“I was told when I graduated that I had to come back and take a few classes,” Warren Buffett, MS ’51, deadpanned as he took the stage with Bill Gates on Thursday as part of a community forum at Columbia Business School. More than 700 students from the Business School were in attendance at the event, which was filmed for global broadcast by CNBC.

A major theme of the 90-minute Q&A session was optimism about U.S. economic prosperity in the long-term, with a nod to future energy issues. That theme underscored Buffett’s comments about Berkshire Hathaway’s recent acquisition of Burlington Northern Santa Fe for $34 billion last week.

“The railroads are tied to the future prosperity of this country. You can’t move a railroad to China or India or anywhere else,” he said. “As the country grows, the transport of goods will grow — [people] will be moving more and more goods back and forth to each other. And you have the most environmentally friendly and the most efficient way of doing that on the railroads.”

The theme returned later in Gates’ discussion about areas he sees with the most growth potential in the United States. He said those include information technology, energy and medicine. Gates discussed the growing field of alternative energy as a driver for a long-term economic development.

“Solar-thermal, solar-electric, nuclear [energy] is going to go through some of the revival and see if it can solve some of its cost challenges. As a country, we want to make sure all of those get lots of R&D and regulatory enablement because one of them is going to give us much cheaper power,” he said. “We don’t have quite as much R&D going into those things as I’d like to see. We have quite a bit, but I think the government policies could drive for more.” He added that he foresees an energy revolution and the United States is expected to lead the way.

Buffett also discussed his value-investing strategy, saying that it had not changed in light of the financial crisis and the fundamentals were the same. “We like companies with a durable, competitive advantage,” he said. On the economy, both Buffett and Gates lauded the actions of the government and the Federal Reserve.

Both men offered advice and inspiration to students. (Marry the right person, said Buffett. Act on your self-confidence, Gates added). Buffett signaled his optimism for future MBA graduates of Columbia Business School, making a promising offer to those in the audience.

“I would pay a $100,000 dollars for 10 percent of the future earnings of any of you,” Buffett said. “If that’s true, you’re a million-dollar asset right now.”

CNBC will broadcast “Warren Buffett and Bill Gates: Keeping America Great” moderated by Becky Quick on November 12 at 9 p.m. and 12 a.m. ET . Join the conversation with other students on Facebook and on Twitter.

Photo credit: Eileen Baroso

New research from Professor Olivier Toubia featured in the current issue of Columbia Ideas at Work demonstrates the power of viral marketing. Working with Aliza Freud ’01 (EMBA), who is the founder and CEO of the social media platform SheSpeaks, Toubia examined how influencer communities can promote and track viral product buzz.

The case study
The research centered on OPI nail products. “They were a very traditional brand and wanted to tap into consumer insights and advocacy,” says Freud. Using the SheSpeaks online community, samples of the new nail product were mailed to 10,000 self-declared beauty enthusiasts. The same women also received coupons for future purchases. Meanwhile, OPI also placed traditional coupons and ads in magazines and newspaper inserts. The result? The viral campaign outperformed the print campaign by 1200%. “It’s not surprising,” says Freud. “There is a much deeper engagement online than flipping through a magazine.”

What does this mean for marketing?
In the past five years, brand marketing has changed dramatically with the emergence of social networking. Current research, such as the data from Toubia and Freud, is backing that up. Freud, who spent 10 years at American Express in marketing and product management, says that marketers are in the rapid evolution phase of brand strategy.

“Brand managers need to change their way of thinking,” she says. “Historically, marketing has been a one-way communication and brands tried to stifle or control conversations about the product. Today, it is very different — it’s a two-way conversation between the brand and the audience.”

“In the future, managers will care much more deeply about these opportunities and make consumer conversations integral to their marketing program,” continues Freud. “They can engage with consumers online and capture a lot more information.”

Photo credit: Will Vanlue

Today, one of TED’s offspring — an independently organized local version called TEDxEast — is taking place in New York City. Professor William Duggan, author of Strategic Intuition and co-author of The Aid Trap, written with Dean Glenn Hubbard, and Naif Al-Mutawa ’03, founder of The 99, are among the speakers at the inaugural event. Other speakers include author Suzy Welch, 10-10-10: A Life-Transforming Idea; Scott Heiferman, CEO of Meetup; and Chris Elam, artistic director of Misnomer Dance Theater. Ed Rashba ’04 and Melek Pulatkonak ’02 helped organize the event.

TEDxEast is streaming live from the City Winery in New York City from 1 to 6:30 p.m. ET on November 6. Check back soon for video clips from the event.

How is open source software a form of social enterprise? That was one of the many timely topics that surfaced at this year’s Social Enterprise Conference on October 9. A theme of technology — how it can be leveraged and developed for social endeavors — was prominent throughout the day. Dr. Craig Barrett, the retired CEO and chairman of Intel, was awarded the 2009 Botwinick Prize in Business Ethics, which was presented by the Sanford C. Bernstein & Co. Center for Leadership and Ethics, and gave the keynote address.

In a panel on “The Power of ICT in Social Enterprise,” several participants discussed the challenges of scaling microfinance and mobile banking. In another popular panel with Wikipedia’s Jimmy Wales, the encyclopedia founder addressed the question of open source software: “It solves a lot of incentive and trust problems,” he said. “It’s a powerful way of leveling the playing field and allowing for collaboration.” Wales went on to offer three tips for community design: 1) Open is not the enemy of quality, 2) You cannot have community without participation and 3) Participation can come in unexpected ways.

In his keynote address, Barrett discussed the ways in which Intel has used technology to do good, including its successful education program in 60 countries that is focused on math and science. He also named the challenges he sees for business leadership, drawing from his experience with the European Union’s anti-trust case against Intel that ended with a $1.45 billion fine against the company last May.

“The increasing role of government will put a burden on CEOs to respond to regulations in an appropriate fashion,” he said. Barrett lauded a recent Wall Street Journal op-ed by Coca-Cola CEO Muhtar Kent arguing against a proposed sugar tax as a way to tackle obesity.

Later he said, “The challenge for CEOs and business executives is to stand behind ethics in the face of governments that don’t have the same ethical background or breadth of view.”

Photo courtesy of Columbia Business School

The media industry is in dire straights — and it’s not because of the Internet. Rather the industry has made some fatal mistakes based on flawed strategies of growth and convergence. A new book, The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies written by Columbia Business School faculty members Jonathan Knee, Bruce Greenwald and Ava Seave, delves into the reasons why the industry is hitting bottom.

In the October issue of the The Atlantic Monthly, an excerpt from the book maps out the reasons behind the value destruction in media companies including “relentlessly overpriced acquisitions, ‘strategic’ investments, and contracts for content and talent.” The authors argue that drastic action is needed by the media giants to restore value. That requires “jettisoning all [the] entrenched media myths and going back to basics: understanding the key characteristics of various media segments and applying established business principles to determine the best way forward.”

So what exactly would this drastic action look like? Author Ava Seave, adjunct associate professor of finance and economics, elaborated.

“All of the advice we give in the book should be evaluated in light of the specific media segment the company operates under. If a company has the misfortune of being a conglomerate, each individual business should be evaluated in relationship to its industry, not its ownership,” says Seave.

“For example, Martha Stewart Living Omnimedia’s businesses (stock symbol MSLO) operate in multiple arenas — each with their own characteristics. The company’s products in magazines, books, TV syndication, online content aggregation and retail licensing are all very different businesses with very little in common in cost structure and competitive environment,” she continues. “It may be flip, but we are serious when we advise that the first drastic change is that immediately (if not sooner) media companies can stop making crazy acquisitions or have wild expectation about synergy among unrelated segments.”

The six principles the authors recommend media companies live (and die) by, according to Seave:

1. Dare to dream Imagine how the industries in which you operate could operate and most effectively organize -- and try to move the industry to the ideal.

2. Keep it local, keep it focused Ignore all the conventional wisdom about global footprint, and find businesses that have either a narrow geographic territory or more likely a product niche. This will have the double whammy of increasing likelihood that scale can be achieved quickly and there is a good basis for customer captivity.

3. Efficiency is cool It may be that asking you to pay attention to revenue and cost management is like preaching abstinence-only sex education in a high school, but it is important for you to try.

4. Don’t be such a big shot Overpaying and other means of destructive competition is a communicable disease, so try to find small areas of collaboration in your industry; cooperation can be similarly contagious.

5. Watch your back Even companies that seem to have an impregnable fortress will eventually be scaled, so a constant reassessment of the strength and reinforcement of the the source of competitive advantage is called for. Increased competition with other forms of media make it even more important to cooperate with your allies and collaborators.

6. Dying with dignity is an option It’s hard to admit you’ve lost it, but rather than reinvesting in projects that have little prospect of generating an adequate return, instead, milk a declining franchise and return the proceeds to the shareholders.

Photo credit: Kent Kanouse

Join professors Jonathan Knee, Bruce Greenwald and Ava Seave as they discuss the new book on November 16. Event is hosted by Columbia Business School Office of Alumni Relations. Click here for more information about the event.

You’ve heard about companies using TweetDeck to tweet on Twitter, updating their Facebook status while feeding into FriendFeed, and building buzz to bolster conversation on their blogs. But if you don’t understand what any of this means, and consider yourself a marketer, then 1) you are not alone and 2) you need to understand what all of this is about.

Social media as a communications channel is the New Big Thing for marketers. So what do you need to do to stay ahead of the curve and make sure your social media initiatives are successful at your company? Let this article be your starting point.

1) Launch, Track, Learn, Evolve, Rebuild

Don’t skimp on reporting. Everything in the online space is trackable — so track it. Launch initiatives quickly and then use the information and results that are gathered to learn and continue to evolve your platforms. Some of my greatest insights and strategic program adjustments have come by really diving into the numbers.

As a student in the Executive MBA program I recently completed a class called Decision Models, which is focused on how to structure information to support managerial decisions. I had little exposure to these areas before, but I was able to use the classroom knowledge immediately in my job. I used the models and applied them to my results to help inform funding allocations. You might consider doing the same thing.

Powerful in its simplicity, yet worth emphasizing — in social media it is critical to launch quickly, track results, continuously learn, iteratively evolve, and periodically rebuild your entire system.

2) Leadership Support and Empowerment

The success of social media programs can be influenced by the degree of leadership support and decentralized decision-making inherent in the process. To me, leadership support means two things: 1) empowering employees and 2) encouraging new ideas by involving social media gurus.

First, empower employees. Senior leaders in most traditional companies are digital immigrants and they are still getting up to speed on these new channels, they need to have trust in the digital natives — the thinkers who have come of age in the digital era. Smart leaders will empower the digital natives to make decisions as they themselves learn the ropes. In time, it is likely that companies which support employees to deliver on new social media initiatives will be the clear winners and innovators. Take, for example, the story of P&G, which is recognized for pioneering sponsored advertising in soap operas when TV was the next big thing.

Secondly, involve social media experts. It is challenging to launch company “firsts” in social media, even if you are working with people who have a can-do attitude and are empowered to drive these initiatives forward. Employee burnout and retention can happen with social media, just as it can with any other creative endeavor. Whether as a leader or peer, continually identifying and retaining people who are skilled in social media will help serve any establishment seeking to make inroads in this space.

3) Form Progressive Partnerships

At its heart, social media is about people and relationships. You can say this applies for anything in marketing, but I believe it is especially true for social media.

In the beginning, the process is about finding and retaining the right employees who are resilient, can work within internal processes, and who are also willing to challenge the ideas when appropriate. However, quickly, this evolves to fostering the right external partnerships. At OPEN Forum, we are fortunate to partner with big brands, small brands, and individuals’ brands. We partner with major online publications like Mashable, experts like Guy Kawasaki, and sponsors like FedEx, along with some of the best and brightest small business owners out there — our customers. (Also, on a personal note about relationships, it’s especially nice to work with another Columbia Business School grad, Julie Hansen ’03 (EMBA) of The Business Insider.)

Through listening and remaining open to opportunities with our partners, we’re able to exchange value organically, in a way that creates efficiencies and opportunities for all. As an example, we frequently meet with small business owners to find what is working for them and what they need (including my own personal experience consulting for SweetRiot, one of our small business retail customers). We help drive their business growth by offering advice, and they come to better understand the value of our products and services so they use them more — it’s a win-win situation. Do this authentically and consistently and you will win. I will leave you with a final thought — whether you are a digital immigrant or digital native, it’s imperative that marketers realize that social media is the business strategy — not just a part of the business strategy. So, keep this in mind as you start to get social and you will be truly successful. If you have any questions, feel free to tweet me at @brianlenhart.

