For only the second time in the organization’s history, the Strategic Management Society has bestowed its educational impact award—this time, on WashU Olin’s Jackson Nickerson.
The society, established to “promote and encourage superior research and practice” in the field of strategic management, will formally present the award to Nickerson at its annual conference in Minneapolis this weekend. Nickerson is a non-resident senior fellow in government studies at the Brookings Institution and Olin’s Frahm Family Professor of Organization and Strategy.
“Jackson has made seminal contributions to management education for graduate students, executives, and government leaders,” the organization reported on its website. “He has been an inspiring and insightful teacher for more than 20 years. He has also authored more than 40 case studies, and he has been a true innovator in pedagogy, with some ground-breaking ideas about how to teach strategy to executives and government leaders.”
Lamar Pierce, professor of organization and strategy and associate dean for the Olin-Brookings Partnership, nominated Nickerson for the award, paying particular attention to his work as an instructor at Brookings and his influence on public sector leaders in Washington, DC.
“We estimate that, over the past decade, more than 15,000 students have attended onsite and open enrollment courses at Brookings in the programs that Jackson launched,” Pierce wrote. “I have no doubt that his impact on the federal government has been in the hundreds of millions of dollars.”
Pierce also commented on Nickerson’s influence and mentorship on junior faculty, noting that Nickerson “pulled me off of the academic scrap heap and gave me a job when no one else would.”
The ‘right’ questions
Daniel Elfenbein, associate professor of strategy at Olin, will introduce Nickerson at the ceremony and also nominated his colleague in a two-page letter, commenting that Nickerson’s curriculum and research “helped transform student outcomes” at the business school.
“I had several opportunities to be involved in courses taught by Dr. Nickerson as part of a custom-designed program for senior executives in Virginia,” said former student Sabrina C. Clark, director of VA Voluntary Service at the Veterans Administration in DC. “Jackson’s model for asking the ‘right’ questions to arrive at ‘right’ solutions is still powerfully resonant and relevant. Without a doubt, that single nugget changed the trajectory of my career.”
Another former student, Tim Keasling, deputy director of intelligence for the Army National Guard, recalled taking a class in which he and the professor had slightly different goals: “My goal was to pass the class,” Keasling recalled. “Professor Nickerson’s objective was for me to get my paper published. I passed the course and had my paper published!”
Using an analysis of thousands of words spoken by corporate
executives, Olin’s Jared Jennings and three other researchers have
created a new way to help lenders make better loan decisions.
Their study uses qualitative information to assess a business’
credit risk. “It’s all based on language,” Jennings, an associate professor of
accounting, said in an interview. “Our measure captures unique attributes
of credit risk that are not readily identified by existing measures.”
As it turns out, the words company officials use in quarterly earnings calls with investors and analysts can be, well, telling.
“Our results suggest that our measure improves the ability to predict future bankruptcies, future interest spreads and future credit rating downgrades,” Jennings said.
Evidence also suggests their measure more consistently captures a borrower’s credit risk than other methods.
They call their measure the “text-based credit score,” or “TCR Score.” The TCR Score could be particularly useful when other market-based measures of a firm’s credit risk aren’t available, Jennings said. “Our analyses suggest that only about 22% of firms with long-term debt are assigned credit ratings by leading rating agencies.”
Their working paper, “Measuring credit risk using
qualitative disclosure,” is under revision for the Review of Accounting Studies.
‘A tighter link’
Traditional credit risk measures mostly use numerical, or
Jennings and coresearchers set out to measure the spoken word. They used three machine-learning methods to create a measure of credit risk based on information disclosed in 132,060 conference call transcripts from 2003-2016.
Jennings, John Donovan of the University of Notre Dame, Kevin Koharki of Purdue University and Joshua Lee of the University of Georgia grouped into categories hundreds of top words, phrases and topics that their machine-learning methods identified.
One method identified language associated with liquidity,
debt and performance. The other two identified phrases associated with
performance, industry and accounting.
“By connecting the language identified by the
machine-learning methods to economic intuition, we are able to draw a tighter
link between the construct of credit risk and our proxy,” the researchers
The study adds to the growing body of research using
machine-learning methods to gather information from conference calls and 10-Ks
to explain accruals, future cash flows, fraud and other outcomes.
