RSM393 Course Pack PDF

1.
Rotman School of Management
STRATEGIC CASE ANALYSIS
Rotman Commerce
RSM393H1 - L0201
STRATEGIC CASE ANALYSIS RSM393H1 - L0201
Rotman Commerce Rotman School of Management
Table of Contents
What Is a Case?...............................................................................................................................5
Analyzing a Case............................................................................................................................13
Persuasion, Argument, and the Case Method................................................................................33
Arcenciel: Bottle Caps for Wheelchairs...........................................................................................41
Telenor Group: Developing a New Business Model.......................................................................51
CampusHash: Evolving Business Model of an Entrepreneurial Venture........................................59
Rocky Mountain Soap Company: The Move Toward Sustainable Packaging................................69
Bed Bath & Beyond: Is Online the Solution?..................................................................................81
MoviePass: Disruption Through Subscription.................................................................................95

2.
HAR VA R D
B U S I N E SS
S C H O O L
For use only in the course STRATEGIC CASE ANALYSIS at Rotman School of Management taught by Rotman Commerce from January 01, 2020 to April 30, 2020.
P R E SS
What Is a Case?
Use outside these parameters is a copyright violation.

E xc e r p t e d fro m
The Case Study Handbook:

How to Read, Discuss, and Write Persuasively About Cases
By
William Ellet
Harvard Business School Press

Boston, Massachusetts
ISBN-13: 978-1-4221-2448-2
2448BC
5
Copyright 2007 Harvard Business School Publishing Corporation
All rights reserved
Printed in the United States of America
This chapter was originally published as chapter 2 of The Case Study Handbook:
How to Read, Discuss, and Write Persuasively About Cases,
copyright 2007 Harvard Business School Publishing Corporation.

No part of this publication may be reproduced, stored in or introduced into a retrieval system,
or transmitted, in any form, or by any means (electronic, mechanical, photocopying,
recording, or otherwise), without the prior permission of the publisher. Requests for
permission should be directed to permissions@hbsp.harvard.edu, or mailed to Permissions,
Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163.
You can purchase Harvard Business School Press books at booksellers worldwide.
You can order Harvard Business School Press books and book chapters online at
www.HBSPress.org, or by calling 888-500-1016 or, outside the U.S. and Canada, 617-783-7410.
6
CHAPTER 2
W H AT I S A C A SE?
I n a case method classroom, both the instructor and student must be

active in different ways. Each is dependent on the other to bring about
teaching and learning. Instructors are experts, but they rarely deliver their
expertise directly. The art of a case method instructor is to ask the right
question at the right time, provide feedback on answers, and sustain a dis-
cussion that opens up meanings of the case.

To illustrate the pattern of question and response, here is a portion of a
simulated case discussion of the Harvard Business School case “Malaysia in
the 1990s (A)”:
Instructor: What do you think the prime minister should do? What
should he say at the United Nations?
Student A: He shouldn’t give in to the environmentalists.The country
should be free to do what it wants inside its borders.That’s nobody
else’s business.The environmentalists should worry about problems in
their own countries.
Instructor: So he should go it alone, then? Say you were interested in
putting your money into the country.Which would you prefer: a gov-
ernment open to discussion and negotiation about issues, or one that
takes a hard line with outsiders?
Student A: I guess I would want the government to be willing to talk.
But I don’t think this is an issue that needs to be discussed.
Instructor: You said you think environmental groups should only con-
cern themselves with issues in their home countries?
Student A: Yes.
Instructor: Does Malaysia have a strong environmental movement?
Student A: I . . . I don’t know.The case doesn’t say.
Instructor: Let’s assume it doesn’t. Does an environmental point of view
have any utility for a developing nation? Are there any results that could
damage the country’s development, or is it just a matter of saving, say, a
7
2 THE CASE STUDY HANDBOOK
species of frog that Western scientists have not yet had a chance to
study?
Student A: I think the country can’t afford to have Western standards
for environmental protection.
Student B: The case does mention some negative consequences for
Malaysia, things like erosion, floods, and some types of plants that
might be destroyed which could be developed for medicines.
Instructor: OK. Can deforestation hurt the country’s long-term
development?
Student C: It could. Harvesting trees at a rate that isn’t sustainable
means the timber harvest will get smaller and smaller. Eventually, the
industry and the revenue from it will disappear.

Instructor: Is this a big problem, a small problem, or something in between?
Student C: I think it’s mostly in one area.
Instructor: Is there anything in the case that tells us the scope of the
problem? Has anyone got numbers that help define it?
Student C: I don’t have specific numbers. I know timber is going down
as a percentage of exports . . .
Students provide most of the content of a case discussion.They are indis-
pensable to the creation of knowledge. In fact, if they don’t come to class
well prepared, the case method will fail because the people responsible for
making meaning from the case are not equipped to do it. In a lecture-, or
expert-based, teaching method, facts tend to be configured in a way that
yields a single interpretation, the “truth.” Case discussions are replete with
facts and information, but they aren’t shaped into a single truth.
The logic of the method sounds fine, even inspirational. The reality of
the experience can be baffling. Case method instructors usually don’t pro-
vide a packaged summation or give a personal opinion of students’ conclu-
sions and plans for action. They may teach concepts for analyzing cases
studied in the class.What they don’t do is announce definitive conclusions
or right answers, although they may discriminate between more and less
plausible solutions. Students enter and leave the classroom responsible for
the outcomes of the discussion.
For students, this can be a monumental shift in the educational experi-
ence, from the comfort of authority and the officially sanctioned truth to
the hard work of personal responsibility and the unease of ambiguity and
multiple meanings.
8
WHAT IS A CASE? 3
WHAT A C A SE IS, WHAT IT DOES,
WHAT IT DOESN’ T DO
A business case imitates or simulates a real situation. Cases are verbal represen-
tations of reality that put the reader in the role of a participant in the situation.
The unit of analysis in cases varies enormously, from a single individual or
organization to an entire nation or the world. Cases can range from one page
to fifty or more. But they all have a common purpose: to represent reality,
to convey a situation with all its cross currents and rough edges—including
irrelevancies, sideshows, misconceptions, and little information or an over-
whelming amount of it.
Most educational texts represent the real as logical and coherent. But real
business situations are fluid and inevitably involve uncertainty; they don’t
present selected and sorted information. Cases don’t either. Real situations

consist of some clarity, too much or too little information, and lots of con-
tingency—and so do cases.They provide business students with the equiv-
alent of laboratories used for educating scientists and doctors. To fulfill its
role, a case must have certain characteristics.As an analog of reality, a substi-
tute for the direct experience of a business situation, a case must have these
three characteristics:
• A significant business issue or issues
• Sufficient information on which to base conclusions
• No stated conclusions
A case without a significant issue has no educational value. You can
therefore assume that every case deals with something important (e.g., a
pricing dilemma, debt-equity trade-offs, a major problem in a plant).A case
must have an adequate fact base to make possible reasonable conclusions,
but it doesn’t state any conclusions.
Many cases have these complicating properties:
• Information that includes “noise”—irrelevancies, dead ends, and
false, biased, or limited testimony by characters in the case
• Unstated information that must be inferred from the information
that is stated
• A nonlinear structure in which related evidence is scattered through-
out the text and is often disguised or left to inference
A well-written case must have these characteristics in order to simulate
reality.As a reader of cases, therefore, you must be able to:
• Construct conclusions from the information in the text
9
• Filter out irrelevant or low-value portions of the text
• Furnish missing information through inferences
• Associate evidence from different parts of the case and integrate it
into a conclusion
Cases may put statements that sound conclusive in the mouths of case
characters, but every case character is subject to skepticism based on his or
her self-interest and limited point of view. Many cases have elaborate
padding in the text and exhibits that serve as noise to distract the reader and
make it harder to distinguish useful information. Noise is a characteristic of
real situations.Today, we are awash in information, much of it of little value.
Cases provide a hard but invaluable education in filtering information
according to its relevance and value. Some of the best cases, however, use

the opposite strategy.They offer what seems to be a hopelessly inadequate
fact base. They mimic situations in which information is scarce, placing a
premium on the reader’s ability to make inferences. Every case, whether it
has a large amount of information or very little, requires the reader to make
inferences.This can be the most difficult transition from textbooks and lec-
tures. If memorization is the primary skill of the lecture model, inference is
the primary skill of the case model.
Cases look like they have a linear structure.They can have an introduc-
tion and a conclusion, a sequence of headings and subheadings, and a series
of exhibits that look like those in textbooks.The introduction and conclu-
sion can provide invaluable information, as we shall see, but they don’t
always. Headings and subheadings seem to divide the case into sections
with the logic of a textbook or a Wall Street Journal article. Business cases
imitate the structure of linear documents such as textbooks, but they are
nonlinear, meaning the content is not presented in the most logical way.
Along with inferential information, this characteristic is probably the great-
est challenge for readers. Inexperienced students read cases assuming that
the text has a logical order.They are puzzled when the content follows an
organization that isn’t completely illogical but is still confusing. They can
then steel themselves to try harder, to spend more time on cases, to take
better notes. Instead, they should question whether the way they read
matches the nature of the text.
TAMING AN INDETERMINATE TEXT

Cases require active readers.The texts most of us regularly read encourage
us to be passive readers. The journalism of newspapers, magazines, televi-
10
WHAT IS A CASE? 5
sion, and the Internet, whether reporting or opinion, tells the reader what it
means. If it doesn’t, it has failed. A newspaper article, for example, states its
subject clearly, often in the first paragraph, and carefully declares its main
points, which are usually explained and amplified through specific exam-
ples. For instance, a recent front-page article in a U.S. newspaper began
with an anecdote about a doctor who discovered that a pharmaceutical
company representative knew a great deal about which drugs he was pre-
scribing. Here is the third paragraph of the story:
Drug makers, in a level of detail unknown to many physicians, are spending
millions of dollars to develop secret reports about individual doctors and their
patients, according to consultants to the drug companies.1
The paragraph succinctly states the overall point of the story. The bal-
ance of the text provides examples of the data collection and explores the

reasons why the companies want to collect it.
In a textbook, an expert delivers the truth, as he or she sees it, to readers.
A history text on ancient Rome asks this “fundamental question” on page 1:
How was it possible, on Italian soil and on the basis of a league presided over
by one of its members, to create a single power with a strong army and a rich
treasury, whereas Greece, in spite of her creative genius, never succeeded in any
of her attempts to secure the same result? In other words: why did Rome, just
such a city-state as Athens or Sparta, succeed in solving the puzzle which had
baffled both Athens and Sparta and even the Greek monarchies founded upon
military strength by the successors of Alexander?2
The rest of the text—more than three hundred pages—seeks to answer this
question.
The Harvard Business School case “Malaysia in the 1990s (A)” begins
with the prime minister of the country, Mahathir bin Mohamad, about to
address the United Nations General Assembly and have meetings with
potential investors. Western environmentalists have been criticizing his
country for deforestation. The prime minister must consider his country’s
development strategy in relation to internal and external interests. At the
end of the case, he is left wondering whether he should accept his speech-
writers’ confrontational statements dismissing the environmentalists and
their criticism.The rest of the case doesn’t report only those facts relevant
to the controversy or offer the views and reasoning of all the parties to the
dispute and evaluate which one has the most legitimate position. Com-
pared with a news story or textbook, the case’s opening and closing sections
seem to have little to do with the text in between.
11
THREE WAYS TO RE AD
There are at least three possible approaches to reading a case:
• Receive it.
• Find it.
• Make it.
The first approach,“Receive it,” fits a text that states both a subject and
its significance, as a news story or an online product review does.The sec-
ond,“Find it,” is adapted to a text that has keys or clues that the reader rec-
ognizes and puts together for a solution.A mystery novel is a good example.
(So, oddly enough, are highly quantitative cases, which give clues that help
identify the correct formulas or equations that will fill a need stated or

implied in a case.) The final approach,“Make it,” is appropriate for cases.
In “Malaysia,” the beginning and end of the case are clear enough. We
can assume that the criticism of Western environmental groups has some
basis—which is not say it is true as stated—and it could complicate the
government’s development strategy. But when we read the case, the infor-
mation varies considerably in its apparent relevance to the issue raised at the
beginning. A reading of the case induces an uneasy feeling that although
the content bears on the issue, how it does is unclear. Indeed, the most basic
matters of fact are not clearly stated or are stated in multiple ways. If this
were a news story, the editor would send it back to the reporter for a com-
plete rewrite.
By design, a case doesn’t tell you what it means. On first reading, it can
seem to be a whole that is less than the sum of its parts.Therefore, you can’t
sit back and let the text do the work.You have to read a case actively and
construct your own meaning.
NOTES
1. Liz Kowalczyk, “Drug Companies’ Secret Reports Outrage Doctors,” Boston Globe,
May 25, 2003, section A.
2. Michael Ivanovich Rostovtzeff, Rome (New York: Oxford University Press, 1960), 1.
12
3.
HAR VA R D
B U S I N E SS
S C H O O L
P R E SS
How to Analyze a Case

Exc e r p t e d fro m

By
William Ellet

ISBN-13: 978-1-4221-2449-9
2449BC
13
All rights reserved

14
CHAPTER 3
HO W TO A NA LYZE A C A SE
A case is a text that refuses to explain itself. How do you construct a

meaning for it?
Start by recognizing some contextual factors that help limit and narrow
the analysis. Cases are usually studied in a course.A marketing case requires
you to think as a marketer, not a strategist or manufacturing manager.
Courses are often divided into different modules or themes defined by cer-

tain types of situations and, often, concepts, theories, and practices appro-
priate for these situations.You can expect to encounter the themes in the
cases that are part of the modules and opportunities to put to work the ana-
lytical tools and best practices you have learned. Past case discussions pro-
vide a foundation for thinking about a new case, and study questions can
call attention to important issues.You should make use of all these contex-
tual factors, but they don’t amount to a method for analyzing a case.
STARTING POINT FOR UNDERSTANDING

The case method is heuristic—a term for self-guided learning that employs
analysis to help draw conclusions about a situation. Analysis is derived from
a Greek word meaning, “a dissolving.” In English, analysis has two closely
related definitions: to break something up into its constituent parts; and to
study the relationships of the parts to the whole. To analyze a case, you
therefore need ways of identifying and understanding important aspects of
a situation and what they mean in relation to the overall situation.
Each business discipline has its own theories, frameworks, processes and
practices, and quantitative tools.All of them are adapted to help understand
specific types of situations. Michael Porter’s concepts are productive when
investigating competitive advantage—but they aren’t very helpful for de-
ciding whether to launch a product at a particular price or choosing the
best method to finance the growth of a business. Porter’s five forces can
describe and explain the industry context in which a firm operates.1
No one would expect Porter’s framework to guide a product launch
decision. Specialized methods are fruitful because they’re tailored to fit
well-defined purposes. They’re often complex, though, and hard to apply,
especially for people who are just learning how to use them.
15
2 ANALYSIS
This book teaches an approach to cases that complements business con-
cepts and theories. Its purpose is to provide a starting point for analysis that
aids the use of theories and frameworks and quantitative formulas, all of
which are indispensable for reaching conclusions about a case and building an
argument for those conclusions.The case situation approach identifies fea-
tures of a case that can be helpful to its analysis and encourages active reading.
THINKING, NOT RE ADING, IS KEY

Students new to the case method usually believe the most reliable way to
understand a case is to read it from start to finish and then reread it as many
times as necessary. (That’s why many business school students think speed-
reading courses can help them.) They rush into a case, highlighter in hand,
reading as if the case were a textbook chapter. For case analysis you need to

know when to read fast and when to read slowly. You should also spend
more time thinking about a case than reading it.
When you begin work on a new case, you don’t know what to look for.
That is the major dilemma that confronts everyone who reads a case. In an
active approach to a case, you start thinking before you read the case. And as
you start reading it, you ask questions about the content. Then you seek
answers in the case itself.As you find partial or full answers, you think about
how they relate to each other and to the big picture of the case.You don’t
make knowledge by reading. Reading is never the primary resource of case
analysis. Reading is simply an instrument directed by the thought process
that makes meaning from the text.
TYPES OF C A SE SITUATIONS
Four types of situations occur repeatedly in cases:
• Problems
• Decisions
• Evaluations
• Rules
People sometimes react indignantly to this classification.They insist that
there are a multitude of situations portrayed in cases, and it’s misleading to
say they’re reducible to four. The four are not the only situations found in
cases, but many case situations do belong in one of the four categories, and
when they do, an awareness of which one can help organize analysis.This
approach isn’t the only correct way—it is one way.Try it and see if it helps.
16
HOW TO ANALYZE A CASE 3
Feel free to integrate pieces of it with your own way of dealing with cases.
The greatest value of the case situation approach may be that it causes you
to think about how you think about case studies.
Problems
The word problem has many meanings.The meaning can be vague, referring
to something that’s difficult or troubling.The definition of problem as a case
situation, however, is quite specific. It is a situation in which (1) there is a
significant outcome or performance, and (2) there is no explicit explanation
of the outcome or performance.To put it simply, a problem is a situation in
which something important has happened, but we don’t know why it did.
Cases provide many examples of problems defined this way. In one, a
well-trained, well-intentioned manager has tried to introduce a worthwhile

change in the sales strategy of an organization—a change supported by a
detailed, data-driven analysis everyone admits is a breakthrough—and has
failed to get any of the sales staff to go along. In another, an accounting
manager of a manufacturer notices that two good retail customers suddenly
have accounts payable that are large and overdue enough to be worrisome.
He has no idea why the two firms would fall so far behind in their payments.
Both of these cases describe situations that involve negative outcomes.
The causes of these sorts of outcomes are important to know for a practical
reason: the knowledge can help improve the situation. The change effort
may be self-destructive because it has weaknesses that are not apparent, or
the manager may be good at many things but is a poor change agent.The
manufacturer’s retail customers may have large accounts payable because
they have sloppy internal controls—or they may both be on the verge of
bankruptcy.These possibilities illustrate why accurate causal analysis is vital.
A conceptually flawed change is addressed very differently from an individ-
ual who isn’t well suited to lead change. If both situations exist, the correc-
tive action is that much more complex. Retail operations that need to clean
up their accounting processes might require the manufacturer to engage in
negotiations over a period of time, but two firms with bad debts that might
go bankrupt require the supplier’s immediate attention.
Success can also be a problem in the special meaning used here.Take the
case of a company that specializes in outdoor advertising. It operates in
three different market segments, but the case doesn’t tell you which is the
most profitable, much less why.Another case describes the development of a
country over a period of thirty years or so; after severe political and social up-
heaval, the country slowly recovers and exceeds the performance of most
countries in the region. But the case doesn’t state how much more successful
17
4 ANALYSIS
the country has been relative to its neighbors, and while it provides a great
deal of data, both economic and demographic, it doesn’t enumerate the rea-
sons for the country’s revival.
Problem analysis begins with a definition of the problem. That seems
obvious, yet many cases don’t state a problem. So first, you need to realize a
problem exists and then define it for yourself. Next, you work out an expla-
nation of the problem by linking the outcome or performance to its root
causes—this is the main work of problem analysis. To carry it out, you’ll
need relevant tools, the specialized methods of business disciplines such as
organizational behavior or operations management.
Decisions
Many cases are organized around an explicit decision. The second para-

graph of “General Motors: Packard Electric Division” (reproduced in this
book) begins with this sentence: “The Product, Process, and Reliability
(PPR) committee, which had the final responsibility for the new product
development process, had asked [David] Schramm for his analysis and rec-
ommendation as to whether Packard Electric should commit to the RIM
grommet for a 1992 model year car.” Like many cases, this one complicates
that decision immediately: Schramm must make up his mind within a week,
and the product development people and manufacturing disagree over which
way to go.
The existence of an explicit decision is an important distinction, because
nearly all business cases involve decisions. In many of these cases, however,
the decisions are implicit and dependent on another situation. Let’s take a
case described earlier that involves a problem: the outdoor advertising com-
pany. The case implies a decision: What is the best strategy the company
should pursue in the future? This decision can only be made after the com-
pany’s current strategy and how well it works are analyzed.
The decisions featured in cases vary greatly in scope, consequence, and
available data.An executive must decide whether to launch a product, move
a plant, pursue a merger, or provide financing for a planned expansion—or
the president of a country must decide whether to sign a controversial trade
agreement. Regardless of the dimensions of a decision, analyzing it requires
the following:
• Decision options
• Decision criteria
• Relevant evidence
18
Identifying decision options is often easy because the case tells you what
they are. As soon as you encounter a stated decision, you should look for a
statement of the alternatives. If they aren’t stated, then the first goal of
analysis is to come up with plausible decision options.
The most important part of a decision analysis is determining the crite-
ria. A rational decision can’t be made without appropriate criteria. A deci-
sion case isn’t likely to state criteria—they have to be derived through
careful study of the specifics of the case, with the help of specialized methods.
The criteria are used to develop evidence to complete a decision analysis.
The goal is to determine the decision that creates the best fit between the
available evidence and the criteria. In the General Motors case, a possible
decision criteria is value to the customer.The reader needs to find evidence
indicating which option delivers the greatest value to the customer. (That
doesn’t settle the matter, though, because there are other criteria.)

One other characteristic of decision analysis deserves mention here.
There is no objectively correct decision.The standard for a good decision is
the one that creates more benefits than the alternatives and has fewer or less
severe downsides.
Evaluations
Evaluations express a judgment about the worth, value, or effectiveness of a
performance, act, or outcome.The unit of analysis of an evaluation can be
an individual, a group, a department, an entire organization, a country, or a
global region. An annual performance evaluation of an employee is a real-
world example. So is a new CEO evaluating the performance of the com-
pany she is now heading. An evaluation can also involve the assessment of
an act, such as a decision that has already been taken. Here is an example:
From the perspective of current EU members, do you agree with their decision
to enlarge the Union by ten new members?
Finally, an outcome can be the subject of an assessment.The competitive
position of a company, for instance, is the outcome of numerous decisions
and performances as well as contingencies such as macroeconomic conditions.
Like decision analysis, evaluation requires appropriate criteria. Without
them, there are no standards for assessing worth, value, or effectiveness.As in
decision analysis, evaluative criteria are inferred from the particulars of a sit-
uation with help from specialized methods. Evaluating a company’s finan-
cial performance over a five-year period can be undertaken with a long list
of financial formulas, but the circumstances portrayed in the case come into
play as well.The numbers may show that a company has a steadily declining
19
6 ANALYSIS
performance over the period, but it still may be doing well because the
national economy is slumping and the company is actually doing better
than its competitors.
An overall evaluation expresses the best fit between the evidence and the
criteria. In the example just given, measured against purely financial crite-
ria, the company is doing poorly.Yet, the evidence pertaining to macroeco-
nomic and competitive criteria alters the evaluation: in a tough market, the
company is actually performing better than its peers.
Another requirement of evaluation is that it include both positive and
negative sides.A leader has strengths and weaknesses, and both are included
in an accurate evaluation. Moreover, there may be aspects of the leader’s
performance that are ambiguous—he has delegated power widely, but it is
too early to tell whether the managers below him can handle the power.
And this individual’s performance as a leader could be substantially affected

by factors outside his control—corporate headquarters has intervened in
his promotion decisions and insisted that certain favorites be elevated even
though they aren’t the best-qualified candidates.
Rules
Quantitative methods can provide critical information about business situ-
ations. For example, say there is a need to compare the value of a company
when a specific condition exists—a partnership with another company—
and when it doesn’t exist.The way to calculate future cash values—one that
experts and experience support as reasonably accurate—is net present
value.An NPV calculation is done according to a formula. Mathematically,
there is a right way to perform the calculation; any other way provides an
inaccurate result.
For rules analysis, you need to know:
• The type of information needed in a situation
• The appropriate rule to furnish that information
• The correct way to apply the rule
• The data necessary to execute the rule
Rules analysis exists in virtually every area of business. A breakeven cal-
culation is a rule used in marketing. In manufacturing, quantitative meth-
ods are used for process analysis, and accounting and finance consist
primarily of rules.The scope of rules is very narrow. For the most part, they
are useful only in specific sets of circumstances, but in those circumstances
are very productive.There is a correct way to execute or perform the rule,
20
and the output is of one type. A well-defined set of rules is needed to ana-
lyze a company’s liquidity.Those rules are the most useful in the situation,
because they are designed to be. Each calculation specified by a rule has a
procedure that must be followed. If it isn’t, the result is a meaningless num-
ber. Each calculation yields a precise output of a prescribed type (e.g., a per-
centage less than or equal to zero).
Qualitative methods are different from rules.There are often many alter-
native methods for obtaining the same or similar information. To analyze
the quality of leadership in an organization or its competitive strategy, there
are a large number of methods to choose from. There is no prescribed
method that provides correct information about competitive advantage. In
marketing, two different methods can be applied to the same situation, can
produce very different results, and can both be useful—or useless.A second
difference between rules and qualitative methods is how they are executed.