Photo credit: Mike Paradise

The Federal Communications Commission, the agency charged with the task of creating a national broadband plan under the Obama Administration, asked the Columbia Institute for Tele-Information (CITI) to serve as an outside expert and provide analytic review for the program’s deployment last week.

The push to expand broadband coverage in the U.S. has raised a host of questions over ownership, content, speed and other economic issues. Backers of net-neutrality have expressed concern that telecom companies receiving broadband grants will have too much power over how and what information is transmitted. Part of CITI’s task is to provide a capital assessment of companies with future plans to deploy broadband networks, as well as their historical track record doing so. The FCC will make its official recommendations in February 2010.

“Too often, the debates over Internet policy have been driven by narrow agendas, with facts used selectively as ammunition rather than enlightenment,” says Professor Eli Noam, the director of CITI. “By focusing on data analysis of investment plans and deployment figures of upgraded broadband infrastructure, especially in this century — CITI looks forward to helping the FCC to change the past culture and develop a National Broadband Plan grounded in facts.”

Globally, broadband infrastructure reached a new frontier this week. On Monday, a new underseas fiber-optic cable providing faster connections to eastern and southern Africa opened.

Photo credit: Craig Rodway

Why do we love our iPhones so? Of course the reasons for the gadget’s immense popularity are many, but consider this: the device’s interface — complete with colorful pictures and icons — may activate the part of our brain associated with emotional processing, and that, in turn, may lead to greater consumer preference for the best-selling phone.

In a new study published in the Journal of Consumer Research, Professor Leonard Lee, with his colleagues Dan Ariely at Duke University and On Amir at the University of California San Diego, found that decisions made with emotional processing, such as a gut decision, rather than cognitive processing (analyzing the pros and cons) tend to be more consistent. And consistency is, after all, what we humans really crave. Indeed, there is long-standing evidence in social psychology that we aim for consistency across all our beliefs and attitudes.

“How happy or satisfied we are by our preferences is driven by consistency to some extent,” says Lee. “When we use emotional processing to make decisions, we can actually be more satisfied with our choices.”

Lee found that certain attributes elicit more emotion-based decisions. For example, a color photo of an object rather than black and white text describing its features provokes more emotional, and thus more consistent, decisions in people. He also found, in another study, that some products might naturally elicit more emotional processing than others.

“Even if the product is essentially utilitarian and elicits more cognitive processing, we can put a more emotional layer on it so we can better elicit emotional processing,” says Lee.

For marketers and product designers, the implications are manifest — the big, shiny red button will outperform that wonky features list when it comes to giving consumers a choice that they will feel satisfied with.

“For many consumer products, it makes sense for marketers to use as many affective cues or emotional cues to elicit consumers’ emotional processing rather than just listing all the features of a product, which might induce greater cognitive processing,” says Lee.

Photo credit: David Pham

Media publishers are marching ever closer toward pay walls and price hikes for their content. Last month, GigaOM Network, a group well known for its tech blogs, announced it will charge a $79 annual fee for its research service. Hulu may soon jump to a subscription service as well. Offline, the New York Times recently increased the price of both its weekday and Sunday newspapers.

A variety of pricing schemes and solutions for content — pay walls, increased fees, bundling and micropayments — has been the topic of media discussion in the last year. But will people start paying for something that has been free? Not if there’s cheaper competition, says Ava Seave, adjunct associate professor in finance and economics. She is the co-author, with Bruce Greenwald and Jonathan Knee, of The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies, which will be published later this year.

“It’s pretty hard to start charging if there is a substitute product that is free,” she says. “Free competition forces companies to try and make due with advertising or other revenue, which they hope they are making up for in eyeballs. What we may see is that many companies will go under or become only marginally profitable. At this point new companies won’t want to enter in the ‘free’ business and they will try to enter by charging for some sort of differentiated product. But it’s tough.”

Print publishers for magazines and newspapers are struggling to find the right price for their products. But as ad revenue dries up, where does the pricing power remain if it’s not with advertisers? Seave says there is no one right answer to that question.

“You can’t make any generalizations across the board — each industry vertical is different,” she says. “One thing that you need to know is who the players are and look at the product in a local way or in a space.”

For example, the New York Times, in their decision to raise the print price, likely made a calculation that existing paper-readers were committed and a bump in the price would not lead to a subscriber drop-off.

“It seems as if the remaining readers of the newspaper are inelastic when it comes to price. Even with a higher price-per-copy, these readers will, by and large, stay with the paper,” she says. “It is possible that the Times will lose so few copies due to the price increase that they can still make more money from circulation and they can still be able to guarantee the same amount of money by guaranteeing the reader level to keep up their ad rates. They probably figured that paper buyers are committed and so net, they could be ahead for the moment.”

But for online-only media, finding the right price is especially difficult because free competition is stiff. “Electronic media has very little pricing power,” says Seave. “It is too easy for consumers to click around to find something that is a reasonable substitute and is free.”

So how do companies get online users and readers to start paying for their products? Create necessary value.

“You have hook someone into some sort of product and then make it so that it is essential to their work,” says Seave.

Photo credit: Rick Valentin

Narayana Murthy is arguably the most respected voice in India’s business community. Under his leadership, the computer services firm Infosys, which he founded in 1981 with six others, paved the way for the booming outsourcing industry that now thrives in the country. In 2005, the Economist ranked him 8th among the 15 most admired global leaders.

His words and his presence exuded a blend of conviction, practical wisdom and humility as he delivered the inaugural Khemka Distinguished Speaker Forum talk to the Columbia Business School community at University Club in Manhattan on May 26.

Mr. Murthy offered a provocative thesis on what has gone wrong with capitalism in recent times and how to fix it. Instead of focusing on regulatory policy and institutional reform, he took aim at the enemy within — the need for a change in leaders’ attitudes and mindsets, the need for each of us to, in Gandhi’s words, “be the change we want to see in the world.”

What do you think of Mr. Murthy’s definition of “success” as being “not about money or power… [but] the acceptance by the circle of your family, friends and your community that you are indeed valuable”? What is your definition of success in life?

Mr. Murthy’s prescriptions for strengthening our leadership qualities — such as “creating an environment of happiness around you”, “shunning jealousy” and seeing all parts of your life in totality — resonate well with the scientific findings and great-achiever stories that we discuss in the CBS course on Personal Leadership & Success. Which prescriptions do you find provocative, or difficult to accept? Why? And which of them strike a strong chord with you?

In mid-May the European Commission fined Intel $1.45 billion as part of an anti-trust lawsuit, ruling that the microchip company had skewed the competition — namely with rival Advanced Micro Devices (AMD) — by offering rebates to computer manufacturers in exchange for exclusive distribution contracts.

Supporters of the Commission’s decision hope that the ruling will make the microchip market more competitive — and thus more innovative. However, research from Professor Brett Gordon and Ronald Goettler from the University of Chicago based on data collected from the two chipmakers suggests that in the case of Intel, less competition, not more, would lead to more innovation.

In their research, which was recently featured in Ideas at Work, Gordon and Goettler found that the company would have innovated more quickly if it had not been in competition with AMD. How might this be possible?

First, as the world’s only microprocessor developer, Intel would have pricing power in the market, allowing it to charge more for its products. The increased profit margin would allow Intel to invest more money in research and development, which would result in a higher rate of innovation.

Second, as the sole microprocessor developer, Intel could potentially put itself out of business if it didn’t innovate often enough. If, for example, Intel sold a microprocessor today, it is unlikely the same customer would purchase another microprocessor unless the new processor was more technologically advanced. This provides another incentive for Intel to innovate rapidly.

Read the complete article about this research in Ideas at Work.

Photo credit: Uwe Hermann

Naif al Mutawa ’03 of the Teshkeel Media Group, left, receives the Social Entrepreneur Award in the Middle East from Hilda Schwab, chairperson and co-founder, Schwab Foundation for Social Entrepreneurs at the World Economic Forum on the Middle East at the Dead Sea, Jordan on May 16.

It has been a big year for Naif al Mutawa ’03. The founder and creator of comic book company Teshkeel and The 99, an Islamic comic book series based on the 99 attributes of Allah, opened the company’s first theme park in Kuwait in March, and last weekend al Mutawa was honored with the Social Entrepreneur Award in the Middle East by the Schwab Foundation. Public Offering recently spoke with him about his adventures with superheroes and his advice for entrepreneurs.

How is a comic book a social enterprise?

I wanted to create alternative heroes that wouldn’t disappoint and would be positive. In so doing, I knew I needed to create something that would have legs in U.S. and Europe and Asia. One of the ideas that I send out through the series is that the values implicit in the 99 attributes of Allah tie us all together as people. Our focus is on the values that humanity shares while building a business around it and to create an alternative to those who would have others believe that there is a clash of values between Islam and the rest of the world.

How does the company fit into the larger trend of social enterprise?

We are a social enterprise through our values and the medium is comic books. It’s our philosophy that we are doing well by doing good. You hear about the philosophy of business at the School; this is the business of philosophy.

In the nearly five years since you launched the company, what has surprised you?

I have had to switch our focus. At first, we focused on protecting the property and creating the concept with [the artists] … We were covered extensively in the press and had a lot of positive publicity before we even had a product. I mistook that to think I could expand outside of the region, but that time might have been better spent focusing on the region. So we let go of that a little and we raised a second round of financing. We converted the company to an Islamic company and that allowed us to be accepted in new places, which led to the opening of the theme park and that allowed for more opportunity for us in the Middle East.

What advice do you have for entrepreneurs starting out?

Networks are very important. Never burn a bridge and don’t let your ego get in the way, because an opportunity may come down the road. It is also important to know the difference between luck and skill and don’t confuse the two — we got extremely lucky.

Photo credit: World Economic Forum/Nader Daoud

The ailing newspaper industry has seen its troubles go from bad to worse in recent months, with several high-profile closures and bankruptcy filings. Professor Jonathan Knee, director of Columbia Business School’s media program and co-author of the forthcoming “Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies?”, was recently interviewed by the Wall Street Journal on the subject. Knee’s recommendation? Newspapers should focus more on their local coverage.

WSJ: What would be your advice to newspaper owners?

Knee: You have seen people outsource everything from printing to editorial and indeed, any kind of journalism where your scale in the local community does not provide you with an advantage should be gotten elsewhere. If you find out how many people the large papers sent to the national conventions, you would wonder whether that’s economically justified. You have to focus on your competitive advantage, which is local. When the smoke clears, the local newspaper, which may not be the sexiest part of the newspaper industry but is overwhelmingly the largest and most profitable part of the industry, will be a smaller and more-focused enterprise whose activities will be directed to those areas where their local presence gives them competitive advantage and they will continue to generate as a result better profits than the supersexy businesses in the media industry asking for government or nonprofit help like movies and music.

The newspaper industry has not been blessed with the best managers, and generations of monopoly profits do dull the senses. On the journalism side, I think many managers would rather have avoided a fight with journalists than actually force them to think harder about what their readers want, rather than what they want their readers to want. In the economic environment we’re in, newspapers can’t afford to do every six-part investigative series they could have done before.

Photo credit: Matt Callow

In a New York Times Magazine article from April 16, Professor Elke Weber, co-director of the Center for the Decision Sciences, suggests that solving climate change requires more than developing the right technology. It requires changing the way we make decisions. “… Climate change is anthropogenic,” Weber says. “That means it’s caused by human behavior. That’s not to say that engineering solutions aren’t important. But if it’s caused by human behavior, then the solution probably also lies in changing human behavior."

But why aren’t we naturally inclined to curb behavior that promotes global warming? Why, as the title of the article wonders, isn’t the brain green? Jon Gertner, author of the article, explains Weber’s findings:

… Weber’s research seems to help establish that we have a “finite pool of worry,” which means we’re unable to maintain our fear of climate change when a different problem — a plunging stock market, a personal emergency — comes along. We simply move one fear into the worry bin and one fear out. And even if we could remain persistently concerned about a warmer world? Weber described what she calls a “single-action bias.” Prompted by a distressing emotional signal, we buy a more efficient furnace or insulate our attic or vote for a green candidate — a single action that effectively diminishes global warming as a motivating factor. And that leaves us where we started.

