How Work Culture Impacts Brand Reputation

Work culture has been defined as “the interactions of all employees which in the aggregate creates a picture of how things get done and what matters inside the organization” (Gebler 2017). Culture, at a point, intersects with brand reputation in that it can be considered two sides of the same coin. Reputation comes from the external belief of your company behavior, while culture is how people inside your company behave and reaffirm those beliefs.

Earlier this month, we held a thought-provoking session that explored how work culture and impacts brand reputation, specifically exploring the conversation from the perspective of academics and business leaders.

Session presenters included:

  • David Gebler, of Indiggo, Washington, DC has over twenty years’ experience working with global organizations on how to reduce people based risks while improving productivity and corporate reputation. Named as one of America’s top Thought Leaders in Trustworthy Business Behavior.
  • Dennis Hirsch, Professor of Law and Director of the Program on Data and Governance at The Ohio State University. In 2010, he served as a Fulbright Senior Professor at the University of Amsterdam where he produced a leading study on Collaborative Dutch data protection regulation.
  • Bob Bowman, Director Risk Management, The Wendy’s Corporation. Bob has a diverse risk management background with Macy’s for many years and since 2014 with Wendy’s. Bob’s background and responsibility include enterprise risk, business continuity, data and privacy risk management.
  • Lowell (Chip) Howard, Jr., Honda North America, Inc. Chip is General Counsel- Manufacturing at Honda North America and has responsibility for HNA Law Division’s offices in Ohio, Alabama, Indiana and South Carolina.

At its core, culture and brand reputation have effective leaders and leadership as an underlying foundational element.  From that core, effective leaders develop engaged employees who develop loyal customers.

The impact of Big Data on culture and brand reputation begins with what Professor Hirsch refers to as the Three V’s: volume, velocity and variety.  The fourth attribute is correlation.  The use of big data can bring great benefit, but also significant risk to a brand. A now classic example is when Target figured out that a teen girl was pregnant before her father did.

The Target Example

Target assigns every customer a Guest ID number, tied to their credit card, name, or email address that becomes a bucket that stores a history of everything they’ve bought and any demographic information Target has collected from them or bought from other sources. (Forbes) Target then uses this data to create highly personalized marketing materials.

In the case with the pregnant teen, she received a mailer containing only advertisements for baby products. Her father saw the mailer and become enraged, as he thought that Target was encouraging her to become a teen mother. After some back and forth with his local Target’s management, where Target apologized for the error, the father returned to the store and informed management that his daughter was indeed expecting.

Target and many other companies continue to utilize big data in order to generate a customized consumer experience. But now, in order to mitigate the risk of revealing consumer secrets and just generally spooking people, Target incorporates those customized advertisements in with the regular circulars.

Big data certainly has massive benefits for companies and the consumer when applied thoughtfully and strategically, but can create headaches for brands when used too liberally.

Thinking Practically

Bob Bowman and Chip Howard engaged the audience in discussion about how their respective companies leverage positive company culture towards a positive brand image.

At Wendy’s, culture and values are everything, going all the way back to Dave Thomas, the company’s founder. Bowman expounded on some of the trials Wendy’s have been through over the years — from fingers in chili to viral Frosty videos — and how Wendy’s leveraged its brand equity and relied on culture to see them through varying crises.

Values inform culture at Honda too, in the form of the three joys — the joy of buying, the joy of selling, and the joy of creating — and respect for the individual. Howard explained to participants that every Honda employee are encouraged to “find their Honda joy” because Honda believes that when associates work towards their own happiness first, the company will grow as a result.

Takeaways

  • Brand reputation and company culture are two sides of the same coin.
  • Effective leaders develop engaged employees which ultimately lead to loyal customers. At the core is effective leadership.
  • In managing big data and big data analytics risk, we must be careful to consider the potential impacts of the data, the correlation of the data, how that data could profile and what predictions can be made using the data.
  • Significant benefit can exist from the big data analytics. Risks, however, are present to include privacy violation, legal and regulatory, as well as the consequential brand and values impact.
  • Wendy’s core belief is that their success is based on the relationship with the customer. The foundation is food, which relationship is enhanced or eroded by behavior and trust is earned when both are delivered in a predictable consistent manner.
  • The Honda philosophy is built on a foundation of respect for the individual. From that fundamental belief, they believe that;
    • Initiative — Associates should not be bound by preconceived ideas.
    • Equality — Recognize and respect individual differences in one another and treat each other fairly.
    • Trust — The associate relationship should be based on mutual trust.

