Con: Innovators Turbocharge Economic Growth

by Hal Gregersen, INSEAD

Innovation trumps entrepreneurship when it comes to economic growth. Don't get me wrong. Entrepreneurship matters, but innovation and innovative entrepreneurs matter more. Here's why.

Eighty-eight percent of the world's entrepreneurs succeed through "exceptional execution of an ordinary idea" (meaning one that's already succeeded somewhere else in the world), according to research by Amar Bhidé, an entrepreneurship guru and author of The Origin and Evolution of New Businesses. By contrast, the other 12 percent of the world's entrepreneurs succeeded by executing on "an unusual or extraordinary idea" (usually their own).

Indeed, innovators and innovative entrepreneurs fuel phenomenal economic growth by creating entire new industries. They are the disruptive ones. They change the way things are and, by so doing, turbocharge economic activity. Let's look at one historical innovation that produced more than 100 years of substantial economic success.

In 1884, George Eastman launched an economic growth engine by patenting the first film in roll form, and then, in 1900, he single-handedly created mass-market photography by inventing the Brownie camera. His innovative ideas, especially the Brownie camera, started an economic wave of success that spread from Rochester, N.Y., to the rest of world for a century. The tragic ending of Kodak's century of success, however, underscores the dilemma that any company or country faces in search of growth. Innovative ideas spark new markets and strong economic growth, while the repetitive reliance on well-known ideas ultimately stalls and crashes. Kodak failed to learn this lesson fast enough and went bankrupt in the process.

In short, entrepreneurship fuels economic growth, but it's the disruptive innovators of the world who turbocharge it.

Hal Gregersen is a professor of leadership at the graduate business school INSEAD. Gregersen's work has been published in many academic and business journals. His most recent book is The Innovator's DNA, co-authored by Clay Christensen and Jeff Dyer.

Con: Contentment Can Breed Complacency

by Costas Markides, London Business School

Sometimes it pays to question the things we take for granted in life. For example, for years we have been telling people to look at problems in a positive way and see the glass as half-full rather than half-empty. Yet research undertaken by Clark Gilbert for his doctoral thesis at Harvard has shown that those who view the glass as half-full do not do better than those who perceive it as half-empty. Instead, it is the people who see it as both half-full and half-empty who do the best. There are many reasons for this, but the point is that even seemingly incontrovertible statements such as "be positive" can be found wanting.

The same principle applies to our firmly entrenched belief that "happy employees are more productive." Having happy employees has many benefits—but also costs that can sometimes outweigh the benefits.

For example, happy employees tend to enjoy the status quo so much that they might resist changes to it. This is hardly a recipe for success in today's world, where agility and embracing change are essentials for success.

Another potential cost is that happy employees can feel so satisfied with their work that they refrain from taking on new challenges. As we all know, dissatisfaction with one's current position leads one to search for alternatives and innovate. But the biggest cost to having happy employees becomes evident when we ask the question: "Why are our employees happy?" One possible reason: We have tried to keep them happy by never saying no to them—an attitude that any parent call tell you all about.

Unfortunately, to succeed in business, organizations need to make difficult choices all the time—what to do and, more important, what not to do. The truth of the matter is that whenever we make a difficult choice, some people will win and some will lose. The winners will be happy and the losers unhappy. It's impossible to make everybody happy all the time. If everybody in your organization is happy, that may be because you're failing to lead them.

Costas Markides is professor of strategy and entrepreneurship and holds the Robert P. Bauman Chair of Strategic Leadership at London Business School , whose MBA program was ranked No. 1 by the Financial Times in 2009, 2010, and 2011. A native of Cyprus, he received his B.A. (Distinction) and M.A. in economics from Boston University, and his MBA and DBA from the Harvard Business School. His current research interests include the management of diversified businesses and the use of innovation and creativity to achieve strategic breakthroughs.

