his view that shareholder activism is a good thing and predicts that the future will see stronger owners and hopefully managers who have learnt how to engage with these owners.

Created: Monday 08 October 2007

Donald Sull explores how to put the loop theory into practice

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The third in his series on strategy and its discontents, Sull talks about how to put the notion of a strategy loop into practice in an organisation.

This podcast builds upon the first and second podcasts which rejected the linear view of strategy and then suggested an alternative view of strategy as a loop or an iterative process.

Sull explains that there are many things that help or hinder the strategic loop in practice. These include the information systems in place, the culture of the organisation, and organisational strategy. Importantly, one of the most significant obstacles or enablers is how good managers are at leading discussions throughout the process.

Sull then offers an explanation of what organisations can do to make the loop theory work, what can go wrong and ways to overcome these obstacles.

Firstly Sull states that people within an organisation must observe the data and come to a shared mental model of the situation sufficient to get through the iteration. This calls for a tone of open inquiry. Sull points out that this practice can go wrong in action-orientated organisations where managers are quick to cut down the discussion and hastily begin taking action. He suggests the way to overcome this obstacle is taking action proposals "backwards rather than forwards" and re-examining the original questions.

Secondly making choices through respectful argument is suggested as a way to help the implementation of the strategic loop. However, this can go wrong when groups talk around in circles without ever coming to a choice. Sull recommends that groups devise a set of rules upfront about what to do if they cannot come to a consensus.

Thirdly, Sull looks at the implementation - making it happen. This is primarily about getting good promises from people and making sure they are delivered. The tone here is about supportive discipline. This can go wrong for many reasons including when deals are made in private and people do not feel compelled to honour them. A way to overcome this is to have public monitoring of commitment.

Finally Sull touches on an area that most organisations struggle with – making revisions. The objective here is to note anomalies, things that don’t fit with the point of view and then revise. This commonly goes wrong as people search out information that confirms what they want to believe rather than information that disconfirms that. It is proposed that the best way to overcome this is to bring in outsiders into the revision process who are less emotionally bound and may be able to note disconfirming information.

In conclusion to this three part series, Sull states that it is not easy to move from a linear view of strategy to a loop view but the payoff for organisations is enormous.

Donald Sull's associated paper, ‘Closing the Gap Between Strategy and Execution’, Sloan Management Review Summer 2007, is available at the Sloan Management Review website.

Created: Wednesday 03 October 2007

Doug Ready and Jay Conger show us how to navigate through the 'perfect storm' facing talent management

How many times have you heard a CEO saying people are the most important asset to a company? It’s never been more true than it is today - because the ‘perfect storm’ facing talent management has emerged as the number one issue that keeps CEOs up at night.

Visiting Professors of Organisational Behaviour Doug Ready and Jay Conger have identified the top talent management challenges facing HR professionals. These include:

• Developing a cadre of talent capable of driving growth - imperative in today’s economy of emerging markets
• Implementing a performance management process that ‘works’ across the enterprise - overcoming the deep walled silos entrenched by globalisation and diversification which make cross-developmental moves very difficult to accommodate.
• Retaining a high potential talent – tackling the sea change in expectations on the part of employees and next generation leaders about what a career means to them; loyal baby-boomers are now retiring creating a significant leadership vacuum for companies, and gone forever is the notion of a one-job career
• Developing a cadre of talent capable of driving strategic and cultural change - overcoming ‘blind spots’ - where companies tend to hire promote and reward people who look, behave and think the way they do.

Ready and Conger have proposed some solutions to these challenges. These include ensuring that your talent plan matches your business plan and making certain that people throughout the entire company, not just the human resources team, are committed to talent management.

Organisations must also remember that global excellence requires local effectiveness therefore it is imperative that organisations begin with efficient hiring and development practices in their local branches. It is also important for organisations to support their employees and provide them with frequent coaching, training and feedback. In conclusion Ready and Conger suggest establishing a set of metrics for talent development which, where possible, are linked to the company’s strategic objectives.

Created: Friday 28 September 2007

Arthur Kraft looks at the effect of reporting frequency on the timeliness of earnings

New research by Arthur Kraft, Assistant Professor of Accounting, along with co-authors Marty Butler of Emory University and Ira S. Weiss of the University of Chicago, examines how the frequency of financial reporting affects the speed with which accounting information is reflected in security prices.

The research, the first of its kind to directly test the effect of disclosure frequency on timeliness, was undertaken to improve understanding of capital-market effects of increased disclosure. 