There is a correct way to execute a rule such as the formula for net present
value; there is no objectively correct way to execute qualitative methods for
analyzing competition.
That is not to say that rules analysis lacks uncertainties and ambiguities.
Any calculation about the future involves uncertainty. This uncertainty is
built into formulas through assumptions, and assumptions involve judg-
ment, not objective truth. Settling on a growth or inflation rate over a cer-
tain period of time is speculative. The key is the reasoning behind the
choice. Central bankers can be wrong about inflation and growth, and so
can the rest of us. Assumptions need to have a reasonable basis, but reason-
able people can disagree about them. But note that the argument is about
assumptions, not about the rules themselves. (Experts do argue about the
fitness of rules and make changes to them, but after they do, everyone uses
the changed rule and executes it the same way.)
Sometimes, though, an idiosyncratic assumption has no material effect
on the result of a calculation. In the earlier valuation example, you might
assume a growth rate that is too optimistic, but if the rate is the same for the
calculation with and without the partnership, it should have no effect on
the comparison of the end values.
The results of rules analysis frequently provoke sharp differences of opin-
ion. What two people infer from the same numerical results can diverge.
Economists are famous for looking at the same set of numbers and coming
to vastly different conclusions about them, even though they all agree on
the formulas and data that have produced the numbers.The same is true in
companies. One executive can read financial numbers as confirmation that
a strategy is working, while another can read them as a warning that disas-
ter looms. In short, numbers don’t explain what they mean, and they don’t
make decisions for you.
21
8 ANALYSIS
However, the interpretation of the output of rules is distinct from the
rules themselves. If the right rule is applied and correctly performed, and the
rule doesn’t involve a controversial assumption (like the predicted growth rate
of GNP), everyone will come up with exactly the same result. If a qualita-
tive method relevant to a situation is applied to the same set of facts in a way
consistent with the generally understood meaning of its concepts, everyone
will not necessarily come up with the same result.That is the fundamental
difference between rules, as defined here, and qualitative methods.
Rules aren’t pursued further in this book. Learning rules analysis means
learning a certain category of rules—valuation, for instance—and when
and how to use them.That learning is the province of accounting, finance,
tax, and other areas that are intensely rule governed. However, it may be
helpful to remember that when rules depend upon assumptions, the values
chosen for them require an argument. Moreover, the information rules provide

has great importance for the analysis of problems, decisions, and evalua-
tions.Accounting rules can diagnose the financial health of an organization.
Macroeconomics is invaluable in evaluating a nation’s development strat-
egy. Financial rules are indispensable to a decision about whether to sell a
company at a given time and price. Rules are a large and important subset
of the specialized methods necessary to understand case situations.
C A SE ANALYSIS A S A PROCESS
The way you analyze a case differs from the way anyone else does.There is
a difference, though, between personal study habits and a process for ana-
lyzing a case.The latter involves more than habits and practices. It concerns
how you think about a case. The intention of this section is to suggest a
process that has helped case method students become more efficient and
productive.This process is designed for case discussion preparation, but it is
easily adapted to a process for writing a case essay. (However, the way a case
is analyzed for an essay is more prescriptive, since an essay must have certain
elements. Chapters 10 through 12 will explain these elements.)
The key to the process is active reading.Active reading is interrogative and
purposeful. You ask questions about the case and seek answers. Questions
give a purpose for reading; they direct and focus study on important aspects
of a situation.The moment you sense that you are reading without purpose,
stop and regroup. It may be a good time to step away and stretch, do some
yoga, or walk. Active reading is also iterative, meaning you make multiple
passes through a case.With each iteration, the purpose of reading changes:
you are looking for new information or looking at old information in a
new way. Three concepts contribute to active reading: a goal, a point of
view, and a hypothesis.
22
Goal of Analysis
At first it may seem obvious.What other goal can there be for analyzing a
case than to understand it? The problem is that “understanding” is too
vague.Another way to think about the goal is, How do you know when to
conclude the study of a case? This is an important question. If you don’t
have a concrete limit, you can drift along for hours, much of it taken up by
distraction and undirected effort. Here is a more concrete goal: you are
familiar with the information in the case, you have come to a conclusion
about the main issue, you have evidence showing why your conclusion is
reasonable, and you have thought about other possible conclusions and why
yours is preferable to them.
This substantive goal can be combined with a time limit. Allocate a set
amount of time—two hours, for example—for each case.At the end of the

period, stop and settle for whatever you know about the case.This is a very
good way to put constructive pressure on yourself to make the most of the
time.
Point of View
To anchor analysis, take advantage of what’s already in the case. Adopt the
point of view of the protagonist—the main character. Put yourself in her
shoes. Her dilemma should be your dilemma. If it’s a decision, set a recom-
mended decision as your goal. When you adopt the persona of the main
character, don’t assume that you’re dealing with a cardboard cutout, a dra-
matic veneer. Consider the character’s strengths, responsibilities, and blind
spots. By all means, too, be sensitive to the dilemmas characters find them-
selves in. Often, a good question to ask yourself is,Why is the person in this
dilemma?
Hypothesis
One of the most useful constructs for resolving the protagonist’s dilemma is a
hypothesis.A hypothesis is “a tentative explanation that accounts for a set of facts
and can be tested by further investigation.”2 It is indispensable to science and
to any fact-based analytic activity in which multiple conclusions are possible.
A hypothesis offers the advantage of a concrete statement you can test
against case evidence. Say that the protagonist of a case must evaluate an
individual she has hired—a rising star, but also a person who alienates many
people inside the firm and cuts some corners in his relentless pursuit of
new business.The hypothesis is that the new hire should receive a high rating
despite some flaws in his performance. To test it, you’ll have to develop a
23
10 ANALYSIS
strong argument, based on relevant criteria, facts, and inferences, that backs
a positive evaluation but also recognizes poor performance on other criteria.
Cases don’t allow just any hypothesis.The available evidence in the case
sets the rational limit on the range of hypotheses.A hypothesis that can’t be
argued from evidence in the case is simply an unsubstantiated opinion.
However, there is a range of possible hypotheses about every case. A con-
trarian’s position—one that opposes what seem to be safer hypotheses and
can be argued from evidence—can have a galvanizing effect in a discussion,
forcing everyone to look at the evidence from an entirely new angle or
consider evidence no one else has noticed.
DESCRIPTION OF PROCESS
The rest of this chapter outlines a process for working on cases.The process

has five phases:
1. Situation
2. Questions
3. Hypothesis
4. Proof and action
5. Alternatives
The process is meant to be flexible and adaptable. Experiment with it,
using the cases in this book. Many MBA students don’t give much thought
to their case-study approach, not because it is unimportant but because
they don’t see anything tangible to think about. Ultimately, the value of the
process described below depends on whether it prompts you to think about
your own process.
1. Situation (5 minutes)
The most difficult part of a case analysis seems to be the beginning.You
have to bridge the gap between no knowledge about the case and knowl-
edge sufficient to form a hypothesis. That gap can look very wide as you
begin reading a case thick with detail; it can seem to be all parts and no
whole. Earlier in the chapter, I stressed that it is hard to find something
when you don’t know what you’re looking for. To get started, you can
structure analysis with a series of questions.The process I advocate is under-
standing the big picture first and then filling it in with details. Start by ask-
ing this question: What is the situation?
24
Usually reading the first and last sections of the case is sufficient to iden-
tify the situation. Decisions and evaluations tend to be stated at the beginning.
Problems are harder to recognize, and more details about identifying them are
provided in chapter 5. A characteristic of a problem case is the absence of
any actionable statement made by or about the protagonist. Often, the main
character is reflecting on a situation and wondering what to do.
Reading the first and last sections of the case can often provide far more
information than just the type of situation. In decision cases, these sections
may specify the decision options.That is true of the case “General Motors:
Packard Electric Division.” If you don’t find options at the beginning or
end of a case, you should scan other sections. The opening or ending of a
problem case may present a partial or complete description of the problem.
In all types of cases, the initial and final sections frequently express a tension
or conflict important to the analysis. In “General Motors,” the first section

identifies the decision and a conflict between two functional groups. The
two sides of the conflict, with the protagonist in the middle, can be refer-
ence points for analysis. Why do the product development people so
strongly support an innovative component that they’re willing to take a for-
midable risk? And why are the manufacturing people just as adamant that
the company should not go forward with the component in the short term?
After reading the openings and closing sections, you should put the case
aside for a moment and consider what you have learned. Is the situation a
problem, decision, or evaluation? Do you have any ideas about the causal
frameworks or criteria that might fit the situation? Does it seem you’ll have
to cut through a large amount of information in the case or make many
inferences because the information is scarce? Are there any hints in the two
sections about causes, criteria, or even a plausible decision or evaluation?
Do the hints seem reliable or just a way to throw you off?
2. Questions (15 minutes)

Knowing the situation allows you to ask questions pertinent to a problem,
a decision, or an evaluation.The most important of these questions is: What
do I need to know about the situation?
Here are questions specific to each situation:
PROBLEM
Who or what is the subject of the problem (e.g., a manager, a company,
a country)? What is the problem? Am I trying to account for a failure, a
success, or something more ambiguous? What’s the significance of the
problem to the subject? Who is responsible for the problem (usually it is
25
12 ANALYSIS
the protagonist) and what might he need to know to do something
about it?
DECISION
What are the decision options? Do any seem particularly strong or
weak? What’s at stake in the decision? What are the possible criteria?
What might the most important criteria be for this kind of decision?
Are any of the criteria explicitly discussed in the case (case headings
can sometimes give good clues)?
EVALUATION
Who or what is being evaluated? Who’s responsible for the evaluation?
What’s at stake? What are the possible criteria? What might the most
important criteria be for this sort of evaluation? Are any of the criteria

explicitly discussed in the case (case headings can sometimes give you
good clues)?
You won’t be able to answer these questions now.That will take further
study.To make this first pass through the text more targeted, it’s useful to do
a content inventory. Its purpose is to locate information that might be used to
answer the questions about the situation.
To perform a fast inventory, scan the headings in the text. Read a little of
the sections, especially those that seem to have valuable information. Exam-
ine the exhibits to get a sense of what they convey.You will learn some-
thing about the case—sometimes a great deal more than you might expect.
You’ll also build a map of the useful content. Because cases often aren’t lin-
ear in their organization, this map is very important; pieces of information
related to the same issue will be found in different sections of the case and
in the exhibits.
Use a pencil or pen to mark up the case. Mark high-value sections and
circle facts, numbers, and statements of possible importance. Be sure to cap-
ture any thoughts about the answers to your questions, and record new
questions that come to mind. Note what issues particular exhibits may illu-
minate, and what calculations might be performed later to yield relevant
information.
3. Hypothesis (45 minutes)

Armed with a list of things you want to know about the situation and a
map of the content, you are ready for this question: What’s my hypothesis?
This is the most important phase of work on the case. Through close
study of high value sections and exhibits, you narrow the possibilities to the
26
one that seems most plausible to you. If there are three alternatives for a
decision, test them, starting with the one you suspect has the most promise.
Here are some other suggestions for structuring your work at this point:
PROBLEM
• Make sure you know the problem that needs to be diagnosed. Con-
sider whether the characteristics of the problem suggest causes.
• Think about the frameworks that seem most appropriate to the situ-
ation. Quickly review the specifics of the frameworks if you aren’t
sure of them.
• Pursue the diagnosis by looking at case information through the lens
of the cause you are most certain about.

• For each cause, make a separate pass through the case looking for
evidence of it.
• If the case has a lot of quantitative evidence, to what cause is it most
relevant? If you don’t have a cause relevant to the quantitative evi-
dence, formulate one.Work up as much relevant, high-value quanti-
tative evidence as you can.
• In a case with a protagonist, consider whether she is a potential
cause. If you think she is, work out how she contributes to the
problem.
DECISION
• Review the criteria you have come up with so far.Which do you
have the most confidence in?
• Review the decision options. Do any seem especially strong or
weak?
• Apply the criterion that seems to identify the most evidence in
the case.
• Investigate the strongest decision option with the criterion you have
the most confidence in. Or, if you’re reasonably certain about which
is weakest, see if you can dismiss that option quickly.
• If the case has a lot of quantitative evidence, which criterion is most
relevant to it? If you don’t have a criterion relevant to the quantita-
tive evidence, formulate one.Work up as much relevant, high-value
quantitative evidence as you can.
27
14 ANALYSIS
• If there are conflicts about the decision between individuals or
groups, think about why that is. Look at the decision from the point
of view of each of the parties to the conflict.
• If the protagonist is in a difficult position in relation to the decision,
consider why that is.
EVALUATION
• Review the criteria you have come up with so far.Which do you
have the most confidence in?
• What are the terms of the evaluation going to be (e.g., strengths/
weaknesses)? Do any stand out in the case (e.g., an obvious strength
of an individual)?
• Do you already have a sense of the bottom-line evaluation you

favor? If you do, what are the reasons for the preference? Pursue
those reasons.
• Start by applying the criterion that seems to identify the most evi-
dence in the case.
• Investigate the most positive rating or the most negative with the
criterion you have the most confidence in.
• If the case has a lot of quantitative evidence, which criterion is most
relevant to it? If you don’t have a criterion relevant to the quantita-
tive evidence, formulate one.Work up as much relevant, high-value
quantitative evidence as you can.
Taking notes helps you organize and remember information, but it serves
the equally important purpose of recording your thought process.Without
note taking, you can too easily stray from active reading. Of course, note
taking can degenerate into transferring information in the case to a piece of
paper or computer screen. Notes on a case don’t simply record facts.They
capture anything that might lead to answers to the questions you’ve asked.
It may sound trivial, but I recommend that students try to contain the
“highlighter habit.” This study aid is well adapted to the lecture model of
learning, but it can be a detriment to case study. Highlighting sentences is
satisfying because it makes you feel you’re doing something. In reality, what
you’re doing is marking sentences to think about later, and that’s a setup for
passive reading.You should be thinking about statements the first time you
encounter them.That said, highlighters can be useful as a tool to differenti-
ate related content: facts about one aspect of the case, for example, or text
and numbers that belong to one category of evidence.
28
A pencil or pen is more conducive to active reading—to write down
questions and make notes. When you begin to gravitate toward a conclu-
sion, stop work and write it down.The function of a hypothesis is to give
you a position to try out, not a final conclusion, so listen carefully to your
intuition.
If you have time, put the case away after this iteration. Even a short break
can be useful.There is scientific evidence that our subconscious minds are
much better at dealing with complexity than our conscious minds.Turning
your attention to something else allows that subconscious capacity to work
on the information you have collected.
4. Proof and Action (40 minutes)

A hypothesis drives a different approach to the case. You want to prove

something, not look for something to prove. Ask these questions: What evi-
dence do I have that supports the hypothesis? What additional evidence do I need?
Look at the information you’ve compiled and identify evidence sup-
porting the hypothesis.Your first priority should be to add to the evidence
you have.What is the strongest evidence? Can you add more to it?
Now assess where evidence is missing.Where will you find more—or is
there any evidence in the case? Think about any factors you may have over-
looked such as a cause, criterion, or evaluative category.
Go back into the case, with the single purpose of bringing out more evi-
dence that aligns with your hypothesis.You don’t have to work from the
first page to the last.You can go directly to the sections and exhibits you
think have what you need. Of course, you can work from beginning to end
if that makes you more comfortable. Just be sure to stay focused on what
you’re trying to prove.
Let’s say that you’re building an argument for a decision option and one
of the criteria is cost savings.You’ve noted some statements that imply your
decision option will save money for the firm and circled numbers that you
thought were relevant to savings. Collect those numbers now, and work out
calculations to estimate the total savings.You may then have one of those
gratifying moments of case study: from those scattered numbers that looked
so inconsequential when viewed individually, you’ve pulled together an
estimate that indicates a very large annual savings—and that’s just one part
of your argument.
Also give some thought to the actionable content of your position. How
would you implement the decision you’re recommending? What actions
does your diagnosis or evaluation call for? Think in practical, real-world,
not ideal-world, terms. Don’t just sketch out in your mind a broad
29
16 ANALYSIS
approach to action. Think about tangible actions and write them down.
Finally, give a bit of thought to the order of the actions. An action plan is a
program in which actions are taken at a certain time for a reason. It isn’t a
to-do list.
5. Alternatives (15 minutes)

It may seem paradoxical, but the last phase of analysis should be to question
your own hypothesis: What is the greatest weakness of the hypothesis? What is
the strongest alternative to it?
The intention isn’t to undermine your hard work but to take a step back
and look critically at the hypothesis and the evidence. Every position has a
weakness, and you should be the one who recognizes it, not the professor
or your peers. Here are some ways to think critically about your work:

PROBLEM
Can the problem be defined differently? Would that make a difference
to the diagnosis? Are there any holes in the diagnosis—could there be
causes missing? What’s the weakest part of the diagnosis? Could an
entirely different diagnosis be made? What would it look like?
DECISION
What’s the biggest downside of the recommended decision? How
would you manage the downside? What’s the strongest evidence against
the recommendation? How would a case for the major alternative look?
EVALUATION
Have you been objective and thorough about the evaluative findings
that oppose your overall assessment? Think how a different overall
evaluation might be proved. Have you accounted for factors that the
subject of the evaluation couldn’t control?
“BUT WHAT IF MY HYPOTHESIS IS WRONG?”

Students have asked me that question many times.A hypothesis isn’t wrong;
a hypothesis fails when you can’t make a credible argument for it from case
evidence. If you find yourself in that situation—and you will sooner or
later—first make sure the difficulty lies with the hypothesis and not with
your evidence gathering.You may have overlooked important information
or not used specialized tools effectively. If you’re certain the evidence isn’t
there, face up to it but realize that the work you’ve already done isn’t wasted.
30
You now have a good grasp of the case and probably have a good sense of
what the evidence is and where it is.Your work with a new hypothesis is
therefore likely to move along quickly.
Another way of looking at the fear of being wrong is to ask yourself
what the alternative is. I have not heard of a method of case analysis that
never leads to dubious conclusions. In fact, making analytic mistakes is
invaluable. Through mistakes, we learn more about the thought process
called case analysis. And a shaky analysis can sometimes be a symptom of
risk taking, which is also an invaluable learning experience.
NOTES
1. Michael E. Porter, Competitive Strategy:Techniques for Analyzing Industries and Competi-
tors (New York:The Free Press, 1980).
2. The American Heritage College Dictionary, third edition (Boston: Houghton Mifflin

Company, 1993).
31
4.
HAR VA R D
B U S I N E SS
S C H O O L
P R E SS
Persuasion, Argument,
and the Case Method

E xc e r p t e d fro m

By
William Ellet

ISBN-13: 978-1-4221-2447-5
2447BC
33
All rights reserved

34
CHAPTER 1
PE R S UA SION, A R GUME N T,
A ND T HE C A SE ME T HOD
E ach year, entering business school students encounter an approach to

teaching and learning new to many of them: the case method. By case,
I mean the substantial studies from business schools or corporations, not the
slender vignettes included in many business textbooks. For novices, the first

encounter can be perplexing. A case appears to be a straightforward narra-
tive, but when these students finish reading them, they wonder what point
the case is trying to make. A case study of a restaurant chain ends with the
president turning over in his mind basic questions about the business. He
gives no answers and the case doesn’t either. In another case study, a young
MBA has accidentally learned of alleged office behavior that could have
serious consequences for the individuals involved, including him. At the
conclusion of the case, he has a literal and figurative headache—and noth-
ing explicit is mentioned about what he should do.
In classroom discussions of cases like these, instructors use the Socratic
method, in which students carry the discussion through answers to a stream
of questions. Students can feel vulnerable, and the classroom atmosphere
can be strained and edgy, particularly in the first months.Written case-based
examinations pose another challenge. In class, the entire group, including
the instructor, works collaboratively on a case. Depending on the size of the
class, each student is likely to contribute only a small number of comments
to the discussion. On exams, students are on their own.They not only have
to analyze the case in response to one or more questions but also write an
essay that satisfies and persuades an expert reader—all in a limited time.
In class and on exams, case method students are asked questions like
these:
• Is the change effort described in the case worthwhile? If it is, why
has it failed? How can it be successfully implemented?
• How attractive is the industry described in the case? Are some seg-
ments more attractive than others? Why? Identify, analyze, and
evaluate the strategy of the company featured in the case.
35
• Thinking from the perspective of current European Union mem-
bers, do you agree with their decision to enlarge the EU by ten new
members? What are the pros and cons? What is the impact on the
world economy?
SKILL S FOR STUDYING C A SES

From time to time, MBA students have told me they feel there is a secret to
the case method that some people get and some don’t. If you get it, you do
well; if you don’t, you scrape by as best you can, always fearful that you will
be exposed.
The case method requires a lot from the student.At the same time, it isn’t
a secret society in which a few fortunate individuals get it and thus outper-
form their peers. Case method students need two distinct sets of skills. First,

they need to be able to analyze a case, to give it meaning in relation to its
key issues or questions that have been asked about it.The goal is to come to
conclusions congruent with the reality of the case, taking into account its
gaps and uncertainties. Second, students have to be able to communicate
their thinking effectively.
This book provides a method of organizing and directing case study and
guidance on how to communicate the results.The method should help you
use the business concepts that are already part of your working knowledge
or are taught in business courses—concepts such as:
• Expectancy Theory (Victor Vroom)
• 5 Cs analysis of marketing situations1
• 5 Ps Model of Leadership (Mildred Golden Pryor, J. Christopher
White, and Leslie A.Toombs)
• Macroeconomics
• Value Chain (Michael Porter)
The combination of a method to organize thinking about a case and
business concepts will help you come to conclusions and explain why you
think they’re valid. In education and in business, your conclusions have lit-
tle meaning unless they’re shared with others. The case method is about
stating and comparing opinions and learning from the differences and sim-
ilarities. In an academic program, communicating conclusions about a case
occurs orally, in study groups and class discussions, or in formal presenta-
tions. It also occurs in writing, in class assignments, research projects, and
examinations. Each type of communication has its own needs and require-
ments. In class, you have to meld your insights with the overall discussion.
36
PERSUASION, ARGUMENT, AND THE CASE METHOD 3
The role of each individual is to advance the discussion and contribute to
the collective understanding of the case. Individual or group presentations
usually aim at persuading the audience.A case-based essay also aims at per-
suasion.This book is divided into three separate skills: case analysis (part I),
discussion (part II), and writing about cases (part III).
RECEIVING KNOWLEDGE VERSUS MAKING IT