Con: Size Means Added Value

by Jean Charroin, Audencia Group

Management education faces the same challenges any other global sector does. The key is to gain a long-term competitive edge by reaching the sort of critical mass that does not simply bring costs down but also boosts visibility and adds pedagogical value through greater flexibility and choice. An increase in size also allows room for a wider mix of students academically (who initially studied management, engineering, literature, design, etc.) and a more varied geographical makeup.

A greater variety of teaching groups boosts student-faculty interaction and the sharing of best practices while taking intellectual and human relations within a class to higher levels.

A certain size also permits a management education provider to offer a bigger choice of specialization tracks, plus the sort of cultural openness that allies the intake of knowledge with solid career plans and not-for-profit activities. Such an approach also means choosing program participants from a larger overall group whose members wish to steer their careers toward posts of strong added value--posts for which the employment market is highly competitive.

Additionally, a rise in the number of students recruited will bring an increase in faculty size, meaning it will produce more research and become visible, in turn raising higher still an institution's international profile.

Jean Charroin is vice dean of Audencia Group in France and director of the Audencia Nantes School of Management. He worked for 10 years in the biotech and agrofood industries. He was also a visiting research associate at the Industrial Performance Center, Massachusetts Institute of Technology, and is currently a member of the AEGIS (Analyse Économique et Gestionnaire des Institutions et des Stratégies, or Managerial and Economic Analyses of Institutions & Strategies).

Con: Your PC Is More Trustworthy

by Julie McNelley

While the mobile platform has many features with the potential to facilitate a safer remote-channel experience over time, today's online channel typically offers more in the way of robust security. Much of this is the product of necessity: Online banking has been around a lot longer than mobile, offers more transactional capability (much of it higher-risk), and has been much more intensively targeted by malware and other cyberthreats. As a result, online banking platforms are typically more mature in their defenses than are mobile platforms.

Another factor that adds to the risk of mobile banking is consumers' failure to treat their smartphones like tiny little computers. Few consumers have any form of anti-malware software on their mobile devices and, with little consideration for security, many are willing to download apps of completely unknown provenance from app stores.

Risk executives at financial institutions expect mobile banking to come under more intensive attacks as enhanced transactional capability is deployed to the mobile channel. Aite Group surveyed global risk executives in November 2011 to determine the extent to which they plan to bolster the defenses of the mobile channel over the next two years. Ninety-two percent of respondents expect to deploy increased fraud prevention technology. Sixty-seven percent have projects under way, and 25 percent are waiting to see what kind of threats emerge.

Mobile banking is viewed as a critically important strategic channel by most financial institutions. In order to ensure a secure experience for everyone, the protections must increase alongside the risks.

Julie Conroy McNelley is a senior analyst within Aite Group's retail banking practice, covering fraud, data security, anti-money laundering, and compliance issues. She works with financial institutions, payment processors, and risk management companies, including Golden Gateway Financial and Early Warning Services.

Con: Communications Deficit

by Ben Waber, Sociometric Solutions

Management research shows unequivocally that without face-to-face interaction, performance and the mental health of employees suffer.

My studies using sensor ID badges to measure human interaction in the workplace show that people with extensive face-to-face networks are roughly twice as productive as people who keep to themselves or only communicate over e-mail. The mental toll is equally striking: Face-to-face interaction accounts for nearly all boosts in job satisfaction, while e-mail communication has no effect.

Now imagine what happens when people work from home and can only rely on electronic forms of communication. For example, how long would it take to write an e-mail to explain all the nuances of your position on your company's R&D budget? Probably a few hours. Then people would get back to you with their positions, also spending hours going over fine points that you didn't think to consider when you wrote your e-mail, and this back and forth could take days or even weeks. But if you met face to face, you could accomplish this entire discussion in an hour.

There's the added benefit of being able to go out for coffee afterward; even if we disagreed, we could build social capital difficult to reproduce through electronic media. Without face-to-face interaction, people become less committed to one another and the organization. Until communication technology vastly improves, we are better served by utilizing the mode of interaction that we've refined as a species over millions of years: face-to-face communication.