Another motivation for the paper was policy based, given that understanding the effect of reporting frequency on timeliness is important in helping regulators decide whether to impose more frequent, and potentially more costly, interim reporting.

The results of the study conclude that there is little evidence to support the claim that regulation forcing firms to report more frequently improves earning timeliness. 

The authors’ interpretation is that cross-sectional variation in reporting frequency is an equilibrium response to differences in the market’s demand for accounting information and that this demand is shaped by firm characteristics and the availability of lower-cost information alternatives.

In conclusion, the report finds that firms forced to adopt more frequent financial reporting policies are unlikely to improve their earnings timeliness as much as firms freely choosing to report more frequently.

Created: Friday 28 September 2007

John Mullins examines how discovering what you don't know that you don't know is the key for entrepreneurs

A recent paper from John Mullins, Associate Professor of Management Practice, discusses the importance for innovators to identify the things they don’t know that they don't know yet, as it is these factors that may derail their new venture.

In his paper, Discovering the Unk-Unks, Mullins points out that the greatest challenge for innovators is to establish empathy with the customer by getting into their mindset to find a way to uncover what they really need. A successful innovator needs to work out what the customer doesn’t already know they need.

Drawing upon his vast background of studying entrepreneurs, Mullins suggests the ‘long interview’ as an effective way to uncover factors or issues that are yet unknown as it can draw out answers to key questions innovators need to ask - including those they don’t even know they need to ask.

The principle of a long interview is to only ask a few open-ended question that can lead the respondent where they want to go, which is more likely to expose the unknown unknowns. When planning a long interview, Mullins suggests firstly constructing an interview guide and preparing two lists; what you think you know about your idea and its use and what you know you don’t know and want to explore. Once these are prepared, the next step is to create an interview guide which Mullins elaborates on.

Mullins also advises innovators about the common mistakes that can take place in a long interview which include letting your enthusiasm show through, focusing on your ideas and not the customer’s concerns, asking leading questions; and asking questions that encourage a yes/no answer.

Created: Friday 28 September 2007

Bridging faultlines: Lynda Gratton and Andreas Voigt look at overcoming fractures in diverse teams

New research by Lynda Gratton, Professor of Management Practice in Organisational Behaviour, and Andreas Voigt, Research Assistant in Organisational Behaviour, recommends management practices to guide diverse teams to success.

Through examining how some diverse teams fail and how some succeed, the study identifies two core failures.  The first of these is the failure of collaboration where team members did not develop trust and goodwill among one another and secondly, failure of knowledge-sharing, where team members withheld their individual knowledge from other team members.

The study recognises that in many cases the failures in collaboration and knowledge-sharing were a direct result of faultlines, which are defined as subgroups or coalitions that emerge naturally within teams, typically along various demographic lines.

The research provides important guidelines for managers who head diverse teams, recommending four actions for leaders to follow. 

It is suggested that firstly leaders should carefully diagnose the likely extent of faultlines in a new team.  Secondly, when the team is newly formed it is important that the leader focus on task orientation; however the leader must carefully decide when a switch in management would be most appropriate.  Finally leaders should aim to build a relationship-orientated style.

The research also recommends that in addition to developing solid program management skills and confident interpersonal skills, future leaders need to learn which leadership style to emphasise based on their team’s individual needs and characteristics.

Created: Friday 28 September 2007

Randall Peterson looks at the links between conflict type, conflict management strategies and team outcomes

Through his recent research into conflict resolution in teams, Randall Peterson, Professor of Organisational Behaviour, explores the linkages between strategies for managing different types of conflict, and group performance and satisfaction.

The study found generally that successful teams are likely to be proactive in anticipating the need for conflict resolution, realizing that conflict is inevitable and trying to resolve it before it becomes a hot issue.  And secondly, developing conflict resolution rules that apply to all group members, rather than creating rules designed to contain a single “difficult” member of the team.

More specifically, this study identified three conflict resolution strategies in groups that tend to improve and/or maintain top performance over time.  These tendencies include; 1) focusing on the content of the interpersonal interactions rather than delivery style; 2) explicitly discussing reasons behind any decisions reached in accepting and distributing work assignments, and 3) assigning work to members who have the relevant task expertise, rather than assigning by other common means such as volunteering, default, or convenience. 

This study also identified three specific conflict resolution strategies in groups that tend to decrease and/or maintain poor performance over time.  Those tendencies include: 1) ignoring or avoiding conflict, including working in sub-groups to avoid personality clashes between members, 2) “giving into” difficult or overly assertive team members, and 3) regularly using majority rule voting to make decisions (i.e. resulting in a very unhappy minority).