The Risk Institute at The Ohio State University’s Fisher College of Business exists to bridge the gap between academia and corporate America. By combining the latest research with the real-world expertise of America’s most forward-thinking companies, the Risk Institute isn’t just reporting risk management’s current trends — it’s creating tomorrow’s best practices.

OSU research institute leads nationwide initiative to curb distracted driving

The Risk Institute at The Ohio State University Fisher College of Business is leading a nationwide initiative comprised of dozens of companies, government entities, and researchers seeking to combine leading-edge research with industry expertise in order to predict and curb distracted driving behaviors. The project officially kicked off on Wednesday, February 22 at a roundtable discussion at The Fisher College of Business. 

“Distracted driving is an epidemic across the country. Every day you hear ‘distracted driving is killing people,’ and it is, but nothing is being done to figure out how to stop it,” says Phil Renaud, Executive Director of the Risk Institute. “That’s why we started this initiative — to create actionable change.” 

The number of fatal traffic accidents rose 7.2 percent nationally in 2015 according to the National Highway Traffic and Safety Administration. It is the greatest year-over-year increase since 1966. Distracted driving was a factor in about 10 percent of auto deaths; the exact percentage is difficult to determine due to privacy rules and other factors.

“Nationwide Insurance has a long history of promoting safety for our members,” says Larry Thursby, Vice President of Personal Auto Product and Pricing at Nationwide Mutual Insurance Company.  “We recognize that distracted driving is an issue and we’re looking forward to working with a team of professionals from across the country to find solutions that protect families in every community.”

The consortium identified a three-tiered approach: research, legislation, and technology.

Michael LaRocco, president and CEO of State Auto Insurance Cos., says that collaboration is the reason partnerships between industry, research, and government are crucial to a project like this saying, “This isn’t a problem that will be solved by legislation, research or technology alone. That’s why we’re working directly with researchers to apply their research to everything from car design and manufacturing to insurance, and using new technology to our advantage.”

Practical research application is a crucial component of this initiative, particularly behavioral research. 

“Understanding what makes people do what they do is the first step to changing that behavior,” says Ellen Peters, Professor of Psychology at The Ohio State University. “At a dangerous curve in the UK, for example, they played with drivers’ peripheral vision.  As drivers approach the curve, they see trees planted next to the road at decreasing distances apart. This funnel of trees creates a visual illusion that tricks drivers into feeling as if they’re speeding. As a result, people slow down.”

Renaud highlighted the Risk Institute’s involvement in bringing this project and all the involved partners together saying, “We are uniquely positioned to facilitate valuable conversation between academics and practitioners. The Risk Institute is rooted in research, dedicated to education, and committed to collaboration. This initiative is the perfect amalgamation of those values, and we are so excited to get started.”

Industry partners involved with the project are Honda Inc., Aon Benfield, Nationwide, NiSource, Ford, Motorists Insurance, DHL, State Auto, Freer Logic, True North and others. Representing the legal and governmental branches are the Ohio Attorney General’s Office and the Ohio Department of Insurance. Ohio-based Root Insurance, Smart Drive, Greenroad, and eDriving Fleet make up the technology voices in the conversation. A dozen researchers and thought leaders from OSU representing behavioral science, engineering, automotive research, risk and others make up the research arm of the initiative.

Resilient By Design

In our interconnected, 21st century global economy, unexpected— black swan— events in one corner of the globe can have a ripple effect through global supply chains and impact customers like we have not seen in the history of global trade. In a January 24 session on supply chain resilience, we explored how companies who are prepared for such events can come out stronger and thrive, while others who may be less prepared or not at all, risk significant impact to revenue, brand and at the extreme, the very viability of the underlying business.

Session presenters included:

  • Joseph Fiksel, Executive Director of the Sustainable and Resilient Economy program at The Ohio State University and a faculty member in Integrated Systems Engineering. Dr. Fiksel is an international expert in sustainability and resilience with over 25 years experience in the space.
  • Keely Croxton, Associate Professor of Logistics at The Ohio State University. Dr. Croxton has a developed expertise in supply chain resilience, focused on helping companies balance their inherent vulnerabilities with their management capabilities in order to effectively mitigate disruptions in the supply chain.
  • Darrell Zavitz, Vice President (Retired) Shared Services/Supply Chain, The Dow Chemical Company. During his tenure with Dow, Darrell drove best practices into each of Dow’s businesses including Resilience, Six Sigma/Lean, and Network Design.