Ben Waber is president and chief executive officer of Sociometric Solutions, a management consulting firm that specializes in social sensing technology. He's also a senior researcher at Harvard Business School and a visiting scientist at the MIT Media Lab, where he received his PhD in the Human Dynamics Group. Waber has served as a consultant on technology trends, social networks, and organizational design for such concerns as LG Electronics, McKinsey & Co., and Gartner.

Con: Stay Social but Protected

by Jorge Steinfeld, Check Point Software Technologies

Social media are here to stay. Innovative companies understand this reality and are using social media to improve employee collaboration, strengthen customer service, and expand their businesses.

While Facebook, Twitter, and LinkedIn have created a lot of opportunity for businesses, they have also become significant entry points for security threats. Check Point research has shown more than 80 percent of organizations believe Web 2.0 applications significantly lowered the security posture of their business, citing viruses, malware, and data loss as critical concerns. However, banning social media from their networks seems like a "flat earth" policy and, with today's security gear, unnecessary.

So how should organizations proceed? While there are a lot of security solutions that offer application control, employee education is a critical component that businesses must integrate in order to benefit from Web 2.0, without compromising security. People are a critical part of the security process as they can be misled by cybercriminals and make mistakes that lead to viruses or unintentional data loss. Many organizations do not pay enough attention to the education of users when, in fact, employees should be the first line of defense. Employers should empower workers to prevent security incidents in real time. Some of today's technologies integrate user awareness capabilities, helping businesses alert employees about corporate policies and putting them at the heart of the security process.

The bottom line is that social media are part of an evolution in the way people communicate and collaborate in modern-day business environments. As security issues with Web 2.0, mobile devices, and other emerging trends contribute to the growing list of IT priorities, organizations should implement a combination of technology and employee awareness in order to align security with business needs.

Jorge Steinfeld is the vice-president of information systems at Check Point Software Technologies and has 32 years of information systems experience.

Pro: New Media Demands New Insurance

by Michael Fertik, Reputation.com

We insure the things most important to us: our life, health, home; in business, our corporate risk, revenue, key people. We insure these things because we know how precious they are.

Reputation is the most important asset a company possesses. The Economist Intelligence Unit has found that 75 percent of a company's value is tied up in its reputation. When a company's name gets tarnished because the chief executive is caught up in a scandal, an environmental disaster occurs, or workplace conditions are criticized, revenue falls, the stock price slides, and the acquisition of new customers slows.

Today, reputation lives on the Internet. More than 90 percent of consumers use the Web to research companies and products before buying, and 80 percent make decisions based on what they see. If a disgruntled former employee is slandering your business online, customers won't take the time to evaluate your company's products further--they'll do business with your competitor instead.

There are two kinds of reputation insurance that matter. The first is "informal insurance:" building up digital reputations before problems occur by making sure companies control the top 20 Google results for their names and own the Twitter, LinkedIn, and Facebook accounts for those names. Businesses manage their reputations proactively by making sure the Internet accurately reflects their offline successes. When such companies suffer Internet attacks, they already enjoy "prophylactic" layers of technical protection.

The second is "formal insurance:" Over the past 24 months a growing number of organizations have been demanding dedicated reputation insurance products in the same way they buy errors & omissions insurance, data breach insurance, and professional liability insurance. It's a classic use of insurance, a classic hedge, and it makes perfect sense.

When 75 percent of a company's value is tied up in its reputation, a big insurance market seems not just smart but inevitable.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: Consumers Trust Their Friends

by Shawn P. O'Connor, Stratus Prep

What's more valuable for choosing a restaurant, dentist, gym, or new smartphone--an online review or a suggestion a close friend makes to you? Even with the explosion of review applications and sites (eg, Yelp, Google, Urbanspoon), research clearly demonstrates that word of mouth--product or service recommendations made by friends, co-workers, or neighbors you know and trust--is still the most effective way to win new customers.