Created: Friday 28 September 2007

Donald Sull explains that the best way forward is in loops not lines

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"The linear approach to strategy should be relegated to the dustbins of history; an iterative approach to strategy is a better replacement," says Donald Sull.

In the second of his series of three podcasts about strategy and its discontents Sull reiterates how the linear view of strategy (plan, implement and protect) should be abandoned, as it is fundamentally broken.

Sull proposes that we should replace the liner view with an iterative approach that sees strategy always and everywhere as unfolding in a repeated cycle. Put simply, "the best way to proceed forward is in loops, not in lines."

The iterative cycle takes the form of the following stages in a business context:

1. Make sense of an uncertain situation
2. Make choices about what to do and what not to do
3. Make it happen - execute your plan
4. Close the loop by making revisions based on the new information that execution has produced.

Sull goes on to praise the iterative view as it takes into account new information and assumes that all strategy is a work in progress subject to revision in light of new data. He says that agile organisations must be in a constant and ongoing dialogue with shifting environments. The greatest advantages of this approach are that it; integrates strategy formulation with execution, mitigates managers’ tendency to escalate commitment to a failed course of action and improves timing.

Examples of other areas aside from business that have adopted the iterative approach include venture capital, the military, the philosophy of science and new product development.

Sull concludes this podcast by inviting listeners to discover how this theory can be put into practice in his next podcast which will be available from next Wednesday 3 October on the website.

Donald Sull's associated paper, 'Closing the Gap Between Strategy and Execution', Sloan Management Review Summer 2007, is available at the Sloan Management Review website.

Created: Wednesday 26 September 2007

Christopher Malloy discusses the small world of investing

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The eleventh in a series of London Business School podcasts featuring members of faculty is now online. Christopher Malloy, Assistant Professor of Finance, talks about his research into social networks, specifically about the connection between mutual funds managers and senior corporate board members.

The findings of the study show that portfolio managers place larger, more concentrated bets on stocks they are connected to through their education network and performed significantly better on these holdings relative to their non-connected holdings, and relative to connected firms they chose not to hold.

Put simply, Malloy’s research proves that people tend to do business with people they know and trust and his message in this podcast is that it is very important to keep in touch with your social network, be it a school, university or past employee network. If a background connection can be identified, it is easier for employers to ascertain a better signal of someone’s ability, skill and intelligence.

Malloy then puts his research into the context of current London Business School students and says that the social networks that students develop may be the most valuable resource they will leave with.

Created: Monday 24 September 2007

Donald Sull discusses strategy and its discontents

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Over a series of three podcasts available over three weeks, Donald Sull, Associate Professor of Management Practice in Strategic and International Management, will discuss closing the gap between strategy and execution, focusing on strategy and its discontents.

In the first of this podcast series Sull comes straight out and states that the traditional and conventional wisdom of strategy - the linear process of plan, implement and protect - does not work despite sounding good in theory.

Sull explores why the linear process doesn’t work and attributes its failure primarily to the fact that it doesn’t incorporate new information and act on it. Sull says, “The plan is made in the beginning, at a time when you have the least information about how events will unfold that might influence strategy.” This doesn’t allow the strategist to capture and use new information.

Sull identifies the three key reasons why the linear model doesn’t work as being; firstly because it separates execution from the formulation of the strategy, which is a problem as some of the most important information about strategy only comes through its execution; secondly as it fuels people’s tendency to escalate commitment to a failed course of action and finally as it hinders good timing.

Sull then examines the ways strategists have been trying to accommodate these issues by attempting to identify big issues up front and through diversification, both of which are flawed methods.

Sull concludes by introducing the topic of his next podcast discussion – If the linear view of strategy doesn’t incorporate and act on new information, what can we use instead? Sull’s next podcast will be available from next Wednesday 26 September.

Listen to this three part series to hear about how organisations can move past the linear model of strategy.

Donald Sull's associated paper, ‘Closing the Gap Between Strategy and Execution’, Sloan Management Review Summer 2007, is available at the Sloan Management Review website.

Created: Thursday 20 September 2007

Don Sull speaks with Kathleen M. Eisenhardt about what makes a good team

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In the final in his three part podcast series with Kathleen M. Eisenhardt, Donald Sull, Associate Professor of Management Practice in Strategic and International Management, speaks with the Stanford University Professor about what makes good management teams.