Between 1900 and 2010 global natural disasters have grown exponentially, arguably impacted by climate, global crowding and connectivity. With the frequency of black swan events accelerating, the traditional COSO Framework for Enterprise Risk Management (Objective Setting, Event Identification, Risk Assessment, Risk Response and Control Activities) is no longer a sufficient means to view the world.

Today, more than ever, risks cannot always be anticipated. The risks may be very hard to quantify and adaptation may be needed to remain competitive. Resilience strategies in turbulent times would suggest that a more comprehensive strategy to the abruptness of change and the magnitude of change is warranted.

Introducing SCRAM™

The SCRAM (Supply Chain Resilience Assessment & Management) Tool™ is based on more than a decade of research at The Ohio State University and was highlighted as an alternative framework allowing companies to focus on balancing vulnerabilities with capabilities. With this balance, a business will achieve balanced resilience and improved performance over time.

An ability to assess vulnerabilities and capabilities, look for gaps and build capabilities is at its basic level the key to building supply chain resilience. The more resilient a firm is, the less likely the firm will see swings in performance.

SCRAM™ in Action

The Dow Chemical Company began SCRAM implementation several years ago. Their focus on supply chain resilience and being agile drove a strategy shift. The project was in three phases:

  • Phase 1:   “Get Fit” | Manage the Cycle
  • Phase 2: “Change the Rules” | Dampen the Cycle
  • Phase 3: “Change the Game” | Break the Cycle.

The approach taken by Dow in its SCRAM implementation began with a rapid qualitative assessment. This included an electronic survey involving 30-40 business resources devoting an hour or so to the assessment. The SCRAM methodology was then used as a filter to prioritize and sequence business urgency (opportunity and commitment). Model those results and follow with and audit to value delivery.

Session Takeaways

  • Risk tolerance and resilience capabilities tend to change as companies grow.
  • Companies need to develop the right portfolio of capabilities to match the vulnerabilities they face.
  • Every disruption presents a learning opportunity.
  • A critical leadership requirement is to develop a culture of resilience in the organization.
  • To maximize return on investment, companies should design for inherent resilience.
  • Measuring and managing enterprise resilience is still an emerging field, ripe for collaboration between industry and academia.

Four things you need to be doing with risk capital

Photo curtesy of iStock

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Risk capital gives financial firms the cushion they need to protect liability holders from unexpected losses. Simply put, risk capital is your home-run money — funds that are invested in high-risk, high-reward investments. It reduces debt overhang that could limit borrowing capability and makes the costs of bankruptcy or firm distress more remote.

But there’s a catch — adding risk capital can only benefit firms’ balance sheets if it is allocated efficiently, according to a study co-authored by Isil Erel, Academic Director of the Risk Institute and Distinguished Professor of Finance at The Ohio State University Fisher College of Business.

The study, “A Theory of Risk Capital”, was co-written by Erel, Stewart C. Myers at MIT Sloan School of Management, and James A. Read Jr. at The Brattle Group Inc. in Cambridge, Mass. In the study, Erel, Myers, and Read focus on diversified firms with safe and risky businesses in their portfolios. The firms have customers and counterparties who are not willing to bear significant default risk.

Know if your company’s risk capital really working for you — here are the four things you need to know and be doing.

1) Risk capital must be allocated

  1. To assess profitability,
  2. To make investment decisions,
  3. To price products and services, and
  4. To set compensation.

2) Efficient risk capital allocation has to do two things: 1) there can be no risk that changes in the business portfolio that would affect the credit quality of the firm’s liabilities, and 2) firms have to avoid shifting risk capital from one business to another.

3) Of course, your business is doing all that already, so what do you really need to focus on? Your marginal default rate in order to allocate the risk capital.

The marginal default rate is the derivative of the value of the firm’s option to default with respect to a change in the business size, according to the study. The required amount of capital depends on the target credit quality and on the risk of the business portfolio. Businesses with the largest marginal default values should receive the most risk capital and be charged most of the costs of the risk capital.

4) Risk capital can help expand your business, but keep in mind that riskier businesses need free passes to expand, which will increase the default risk. These risky businesses might also operate at a lower credit quality.

To mitigate the effects on credit quality of the overall business, businesses shouldn’t use risk capital that’s fixed in the short term.

Remember, any asset or activity with uncertain returns requires risk capital. By focusing on marginal default values, credit quality, and risk within the business portfolio, firms can us risk capital efficiently to help improve their bottom lines.