Weber’s research illustrates how decision science can be used to influence human behavior — in this case, to make our brains green. Gertner writes:

“… Cooperation is a goal that can be activated,” Weber told me one morning. Her point was that climate change can be easily viewed as a very large “commons dilemma” — a version, that is, of the textbook situation in which sheepherders have little incentive to act alone to preserve the grassy commons and as a result suffer collectively from overgrazing. The best way to avoid such failure is by collaborating more, not less. “We enjoy congregating; we need to know we are part of groups,” Weber said. “It gives us inherent pleasure to do this. And when we are reminded of the fact that we’re part of communities, then the community becomes sort of the decision-making unit. That’s how we make huge sacrifices, like in World War II.”

But does employing decision science in such a manner carry ethical consequences?

“We tend to always wonder,” Weber says: “What’s that person’s true preference? What do they really want? I think that’s the wrong question, because we want it all.”

Photo credit: Xurde

How much is your virtual yuan worth?

Green Panda Games is hoping quite a bit. The gaming company, a new venture by Megan Bordi ’09 and business partner Nate Altschul, recently won the Eugene Lang Entrepreneurship Center’s annual A. Lorne Weil Outrageous Business Plan Competition. (check out their winning elevator pitch)

Green Panda is a free-to-play virtual world and educational online game for Chinese kids and tweens. The company’s goal is to create an alternative product to the popular but violent role-playing games and culture that has become prevalent in China.

One of the key elements of the platform — and Green Panda’s primary revenue stream — is the use of microtransactions, a model that has been very profitable in the Chinese gaming market. That format both localizes the platform and provides an educational component with virtual allowances and bank accounts.

“If the kids are buying things, the parents ultimately pay so we recognize that we need to target both groups,” says Bordi, who is a participant in the Entrepreneurial Greenhouse Program Master Class.

However, Green Panda is careful to learn the lessons of other American Internet companies, such as Google, that have gone into the Chinese market.

“We are focused on developing the product from a Chinese perspective and we have a Chinese development team,” Bordi says. “We’re not adapting an American product.”

Altschul adds, “We’ve done a lot of research and work with gaming experts to understand what parents, educators and kids want.”

With the product in private beta testing now, Bordi and Altschul plan to launch the game platform later this year.

Watch video for Green Panda’s winning elevator pitch (opens Flash player).

Only days before the Indian Premier League is set to begin its month-long second season in South Africa, a different sort of cricket tournament concluded at Columbia Business School. Last night, Cluster C's Team 11 nabbed the winning spot in Case Competition 2009.

Sponsored by the Dean’s Office, the Chazen Institute, the Samberg Institute and Columbia Case Works, the event was Columbia Business School’s first ever case competition. The winning team was awarded a check for $2,400.

This term’s case, The Launch of the Indian Premier League, followed Lalit Modi as he endeavored to build a domestic cricket league in India. The league plays a new form of the game that lasts about three hours and which is more compatible with television. The league’s eight teams are based in Indian cities in a model similar to American professional sport leagues.

“Almost no one gave the new cricket league a chance when it was first conceived,” says case author Professor Rajeev Kohli about how he became interested in the story. “But not only was it successful, it became a phenomenon around the world. The case centers around why that is so.”

Kohli says there are three keys to IPL’s success:

1. The players: “There was great clarity in Modi’s mind that the first issue was the players. He created the right incentives for them so [joining the IPL] would be financially lucrative for every top player in the world.”
2. Securing broadcast rates: “The payment structure was based on a long-term (10 year) contracts with clauses for ratings. The broadcasters had the right incentives to take risks and to make the product right for a prime-time audience in a country where most households have a single televisions set.”
3. Glitter factor: “Once the [Bollywood] stars showed interest, the league became a very glamorous mix of cinema and sport. Suddenly all the industrialists said, ‘We want in, too.’”

“By providing the right incentives, structuring the broadcast rates and bringing in glamour, and attracting women and children into the audience, Modi was able to create demand,” explains Kohli.

How will this season’s South Africa location affect the league’s success? The IPL had to move the 2009 tournament out of India due to ongoing security concerns surrounding national elections.

“It is a disappointment, but in balance it is the best thing that could be done at this time and keeps the players safe,” says Kohli. “My hunch is that they won’t be much affected because it is a media event, and South Africa also has many cricket fans.”

Photo credit: SJ Jagadeesh

This post is part of a special series celebrating the School’s Alumni Forever Week (March 30 through April 2).

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Stephano Kim ’03
President and Chief Operating Officer, [x+1]

Tell us about your career path since getting your MBA.
When I came to business school I really wanted to know what I didn’t know. A lot of my colleagues came for the networking or certification or career change, but I went to figure out what I wanted to round out in my skill set. I have a background in venture capital and entrepreneurship, but I knew my professional experience was lacking something. After graduation, I joined AOL’s business strategy and development team and helped turn them into a portal- and ad-driven business. In July 2006 I joined [x+1], where I am the president and COO. Our mission is to use data to make online advertising more effective. We have Fortune 500 brands that power their advertising through us to make it more targeted and efficient. In a time with increased focus on ROI, our story has become powerful.

Looking back at your CBS experience, what was your aha! moment?
My core classes validated and formalized what I already knew, but Professor David Juran’s modeling and stats classes were key for me. I realized I should have been an engineer! The data and the numbers speak for themselves, and they are the foundation of what we do. Juran is now on our advisory board and he is helping us with new product development.

In your field, what business trend or idea are you watching this year?
In media and marketing, there are a couple of key trends. First, the agencies are embracing digital. It has been a buzzword for the past 10 years, but as CEOs demand more ROI, agencies and their respective clients are forced to take a harder look at which channels are performing. When you dissect a $1 billion ad spend and look at where the chunks go — online, print, broadcast — you see that it is hard to measure the effectiveness of a television ad campaign and that the reach of newspaper and other print is falling off. So now it is about finding pockets of performance that can deliver the reach of TV with new platforms like mobile, where you can measure the ROI. While overall ad spend will decline this year, performance based online advertising will grow as the marketing mix shifts away from less effective and less measurable marketing channels.

What advice do you have for MBA or prospective MBA students?
Take a hard look at your skill set and see where you can leverage those while figuring out what other skills you need to develop. The roles within media and marketing have traditionally required very specific personality traits but with recent trends, those roles now require more business savvy people with well rounded skill sets. People who haven’t considered careers in media and marketing should take another look because their skills will be more and more relevant.

Photo courtesy of Stephano Kim

With the economy sputtering, many are looking to a government-funded expansion of our broadband networks to spur a recovery. The recently-passed economic stimulus package allocated $7.2 billion for projects to expand broadband, including bringing service into rural areas. But will increasing our nation’s Internet connectivity create jobs and promote economic growth?

Yes and no, says Raul Katz, adjunct senior research scholar in finance and economics and the director of business strategy research for the Columbia Institute for Tele-Information (CITI). Katz recently spoke about the impact of the expansion at a conference cosponsored by CITI and Georgetown’s McDonough School of Business.

He says that while physically expanding the networks will undoubtedly create jobs, “the most difficult part is determining the jobs that will be generated as a result of network externalities (e.g. the innovation effect, the productivity impact). The research in this area is very embryonic.”

Katz also cautions those looking for a quick pop in economic growth.

“Economists have determined that in order to profit from information and communication technologies, firms have to modify their production processes and organization to adapt them to the new technology,” he says. Katz estimates the timetable for changes in business processes, training and exploration of new applications to be two to three years.

Additionally, Katz says that people receiving broadband access by way of the expansion might be less likely to take advantage of the technology’s benefits than earlier adopters.

And just as the expansion may create new jobs, it will destroy others. New technologies focused on efficiency often leave some professions obsolete. A New York Times article on the subject refers to this as the “John Henry Effect.”

“Productivity enhancement that is not compensated by business expansion necessarily has to lead to job destruction,” says Katz. “If new services/businesses are not developed by firms having a productivity dividend out of broadband, jobs will be eliminated.” The sector most likely to be affected by this trend, Katz says, are professional services, which are information intensive.

There’s also the risk of increased outsourcing, which Katz’s research (PDF) suggests is a likely result of the expansion.

Katz recommends that the following steps be taken to ensure that the U.S. gets the most bang for its broadband buck:

• Provide incentives to companies likely to outsource services to help keep jobs in the region
• Enact job creation programs that include relocation of businesses in the areas where broadband is deployed
• Promote business innovation that can lead to the creation of new services by the firms benefiting from broadband-induced productivity effects
• Train the workforce and entrepreneurs take advantage of the newly deployed broadband infrastructure

Did you “Elf Yourself” last holiday season? OfficeMax’s seasonal marketing campaign featured a viral Web component which allowed customers to superimpose an image of their own face on an animated dancing elf. According to Internet tracking service comScore, more than 17 million people visited the Elf Yourself Web site during the 2007 holiday season. But did all of those unique visitors translate into increased sales? The answer is not really: the company’s reported total sales in Q4 2007 were down 2.6%. The economy’s slide hasn’t helped either; in 2008, OfficeMax reported that its 2008 Q4 earnings were down more than 14%.

Ava Seave, an adjunct associate professor in Finance and Economics, recently blogged about the correlation between viral marketing success and sales totals. Seave suggests that marketers examine traditional metrics to gauge the success of their campaigns. She writes:

Viral marketing can decrease acquisition costs for new customers because your current customers essentially endorse your product when they send along a game or video they think is funny or interesting, and, of course, is associated with your product.

However, the acquisition cost calculation needs to be done over time, since a viral marketing campaign almost never leads to direct sales from that game or video viewing. The right goals for a viral campaign should be a lot more old school: Does this campaign generate leads and does it help with brand recognition?

Judging a viral campaign’s success for lead generation is straight forward — count the number of the leads that close and judge the quality — i.e. total revenue — of the new customers. To count, how many leads land on the registration form and actually fill in the information, and how many abandon? What percentage of leads make a transaction? What is the cost of the lead and the cost of the order?

Compare these statistics to all your other sources, naturally. Does this campaign help with brand recognition is a harder question to pull out a quantitative answer. You can point to the number of downloads or pass-alongs as new exposures to your brand, and we assume exposure will lead to recognition. You also could look at what terms are put into search engines that lead to your site and determine if this indicates the effectiveness of the campaign.

Photo credit: Judy Baxter

How can marketers adapt to this challenging economic climate? Professor Don Sexton offers three keys to success.

Do not use an axe to make cuts
In a down economy, the worst thing you can do is make across-the-board cuts. If you go in with in axe, you will most likely make some real mistakes. Think more carefully where your outlays are. How do you determine what you get back from marketing expenditures? You must first understand the long-term value of your customers to you and the costs involved with finding and keeping them. If you go by your gut you will have a problem. This applies to which type of media to use, such as deciding between social media and more traditional types of media, and to whom you direct your marketing efforts.

Help your customers find value
Don’t just say “we feel your pain.” Think about what you can do to help and find ways to partner with your customers. For example, I recently heard about an auto dealership that will give you a loaner if you need to get to a job interview. It’s not a major outlay for the dealership but it shows they care about their customers. The point is not just the thought but the action behind it. What you do with your customers now will affect your performance in the future.

Marketers must also rethink how to delight customers. You want to satisfy customers but make sure the balance between costs and value is correct. Don’t cut costs so much that you are pulling down value to the customer more than any costs you save and don’t add value so much that your costs increase more than the additional value you are providing. We call this “value engineering.”

Perceiving is believing
Marketers need to be more transparent to consumers. For example, even if the $400 million that Citigroup reportedly spent on the naming rights for the new Mets ballpark is a good idea — and that is debatable — Citi still must consider how people will perceive that expenditure. Someone unfamiliar with how branding works and why such a move might make sense may wonder why their taxes (via bailout money) and fees/interest they pay the bank are being used to put a name on a stadium instead of helping them. That kind of perception can have a negative impact. No company is immune to such scrutiny. These days marketing actions are public and will be discussed. Companies should be sure that people are going to understand the motivation behind its actions. They really have to think about what signals they are sending with every marketing action they take.

Don Sexton is the author of Marketing 101, Branding 101 and Value Above Cost: Driving Superior Financial Performance with CVA®, the Most Important Metric You’ve Never Used.