Many entering business school students have been educated in a lecture
system.A lecture is an efficient way for an expert to deliver content to many
individuals at once. In combination with textbooks, which are lectures in
print, this learning model can deliver volumes of content in a short time.
The lecture model is good at transferring information. Like any learning
model, it has limitations. One of the most important is that it doesn’t

encourage listeners to think about the content and apply it. Lectures on
organizational development or macroeconomics aren’t truly meaningful
until the learner can apply the content to issues to better understand orga-
nizations or countries. Concepts that are meant to be applied require prac-
tice opportunities.The lecture method generally doesn’t afford students the
chance for rigorous practice, and learners tend to be graded on recall of facts.
When students enter a case-based program, they understandably assume
that regurgitation of case facts is a central task. They are surprised when
their professors not only expect them to know the facts but to use them to
support an opinion about an issue the case raises. It doesn’t help that
incoming business school students often aren’t told what the case method
asks of them. A sink-or-swim mentality seems common in professional
education, at least in the United States. In the lecture method, learners
receive knowledge from an expert. In the case method, learners make the
knowledge with the assistance of an expert. This fundamental shift causes
many new case method students to be confused and uncertain about how
they should go about learning.
WRITING AND PERSUA SION

A graduate once summed up his feelings about writing instruction in an
MBA program:“I didn’t go to business school to learn how to write!”
Fair enough. But many business school students don’t think they have
strong writing skills and aren’t sure how to write an argument. Graduates of
undergraduate programs often have had little practice in writing after a
required freshman composition course and very little meaningful feedback
on what they do write. Individuals with degrees and backgrounds in sci-
ence and technology may have done no significant writing since high
37
school.Yet, quality MBA programs—classroom based and online—require
students to write, and the dearth of prior instruction and practice can be a
liability. It can also reduce graduates’ career effectiveness.The title of a much
discussed New York Times article captures the state of writing in the United
States:“What Corporate America Cannot Build:A Sentence.”2
The ability to think clearly and communicate convincingly has always
been an important skill for managers and leaders. It is now arguably more
important. Rapid globalization, the increase in geographically dispersed
work groups, and the Internet put a new premium on text communication.
The New York Times article just cited illustrates the daily chaos that badly
written e-mails cause in companies. In the “knowledge economy,” employ-
ees are expected to think and act on their own.These skilled and intelligent
individuals expect management to explain and persuade, not issue orders.
With employees distributed around the world, the most practical way of

reaching them is writing.Well-written documents can be a hidden source
of competitive advantage.
Persuasion is the art of convincing an audience, listeners or readers, to
believe, think, or act as the speaker or writer wants them to. The art has a
long history, going back more than two thousand years in the West. It is still
as vital today as it was in its ancient forms. Argument and persuasion are
necessary to resolve controversy—to assist people with very different views
of the same thing to find common ground. That function has particular
importance in business, with its emphasis on action. Differences of opinion
need to be negotiated so that a company can take intelligent action.
Cases have multiple meanings and thus are always controversial. In a class
of forty students, there are likely to be forty different views of a case. To
persuade classmates and professors in a case method setting, writers must
deal with two obstacles: the shared text (the case) and the critical outlook
or attitude of the audience. The audience knows the text and the facts so
writers can’t afford to make factual mistakes. In addition, because the audi-
ence members are familiar with the case and will have their own opinions
about it, writers must meet a high standard of proof.
On the other hand, the audience’s knowledge of the case is an asset. It
relieves writers of having to describe the case situation, define the terms used
in it, and other tasks speakers and writers often have to perform when the audi-
ence isn’t intimately familiar with the topic.Also, most professors are less inter-
ested in the position writers take on a case than in how well they can prove it.
There are many ways to persuade an audience—emotional appeals;
tricks of logic; appeals to authority; or reasoning and evidence. In an aca-
demic or business setting, the best way to persuade is through argument.
Academic work is founded on rational, logical thinking and discourse, and
argument is essential to both. For business students, learning to analyze a
38
PERSUASION, ARGUMENT, AND THE CASE METHOD 5
situation accurately and persuade through rational argument has great
importance. Managers and executives need to be able to think logically
about the businesses they are trying to run, the people they are trying to
lead, and the goals they are trying to achieve.Thinking chronically clouded
by emotion, lapses in reason, or an unwillingness to look hard at the facts
generally leads to trouble for both managers and their organizations.
Broadly speaking, an argument is a series of logically related statements.
The fundamental relationship, the one that matters most, is between the
statement of a conclusion and the evidence for it.You make a conclusion
about a case—the president of the country is right to default on its foreign
debt—and readers nod their heads and say, “Fine, but what can you say to
prove it?”3 For the audience to take your conclusion seriously, you need to
show them why they should.
Here’s an illustration of the conclusion-evidence relationship:

What? (conclusion) Why? (evidence)
[because]
The president is right Full payment of the debt will destabilize the country.
to default on the
country’s foreign debt.
The statement “Full payment of the debt will destabilize the country”
won’t persuade anyone on its own.The audience needs to see the evidence
proving that full payment will destabilize the nation.
What? (conclusion) Why? (reason)
[because]
The president is right Full payment of the debt will destabilize the country.
to default on the
country’s foreign debt. Evidence
1. Debt payments will take money out of the
country that is badly needed to support the
economy and meet social needs such as education
and healthcare.
Evidence includes historical narrative showing
that past economic downturns have impoverished
the population and created political conflict that
worsened the economic situation.
2. National finances are depleted.
Evidence includes data and calculations showing
that poor management of the economy has re-
sulted in deficit spending and spotty tax collection.
3. The national economy is just beginning to recover.
Evidence includes data and calculations showing
that GDP has increased by 3 percent and 5 percent
39
the last two years, respectively; inflation has
declined 5 percent in a year; but unemployment
has risen sharply.
4. The standard of living and other indicators of social
well-being are improving, but a downturn in the
economy will reverse the gains.
Evidence includes data showing that per capita
income has risen slightly (2 percent). Major crime
is down 6 percent and the decline coincides with
improved economy.
5. A political crisis has just been resolved, but if the
economy declines, there is potential for more.
Evidence includes recent political history of
political turmoil that has prevented the government

from taking the difficult steps necessary for
economic growth.
The argument began with a conclusion and a statement summarizing

the proof.Arrayed under the statement are other, more detailed, statements.
Each needs to be accompanied by further evidence that corroborates it. (In
order to keep the outline uncluttered, most of this detailed evidence has
not been included.) Note that the evidence is not only specific but is also
derived from different sources including economic statistics and political
history. Generally, the broader the range of evidence that aligns with a con-
clusion, the more convincing the argument is.
Keep this simple model of argument in mind, especially in the chapters
on case-based writing. Cases constantly invite immersion in the details of
fact and data.You want that detail—but you also want a structure that man-
ages the detail and links it to a conclusion.
NOTES
1. See Robert J. Dolan,“Note on Marketing Strategy,” Note 9-598-061 (Boston: Har-
vard Business School Publishing, 1997).
2. Sam Dillon,“What Corporate America Cannot Build: A Sentence,” New York Times,
December 7, 2004.
3. Paraphrase of Stephen Toulmin, The Uses of Argument (Cambridge: Cambridge Uni-
versity Press, 1958), 13.
40
5.
9B19A031
ARCENCIEL: BOTTLE CAPS FOR WHEELCHAIRS
Dr. Bettina Bastian, Kim Issa, and Sasha Larnaud Mourgues wrote this case solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs
Copyright © 2019, Ivey Business School Foundation Version: 2019-07-19

On a sunny afternoon in 2015, Pierre Issa, the director of Arcenciel (AeC) one of the leading non-
governmental organizations (NGOs) in Lebanon, was strolling down a street in Gemmayze, a charming
bohemian neighbourhood in buzzing Beirut. As he passed a grocery store, he saw bags of empty water
bottles in the entrance, set aside to be collected for recycling. He felt a surge of pride as he realized that
AeC’s bottle caps project had created grassroots awareness of the importance of recycling.
In recent years, AeC had grown from an organization that supported people with disabilities and those who
were considered to be disenfranchised to become the largest recycler in the region. The organization had
managed to create a synergy between its engagement on behalf of people who had been marginalized, and its
activities to dispose of garbage in a sustainable and environmentally friendly way. One marketing project in
particular leveraged the idea of garbage recycling in Lebanon and created the foundations of AeC’s reputation
as a leader and expert in the field. The organization encouraged the Lebanese public to collect plastic waste
and offered to donate wheelchairs to people in need and those with disabilities in exchange for each tonne of
collected bottle caps. This initiative managed to engage thousands of people in joint collection efforts.
As Issa looked at the bags of empty bottles, he wondered how the trust that AeC had gained through the
bottle caps project could be harnessed to bring about political change, and to place environmental and social
issues in Lebanon on the national agenda.
BACKGROUND OF ARCENCIEL
Services and Manufacturing of Medical Equipment for People with Disabilities
The civil war that ravaged Lebanon between 1975 and 1990 left behind many people who had physical
disabilities, as a result of having been injured from the fighting, bombs, and anti-personnel mines. During
that time, and in parallel with the increase in demand for medical services, the public sector collapsed,
which led to a complete deterioration of the Lebanese health care system.1 Hospitals were overwhelmed by
1
Institut de Gestion de la Santé et de la Protection Sociale (IGSPS), Recueil National des Statistiques Sanitaires au Liban,
2012, accessed March 3, 2016, www.usj.edu.lb/intranet/annonce/files/pdf/172_pdf_1.pdf.
41
Page 2 9B19A031
the influx of the casualties of war, and medical supplies became scarce. Lebanese people were forced to
resort to the much more expensive private sector for the provision of much-needed health care, which turned
medical care into a privilege, available only to those who could afford it. Other organizations, such as NGOs
or international agencies, were either not present in the sector or simply unable to deal with the needs of
the growing number of people with physical disabilities. Individuals with disabilities in Lebanon became
marginalized, and their human dignity was eroded. Without proper health care, they remained crippled—
physically and socially—and unable to re-establish their life or participate in the workforce again.
In 1985, Issa and a group of friends decided to take action and founded AeC. At the time, Issa was the owner of
Lignes et Couleurs (Lines and Colours), a furniture factory that employed people with disabilities. The other
AeC founders included Antoine Assaf, who had experience in working with people with disabilities; Nabil
Hokayem, a medical doctor; Nassib Chedid, a lawyer; and Johnny Stéphan. The NGO’s name, Arcenciel, was a
variation on the French word for rainbow, which was intended to symbolize a commitment to serve everyone,
without discrimination. Over time, the rainbow’s colours evolved to represent inclusion and respect for all
people. For the founders of AeC, the symbol also represented hope for new beginnings, with the organization
being established in response to a civil war that had segregated the society into sectarian and political factions.
During that period, all social work and developmental endeavours had been carried out by political parties that
exclusively served their “own” people or religious sect. In response, and in an effort to integrate sustainable

development into society, AeC defined its mission as working with and for all people living with difficulties,
irrespective of their age, gender, religion, culture, race, or nationality. With that mission, AeC addressed the needs
of individuals who were in difficulty, while avoiding any sectarian affiliation.2
The founders of AeC wanted both to create awareness of the needs of people who had disabilities and to
alleviate their hardships. They provided practical information for concerned people, including where to find
wheelchairs, how to better accommodate the daily life of a person who had handicaps, and how to furnish
and arrange the house so it was better adapted for the needs of a person who was disabled. They also created
a safe haven, where people with similar issues could exchange their stories and learn from each other. The
NGO allowed people with disabilities to break out from their social isolation and to feel stronger as they
engaged with people of similar circumstances and learned how to defend their own interests.
The early stages of the NGO were time-consuming and stressful for the founders. They spent many hours, all
over Lebanon, going door to door and meeting with the families of individuals who had disabilities, creating
awareness, informing the public, and learning more about specific needs of people living with disabilities.
One important need that AeC was able to identify was the shortage of wheelchairs available in the Lebanese
market. The organization responded first by fixing broken wheelchairs, then by manufacturing them locally.
In 1987, AeC launched its first wheelchair factory in Jisr el Wati and hired people with disabilities to operate
it. Doing so reflected the NGO’s core mission at the time—to work with and for all people who lived with
difficulties. Later, AeC opened production facilities in the Beqaa Valley and Akkar, outsourcing the
manufacturing of mechanical parts that required more technical expertise. The organization went on to
establish centres in Halba, Taanayel, Damour, and Jisr el Wati, specializing in the production or assembly
(or both) of wheelchairs, orthopaedic shoes, walkers, and other medical equipment. For example, in the
Beqaa Valley, AeC produced wheelchairs made by employees who used wheelchairs themselves, and in
Akkar, the organization produced crutches and equipment made of aluminum. The facilities were located
in rural and remote regions, with the idea of creating jobs and professional prospects for people with
handicaps and those who had meagre professional qualifications. The production facility in Beirut was
dedicated to the manufacturing of precision instruments and electrical products, as well as beds, elevators,
and systems for adjusting cars to replace foot pedals with hand-operated pedals.
2
“Brief Overview of Arcenciel Services and Projects in Lebanon,” (in Arabic), YouTube video, 9:05, posted by “Arcenciel,”
February 8, 2016, accessed March 23, 2016, www.youtube.com/watch?v=E5ItcCKPXP0.
42
Page 3 9B19A031
The strategy of AeC was to respond to the considerable unfulfilled needs of people who had physical
disabilities and lacked access to medical support. According to Issa, the organization’s strategy always
remained focused and loyal to its vision—to serve all Lebanese people in need. The organization began
offering physiotherapy treatment in all its centres and went on to offer services in remote areas, where help
was needed. For example, knowing that the Akkar Governerate had virtually no specialized services for
people with disabilities, AeC opened a specialized health facility in its capital, Halba. The AeC
rehabilitation centre offered physiotherapy, hydrotherapy, and neurological and orthopaedic services.3
In 1995, AeC started an initiative called Accès et Droits (Access and Rights), which aimed to support people
with disabilities in Lebanon and to make their needs public by lobbying for laws that protected their interests.
What had started as a grassroots approach ended successfully in 2000, when the legislator adopted Law 220
that granted people with disabilities the right to treatment and support. This law also gave people with
disabilities the right to own a wheelchair, regardless of their financial situation. The law was the result of
AeC’s many years of fieldwork and of learning to become experts at what they did. AeC used this particular
experience to bring the needs of people with disabilities to the attention of the national Lebanese agenda and
to instigate change at the national level. It was a great success and increased AeC’s credibility and visibility.
Issa and his friends had succeeded in making the rights of people with disabilities a public matter.

Hospital Waste
In addition to working to help people with disabilities, AeC decided to tackle the pressing issue of
environmental pollution due to Lebanon’s insufficient and failed waste management strategies. In the small
and densely populated country, most people lived in cities, and Lebanon’s population doubled between
1960 and 2005.4 The amount of garbage increased in tandem with the population. Urban expansion reduced
the landfill space available to stow refuse, while the demographic boom increased the quantity of garbage
generated. In 2013, Lebanon produced 2,040,000 tonnes of municipal solid garbage,5 of which 8 per cent
was recycled, 15 per cent was composted, 51 per cent went to landfills, and 26 per cent was disposed of in
open dumps, according to the country report on solid waste management in Lebanon.6
In 2003, after deciding to enter a niche sector of waste treatment, AeC created a hospital waste management
program called DéHo. The program’s objective was to reduce the risk posed by the mismanagement of
hospital waste by collecting and treating hospital waste by sterilizing needles, bandages, and other items
generated by hospitals. The program focused on waste management, education for sustainable development,
training, and consultation.7 By 2011, AeC had become Lebanon’s market leader in that sector, and was treating
90 per cent of the high-risk (i.e., infectious) waste produced by hospitals. Before AeC entered the sector,
Lebanon had no waste treatment system. Hospital waste had been inadequately treated, posing a danger for
public health and for the environment. Moreover, hospitals lacked the financial resources to implement
individual treatment systems that complied with international health standards.8
3
Aicha Mouchref, Forgotten Akkar: Socio-Economic Reality of the Akkar Region (Beirut, Lebanon: Mada Association, January
2008), accessed March 23, 2015, https://civilsociety-centre.org/sites/default/files/resources/MADA_Forgotten_Akkar_SocioE
conomicReality_Jan08.pdf.
4
Eric Verdeil, Ghaleb Faour, and Sébastien Velut, Atlas du Liban: Territoires et Société (Beirut, Lebanon: Presses de l’Ifpo,
2007), Chapter 3, accessed September 17, 2018, http://books.openedition.org/ifpo/418.
5
SWEEP-net, Country Report on the Solid Waste Management in Lebanon (Bonn and Eschborn, Germany: Deutsche
Gesellschaft für Internationale Zusammenarbeit, April 2014), accessed September 15, 2017,
www.moe.gov.lb/getattachment/2/‫ﻟﺑﻧﺎﻥ‬-‫ﻓﻲ‬-‫ﺍﻟﺻﻠﺑﺔ‬-‫ﺍﻟﻣﻧﺯﻟﻳﺔ‬-‫ﺍﻟﻧﻔﺎﻳﺎﺕ‬-‫ﻗﻁﺎﻉ‬/‫ﺑﻳﻳﻳﺔ‬-‫ﻭﻧﺻﺎﻳﺢ‬-‫ﻣﻌﻠﻭﻣﺎﺕ‬/‫ﺍﻟﺑﻳﻳﻲ‬-‫ﺍﻟﺗﻭﺟﻳﻪ‬-LEBANON-COUNTRY-REPORT-
ON-SWM-2014.pdf.aspx?lang=ar-LB.
6
Ibid.
7
Mouchref, op. cit.
8
“Potentially Infectious Healthcare Waste,” Environment.aec blog, accessed March 23, 2016, http://environnement-
arcencielen.blogspot.com/search/label/dasr.
43
Page 4 9B19A031
Solid Waste in Lebanon
After the end of the civil war, Lebanon had no waste management strategy for dealing with municipal waste.
The government had allocated only a limited budget for waste management, and it was reserved for Lebanon’s
only waste management company, Sukleen,9 which used several landfills, including one located in the
Naameh region.10 With the entire waste management process in the hands of one enterprise, the task soon
proved overwhelming for the understaffed organization.11 Some recycling efforts were initiated, and some
people started sorting their waste at home, but the waste had to be deposited in bins owned by Sukleen, which
enjoyed a monopoly in waste management and was the only source for recycling bins. However, as Issa noted,
Sukleen kept transport costs low by compacting the sorted waste together with the unsorted waste and
dumping everything in the landfill. Moreover, the political divisions in the country from 18 different religious
sects blocked any possible changes for improvement. In such an environment, decisions on political projects
such as waste management needed to consider the economic interests of individual sects and members of
political parties. Waste management was a big business in Lebanon, and was the source of many internal
conflicts that slowed and devastated any initiative or attempt at finding a durable political solution.

RECYCLING FOR SOLIDARITY
The objectives of AeC were tailored to upholding the concept of sustainable development, which meant
that they were based on social, environmental, and economic principles. Socially, AeC instilled diversity
in its programs and activities and included people who had been marginalized. Environmentally, the
organization promoted recycling and the preservation of natural resources. In terms of the economy, AeC
helped ensure maximum financial and economic autonomy. The overall approach of AeC was to create
change in the country, as Issa explained:
There is always a growing need that calls for a project or a certain initiative, and the process is
encompassed within three pillars: First, you come up with a pilot project to address this growing
need; second, you become a centre of reference; and third, you pass the law.
In response to the country’s poor waste management schemes, AeC developed its own waste management
strategy. The plan aimed to offer a cost-effective approach to waste disposal based on sorting, recycling,
and funding of social services through the sale of sorted waste. Issa described the strategic approach as
opportunistic. Seeing a waste management crisis rising, AeC’s decision makers decided to seize the
opportunity to leverage its experience in the hospital waste sector, using the credibility and knowledge the
organization had amassed in treating toxic waste.
The initial goal was to create incentives for citizens to sort waste and, through this process, to help them
become aware of the usefulness of recycling. Moreover, AeC planned to learn about waste typology and
categorization, which would later help the organization develop a viable business model that involved
different types of recyclables that could be exploited and sold on the local market. In the long term, AeC
hoped to find a viable solution for the waste problem in Lebanon, based on decentralized waste treatment
9
Nadeen Hilal, Racha Fadlallah, Diane Jamal, and Fadi El-Jardali, K2P Evidence Summary: Approaching the Waste Crisis in
Lebanon: Consequences and Insights into Solutions (Beirut, Lebanon: Knowledge to Policy Center. December 2015)
accessed March 23, 2016, www.aub.edu.lb/k2p/Documents/K2P%20Evidence%20Summary%20Waste%20Management_Fi
nal_%20Dec%2014%202015.pdf.
10
James Haines-Young, “Lebanon’s Rubbish Crisis, 40 Years in the Making,” Middle East Eye, August 6, 2015, accessed
March 27, 2016, www.middleeasteye.net/news/lebanon-s-rubbish-crisis-40-years-making-455710319.
11
Muriel Rozlier, “Déchets Solides: Une Poubelle à Ciel Ouvert,” Le Commerce du Levant, November 2010, accessed March
26, 2016, www.lecommercedulevant.com/rubrique/17432-dchets-solides-une-poubelle-ciel-ouvert.
44
Page 5 9B19A031
at the municipal level. The organization also wanted to prove that the Lebanese people could embrace
sorting at the source, if the providers offered proper waste collection and treatment. With this view, AeC
was contradicting prevailing arguments that the Lebanese population was not sufficiently mature for a
decentralized approach, and that waste sorting in the household was not feasible in that country.
In 2009, AeC launched the Recycling for Solidarity project. A year before the official launch, AeC had
already started to develop local initiatives to show the population the economic opportunity that recycling
offered. The organization also wanted to prove that recycling could help municipalities save valuable
landfill space, and that waste could be turned into value and used as a resource in different contexts. Over
the long term, AeC aimed to expand its activities to include sorting and recycling of different types of waste,
and to promote best practices for waste management across the country. In this context, AeC planned to
develop smaller waste management initiatives that would become models of best practice, and then turn
them into reference projects for potential future public action.
The Difficult Task of Raising Awareness
To begin its ambitious program, AeC tackled one of the greatest challenges: raising awareness about the

important role that recycling could play in solving the Lebanese waste problem. According to Issa,
Lebanon’s postwar generation was not thinking about the future—and especially not about the environment.
The people were more concerned about living day to day. Environmental protection was not a major
concern in their daily struggle for economic survival.
Essa was impressed by a French program called L’École Agit (roughly translated as “school action” or
“school acts”), which the French Ministry of Education successfully introduced in 2007 to educate young
school children about sustainable development. The idea was to reproduce this concept in Lebanon and to
create awareness among Lebanese children about how their daily activities could create a lot of solid waste,
with possibly irreversible consequences on the environment. In this campaign, AeC did not focus
specifically on garbage, but instead advocated sustainable development in general.
In 2008, the first Eco-Attitude booklets were distributed in schools across Lebanon. One year later, the
booklets began being printed on recycled paper to be consistent with AeC’s message on recycling and
sustainability. The booklets included tips and tricks to adopt an eco-friendly way of life. The AeC team also
proposed workshops about recycling for children. The aim was to have interesting enough activities that
would convince children—and through them, their parents—to recycle.
With strong support from sponsors, AeC introduced its own version of the French program L’École Agit. The
program’s sponsors, who were known for their experience, promotion, and conservation of nature, included
Maxime Chaaya from Lebanon and Nicolas Hulot from France. Hulot was a well-known environmental
activist and a major influence among young people in France. Both men loved the idea of introducing
recycling to Lebanon and wanted to reapply the French programs that had proven to be success stories.
Right from the beginning, AeC’s initiative enjoyed the support of Lebanon’s Ministry of Environment.
Working together, AeC and the ministry reached 335 schools throughout Lebanon and worked on nurturing
ecological behaviour among the students. In 2010, the project became more institutionalized. The name was
changed to Happiness Heroes, referring to the children who were recycling. Picon, a Lebanese subsidiary of
the French group Fromagerie Bel, was the external sponsor that assured the financial durability of all three
phases of the project. Picon was less interested in the long-term strategic vision of the project, regarding
national waste management. The company agreed that the workshops and contests in schools were interesting
from a marketing and corporate social responsibility perspective. However, Picon believed that the program
had little effect in convincing future generations about the need for a cleaner and greener planet.
45
Page 6 9B19A031
The marketing manager of AeC felt that copying the approach of L’École Agit and launching the Happiness
Heroes were bad marketing choices that could kill a good idea. According to him, a good campaign had to
answer three questions: Who is our audience? What is the message? Why are we sending this message?
However, only the last two of the three questions had been addressed. The Lebanese population needed to
start sorting and recycling to reduce the amount of waste in Lebanon. Picon was very happy with the
outcome of the project, but AeC felt that the Happiness Heroes initiative had failed to understand the
mindset and mentality of the Lebanese people, which differed from that of the French. For example,
Lebanese kids proved to be disinterested in sorting garbage. After only a few days, they lost interest in
recycling altogether.
Although AeC decided not to drop the project, there was a great deal to be learned from it. Issa noted that
AeC had learned to focus more on the big picture. He observed that children liked the playful aspect of the
program while in the school, but soon forgot to apply the concepts about recycling outside class. Issa
thought that AeC was too focused on the small projects, which was also the donor’s opinion, rather than
ensuring that the kids continue to recycle. In the end, the project seemed to amount to interesting ideas
without long-term vision for a clean environment.