If you want to dig deeper into this (and other) of the latest risk research, the full paper and accompanying translation are available on our website.

Show me the money

Are private equity investments worth the risk?

investment-trees

Question: Do private equity returns and diversification benefits adequately compensate investors?

This is the debate swirling in investment circles, and it’s the question that researchers Berk A. Sensoy from The Ohio State University Fisher College of Business and Nicholas P.B. Bollen from Vanderbilt University work toward answering in their paper, “How much for a haircut? Illiquidity, secondary markets and the value of private equity.”

Private equity investments have illiquidity and market risks related to the timing of capital flows and require management fees that are usually two percent of investors’ capital commitments per year, plus performance fees typically equal to 20 percent of the profits. According to the researchers, the returns and diversification benefits do justify the risks and costs borne by investors.

The drawback is that secondary sales could result in discounts from fund net asset values of as much as 50 percent during financial crises. During other times, the discount could be 20 percent. Despite these discounts, the study finds that the historical performance and diversification benefits of venture capital and buyout funds, the main types of private equity firms, are sufficient to justify their risks and fees. For example, buyout funds have on average outperformed public equities by about 3% per year.

So what percentage of your portfolio should you allocate to private equity?

If you’re an extremely conservative investor with an extreme risk aversion, the researchers recommend that you should allocate no more than about 10 percent of your portfolio to private equity investments.

If you’re an investor with low to moderate risk aversion, you can comfortably allocate up to 40 percent of your portfolio.

To set yourself up for the best chance of success, the study notes that you should be particularly willing to take the risk of private equity investments if you can access average-performing funds.

While this study will certainly not end the debate, Bollen and Sensoy’s study shows that the returns and diversification benefits of private equity appear sufficient to compensate for the risks and costs for limited partners who have a broad range of risk preferences at portfolio allocations typically observed in practice. The findings offer limited partners a guide in making their portfolio allocation decisions.

If you want to dig deeper into this (and other) of the latest risk research, the full paper and accompanying translation are available on our website.

 

Intellectual Property: Defense is the Best Offense

Intellectual property is worth a good strategy for risk management.

Identifying a company’s intellectual property can sometimes be a fuzzy exercise, but it’s clear that failing to do so and not having a risk management strategy to safeguard a business’ “secret sauce” can lead to dire consequences. That’s especially true for startups whose only real asset may be the big idea that got them going in the first place.

Still, intellectual property and risk management consultants say companies may not be doing as much as they can to protect their IP assets, which can include everything from product formulas to customer lists.

Risk Institute Portraits Fisher Hall - Third Floor Feb-02-2016 Photo by Jay LaPrete ©2016 Jay LaPrete

Philip Renaud, executive director of the Risk Institute at Ohio State University’s Fisher College of Business

“I wonder if inside the doors people are having enough robust conversations about what their intellectual property is and what needs to happen to manage the risk,” says Steve Snethkamp, a partner in the Columbus office of EY. His consulting practice covers a variety of industries with a focus on information technology.

The stakes are high, he says, pointing to incidents in which the technology behind a new product has been stolen and implemented by overseas competitors even before the IP owners can get that product to market. And it’s not easy to manage that risk, especially with all the data that can be shared—and exposed—through the ever-increasing use of mobile technology and interconnected devices.

“There is no silver bullet,” Snethkamp says, “but the first thing (for companies) is to create a cultural awareness that security is important and IP is the lifeblood of the organization. That needs to be the mantra of every person in the company from the janitor to the CEO.”

Then businesses need to clearly define their intellectual property, identify where it is located, make an inventory of it and put in place controls, processes and procedures to protect it appropriately.

“It’s hard stuff to do,” Snethkamp says.

But it’s also essential given the findings of a 2013 study by the independent Commission on the Theft of American Intellectual Property. It estimated that international thefts of intellectual property have an impact of more than $300 billion annually on the US economy, costing the country millions of jobs and dragging down economic growth and investments in research and development.

Risk managers historically were focused on hard assets—buildings, equipment and inventory—but that has shifted to intellectual property and intangible assets such as copyrights, patents, technical processes, trade secrets, customer lists and distribution networks, says Philip Renaud, executive director of the Risk Institute at Ohio State University’s Fisher College of Business. He has worked in the risk management field since the early 1980s, including stints with L Brands, Kmart, Exel and Deutsche Post.

“It’s much more difficult to value an intangible asset and protect it,” Renaud says. “I can’t put a sprinkler system and firewall around a copyright.”

