Should Everyone Be Allowed to Invest in Private Tech Companies?

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The SEC Chairman recently announced a policy initiative to enable the ordinary investors to invest in private companies. Currently, only  wealthy accredited investors are allowed to invest in private companies. His stated goal is enabling small investors to get access to alternative high-quality investments, such as in private tech companies like Uber and AirBnB. But in our view this policy, even if implemented, will not work as intended because the ordinary investors may not want to invest in private startups and private companies, especially digital ones, may not want ordinary investors.

It’s worth noting that the average investor does have alternative options to indirectly invest in digital startups. While most of the private equity companies are private, a few like Blackstone Group, KKR, Carlyle Group, and Apollo Global Management are traded on stock exchanges. Many public traded companies, such as Alphabet, Intel, and Apple are, in part,

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How One Nonprofit Is Expanding Health Care for the Uninsured

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America spends $3.3 trillion on health care, or more than $10,000 per person, which is twice as much as any other industrialized country. Yet nearly 30 million Americans, or 10% of the population, are uninsured. If the Affordable Care Act unravels in the near term, the number of insured could creep back up to 50 million, the level in 2009. These numbers exclude the millions more who are underinsured — people with high deductibles, high copays, and benefit caps that leave them very exposed if they fall seriously ill and are hospitalized.

Washington, DC invariably takes a financial approach to this problem. Politicians debate endlessly who should pay for what, and how much of the burden of health care should be borne by individuals and their families versus state governments or the federal government. There is deep division on these questions, and Washington has

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Why We Shouldn’t Worry About the Declining Number of Public Companies

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Elon Musk recently tweeted that he intends to take Tesla private, that is, to take Tesla off U.S. stock exchanges. In a parallel development, the number of companies listed on U.S. stock exchanges has declined by almost 50% from its peak in 1996, despite dramatic increase in aggregate market capitalization. Many conjectures have been offered to explain this controversial trend. We offer a new explanation: the rising role of digital firms in the U.S. economy.

The number of listed firms can decline because of three developments: 1) bankruptcy, failure, or closure of listed firms, 2) delisting of firms going private or acquired, and 3) decrease in number of initial public offerings (IPOs). All three factors have become more common over time, which we argue stems from firms’ increasing reliance on intangible and knowledge inputs in their business models.

Emerging digital firms compete with knowledge,

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Why the World Needs Doctors with These 3 Qualities

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Doctors are sometimes blamed for the ills of the U.S. health care system, but our five-year research project in India and the U.S. revealed the opposite. Almost every high-performing health care organization we studied was led by a medical professional (something that academic research has also found).

What we found, while collecting case studies for our book Reverse Innovation in Health Care, is that these doctors are not just medical experts; they also have other qualities that make them very effective leaders. We call these individuals “doctorpreneurs,” and believe they are key to fixing the problems of the health care industry.

Doctorpreneurs have three important qualities:

  1. Medical excellence: First and foremost, doctorpreneurs are excellent doctors, with first-rate education and training. In professional organizations (consulting firms, universities, law firms), only a person trained in the profession is usually acceptable as a leader, and health care is no exception.
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A Blueprint for Digital Companies’ Financial Reporting

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On July 25, 2018, Facebook lost market capitalization of more than $100 billion in just two hours of trading after it announced its quarterly performance, despite exceeding analysts’ earnings forecasts. What caused this slump? It failed to meet its revenue and subscriber growth targets. This example illustrates that investors consider information beyond just earnings as value-relevant. In a recent HBR article, we claimed that modern digital companies such as Uber, Facebook, and Alphabet play an increasingly important role in the economy, but their financial statements fail to capture company’s main value drivers. In a follow up HBR article, we interviewed several chief financial officers (CFOs) of leading technology companies and senior analysts of investment banks and distilled seven key insights from those discussions. Based on these insights, we now propose a new blueprint for financial reporting of digital companies.

Information on revenue and its drivers are,

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Task Shifting Could Help Lower Costs in U.S. Health Care

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If you ran a fancy restaurant, would you want the chef also to clean dishes and mop the floor? Of course not. You’d hire others to do these things and let the chef focus on producing delicious food. This simple idea — that one should match the skill level of the individual to the skill requirements of a task — has influenced how many businesses operate. That’s why lawyers are helped by paralegals, professors by teaching assistants, and chefs by sous chefs.