ROLLING CAPS
In 2009, Issa received a phone call from his friend. Her son’s teacher in Beirut had asked her students to
collect the caps from plastic bottles. The teacher would then send them to Switzerland to be sold and
recycled in exchange for a free wheelchair. Issa’s friend wondered, “Why not sell and recycle the caps in
Lebanon instead of Switzerland? It would be the chance for children to concretely see the result of their
recycling efforts.” Being familiar with AeC’s past activities, including the production of wheelchairs and
the promotion of recycling, Issa’s friend wondered whether the social equation “plastic = wheelchair” could
apply in Lebanon. Issa was skeptical about the idea at first, thinking back a few years earlier to the unethical
business practices of some cigarette merchants who had spread false information about the aluminum
wrapping of cigarette packaging being recycled to make wheelchairs, which had turned out to be a hoax
intended to encourage cigarette sales. Still, Issa decided that the idea was worth at least a trial, and thus the
Rolling Caps project was launched.
To finance the building of a wheelchair, AeC needed 500,000 bottle caps, which would raise the $30012
needed to build one wheelchair. The important factor in this plan was that, in the end, the children would
be able to see clearly the results of their work. On average, it took about a year for a school to collect
sufficient bottle caps to “donate” a wheelchair.
The Rolling Caps became an instant success. The first school to enter the program was the Collège Louise
Wegmann, a private school in east Beirut. The concept of collecting bottle caps to donate a wheelchair to
the needy aroused the students’ interest and created real excitement. They felt they could be of concrete
help to others. By the end of 2009, the pupils of Collège Louise Wegmann had collected the required
number of bottle caps to exchange for a wheelchair. The experience taught Issa that connecting with the
Lebanese people differed from connecting with Europeans. The long-term horizon of a cleaner planet didn’t
make sense to people emerging from war and living in an uncertain geopolitical context. However, the idea
that their actions would actually benefit a person with disabilities who was living in Lebanon seemed to fill
them with enthusiasm.
12
All currency amounts are in US$ unless otherwise specified.
46
Page 7 9B19A031
A Mountain of Caps under Our Desks!
The bottle caps project was started spontaneously, without a specific team or financial endowment.
However, AeC was able to leverage a large and efficient network of efforts, stemming from its activities in
the hospital waste treatment and its long-standing support of people who were marginalized.13 Schools and
institutions served as collection centres for the plastic caps provided by students and employees.
A leading global logistics and transportation provider called Aramex learned about the Rolling Caps project
and proposed a partnership. Aramex was founded by a Lebanese entrepreneur and based in Dubai. The
company offered to use its delivery vans to help collect the bottle caps from people’s houses, which meant
that individuals had become involved in the project, in addition to schools and institutions. When people
had bags filled with caps ready to be picked up, they contacted AeC, which informed Aramex and provided
the pickup address. Two AeC volunteers were responsible for coordinating efforts with Aramex, which
collected the recycling items and delivered them to AeC without cost. In 2009, only one Aramex truck was
dedicated to the initiative, and AeC had no budget allocated for the project. However, despite the meagre
resources deployed, the bottle cap program was successful from the start and grew very quickly.
AeC would collect the bottle caps and transport them to secondary sorting centres, where they were

compressed, then sold and shipped to a recycling company. The value added within each step of the process
was within AeC’s mode of operation. People who were marginalized and had difficulties that prevented
them from being integrated in the regular labour market were integrated in the collection, sorting, and
shipping activities, which fulfilled AeC’s social commitment. Sorting the waste at the source (i.e., in
households) assured environmental sustainability by avoiding the sporadic dumping of waste material on
land and in the sea. Moreover, supplying local companies with raw materials obtained from recycled plastic
caps empowered AeC and created more job opportunities at the local level. Altogether, the project promoted
the use of local recycling plants, the involvement of workers into the market, the financing of wheelchairs,
and a decrease in imported raw materials.
In the early stages of the project, AeC stocked the bottle caps in its Jisr el Wati centre, which could hold
500 kilograms of caps. The organization sold the bottle caps to a plastic recycling plant called Narizcoplast.
Eventually, in 2015, AeC established seven other collection centres, where people could deliver the bottle
caps on their own. Before long, the volunteers became overwhelmed by the results. “We had mountains of
caps under our desks!” exclaimed Olivia Maamari, who worked in the AeC environment program in Jisr el
Wati. During the first year, approximately 5 tonnes of bottle caps were collected, which increased fivefold
the next year. In 2010, approximately 27 tonnes of caps were collected. Assuring the success of the
initiative, awareness was spreading by word-of-mouth through the message, “Your waste has value, and
with it you can help someone in need!”
After collecting 500,000 bottle caps, which weighed approximately 1 tonne, an individual in the institution,
company, or school that reached the required number of bottle caps would contact AeC to receive the
promised wheelchair. In most cases, people would start the collection for a person who was disabled whom
they personally knew at school, work, or in the neighbourhood. To encourage the collection, AeC created
the Certificat des Amis des Bouchons Roulants (or “certificate of the rolling caps friends”), which was
offered to kids participating in the project. The success story of recycling caps made its way into children’s
minds, and encouraged them to be a part of it. Rana Asmar, who was in charge of AeC’s treasury
department, told her nephew the story of this initiative and he started collecting caps. For his birthday, he
asked to visit the centre at Jisr el Wati, where they made the wheelchairs. He wanted to see the result of his
hard work and to obtain a copy of the “certificate of the rolling caps friends.”
13
Marie Kostrz, “The Dirt Beneath the Stretcher,” Executive, February 16, 2015, accessed March 24, 2016, www.executive-
magazine.com/economics-policy/waste-the-dirt-beneath-the-stretcher.
47
Page 8 9B19A031
The entire promotion campaign took place through social networks and word-of-mouth. Several schools
and organizations, such as the Scouts du Liban, joined the project and offered to collect bottle caps in their
scout camps. Companies such as Société Générale de la Banque du Liban also took part in the project,
which guaranteed the collection of a huge volume of caps and increased media visibility. Some
establishments installed their own collection boxes at their workplace for the collection. Institutions that
joined the effort included banks, companies, schools, and at least three universities: the International
College, the University Saint-Esprit de Kaslik, and University Saint-Joseph. The global bank HSBC
designed its own boxes for the collection. In 2009, 12 institutions and companies participated in the
recycling effort. That number increased nearly fourfold in 2010, when 45 organizations joined the
campaign. In 2016, 450 organizations across Lebanon participated. The amount of bottle caps collected
increased from 2.2 tonnes in 2009 to 28 tonnes in 2010 to 1,413 tonnes in 2016 (see Exhibit 2).
Rolling Caps’ impact grew bigger and spread outside Lebanon. As AeC worker Maamari explained,
“Lebanese people living in Dubai started to call and email the environment program to know if they could
send caps by plane.” Obviously, the idea of plane travel was not very eco-friendly, but AeC had achieved
its objective to incentivize the Lebanese people to sort and recycle, and the message spread like wildfire.
However, some people were unclear about the process. For example, one teacher asked Maamari one day,

“Which part of the wheelchair is made with the caps?” People understandably associated the bottle caps the
actual construction of the wheelchairs, instead of with the money that AeC received from selling the bottle
caps to recycling companies.
In reality the recycling process comprised several steps. First, people would deposit their recyclable waste
in any one of AeC’s seven collection centres. People could also choose to call the AeC centre and have
Aramex collect the bottle caps within two or three days. Second, the caps were sent to the closest secondary
sorting plant to be resorted correctly, compacted, and sold to a recycling company. In 2015, AeC had two
sorting centres. Third, the compacted plastic was transported and sold to end-treatment centres, where they
were crushed and then melted back into plastic. Most of AeC’s work was with the recycling factory
Narizcoplast, which transformed the caps into construction and irrigation pipes. Other recycling factories
used the plastic from the collected bottle caps to produce various other products such as benches and
flowerpots. By 2015, more than 50 jobs had been created in the bottle cap recycling sector (e.g.,
administrative positions, labour workers, drivers, helpers). The project had a very simple cost structure.
With external partners organizing the collection and transportation of the bottle caps, AeC did not need any
factories or machines to treat the plastic. Its costs were nearly entirely related to salaries (see Exhibit 3),
unlike the cost structure of an integrated recycling company.
Eventually, AeC broadened the scope of its activities to encompass other solid household waste such as
paper, aluminum, and iron. In 2013, AeC was collecting the full plastic bottles, rather than just the caps. It
was able to harness the power of the bottle cap initiative for additional purposes. People became motivated
to recycle and were excited to add other materials to their sorting bins. The wheelchair initiative was the
first push they needed to gain a recycling mindset. From that point on, adding types of recyclables to the
bins seemed to come more easily. Since the start of the program in 2009, more than 140 wheelchairs were
provided by AeC in return for 140 tonnes of recycled plastic caps.
In 2013, AeC had an annual operation budget of $14.2 million, of which 28 per cent came from donations
and grants. The rest of the revenue was generated by sales of products and services such as recycling and
hospital waste treatment.14 According to Issa, the organization received about $300 per tonne of plastic
14
Arcenciel, “Impact Report 2015,” April 12, 2016, accessed April 16, 2019, www.arcenciel.org/wp-
content/uploads/2017/12/impact-2014.pdf.
48
Page 9 9B19A031
(from 500,000 bottle caps) that it delivered to companies using their plastic as raw material.15 The price
was dependent on several factors, including the weight of the plastic, the type of plastic, whether it was
compacted or not, and whether it was delivered to the recycling plant directly or indirectly. Bottle caps
consisted of only 5 per cent of all recyclable items, but the program increased the visibility of AeC in
Lebanese societies and gave it the momentum to expand its activities and become the most important
recycling promoter in Lebanon. Nevertheless, recycling had not been profitable and generated a profit loss
of approximately $300,000 annually. Still, AeC considered it a valid price to pay for its efforts. The bottle
caps project had started in schools and gave the organization credibility in Lebanon’s recycling industry.
Later on, in 2015, when Lebanon was overwhelmed by a waste management crisis, AeC was the first
organization to be approached by both private and public institutions, such as municipalities, for help with
advising and developing viable decentralized solutions for recycling activities in Lebanon. Invitations to
government meetings about waste management approaches were common, and AeC was able to influence
thinking processes on these issues. The organization also helped develop legislation to give recycling the
same level of importance as other waste management decisions across the country.
Issa reflected on the most important learning outcomes from the bottle cap project. How could AeC’s status

and reputation in the field of recycling be used to raise the issue of waste management onto the national
agenda. How could the organization compensate for the failures of a weak state? And how could AeC
expand its activities and strengthen its engagement in the future?
15
Arcenciel, “Bouchants Roulants,” accessed March 23, 2016, www.resource-
recovery.net/sites/default/files/6._olivia_marmari_solidarity-based_network_forrecyclable_waste_management-aec1.pdf
49
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EXHIBIT 1: ARCENCIEL’S MAJOR MILESTONES, 1985–2015
Source: Company documents.
EXHIBIT 2: TONNES OF BOTTLE CAPS-WASTE COLLECTED BY ARCENCIEL, 2009–2016 (IN

TONNES)
Year 2009 2010 2011 2012 2013 2014 2015 2016

Number of

participating 12 45 70 130 200 280 400 450
organizations
Tonnes of
waste 2.2 28.0 47.0 138.5 161.0 319.0 930.0 1,413.0
collected
EXHIBIT 3: COST STRUCTURE OF ARCENCIEL’S INTEGRATED RECYCLING ACTIVITIES IN 2015
Salaries 58%
Rent 4%
Depreciation of Recycling Equipment 28%
Fuel and Transport 4%
Maintenance of Cars and Spaces 3%
Others 3%
50
6.
9B19M122
TELENOR GROUP: DEVELOPING A NEW BUSINESS MODEL
Frank Elter, Marcus Moller Larsen, and Torben Pedersen wrote this case solely to provide material for class discussion. The authors
do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

In January 2019, Sigve Brekke, the chief executive officer (CEO) of the giant Norwegian telecommunications
company Telenor Group (Telenor), was preparing his keynote address for the forthcoming Telenor town hall
meeting. “We’re facing a massive transition,” he thought, “and we do not have much time.”1 Brekke’s
ambition was to save Telenor from merely providing connectivity and voice services by changing the company
into a full-fledged digital service provider that shifted the distribution of connectivity from physical to digital
channels. Yet he knew that this change was going to be full of painstaking uncertainty. Telenor was sorely
aware that actors such as Google LLC (Google), Facebook Inc. (Facebook), Apple Inc. (Apple), and Microsoft
Corporation (Microsoft) had started offering communications services and thus had entered the turf of
telecommunications companies (telcos). How could Telenor deal with the competitive threat posed by new
actors who competed with a set of capabilities not possessed by telcos?
TELENOR GROUP
Telenor Group—a Norwegian company that provided voice, Internet connectivity, and media services in
the Nordic countries, as well as voice and Internet connectivity services in central and eastern Europe and
Asia—was established in 1855 as Telegrafverket, a state-operated monopoly providing telegraph services.
As a result of the deregulation of the Norwegian telecommunications sector, the company became a public
organization in 1994. Telenor’s telecommunications operations were divided into segments that operated
in the Nordic countries, central and eastern Europe, and Asia. In the Nordic countries (i.e., Norway,
Denmark, and Sweden), Telenor was one of the leading providers of mobile and fixed services and had a
strong position in the broadband market. With over 211 million mobile subscribers in 12 country markets,
more than 38,000 employees, and the prestigious status of one of the world’s 500 largest companies by
market value, Telenor was by all means a proud and successful company. With NOK110 billion2 in revenue
in 2018, it was one of the world’s 20 largest mobile operators.3
1
Jorun Sofie F. Aartun and Marte Ramuz Eriksen, “Vi har ikke mye tid [We Don’t Have Much Time],” Dagens Næringsliv, April 25,
2016, accessed December 5, 2018, www.dn.no/nyheter/naringsliv/2016/04/25/1815/Telekom/-vi-har-ikke-mye-tid?v=39178.
2
NOK = Norwegian krone; US$1 = NOK8.6142 on January 1, 2019.
3
“The World’s Largest Public Companies,” Forbes, accessed May 22, 2019, www.forbes.com/global2000/list/#industry:
Telecommunications%20services.
51
Page 2 9B19M122
In 2016, the bulk of Telenor’s revenue came from providing connectivity, with voice, messaging, and data
constituting the sources. However, the telecommunications industry was in 2019 undergoing radical
changes that both stirred and undermined traditional business models. The growth rate of worldwide
telecommunications services spending was down to 2.2 per cent in 2016 and was expected to further
decrease to 0.9 per cent in 2020, with the largest drop in the mature markets.4 With slower growth rates and
fierce price competition, most telcos in mature markets had started to experience dropping margins.
THE DISRUPTED TELECOMMUNICATIONS INDUSTRY
In 2015, Brekke was appointed CEO of Telenor to replace Jon Fredrik Baksaas. Baksaas, who had once been
voted one of the world’s 100 best performing CEOs by the Harvard Business Review, had decided to retire as
CEO after 13 years at the top. Before transitioning to CEO, Brekke had been head of Telenor’s operations in
Asia, where he had succeeded in establishing the company as a leading telecommunications operator with
more than 100 million subscribers contributing more than 40 per cent of Telenor’s total enterprise value. “In
Sigve Brekke,” explained former CEO Baksaas, “the Board of Directors has found the perfect candidate to
continue Telenor’s growth and value creation. We have worked closely for many years, and his knowledge of

the business, customer focus, and hands-on management style will ensure a great future for the company.”5
While Telenor was generally in a healthy state as Brekke assumed responsibilities as CEO—results were
positive, and the organization was lean—the disruptive nature of the industry had taught him not to rest on
his laurels. “In the year 2020,” the newly appointed CEO reasoned, “80 per cent of the earth’s population
will own a smartphone. Telenor has no intention of giving all the opportunities to Google and Facebook.
We also want to have a position in this area.”6
Accordingly, Brekke, who had been in the company since 1999 and had therefore experienced many of the
ups and downs of running a telco, had learned that, to succeed in the industry, firms needed not only to be
able to adapt to changing environments but also to take an active lead in the change. Over the last few
decades, the industry had evolved in ways that had forced traditional firms to radically reassess and reinvent
their business models (see Exhibit 1). In the 1990s and early 2000s, Telenor had adhered to the common
model among telcos by vertically integrating operations to offer voice and messaging over fixed lines and
mobile networks. The intention here was largely to generate revenue by charging for the length of the voice
calls and the number of messages. Therefore, with the launch of the second-generation (2G) cellular
technology network in the 1990s, Telenor made good revenues on voice and messaging. In the early 2000s,
with the introduction of the third-generation (3G) network, the key value proposition was expanded to cover
data usage, and telcos charged per megabyte downloaded as customers began using their phones for email
or surfing the Internet. But even then, voice and messaging still functioned as the core services. When the
fourth-generation (4G) network was launched in 2010, the business model altered toward data. Voice and
messaging were increasingly bundled into fixed subscription fees for large data use allowances and
consequently appeared as free add-ons to the data subscriptions.
In approximately 2016, with a mature 4G market and an awaited fifth-generation (5G) network, the industry
was starting to evolve—even disrupt—in ways that were unpreceded. A number of new suppliers of digital
services—including both the tech giants such as Google, Facebook, Apple, and Microsoft, and an army of
4
“Forecast Growth Worldwide Telecom Services Spending from 2019 to 2023,” Statista, accessed December 5, 2018,
www.statista.com/statistics/323006/worldwide-telecom-services-spending-growth-forecast/.
5
“Sigve Brekke New Telenor Group CEO,” Telenor Group, May 12, 2015, accessed December 5, 2018,
www.telenor.com/media/press-releases/2015/sigve-brekke-new-telenor-group-ceo/.
6
Tormod Haugstad, “Vi skal bli et verdensledende digitalt fyrtårn [We will become a world-leading digital lighthouse],” Digi.no,
February 3, 2016, accessed December 5, 2018, www.digi.no/artikler/vi-skal-bli-et-verdensledende-digitalt-fyrtarn/320528.
52
Page 3 9B19M122
small start-ups—were disrupting industries by providing new services on top of the connectivity and
business models supporting them. It was expected that digital services would grow to almost 25 per cent of
revenue in the telecommunications industry in 2020, while the revenue generated by mobile and fixed
connectivity would be stagnating on a global scale (but decreasing in mature markets) (see Exhibit 2). In
addition, those companies providing the digital services would likely obtain the direct relationships with
the ultimate customers, as they provided the platforms and applications demanded by customers. Traditional
telcos, however, ran the risk of being pushed down the value chain as mere providers, where the focus
would be on minimizing costs. While telcos were previously protected by the fact that the hardware was
dedicated to a specific use, the hardware was now becoming more standardized, and so the dedication was
all done in the software. This implied that companies no longer needed to control the hardware to dedicate
it to uses such as voice, SMS (short message service), and Internet. Moreover, as the physical SIM card
was projected to be embedded in the phones over the next few years, the strong position in physical
distribution would diminish as an advantage. If telcos did not build the capacity to serve customers through
attractive digital channels, the provisioning of mobile services could be overtaken by the actors controlling
the operating systems on the phones (with Google and Apple as the most prominent players).
Faced with these challenges, traditional telecommunications operators found themselves in an increasingly

marginalized position. Brekke explained:
We’ve built a business where we’ve controlled the whole value chain of the products we’ve offered,
such as SMS, MMS [multimedia messaging service] and voice. . . . We’re now facing a brand new
world where other companies offer the end products and services. We need completely different
technological solutions, we can’t own the whole infrastructure ourselves any longer, and we need
to collaborate and form new partnerships. This means that the entire way of operating will be done
on a more integrated network system where we do something ourselves and have minority
positions, joint ventures, and pure partnerships.7
As the industry was shifting from a well-ordered sector made up of broadly vertically integrated telcos toward
a dynamic, competitive landscape fluidly populated by a number of new entrants—making it increasingly
difficult to create an unambiguous value proposition—Brekke feared that Telenor would be pushed into a
position as a wholesaler of mobile broadband to other companies that could take over the direct relationship
with customers. Brekke knew that being reduced to such a utility-provider position would be a pure cost game
with very low margins. As Telenor had a history as a retail mobile operator that served consumers directly,
Brekke considered the option of selling only mobile connectivity highly undesirable.
DIGITAL TRANSFORMATION
In light of the recent turn of the industry, Telenor’s 2016 strategy could be summarized as making the shift from
acting as a telecommunications company to becoming a digital service provider. In particular, Telenor would
continue focusing on its telecommunications business but would increasingly emphasize current and new digital
verticals to retain a focus on growth and value creation. Officially, Telenor stated its strategic ambition as follows:
To deliver on the ambitions of growth and value creation, we will take the position as our
customers’ favourite partner in digital life. We will be delivering a broad range of relevant,
personalized, and engaging digital services. These include connectivity and communications
services, select Internet services within, for example, storage and communication, and select stand-
alone digital verticals.8
7
Aartun and Eriksen, op. cit.
8
“Our Strategy,” Telenor Group, accessed December 5, 2018, www.telenor.com/about-us/our-strategy/.
53
Page 4 9B19M122
To initiate the process of becoming a digital service provider, Telenor had started to develop a number of
services accessed through applications (apps) in areas such as online storage, banking, and gaming, as well
as music that would be used to attract and retain new and prospective customers (see Exhibit 3). For
example, an app called Capture was developed so that photos taken on customers’ mobile phones could be
automatically saved in the cloud. In several markets, there was no data charge associated with this automatic
picture uploading, and the pictures would be automatically available on all of the customer’s devices.
Another app, Appear.in, was the result of Telenor’s incubator environment. The purpose of the app was to
provide one-click video conferences in a browser without the need for customers to log in or use additional
software. By 2016, a team of 18 people were working full-time with Appear.in, with the long-term ambition
of creating “easy video meetings for your business.”9 In 2009, Telenor had also partnered with Tameer
Microfinance Bank Ltd. to develop a service for branchless banking in Pakistan, called Easypaisa. Since
then, the app had received significant international recognition and reported more than 5 million unique
users of the service every month. In 2015, Telenor launched a lifestyle app in Bangladesh called WowBox,
which upsold internal product offers and provided users with engaging local content from established
partners, such as daily trending news, sport results, built-in games, free music, lifestyle articles, and much
more. According to the head of the app, Holger Hussmann, “WowBox has established a unicast channel

