Editors’ Note

“People are the ultimate source of sustainable competitive differentiation,” write Ram Charan, Dominic Barton, and Dennis Carey in their article “People Before Strategy: A New Role for the CHRO.” But it may not always be so. Take the growing tension between man and machine: To what extent will knowledge workers’ jobs be replaced by smart products? What is the role of a human professional in a world of big data and predictive algorithms?

In this volume we showcase this and other critical themes highlighted by our authors from the past year of Harvard Business Review. Many of these articles stress the continued need to elevate employees’ work to new levels and unleash their innovative energy. Our authors explore big trends in business—like the increased focus on collaboration and empathy—that emphasize distinctly human skills. Executives and academics alike reengage with design thinking, explaining how to build products, processes, and platforms around users’ experiences. Other authors highlight the need to retool models and metrics for a world where human interactions have become the major source of value. All these ideas highlight that even as technology marches forward, human knowledge and expertise remain critical to strategy and performance.

We begin this collection with a piece that studies how individuals work together. Collaboration has become a hot topic in recent years, and indeed it offers organizations a host of benefits. But it also poses risks: The most productive contributors often burn out from carrying the weight of their teams. In “Collaborative Overload,” professors and researchers Rob Cross, Reb Rebele, and Adam Grant present practical ways to manage collaboration effectively—by redistributing work evenly and rewarding efficient efforts—for high performance without exhaustion.

Like collaboration, big data provides organizations with tremendous opportunity—but also has its limitations. In “Algorithms Need Managers, Too,” professors Michael Luca, Jon Kleinberg, and Sendhil Mullainathan explain what questions algorithms can—and can’t—answer, so companies will be able to use them more effectively. While algorithms can identify patterns in data and generate insights at incredible speed and scale, the authors illustrate, through examples from Netflix movie recommendations to Google ads, how algorithms can also produce unintended consequences if designed too literally or without accounting for all critical goals. It takes managerial know-how to clarify cause and effect, identify risks, and make important decisions.

Our next piece, “Pipelines, Platforms, and the New Rules of Strategy,” redefines strategic advantage. For years managers have relied on Michael Porter’s five forces model of competition. But with platform businesses such as Uber and Alibaba, the distinctions among the forces are less clear, and new competitive factors come into play. It’s now imperative to understand “network effects”—to facilitate interactions between consumers and producers, and to incorporate those interactions into metrics of success. In this article professors Marshall W. Van Alstyne and Geoffrey G. Parker and executive adviser Sangeet Paul Choudary explain the new keys to competitive advantage and how traditional pipeline companies can develop the core competencies to survive in a platform world.

Porter’s five forces isn’t the only classic management concept to be reexamined in HBR this year. Two decades ago Clayton M. Christensen introduced the theory of disruptive innovation, but since then, journalists, researchers, and business practitioners have misinterpreted its concepts and misapplied its principles. Uber, for instance, has been highlighted as a shining star of disruption, but does it truly fit the definition? In “What Is Disruptive Innovation?” Christensen and his coauthors, Michael Raynor and Rory McDonald, provide a primer on the theory, explain how it has evolved, and correct common misperceptions. Their article will help managers to understand how firms innovate successfully and to predict which new models will succeed.

The next piece is an interview with a top business leader: “How Indra Nooyi Turned Design Thinking into Strategy.” HBR editor-in-chief Adi Ignatius asks the CEO of PepsiCo hard-hitting questions about how the company is using design to improve products and customer experiences. Moving beyond the basics of color choice on labels, Pepsi has examined how different segments of its customer base are responding to and using its products. Nooyi’s story is less of a tale of product design, however, and more about managing change in an organization while creating a platform that encourages customer interaction.

Identifying and understanding the needs of customers—this time, consumers in the developing world—is a key element of Amos Winter and Vijay Govindarajan’s McKinsey Award–winning article, “Engineering Reverse Innovations.” In 2009, Govindarajan first described the concept of “reverse innovation,” in which Western multinationals create products and services for emerging markets first and then export them to developed countries. This article explains how to escape the five traps companies often fall into while attempting to innovate for the developing world, drawing on the experiences of a team that built a successful low-priced wheelchair.

The cost of goods may be a major concern in poorer countries, but for companies in the United States, the amount spent on health care is even more challenging. “The Employer-Led Health Care Revolution,” by Patricia A. McDonald, Robert S. Mecklenburg, and Lindsay A. Martin, describes how Intel and a health care institution teamed up to transform the local health care system. By using its purchasing power and working directly with care providers, health plan administrators, insurers, and other employers, Intel was able to streamline health care operations, creating low-cost options for both employers and patients. In this article the authors identify the ingredients of this successful experiment, in the hope that other large employers can follow its example.

Negotiations are an everyday event in business, whether they’re about prices from a vendor or schedules for clients. But when they take place between people from different cultures, the dynamics become much more complex and miscommunication is more common. It’s all too easy to damage relationships irreversibly. Our next piece, “Getting to Sí, Ja, Oui, Hai, and Da by INSEAD professor Erin Meyer, provides five rules of thumb for negotiating across cultures. From building trust with your counterpart to understanding the subtle messages in emotional outbursts, Meyer’s advice illuminates how to strike the right balance and reach that final agreement—and make it stick.

Empathy—the art of understanding others’ needs and responding with compassion—is essential to motivating colleagues, calming upset customers, and designing innovative products. But frequent demands for empathy can exhaust your workers—and even cause them to make unethical decisions. In “The Limits of Empathy,” Adam Waytz of the Kellogg School of Management suggests simple strategies to encourage your team to empathize in a more healthy, sustainable way.

“Businesses don’t create value; people do” is a popular adage among CEOs—but often those same CEOs are dissatisfied with the human resource officers who manage the organization’s workforce. In “People Before Strategy: A New Role for the CHRO,” business advisers Ram Charan, Dominic Barton, and Dennis Carey argue for a new C-level leader whose sole responsibility is to think strategically about an organization’s talent—from identifying and creatively engaging high potentials to developing new performance metrics that better support business goals. This piece provides practical ideas on how to implement this change and ensure that people remain the ultimate source of competitive advantage.

The last article in this volume takes us back to the tension between man and machine. “Beyond Automation,” by Thomas H. Davenport and Julia Kirby, taps into the fear many white-collar employees feel as new technologies make more jobs obsolete. The authors assert that human employees will still be necessary in the future—but they’ll have to find ways to proactively partner with machines. The article identifies five ways humans can thrive at work in the future.

Despite all the amazing advances new digital tools have brought, people still matter. Businesses need individuals who can exercise intuition and judgment, who can see the gaps in data, who can assess new ideas. Most of all, they need leaders who can inspire employees and set them up for success. Competitive advantage lies not in the latest smart devices but in the way we effectively combine the potential of both technology and people.

—The Editors

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