Photo credit: Harlem Lands

Believe it or not, engineers have emotions just like everyone else. I know this because I used to be one — in the car industry, at that. Before going to Columbia Business School, I spent seven years working at Ricardo, one of the world’s leading automotive engineering and management consultancies. After graduation, I founded rightpedal, an automotive social media site for Generation Y. While it is difficult to say what makes an engineer tick, one thing is true of the people who make the world’s machinery: they love a challenge.

This is why the news that troubled giant General Motors was shutting down its High Performance Vehicles division — responsible for cars like the Chevrolet Cobalt and V-Series Cadillacs — came as a blow not only to engineers in the car industry but many car enthusiasts, as well. While the shuttering of a small division responsible for a negligible number of cars seems like minor news against the backdrop of a much deeper crisis, it this kind of act that will have a major psychological and symbolic impact on the car industry.

Nothing gets automotive engineers quite as excited as a project with a purpose. One such project is what I like to call a “halo car,” an automobile designed to rejuvenate a company’s morale and, in turn, its overall product line. With halo cars, engineers are asked to outdo themselves creatively and intellectually. While halo cars aren’t always supercars, it’s often the case.

Creating high-performance cars allows engineers to have fun and think back to when they used to peer up at that poster of a red Lamborghini and dream of one day being close to one. Almost invariably, these halo cars end up being special and historic machines; the original Dodge Viper was concurrent with a brief but confident era for Chrysler, when even its minivans and LH-platform cars were lauded by the automotive press for their innovative design and engineering.

The loss is more than just esoteric or emotional. High-performance cars are crucial to the advancement of technology. Given that these automobiles are usually low-volume and premium-priced, their manufacturers briefly become less risk-averse, and willing to experiment with new and expensive technologies that may some day find their way into regular passenger cars.

Take, for instance, the VTEC system that is today found in many Hondas. The variable valve-timing system, which allows Honda engines to perform more efficiently across their operation range, was first tested in Honda’s brutally successful Formula 1 racing engines and then put into production in the cult classic Acura NSX supercar. The Acura NSX was the first production car in history to feature a full aluminum chassis. While it never sold considerably well due to its exorbitant price, the NSX did change Honda forever.

In a day and age when cars are under attack for ruining the environment and “green” is the socially hip moniker du jour, let us take a moment to remember supercars and their importance in the annals of automotive engineering. If inspirational projects are quashed within R&D centers around the world, innovation itself might be in peril.

Photo courtesy of Hootan Mahallati

Could the power of the crowd soon rival corporations’ ability to organize labor? Jeff Howe, author of Crowdsourcing and writer for WIRED magazine, says it is possible. Howe is speaking at today’s BRITE conference. (Read Howe’s blog; see Public Offering’s live Twitter feed of the BRITE conference.)

The practice of crowdsourcing is simple: an organically-formed community of people use their spare cycles to produce content or solve tasks. “Whether or not [crowdsourcing] will be a model of economic production that occupies space like outsourcing or a long-term permanent alternative to traditional methods of labor acquisition remains to be seen,” Howe said in a recent interview. “I hypothesize we will see the community begin to rival the corporation as a way of organizing labor.”

If the phenomenon is poised to become a serious segment of economic production in the near future, how broadly can the trend be applied?

Already, crowdsourcing has migrated from areas such as open source software to graphic design and stock photography to spot news. One collaborative project referred to as the Eco Team translates the Economist into Chinese each week. Crowdsourcing’s tentacles have also reached into the world of finance through peer-to-peer lenders such as Prosper.com.

The trickiest application, however, is in its use of monitoring — new projects are harnessing the crowd by acting as a kind of universal Big Brother. On the bright side, new efforts such as the Herdict Web project usher in a new type of group-generated transparency to the flow of information. However, the application of crowdsourcing gets decidedly more complicated when it ventures into such areas as patrolling borders (see the Texas Border Sheriff’s Coalition).

As the applications continue to play out in multiple arenas, there remains a constant: the potential labor pool is ever increasing.

“One thing that is safe to say is that the economic downturn is adding fuel to the fire because crowdsourcing tends to be cheaper and more affordable than [traditional] hiring,” Howe said. “Crowdsourcing is based on people’s spare cycles, and as spare cycles increase, the size of labor force as measured in labor hours will increase.”

Photo credit: James Cridland

It’s a common situation: a Hollywood blockbuster, panned by critics, racks up huge box office sales while a critical darling struggles to find an audience. But is this disparity the result of the considerable marketing and promotional backing these blockbusters, or do average moviegoers simply have bad taste?

According to research by Professor Morris Holbrook, the answer is the former. In a study featured in Ideas at Work, Holbrook compared the opinions of professional critics with those of regular moviegoers but controlled for market-related phenomena such as advertising, trailers, number of opening screens and promotional appearances by the stars of the film.

Holbrook found that, absent of the influence of marketing and promotional campaigns, moviegoers expressed views similar to those of professional critics. In fact, they were five times more likely to exercise “good taste” than Holbrook suspected.

People will always flock to theaters to see the latest Hollywood blockbuster regardless of what critics have to say, but according to Holbrook, “If you take away the contaminating influence of the marketplace — advertising dollars, promotional budgets and putting a movie on every screen in every shopping mall — you find that people actually do like what’s good.”

For more information on Holbrook’s research, see “A Question of Taste” in Ideas at Work.

The success of Slumdog Millionaire, which won Best Picture at the Academy Awards on Sunday night, is the a perfect storm of marketing memes in India. The movie’s fairy tale plot, its focus on youth, celebrity and television, and, ultimately, the transcultural nature of its fame are the very things also driving success stories in advertising and branding in India today.

Marketing professor Gita Johar, who recently moderated a panel at the “Branding in China and India: The Reality and the Future” symposium, said that the panelists concluded that the biggest trends in advertising are the size of the youth market — 40 percent of the population is less than 20 years old — and the role of television and celebrity advertising, particularly as aspirational messaging.

“[Younger consumers] are confident, articulate and looking for brands that have some meaning for them,” Johar said about the panel discussion on the success of celebrity endorsements. “Storytelling is appealing to them.”

The panel also discussed the relationship between the growing acceptance of Indian products and items outside the country and their increase in brand value inside India.

“Now we are taking things from East to West,” Johar said. “Indian-based content is doing well abroad and that success abroad validates it back home.”

However, as transcultural products and stories become more popular, there are still distinctly local aspects to branding and advertising in India. The panel discussed the need for firms to quickly innovate products targeted to base of the consumer pyramid, as knock-off competition is strong, and to utilize off-beat media, such as megaphones and wall painting. Johar said the panel also discussed the shift to using local talent for creative and agency work.

Google recently announced a plan to allow employees to exchange their stock options for new ones at a lower strike price. The program aims to create better incentives for employees, who have seen the company’s stock price fall more than 50% since 2007. Professor Wei Jiang offered her thoughts on the program in the Financial Times. She said:

How might Google justify its plan to exchange employee options? First, it might say that, without this initiative, staff will stop putting in long hours or coming up with ideas, since rewards would not kick in until Google’s stock price regained the $400-plus mark — a dim prospect in the foreseeable future. There is some truth to this. But how can exchanging options provide much incentive if employees expect them to be exchanged again if things do not work out further down the road? Second, it might say that without this measure staff will move. Yet there are few greener pastures out there. And why not give key staff restricted shares? Options are “cheaper” only when they are not properly expensed. Another argument is that Google staff should not be punished by stock price falls that were mostly due to the global financial crisis. I agree. But then, should the same rule not apply when the company’s stock price goes up in a bull market?

Photo credit: Keso S.

Last Friday, I participated in a dinner conversation at the World Economic Forum in Davos on whether economics itself is in need of a bailout. The consensus view, which included perspectives from several far more distinguished economists than myself, was that as a predictive social science, economics has not failed. That is, people do generally make decisions based on cost-benefit trade-offs and incentives, and thinking about human decision making in this way is a very effective means of understanding what people do in companies, markets and the economy as a whole.

The natural question, then, is why the world out there has such a dismal view of the so-called dismal science? My answer was that we, as economists, have been terrible ambassadors of the profession in two critical ways. First, we have not properly conveyed the limits to economic predictions. An economy is a very complex system with highly imperfect information and many moving parts. Perhaps more importantly, we also haven’t properly communicated — to students and to the public at large — that economics is about more than the straw man of perfectly efficient markets. Any sensible economist — from Berkeley to Chicago — understands this perfectly well.

What are the implications for policy, and for economics as a profession? First, we have to be a lot better at “selling” our ideas to the public. Rather than leaving it to journalists to parody economic theory, we need to get our voices heard in the public debate. Second, we could do with a dose of humility. If the popular perception is that economics should be an all-knowing, precise tool for fine-tuning the economy, it may be because a lot of economists have drunk a little too much of the economics-as-crystal-ball Kool-Aid themselves.

Photo credit: World Economic Forum

While firms with charismatic CEOs often enjoy an advantage in communicating their message to their target audience, they are also subject to a unique set of challenges, as chronicled by Professor Bruce Kogut in a recent post about leadership in social enterprise.

When Apple CEO Steve Jobs recently announced that he’d be taking a leave of absence until the end of June to address his health concerns, investors panicked and initiated a wave of selling that sent the stock down 10% within minutes of the news.

Now, despite the company posting better than expected first quarter results, some are expressing doubt about Apple’s long-term outlook. As Slate’s Farhad Manjoo asked in a recent article, “What happens to a cult without a leader?”

Apple’s milieu raises several important questions about leadership and corporate governance issues that all successful firms must address. Here are just a few:

How integral is a CEO to a company’s success? Should firms work to dispel the idea that one individual can play such a large role in the company’s business?

By allowing senior leadership to personify the company’s message, is it in effect diluting its brand in the long term?

How necessary is it for companies to develop transparent leadership succession plans?

Should firms be wary of creating celebrity CEOs that become too closely associated with their brand?

What obligation do publicly traded companies have to disclose the health of its senior leadership to its shareholders?

Have an opinion on any of these issues? Let us hear it.

Photo credit: acaben

Columbia Business School’s digital footprint is growing. This month marks the one-year anniversary of Public Offering. Since our first post last January, we’ve not only been blogging on a daily basis but have become part of lively communities on Facebook and Flickr, and we’ve even established audio and video channels on YouTube and iTunes. Also, if you’re just looking for quick hits and other links of interest, you can follow Public Offering on Twitter.

Looking back at a year’s worth of posts, it’s interesting to watch the current economic crisis unfold through the real-time analysis and insight of our faculty bloggers. Here are some of the highlights, beginning in 2008:

January 22: Frank Lichtenberg: When to Use the Word Recession
March 03: Should the Federal Government Provide a Housing Bailout?
May 06: Mortgage Delinquencies and Foreclosures
June 06: Turmoil in Global Money Markets
July 15: The Panic Over Fannie and Freddie
July 21: We’re Asking Too Much of the Fed
August 27: Crisis Alters Banking Structures
September 08: New Chapter For Financial Giants
September 15: Learning from Lehman
September 29: Where Is Oil Headed?
October 13: Financial Crisis' Flawed Metrics
November 21: Grappling with Risk, the New Value-Investing Way
December 16: Too Small to Fail?
January 07: Stemming the Foreclosure Tide

For complete coverage of the financial crisis, visit our special section on the economy.

We would love to hear your thoughts about the blog or tips on what we should add to our blogroll. Please leave your comments.

Photo credit: Enrique Dans

As part of his economic stimulus package, President-elect Barack Obama will reportedly propose a significant expansion of the country’s broadband Internet networks. For the program to launch successfully, however, it must address the issue of network neutrality, Professor Eli Noam said in a recent interview with Fortune Magazine.

Proponents of net neutrality argue that broadband Internet consumers should be free of any content monitoring or restrictions. Network providers, such as Verizon, Comcast and Time Warner, however, say that without the ability to control the data traveling over their networks, they are reluctant to expand their services.

Noam, professor of finance and economics and director of the Columbia Institute of Tele-Information, said that the stimulus package should be designed with the issue of net neutrality in mind:

[Noam] thinks the telecom companies, content providers and lawmakers need to acknowledge the net-neutrality issue in formulating any broadband stimulus package — thus far, few have mentioned it — and essentially forge a pact: “The telecom companies want their incentives, the Internet companies want openness, and citizens need stimulus,” he says.

“If the government makes the stimulus strong enough for the infrastructure providers but makes it conditional on policies of openness, you can, in a way, have the government underwrite the openness.”