between Telenor and the individual customer. As the current backend implementation is being extended
with stronger analytics features, the content will become even more personalized and the offers more
targeted.”10 The business potential was therefore obvious, as Hausmann argued: “it will also allow targeted
advertisement within the app, which will result in improved revenue.”11
Besides organically developing digital services that would attract and retain customers, the company had
also initiated a new process of targeted acquisitions to strengthen its competence pool. For example, in
February 2016, Telenor made a NOK3.1 billion acquisition of Tapad Inc. (Tapad), a New York–based
marketing and technology company. Commenting upon the acquisition, Brekke stated that Tapad was
“world class in targeting marketing and [would] help in making Telenor’s operations highly customer and
cost oriented.”12 Tapad, whose CEO, Are Traasdahl, was also Norwegian, would therefore assist Telenor
in generating new sources of revenue. As Brekke explained, “We shall take up the competition with others
dealing with such solutions and services. We operate in large markets where there are no payment solutions.
Google is largely based on markets with Wi-Fi, but must, in many areas, collaborate with the telcos. We
bought Tapad because we need competencies in advanced business models.”13
Brekke knew that a digital service provider could mean a lot of different things (see Exhibit 4). On the
lower end of the continuum, a digital service provider could represent an actor characterized as “bit pipe”
that provided high-quality networks but without specific digital service delivery. In this respect, firms
would operate within the digital service arena but without any direct contact with the end-users. In contrast,
firms could also embrace the role of digital enabler, wherein they would act as third-party service suppliers
to operators closer to the end-users. Moreover, firms could characterize themselves as digital
telecommunications companies, in which capacity they would own digital services and engage widely in
third-party partnerships. Finally, firms could strive toward becoming over-the-top digital players (such as
Google and Amazon), focusing on delivering digital services directly to a network-agnostic customer base.
9
“Our Team,” Appear.in, accessed May 22, 2019, https://appear.in/information/team/.
10
“WowBox Reaches 1.5 Million Users,” Telenor Group, October 2015, accessed December 5, 2018,
www.telenor.com/media/articles/2015/wowbox-reaches-1-5-million-users/.
11
Ibid.
12
Richard Valmot, “Alt går ikke på skinner for Telenor i Asia [Everything is not going well for Telenor in Asia],” Digi.no, February
25, 2016, accessed December 5, 2018, www.digi.no/artikler/alt-gar-ikke-pa-skinner-for-telenor-i-asia-men-verdensdelen-er-
full-av-muligheter-mener-brekke/320575.
13
Haugstad, op. cit.
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Page 5 9B19M122
GOING FORWARD
Finding one identity in the ever-disrupted telecommunications industry was surely not a straightforward
endeavour. As the traditional connectivity business still generated most of the revenue, the more palpable strategy
would be to exploit existing sources of income to generate the necessary liquidity for the future business model.
However, several uncertainties loomed: How fast should a telecommunications company switch from the old to
the new business model? How much funding should be redirected from the old to the new business? And, more
generally speaking, what was the future business model? Should the customers be at the centre of attention, or
would a business-to-business or business-to-business-to-consumer model be more feasible? For example,
Telenor had started to explore collaborations with municipalities in Norway as a way to offer focused, niche-
oriented solutions instead of serving the broad group of end-customers it was currently serving. As such, would
it be possible to manage two conflicting business models under the same roof?
Notwithstanding the sheer complexity of adding another business model to a company, a big challenge also
related to getting the existing employees on board an uncertain journey toward becoming a digital service
provider. Internal political battles had unfolded in regard to Telenor’s organizational development: some
employee groups (referred to as “Bellheads”) were advocating the old network technology that had served

them well, whereas other groups (referred to as “Netheads”) were fighting for a new model embracing
digital technologies. How could Telenor foster a culture that encouraged innovation and knowledge sharing
in an organization that had previously optimized activities separately in each country?
Brekke doubted that Telenor’s only path was to become a digital service provider. He also knew, however,
that the task before him would be challenging. “The core company must be digitalized,” he acknowledged.
“Telenor needs to establish digital verticals and must be fuelled with competencies in analytics and the
systematic use of big data.”14 Above all, he recognized that a key hurdle would be to convince all employees
to embrace the basic fact that the future would encapsulate radical changes to the current business model.
While the current organization was dominated by the “telco mentality,” wherein digital services were
primarily developed as an add-on reward for existing customers who paid for connectivity, Brekke sought
a change toward a “digital service provider mentality,” wherein digital services were the main source of
revenue, and connectivity was regarded as a simple utility. “A lot of our employees need retraining,” Brekke
explained. “We need new expertise in computer technology, product development, IT [information
technology], and network strategy. Some of our employees will not stay with the company, but overall we
will be a growth industry.”15
To avoid being cornered into becoming a marginal provider of simple utilities—or, worse, of sharing the
fate of the likes of the Eastman Kodak Company and Nokia Corporation—Brekke had to develop a strong
and convincing strategy to steer Telenor in the right direction. The question, of course, was how.
14
Ibid.
15
Aartun and Eriksen, op. cit.
55
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EXHIBIT 1: BUSINESS MODEL EVOLUTION
Source: Created by the case author.

EXHIBIT 2: WORLDWIDE MARKET FOR TELECOMMUNICATIONS SERVICES, 1990–2020
(ESTIMATES)
Source: Internal company documents.
56
Page 7 9B19M122
EXHIBIT 3: OVERVIEW OF TELENOR’S DIGITAL SERVICES
Services on Top of Core Product New Digital Business
Access Communication IoT/M2M

• WowBox • Rich • Double connectivity
• Wi-Fi and Small Communications revenues.
• Expand to new areas.
Cells Suite Financial Services
• Appear.in • Become leading online
• Comoyo payment platform in
• VoIP service Asia.
• Build lending position.
Online Classifieds
• Grow current generalist
Storage Other
sites.
• Capture • Health in BD • Invest in verticals (cars).
• MyContacts • Easypaisa in PK Advertising Technology
(Pilot)

(New)
• My Study in BD • Operate as separate
(Pilot) business.
• Build digital distribution.
Note: VoIP = voice over Internet protocol; BD = Bangladesh; PK = Pakistan; IoT = Internet of things; M2M: machine to machine.
EXHIBIT 4: POSITIONING OF BUSINESS MODEL ARCHETYPES
Note: OTT = over the top; telco = telecommunications company; API = application programming interface; SDN = software-
defined networking.
57
7.
9B19M098
CAMPUSHASH: EVOLVING BUSINESS MODEL OF AN
ENTREPRENEURIAL VENTURE
Atul Arun Pathak, Saroj Kumar Pani, and Anish Agarwal wrote this case solely to provide material for class discussion. The authors
do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

It was late evening on January 30, 2016, and Sanket Saurav and Rohit Tirkey, co-founders of the Indian
start-up CampusHash Technologies LLP (CampusHash) were returning home from a two-day technology
training workshop in Bengaluru. CampusHash focused on conducting software-language training programs
in engineering colleges in India. Saurav and Tirkey were discussing their company’s performance while
they navigated the Bengaluru traffic. In the last few months, CampusHash had gained some traction and
conducted over 75 training programs. However, the co-founders were not satisfied with the speed at which
their company was growing. As Saurav recalled, they had not been very ambitious when they started the
company. But now that they were seeing some success, they wanted more. The current model was limited
in its scalability, so the pair needed to rethink their strategy to meet their ambitious growth targets. They
had hoped that CampusHash would by now have scaled up so that its profits would be at least twice the
potential salaries the partners had given up. The team was hoping to raise funds from an angel investor and
were scheduled to pitch their business plan to a potential investor in a couple of weeks. They needed to
ensure that their business model and projections were attractive enough to secure this funding.
BACKGROUND
About the Founders
Saurav and Tirkey met in 2010 while pursuing bachelor’s degrees in computer science engineering at the
prestigious National Institute of Technology (NIT) in Jamshedpur, India. Sharing a common passion for
entrepreneurship, they started a web design firm called designfromtheheart in 2010, with the intent of earning
some easy pocket money. They both had a flair for web design and received quite a few projects in this field.
However, they soon got tired of doing the same type of work repeatedly and closed the venture in 2012.
By 2012, both Saurav and Tirkey had become excellent software programmers, and they often helped their
friends and even their seniors at college with programming assignments. They also enjoyed teaching others
how to write software code, so they decided to become trainers in this field. In December 2012, during their
third year at college, they started CampusHash, a venture focused on software programming language training.
59
Page 2 9B19M098
About CampusHash
Saurav and Tirkey realized that the computer science engineering course curriculum offered at NIT was not
up to date. While the world of software engineering had moved on to areas such as social media, mobile
applications, and big-data analytics, the institute’s curriculum was still teaching students rudimentary
software-engineering related concepts and did not expose them to cutting-edge technologies. Students
therefore found it difficult to present themselves as industry ready during job interviews for software
programming roles in information technology (IT) companies. To be ready for jobs in the IT industry,
engineering students needed to be equipped with both conceptual knowledge and hands-on skills in the
latest technologies. This gap became the genesis of CampusHash’s initial offering.
Saurav and Tirkey started by themselves mastering the programming languages and technologies that were
aligned with the latest trends in the IT industry. Then they started offering informal sessions on these topics
to their peers at college. They quickly realized that if students of premier engineering institutes like theirs
were facing these challenges, the situation was likely to be much worse among students at lower-ranked
engineering colleges. Thus, with the intention of equipping fellow engineering students with skills in the
latest technologies, Saurav and Tirkey started conducting two-day software-training programs at various

engineering colleges in and around Jamshedpur.
In the early days of their venture, Saurav and Tirkey spent a lot of time refining the content and structure
of their training programs. They designed a highly interactive, hands-on workshop where participants were
exposed to the latest concepts in IT and given opportunities to solve problems and practice writing working
software code. The two tried to align the workshops with the needs of the IT industry, keeping campus-
recruitment interviews in mind. They also offered participants the opportunity to complete take-home
assignments, which they subsequently evaluated. After each workshop, Saurav and Tirkey encouraged
participants to contact them via email to resolve any questions.
Noticing that many IT companies were engaged in projects in social media, website development, and
mobile applications development, Saurav and Tirkey conceptualized two training programs: Web
Development Using Google App Engine,1 and Python2 for Beginners. During this phase, CampusHash was
getting an average of about 20 participants per program and charging each participant ₹1,0003 to attend a
two-day program. Their workshops were less expensive than those of their competitors, who were charging
about ₹1,500–2,000 per participant for similar training programs. Net of all costs, CampusHash was
managing a 70 per cent profit margin from these programs.
Within a few months, CampusHash began receiving a large number of invitations from colleges that wanted
Saurav and Tirkey to conduct training programs on their campuses. Typically, this meant that they spent
six to eight hours per day in class as trainers whenever a program was conducted. Since their workshops
were entirely dependent upon their own availability as trainers and they were offering the workshops while
continuing their own studies at NIT, they could only manage a handful of workshops each month, mostly
on weekends. Their workshops soon became popular, and they received significant word-of-mouth
publicity. CampusHash received further visibility when it was made the official training workshop partner
for the annual PyCon India 2013 Python programming language conference, which attracted the best Python
programmers from across the country and abroad.
1
Google App Engine (often referred to as GAE or simply App Engine) was a web-framework and cloud-computing platform
for developing and hosting web applications in Google-managed data centres.
2
Python was a popular language for general-purpose programming. It emphasized code readability, and its syntax allowed
programmers to express concepts in fewer lines of code.
3
₹ = INR = Indian rupee; ₹1 = US$0.0147 as of January 30, 2016.
60
Page 3 9B19M098
During their final year at college, Saurav and Tirkey managed to conduct training programs at nearly 50
colleges across India in collaboration with PyCon. Given the early success of their venture, they decided to
take this further on a full-time basis upon graduation from NIT. Tirkey recalled,
Saurav was quite bullish about CampusHash and opted out of the institute’s job placement process.
Initially, I was not very sure, and therefore I went through a few interviews and landed a job at
IBM, with a pay package of ₹40,000 per month, while still in my final term at NIT. However, by
the time I finished college, I was seeing CampusHash as the dream that I wanted to pursue and
therefore never ended up joining IBM.
Saurav and Tirkey moved from Jamshedpur to Bengaluru after finishing college. Bengaluru had nearly 60
engineering colleges, which produced approximately 40,000 engineers every year. Most of these engineers
looked for jobs with leading and small software companies.
THE INDIAN IT INDUSTRY

In fiscal year (FY) 2016, the IT industry in India employed about 3.9 million people in IT services, business
process management (BPM), software products, engineering services, and hardware segments.4 Revenues
from the IT-BPM industry (excluding hardware) were estimated at US$130 billion and were growing at
about 8 per cent annually5 (see Exhibit 1), with exports playing a major role overall (see Exhibit 2). The
top 10 firms had about 40 per cent revenue share and employed over 35 per cent of the total employees.
The industry also included 150 medium-sized players, about 1,000 emerging players, and 15,000 small
players6.
Most IT firms recruited entry-level programmers from college campuses in large numbers. About 130,000–
150,000 graduates entered the Indian IT industry every year, most through on-campus hiring (see Exhibit
3). About 2 per cent of total industry revenue was spent on training employees, and 40 per cent of this
training budget was used for training entry-level employees to make them job ready7 (see Exhibit 4).
The industry was evolving rapidly, and new technologies were becoming increasingly popular. Further,
customers were becoming highly demanding, expecting high-quality work at low costs, and IT firms were
faced with a constant requirement to increase revenue per employee. Hence human resource (HR) managers
in IT firms were constantly under pressure to make the recruitment process faster and easier and to hire
quality talent while reducing the overall costs of hiring. The HR managers faced numerous recruitment-
related challenges in hiring entry-level employees and mid-level managers (see Exhibits 5 and 6), and they
needed to design efficient and quick hiring processes while controlling fixed and variable costs. However,
they also needed to ensure they selected high-quality candidates so that these new employees could be made
billable quickly. It was typically challenging to identify and attract the best talent from engineering
campuses, and the companies needed to do both effectively and efficiently.8
4
NASCOMM, Indian IT-BPM Industry in India: Skilling for Digital Relevance, September 2017, 4–5, accessed January 30,
2018, www.nasscom.in/knowledge-center/publications/indian-it-bpm-industry-skilling-digital-relevance-case-study.
5
NASCOMM, IT-BPM Industry in India: Sustaining Growth and Investing for the Future, June 22, 2017, 4–8, accessed January
30, 2018, www.nasscom.in/sites/default/files/NASSCOM_Annual_Guidance_Final_22062017.pdf.
6
IBEF India and Aranca, IT & ITeS, January 2018, 9–13, accessed January 30, 2018, www.ibef.org/download/IT_-ITeS-
Report-Jan-20181.pdf.
7
Ibid.
8
Raghav Poojary, “Key Recruitment Challenges in 2017,” People Matters, May 19, 2017, accessed February 3, 2018,
www.peoplematters.in/article/strategic-hr/key-recruitment-challenges-in-2017-15482.
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CURRENT STATUS
Near the end of 2014, Saurav and Tirkey welcomed a new partner, Iliyas Shirol, an experienced technologist
who had worked for around eight years in various leading IT companies and had a job with a monthly salary
of about ₹250,000. Shirol had industry experience that CampusHash’s initial co-founders lacked. He also
had a wide network of contacts in the IT industry. With Shirol’s input, CampusHash redesigned its training
programs to make them more effective and attractive to students. In particular, it started conducting
hackathons, or programming competitions, on the second day of each training program. The hackathons
helped CampusHash in multiple ways: participants’ performance in these events helped CampusHash
measure the effectiveness of its programs and, more importantly, the hackathons helped CampusHash
identify good programmers from among the participants. Soon, the team realized that they could refer a few
participants who performed well in the hackathons as potential internship candidates at IT companies.
Shirol helped CampusHash approach companies like Ibibo Group Private Limited (Goibibo), a leading
online hotel booking engine and airline ticket aggregator, to pitch the idea of CampusHash identifying and
selecting skilled engineering interns for them through its workshops. CampusHash approached other IT
companies with this idea, and a few showed interest. In return for some social media publicity, a few IT

companies started to sponsor CampusHash’s events. Once engineering students learned that CampusHash
workshops could potentially result in IT internships, the average number of participants in the training
workshops grew significantly, from 20 to 40 per program. To leverage this increased demand, CampusHash
increased its fees to ₹1,250 per participant for its two-day program.
The students were happy to have the opportunity to intern with good IT firms. In return, the IT firms paid
the interns a small stipend and used them to do billable software programming work. The IT firms also used
the internship periods to thoroughly evaluate candidates and made permanent job offers to those who fit
their requirements. CampusHash was not charging any fees or commissions to either the IT companies or
the candidates for its role in facilitating these internships. This activity helped CampusHash build contacts
with HR teams of IT companies and establish the CampusHash brand.
The IT companies found that the CampusHash interns were of above-average quality. For instance, when
Shirol sought feedback from Vikalp Sahani, the chief technology officer at Goibibo, about his experience
with CampusHash interns, he stated,
CampusHash-trained and selected interns were adequately skilled and could write entire software
applications for us. We were pleasantly surprised to see that, despite [their] lack of work experience,
these interns understood technology architectures and functionality. They were [the] right fit for
the intern roles we had in mind.
By the end of 2015, with CampusHash’s business growing rapidly, the three co-founders got together to make
a few critical decisions regarding expanding their technical training and recruiting marketing teams. The co-
founders felt that they had done well to launch their venture early and iterate the offerings as their
understanding of the market improved. However, they realized that since the workshops had to be delivered
in person by high-quality trainers, their business model was limiting CampusHash’s ability to scale up
revenues. At present, CampusHash was achieving about a 60 per cent net margin in these training workshops.
However, this profit margin was achievable because none of the co-founders was presently drawing a salary
for delivering the training. The co-founders were not sure whether to hire training professionals to deliver the
workshops. They were worried that using new trainers might affect the quality of training, and they were also
concerned about protecting their intellectual property and client relationships. One option they considered was
to continue as they were for now, rather than expanding rapidly.
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However, Saurav felt that investing more money, time, and creative energies into the current idea would
make it more difficult for them to subsequently change their business model. While CampusHash’s
performance was picking up, he felt that it was not yet good enough, given the team’s high aspirations and
high opportunity costs. He felt that adding new features like hackathons and approaching companies for
internships had certainly improved their business performance; however, he was worried that they were not
working toward a business model that was scalable and would give them a sustainable competitive
advantage. Saurav was of the opinion that CampusHash’s co-founders needed to seriously consider whether
they needed to change their business model entirely. One option was to focus more on the needs of the
company’s corporate clients. Alternatively, they could focus on providing more services to engineering
students looking for internships and jobs. “But then, we were a young company,” Saurav recalled. “Was I
being too impatient and hasty in thinking of radical changes?”
DECIDING THE ROAD AHEAD
Tirkey and Saurav had heard from HR managers of many IT firms about the challenges that these firms
faced when recruiting engineers for entry-level positions. CampusHash was keen to make use of this market

understanding to further refine its offerings. Tirkey recalled,
I felt that Saurav was keen to make some radical changes. He mentioned to me that while we should
keep one foot rooted in what we had learnt so far, we should also consider making fundamental
changes to our business strategy. He stressed that we ought to take more risks in order to realize
the true potential of our business.
Recruitment screening
Most of the smaller IT companies that CampusHash interacted with were finding it difficult to recruit good-
quality engineering talent for their teams. CampusHash already knew that part of the problem was that
aspirants’ formal engineering education did not meet the IT industry’s cutting-edge needs. Secondly, the
small IT firms did not have robust recruitment processes to help them identify quality resources from among
the hundreds of applicants during campus recruitment. Most companies followed a fairly subjective process
of assessing potential recruits in the initial screening round. This screening was typically done by either a
hiring manager or an experienced technical team member.
From his first-hand experience, Saurav explained to his co-founders that experienced technical employees in
most IT companies were generally extremely busy with project deliverables and saw recruitment screening as
an extra burden. They were unable and usually unwilling to devote the necessary time and attention to the
assessment process. In certain cases, companies used practical assignments where candidates had to solve
problems that tested their programming skills. Saurav felt that this was a good method of assessing
programmers’ skill levels but that the problems chosen were typically not ideal. He explained:
Either the problems were extremely elementary, drawn from standard textbooks, or the same
problems were reused multiple times. Thus, candidates’ abilities were not truly tested. As such,
candidates were able to clear the screening process but were later unable to perform well in their roles.
CampusHash realized that a refined version of its hackathon offering could potentially address these issues,
particularly for small IT companies such as Goibibo, the event management platform Explara, and the
health management platform ZeOmega, which did not have adequate resources to efficiently screen their
potential recruits. Saurav observed that programming hackathons had been gaining in popularity in India in
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recent years, and many companies were keen to hire developers who had performed well in such
competitions. Online platforms such as HackerRank and HackerEarth catered to these needs by conducting
hackathons on their portals. Saurav felt that the assessment methods used by these competitors were rather
simplistic and were inadequate for effectively differentiating between good and ordinary programmers. He
believed that there was a need for a high-quality automated assessment platform that could help companies
recruit good-quality employees who were skilled in various technologies.
Saurav, Tirkey, and Shirol got together to discuss the road ahead. Saurav suggested that they could consider
getting out of training altogether. He proposed that they could focus entirely on solving the employee-
screening needs of IT companies. They could achieve this by engaging with IT companies and carrying out
hackathons in engineering colleges as part of the IT companies’ campus recruitment processes and also
during lateral-hiring drives. To do this, CampusHash would need to build a strong business-to-business
(B2B) sales team to approach the HR managers of IT companies. It would also need to develop capacity
and capabilities to carry out multiple hackathons simultaneously in different locations, if the demand for
these services grew in the future. Shirol, however, was not entirely convinced by Saurav’s arguments. He
asked, “Would we be taking full responsibility [for] the screening and hiring decisions, or would we limit
ourselves to conducting the hackathon and giving the candidate performance scores to the company?”

