Haas Faculty Examine Corporate Strategy, Conscious Capitalism in California Management Review

With a focus on corporate strategy and conscious capitalism, the spring 2011 issue of the California Management Review (CMR) showcases the work of four Haas faculty members: Homa Bahrami, Henry Chesbrough, John Morgan, and David Vogel.

Chesbrough, faculty director of the Garwood Center for Corporate Innovation, has taken the concept of open innovation to the next level in Open Services Innovation: Rethinking Your Business to Grow and Compete in a New Era. In an excerpt from his book featured in CMR, Chesbrough encourages companies to change their business models by transforming the way they operate from being product-centered to service-centered and by getting customers engaged in the process.

Another corporate strategy, super-flexibility for real-time adaptation, is the subject of an article by Bahrami, senior lecturer in the Haas Management of Organizations Group, and Stuart Evans, a distinguished service professor at of Carnegie Mellon University, Silicon Valley campus. Based on three decades of experience in Silicon Valley and the study of more than 75 technology companies, the authors assert that new games can’t be played by the old rules and leaders have to continuously adapt in real time to a continuous stream of “revision triggers” that force unexpected change.

One way to accomplish this is through super-flexibility, the ability to rapidly change course while at the same time withstanding turbulence. The article outlines five action principles to put super-flexibility into practice. These principles include creating a variety of initiatives and shifting between them as one would change gears in a car; relying on a scientific approach that uses hypotheses, data, and experimentation; and creating innovation by recycling, whether through re-inventing or redeveloping products, reorganizing companies, or changing the way information is disseminated.

In another article, Morgan, the Gary & Sherron Kalbach Chair in Entrepreneurship, examines the practice of corporate social responsibility as a form of reputation insurance. Morgan and co-author Dylan Minor, who just completed his PhD at Haas and will take a position at Kellogg in the fall, believe that the most important asset of many companies is their reputation and that a wise use of CSR can help firms weather the storms of negative events, most notably product recalls.

By doing a case study of two medical device companies and examining the stock prices of S&P 500 firms following product recalls between 1991 and 2006–along with the CSR ratings before and after the events–the pair found that those companies implementing effective CSR programs were able to preserve their reputation more effectively than those who did not. Doing good, such as investing in communities or donating products and services, together with avoiding harm, such as buying sustainable products or not dealing with sweatshops, produce better results in terms of reputation than either of these alone.

An article by David Vogel, Soloman P. Lee Chair in Business Ethics, and James O’Toole of University of Denver’s Daniels College of Business kicks off a forum on conscious capitalism. They define companies embracing this philosophy as those with a higher purpose than just profit, those wanting to answer to the needs of all their stakeholders, and those having a strong sense of employee involvement, among other characteristics.

In “Two and a Half Cheers for Conscious Capitalism,” the two authors evaluate this movement that has inspired many business leaders in recent decades and highlight its shortcomings.

The problem with conscious capitalism, they contend, is that it is difficult to maintain the lofty goals of “doing good” set by the movement. Many who have tried have eventually failed or may fail in the future due to economic challenges, changes in corporate leadership, or the difficulties of trying to solve the world’s problems through business. It is crucial that adherents of conscious capitalism understand the limitations of what they can accomplish and recognize the essential role that government must play in the process, the authors maintain.

Visit the California Management Review website to order a copy of the spring issue or subscribe.