Why? While traditional advertising such as TV spots and newspaper ads, as well as digital marketing such as sponsored links on Google, can build brand awareness, they increasingly do not resonate with target audiences. This is especially true among the 18-29 demographic, a group that's notoriously suspicious of advertising and well aware of the proliferation of fake positive (and negative) reviews.

While there's no single formula for word-of-mouth success, I've found it often starts with creating a culture that encourages your clients to consider themselves valued partners in your business. Word-of-mouth referrals stem naturally from an unparalleled customer experience that fosters clients' identification with your brand.

I've seen firsthand the power of word of mouth. In 2006, I launched a test preparation and admissions counseling firm out of my Manhattan apartment with just $5,000. Word of mouth has been the driver of my company's success, translating into hundreds of new business referrals each year. Primarily through word of mouth, my firm has grown 50 percent annually, acquiring clients in Europe and Asia as well as in the U.S.

Despite the multitude of media platforms available, verbal buzz about your business or product passed from one reliable person to the next is still the most cost-effective way to build a loyal following, expand your business, and reach new customers.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: No Credible Evidence

by Stephen Slivinski, Goldwater Institute

You usually only know something's a fad in retrospect, after a number of unsustainable businesses fail in the marketplace. But when it comes to the renewable energy industry, it's hard to tell whether certain companies or technologies are fads or innovators, because the government is plying them with subsidies that shield them from market competition.

Venture capitalists try to avoid fads, but they also know that taking some risks with emerging technologies can pay off. They're doing it, however, with private money and have no incentive to allocate capital on a whim. When government tries to play venture capitalist, it does so with taxpayer money and has less incentive or ability to get it right.

The government's track record at picking winners in energy markets has been dismal. Take the failed taxpayer-funded experiment with "synthetic fuels" in the 1970s. More recent were government efforts to jump-start the hydrogen fuel-cell automobile and the quest to find a cleaner-burning coal. All petered out due to each project's economic infeasibility--but only after spending billions of taxpayer dollars.

Until the energy market is left to innovate in all sectors--renewable and nonrenewable--without government trying to steer the flow of capital, it's hard to know whether renewable energy sources can be a real long-term solution. We should trust the markets to determine the best way to reach that goal, not government planners.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: Lots of Costs, Little ROI

by Patrick J. Michaels, Cato Institute

Former Washington Redskins quarterback Sunny Jurgenson, now a sportscaster, often derides the so-called prevent defense by saying, "the prevent defense doesn't." Ditto for "sustainability." It does not sustain. It spends resources that would much more likely go into market efficiency. It wastes public monies and costs jobs.

This is obvious when examining the economics of the environmentalists' favorite "sustainable" or "renewable" energy sources, solar power and windmills. According to the Energy Information Administration's 2011 summary, the total cost per megawatt-hour of an average of solar thermal and photovoltaic will exceed four times that of advanced combined-cycle natural gas in 2016. For combined onshore and offshore wind, the cost exceeds 2.5 times that of gas.

Spain has already demonstrated the "unsustainability" of "sustainable" distributed energy.

The government bought support there by paying everyone who placed a solar panel on his or her roof an exorbitant amount. According to Gabriel Calzada, of Spain's King Juan Carlos University, each "green job" that was created cost approximately $800,000 per year. Soon the solar subsidies began to gnaw away at Spain's economy, and they were drastically reduced. Spain's unemployment now stands at 21 percent, and there is a chance the government will default on its sovereign debt. Throwing money at solar energy and windmills has real costs and economic consequences that reverberate worldwide.

People may tell pollsters they favor "sustainable" projects, but they don't buy them. Fewer than 7,000 private individuals have purchased the Chevrolet Volt, despite state and federal subsidies that approach $10,000 per car and that are transferred to the purchaser. All "sustainability" does is reward inefficiency and promote development of politically correct technologies people do not want. As the people of Spain and the stockholders of General Motors (that would be you, reader) know, sustainable development isn't.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: Enhance Returns, Reduce Risks

by R. Paul Herman, HIP Investor

Can you make bigger profits and build a better world? In the 21st century, integrating sustainability--and quantifying its value to business and society--can enhance shareholder returns and reduce volatility in portfolios (which was not the case in 20th century socially responsible investing).