Tirkey thought that it would be better to allow each client company to judge for itself the candidates’
solutions in terms of logic, code quality, and semantics. He felt that it would also be best if the client
companies decided the weighting of these parameters in their recruitment processes. He believed that
CampusHash ought to limit itself to simply preparing the test questions and providing the client companies
with performance reports about the candidates. Focusing on doing this much would not require too many
additional resources. Tirkey estimated that it would cost CampusHash about ₹10,000 for travel, ₹5,000 for
lodging, and about ₹5,000 for client-specific customization and creation of new programming problems for
each hackathon. The company would also need to spend about ₹6,000 per day for professional fees to
compensate its trainers to run each hackathon.
Saurav did not agree with Tirkey’s point of view. He noted that they had ambitious objectives for
CampusHash, and he believed that they needed to consider taking on greater scope to meet these objectives.
He felt that the more responsibility CampusHash took in the recruitment process, the more value it would
add for its clients. Saurav was confident that CampusHash could charge about ₹100,000 to each client IT
company for a hackathon, which would typically screen about 100 candidates. CampusHash’s value
proposition, in this case, was that it would be reducing the client’s recruitment-related operational expenses
and also assuring them of high-quality recruitment screening. Saurav estimated that each trainer could do
one program a week, and if CampusHash marketed this offering effectively, it was likely to get 16 such
assignments per month.
Outsourced Software Development
Tirkey changed the direction of the discussion altogether. He felt that CampusHash’s main strength was the
three co-founders’ expertise as great programmers who had learned how to spot other good-quality
programmers. He proposed that they could leverage this strength to create offerings beyond mere
recruitment and could instead try to get outsourced software-programming projects from Indian IT
companies.
Shirol was not entirely convinced and asked Tirkey why IT companies would consider a small nondescript
venture such as CampusHash as a potential outsourcing partner. Further, he wanted to understand the risks
involved in this business model. Tirkey explained that while he was not entirely sure whether it would
work, they could try to seek software-development assignments from IT product and services companies;
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CampusHash could break each assignment task into smaller problem statements and use these as coding
problems in its training hackathons. This way, they could get the software-development work done for free
by hackathon participants, and the students would be exposed to the actual industry problems they would
be expected to solve once they entered the industry.
Tirkey was confident that CampusHash could thus create a business that would yield about a 50–60 per
cent gross margin. He explained that for this approach, they would need to hire four sales professionals
focused on getting software-development projects from IT companies. The sales professionals would each
have to be paid a salary of about ₹30,000 per month. CampusHash would also need to recruit five software
developers, each costing about ₹50,000 per month, to carry out quality control and choose the right solutions
from among the candidates’ submissions to deliver to the client companies. Tirkey was confident that
CampusHash would be able to get about two to three assignments of this nature every month and that it
could charge about ₹300,000 for each assignment.
Scaling Up with an Online Platform

Saurav was strangely quiet for some time. When his partners asked why, he stated, “I was thinking of
something different. Why don’t we consider offering end-to-end recruitment and employee management
solutions to these small IT product and services firms?”
Saurav explained that this would require CampusHash to continually focus on developing a wide variety of
recruitment-related assessments. The company would have to convince recruitment managers of IT
companies that these assessments were superior to those they were currently using in their software
developer recruitment processes. CampusHash would have to work continually to understand the
requirements of each client company and would have to change its assessment models accordingly. Using
these customized models, CampusHash would be able to provide client recruitment teams with selections
of candidates who had been pre-assessed for further processing and final hiring-related decision-making.
In addition, CampusHash could leverage its understanding of the HR requirements of IT firms by creating
a talent management offering. This would help HR managers of IT firms assess the technical proficiency
of their existing software developers on an ongoing basis. For CampusHash, this would entail providing
clients with a suite of simulated assessments that supported various popular and emerging technologies
such as full-stack development, data sciences, artificial intelligence, and machine learning. Through these
assessments, CampusHash would be able to provide clients with detailed reports highlighting their
employees’ technical proficiencies.
Shirol stated that this option would require a lot of groundwork and operational changes to CampusHash’s
current offerings. He explained that this would involve CampusHash moving to a B2B or enterprise sales
model, which would typically result in high volumes. The company’s profit margins would depend upon
its ability to negotiate well with corporate clients and manage operational costs tightly.
Tirkey commented that one way CampusHash could scale up revenues in a non-linear manner, while not
having to add as many employees as before, would be to create technology solutions with increased
automation possibilities. For instance, it could create an online platform that allowed client companies to
register, create their own assessment tests, or give CampusHash the requirements to create customized tests
for them. Tirkey explained that CampusHash’s database of assessment questions would ultimately grow to a
scale where the marginal costs of servicing each subsequent client assignment would reduce significantly.
Tirkey believed that if this business took off, they would no longer need to deliver candidate assessments on-
site at college campuses. All they would require was a good B2B sales team and a strong technology backbone.
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Tirkey estimated that it would take CampusHash a year and cost about ₹1.0 million to develop this online
platform. (It was assumed that the IT platform would depreciate at a rate of 33 per cent using a straight-line
depreciation method.) The co-founders agreed that it would cost a further ₹100,000 per year to maintain
this platform. To implement this option, CampusHash would require a team of about five salespersons, each
costing about ₹30,000 per month, and six technical persons, costing about ₹300,000 per month in all. It was
likely that CampusHash would be able to get eight recruitment assessment assignments each month. In each
assignment, CampusHash would need to process about 500 job candidates; it would be able to charge ₹200
per candidate for this service. Additionally, CampusHash would be able to get four assignments a month
where it would carry out proficiency assessments of existing technical employees for client IT firms. In
each of these assignments, CampusHash would typically have to carry out comprehensive assessments of
about 300 employees and would be able to charge the client company ₹1,500 per employee assessed.
CampusHash estimated that it would have to raise about ₹7 million in equity as seed funding to successfully
take this option forward.
While their detailed discussion had given all of them some ideas about what CampusHash could potentially
do next, Saurav, Tirkey, and Shirol were unable to come to a decision within the meeting. Instead, they
decided to consider these options for a couple of days and meet again to crystallize CampusHash’s strategy.

CONCLUSION
As their cab wove through the evening traffic, Saurav and Tirkey continued to reflect on the difficult and
urgent strategic decisions that lay ahead. They realized that their success at their upcoming meeting with
the potential angel investor depended on their ability to showcase a business plan that was both ambitious
and practical.
Atul Arun Pathak and Saroj Kumar Pani are Associate Professors in the Strategy and Entrepreneurship area at the
Indian Institute of Management, Nagpur, India.
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EXHIBIT 1: INDIAN IT–BUSINESS PROCESS OUTSOURCING SECTOR, EXPORT REVENUES
FY2013 FY2014 FY2015 FY2016E FY2017P
Export Revenues (in US$ billions) 76 86 99 108 120
Note: E = estimate; P = projection; FY = Fiscal Year; the value for FY2016 was an estimate and that for FY2017 was a
projection.
Source: Adapted from IBEF India, IT & ITeS, January 2017, 35, accessed June 28, 2018, www.ibef.org/download/IT-and-
ITeS-January-2017.pdf.
EXHIBIT 2: INDIAN IT–BUSINESS PROCESS OUTSOURCING SECTOR, REVENUE SOURCES

(FY 2015, IN US$ BILLIONS)
Segment Domestic Exports

IT Services 13.0 55.0
Business Process Management (BPM) 4.0 23.0
Packaged Software and Product Development 4.0 20.0

Hardware 13.0 0.5
eCommerce 14.0 0.5
Total Revenue (US$ billions) 48.0 99.0
Note: IT = Information Technology.

EXHIBIT 3: GRADUATES ADDED TO TALENT POOL IN INDIA
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Number of English-speaking
graduates added to the 3.7 4.0 4.4 4.7 5.3 5.8
workforce in India (millions)
Note: The availability of English-speaking workers was a key driver in the growth of the Indian IT industry.; FY = Fiscal Year.
EXHIBIT 4: INDIAN IT–BUSINESS PROCESS OUTSOURCING SECTOR,

TRAINING EXPENDITURES BY SECTOR
FY2014
Percentage of Indian IT-business process management industry revenue spent
2%
on training employees
Approximate total spend by the Indian IT-business process management
US$1.6 billion
industry on training its workforce
Percentage of total training budget spent on training new recruits 40%
Note: IT = Information Technology; FY = Fiscal Year.

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EXHIBIT 5: CHALLENGES FACED IN ENTRY-LEVEL HIRING
General Professional
Challenge Area
Candidates Candidates
Ascertaining ability of candidate for the job role 56% 56%
Finding appropriate candidate with relevant qualifications 47% 36%
Screening from large number of applications 43% 29%
Verifying the credentials 36% 23%
Trusting candidates’ presented credentials 36% 15%
Identifying candidate impersonation at recruitment test/process 30% 20%
Recognizing exaggeration of relevant experience 20% 29%
Managing external agencies that perform candidate verifications 20% 7%
Note: Survey based on responses from 70 human resource managers and appropriate line managers from medium and large
Indian organizations.
Source: Adapted from Pearson, Assessing the Right Talent and Job Readiness for India’s Professionals: Challenges and
Opportunities in the India Hiring Sector, July 2015, 7, accessed June 28, 2018,

https://home.pearsonvue.com/Documents/Report/Pearson-VUE-India-Employer-Survey-2015.aspx.
EXHIBIT 6: CHALLENGES FACED IN MID-LEVEL HIRING
Challenge Area Percentage

Availability/pool of suitable candidates 69%
Finding appropriate candidate with relevant qualifications 46%
Ascertaining ability of candidate for the job role 45%
Trusting candidates’ presented credentials 28%
Verifying candidates’ credentials 24%
Screening applications 19%
Managing candidate verification 14%
Candidate impersonation 8%
Note: Survey based on responses from 85 human resource managers and appropriate line managers from medium and large
Indian organizations.
Source: Adapted from Pearson, Assessing the Right Talent and Job Readiness for India’s Professionals: Challenges and
Opportunities in the India Hiring Sector, July 2015, 6, accessed June 28, 2018,
https://home.pearsonvue.com/Documents/Report/Pearson-VUE-India-Employer-Survey-2015.aspx.
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ROCKY MOUNTAIN SOAP COMPANY: THE MOVE TOWARD
SUSTAINABLE PACKAGING
Jennifer Sloan, Leanne Hedberg, Jennifer Liu, and Yi Wu wrote this case under the supervision of Professor Joel Gehman solely to
provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial
situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

In November 2017, Cam Baty sat in the sun on a veranda soaking up the European countryside. He and his
wife, Karina Birch, had taken a well-deserved sabbatical from their life as co-owners of Rocky Mountain
Soap Company (RMSC), based in Canmore, Alberta.
Despite being an ocean away, Baty accepted a webchat invitation and began an interview about RMSC’s
path ahead. RMSC was committed to sustainability, and both he and Birch felt strongly about continuing
to provide toxin-free, 100 per cent natural bath and body products. They also were intent on finding a way
to make their product packaging more closely mirror their values: “At the end of the day we believe in
our business. . . . Our product is 100 per cent natural and nobody can touch us on that. . . . We have tried
to build sustainability in our built environment, and the next step is to build it into our packaging.”
While laudable, RMSC’s commitment to sustainability was not straightforward, especially given the
intensifying competition in the personal care retail sector. As a still-growing company, how could RMSC
ensure that its focus on sustainability remained central to how it did business? And, maybe more
importantly, what investments would the company need to make in order to help customers support
RMSC as an organization that went beyond greenwashed marketing to deliver both a product and
packaging that truly aligned with a sustainability consciousness?
ROCKY MOUNTAIN SOAP COMPANY: THE ORGANIZATION
History
Tricia Pearson founded RMSC in 1995 but put the business up for sale a few years later when her
husband received an overseas job transfer. In 2000, the company and its single 300-square-foot location
was purchased for CA$45,0001 by regular customer and business graduate Birch and her then boyfriend
Baty, also a business graduate. During that first year, Birch and a team of her friends could be found
making the soaps on a hot plate in the back of the store and affixing printed labels with a glue stick.
Since that first humble year, however, Birch and Baty watched as annual sales rose to more than $10
million (see Exhibit 1). By 2017, RMSC had more than 700 wholesale accounts and had expanded into
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six major retail markets, with seven of its 11 stores located in Alberta. Also in 2017, Baty and Birch had
their eyes set on a Yonge Street location in Toronto and had plans to open a storefront in Ottawa.
RMSC’s impressive growth landed the company in a market alongside much larger industry players that
had deep resource pools to draw from. Baty explained:
We used to be the mom and pop [store] in Canmore, but now we’re playing against the big guys
from all over the world: The Body Shop, Lush, Sage, Kiehl’s. . . . Now there’s [sic] 10 players in
our category and it’s extremely competitive. . . . We really have to be good to differentiate
ourselves. We’re really still an infant business with infant skills.
Feeling their way into a differentiation strategy took time, and it was not until about 2003 that Birch and
Baty decided to include only 100 per cent natural ingredients in their products, a strategic decision that
moved RMSC away from being a mere producer and retailer toward becoming an outward representation
of a value system and informed lifestyle choice.

Natural Innovation
Birch and Baty believed that “with fewer ingredients, you obtain higher quality.” Thus, they focused on
their products comprising 10 or fewer ingredients and locally sourced whenever possible. Additionally, they
published two lists: a “Green List” of their 21 top natural or organic ingredients, many of which were
sourced from local grocery and restaurant suppliers, and a “Red List” of 21 products that RMSC would
“never put in anything they make.” Their commitment was to provide customers with therapeutic and toxin-
free products that could go onto the skin and into the body without contributing to anyone’s “body burden”
(which RMSC defined as the number of toxins that have been absorbed and stored in body tissues).
RMSC’s product design process, which Birch oversaw, primarily relied on customers and employees
presenting a strong case for bringing a new product to market. Once a product idea was approved by
Birch, she then worked with an on-staff chemist to develop product formulations and essential oil blends
to ensure the safety of the product. Ensuring product safety meant that the product was tested—
repeatedly—on Baty, Birch, their kids, store managers, and employees before it was ever sold to
customers. For example, before a single salt scrub actually launched, RMSC insiders thoroughly tested
each of its 17 different formulations.
While RMSC’s “tested on owners, not animals” approach was a protest against animal testing, it also meant
more. RMSC believed that if all body care companies would use only toxin-free ingredients, then the entire
industry would completely eliminate the need to test on animals. RMSC also asserted that non-toxic body
care products served to protect natural habitats and aquatic life after the products went down the drain and
re-entered the natural environment. The co-owners’ goal was to change the industry as a whole so that it
took care of animals and their habitats. They conscientiously worked to make “100 per cent natural” an
environmentally and socially conscious choice for all consumers, not just RMSC customers.
Manufacturing
To ensure high quality, RMSC formulated and manufactured its own products in its Canmore workshop, a
16,000-square-foot “green” space that welcomed visitors who could see first-hand how products were
made and how RMSC’s different departments worked together to conduct business.
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In planning for the facility expansion, which took place in 2015, Baty and Birch were intentional in
designing a manufacturing space that aligned with their commitment to being 100 per cent natural and
eco-friendly. Following through with that intention, they purchased and renovated a used building rather
than constructing a new one. Whenever possible, they also reused existing furnaces, insulation, lighting,
doors, bathroom fixtures, and kitchen cabinets. Reclaimed wood was chosen for all millwork and studs,
and all lighting was obtained from reclaimed sources. Solar electricity was added, low-VOC (volatile
organic compound) paint was used, and recycled fibre carpeting was installed. Desks were constructed
from birch plywood rather than laminates, tables were made from barn fir, and marble countertops were
fashioned from slabs that once dressed the outside of a Toronto office tower.
The expanded workshop allowed RMSC to keep the small-batch processing Baty and Birch believed was
integral to the consistent manufacture of high-quality products while providing enough space for the
operation to triple in size before they needed to consider another facility. And, while Baty admits that
their expansion approach was more expensive than the other avenues they considered (most specifically,
relocating manufacturing operations to his hometown of Winnipeg, where real estate and development
costs were significantly lower than in the resort community of Canmore), the decision to keep operations
“nestled in the heart of the snow-capped Canadian Rockies” made sense from both an ethical and

branding perspective. Baty fittingly affirmed, “We are the Rocky Mountain Soap Company, after all.”
Corporate Culture
In 2012, RMSC was recognized as one of Canada’s 10 Most Admired Corporate Cultures.2 This
prestigious award was created to celebrate and advance “best-in-class Canadian organizations for having
cultures that have helped them enhance performance and sustain a competitive advantage.”3
In line with the criteria for this award, RMSC identified five key values that helped drive its business
practices:
 Positivitude—RMSC coined this word to amalgamate positivity and attitude. RMSC believed that the
more positive energy that people experienced, the healthier and happier they would be.
 Be Kind—RMSC invited its staff to consider the impact of their actions on those around them: “In the
hardest moments it’s not what you do, but how you do it.”
 Customer Service Is an Extreme Sport—According to RMSC, providing great service required
creativity, focus, and a solid game plan, all built from sharp skills and meaningful relationships.
 Cultivate Team Spirit—“Never leaving anyone behind” was the summary principle. RMSC advocated
open and honest communication, respect, and positivity as methods to build team trust and create
unity around shared objectives.
 Give It a Go—This final value referred to the use of innovation, adventure, courage, curiosity, open-
mindedness, flexibility, and imagination.
These values stemmed from Baty and Birch’s general leadership approach to dismantling barriers between
management and employees. To demonstrate their commitment to sharing RMSC’s successes with their
employees, Baty and Birch drew on WestJet’s model and implemented their own profit-sharing program.
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THE SKINCARE INDUSTRY
The retail market of skincare products included products formulated for facial care, body care, hand care,
make-up removal, and depilatories (hair removers). Facial care, body care, and hand care made up 96 per cent
of the skincare market in 2017 (see Exhibit 2).
The Personal Products Council, a trade association for the cosmetics and personal-care products industry
with more than 600 member companies, reported annual industry revenue of more than US$250 billion
worldwide for 2016.4 Furthermore, the global market for this sector was expected to increase between 3.5
per cent and 4.5 per cent to reach a forecasted total market value of US$500 billion by 2020.5
Industry Trends and Opportunities
RMSC was growing amid rapidly changing trends in the personal care product industry, including
increased demand for organic and natural products, new target markets, and new distribution channels.

Increased Demand for Organic and Natural Products
Consumers had begun to draw connections between toxic chemicals and health, which led to a
realignment in the personal care market.6 Even though natural and organic products were generally 30–50
per cent more expensive than traditional products, this segment’s consumer base was growing. In
response, large manufacturers were trying to enter this growing market by buying smaller, natural brand
companies like RMSC.7
New Target Markets
Historically, the primary target market for personal care products had been women. However, statistics
revealed that 52 per cent of global male consumers considered their looks and appearance to be either
important or very important, and 29 per cent touched up their look throughout the day.8 Not surprisingly
then, the men’s personal care market was expected to grow to US$166 billion worldwide by 2022,
translating to an exceptional compound annual growth rate (CAGR) of 5.4 per cent from 2016 to 2022.9
New Distribution Channels
In 2016, consumers were 37 per cent more likely to buy products such as soap bars and shaving cream on
Amazon.com, Inc. (Amazon) in 2016 than they were in 2015.10 By leveraging e-commerce distribution,
smaller companies could compete with established players, particularly by posting product reviews,
creating positive customer experiences, and providing community engagement forums.
The Natural and Organic Personal Care Market
Consumers’ purchase behaviours for natural and organic skin and hair care products were influenced by
three main factors: health consciousness, environmental consciousness, and appearance consciousness.
The term “health consciousness” referred to consumers’ desire to actively seek a healthy lifestyle, and
environmental consciousness referred to consumers' preference to purchase products that had a minimal
impact on the environment. Lastly, appearance consciousness referred to consumers’ perception that
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chemical-free products would be more likely to help them externalize an internal image of being both
health conscious and environmentally conscious.11 Although the natural and organic personal care market
was a small market segment, increasing demand from consumers and growing awareness were expected
to drive the global natural and organic personal care market to an estimated value of US$22 billion by the
end of 2024, based on a CAGR of 8.8 per cent. North America was expected to dominate the market with
a 33.5 per cent global market share, registering a CAGR of 9.7 per cent.12
Competitors
At the time that RMSC was contemplating changes to its product packaging, the natural and organic
personal care market appeared to be highly fragmented and intensely competitive. Brands were working
to differentiate their images and products by competing on the basis of product, cost, and even packaging.
Key global players in the same market included Estée Lauder Companies Inc.; L’Oréal Group (L’Oréal);
L’Occitane en Provence; The Body Shop International Limited (The Body Shop); Burt’s Bees, Inc.
(Burt’s Bees); and Kiehl’s LLC (Kiehl’s).13 However, considering RMSC’s geographic location and
primary product line, the most relevant competitors were Lush Retail Ltd. (Lush), Kiehl’s, Burt’s Bees,
and The Body Shop.

Lush
Founded in 1994, Lush was a UK-based firm that focused on using fresh and natural ingredients.14 In
2016, the company generated US$900 million in sales, which represented an increase of 26 per cent from
the previous year.15 By 2017, Lush had opened approximately 250 stores in North America with products
being made primarily in two Canadian factories. To offer some context, workers in these factories hand-
made roughly 500 fist-sized bath bombs per day.16
Lush’s focuses included (1) fighting animal testing, (2) providing the freshest cosmetics online, (3)
practising ethical buying, (4) providing 100 per cent vegetarian products, (5) building products by hand,
and (6) using “naked packaging” as often as possible. To reduce packaging waste, 35 per cent of its
products (e.g., solid shampoo bars and massage bars) were unpackaged, with the remaining product line
packaged using recycled and recyclable materials.17
Kiehl’s
Kiehl’s began as a New York pharmacy in 1851 and had been developing and marketing efficient, highly
concentrated skin care from natural ingredients ever since. By 2017, it surpassed sales of US$1 billion.18
The company focused on three pillars: quality, service, and community.19 Until 2015, the company had
donated approximately US$3.5 million to charities related to its three core initiatives: environmental
sustainability, HIV (human immunodeficiency virus) protection and education, and children’s well-being.20
Recently, Kiehl’s had partnered with Academy Award-winning actor Matthew McConaughey to benefit
Autism Speaks, a global leader in autism advocacy. Each time someone shared Kiehl’s awareness video,
Kiehl’s donated US$1, up to a maximum of US$200,000, to autism advocacy. To further support the cause,
the company released a Kiehl’s x Matthew McConaughey Limited Edition Ultra Facial Cream.21
In addition, Kiehl’s had a program called “Recycle and Be Rewarded” that provided customers with a
complimentary product when they returned 10 empty bottles of Kiehl’s products.22
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Burt’s Bees
Acquired by The Clorox Company in 2007, US-based Burt’s Bees was originally founded in 1984 and
was a prominent role model for this market sector. In 2008, the company collaborated with the Natural
Products Association to develop the Natural Standard for Personal Care Products, and in 2011, the
ImagePower Green Brands Survey identified Burt’s Bees as the number one green brand as perceived by
US consumers.23
A member of the Sustainable Packaging Coalition, Burt’s Bees had committed to the highest standards of
package development and actively developed innovative sustainable packaging solutions including
TerraSkin wraps, an environmentally friendly, treeless, and bleach-free paper alternative the company
used to package its bar soaps.24
The Body Shop
Established in 1976, the UK cosmetics chain was purchased by L’Oréal in 2006 and sold for US$1.1
billion in 2017. The Body Shop’s new owner, Natura, was a Brazilian cosmetics group considered to be a

pioneer in nature-inspired products, personalized service, and ethical business. The acquisition provided
Natura with more than 3,000 stores in 66 countries, the corporate infrastructure to test its local expertise
at a global level,25 and sales of more than US$1 billion.26 The core values of the business included (1)
supporting community fair trade, (2) activating self-esteem, (3) defending human rights, (4) eliminating
animal testing, and (5) protecting the planet.27
In 2016, The Body Shop introduced a new commitment, Enrich Not Exploit, which aimed to protect and
enhance the planet and its people. The Enrich Not Exploit initiative introduced new packaging designs for
all 905 full-sized products and for more than 100 trial-size and travel-size products with the goal that, by
2020, 70 per cent of product packaging would not contain plastics made from oil. To achieve this goal,
The Body Shop partnered with Newlight Technology to develop packaging using AirCarbon, a
thermoplastic made from pollutant gases—carbon dioxide and methane. The Body Shop claimed that it
was the first within the beauty industry to commercialize the use of AirCarbon28 and saw the move as an
outward commitment toward the principle of “keeping fossil fuels in the ground.”29
SUSTAINABLE PACKAGING
One of the fastest-growing influences on consumers’ purchasing behaviour were the sustainability claims
that were made by companies.30 In 2015, Nielsen conducted an online survey of 30,000 consumers in 60
countries to assess how sustainability influenced purchasing decisions. At that time, customers weighed
environmentally friendly packaging as driving 41 per cent of their purchase behaviour, the same rank they
afforded products made by companies known for their commitment to community (see Exhibit 3 for a full
list of customer responses).
Perhaps in response to changing consumer behaviours that valued sustainability, companies began
including environmentally responsible packaging as a part of their standard practice and sustainability
goals, pushing the sustainable packaging industry toward the forecasted value of US$244 billion in
2018.31 Sustainable packaging referred, in general, to the use of materials and manufacturing methods that
had a positive impact on the environment and on people. The Sustainable Packaging Coalition’s (SPC’s)
definition for sustainable packaging focused on eight equally weighted criteria:32
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 is beneficial, safe, and healthy for individuals and communities throughout its life cycle,
 meets market criteria for performance and cost,
 is sourced, manufactured, transported, and recycled using renewable energy,
 optimizes the use of renewable or recycled source materials,
 is manufactured using clean production technologies and best practices,
 is made from materials healthy throughout the life cycle,
 is physically designed to optimize materials and energy, and
 is effectively recovered and utilized in biological and/or industrial closed loop cycles
Packaging for RMSC
From the beginning, Birch and Baty had embedded economic, social, and environmental logic into
RMSC’s business and manufacturing operations. Waste reduction and sustainability efforts included
simple measures, such as reducing and simplifying product packaging, and more complex decisions, such
as abandoning traditional plastic-based shipping peanuts in favour of an edible corn starch version. In an
interview with Forbes, Birch explained: “It just makes sense. We work hard to make sure that our product

