Harvard Business Review November 2016

For the fourth straight year, Harvard Business Review presents its list of the world’s 100 best-performing CEOs (see page 41). And for the fourth straight year, there is a dispiriting absence of women. Our goal with the list is to measure CEOs on their long-term performance. Our formula looks at adjusted total shareholder return and increase in market capitalization over a chief executive’s entire tenure. We also factor in two separate ratings of corporate ESG (environmental, social, and governance) performance, to ensure that we’re evaluating executives on more than just their companies’ share price. The results are in, and only two women made this year’s top 100: Debra Cafaro of Ventas and Marillyn Hewson of Lockheed Martin. But the results aren’t an indication that women underperform men as executives; rather, they reflect…

A. Ruiz Villar, whose collages accompany this month’s Spotlight, is more concerned with creating language than with delivering any sort of message. “Communication is language itself,” says the Barcelona-based artist. “The only purpose is the creation of a code.” See more of his work at ruizvillar.net. Having grown up in Montana during the air- and water-pollution crises of the 1960s and the energy shocks of the 1970s, Forest Reinhardt has long sought to use his management expertise to address environmental problems. A fictionalized version of his case about an almond grower who must deal with water scarcity starts on page 105. Ron Adner’ ideas about why some great innovations succeed and other great ones fail began to crystalize during the internet bubble of the late 1990s. Many tech firms of that era…

I appreciate the perspective that what customers perceive as value can be vastly different from what we (business owners and consultants) perceive as value—and that it can be mercurial. I especially appreciate the statement that leaders of organizations typically spend less time with customers, which can slow innovation. Understanding the differing impacts on customers of decisions that are made based on theory as opposed to those based on real-world experience is critical. Colleen O’Connor, area developer, Elements Therapeutic Massage As a market researcher, I see many brands skip the more qualitative stages of product or service development and go directly to discrete choice studies, without understanding what matters to customers and doing the important work of winnowing down the multitude of options. What is the result? Overbearing 35-minute surveys that nobody would…

Most people are familiar with the traditional approach to venture capital: An investment firm carefully parcels out capital to a portfolio of start-ups, knowing that most will fail—but that with luck, the financial returns from the handful of winners will make the exercise extremely profitable. For more than 40 years, however, another model has also existed: corporate venture capital, in which a very large company invests in start-ups, often in adjacent industries. While traditional VCs are all about financial returns, most corporate VCs are motivated by strategic payoffs. They recognize that big companies often can’t match start-ups’ ability to create breakthrough innovations, so they use their in-house VC operation to gain insight into new products that could affect their competitive position—and perhaps to get a jump on acquiring the start-up…

How do you balance the desire for financial returns with the need to invest strategically? We are very selective about what industries we invest in, and within each one we have well-defined themes that are highly strategic for GE’s businesses. Just by operating within those constraints, we’re addressing our strategic mandate. But you can’t focus only on strategic fit. Anyone in corporate venture capital who says they don’t also focus on financial goals won’t be around very long. What do you do to help portfolio companies succeed? We are very hands-on, unlike a lot of corporate venture capital firms, which really just write a check and hope something comes of it. We work with our portfolio companies to adapt their product or service so that it can be tested and used…

1953 FROM THE ARCHIVE “As science unleashes vast new sources of power, it appears possible for the first time in history for men of all types and classes to avoid the toil and suffering of hard labor and to experience the joys of work—a satisfaction which in times past was limited to the few.” “BUSINESS LEADERSHIP AND A CREATIVE SOCIETY,” BY ABRAM T. COLLIER (HBR, JANUARY–FEBRUARY 1953) When a prominent product is recalled, rivals should have an opportunity to gain market share. After all, negative publicity about the recall tarnishes the brand, so it would be natural for consumers to consider competing products instead. But new research by professors at the University of Washington and the University of Southern California suggests the opposite: A brand’s recall may hurt its rivals—a phenomenon the researchers call “perverse…