Task shifting of this kind moves routine tasks requiring lower skills away from high-skilled professionals. It must be done judiciously, because if a person is less qualified than a task requires, it will hurt quality and may add to costs if rework becomes necessary. On the other hand, if a person is overqualified for a task, it will increase cost and, counter-intuitively, may lower quality

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3 Entrepreneurs Who Made It Their Mission to Lower Health Care Costs

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There is a healthcare crisis in the U.S. which cries out for breakthrough healthcare delivery innovations that aim at significant cost reductions and wider coverage. In 2016, the U.S. spent a staggering $3.2 trillion, or almost 18% of its GDP, on health care — that’s $10,000 per person, twice as much as any other country in the industrialized world. Innovation has the power to ratchet down U.S. costs quite dramatically over the next decade. We know this because in India innovators have found ways to deliver high-quality care to everyone — rich, poor, and virtually penniless — and make money doing it.

It all starts, as the stories below show, with purpose-driven leadership: a determination to provide high-quality, ultra-affordable health care to all, regardless of ability to pay:

Saving Eyesight at a Fraction of the Cost
Born and raised in Trichy, India, Kuppuswamy

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Is This the Hospital That Will Finally Push the Expensive U.S. Health Care System to Innovate?

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There was a time when the American steel industry seemed invincible. The American automotive industry looked rock-solid. American consumer electronics industry seemed untouchable. In every one of these cases, global competition changed the game forever. Will the same happen to health care in the United States?

By almost any measure, American health care costs are out of control but the system refuses to change. What if you could provide excellent care at ultra-low prices at a location close to the U.S.? That’s what Narayana Health (NH) did in 2014 by opening a hospital in the Cayman Islands — Health City Cayman Islands (HCCI) — which was close to America but outside its regulatory ambit.

As we explain in Reverse Innovation in Health Care, Narayana Health’s founder, Dr. Devi Shetty, wanted to disrupt U.S. health care with this venture, set up in partnership with America’s largest

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Why We Need to Update Financial Reporting for the Digital Era

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The market caps of just four companies, Apple, Alphabet, Amazon, and Microsoft, now exceed $3 trillion. Their combined assets of $944 billion are an order of magnitude lower than the combined assets of $7,700 billion of the largest 3,177 companies in 1986, when the aggregate market capitalization reached $3 trillion for the first time. In our recent HBR article, we argued that financial statements fail to capture the value created by modern digital companies. Since then, we interviewed several chief financial officers (CFOs) of leading technology companies and senior analysts of investment banks who follow technology companies. We asked: (i) what makes the valuation of digital companies more challenging?; and (ii)  how can digital firms improve their financial reports to communicate sources of value creation in their businesses? We distilled seven key insights from those discussions.  Some of these ideas contradict traditional financial thinking

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3 Reasons Global Firms Should Keep Investing in India

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A major debate has unfolded around India’s economic prospects. On the one hand, you have Prime Minister Modi declaring at the 2018 World Economic Forum that India’s economy, already the fifth largest in the world, will double, to $5 trillion, by 2025. On the other hand, you have the media pointing out the country’s shallow middle class, growing inequality and joblessness, and a trail of multinationals frustrated by the lack of China-like success in India.

While India remains a challenging market, there are at least three reasons global firms cannot overlook the country without consequences.

India has seen growth in infrastructure spending. The country has been increasing its spending on infrastructure such as airports, cities, hotels, ports, roads, bridges, hospitals, and power plants. During the past three years, for instance, the newly formed Andhra Pradesh State has made massive investments in building out its infrastructure. India has expanded its solar

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Can Anyone Stop Amazon from Winning the Industrial Internet?

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Just the announcement that Jeff Bezos, Warren Buffett, and Jaime Dimon will be entering the health care space has sent shock waves for industry incumbents such as CVS, Cigna, and UnitedHealth. It also puts a fundamental question back on the agendas of CEOs in other industries: Will software eat the world, as Marc Andreessen famously quipped? Is this a warning shot that signals that other legacy industrial companies, such as Ford, Deere, and Rolls Royce are also at increased risk of being disrupted?

To start to answer that question, let’s tally up the score. There are three types of products today. Digital natives (Amazon, Google, Facebook, Microsoft, IBM) have gained competitive advantage in the first two, and the jury is still out on the third:

What U.S. CEOs Can Learn from GM’s India Failure

General Motors, once the world’s largest car maker, has decided to stop selling vehicles in India by the end of 2017, since it considers its India operation to be not profitable. The company re-entered a liberalizing India in 1994, after abandoning the country in 1954. Like its American compatriot Ford Motor Company, GM’s market share in India has always been in the single digits, but recently Ford has reported rising monthly sales of 36% in India. A few years ago cosmetics company Mary Kay also exited India, blaming local issues for its problems. While India now claims to attract more foreign direct investment than China, American companies have not been as visible as European and East Asian players. Is there something wrong with the India opportunity, or are American companies being unnecessarily restrained about the world’s fastest-growing major economy? We think it is the latter, and that it is correctable with
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Two Ways to Break into India’s Consumer Market