is clean, 10 ingredients or less [sic], that our stores and offices are eco-friendly. It’s only natural that we
try to limit our impact in the packaging department as well.”33
As Birch and Baty decided how to solve the problem of unsustainable packaging, they considered at least
three possible avenues: reduce, recycle, or refill.
Reduce
Reducing package material content and eliminating unnecessary design work on packages could be both
earth-friendly and cost-saving. To date, RMSC had used minimal packaging for soap and had removed
extraneous elements from other personal care products. Further reductions were best thought to be done
“one step at a time” where customers and staff would have the opportunity to contribute to the unfolding
of new package strategies.
Recycle
Recycling was considered a way to address package waste but was generally neither convenient nor
profitable. Many sources of personal care packaging were comprised of blended materials that were not
easily separated, making recycling virtually impossible, especially when leftover product remained in the
tube or container. Furthermore, the high costs for collection, separation, and processing made traditional
disposal methods (i.e., landfill or incineration) the most economically viable options.34
Nonetheless, to facilitate recycling, RMSC designed packaging from simple materials that did not require
extensive disassembly prior to being recycled. The company also coloured its packaging with natural inks
that would not release toxins into the environment.
Further, RMSC promoted “upcycling,” a way of recycling that used an unwanted item to create a product
of higher quality or higher value than the original.35 For example, in 2016, RMSC worked with the SPC
in the United States and a Chicago-based supplier to develop a paper-based, compostable pot that was
robust enough for packaging waxy substances, such as lipsticks. RMSC used this packaging, made from
the fibres of recycled materials and post-consumer waste, to launch its Lip Quench product. The RMSC
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website showed how, once empty, the Lip Quench package could be upcycled into a plant pot used to
start seedlings.36 Later, this packaging would become Forest Stewardship Council-certified.37
Although this innovative packaging aligned with RMSC values, developing and sourcing it had been cost
and time intensive. At a cost of $2.50 per unit, the compostable packaging for Lip Quench comprised 72
per cent of the cost of goods sold (COGS) and 18 per cent of the retail price. RMSC’s average packaging
costs were 36 per cent of COGS and 4 per cent of retail price. Traditional plastic packaging would have
cost only $0.56 per unit (see Exhibit 4).
Refill
RMSC considered two refill strategies. The first was to create milk carton packaging that would function
as a refill for liquid products such as shampoo, conditioner, body wash, and liquid soap. RMSC’s current
refill bottle was made of highly recyclable plastic, but Baty and Birch believed that a cardboard solution
would be better. They had approached a packager to help develop a carton but were having difficulty
finding a closure that would prevent soap and essential oils from leaking out and an exterior coating that

could effectively resist water. These research and development efforts were expensive, and as a small
company, RMSC had limited bargaining power and no economy of scale to leverage.
For the second strategy, RMSC considered splitting the product containers into an outer component and
an inner component. The outer container would be designed to house an inner insert, which would contain
the product. Because RMSC used glass jars for products in its skincare line and the glass industry was
energy intensive,38 providing customers with a cardboard or plastic insert option could effectively reduce
waste and decrease the amount of energy required to transport materials (cardboard was significantly
lighter than glass). Customer reactions to this approach remained unclear, as did the total cost of
redesigning current packaging to accommodate an insert option.
CONCLUSION
Birch and Baty knew that decisions about how to build greater sustainability into RMSC’s packaging
would be waiting for them as soon as they returned home from Europe. They recognized how important
these efforts were for their company, but also saw how RMSC’s progress could motivate a new industry
precedent that would benefit businesses, people, and the environment in the long term. Yet, none of these
initiatives would matter if the expense of pursuing them put the company at risk: financial viability was a
prerequisite for a business pursuing environmental and social stewardship.
What should Birch and Baty do? How could they use the resources available to develop a packaging solution
that aligned with RMSC’s brand focus of “100 per cent natural”? Were there other options to consider? Was
there someone they could bring on board to help? In general, how could they find the support they needed?
Baty knew that improved packaging would happen only if he and Birch forced it to happen, at least
initially. His mind began filling with potential solutions. Baty’s eyes turned toward the patio table,
landing first on a pen and some paper, and then on a tube of natural sunscreen. The choice was simple:
sunscreen first, pen second.
Acknowledgement: The authors thank the Canadian Centre for Corporate Social Responsibility at the Alberta School
of Business and the University of Alberta Office of Sustainability for their support in the development of this case study.
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EXHIBIT 1: ROCKY MOUNTAIN SOAP COMPANY REVENUE GROWTH, 2013–2019 (REVENUE IN

THOUSANDS OF CA$)
FY13 FY14 FY15 FY16 FY17* FY18* FY19*
Total Revenue 7,139 7,552 8,509 9,836 10,911 11,944 13,883
LTR % 32.3% 31.1% 30.5% 33.9% 32.8% 36.3% 36.5%
COGS % 28.6% 29.2% 31.2% 31.3% 24.0% 28.8% 27.8%
OH % 20.2% 23.3% 24.5% 23.5% 25.3% 25.4% 22.0%
R&D % 3.0% 3.0% 2.5% 2.3% 2.5% 2.9% 2.7%
Note: FY = fiscal year; LTR = loan to revenue (also referred to as debt to income); COGS = cost of goods sold; OH =
overhead; R&D = research and development; *FY17–FY19 are estimates.
Source: Compiled by authors based on company data.
EXHIBIT 2: 2017 GLOBAL SKINCARE PRODUCTS MARKET CATEGORY SEGMENTATION
Category Value (in US$ billions) %

Facial Care 97.4 80.5
Body Care 15.6 13.0
Hand Care 3.1 2.5

Make-up Remover 2.3 2.0
Depilatories 2.3 2.0
Total 120.7 100.0
Source: Reformatted by the authors from Marketline, “Global Skincare,” 2, MarketLine Industry Profile, 2018.
EXHIBIT 3: NIELSEN RESEARCH ON HOW SUSTAINABILITY INFLUENCES CONSUMERS’

PURCHASING INTENT
Key purchasing drivers as weighted by all survey respondents

The products are made by a brand or company that I trust 62%
The product is known for its health & wellness benefits 59%
The product is made from fresh, natural, or organic ingredients 57%
The product is from a company known for being environmentally friendly 45%
The product is from a company known for its commitment to social value 43%
The product’s packaging is environmentally friendly 41%
The product is from a company known for its commitment to my community 41%
I saw an ad on television about the social or environmental good the product’s company is doing 34%
Source: Reformatted by the authors from Nielsen, The Sustainability Imperative. New Insights on Consumer Expectations, October
2015, accessed November 22, 2017, www.nielsen.com/content/dam/nielsenglobal/dk/docs/global-sustainability-report-oct-
2015.pdf?afflt=ntrt15340001&afflt_uid=oB7cx5Vqojc.7kTBloThxcFQfMbv5bHjKFtN7-7s9F2r&afflt_uid_2=AFFLT_ID_2.
EXHIBIT 4: ROCKY MOUNTAIN SOAP COMPANY’S PACKAGING OPTIONS—TRADITIONAL

VERSUS SUSTAINABLE LIPSTICK
Item Conventional Lipstick with Lip Quench with Sustainable
Traditional Packaging Packaging
Retail Price $14.00 $14.00
Total COGS $1.55 $3.49
COGS as a % of Retail Price 11% 25%
Packaging Cost $0.56 $2.50
As a % of Retail Price 4% 18%
As a % of COGS 36% 72%
Note: COGS = cost of goods sold
Source: Compiled by authors based on company data.
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ENDNOTES
1
All currency amounts are in CA$ unless otherwise specified.
2
“Rocky in the Spotlight,” Rocky Mountain Soap Co., accessed November 16, 2017,
www.rockymountainsoap.com/pages/awards.
3
“Canada’s Most Admired Corporate Cultures™,” Waterstone Human Capital, accessed November 18, 2017,
https://waterstonehc.com/cma/awards/canadas-most-admired-corporate-cultures/.
4
“Personal Care Products,” Vault, accessed November 23, 2017, www.vault.com/industries-professions/industries/personal-
care-products.aspx.
5
Simon Pitman, “Growth of Global Ingredients Market Outpaces Personal Care Industry,” Cosmetics Design, October 28,
2015, accessed November 23, 2017, www.cosmeticsdesign.com/Article/2015/10/28/Growth-of-global-ingredients-market-
outpaces-personal-care-industry.
6
“Industry Trends 2017—CPG Personal Care,” Snipp!, August 14, 2017, accessed November 22, 2017,
www.snipp.com/blog/2017-08-14/industry-trends-2017-cpg-personal-care/.
7
“First Research Industry Profile: Personal Care Products Manufacturing,” First Research, August 7, 2017.
8
Imogen Matthews, “Trends in the Global Men’s Grooming Market,” In-cosmetics, January 29, 2015, accessed November
21, 2017, http://news.in-cosmetics.com/2015/01/trends-in-the-global-mens-grooming-market/.
9
“Men's Personal Care Market to Reach $166 Billion, Globally, by 2022—Allied Market Research,” Cision: PR Newswire,
October 19, 2016, accessed November 23, 2017, www.prnewswire.com/news-releases/mens-personal-care-market-to-
reach-166-billion-globally-by-2022-allied-market-research-597595471.html.
10
“Industry Trends 2017,” op. cit.
11
Hee Yeon Kim and Jae-Eun Chung, “Consumer Purchase Intention for Organic Personal Care Products,” Journal of

Consumer Marketing 28, no. 1 (2011): 40–47.
12
“Natural and Organic Personal Care on Track to $22 Billion by 2024,” Global Cosmetic Industry, July 12, 2016, accessed
November 15, 2017, www.gcimagazine.com/marketstrends/segments/natural/Natural-and-Organic-Personal-Care-on--
Track-to-22-Billion-by-2024-386495471.html.
13
“Global Natural and Organic Personal Care Products Market Projected to Be Worth USD 17.63 Billion by 2021: Technavio,”
BusinessWire, February 14, 2018, accessed July 10, 2019, www.businesswire.com/news/home/20170601006665/en/Global-
Natural-Organic-Personal-Care-Products-Market.
14
“Lush Cosmetics Ltd.,” Bloomberg, accessed November 28, 2017, www.bloomberg.com/research/stocks/private/snapshot.
asp?privcapid=159642571.
15
Walter Loeb, “Lush Beauty: Taking the Industry by Storm Thanks to Young Love,” Forbes, April 7, 2017, accessed
November 14, 2017, www.forbes.com/sites/walterloeb/2017/04/07/lush-beauty-taking-the-industry-by-storm-thanks-to-
young-love/#4d3d692b11c5.
16
Jennifer Roberts, “Canadian Factories Keep 250 Lush Stores Humming across N. America,” Globe and Mail, September
19, 2017, accessed November 22, 2017, https://beta.theglobeandmail.com/report-on-business/economy/growth/canadian-
factories-keep-250-lush-stores-humming-across-n-america/article35461101/?ref=http://www.theglobeandmail.com.
17
“Our Values: Naked—Packing-Free Goods Are Always in Store,” Lush, accessed November 15, 2017,
www.lush.ca/en/article_our-values-naked.html.
18
Erin Griffith, “L’Oréal’s Beauty Secret: Buying Other Brands,” Fortune, March 15, 2017, accessed July 29, 2019,
https://fortune.com/2017/03/15/loreal-mergers-acquisitions/.
19
“Kiehl’s,” L’Oréal, accessed November 22, 2017, www.loreal.ca/brand/l’oréal-luxe/kiehl’s.
20
Nichole Dunst, “Greenwashing Alert: Kiehl’s,” Ecocult, June 9, 2015, accessed November 22, 2017,
https://ecocult.com/greenwashing-alert-kiehls/.
21
“Kiehl’s Partners with Matthew McConaughey to Benefit Autism Speaks,” L’Oréal, press release, September 27, 2017,
accessed November 27, 2017, www.loreal.com/media/news/2017/september/kiehls-partners-with-matthew-mcconaughey-
to-benefit-autism-speaks-.
22
“Recycle and Be Rewarded Program,” Kiehl’s, accessed November 23, 2017, www.kiehls.ca/en/editorial-pages/recycle-
and-be-rewarded/.
23
Burt’s Bees, “Our History,” 2017, accessed November 23, 2017, www.bee2bee.com/story-history.html.
24
Burt’s Bees, “Commitment to Green Packaging—Environment & Sustainability,” accessed November 14, 2017,
www.burtsbees.ca/c/root-commitment-to-green-packaging-environment-sustainability-burt-s-bees.html.
25
“Body Shop Bought by Brazil’s Natura,” BBC News, June 27, 2017, accessed November 12, 2017,
www.bbc.com/news/business-40417961.
26
“Sales at 30 September 2017,” L’Oréal: Finance, November 2, 2017, accessed November 14, 2017, www.loreal-
finance.com/eng/news/sales-at-30-september-2017-1216.htm.
27
The Body Shop, “The Body Shop Values Report,” 2014/2015, accessed July 29, 2019,
https://www.thebodyshop.com/medias/Values-Report-2015-6.pdf?context=pdf/ha8/h40/9089793032222.pdf/.
28
Sarah Dawood, “Why The Body Shop Is Making Packaging out of Greenhouse Gases,” Design Week, February 1, 2016,
accessed November 25, 2017, www.designweek.co.uk/issues/1-7-february-2016/why-the-body-shop-is-making-packaging-
out-of-greenhouse-gases/.
29
The Body Shop, “Enrich Our Planet,” 2017, accessed November 23, 2017, http://thebodyshop.com.ph/commitment/enrich-planet.
30
Nielsen, The Sustainability Imperative. New Insights on Consumer Expectations, 5, October 2015, accessed July 29, 2019,
https://www.nielsen.com/wp-content/uploads/sites/3/2019/04/Global20Sustainability20Report_October202015.pdf.
78
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31
Mike Hower, “Sustainable Packaging Market to Hit $244 Billion by 2018,” Sustainable Brands, February 18, 2014,
accessed November 22, 2017, www.sustainablebrands.com/news_and_views/packaging/mike_hower/report_sustainable_
packaging_market_hit_244_billion_2018.
32
Sustainable Packaging Coalition, Definition of Sustainable Packaging, August 2011, accessed November 22, 2017,
https://sustainablepackaging.org/wp-content/uploads/2017/09/Definition-of-Sustainable-Packaging.pdf.
33
Esha Chhabra, “This Canadian Company Has $11 Million in Annual Sales While Putting the Environment First,” Forbes,
January 23, 2017, accessed November 20, 2017, www.forbes.com/sites/eshachhabra/2017/01/23/how-this-canadian-
company-has-11-million-in-annual-sales-while-putting-the-environment-first/#6803d3ce5085.
34
Tom Szaky, “Recycling Adds Value to Beauty Packaging,” Happi, January 1, 2017, accessed November 20, 2017,
www.happi.com/contents/view_experts-opinion/2017-01-01/recycling-adds-value-to-beauty-packaging/.
35
“Upcycle,” accessed December 6, 2017, www.dictionary.com/browse/upcycle?s=t.
36
“Upcycle Your Tinted Lip Balm Packaging,” Rocky Mountain Soap Company, August 2, 2016, accessed November 20,
2017, www.rockymountainsoap.com/blogs/blog/upcycle-your-lip-quench-packaging.
37
“Rocky Mountain Soap Co’s Lip Color Is in Paper Pots,” Beauty Packaging, February 13, 2017, accessed November 14, 2017,
www.beautypackaging.com/contents/view_breaking-news/2017-02-13/rocky-mountain-soap-cos-lip-color-is-in-paper-pots.
38
“Plastic vs Glass VOTE!,” Voss World, November 20, 2012, accessed November 20, 2017,
https://vossworld.wordpress.com/2012/11/20/plastic-vs-glass/.
79
9.
9B19M105
BED BATH & BEYOND: IS ONLINE THE SOLUTION?1
Wolfgang Messner, Suzanne Ducker, and Katherine C. Wilson wrote this case solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.

In December 2017, Bed Bath & Beyond Inc. (BBBY) announced its third-quarter earnings results, revealing
a 50 per cent year-over-year decline in net profits and a 45 per cent decline in stock price as compared to
the beginning of 2017. BBBY was facing a steady decrease in physical store sales even as digital sales
showed growth.2 Steven Temares, then chief executive officer (CEO) of BBBY, acknowledged that “how
[customers] discover product[s], their expectations and knowledge around pricing and services offered, and
how they share their thoughts about their shopping experiences are all changing rapidly.”3
But the rapid shift to online sales simply could not cover the losses in a business that historically depended
on in-person shopping. Over the previous 10 years, BBBY had experienced continuously decreasing gross
margins, pressure from shipping expenses for increasing online orders, lower merchandise margins, and
expenses from discount coupons. In 2017, BBBY also spent US$264 million4 in capital expenditures for
technology investments related to both online sales and improvements to store infrastructure, and its
advertising and employment expenses increased.5
Combined, the growing expenses and declining profits brought about significant questions about BBBY’s
future and its ability to adapt in the rapidly changing retail market. Jaime M. Katz, a Morningstar equity
analyst, noted,
These efforts are not enough to differentiate Bed Bath from its competitors that are undertaking
similar efforts. […] We do not believe Bed Bath & Beyond has established an economic moat,
given the brand’s limited pricing power, nonexistent consumer switching costs, and unsustainable
cost advantages.6
Now in 2018, how could BBBY stay relevant and competitive?
COMPANY BACKGROUND
BBBY, founded in 1971 by Warren Eisenberg and Leonard (“Lenny”) Feinstein, had its headquarters in
Union, New Jersey.7 The retailer provided a wide variety of home furnishings and domestic merchandise,
and its mission was “to be trusted by customers as the expert for the home and ‘heart-related’ life events.”8
It later expanded to include multiple subsidiaries that broadened its reach under these market categories,
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and it expanded to reach consumers through a combination of physical retail store locations, online e-
commerce platforms, and mobile applications. The company went public in 1992 with its shares traded
under the symbol BBBY on the Nasdaq Global Select Market.9
BBBY had three main objectives: (1) provide customers with a variety of quality products; (2) provide
services to assist customers in using these products; and (3) deliver an engaging and personalized shopping
experience. The company’s focus on the “home and heart life events” was bolstered by specialized offerings
for wedding and baby registries, student and new home transitions, and home decoration.10
By the end of 2017, the company had over 1,530 stores, covering all states of the United States, Puerto
Rico, and Canada. Of these stores, 1,020 were store locations for BBBY, 280 for Cost Plus World Market,
100 for Buy Baby Inc., 80 for Christmas Tree Shops, and 50 for Harmon Stores Inc. (see Exhibit 1).11 The
company owned three distribution facilities and leased about 10 others to support these retail locations; it
also had more than seven locations for institutional sales-related functions. BBBY had also expanded into
the Mexican retail market through eight joint ventures.12
BBBY was jointly led by Temares and the company’s original founders, Eisenberg and Feinstein, who were

both co-chairs of the board. Klaus Eppler was appointed as lead independent director to serve an
independent interest, in line with Nasdaq listing rules. The board of directors included three executive and
seven independent members, who were tasked with electing the company’s executive officers for one-year
terms. Eisenberg, Feinstein, and Temares were all members of the board of directors in addition to serving
as executive officers for the company.13
The founders of BBBY played key roles in the company’s leadership team. From the company’s start in 1971
until 2003, Eisenberg and Feinstein held positions as co-CEOs, and from 1992 until 1999, Eisenberg served as
chairperson while Feinstein was the company’s president. Since 1999, the pair had held positions as co-
chairmen. Although both elected “senior status” under their employment, the two co-founders actively continued
to bring their extensive retail industry and company experience into BBBY’s strategy and operations.14
Temares, who graduated first from Rutgers University with a major in economics and a minor in philosophy
and then from the University of Pennsylvania Law School, in 1983,15 joined BBBY’s team in 1992 as the
director of real estate and general counsel. He had played a part in the leadership of BBBY throughout its
time as a public company. In 1997, Temares was appointed chief operating officer and executive vice-
president. In 1999, he became the company’s president, and when he was named CEO in 2003, his company
leadership was informed by over 20 years of experience with BBBY.16
INDUSTRY BACKGROUND: E-COMMERCE
Prior to the mid-1990s, electronic commerce (e-commerce) had mainly involved phone orders from
catalogues and advertisements on television or in magazines. The 1990s were characterized by a more
widespread use of personal computers along with development of the Internet. In 1994, Mosaic
Communications Corporation announced the release of a free Internet browser, Netscape, and soon, the
first efforts toward advertising and marketing on the Internet started. This was considered the beginning of
the current e-commerce industry.17
High speed connections were developed, and trust with online vendors was established. Part of that trust
included transparency and protections for consumers with regard to filling orders, making payments, and
returning items. With these foundations in place, companies such as eBay Inc. and Amazon.com Inc.
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(Amazon) began to expand their reach in the e-commerce market. In 1995, Amazon shipped its first online
book sale, and in 2002, the company made its first profit.18 By 2016, the online retailer reported over 310
million active customer accounts globally.19
Characterized by rapid growth and continuous transformation, the e-commerce industry changed the way
consumers interacted with markets. Online shopping developed from basic product purchases to a more
interactive experience where consumers customized products, managed membership and rewards accounts,
and engaged with fellow customers through online product feedback. Online retailers soon began to offer
personalized shopping experiences tailored to customer preferences and previous purchase patterns, made
shipping of online purchases easy and fast, and offered simple and flexible return policies.20
The convenience and price transparency of online shopping turned e-commerce into a major competitor for
physical retail stores. With online retailers expanding into nearly every industry, physical stores found it
difficult to compete in attracting customers and matching the ever-lowering prices from online sources. In
the United States in 2017, e-commerce accounted for more than 18 per cent of houseware and home
furnishings sales, and the expectation was that the proportion was likely to grow.21 Footfall in shopping
malls and brick-and-mortar stores continued to decline. Many companies that had traditionally centred on

sales from physical store locations were therefore quickly developing strategies for transitioning into the e-
commerce market to avoid losing their market presence.
BBBY’S CHALLENGES AND NEW STRATEGIES
In this rapidly changing retail environment, BBBY had to transform quickly in order to survive the increased
competition with online platforms such as Amazon and megastore companies such as Walmart Inc. In early
2017, BBBY lowered the free shipping threshold for online purchases from $49 to $29, but this left the
company with fewer, smaller online sales.22 And absorbing shipping costs (especially on larger items) reduced
the margins. Nonetheless, BBBY showed growth in digital sales even as its physical sales continued to
decline, and by 2017, the company’s online business represented roughly 15 per cent of its overall sales.23
Analysts noted that “given that the company’s investment in digital initiatives have come later than many
of its competitors, [BBBY] does have a lot of scope to grow further and offset the declining foot traffic.”24
Competing with established Internet retailers came at the price of overall shrinking gross margins (see
Exhibit 2),25 but the company still held an 11 per cent share of the US domestic home furnishing retail
market at the end of 2016.26
In an effort to increase customer stickiness and rival competitors’ online member services, such as Amazon
Prime, BBBY launched its membership program, Beyond+, in 2017. For an annual membership fee of $29,
Beyond+ offered customers a flat 20 per cent off all purchases plus free shipping for any order.27 In addition,
the retailer provided coupons to prospective and existing customers alike for 20 per cent off one single item,
$20 off a purchase over $75, or simply $5 off any purchase. The coupons were generously distributed through
email distribution lists, traditional mail campaigns, print catalogues, and advertisements in magazines.
However, many of the brand name items were also available from other online retailers at low prices.28
Morningstar, the investment research company, considered BBBY to have no sources for an economic moat
(see Exhibit 3);29 that is, it was a company without a sustainable competitive advantage:
As the company competes in largely commoditized retail categories with ample domestic brick-and-
mortar and online rivals, we believe the lack of moat has become evident in the frequency and size
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of couponing, which underscores a consistently promotional environment (with few indicators of a