Photo credit: von Kinder

The massive accounting scandal involving Satyam, one of India’s largest outsourcing companies, seriously hurts investor confidence, not only in India but worldwide, says Professor Sudhakar V. Balachandran.

“They should have been under good accounting scrutiny, and so this is shaking confidence,” Balachandran said in a phone interview Thursday morning. “There will be spillover effects, people will think twice about investing in Indian tech companies, investing in India and, following that, investing in the market. It’s the old story of a few lemons corrupting the entire market.  If you can’t tell the good from the bad, it just becomes too risky to invest. Eventually that poses risk to the entire economic system.”

In an op-ed published on Forbes.com on January 8, Balachandran says that the three mechanisms to prevent fraud — corporate governance, audits and legal consequences — are not doing enough.

The company’s good social standing added another layer of complexity. “[Satyam] was well run and well governed.  They also did a lot of charitable work in rural development in India, so they appeared to be taking social responsibility seriously. They did a couple little things with their accounting early and then it snowballed,” said Balachandran. “These may not have been evilly intentioned guys; they had a history of doing good.”

Especially worrisome to Balachrandan is the failure of the requirements for auditing control systems.

“Satyam has an ADR [American Depository Receipt] and they are listed on the NYSE, so they have to follow American rules similar to those of American publicly traded companies. That includes having audited financial statements, using US GAAP, having signatures from the CEO and CFO stating that their accounting is sound as required by Sarbanes-Oxley Section 302, and so on. With all this, the company reported a lot of cash — a little more than $1 billion — that wasn’t there,” he said.

“Section 404 of Sarbanes-Oxley has very strict and very costly rules on what should be audited in the firm’s internal control systems. Auditors certify the controls so we can believe that the company is not recording fictitious transactions, so that when they say they have made a sale, we can believe they actually made a sale. In addition, auditing standards in India are not trivial and definitely require the auditing of cash. The fact that they didn’t catch the missing cash [at Satyam] raises a lot of questions.”

Prof. Balachandran acknowledges Columbia Business School professors Ray Fisman, Bruce Kogut, Partha Mohanram and Amir Ziv for their contributions in the analysis of the Satyam situation.

The Tribune Company’s filing of Chapter 11 this week could wind up being the journalism industry’s equivalent of the subprime crisis. Print is the backbone of American journalism and if it collapses, then all serious, professional journalism is the United States is in peril. To avoid this, we must present new economic models to support good, robust print reportage.

One alternative is not-for-profit journalism. In my role as a senior research fellow at Harvard’s Hauser Center at the Kennedy School, I am creating a dynamic NPO database to follow these various emerging organizations. Though valuable, the not-for-profit model cannot replace a whole industry that represents billions of dollars. There is not enough philanthropy out there to do that. There must be earned income for print journalism.

Right now, almost all newspaper content that appears on the Web is free. The newspaper industry has been trading advertising dollars for Internet cents. How does it turn those Internet cents into Internet dollars? Or, simply, how does it get direct money from its users?

One discussion I’ve had with students here at Columbia Business School is about creating an earned-income model for the newspaper industry along the lines of Skype, where users make micropayments.

I check the New York Times five to 10 times a day on my Blackberry, for example, and I don’t pay a cent for that content. Is there a way for the Times and other newspapers — especially local newspapers, where there is high value for the reader — to create a micropayment each time a reader checks the site?

Multiply those small amounts by millions of users and it adds up to a serious amount of money. Direct micropayments are part of the solution, but experts must first create a model for them.

The challenge is to better understand the technology so it can be implemented seamlessly, like with Skype, or people just won’t participate. Another challenge lays in adoption: if only one or two newspapers do this, will readers simply choose to get their information elsewhere? Migrating from a free to a for-pay service in critical areas, like journalism, will take some work, but I feel confident it can be done.

Journalism is arguably one of the most important industries in the U.S. because it involves fundamental and basic freedoms: the right to free speech and information.

That Tribune Company filed Chapter 11 doesn’t mean that it — and others — are going out of business, but it does create a snowball effect and says to investors that print journalism is not a good place for their money. We need intelligent models to excite investors and present operators before things get worse.

The model that ultimately may make the most sense is some combination of micropayments and advertising. Academics and students must now present plausible models and see if the free market jumps on board. Otherwise, we are in danger of losing the great professional infrastructure that exists in American journalism.

Dr. Baker is the co-author of Leading with Kindness.

Photo credit: Daniel R. Blume

Professor Noel Capon has something in common with his students: he thinks the price of textbooks has gotten out of hand. “It’s a serious social issue,” he says.

Capon likens the landscape of the textbook industry to that of the airline industry in the 1950s and ’60s, describing it as a “cozy oligopoly” in which the different players “compete for authors and over the quality of the books but not on price.”

To help ease the financial burden, Capon is allowing students to pay what they wish to use the online version of his text Managing Marketing in the 21st Century. The pay-what-you-wish model was made famous by the band Radiohead, who allowed customers to download their most recent album, In Rainbows, for what they thought it was worth. The print version of the text, which sells for $45, is priced about $100 less than its competitors.

Capon hopes that the unconventional pricing strategy will cause the major textbook publishers — such as Pearson Education, McGraw-Hill and Cengage — to lower their prices. In this respect, he likens Wessex Press, which publishes Managing Marketing and which is owned and operated by Capon, to Southwest Airlines.

“Thirty years ago, in came Southwest with a very efficient, low price model, offering a safe ride in a new aircraft but without all the frills,” Capon says. “Well, I’ve come in with a book that doesn’t have a lot of frills but which is very much to the point and which is a very serious marketing book.”

Though Capon is unsure of how much revenue he’ll secure from the online version — he’s also donating 50 percent to college scholarship funds — he hopes that the new pricing model will give instructors cause to consider using his text.

“It’s a way of getting my book into the hands of as many people as possible,” Capon says of the model. “The major barrier I’ve had to overcome is the reluctance of instructors to switch books. By taking the price of the online version to zero, instructors who weren’t interested at the old price are going to have to give my book a serious thought.”

Capon hopes improving the book’s readership will benefit Columbia Business School, as well. “Columbia has arguably the world’s leading marketing division, but we’ve never been strong in the textbook area. I’m hoping that this move, if it’s successful, will strengthen the School’s position as having the world’s leading marketing division.”

Capon’s colleagues are taking notice. Michael R. Czinkota, Ilkka A. Ronkainen and Michael H. Moffett, authors of Fundamentals of International Business, have published the new edition of their text with Wessex. While Capon “wouldn’t rule out” taking on similar projects in the future, he plans to remain focused on his day job, teaching at Columbia Business School and writing his own books.

When asked about being referred to as the “Radiohead of textbook authors,” he only laughs. Capon, who hails from Southampton in southern England, says, “I’m fine with that. They’re British, after all.”

It’s been just two months since Google rolled out its new Web property “Knol” to much confusion, ill will among advertisers and derision for the worst brand name of all time. Many have asked whether we really need another Wikipedia.

Last month, Google announced another seemingly-redundant product: it’s new Web browser, Chrome. And at the end of this month, Google will launch the much-anticipated Android-based G1 smart phone.

Why develop a new Web browser? (Especially when Google has been spending heavily to invest in the open-source Firefox browser.) Is this a sign that Google’s culture of a million innovations has gone off the deep end? Are there too many engineers with too much “20% time” on their hands? Or is there a far-reaching strategy behind this?

I’m leaning towards the latter.

The Future is Cloudy

We are in the midst of a huge shift towards “cloud computing” — where we store our files and software on the web rather than on our personal desktop machines. This shift began for consumers with services like Flickr, Facebook, and YouTube; it’s now moving to online applications like Google Docs and Zoho, which may make Microsoft Office a thing of the past. Utility-like Web services have also been designed for corporate consumers, first by pioneers like Salesforce.com (which offers a database you can access through the Web), and now by Amazon and IBM. As I’ve written previously, this shift raises the stakes in the browser wars.

But what’s the advantage of Google entering the browser market itself instead of just continuing to support the successful and well-designed Firefox?

An Operating System Built for Web Apps

Google argues that Chrome is not just another browser but rather an attempt to build the next-generation environment for the future of cloud computing. In other words, Chrome aims to be a operating system for the next wave of Web apps that Google is developing.

It will need to be if Google really wants to challenge licensed-software companies like Microsoft. Many of Google’s current Web apps offer the promise of thrilling functionality (incredibly easy collaborating on Google Docs, the ability to work offline with Google Gears). But most are still trapped in a “Beta” version with limited applicability.

With the Chrome browser, Google may be able to make its Web apps more robust, so that they can really compete with Microsoft for the future of the personal computer space.

Chrome Smells a Lot Like Android

We’ve seen this play before from Google, except now it’s in the mobile phone space. With much advance buzz over the last year, Google has been developing its next generation operating system for smart phones – called Android. Google’s competitor in the mobile phone space is not Microsoft but Apple, maker of the iPhone. And industry observers have been waiting to see if the Android operating system will allow phone makers like Samsung and Nokia to roll out an “iPhone killer.” The first phone running on Android is expected this fall from HTC.

Open vs. Closed

With both Chrome and Android, Google is betting on the open-source model for innovation, which built the Linux operating system and the Firefox browser. By contrast, Microsoft Office and Apple’s iPhone are both built on closed, proprietary systems.

Open vs. closed is a big debate these days. Techies love to extol the virtues of the open source movement. But Apple’s success shows the potential strength of closed innovation, which allows for a seamless user experience. Closed innovation is why iPod+iTunes were able to break the deadlock on digital music (winning the trust of record labels and creating an intuitive buying experience online). Closed innovation allowed Apple to create the first Web-enabled phone that actually works in the U.S. (too bad Apple couldn’t build its own phone network, too, rather than use AT&T’s).

But Apple has not always been able to hold on to the success of its innovations. Windows stole Apple’s thunder (and huge market share) by copying the best design elements from the Mac. What’s to keep Google from swooping in like Microsoft did and copying the iPhone design (which has solved the key problems for a smartphone in the U.S. market)? Can Google grab the best ideas for their Android phone platform, allowing Samsung, HTC and others to dominate the smartphone market? Will the diversity of an open ecosystem triumph over Apple in the end?

Betting on Google’s Strategy

What’s clear now is that Google is pursuing a two-pronged strategy aimed at a future of cloud computing. They will use Chrome as an operating system to challenge Microsoft in the world of PCs, laptops and netbooks. And they will use Android to establish an alternative Apple in the realm of mobile devices. With both prongs, they are using an open innovation approach with many partners to challenge established market leaders.

It’s an audacious strategy. And it’s probably too early to tell if will succeed.

Right now, I’m hedging my bets. When people ask what me, “Which operating system do you use?”, I answer, “All three.” My mobile platform is iPhone, my laptop platform is Windows and my cloud platform is Google. But I’m open to see who comes up with the next great idea.

Columbia Business School and the Center on Global Brand Leadership are hosting the BRITE Workshop on Online Communities on Oct. 16.

Photo credit: Google]]> Thu, 16 Oct 2008 13:42:40 EDT ]]> Marketing Media and Technology

Sensitive readers be warned: this is a story about a serious childhood addiction. Many little boys love toy cars — it’s almost a cliché. But I remember thinking at age six that I loved cars more than my playmates. When other kids made simplistic “vroom vroom” sounds as they played, I would chastise them for not shifting gears with their voices.

Packing boxes upon boxes of old car magazines every time I move has made me want to kick the habit, but it’s amazing how strong a grip a childhood passion can have on your life. My love for cars led me to engineering school and the heart of the car industry, and having passed through business school and Silicon Valley, I now find myself steeped in my passion through my company, rightpedal.

Rightpedal will be a universally appealing automotive social media site for the influential and trend-setting Generation Y. In the most fundamental sense, my goal for the company is to bring accessible automotive entertainment and information to the masses. This will be done through a Web site that is a joy to navigate and that, among other features, contains entertaining video reviews of cars. The reviews are a cornerstone of rightpedal, which will live within a social environment where visitors can contribute content and also learn from one another. The aim is to spark conversation and information exchange.

Currently, all the information that’s available online is geared mainly toward car enthusiasts — people like me. But I’ve always believed that there are millions of people out there just waiting for people to talk to them in an accessible language about cars, not technical jargon.