While India is the fastest growing major economy in the world today, some foreign companies are still struggling to enter the market there. However, recent developments have opened new doors for consumer product companies to expand their presence and sales in India, at much lower risks. Giant companies such as Coca Cola , L’Oréal  and PepsiCo have made large, profitable investments in India, but many others are absent or have withdrawn, including Henkel, Mary Kay and Sara Lee. In the meantime, both the number of middle class consumers and their spending per capita continues to rise, driving rapid growth of domestic Indian consumer companies from Amul (foods, dairy), to Dabur (personal care) to Godrej (home care and hair care) to Patanjali (foods, beverages, personal care) to Ghari (laundry detergent). To enter the Indian market with more profitability, multinational companies would benefit by creative use of the country’s supply
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How Amazon Adapted Its Business Model to India

When Amazon decided to enter the Indian e-commerce market, it was clear from the outset that something would have to give. That something was the very business model that had made Amazon an internet powerhouse in the U.S. debuted as an online bookstore in 1994. Founder Jeff Bezos’s initial business model was fairly simple: Source a single product type from wholesalers and publishers and sell it directly to consumers on the then fledgling internet. Thanks to Bezos’s vision and a highly successful, user-friendly website, by 1997 was the first online retailer to boast one million customers. As the company added more titles and expanded its product line, it developed an ecosystem rooted in the wholesale purchase of goods; huge, strategically located fulfillment centers; and contracts with national and regional carriers who shipped its products throughout the U.S. and to other countries. A decade into the
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What Innovative Companies Can Learn from Keurig’s Highs and Lows

Leading an organization can sometimes feel like plate spinning: racing from pole to pole, trying to keep each plate aloft and whirling. To lead (and to spin), you have to achieve and maintain balance. Within an enterprise, this means balancing the demands of current operations while laying the groundwork for future opportunities, as well as reviewing past activities and policies that may be holding back your organization. Too often, leaders focus only on current operations because it is the performance engine that generates the funds necessary to stay in play. But an organization’s success may be relatively fleeting if its leaders don’t simultaneously attend to the future and the past. It’s a balancing act that requires a unique mindset, a particular set of skills and tools, and a specific strategy. Continuously reinventing your organization doesn’t mean you have to start from scratch with each new innovation. Exploring new opportunities is
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How Disney Found Its Way Back to Creative Success

Since every industry changes in time, the key to success is adapting to those changes – hence, strategy is innovation. In this, Disney and Warner Brothers provide an instructive study in contrasts. When Robert Iger, Disney chair and CEO, purchased Pixar for $7.4 billion ten years ago, some in the industry thought he was crazy. The Disney empire was rooted in animation, and its classic characters — Mickey and Minnie Mouse, Donald Duck, Goofy, the Disney princesses — are some of the best-known, and most beloved characters in the world. Yet Disney Animation needed some breakthrough ideas. Beauty and the Beast, Aladdin, and The Lion King were good draws in the 1990s, but things had lagged since the start of the new millennium, while Pixar’s Monsters, Inc., The Incredibles, and Finding Nemo were all the rage. In fact, Iger reportedly noticed that Pixar’s hugely popular Toy Story characters
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To Win the Civil War, Lincoln Had to Change His Leadership

In our work with leaders, we see that great ones grow themselves and their organizations by deliberately working on three areas:
  1. They wisely manage the present, anchoring in purpose and values.
  2. They selectively forget the past, letting go of old values, beliefs, and behaviors that no longer serve them or their organizations.
  3. They purposefully create the future by adopting new aspirations, values, beliefs, and behaviors that enable a step-change in their leadership.
Most leaders are good at the first and third areas. What many leaders may not recognize is that we often need to give something up — a belief, attitude or behavior — in order to achieve a new level of performance. How is this done effectively? We can look to one of the most celebrated leaders of U.S. history for an example. He was a leader who rallied people around vision, a vision
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From Accountant to Yogi: Making a Radical Career Change

At some point, almost all of us will experience a period of radical professional change. Some of us will seek it out; for others it will feel like an unwelcome intrusion into otherwise stable careers. Either way, we have choices about how we respond to it when it comes. We recently caught up with yoga entrepreneur Leah Zaccaria, who put herself through the fire of change to completely reinvent herself. In her quest to live a life of purpose, the Seattle-based yogi shed her high-paying accounting job, her husband, and her home. In the process, she built a radically new life and career. Since then, she has founded two yoga studios, met a new life partner, and formed a new community of people. Even if your personal reinvention is less drastic, we think there are lessons from her experience that apply.

Listen to the whispers

Where do the seeds of change come
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