Eisenhardt begins this podcast by stating that in her opinion the most useful metaphor about teams for managers is a basketball team because the teams are fast moving, fluid and if they’re good they score. Eisenhardt builds on this by explaining that good teams, like basketball teams, are relatively small, highly differentiated with a variation of experience.

Eisenhardt elaborates that the best teams are able to make decisions quickly, are able to handle conflict and can walk out of a meeting room and be ready to execute their ideas, while still liking each other. She points out that one of the challenges of conflict is to ensure that the conflict is about an issue and not any individual person. Eisenhardt suggests that this can be achieved by staying focused in the data and also by developing multiple alternatives which can depersonalise conflict and encourage creative decision making.

On a lighter note, Eisenhardt points out the importance of humour and how encouraging an environment of fun and good humour puts people in a good mood and they become more co-operative.

If conflict does arise, it is important to be able to cut it off and Eisenhardt suggests introducing some simple rules. For example teams could include a rule limiting the number of meetings about a particular issue or a rule that defers the final decision to a particular leader if there is difficulty in reaching a decision.

Kathleen M. Eisenhardt and Donald Sull’s associated paper, "Strategy as Simple Rules," is available at Harvard Business Review.

Created: Wednesday 05 September 2007

Don Sull and Kathleen M. Eisenhardt discuss how managers can use simple rules

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In the second in his three part podcast series with Kathleen M. Eisenhardt, Donald Sull, Associate Professor of Management Practice in Strategic and International Management, speaks with the Stanford University Professor about simple rules.

Eisenhardt begins by discussing how managers learn about rules and begin to implement them; and then how this tends to evolve into many more elaborate rules before they realise they have too many and want to simplify them.

Speaking about simple rules, Eisenhardt states that it usually takes three to four trials before organisations get to the point where the rules have been simplified and they understand timing. At this point managers should start to realise that they should be more enabled to identify new rules they haven’t already learned about and identify which of these to add.

The third and final in this series of podcasts with Kathleen M. Eisenhardt will elaborate on what makes good teams and will be available from next Wednesday 5 September.

Kathleen M. Eisenhardt and Donald Sull’s associated paper, "Strategy as Simple Rules," is available at Harvard Business Review.

Created: Wednesday 29 August 2007

Marco Ottaviani talks about prediction markets

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The tenth in a series of London Business School podcasts featuring members of faculty is now online. Marco Ottaviani, Professor of Economics, talks about prediction markets - a subject currently in the spotlight as a growing number of companies, including Google, are using this method to derive information for their corporate decision making.

Likening the practice of prediction markets to betting, Ottaviani explains how the essence of prediction markets is concerned with taking a strategic position about what one thinks is going to happen.

Ottaviani elaborates on how the information generated through prediction markets can often be more accurate and less expensive than that obtained by other more traditional forecasting methods, such as expert opinions or polls. The advantages of setting up a prediction market within a company extend past financial savings to increasing management morale. By calling on managers to comment and relay customers’ sentiments, managers are made to feel that they are involved in the decision making process.

Interestingly, prediction markets are being heralded by some as a possible weapon against terrorism. Can prediction markets be used to prevent another 9/11? Ottaviani gives his views on the practical difficulties and concerns about this, while exploring how this tool can be put to use.

Created: Tuesday 28 August 2007

Donald Sull speaks with the Stanford University Professor Kathleen M. Eisenhardt about simple rules

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Throughout a series of three podcasts available over the next three weeks, Donald Sull, Associate Professor of Management Practice in Strategic and International Management, speaks with Kathleen M. Eisenhardt about management practice including managing by simple rules.

Eisenhardt is a Professor of Strategy and Organisation at Stanford University who is widely known for her work on strategy, strategic decision making and innovation in rapidly changing and highly competitive markets.

In the first of their three part series, Sull speaks with Eisenhardt about her research into uncertain markets and about the notion of companies implementing and maintaining the right amount of structure.

Eisenhardt says her research has shown that the challenge of managing structure is more difficult for established firms, especially when they are entering uncertain markets. Eisenhardt states that stable markets are relatively insensitive to the amount of structure they have whereas when a company enters an uncertain market it becomes increasingly important for managers to keep monitoring the amount of structure they have.

The second in this series of podcasts with Kathleen M. Eisenhardt elaborates on simple rules and will be available from next Wednesday 29 August.

Kathleen M. Eisenhardt and Donald Sull’s associated paper, "Strategy as Simple Rules," is available at