Interestingly, I came to see many of my classmates at CBS — young, influential, interested and with buying power — as the right target demographic for rightpedal. Many who knew me as the “car guy” would come to me with car questions and express their support of rightpedal if it could to explain cars to them in an accessible manner. Rightpedal is my way of being a “car buddy” on a national and even international level.

The challenge is reaching people who are not on the lookout for this content that I’m making. To that end, I’ve been working on establishing partnerships with existing media entities that have built-in traffic — like general portals and social networking sites — and trying to get them to adopt rightpedal as their purveyor of automotive content. I can make a convincing argument in this sense by showing how our unique content would be welcomed by these sites’ target demographic.

The critical point is this: people, no matter how much interest they have in cars, form an emotional connection to cars. We have childhood memories of driving with our parents, of our first car out of college, the car we took road trips in.

It’s very exciting, because I feel that with rightpedal, I’m awakening something that’s been dormant in people.

Photo credit: rightpedal

On NPR’s On Point program recently, there was a wide-ranging discussion of business jargon (“bizz words”) — how these terms arise, when they can be helpful, when they obscure meaning, when they come to mean everything and therefore nothing and also when they signal a real change in the culture.

One bizz word was cited for imbuing real meaning in a previously silly word: widgets. These are little programs that run on your Mac dashboard, your iGoogle portal or your Facebook homepage, and are often developed by an army of independent programmers.

The interviewee on NPR mentioned the popular iPhone Apps Store as a home to widgets such as games, navigators and news feeds. Which begs a question I’ve been puzzled by: just what is the difference between a widget and an app?

I got to the bottom of this by talking to Joshua Keay, founder of Magnetism Studios, who has created some very successful widgets for the Mac dashboard and apps for the iPhone Apps Store, including Tile Sudoku, CityTransit and FileMagnet.

So is an app just a renamed widget? A bit of clever branding from the marketing geniuses in Cupertino?

No. According to Keay, there is a technical difference, although it’s mainly seen on the programmer’s side. A widget is web based, running on Javascript and XML, languages of the Web that are read by browsers. An app is compiled code residing on your device written in a programming language that is read by operating systems — like the Objective-C language (for Apple products) or Java (for Google’s Android phone project).

Many of these apps that Magnetism and others have designed add clear enough value that you could wonder why Apple didn’t do it themselves. Didn’t they know half the world would want Sudoku on their iPhone? Perhaps. But by opening their platform up with a software developer kit (SDK), Apple was able to embrace the “jailbreaking” hackers who had threatened to undermine the first generation iPhone, and stimulate a much broader range of features than they could develop themselves. The challenge, though, may be filtering through all this choice.

“When Apple reached 2,000 dashboard widgets, suddenly there was a big quality-versus-quantity issue — there were a lot of widgets that were only half-baked and finding the good stuff was surprisingly difficult,” says Keay. The iPhone Apps Store already has over 1,400 offerings less than a month after it opened. As open platforms like Facebook, Android and the iPhone lead to vast numbers of apps and widgets, users may need new tools to filter through the noise and customize the right set for them. Social bookmarking or search might be of help. But companies like Netflix have found that building really good recommendation engines can be very tricky.

Yasmina McCarty ’08, a graduate of the EMBA-Global program, was a recipient of the Cartier Women’s Initiative Award last year in recognition of GreenMango, a company she developed with business partner Nandini Pandhi.

On May 31st, my business partner Nandini and I got the call we had been waiting for all month. It was from Echoing Green, an organization that provides seed funding and support to social entrepreneurs with “bold ideas for social change.” This year the fellowship had been ridiculously competitive, with nearly 1,500 organizations applying for just 20 available spots. When we learned we were one of the lucky 20, irrepressible smiles rose to our faces and we danced for joy around the apartment. It was an honor to be included with such an inspirational group of individuals.

But what exactly is a social enterprise? And how are we delivering on our bold idea for social change?

Last Saturday, I had my weekly conference call with a top strategy consulting firm that generously donates their time to support GreenMango. While we were talking about GreenMango’s revenue model and customer segmentation, our consultant realized exactly how “bottom of the pyramid” GreenMango is.

“Yasmina,” he said, “why on earth are you focusing on these businesses making a few dollars a day? Have you come here to run a business or do some charitable work? Creating a viable business with this customer segment is damn difficult. Damn difficult. And I’m really not sure you can pull it off.”

Indeed, building a social enterprise is one of the toughest things I have embarked on yet. And of course, it’s not just me who finds this challenging. McKinsey’s recent global survey of 4,000 executives in 116 countries found that 84 percent embrace the idea that a corporation has some social role in addition to its responsibilities to its shareholders. Just three percent of these executives think they are doing a good job delivering this social aspect.

Our vision is to build an organization that delivers financial returns to its investors, provides a positive workplace for its employees and increases the income of millions of low-income entrepreneurs. The customer element is a challenge but to me, tenable; it’s the core of our business. There are millions of informal entrepreneurs in developing countries — carpenters, tailors, electricians, plumbers, mechanics, embroiderers — who struggle to grow their businesses because they are invisible. GreenMango is an affordable marketing platform for them to promote their business and find new customers locally.

Now add in the benefits for our employees. We are operating in India, where staff turnover last year was 40 percent (i.e., nearly half of the country changed jobs). To counter that, we have built a dynamic environment: we spend for staff development and training and have clear career paths. We invest into our employees not only because it’s good for them, but also because it’s good for us. Year to date, we have had zero percent attrition.

Finally, we come to the third tenant of our vision: Delivering an excellent ROI for our investors. Our model is generating revenues but in order to succeed, we must deliver a high level of profits quarter after quarter.

Only time will tell if we can pull off all three elements of our plan.

In the end, of course, there is no clear definition of a social enterprise. And the longer I work at building GreenMango, the more I believe it is just the sum of the many small decisions I take every day. To what lengths will I go to ensure our employees are taken care of? How far will I challenge our team to find ways to serve the poor and semiliterate? How far will we push ourselves to find a revenue model that works at the bottom of the pyramid but delivers topline profits to our investors?

At our EMBA Global graduation, we were challenged and inspired with this quotation from George Bernard Shaw: “The reasonable man adapts to the world. The unreasonable man adapts the world to himself. Therefore progress rests upon the unreasonable man.”

Pinpointing your location on a Google map is only the beginning. The iPhone 3G, coming out July 11, offers a platform for a wide variety of new location-enabled applications ranging from plain-vanilla navigation systems to more sophisticated location-enabled social networks and comparison-shopping tools.

Since the implementation of e-911 legislation in 2004, there have been major developments in the world of consumer-facing location-based services (LBS), many of which will be entering the market in the year to come.

To many, the idea of a phone that gives your location away to a third party is a scary proposition — but why?

LBS in a variety of forms has transformed B2B operations and infrastructure profoundly in the past 25 years (think just-in-time inventory-management and -procurement systems). No one challenges the merits of these systems, which save time and money and improve efficiency. Yet the widely adopted consumer touch points for this technology have been limited to passive activities, like viewing where your J. Crew packages are with FedEx.

While the hypothetical case of walking by a Starbucks and getting pinged with a coupon for a Frappuccino may seem invasive to some, the proposition is mainly flawed and elicits such a reaction because the value proposition is so weak.

As a data point about a consumer, location adds the critical dimension of relevance to an endless array of consumer-facing services. Imagine being able to shop for the best deal on a camera in midtown by using the location-enabled Web browser in your phone to link to real-time inventory-management systems at Best Buy and Circuit City. Or to instantly find out where you can get a reservation for sushi in Soho by accessing Open Table’s mobile Web site, giving you real-time access to restaurant-reservation systems in the blocks around you. It’s not just a marketer’s dream: LBS can save you money on the things you actually want and provide valuable, relevant information you actually need at the moment when you’re making a decision.

Those LBS-enabled service providers who can find the magic mix in their service offering in exchange for your location not only will be able to deliver value to the end users but also will be able to engender loyalty for enhancing consumers’ lives in real time, in a way that the fixed internet can never compete with.

The numerous issues that LBS faces in reaching such an ideal service offering will be discussed on Friday, July 11 at “The Focus on the Locus,” hosted by the Columbia Institute of Tele-Information.

Photo Credit: Li]]> Mon, 7 Jul 2008 15:28:58 EDT ]]> Marketing Media and Technology

This article is a dedication to Professor Morris Holbrook, who taught me to appreciate music holistically. I will always hold him as a prime example of someone who learned to juggle music with academics, and did both with so much grace. He thought nothing of the sacrifices one makes in order to pursue one’s passion wholeheartedly.

Professor Holbrook did a series of studies on music, mostly to understand the role music plays in shaping the way most of us think and feel about nonmusical things. He once told me that he found that most adults form their preferences for musical styles and formats in their early to mid-20s.

Knowing scores of relatives who took to appreciating classical music well into their 40s, I questioned that observation, until he gently guided me through the reasoning of the human mind in its quest to categorize musical stimuli early.

He taught me that the groove gets set much earlier than we realize. In effect, our minds become comfortable with the structural characteristics of a preferred music form much earlier than the emotional meanings associated with it, which in turn are affected by life situations and experiences. A fascinating idea.

As I think back to the musical styles, songs, artists and records that I treasure the most, I realize that the music I heard while taking the commuter train to work in Mumbai shares pride of place with the concerts I had attended at the time, all of which I encountered in my early 20s!

I had started listening to Carnatic music at the time, a preference that has now burgeoned into a dangerous obsession. I had also started listening to Miles Davis and, for some inexplicable reason, to Cat Stevens. And I hoarded my Ilaiyaraja mixed tapes like a smuggler with new-found gold. These favorites continue to dictate my evaluations of other artists and styles.

I have yet to meet someone younger than 30 who does not compulsively listen to music of some form. Be it classical, pop, jazz, reggae or the ubiquitous film music, young people are exposed to every style and format of music, faster than the combined might of the recording industry and the information highway can provide.

And it is important for the industry and for musicians of all genres to realize that these experiences are forming “grooves” in the young that will inform what they listen to in their older years. As a musician, I can see that this is perhaps a responsibility, and also a position of tremendous privilege. It is a call to communicate to younger audiences more meaningfully, developing a dialogue that will deepen their interest in and craving for music that is both contemporary and representative of a cultural identity that they are proud to espouse.

It is also a call for more composers and creators of original sound. As ever, I maintain that younger Indians are endowed with tremendous creativity, and are capable of advancing the body of musical content we currently enjoy. New sounds that reflect individual compositional style should be judiciously interwoven with themes that reflect today’s mood and preferences.

And this does not mean resorting to the sort of risqué lyricism that predominates popular music. Traditions can be retold with grace, and stories that embody cultural heritage can be told through younger perspectives just as well as they have been by voices of the past.

When I think of Professor Holbrook sitting in his office at the business school, playing jazz on his makeshift keyboard suite, I think of the word “bliss.” There is a secret to all this, he used to say — to be able to understand the vagaries of the corporate world, make sense of academic politics and maintain one’s passion for a language that goes beyond the corporeal requires perfect balance. It requires being able to understand ancient stories but tell them in a way that is entirely new, infusing old themes with entirely new music and boldly pushing the envelope forward. And keeping one’s focus on the young people, for they will decide what will become of the world we know. It is this focus that will keep the music we make from going out of style.

© Indian Express

The gap between rich and poor has widened in America over the past few decades. And we’re getting increasingly better evidence that technology is one of the main culprits.

In the computerized workplace of the 21st century, skills and education are becoming ever more valuable, and those that don’t keep up with this technological revolution are left on the wrong side of the so-called digital divide. That’s the rationale behind government subsidies for computers and all sorts of corporate-giving programs focused on computer education. But anyone who has witnessed the gaming power of the modern PC is surely aware that these machines won’t necessarily be used for educational purposes if placed in the hands of an easily distracted teenager.

This is the topic of this month’s Slate column, where I report on the results of a study by Cristian Pop-Eleches, my colleague in Columbia’s economics department. Pop-Eleches and his coauthor, Ofer Malamud, find that distraction won out over more studious pursuits when unchaperoned kids were given subsidized computers by the Romanian government.

Obviously, this hadn’t been the government’s intention in designing the program (nor is this the intent of the host of other efforts that similarly focus on providing poor kids with computer access). The Romanian experience with computer subsidies also serves as an object lesson on the importance of having mechanisms in place for evaluating the impact of social programs, whether they originate in government or through corporate philanthropy.