In his opinion, IP risk management in many cases becomes a defense strategy in which companies must educate team members about the importance of protecting the brand. That is particularly the case of detailing the risks when employees are working online and sharing data.

Such preventative steps are especially important, Renaud says, because of the difficulty and expense of stopping an IP infringement after the fact.

“That’s the greatest challenge,” he says. “If the company that has infringed on you is exposed, the only way to get there is through legal proceedings. That costs a lot of money.”

There is also the thorny issue of taking legal action when an IP infringement occurs overseas. “How do you get enforcement in China?” Renaud asks.

His best advice for companies is to make sure they understand their intangible assets—how they are used, their value to the business and how they are being protected.

When looking to protect intellectual property, companies should consider registering their rights with patents, trademarks and copyright, says Susan Rector, an attorney at the Columbus office of Ice Miller LLP. She represents companies in all aspects of IP ownership and information technology transactions.

“Inherently, taking the steps to register the rights to your intellectual property gives you a leg up,” Rector says. “That’s important from a defensive standpoint. It can also be used offensively against people who come too close to your (IP) rights.”

She works with a lot of startup companies that are building their business model around a proprietary product that is far and away their most valuable asset.

“Often it’s two guys, a laptop and an idea,” Rector says. “A lot of them will get big valuations (from investors), but people will only back them if no one else has done it. … They need to think about an intellectual property strategy early. If they don’t, they can lose their ability to protect that product or device.”

Intellectual property presents some specific challenges for risk managers, says Nicholas Kaufman, head risk manager at Battelle in Columbus.

First, it can be difficult to place a value on IP assets because they can be hard to measure, especially compared to property risks or auto liability. Second, Kaufman says there really is no insurance market for intellectual property because mature insurers tend to organize around areas they understand and know the likelihood of payouts on policies. That’s not the case with IP because of the difficulties in placing a value on the assets and calculating the risks to them.

Despite those issues, companies still need to have a risk management program in place for their intellectual property assets because the stakes can be so high. Kaufman says Battelle’s program takes an enterprise-wide approach in managing the IP risks for its range of products, services and research it conducts.

“We look at it holistically,” he says. “It’s not just about defending our intellectual property but making it as easy as possible for our scientists to create IP.”

Kaufman says intellectual property best practices start with an understanding of your organization and how IP brings value. Then it becomes a matter of aligning resources to protect that value.

The sooner that companies think about protecting new intellectual property the better, says Ari Zytcer, a Vorys, Sater, Seymour and Pease LLP attorney who has worked in the IP field for more than 10 years. But he also recognizes that can be easier said than done.

“In identifying intellectual property,” he says, “you’re starting in the dark. Is this going to be a commercially successful product or an intermediary that leads to something down the road that you would like to protect and stake a claim? You don’t know what aspects you’d like to protect (with a patent) … so we see broad coverage at the beginning. As development continues, you home in on what is commercially viable and blocking other companies from getting into that space.”

Zytcer also says there is no one-size-fits-all approach for IP risk management.

Small companies, for instance, have to consider whether it is best to spend limited resources on patent procurement versus funding research and development and breaking into a market. Large companies generally take a more holistic view with IP committees drawn from the business side—risk management, legal, finance and marketing for example—and R&D side of the enterprise. They track new inventions and make the call on the allocation of resources for patents, trademarks and other IP safeguards.

“Having a cohesive policy for the company is crucial,” Zytcer says. “It’s almost like a marriage. The right hand needs to know what the left hand is doing.”

Jeff Bell is a freelance writer.

Area Companies Learn to Navigate Political Risk

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Whether an organization is a multinational player or just starting to explore expansion into the global market, political risk cannot be ignored or underestimated. Political risk is taking on new forms, both real and perceived, and may be at its highest level since the Cold War.

In order to succeed, companies must elevate their awareness of inherent challenges of everything from political violence to currency inconvertibility.

On November 15, The Risk Institute at The Ohio State University Fisher College of Business welcomed dozens of area and regional professionals to Navigating Political Risk in Uncertain Times (part of this year’s Risk Series) — an executive education session that explored effective ways to manage political risk and gain insight on how to navigate the landscape and find potential for competitive advantage.

The Risk Institute is thankful for the informed leadership of our session experts: Les Brorsen, Americas Vice Chair Public Policy at EY; Professor Richard Herrmann, Professor & Political Science Department Char at The Ohio State University; Roger Schwartz, Senior Vice President at Aon Risk Solutions; and Sarah Brooks, Associate Professor of Political Science at The Ohio State University.

