strategy+business Fall 2018

Get a truly innovative chief executive to open up candidly, and you can learn a great deal. We feature five such CEOs in this issue. The first is Danny Meyer, the remarkable entrepreneur who started New York City’s iconic Union Square Cafe and the wildly successful Shake Shack chain. In Ann Graham’s profile, “Danny Meyer’s Recipe for Success,” we look closely at the philosophy he calls “enlightened hospitality,” which Meyer used to help scale both his company and its culture (page 82). Second is Tim Armstrong, the digital media pioneer at the helm of Oath, the Verizon subsidiary whose assets include AOL, Huff Post, and Yahoo (page 136). The other three CEOs — Melissa Snover of Katjes Magic Candy Factory, Shin Sakane of Seven Dreamers Laboratories, and Valentin Stalf of…

During the heyday of the Industrial Revolution, at the end of the 19th century, few people understood the intricate dynamics of financial capital. Its growth often seems slow at first, but when managed well, it doubles regularly; this exponential growth can accelerate a company’s progress. For early companies that pioneered better approaches to business economics, financial capital gave them a strong competitive advantage. As the 20th century unfolded, two additional types of equity became important: human capital (the return gained from the development and deployment of staff and contractors), and natural capital (the manageable value of land, water, and other environmental resources). Business success came to depend on managing these three forms of capital effectively. In the 21st century, with the accelerating increase of technological innovation, three more forms of capital have…

A sales revolution is under way, and it can be summed up with one word: subscriptions. Faced with fierce competition and low customer switching costs, companies are turning to subscription-based offerings in search of revenue predictability. And their customers have responded in droves. In April 2018, the Economist reported that U.S. households have more than 200 million subscriptions to various streaming and Internet-based services. Amazon Prime announced the same month that it had exceeded 100 million subscriptions worldwide. The shift toward subscription models is happening across industries. In apparel, some traditional retailers watched the subscription-box wave and saw an opportunity to rethink how they engage with customers, by offering curated selections or clothing rentals, as well as incentives for continuing to shop in-store. The auto industry is also entering the ring,…

Leaders who listen and engage in open dialogue with their employees gain enormous advantages. Yet, in practice, leaders sometimes hesitate to invite such dialogue, because they fear their employees’ opinions will be off-base. Rather than face a confrontation, these managers sidestep important conversations altogether. Avoiding difficult conversations may seem easier in the short term. But over the long haul, leaders cannot achieve alignment, empowerment, or accountability without actively engaging their employees. What leaders need, then, is a way to be open and accepting, even if they ultimately disagree and decide to go in a different direction. This is where one of the key tenets of improvisational comedy can help: “yes, and.” Yes means agreeing with your partner’s premise, whatever it is; and means building on what he or she has offered.…

Global spending on enterprise IT could reach US$3.7 trillion in 2018, according to Gartner. The scale of this investment is surprising, given the evolution of the IT sector. Basic computing, storage, and networking have become commodities, and ostensibly cheaper cloud offerings such as infrastructure-as-a-service and software-as-a-service are increasingly well established. Open source software is popular and readily available, and custom app development has become fairly straightforward. Why, then, do IT costs continue to rise? Longtime IT consultant Dave Mc-Comb attributes the growth in spending largely to layers of complexity left over from legacy processes. Redundancy and application code sprawl are rampant in enterprise IT systems. He also points to a myopic view in many organizations that enterprise software is supposed to be expensive because that’s the way it’s always been. McComb, president…

Purchasing a home or car is an exciting moment in a person’s life. Consumers may be comfortable with and even appreciate data-driven recommendations in the search process, for example, from websites that suggest homes based on properties they’ve previously viewed. But what if the decision to grant a mortgage or auto loan is made by a machine-learning algorithm? And what if the logic behind that algorithm’s decision, especially if it rejects the application, is unclear? It’s hard enough being denied a loan after going through the traditional process; being turned down by an artificial intelligence (AI)–powered system that can’t be explained is that much worse. Consumers are left with no way to know how to improve their chance of success in the future. As companies adopt more advanced algorithms, their ability…