I’m hoping that companies whose philanthropic activities focus on computer education will pay attention to Pop-Eleches’s study in designing their programs, and more broadly, I hope that companies become as serious about measuring the impact of their philanthropic pursuits as they are about tracking profits and losses.

I've been working to have my novel turned into a movie for the past few years (the NYT just wrote on my experiences). Along the way, the process has revealed the truth behind some positive and negative stereotypes of the film industry: it’s full of passive-aggressive people, but it does respect persistence.

If you’re a new filmmaker like me, you’ve got a lot working against you. Most doors will be closed to you because established industry people already have thousands of projects from established filmmakers that they can work on.

But what I’ve found is that if you knock on those doors long enough, eventually someone will notice that you believe in yourself and in your project enough to still be standing there knocking.

I learned that persistence pays off when I was trying to get my book published, a process which took me two years. I learned the hard way that I had to do most of the legwork on my own.

At one point, I had pretty much given up. My agent had refused to send the book to publishers a second time. I called everyone I knew, emailed everyone I knew — nobody could help. I was tired of it all — I was unemployed, I was running out of money. I said to myself: “I’m going to send out one final email. And after that I’ve had it.”

And I sent that one final email, and I fully expected the person to come back and say, “You know, look: you’ve asked me this question 20 times, and I’ve told you no 20 times.”

But to my surprise, he came back and said, “Alright — I’ll connect you with someone.”

Had I not sent that one final email, none of this would be happening.

Sanjay Sanghoee is the author of the novel Merger and is working on the film adaptation.

At Columbia’s BRITE ’08 conference in February, Mike Hemingway of Ogilvy discussed how his company has helped Dove build a PR, social media and viral video campaign aimed at fostering conversation and community around a new definition of beauty — one that runs counter to the narrow, air-brushed definition of mainstream fashion.

Here’s a 90-second clip from his talk:

It turns out that Dove’s refreshingly atypical beauties from its print campaign (freckled, wrinkled, flat-chested, large-thighed, etc.) may have been. . . airbrushed!

The scoop came out in a New Yorker profile on airbrush maestro Pascal Dangin, igniting commentary in the blogosphere and advertising press.

Anyone in the advertising field knows that minor photo correction is standard. But had Unilever betrayed the very values of authenticity that the entire Campaign for Real Beauty was based upon?

In an Ad Age article, an Ogilvy spokeswoman expressed doubt that any significant alterations were made. But in the New Yorker, Dangin is quoted as saying “It was. . . a challenge, to keep everyone’s skin and faces showing the mileage but not looking unattractive.”

But even if Dangin’s account is true, is that really hypocritical? After all, Dove’s message was that a freckled/wrinkled/etc. woman can be as beautiful as anyone else. Not that she shouldn’t be well lit, sharply dressed. . . and using Dove products.

What matters is the customer’s opinion, however, and the airbrushing story has the potential to tarnish a powerful brand image.

It also highlights the importance of transparency in an age of blogs and the growing flow of information among and between customers. Media companies, like newspapers and record labels, have been hit hardest by this technological change, but the revolution is also impacting consumer packaged goods like Dove.

As Clay Shirky writes in his new book on social media, Here Comes Everybody:

We are plainly witnessing a restructuring of the media businesses, but their suffering isn’t unique, it’s prophetic. All businesses are media businesses, because whatever they do, all businesses rely on the managing of information for two audiences — employees and the world.

In an age of interactive media, managing that flow of information will get harder and harder.

In a recent Wired article, editor Chris Anderson creates a useful taxonomy of new business models, leveraging the idea that some aspects of the offering are free to the end user (although someone in the economic ecosystem is making money).

The different models he lists are:

The freemium. In this model, basic versions of products (such as software) are given away for free, while premiums and upgrades are offered for a price. This works because the cost of providing the basic version is generally pretty low while the profits on the upgraded version are substantial.

A clever version of this is currently offered by Classmates.com, a social networking site that provides information about people you attended school with. I’ve been bombarded recently with come-ons from this site, suggesting that I find out who signed my “guest book.” But to find out this interesting information — you guessed it — you have to subscribe and take out a “premium” membership. I find that irritating. And no, I haven’t bought.

Advertising. This is probably the best known of the “free” models and has formed the basis for many traditional industries, from newspapers to television. The places where advertising dollars are spent have radically changed, and this has shifted the economic underpinnings of many industries while creating a boom for others. The core idea is that advertisers will pay to get your attention, regardless of the ”free” offerings you actually came to consume.

Cross-subsidies. These are the traditional loss leaders well known to retailers. The idea here is that you give away one product (or portion of a product) in the pursuit of charging higher prices on others — examples are money-losing sale offers in the supermarket, low-priced CDs at Wal-Mart or toasters at the bank. They are all provided to get you to buy the more expensive offers.

The key assumption here is that customers are open to cross purchasing — not always true. When Wal-Mart went into Germany, for instance, they discovered (much to their dismay) that German shoppers are happy to engage in “basket splitting” — meaning they will go to multiple stores and scoop up the low priced items only, rather than buying everything from one place. Wal-Mart eventually had to make a rather humiliating exit from that market.

Ironically, business books fall into this category too. Very few people make a lot of money on business-book sales — instead, the real money comes from speaking and consulting work.

Zero-marginal cost. Software distributed over the web and digital music fall into this category. While there is a cost to create the initial offer, the cost of distributing it broadly is very low.

And sometimes the free good is actually a come-on for another item. For instance, while it may be impossible for a singer to limit the distribution of songs in digital form, they may make their money on concert sales (a variant on the cross-subsidy idea).

Labor Exchange. In this model, marketers offer you something for free in exchange for you providing them information or assistance. Anderson uses the example of Google providing “free” directory assistance because they can use the calls to improve their voice-recognition technology, potentially opening the way to a huge market down the road.

Gift economy. In this model, things are given away for free out of altruism or because people simply enjoy doing the work required to create the goods. The classic examples here would be open-source software and Wikipedia entries. People voluntarily create and consume the free good.

While there is still room in the economy for premium-priced real goods, the “free” based business models are becoming a force to be reckoned with.

Among the implications of the free economy? There are a few that business people should keep in mind:

First, when many aspects of an offering are free, premiums are going to be placed on those aspects that are scarce or expensive. While you may be able to get free lectures on YouTube, for instance, people will still pay for the in-person experience of a real, live, class because that in-the-moment experience is irreplaceable.

Second, don’t be greedy — you may find that you have to give away a lot to keep your core offerings relevant and of interest to your target customers.

Finally, be open-minded. While you may find that you can no longer make money on certain aspects of your business, there may be surprising opportunities to capitalize on relationships in other ways.

We’ve adapted to our 14-hour time difference quite well — and the 14-hour flight to Seoul. We had to adapt — our week is jam-packed with business and cultural adventure. And everybody knows who we are because there’s a big Columbia Business School banner on the side of the tour bus we’re riding in around town!

Hours after arriving in Seoul, we spent a beautiful pre-spring afternoon at Changdeokgung Palace. It was rebuilt in the early 1600s after being destroyed during the Japanese invasion.

From there, it was off for a gourmet lunch and to see the live martial arts comedy Jump. One of our fellow CBS students was even pulled on stage to perform a little!

Monday morning, we started the day off with yoga. The instructor at Dahn Yoga kicked my butt (and a few others). If you want proof, we're already in the news.

Top executives at LG were welcoming and accessible (their showroom of new gadgets and widescreens is SWEET), and so were the execs at Mirae Asset — the top asset management company in Korea.

I know this seems like a lot for our first 24 hours, but we did it. Next, we take on Samsung!

Photo credit: photocapy

Prior to the taping, we found ourselves in the green room with Professor Jonathan Knee, director of the Media Program, and Karmazin, who regaled us with tales from his days at CBS Corp. and his experiences with higher education.

“When I was in college, they wouldn’t have even let me walk in this neighborhood!” he quipped.

During the taping, Karmazin spoke candidly to CNN host Andrew Stevens about his life. He is the son of a taxicab driver, and he reminisced about attending P.S. 1 in Queens, high school in Hell’s Kitchen and maintaining a C average as an accounting major at Pace University in Manhattan.

Karmazin found his calling in ad sales at CBS Radio, and at an early stage in his career began making more money than his bosses.

“Because of my own insecurity, I worked harder than everybody else,” he said.

When the top brass tried to cap his pay with the reasoning that “CBS made you, you didn’t make CBS,” he left and went on to build Infinity Broadcasting in 1981.

Eventually, he became president and COO of CBS Corp., but he left in 2004 (CBS Corp. was acquired by Viacom in 2000).

In November of 2004 he took the helm of Sirius, he said, because he could “maneuver [in radio] much quicker than [in] the television business,” due to the myriad of long-term production and distribution contracts that are prevalent in TV.

Karmazin remembered advice handed down to him by an early mentor: “Managing is like holding a dove. Hold it too tight and you’ll kill it. Hold it too loosely and it’ll fly away.”

“I’ve always believed in paying the people who work for me very well,” he said. “I have huge expectations. I expect zero defects. I expect you go to the Super Bowl every single year, and I expect you to win it.”

But Viacom didn’t exactly win Super Bowl XXXVIII in 2004, the year of the infamous Janet Jackson “wardrobe malfunction” during the half-time show, which resulted in FCC fines of over a half-million dollars.

After conducting an internal investigation, Karmazin decided he would not be made a scapegoat. “If I thought I did something wrong, I would have been happy to step down,” he said. He blamed the incident wholly on Jackson and didn’t say whether the network passed any fines or other penalties on to her.

Then again, Karmazin is no stranger to controversy; he has often been a staunch defender of the right of broadcasters to put divisive material on the air.

The Howard Stern Show was first broadcast on Infinity before moving to Sirius in 2006. Since the switch, Sirius has rapidly grown its subscriber base from 700 thousand to 8 million.

“Most of us believe a significant driver in this was related to Howard,” Karmazin said. Although the company paid Stern $80 million a year, Karmazin said CBS Radio lost $200 million in revenue when Stern departed.

“It’s about the content. Shakespeare said, “The play is the thing.” Although 90 percent of people don’t listen to Howard Stern, the 10 percent [who are] fans are huge fans. We all would like to get that content cheaper,” Karmazin said. “But that content helps separate your brand.“

Karmazin believes that Sirius will move to a model of increased content choices in the same way that cable TV relies on identifiable brands ranging from HBO to VH1 to ESPN.

“I think it’s a great time to be a consumer,” he said. “Technology is so phenomenal. You have so many choices.”

Karmazin closed his talk by reminding students that ethics — honesty, credibility, following the rules, integrity — are the most important element in business.

“I’m willing to believe someone until he tells me the first lie,” he said. “Then I’ll never trust him again.”

This event will also be viewable online at www.cnn.com/boardroom.

So during winter break, I was one of 30 CBS students who traveled to Africa to write case studies about successful entrepreneurial businesses on the continent. (See previous posts here and here.)

Our goal was to develop a world-class business school case study about Computer Warehouse Group (CWG). This project presented the opportunity to dispel the myth that there are no sophisticated businesses on the African continent — or worse, that businesses there can only get ahead through corruption.

We knew only that the firm had experienced explosive growth over the past few years, achieving some $100 million in revenues in 2007. We knew the firm was an early reseller for Dell, and that it was an important partner for a variety of blue chip Silicon Valley firms, including Cisco, Sun Microsystems and Oracle. We understood CWG’s strategy to position the firm as a strategic partner capable of delivering turn-key IT solutions for big companies, and we knew that a well-known global private equity fund had made an offer to purchase a minority stake in the company.

And until we got to Lagos, we didn’t have any sense of this company’s culture. Was it a one-man show, heavily dependent on its charismatic founder, Austin Okere? Or did it have people and processes in place to ensure continued growth into the future? Did employees at the bottom live the values expressed by those at the top? Or was it more of a show to impress customers, potential investors or other stakeholders?

To answer these questions about the company’s culture, we interviewed dozens of employees, from the most senior management to the most junior customer service and sales teams.

As it turned out, we couldn’t have picked a better company to lay these stereotypes to rest. The company has thrived in difficult circumstances because of an entrepreneurial culture that embodies the work ethic, personal responsibility and integrity of its founder. The firm has distinguished itself from the competition by consistently delivering on promises to customers and is one of Nigeria’s 50 fastest growing companies.