It also adds to research that examines other useful signals
extracted from conference calls, such as vocal and video cues, and tone. (See “When Upbeat Language Belies Downbeat Results,”
about research by Olin’s Xiumin Martin and Guofu Zhou.)
“We expect that practitioners and academics could use our
measure to supplement existing credit risk models to obtain a more
comprehensive and independent estimate of credit risk,” Jennings and
Yulia Nevskaya’s first foray into the World of Warcraft started one evening at 7 p.m. She created an avatar to represent her in the online video game and set off to explore another land.
“It’s like another Earth. It looked like paradise,” Nevskaya said. “I was completely immersed.”
The next thing she
knew, it was 4 a.m.
Nevskaya is an assistant professor of marketing at WashU Olin who studies, among other things, how consumers form habits. Her recent research used data that a bot gleaned from World of Warcraft, a massively popular multiplayer role-playing computer game set in a fantasy universe.
Blizzard Entertainment launched the game in 2004, and by 2011, it had more than 10 million subscribers worldwide. A character in World of Warcraft spends, on average, 12.5 hours per week playing the game, and more than 53 million people in the US played online games at least once a month in 2016.
The study emerges against a backdrop of societal concern over the overuse of online products and screens, including games and beyond.
Nevskaya and co-author Paulo Albuquerque of INSEAD focused their investigation on three main actions that the game developer has at its disposal to manage consumers’ use of the game: redesigning content and in-game reward schedules, sending notifications to gamers and imposing time limits on gameplay. In all, they analyzed a random sample of 402 gamers and nearly 15,000 gaming sessions.
They discovered this: When a firm changes its game’s rewards schedule and also limits how long gamers can play in a sitting, the firm can actually make more money—and people devote a smaller share of their time on gaming.
‘A win-win outcome’
“It’s a win-win outcome for both the firm and consumers,” Nevskaya said. “Those actions led to higher revenues and a smaller share of people’s time devoted to gaming, curbing potentially excessive use of the product.”
The researchers found
gamers’ slower consumption of content led to an increase in their long-term
engagement with the product, which is based on subscriptions. At the time of
the research, subscription fees were about 50 cents a day on a weekly or
monthly automated payment plan.
“What’s good for the consumer is not necessarily bad for the company,” Nevskaya said in an interview.
Notifications might reinforce habit
Nevskaya and Albuquerque built an empirical model that mimics how consumers make choices so they could learn about gamers’ decisions—such as when to start and stop playing. Their approach allowed them to study consumers’ response to product design, notifications and rewards over time, as well as to identify people who display signs of habitual gaming. According to the study, more than two-thirds of gamers exhibit signs of habitual gaming with, on average, 100.8 minutes in every 24-hour period.
The data were collected by a software program that logged on to the game server every 5 to 10 minutes. It recorded gamers’ avatars present on the server at the moment, as well as their current experience level and the content area in which they were playing.
Yes, they found that
altering in-game reward schedules and imposing time limits leads to shorter
gaming sessions and longer subscriptions. But they also learned that
notifications saying players should take a break don’t help.
Here’s the rub: Because a suggestion to take a break may arrive at a time when a gamer is not yet satiated with a gaming session and is in a “hot habit state,” as Nevskaya calls it, it also may motivate the gamer to return quickly to the game—and reinforce the gaming habit. Notifications lead to a pattern of shorter but more frequent sessions resulting in a significant increase in active gaming time, for a large group of gamers, the authors discovered.
“Our paper addresses the important question of how to curb excessive screen usage, which has been a frequent concern among public policymakers,” Nevskaya said.
Since 2014, the researchers note, the World Health Organization has been evaluating the public health implications of excessive use of the internet, computers, smartphones and other devices. Last year, the WHO included “gaming disorder” in the 11th edition of the International Classification of Diseases as a clinically recognizable and significant syndrome when “the pattern of gaming behavior is of such a nature and intensity that it results in marked distress or significant impairment in personal, family, social, educational or occupational functioning.”
With about $19.9
billion in sales in 2016 worldwide, the online video gaming industry especially
benefits from new technologies that allow almost-constant online connectivity.
Online and mobile games and social media platforms have spent significant
resources to increase product use through customized content, frequent
promotions and virtual rewards, the authors note.
“‘Gamification’ of products is a common practice, which makes understanding of how consumers react to game-like product features increasingly important,” they write.