First, profit potential can drive revenue higher as customers seek products and services with more benefit to society: renewable energy, compostable packaging, organic foods. Double-digit growth rates in these markets are higher than overall industry growth, according to Pegasus Capital.

Second, the bottom line can benefit from lower costs and reduced volatility in fuel, energy, and materials prices when companies become more resource-savvy and emissions-efficient. Society wins with less pollution and better health for citizens. Shareholders can win, too, as Carbon Disclosure Project leaders tend to outperform.

Third, the duration of profit matters to shareholders: Century-old companies such as IBM (IBM), Dow (DOW), and Coca-Cola (KO) are becoming more water-efficient in all their operations and outlive such companies as Johns Manville (asbestos).

Fourth, the cost of capital (e.g., the required returns for equity) is higher for unsustainable companies such as tobacco and alcohol producers. This can also increase portfolio volatility, as it represents higher risk.

These quantifiable human, social, and environmental impacts are neglected by most investors today. Mutual fund Portfolio 21 (PORTX) focuses on eco-efficient companies, resulting in stronger risk-adjusted returns, even exceeding those of the Vice Fund (VICEX). Additionally, Portfolio 21 offers a more positive HIP (Human Impact + Profit) score than the overall market, while the Vice Fund's sustainability is much lower, given its investments in alcohol, tobacco, defense, and gaming.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: Look at the Big Picture

by Robert Glennon, University of Arizona

To transform solar energy into a major player on the energy stage will take a lot of land. Solar power plants require 20 to 30 times the amount of land as coal, natural gas, or nuclear plants to generate the same number of kilowatt hours. Solar energy now contributes a paltry 0.02 percent of the nation's electricity. It will take hundreds of thousands of acres of land to raise this percentage significantly.

Some land can come from placing photovoltaic panels on existing rooftops, fallowing agricultural fields, and redeploying degraded public lands, such as old landfills. But that's still not enough space.

That's where the U.S. Bureau of Land Management comes in. It manages 264 million acres in 12 Western states--land with lots of sunshine. Much of it consists of scrub desert that provides only marginal habitat for plants and animals. BLM should permit solar plants on low-value areas adjacent to Interstate highways, bisected by high-voltage transmission lines and disturbed by decades of cattle grazing and off-road vehicles.

Concern over protecting a small number of important species, especially the threatened desert tortoise, has prompted environmental organizations and local citizen groups to oppose every attempt to put solar plants on BLM land. This opposition is understandable but short-sighted, given the potential consequences of global climate change. Proposals for solar plant sites pose a stark choice: Should we save some marginal habitat of a few species or save the planet?

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: If You Can't Beat 'Em, Join 'Em

by Nathan McNeill, Bomgar

The Millennial generation--those born in the 1980s and later--were raised in a world where answers were available with just a few thumb clicks. Now those Millennials are bringing similar expectations into the workplace, wanting near-instant responses and resolutions to tech issues. While this may seem daunting, IT should view it as an opportunity to rethink the traditional support model and build more efficient and effective support centers for everyone.

Millennials are in the forefront of the mobile trend, but they're not the only employees bringing in their own mobile devices and working outside the office. By adopting multi-platform support tools that allow IT to remotely manage and fix nearly any type of device, no matter where it is, IT departments can better prepare themselves to support all the smartphones and tablets flooding the market.

A recent survey my company conducted with GigaOM Pro and Isurus Market Research found that Millennials seek help with IT issues from outside sources, often turning to Google before contacting their support departments. This means problem solving comes in part from Millennials' need for speedy answers, as well as from their desire to understand problems and possibly fix them without help. IT managers can use this self-sufficient attitude to their advantage.