A rep from Cisco told us that the firm is “probably the most entrepreneurial company in Nigeria, certainly in the most entrepreneurial in IT sector.” The founder of the competing firm, who has since sold his business to a larger international player, expressed similar respect for his former rivals.

Because the case study requires a valuation of the company, we also spent a good deal of time learning about the country’s capital markets in general and the private equity group’s offer in particular. We interviewed senior leaders at several private equity firms, the founder of a local investment bank and high-ranking officials from Citigroup. The information we gained from these meetings was invaluable for understanding the similarities and differences between Nigerian capital markets and those of more developed economies.

We concluded our trip with a visit to the Lagos Business School, a member of the Association of African Business Schools and a huge supporter of our project. The folks there not only linked us up with Computer Warehouse Group at the outset but also booked our hotels and even provided our team with a driver during our stay. The school’s ultramodern facilities and helpful administrators were very impressive. We are excited that our work will help contribute to the world-class institution they are building in the heart of Africa.

But to win, players must answer algebra questions.

The video game, Meltdown, is being tested as a new way to teach math to middle schoolers, including pilot programs in some of the country’s biggest school systems, such as Miami, Chicago and New York.

“It's a paradigm shift in thinking about education,” said Ntiedo “NT” Etuk ’02, who is also cofounder, chairman and CEO of Tabula Digita, the maker of Meltdown. “I really believe that the reason kids are doing poorly is because what is happening outside the classroom is not being translated to what is happening inside the classroom.”

Preliminary results suggest that the game helps students’ standardized test scores, and that students in classes that use the game have better attendance and are more engaged in learning.

Research by Professors Gita Johar (CBS) and Andrew Gershoff (Michigan) concluded that while our close friends have influence over our purchasing decisions, these same friends are no better than acquaintances in knowing our tastes.

Still, online recommending agents are capitalizing on the assumption that friends know us best.

“We want to believe that we are important to others, particularly to others we care about,” the researchers say. “From a normative standpoint, you’d be better off not trusting your friends as much, because they don’t know you as well as you think.”

But the ten students from CBS’s Media Management Association had no such motives — we focused instead on soaking in the scene, hitting the slopes and finding and watching some great films. Despite overwhelming demand for screening tickets — almost every screening sold out weeks before the festival began — our group had great success with wait list and day-of ticket sales.

Having worked at MTV Networks and Marvel Entertainment, I came to Sundance hoping to observe to industry mechanics of this festival firsthand, and it certainly met my expectations on that front. For me, though, the highlight of the trip was a attending a screening of a documentary called Anvil! The Story of Anvil. Though it flew into the festival with little buzz and not much promotion, it seems to have created a bit of a stir here, with every screening ending in a standing ovation, tears,and gushing volumes of praise.

When I caught the film Sunday morning, I understood why: while a rock documentary about an obscure Canadian metal band may seem like a niche offering, its incredible direction, message of hope and exceptionally entertaining subjects transcended its genre and left audiences — and me — overwhelmed. Being a part of the electrified audience that morning made me understand why this festival can be so thrilling for filmmakers, their audiences and the businesses that have grown up around them.

The World Wide Web has evolved at such a tremendous pace, often in utterly surprising ways — it is hard to believe that just 10 years ago no one had yet used “google” as a verb, sent an email invitation to another person requesting declaration of their friendship to the world, or even remotely considered penning a Wikipedia entry. And yet, up to now there have been very few academic institutions to embrace tools like blogs and user-generated content to support and further their work. And I don’t just mean message boards and online course discussions, but a true communication medium that draws upon a community’s knowledge and ideas in order to stimulate thought.

I am proud that Columbia Business School is using technology to foster exchange in our community, which includes students, faculty members, and alumni in every part of the world. Moreover, it is my hope and expectation that this blog will eventually grow to serve the wider business community.

The Web is now designed and produced by all of us. YouTube, LinkedIn, Twitter — they are all platforms for you to exchange ideas and to build your personal and professional network. Think of this blog as a resource for topical, relevant business information and commentary — another tool in your arsenal as you do business.

Glenn Hubbard
Dean and Russell L. Carson Professor of Finance and Economics

This year, advertisers paid $2.7 million for each 30-second slice of air time, but you didn’t have to turn on your TV for a minute to catch them. YouTube, AOL and MySpace provided online sites where you could watch the entire roster of ads and vote on them. I’m sure Professor Bernd Schmitt wasn’t the only marketing guru to cancel his annual Super Bowl party this year as a result (Schmitt went to a classical music concert and caught the ads online, like me).

But did the Super Bowl ads really make the transition online — to the new world of networking sites, user content and interactive media? Leading up to the game, there was much buzz about how advertisers were “exploring new ways to bring their ads online. . . to make [their] steep investment go further.” (WSJ)

But almost without exception, the advertisers failed to use their TV ad as a jumping-off point for an online experience — one that could be more interactive, engaging and potentially sales-driving. (A notable exception was the super tacky GoDaddy.com, which created a “censored ad”that you had to go to its site to watch.) Even user-generated ads were on the decline, with a single Doritos spot.

Instead, the ad agencies fell back on their old habits of telling 30-second “stories” about a brand, hoping that a tale of goofy cavemen, noble clydesdales or aphrodisiac peanuts would make you think their brand was “funny,” “inspiring”or “irresistible.”

When I spoke last week to advertising legend Bob Greenberg, CEO of R/GA, he wondered whether there was still much to be gained in broadcasting such multimillion-dollar “metaphors” when consumers have shifted to a more interactive media experience.

We’ll continue the discussion this week as part of the BRITE ’08 conference and CMO summit on branding, innovation and technology at Columbia. Bob and other marketing leaders from G.E., SAP, Fox and more will be discussing what the new models are for building brands in an age of interactive media.

For now, I’d give the Super Bowl ad lineup a B+ on creativity, and a D- on catching the new media paradigm.

Regarding my first choice, it might help you to know that a quarter century ago I bought a Macintosh, and then a Mac Plus, and I’ve probably bought every other Macintosh product since. Indeed, I’m writing this blog post on a MacBook Pro, and in customer lifetime value terms I’m just the sort of customer that any company would love to have.

But that’s not why Apple is my first choice. I’m choosing it because Apple, more than any other company, exemplifies what Peter Drucker said about business: at root, only two things really matter — marketing and innovation. Apple excels in developing offers that customers love to purchase, and it has not been afraid to diversify away from its home base in personal computers. The iPod is quite a distance from the Mac and the iPhone is even further, but they are still electronic products; the successful iTunes service represents a quite different growth vector. And then consider the Apple Stores. The received wisdom was that Apple was crazy to go direct to consumers through retail. How wrong was that wisdom? The revenues per square foot from Apple Stores are the highest of any U.S. retailer, in large part because the service is out-of-sight. Just check it out for yourself and, while you’re at it, see what happened to Apple’s stock price in 2007.

Nintendo
Years ago I was pretty good at Pong and Pac-Man, but I haven’t touched a video game since. My image of the game player is male, 16 to 24, the high school or college student locked in his room alone for hours on end, while the affairs of the day like schoolwork and family meals just pass him by. He may connect with someone online, but it’s a pretty lonely existence.

Over the years we’ve seen the competition — Nintendo, Sega, Sony and Microsoft — each developing ever more complex games to keep the player glued to his screen even longer. But now there’s the Wii from Nintendo. Sure it’s a video game, but so different in concept and with a value proposition that speaks to the entire age range. Forget the solitary game player — the Wii is for the whole family, and lets baby boomers and older relive their youth.

At Thanksgiving, I played tennis for the first time in years. Sure, my 10-year old relative played like Roger Federer in giving me a drubbing, but the sense of family was exceptional. So, Nintendo is my second choice for top marketer of 2007; it figured out a customer need and used its technological resources to make an unbelievably compelling market offer.

Monsanto
But not all great marketers address consumer markets. My third choice is quite different and may be controversial. In the past several years Monsanto has run into considerable public relations trouble in Europe as consumer–based movements have worked to block its genetically modified seeds. But around the world farmers know only too well the damage caused by a wide variety of bugs: crop yields go down and their earnings suffer. Monsanto has targeted farmers in the United States, Latin America and Asia — regions that are increasingly using the company’s seeds to grow their crops. Of course, Monsanto has had some luck — as oil prices have risen and the demand for organically based alternative fuels has grown, the pressure on crop yields has increased. Monsanto has the products to make that happen and, as with my other choices, the stock market has rewarded its efforts.

So there you have it — Apple, Nintendo, Monsanto. What unites these firms is a fierce focus on delivering customer value and securing differential advantage.

Now, take a look at your own corporation — is your CEO leading a similar drive? When your senior leaders understand that all that really matters is marketing and innovation, then your firm will be a candidate for my top three marketers of 2008.

Professor Capon is working to reduce the obscenely high price of marketing textbooks by offering Managing Marketing in the 21st Century as a new low-price/high-value alternative at www.mm21c.com.

My heart went out to two companies who had to make those painful decisions. In one case, that of Polaroid, the decision was to stop making instant film, a product deeply linked to the company’s identity. They have just announced that they plan to close factories in Massachusetts, Mexico and the Netherlands that make instant film. They’ve stopped making instant cameras for some time now. The other, even sadder case is that of Toshiba, whose high-definition DVD format has now lost out in the standards war and will be discontinued.

Fans of the instant-film format are howling, but the relentless realities of declining sales and the relegation of instant film to a footnote in the photography industry leave Polaroid with few options.

The good news is that perhaps a smaller company will license the rights to manufacture the instant film and keep some supply available.

Toshiba, in contrast, sees no hope, resigned to the fact that its HD DVDs have irrevocably lost the standards war to Sony’s Blu-Ray technology. This must feel like sweet justice for Sony and its CEO Howard Stringer (c’mon, everybody remembers Betamax vs. VHS) and be a bitter disappointment for Toshiba. Standards battles are hard to predict, and both sides went into this one well armed for a long war of attrition. With computer manufacturers, content providers and others unprepared to place a compelling bet on one or the other standard, the battle could have dragged on for some time.

I find it fascinating that the critical blow (after some others had been cast, of course) came from a third party that stood to lose a great deal in a protracted standards battle, and that’s Wal-Mart. Wal-Mart has no interest in shoppers holding off their purchases for fear of spending a lot of money on a piece of obsolete junk. The superstore’s perspective is: who cares who wins, as long as the situation gets resolved and commerce can chunk merrily along. So when one of the big film studios went with Blu-Ray, that was enough to convince Wal-Mart that it was time to place a bet. Toshiba’s capitulation came within days.

While both stories are sad, they do serve to remind us that for innovation to progress, some established practices, offers and products have to give way. It sure isn’t the most pleasant part of the innovation process, but it is necessary. So best of luck to both companies, and may something brighter offer some excitement down the line.

We mingled with Call of Duty and Guitar Hero brand managers from Activision, who illustrated opportunities for in-game advertising and franchise growth. Agents from UTA Online, United Talent Agency’s emerging-media practice, discussed how they discover and nurture creative talent on the Internet — including Lonelygirl15.

During a panel presentation at Yahoo! media group, featured speakers described the company’s strategy for promoting relevant content for its 500 million users worldwide.

At Participant Productions, a small studio known for its social action films, we learned about their two bottom lines: financial and social change.

Our itinerary included requisite stops at major film studios. We discussed the highs and lows of Hollywood with Fox executives, illustrated in the euphoric success of Juno coupled with the challenges of working around the WGA strike.

Columbia alumni at Sony and Paramount organized panels and gave us a crash course in the green–lighting process and the complex dynamics of acquiring films. Disney rolled out the red carpet for a multischool visit. As with many of the other companies, HR representatives were on hand to discuss internship opportunities.

We also attended the Los Angeles alumni reception, held at the Twentieth Century Fox Studios, and did some good old–fashioned networking.

The highlight of that night was a lively panel titled “Managing Creative and Creative Management,” moderated by Professor Jonathan Knee, head of CBS’s Media Program. Alumni panelists Chad Gutstein ’00, Pearlena Igbokwe-Robinson ’92 and Robert Fried ’83 were on hand to offer their experiences as MBA grads in a creative yet increasingly management-minded industry. The next evening, a mixer in Santa Monica with MBAs from other top business schools rounded out our social calendar.

We left Los Angeles feeling like Hollywood insiders — possessing not only clearer insight into a complex and changing industry, and wallets crammed with the business cards of valuable contacts, but also a heightened passion for the business of media and entertainment.