“We’re not claiming that gaming is harmful. It can be a wonderful pastime,” Nevskaya said. “But it’s potentially harmful when enjoyed in excess.”
As a marketing expert,
she said she feels a responsibility to consumers.
“We can agree that marketing has become very sophisticated” in large part because of the massive troves of data now available to companies, she said. “Academics as well as responsible businesses should help consumers navigate the field safely.”
To lure customers, online retailer Alibaba often targeted existing customers when marketing resources were limited. Then along came a research project with a novel question: What if you pursued prospective customers, and then tracked their offline and online spending habits compared to frequent customers?
That’s how two Olin Business School researchers, along with a former fellow Olin faculty member and Alibaba officials, flipped the pop-up business model, and possibly more. The co-authors found that inviting potential customers via text message could increase buying with both a pop-up shop retailer and similar product vendors online.
In fact, that online shopping hangover — which they labeled a “spillover effect” — spread over far more retailers than the original participants and lasted as long as six weeks to three months after the initial text/pop-up lure.
“Pop-up stores have become an increasingly popular channel for online retailers to reach offline customers,” said co-author Dennis Zhang, assistant professor of operations and manufacturing management at Olin. “Pop-up stores are cheap and fast to build, which means that those internet-based retailers can test building them in many different locations and find the best strategies.”
All this increased spending starts with a pop-up shop and a cellphone invite.
Pop-up week of jeans sales
Co-authors Zhang and Lingxiu Dong, professor of operations and manufacturing management, worked on the huge project wiith former Olin colleague Hengchen Dai of UCLA and Alibaba’s Qian Wu, Lifan Guo and Xiaofei Liu. The group conducted the experiment tracking some 799,904 Alibaba-app customers during a pop-up week of jeans sales in October 2017 in Hangzhou, China, southwest of Shanghai. Next, they followed those customers’ habits online for six- and 12-week periods to follow.
They randomly split the customers into two sets living within 6.2 miles of the pop-up: those who received a text-message invite — making no mention of brands, coupons or participant retailers — and control-group members who didn’t get an invite.
Using a type of “Internet of Things” (IoT) technology and the customers’ Alibaba apps, they were able to track customers even when the customers bought nothing in the pop-up, which mostly was an online portal that allowed them to use a virtual fitting-room function to “try on” jeans on a screen. (Customers also found coupons once they arrived at the physical store.)
Building trust with platform itself
Some of the findings:
Foot traffic increased by 76.19% because of the text invites; using the tracking information to determine frequent/existing from infrequent/prospective customers, the researchers found that the text invites increased foot traffic among the former by 200% and the sought-after second group by 69%.
Invitees spent 39.51% more money on participating retailers online long after the original pop-up visit. They also spent 17.17% more on non-participating retailers, defined as those beyond the pop-up vendors and carrying at least 10 jeans products on their online stores.
The buzz continued for those non-participating retailers deep into the New Year, some 12 weeks after the October pop-up week. Their sales saw a 14.89% increase while participating retailers experienced no lingering effect, at least not one that was statistically significant either way.
“This suggests that customers are not only building trust with specific retailers on the platform but also with the platform itself.” Zhang said.
The researchers found that the text invites increased foot traffic among existing customers by 200% and the sought-after prospective customers group by 69%.
“The experiment offers insights into the relationship and dynamics of online and offline shopping behaviors, which can be very helpful for retailers to devise omni-channel strategies,” Dong said.
The co-authors surmised that the pop-up visits served as a “transient billboard”: The shop advertised the presence, and thereby increased awareness, of these retailers — existing, frequent customers were already under the tent, but the prospective customers could be won over a fiscal quarter at a time. The visits also provided “experiential learning” so customers could assess these retailers’ products.
They also realize this experiment centered on jeans, a product requiring a good fit, feel. Commodity products — entertainment devices, food, etc. — could be evaluated more easily “without touching or trying on.”
Then again, it revolved around the online retailer Alibaba rather than a line of physical stores/chains. The study suggests positives for both types via pop-ups and invites, though the next step in research is to study pop-up store effects for traditional, omni-channel retailers. Using data correctly, the co-authors said, many retailers could be able to create personalized shopping experiences for both offline and online sales.
“As we have shown, pop-up stores are very efficient in reaching offline customers and attracting them online. This will be a good strategy for retailers who face online growth pressure in certain areas.” Zhang said.