Herbert Simon
Decision makers can satisfice either by finding optimum solutions for a simplified world, or by finding satisfactory solutions for a more realistic world.
Content: Quotation | Author: Herbert Simon | Source: Management and Business Review (MBR) | Subjects: Decision Making, Organizational Behavior
Paul Polman
If purpose is the broader intent of why you are there, values are how you make purpose come alive.
Content: Quotation | Author: Paul Polman | Source: Management and Business Review (MBR) | Subjects: Management, Mission, Values
Ivo Welch
In a Modigliani-Miller (M&M) perfect capital market, the overall WACC remains the same regardless of capital structure. Mathematically, a capital structure with more leverage has a higher cost of debt and a higher cost of equity but tilts the weighting from higher-cost equity towards lower-cost debt. Of course, the Modigliani-Miller world is primarily a thought experiment.
When the capital markets are not perfect, firms can minimize … [ Read more ]
Content: Quotation | Author: Ivo Welch | Source: Management and Business Review (MBR) | Subject: Finance
Ivo Welch
Models like the CAPM assume perfect capital markets: All investors are alike and compete, so only the project characteristics matter. This view is often too simplistic. Instead, it seems that the CC depends on both project supply (their future cash flows) and project demand (available investor capital).
Content: Quotation | Author: Ivo Welch | Source: Management and Business Review (MBR) | Subject: Finance
Ivo Welch
The workhorse cost of capital (CC) model for nearly half a century has been the Capital Asset Pricing Model, or CAPM. It dominates textbooks, teaching, and practice. Over 90 percent of all publicly-traded companies use it. Courts and appraisers also use it. In many contexts, it is even the only accredited model. Unfortunately, the CAPM is not just imperfect; it is so badly wrong that … [ Read more ]
Content: Quotation | Author: Ivo Welch | Source: Management and Business Review (MBR) | Subject: Finance
Paul J.H. Schoemaker
Too many people settle for dumb luck and hope for the best, when they should be orchestrating smart luck. Although success in work and life often appears to be the result of random events, in truth the lucky ones often managed the broader context better. Some people may attribute their success to a few key breaks, such as a professor who helped them or an … [ Read more ]
Content: Quotation | Author: Paul J.H. Schoemaker | Source: Management and Business Review (MBR) | Subjects: Luck, Personal Development, Quote
Paul J.H. Schoemaker
Most companies promote managers for hitting designated targets rather than for pursing the best process strategy. A good plan which fails is seldom rewarded, even if it had evident merit. But some companies do inculcate a smart process mindset in their culture and try to reward it. […] Has your organization ever given a performance reward for an excellent plan that happened to fail? Although … [ Read more ]
Content: Quotation | Author: Paul J.H. Schoemaker | Source: Management and Business Review (MBR) | Subjects: Management, Success / Failure
Hyper-Personalization for Customer Engagement with Artificial Intelligence
Personalization based on customer attributes and behavior is a familiar concept among marketers, and artificial intelligence is making it increasingly effective. AI-based hyper-personalization employs both sophisticated methods and far more data than previous methods and is far more precise as a result. Thomas H. Davenport discusses the role of AI in personalization as well as the growing backlash against personalization fueled by data privacy concerns. … [ Read more ]
Content: Article | Author: Thomas H. Davenport | Source: Management and Business Review (MBR) | Subjects: Customer Related, IT / Technology / E-Business, Marketing / Sales
Teppo Felin, Alfonso Gambardella, Todd Zenger
Theories illuminate paths to value that might otherwise remain unseen. Managers and entrepreneurs who hold the flashlight of theory can avoid the streetlight effect—the human tendency to search only where the light already shines, where things are already evident.
Content: Quotation | Authors: Alfonso Gambardella, Teppo Felin, Todd Zenger | Source: Management and Business Review (MBR) | Subjects: Innovation, Management
3 Visions of the Future of AI for Customer Engagement: 2027 Scenarios
Artificial intelligence (AI) is making deeper inroads into every aspect of business and society every day. By 2027, how will AI transform the future of customer engagement? Management and Business Review and the Association of National Advertisers’ (ANA) Global Chief Marketing Officer (CMO) Growth Council recently organized a forum to discuss three possible scenarios for the future – optimistic, pessimistic, and realistic.
Content: Article | Authors: Jerry Dischler, Jerry Wind, Margherita Pagani, Mukul Pandya | Source: Management and Business Review (MBR) | Subject: IT / Technology / E-Business
The Cost of Capital: If Not the CAPM, Then What?
Twenty years ago, it would have been considered heresy to doubt the usefulness of the capital asset pricing model (CAPM) in assessing the cost of capital. Ivo Welch argues that, today, the CAPM should not just be doubted—it should be discarded.