The session centered around three concepts:

  • Learning to identify, measure, and manage political risk
  • Examining the macro-level political risks that could affect business interests
  • Exploring the relationship between the state and market in social and economic relations

The session’s thought provoking ideas and dialogues advanced The Risk Institute’s unique role in uniting industry thought leaders, academics and highly respected practitioners in an ongoing dialog to advance the understanding and evolution of risk management. The Risk Institute’s conversation about risk management is open and collaborative and relevant across all industries.

Start the New Year off right — registration is now open for our next Risk Series on supply chain resilience on January 24, 2017. We’ll see you there!

Risk Case Competition a Success

img_5464The Risk Management Association at Fisher College of Business in partnership with The Risk Institute held a case competition earlier this month which exposed its participants to the technical aspects of risk management while also developing their critical thinking and presentation skills.

Seven teams competed in the two-week competition, which culminated in presentations to an expert panel of judges: Nick Kaufman, Head Risk Manager at Battelle; Dr. George Pinteris, Associate Professor of Finance at The Ohio State University; Dr. Jay Wellman, Associate Professor of Finance; Daniel Chizever, Senior Director of Risk Management at Abercrombie & Fitch; Jonathan Caruso, Risk Manager at Express.

The winning team included John LaVange, junior; Sam Bernardo, senior; Zhe Wang, senior. Awards were also given out for Best Speaker — George Valcarcel and Carly Smith — and Best Q&A — Ryan Patrick.

Navigating Political Risk in Uncertain Times

social-media-politicsJoin us on November 15 at 10 a.m. to explore effective ways to manage political risk and gain insight on how to navigate the landscape and find potential for competitive advantage.

Whether your organization is a multinational player or just starting to explore expansion into the global market, political risk cannot be ignored or underestimated. Political risk is taking on new forms, both real and perceived, and may be at its highest level since the Cold War. Companies have to elevate their awareness of inherent challenges of everything from political violence to currency inconvertibility.

Executives will learn:

• To identify, measure, and manage political risk

• To examine the macro-level political risks that could affect your business interests

• About the relationship between the state and market in social and economic relations

The Institute will welcome Les Brorsen, Americas Vice Chair Public Policy at EY; Professor Richard Herrmann, Professor & Political Science Department Char at The Ohio State University; Roger Schwartz, Senior Vice President at Aon Risk Solutions; and Sarah Brooks, Associate Professor of Political Science at The Ohio State University.

If you’re interested in attending, contact Denita Strietelmeier at (614) 688-8289 or send an email to RiskInstitute@fisher.osu.edu. For more information about this and the upcoming sessions in our Risk Series, please visit our website.

Build a bridge or blaze a trail: how companies respond to major technological change

Technology is changing our world more quickly than anyone ever anticipated. Everything from customer tastes to regulations is forcing companies to develop radically new capabilities in order to compete. So when faced with these major developments, managers are faced with a tough question: build a bridge or blaze a trail? choose-path

According to the findings from the study “Alliance Activity as a Dynamic Capability in the Face of a Discontinuous Technological Change” by Jaideep Anand, Raffaele Oriani, and Roberto Vassolo, some managers attempt to develop new technologies in-house while others seek alliances to access those technologies.

Option #1: Blaze a trail & develop new technologies

  • Many managers choosing to develop technologies in-house do not realize that existing technologies can be a handicap — not a help.
  • Firms with stronger technological capabilities are more likely to enter new domains.
  • Remember, even though you aren’t building external relationships, you still need complementary capabilities, such as being proactive in seeking new technologies and having a strong internal development research team.
  • Firms with capabilities in traditional technologies do not have an advantage in entering emerging technological fields through internal development. In fact, capabilities in the traditional technology not only decrease the likelihood of entering new domains but also might have a negative effect

Option #2: Build a bridge & form alliances

  • Managers seeking alliances may not know that successful alliances require more than connecting technological capabilities.
  • Technologically disadvantaged companies also are less likely to enter new domains.
  • Firms with good complementary capabilities are more likely to find competent partners and access their capabilities.
  • Alliances build the “give-and-take” relationships that effective alliances require. In the study, creating alliances in the pharmaceutical industry gave companies the technology they needed in exchange for testing, marketing and distribution.

If you want to dig deeper into this (and other) of the latest risk research, the full paper and accompanying translation are available on our website.