Knowledge at Wharton

At Wharton’s 10th annual leadership conference on June 13 the theme of ”Leading with Resilience: Coming Back from Challenge and Adversity” brought together speakers who had faced hardships in a number of different areas. Perhaps none of the speakers however had experienced as much physical danger as David Breashears filmmaker and mountaineer who recounted how he and his team survived one of the deadliest accidents in the history of Mt. Everest. ”So where does a mountaineer and filmmaker fit into this conference?” Breashears asked. ”Resilience excellence determination conviction resolve” -- words that are often used to describe a successful team anywhere whether on Wall Street or on a cliff. Another speaker at the conference -- organized by Wharton’s Center for Human Resources and The Center for Leadership and Change Management -- was Sylvia M. Montero who recounted her own journey from a farm in Puerto Rico to a position as senior vice present human resources at Pfizer.

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Ray Ozzie is in. Bill Gates is heading out (but not entirely). And Steve Ballmer is staying right where he is (at least for now). What does this game of musical chairs among the members of Microsoft’s high command portend for the world’s biggest software company? Far from being a source of confusion and uncertainty Gates’ recently announced decision that he will relinquish his full-time day-to-day involvement in the company in July 2008 may be just the breath of fresh air needed for a firm facing major challenges to its core business according to Wharton experts. At the same time it’s not yet clear just how successful Gates will be in removing himself from a company that has been his life for three decades.

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Over the past three decades index-style investing has moved from the fringes to the mainstream with an estimated $3 trillion now committed to this simple strategy -- to match broad market returns and give up as little as possible to fees and taxes. Clearly indexing has served investors well and is here to stay. But can it be made even better? Wharton finance professor Jeremy Siegel thinks so. The standard index which gives more weight to stocks of bigger companies should be replaced by ”fundamental indexing” that assigns each stock a role based on factors like corporate sales or dividend payments Siegel says. But many index-investing experts are unconvinced. ”I don’t believe in new paradigms ” says John C. Bogle founder of the Vanguard Group mutual fund company which specializes in traditional index investing. Siegel and Bogle offer their different views on indexing.

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In the spring of 1980 ”Dallas” ended its season with the biggest network television cliffhanger ever. Viewers waited all summer to discover who shot conniving oilman J.R. Ewing; when CBS finally provided the answer that fall a record 76% of American TVs in use were tuned into the show. In that pre-Internet pre-podcast pre-TiVo world networks had only each other to compete with. Today under pressure from on-demand media networks are using new tricks to retain viewers. Their strategy this time around? Turn shows into communities and viewers into cult-like fanatics. ABC’s ”Lost” is probably the most visible example of this recent phenomenon but it’s not the only one. What strategies are networks and advertisers using to gain the attention of that ever-important consumer?

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On June 8 the House of Representatives squashed an amendment that would prevent telecommunications companies from charging Internet content companies more to deliver enhanced services such as high quality audio and video content. The amendment would have required ”network neutrality ” an often-debated term that means different things to different people. To its supporters like Google Yahoo and eBay it means that telecommunications companies should be required to treat all Internet traffic -- whether bandwidth-hogging video or a brief email message -- the same. To companies like Verizon and AT&T imposing network neutrality would mean that they could not charge for enhanced services on networks that cost them billions of dollars to build. Experts from Wharton and elsewhere weigh in on the issue.

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Almost everyone these days will agree that an organization’s intellectual capital or knowledge assets are as important as its physical assets. The challenge of how to track organize and use knowledge assets however is easier said than done. How can companies tackle this challenge? Michael Lynch founder and CEO of Autonomy a company with offices in Cambridge England and San Francisco believes that his company’s technology can help organizations extract meaning from reams of unstructured data. Autonomy even has a name for this process -- meaning-based computing. Lynch and Kevin Werbach a Wharton professor of legal studies and business ethics who has written extensively on this subject spoke with Knowledge at Wharton editor Mukul Pandya about these issues.

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Major League Baseball’s decision to square off with CBC Distribution and Marketing an online baseball fantasy-league operator based in St. Louis Mo. might make good legal sense but it’s bad for business according to Wharton faculty and baseball industry spectators. For several years CBC paid a fee to the Major League Baseball Players Union for the right to use players’ names and stats for its virtual leagues in which fans draft pro players onto imaginary teams and then compete with each other based on their players’ statistics. But last year Major League Baseball Advanced Media bought the Internet and wireless rights to the names and stats from the union and informed CBC that it wouldn’t renew its license. CBC has filed a law suit in response but the league isn’t backing down. By picking a fight with CBC -- and the $1.5 billion fantasy league industry -- baseball risks alienating fans damaging its brand and sacrificing future revenues for a small gain experts say.

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John Zhang has a message for Cingular Wireless and Verizon Wireless or for that matter any company that uses its ads to attack a competitor. Instead of luring away your competitor’s customers you may just be hurting yourself. Zhang a Wharton marketing professor has found that combative ads -- the sort of comparative spots that beer makers particularly Anheuser-Busch and Miller are famed for -- may backfire. Instead of pulling consumers to an advertiser they may just make people indifferent to all offerings in a product category. ”Combative advertising a characteristic of mature markets is defined as advertising that shifts consumer preferences toward the advertising firm but does not expand the category demand ” Zhang says in his research paper titled ”A Theory of Combative Advertising.”

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In recent years when interest rates in the U.S. were low hordes of homeowners and investors in real estate grew wealthier as they watched their home values increase or their investment properties sell for multiples of their purchase price. But now with interest rates rising the run-up in real estate may be ending. What will happen next? Experts from Wharton and elsewhere debated this question at a conference on innovation and risk in real estate markets organized by the Wharton Financial Institutions Center and Mercer Oliver Wyman.

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After saturating its target market of working class bargain-hunting consumers Wal-Mart is ratcheting up its low-price strategy to appeal to more upscale shoppers by expanding its merchandise lines to include organic foods better wines high-end consumer electronics and new fashion-oriented apparel. It’s an approach that carries some risk say Wharton faculty and analysts but that is dictated by intense competition and the lack of other opportunities for growth.

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