Content: Article | Author: Ivo Welch | Source: Management and Business Review (MBR) | Subject: Finance
Jan-Benedict Steenkamp
In order to disrupt your own frame of reference, you have to be willing to treat your accumulated experience as sunk cost, to be discarded as circumstances require. It’s a psychologically difficult thing to do. Moreover, ordinary daily pressures make it difficult to find the time to really think about, and thoroughly analyze, environmental trends. Many people, managers among them, suffer from cognitive myopia, the … [ Read more ]
Content: Quotation | Author: Jan-Benedict Steenkamp | Source: Management and Business Review (MBR) | Subjects: Leadership, Management, Personal Development
Reimagining Capitalism
What is capitalism? Is it the greatest source of prosperity and freedom the world has ever seen or a menace on the verge of destroying the planet and our society? Rebecca Henderson argues that capitalism is the only solution to the massive problems that we face and explores the ways in which the private sector can help to reimagine capitalism so that it works for … [ Read more ]
Content: Article | Author: Rebecca Henderson | Source: Management and Business Review (MBR) | Subjects: Capitalism, Economics, Social Responsibility (ESG)
Rebecca Henderson
Scholars came to distinguish between “inclusive” and “extractive” societies. Extractive regimes concentrate both political and economic power in the hands of an elite few. Healthy inclusive societies, by contrast, rest on three foundations: a free market; a strong civil society; and a democratically elected, transparent, capable, and responsive government. Together these three institutions hold each other accountable, balancing the power of the free market with … [ Read more ]
Content: Quotation | Author: Rebecca Henderson | Source: Management and Business Review (MBR) | Subjects: Capitalism, Economics
Rebecca Henderson
Markets require adult supervision. Markets only lead to prosperity and freedom when they are genuinely free and fair. Intuitively, if firms can dump toxic waste into rivers, lie to their consumers, and form alliances to fix prices, there is no guarantee that maximizing profits will increase either aggregate wealth or individual freedom.
Content: Quotation | Author: Rebecca Henderson | Source: Management and Business Review (MBR) | Subjects: Capitalism, Economics
Rebecca Henderson
The rule of law, well-designed corporate governance, anti-corruption safeguards, democratic government, a free media, and appropriate financial regulations are critical to enabling free markets to stimulate high quality development.
Content: Quotation | Author: Rebecca Henderson | Source: Management and Business Review (MBR) | Subjects: Capitalism, Economics
Rebecca Henderson
The deepest moral commitments of capitalism require that they help to sustain the health of the institutions on which the free market relies. If firms exist to maximize prosperity and social welfare, they have a moral duty to act as if there were a price for carbon, for example, even when there is no price in place. If firms exist to maximize freedom of opportunity, … [ Read more ]
Content: Quotation | Author: Rebecca Henderson | Source: Management and Business Review (MBR) | Subjects: Capitalism, Economics
Pay for Performance: When Does It Fail?
The consensus in social psychology is that monetary incentives for performance have a detrimental impact on individual performance. Yes, under certain specific and limited conditions, rewards can reduce performance. Yet pay for performance schemes are ubiquitous. How can we resolve this divergence between theoretical recommendations and observed practices? Nirmalya Kumar and Madan Pillutla recommend solving the problem by designing smarter incentives that avoid these detrimental … [ Read more ]
Content: Article | Authors: Madan Pillutla, Nirmalya Kumar | Source: Management and Business Review (MBR) | Subjects: Compensation, Human Resources, Motivation, Organizational Behavior
Nirmalya Kumar, Madan Pillutla
In order to understand the undermining effects of rewards, we must consider how the recipients are likely to interpret them. Specifically, the effects of a reward depend on how it affects the recipient’s perceptions of autonomy and competence. When monetary incentives interfere with an individual’s sense of autonomy or competence, they tend to decrease intrinsic motivation.
Content: Quotation | Authors: Madan Pillutla, Nirmalya Kumar | Source: Management and Business Review (MBR) | Subjects: Compensation, Human Resources, Motivation, Organizational Behavior
Digital Operations: Autonomous Automation and the Smart Execution of Work
By digitizing operations, companies may replace manual work with increased automation, but they may also augment human work through smarter execution. Robert Boute and Jan Van Mieghem present a conceptual framework that distinguishes the different levels of digitization, automation, and intelligence. This framework can serve as an audit, helping companies to assess where they are now and where they could be in the future.
Content: Article | Authors: Jan A. Van Mieghem, Robert N. Boute | Source: Management and Business Review (MBR) | Subject: IT / Technology / E-Business