By engineering self-help centers to behave more like the search engines, social networks, and forums to which Millennials gravitate, IT can increase self-help and reduce calls to the support department. IT should also leverage screen-sharing technology that allows end users to watch IT professionals fix their computers or mobile devices and thereby learn how to do so themselves.

It's well documented that Millennials prefer instant text-based communication such as text or chat over traditional phone or e-mail. In fact, our research showed that six out of 10 Millennials said the telephone was not their first choice; more than half listed chat among the top three choices. By encouraging end-users to contact IT via chat vs. the phone, support reps can help multiple employees simultaneously, greatly improving response time and productivity.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Pro: The People Want Their Sopranos

by Ron Frankel, Synacor

Lose ESPN, Disney, Nickelodeon, Discovery, and E!? No way. Which is why fewer than 5 percent of subscribers will sever their pay TV relationships.

People love watching TV, now more than ever. The average 40-year-old watches 40 hours a week. TV viewing is up 22 minutes per month, and 91 percent of TV households pay for TV subscriptions, according to Nielsen. And though they may complain, most folks will keep paying their cable bill.

Why? Because the best content is available only through a pay TV provider. And as for those few seriously considering a switch to over the air (OTA) or Internet options such as Netflix, Hulu, iTunes, Amazon, or YouTube, they will find lower quality and limited offerings. This doesn't even count the hassle factor of slogging through websites figuring out where content is and when it can be viewed. Plus, attach an antenna to the roof lately? Moreover, anyone thinking they'll cut costs by "cutting the cord" may be disappointed as costs for content increase across the board, whether at Netflix or Hulu Plus or on a cable bill.

Pay TV is here to stay not only because of compelling content, but also because cable, satellite, and telecom providers are pumping up their online offerings with initiatives such as TV Everywhere (TVE), which permit consumers to access TV programming any time, anywhere, on laptops, smartphones, and tablet devices. HBO GO made its debut with 4 million fans downloading the app to watch True Blood and Game of Thrones. Now 85 percent of HBO GO users are watching more HBO content and reporting higher customer satisfaction than ever before. Time Warner Cable also launched its live-TV iPad app, which was downloaded by 360,000 users in the first month, and the company will even subsidize subscribers using Slingbox.

Cable bills aren't going anywhere.

Opinions and conclusions expressed in the Debate Room do not necessarily reflect the views of Bloomberg Businessweek, Businessweek.com, or Bloomberg LP.

Con: Teach the Practice, Not the Concept

by Mary C. Gentile, Babson College

Too often we try to teach business ethics through intellectual analysis, as if it's only an academic subject. Or we teach ethics as if it's a wake-up call to an assumed audience of blissfully self-centered future managers.

Although there can be truth and undoubted value in both of these approaches, perhaps our focus should go beyond trying to "teach ethics"-to teaching how to practice ethical behavior. Based on this simple observation, it would be fruitful to shift the debate from "What is the right thing to do?" to "How can I make the right thing happen?"

Business faculty all over the world are addressing the questions of values-driven leadership. They are inviting students (the future leaders and executives of global business) to engage in an explicitly acknowledged "thought experiment." Rather than limiting the discussion of ethics to thorny dilemmas where intelligent people can reasonably disagree, triggering what one professor called "ethics fatigue," these educators invite their students to approach ethics from a new direction: "What if you thought you knew what was right in a particular situation? How would you get it done? What would you say, to whom, in what sequence, with what evidence, and how would you counter their resistance or fears?"



This approach, called "Giving Voice to Values," begins from the assumption that there will always be those who push and even break society's laws and ethical norms. But there will also be those who would rather observe them, if they believed they had the skills, the competency, and the literal practice in how to do so. Rather than "teaching ethics," this approach teaches managers how to be ethical, enabling them to believe they have a choice.



The rapid adoption of this new approach is a promising sign that business schools have finally found a way to reconcile their core strength of preparing future leaders for action, with their new mission to instruct those same leaders how to be responsible, and, yes, ethical.