near- to medium-term reversal or abatement) and the price-sensitivity of the consumer base, which
has easy access to pricing comparisons through use of smartphones and other handheld devices.30
BBBY also initiated a series of structural and managerial changes. Capital expenditures were high, so the
company was looking at increasing the pace of store closures when leases came up for renewal and
favourable terms could not be negotiated.31 BBBY’s stores were big and inefficient—with an average floor
space of nearly 44,000 square feet, only generating $239 in sales per square foot. In comparison, an average
store of the consumer retail company Williams-Sonoma Inc. had a floor space of just over 10,000 square
feet but generated $392 in sales per square feet.32
BBBY closed approximately 15 stores in the United States in 2017. Management restructuring efforts that
same year resulted in a reduction of 880 department and assistant store manager positions, and organizational
changes were expected to result in future pre-tax cost savings of $16 million.33 Still, BBBY’s stock price
dropped to a low of $24.47 in December 201734 from a high of $66.84 in September 2014 (see Exhibit 4).
BBBY tried to catch up with competitors in digital initiatives, gain and retain customers through discount

and membership programs, and keep a close control on costs. Temares publicly expressed his optimism:
We have made considerable progress in our ability to align the organizational resources to
accelerate our strategic priorities. . . . Each of the initiatives we are working on has its own
framework and structure built around cross-functional coordination to expedite results, to further
our mission, and to drive greater efficiencies to achieve operational excellence.35
Temares’s reliance on efficiencies and resources was laudable, but he needed to keep BBBY relevant and
competitive in the long term in a retail sector that was evolving at breakneck speed.
THE EVOLVING RETAIL SECTOR
Leading management consulting companies and other business news outlets published thought leadership
viewpoints based on their knowledge of the retail sector, understanding of the trends and events, and deep
insight into the market players’ potential challenges throughout 2016 and 2017.
Customer Journey
The traditional model of the customer journey consisted of six steps. First, prospective customers
experienced a “trigger” or an event that motivated them to look for a certain product or service. From there,
they found an initial consideration set from which they eventually purchased or not. Next, they actively
evaluated and narrowed their selections. However, during this time, they may have added other brands to
their consideration set. Then there was the all-important moment of purchase, the post-purchase experience,
and if this experience was a good one, the loyalty loop (see Exhibit 5).
Traditionally, a retailer’s most substantial growth came from targeting existing customers with marketing
and advertising, which meant focusing on the loyalty loop. However, more recent research showed that top-
line growth was actually coming from bringing in new customers. McKinsey & Company published a study
in 2017 that pulled numbers from their consumer database of over 125,000 consumers and over 350 brands.
They divided those customers into three categories: loyalists, vulnerable re-purchasers, and switchers.
Loyalists were those who re-purchased the same brand without shopping around. Re-purchasers tended to
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shop around and evaluate other brands, but ultimately re-purchased the same brand. Switchers shopped
around and purchased different brands. Loyalists made up only 13 per cent of the sample, meaning an
overwhelming majority of customers were shopping around. Of the 87 per cent who were shopping around,
29 per cent were vulnerable re-purchasers and 58 per cent were switchers.36
In the digital age, shopping around was not a choice; it was a side effect of simply shopping. More
companies were able to reach customers during their active evaluation and make their way into the
consideration set, dislodging others. It was therefore important to study customer behaviour and preferences
well before the moment of purchase—and even before customers’ active evaluation.
Shift to Subscription Models
The subscription economy became more popular in 2017. Subscription-based business models allowed
businesses to build continuous relationships with their customer base by translating single purchases into
multiple purchases. This model was attractive to firms because it gave easy access to customer behaviour and
usage data, and it made predicting future revenue much more reliable. Many traditional retailers launched

subscription-based services in an attempt to capture a segment of the market they felt they had been missing.37
Companies like New York & Company Inc. and Ann Inc.’s Ann Taylor launched “rent the runway”–style
programs wherein customers paid a monthly fee for access to an unlimited online closet. Both programs
allowed customers to rent three items at a time, return them when they were ready for new items, and
purchase an item from the box should they choose to keep it.38 Gap Inc.’s Old Navy launched a subscription
service for children’s clothing. The “Old Navy Superbox,” a quarterly subscription for children aged 5 to
12 years, contained six clothing items valued at $100 and sold for $70.39 All the parent needed to do was
choose the child’s size, gender, and style.
Under Armour Inc. offered the “Armour Box.” Customers took a style and usage quiz; received four to six
items for no initial fee; had seven days to evaluate the items and return unwanted items; and paid only for
those they kept. The advantage to customers of the Armour Box was a 20 per cent discount on any items
that were kept.40 Target Corporation also jumped on the subscription trend, offering a “Beauty Box,” a “Cat
& Jack Baby Box,” and for children, a “Cat & Jack Outfit Box.” Target’s boxes could be ordered quarterly
or one time only, and they were available at the start of each season.41
The drawbacks to subscription-based business were threefold: (1) it was expensive to attract customers; (2)
customers were not loyal; and (3) customers were not exclusive. To attract customers, subscription-based
businesses had to buy customers’ business. The retailers artificially depressed the prices of their products or
spent heavily on marketing and advertising. Eventually, the retailers needed to raise prices or expand their
market or industry base. Low subscriber loyalty was attributed to “churn”—attrition among individuals in
certain groups42—which was sensitive to both competition and price. Lastly, given the many options
customers had for their subscriptions, it was impossible to gain exclusivity with any one customer. Ultimately,
the boom in subscription-based business meant that there was not enough market demand to meet the supply.43
Building Customer Experience through Human Interaction
Artificial intelligence (AI) in retail allowed consumers to expand their shopping and purchasing opportunities
through augmented reality, such as virtual shopping. But “experience disconnect” was a main drawback of
AI in retail. It occurred when, despite having an enhanced shopping experience and ease of access to products
and services, customers were still dissatisfied with the experience.44 A survey conducted by Pricewaterhouse
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Coopers (PwC) in 2018 found that 75 per cent of consumers wanted more human interaction rather than less,
and almost 75 per cent of consumers thought that experience trumped price and quality. Further, 65 per cent
of surveyed consumers said that brand experience beat advertising when it came to making a purchasing
decision. With regard to human interaction, the same survey showed that customers abandoned a brand after
several bad experiences, and 32 per cent changed brands after just one bad experience.45
Companies were putting the emphasis back on experience by creating communities for their customers,
empowering their employees, and hiring employees versed in data analytics. Nordstrom Inc. and Amazon turned
the usual retailing experience upside down. Nordstrom opened a boutique in Manhattan exclusively for men. In
addition to custom tailoring services, the boutique offered shoe shines and virtual dressing rooms. A visit to the
boutique was a memorable event rather than just an errand. Amazon opened its first brick-and-mortar store,
Amazon Go, which was a cashier-less grocery store. While the experience was a novelty in its own right,
employees were still able to connect with shoppers by helping them to locate items or prepare food.46
Another company that focused on curating experiences was REI (Recreational Equipment Inc.), the popular
recreational and outdoor equipment co-op. It encouraged its employees to explore the outdoors, have their
own experiences, and share these experiences and engage with customers under the hashtag #OptOutside.47

The #OptOutside movement was so successful that it became a part of REI’s customer-facing culture.
Lastly, in order to drive the customer experience, retail employees needed to be able to understand and use
the data available to them. This meant understanding analytics, supply chains, marketing, and technology.
Organizations like the National Retail Federation and UpSkill America offered specialized training to make
future retailers more well-rounded and better able to meet the changing needs of the sales world.48
PwC’s study shed light on five themes for garnering customer loyalty through experience: (1) delivering
the right experience, (2) driving loyalty, (3) keeping it simple, (4) prioritizing employees, and (5) investing
in the experience.49
Theme 1: Deliver the Right Experience
Providing customers with the experience they were expecting carried a hefty price premium. At most, a great
experience could earn a company a premium valued at 16 per cent. Providing the right experience required
information about what customers wanted; 63 per cent of surveyed consumers stated that they would allow
brands they trusted to collect and track their data.
Theme 2: Drive Loyalty
Conversely, delivering a bad experience meant a drastic drop in customer loyalty and sales. For brands they
loved, 59 per cent of Americans said they would walk away after several bad experiences, and 49 per cent
of Latin Americans said they would walk away after just one bad experience. The numbers varied by
country and culture, but the theme was clear: bad experiences lost customers.
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Theme 3: Keep It Simple
Stand-out customer experiences, while aided by innovation and cutting-edge technology, were based on
simple things: efficiency, convenience, and helpfulness. Almost 80 per cent of consumers in the United
States were more concerned with the essentials of the experience than with the “wow” factor.
Theme 4: Prioritize Employees
Taking care of employees meant that they in turn took care of customers, and as a result, customers kept
coming back. Incentivizing employees and focusing on the element of human interaction addressed the
needs expressed by 82 per cent of American consumers and 74 per cent of consumers in international
markets outside the United States.
Theme 5: Invest in the Experience

Customers drove revenue, and experience drove customer engagement. Over 70 per cent of consumers said
that experience was more important than price or quality when it came to making a purchasing decision.
However, 54 per cent of American consumers thought that companies were not putting enough focus on
experience. According to PwC, only 10 per cent of companies were prioritizing experience as part of their
branding, which was in line with the disconnect that their customers felt.
Showrooming
The same PwC survey also found that, for the fourth year in a row, consumers had increased the amount of
time they spent shopping in physical stores versus online outlets. When asked about shopping experiences,
53 per cent of respondents said they most valued an in-person interaction with a courteous and
knowledgeable salesperson, whereas just 40 per cent valued personalized offers, and 39 per cent valued in-
store screen displays.50
Retailers needed to be especially attentive to the changing nature of the path from consumer to buyer, which
was increasingly complex and resembled a journey more than a straight line from point A to point B. This
explained consumers’ affinity for brands like Amazon, Alibaba, Apple, and Walmart, which had created best
practices for gaining customer loyalty: create great value consistent with a wide selection while minimizing
the stress, difficulty, and friction of the buying process. These companies illustrated where other companies
needed to put their focus: in helping consumers as they navigated their shopping journey. It was no longer
sufficient for retailers to simply follow the habits of consumers. Retailers that could forecast consumers’ habits
and innovate accordingly to reinforce them were forecasted to win customers and their loyalty.
The future of retail seemed to be with voice-assisted home control devices like Google Assistant, Amazon
Echo, and Alexa devices, or with Apple Inc.’s Siri. With the rise of the Internet of things (IoT), smart
devices were expected to become more integrated with the shopping experience. Personal smartphone
devices carried the capability for many of the tools essential to future shopping experiences, such as
proximity marketing, personalized offers, and location- or time-based reminders. It was predicted that
companies would leverage customers’ smart devices in tandem with cloud-based services to analyze and
forecast customer preferences, behaviour, and habits.51 This allowed companies to create a start-to-finish
personalized and interactive experience for the consumer. For the consumer, this meant being able to access
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information about the products they desired. In the long run, AI was expected to facilitate the relationship
between the company and the consumer.52
A 2016 Business Insider study showed that almost half of millennials were browsing online, or
“webrooming,” while they were shopping in a store, and 84 per cent of shoppers webroomed before shopping
anywhere.53 Retailers were therefore advised to connect with customers using omnichannel strategies. While
the earlier consumer journey was shaped and evolved over years, with the increased integration of technology
and access to knowledge, a reshaped journey now evolved over a matter of days. The companies that kept
pace were predicted to capture the greatest share of customer loyalty and business.54
BBBY’S FUTURE
Summarizing BBBY’s situation in 2017, analysts like the Motley Fool painted a bleak picture:
Unfortunately, the retailer [BBBY] faces significant headwinds, and management doesn’t seem
concerned enough about tackling them. . . .

It remains in the direct path of much bigger competitors, and it’s standing still like a deer in the
headlights.55
The same analyst later noted that “There’s simply no real reason for shoppers to keep visiting Bed Bath &
Beyond, and the retailer’s desperate attempts to win them back will crush its earnings growth for the
foreseeable future.”56
In light of these dire predictions and emerging retail sector trends, could Temares keep BBBY relevant and
competitive in the long term? What opportunities did BBBY have for encompassing some of the newer
trends to ultimately stay relevant and successful in the home-goods market?
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EXHIBIT 1: BED BATH & BEYOND, COMPANY STRUCTURE
Bed Bath & Beyond
Christmas Tree Shops
Christmas Tree Shops and That!
Harmon Stores, Inc.
Retail Stores
Harmon Face Values
Buy Buy Baby Inc.
World Market
Cost Plus World Market
Of a Kind Inc.
One Kings Lane Inc.
PersonalizationMall.com
E-Commerce Platforms
Chef Central
Decorist Inc.

Linen Holdings LLC
Source: Created by the case authors with information from “Corporate Profile,” Bed Bath & Beyond, accessed February 9,
2018, http://bedbathandbeyond.gcs-web.com.
EXHIBIT 2: BED BATH & BEYOND, GROSS MARGINS OVER THE PAST TEN YEARS (IN %)
45
43
41.5 41.4 41.4
41.0
41 40.2
39.9
Gross Margin Percentage
39.7
38.9
39 38.2
37.5
37
35
33
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Created by the case authors with information from Jaime M. Katz, “Bed Bath & Beyond Inc. BBBY (XNAS),” Equity
analyst report, Morningstar, March 3, 2018, accessed March 3, 2018, www.morningstar.com/stocks/xnas/bbby/quote.html.
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EXHIBIT 3: ECONOMIC MOAT
Intangible assets keep Providing goods at lower
competitors away; strong costs undercuts the
brands connect to competition or improves
the market profit margins
Intangible
Cost
assets
advantage
As more people use a Major sources of Being efficiently scaled to

product, it gains fit the market rivalry
additional credibility or economic moat
reduces returns for any
value Network new entrant
effect Efficient
Customer scale

switching
costs
High switching costs do

not make the customer
switch to a competitor,
even if prices are high
Source: Created by the case authors with information from “Moat Size,” Morningstar Investing Glossary, accessed November
15, 2018, www.morningstar.com/InvGlossary/moat_size_definition_what_is.aspx.
EXHIBIT 4: BED BATH & BEYOND, FIVE-YEAR STOCK PRICE

(DECEMBER 2012—DECEMBER 2017, IN USD)
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Dec-12 Jul-13 Feb-14 Sep-14 Apr-15 Nov-15 Jun-16 Jan-17 Aug-17
Source: Created by the case authors with information from Sydnee Gatewood, “Bed Bath and Beyond Falls Despite Earnings
Beat,” Nasdaq, December 21, 2017, accessed December 17, 2018, www.nasdaq.com/article/bed-bath-and-beyond-falls-
despite-earnings-beat-cm896089.
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EXHIBIT 5: CUSTOMER JOURNEY AND LOYALTY LOOP
Consumer considers Brands enter and Customer selects a Customer
an initial set of exit the consideration brand repurchases brand
brands set (without shopping
around)
Example:
Student moves to Evaluates various Makes decision to Uses products;
college dorm and products from BBBY buy from BBBY BBBY stays in touch
needs to buy and other via campaigns
household items competitors
4
3
2
1
Post-purchase
Moment of experience

Initial Active purchase
consideration evaluation
set
Trigger
Loyalty
Prompts a new loop
consideration set
Student graduates,
starts working, and
sets up new home
Source: Created by the case authors with information from David Court, Dave Elzinga, Bo Finneman, and Jesko Perrey, “The
New Battleground for Marketing-Led Growth,” McKinsey Quarterly, February 2017, 65–75, accessed October 15, 2018,
www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-new-battleground-for-marketing-led-growth.
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ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Bed Bath & Beyond Inc. or any of its employees.
2
Trefis Team, “Why Bed Bath & Beyond’s Stock Price Has Declined by Nearly 50% This Year,” Forbes, September 25, 2017,
accessed July 31, 2018, www.forbes.com/sites/greatspeculations/2017/09/25/why-bed-bath-beyonds-stock-price-has-
declined-by-nearly-50-this-year/#78280d162735.
3
As quoted in Sydnee Gatewood, “Bed Bath and Beyond Falls Despite Earnings Beat,” Nasdaq, December 21, 2017,
accessed December 17, 2018, www.nasdaq.com/article/bed-bath-and-beyond-falls-despite-earnings-beat-cm896089.
4
All dollar amounts are in USD unless otherwise stated.
5
Trefis Team, “A Closer Look at Bed Bath & Beyond’s Disappointing 2017 Performance,” Nasdaq, December 26, 2017,
accessed December 17, 2018, www.nasdaq.com/article/a-closer-look-at-bed-bath-beyonds-disappointing-2017-performance-
2017-12-26. See Exhibit 1 for gross margins diagram.
6
Jaime M. Katz, “Bed Bath & Beyond Inc BBBY (XNAS),” Equity analyst report, Morningstar, March 3, 2018, accessed March
3, 2018, www.morningstar.com/stocks/xnas/bbby/quote.html.
7
“Bed Bath & Beyond,” Forbes, May 2017, accessed December 17, 2018, www.forbes.com/companies/bed-bath-beyond.
8
“Corporate Profile,” Bed Bath & Beyond, accessed February 9, 2018, http://bedbathandbeyond.gcs-web.com.
9
“Bed Bath & Beyond,” op. cit.
10
Nat Berman, “20 Fun Facts You Didn’t Know about Bed Bath & Beyond,” Money Inc., May 2018, accessed July 30, 2018,
https://moneyinc.com/20-fun-facts-you-didnt-know-about-bed-bath-beyond.
11
“Corporate Profile,” op. cit.
12
“Bed Bath & Beyond Inc (BBBY.O),” Reuters, 2018, accessed April 17, 2018, www.reuters.com/finance/stocks/company-

profile/BBBY.O.
13
“Corporate Responsibility Report,” Bed Bath & Beyond, May 2017, accessed February 9, 2018,
www.bedbathandbeyond.com/store/static/CorporateResponsibilityReport.
14
“Warren Eisenberg Biography,” Bed Bath & Beyond, 2018, accessed April 20, 2018, http://bedbathandbeyond.gcs-
web.com/management/warren-eisenberg; “Leonard Feinstein Biography,” Bed Bath & Beyond, 2018, accessed April 20, 2018,
http://bedbathandbeyond.gcs-web.com/management/leonard-feinstein.
15
“Giving Stories: Family Man,” Rutgers University Foundation, July 2012, accessed April 20, 2018,
www.support.rutgers.edu/s/896/Foundation/GiveStories.aspx?sid=896&gid=1&pgid=4175.
16
“Steven H. Temares Biography,” Bed Bath & Beyond, 2018, accessed April 20, 2018, http://bedbathandbeyond.gcs-
web.com/board-member/steven-temares.
17
Kenneth C. Laudon and Carol Guercio Traver, E-Commerce 2019: Business, Technology, Society, 15th ed. (Harlow:
Pearson, 2019), 98.
18
Jennifer LeClaire, “The Evolution of E-Commerce,” E-Commerce Times, February 7, 2005, accessed May 1, 2018,
www.ecommercetimes.com/story/40249.html.
19
“Amazon—Statistics & Facts,” Statista, April 20, 2018, accessed December 26, 2018, www.statista.com/topics/846/amazon.
20
Steve Olenski, “The Evolution of eCommerce,” Forbes, December 29, 2015, accessed November 15, 2017,
www.forbes.com/sites/steveolenski/2015/12/29/the-evolution-of-ecommerce.
21
Trefis Team, “Why Bed Bath & Beyond’s Stock Price Has Declined by,” op. cit.
22
Trefis Team, “A Closer Look at Bed Bath & Beyond’s Disappointing,” op. cit.
23
Trefis Team, “Why Bed Bath & Beyond’s Stock Price Has Declined by Nearly 50% This Year,” op. cit.
24
Ibid.
25
Lizzy Gurdus, “Cramer Explains Bed Bath & Beyond’s Current Existential Crisis,” CNBC, June 23, 2017, accessed April 19,
2018, www.cnbc.com/2017/06/23/cramer-explains-bed-bath-beyonds-current-existential-crisis.html; and Trefis Team, “Why
Bed Bath & Beyond’s Stock Price Has Declined,” op. cit.
26
Katz, op. cit.
27
“Introducing Beyond+,” Bed Bath & Beyond, April 20, 2018, accessed July 9, 2018,
www.bedbathandbeyond.com/store/loyalty/beyondplus.
28
Bryan Pearson, “Bed Bath & Beyond+ Is Not a Loyalty Program, so Can It Generate Loyalty?,” Forbes, July 27, 2018, accessed
December 15, 2018, www.forbes.com/sites/bryanpearson/2018/07/27/bed-bath-beyond-is-not-a-loyalty-program-so-can-it-
generate-loyalty/#58b37f602841; Abha Bhattarai, “Your Love of Bed Bath & Beyond Coupons Could Be Killing the Retailer,” The
Washington Post, April 26, 2019, accessed October 24, 2019, www.washingtonpost.com/business/2019/04/26/your-love-bed-
bath-beyond-coupons-could-be-killing-retailer/.
29
Economic moat was a term Warren Buffet created in a famous 1999 Fortune article; it described how companies
overpowered their competitors through competitive barriers and were able to generate above-average returns on invested
capital. Warren Buffett and Carol Loomis, “Mr. Buffett on the Stock Market: The Most Celebrated of Investors Says Stocks
Can’t Possibly Meet the Public’s Expectations,” Fortune, November 22, 1999, accessed December 4, 2018,
http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm.
30
Katz, op. cit.
31
Trefis Team, “Why Bed Bath & Beyond’s Stock Price Has Declined,” op. cit.
32
Leo Sun, “Should You Buy Bed Bath & Beyond Stock at Its Multiyear Low?,” Motley Fool, September 9, 2018, accessed
December 16, 2018, www.fool.com/investing/2018/09/29/should-you-buy-bed-bath-beyond-stock-at-its-multi.aspx.
92
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33
Reuters, “Bed Bath & Beyond Accelerates Realignment of Store Management Structure,” Reuters, August 3, 2017,
accessed October 30, 2017, www.reuters.com/article/brief-bed-bath-beyond-accelerates-realig/brief-bed-bath-beyond-
accelerates-realignment-of-store-management-structure-idUSFWN1KP184.
34
Stock price as on December 20, 2017, the day when BBBY reported its earnings.
35
Gatewood, op. cit.
36
David Court, Dave Elzinga, Bo Finneman, and Jesko Perrey, “The New Battleground for Marketing-Led Growth,” McKinsey
Quarterly, February 2017, 65–75, accessed October 15, 2018, www.mckinsey.com/business-functions/marketing-and-
sales/our-insights/the-new-battleground-for-marketing-led-growth.
37
Tien Tzuo and Gabe Weisert, Subscribed: Why the Subscription Model Will be Your Company’s Future–and What to Do
about It (New York, NY: Penguin, 2018).
38
Alexandra Schwartz, “Rent the Runway Wants to Lend You Your Look,” New Yorker, October 22, 2018, accessed December
20, 2018, www.newyorker.com/magazine/2018/10/22/rent-the-runway-wants-to-lend-you-your-look.
39
Prices as of 2018.
40
Amir Ismael, “I Tried Under Armour’s Customizable Subscription Service for Athletic Gear—and It Helped Me Feel More
Prepared for My Workouts,” Business Insider, October 29, 2018, accessed December 1, 2018,
www.businessinsider.com/under-armour-armourbox-subscription-review-2018-10.
41
Lauren Thomas, “These Retailers Are Cashing in on the Subscription Box Craze,” CNBC, February 25, 2018, accessed
October 22, 2018, www.cnbc.com/2018/02/25/these-retailers-are-cashing-in-on-the-subscription-box-craze.html.
42
Scott A. Neslin, Sunil Gupta, Wagner Kamakura, Junxiang Lu, and Charlotte H. Mason, “Defection Detection: Measuring and
Understanding the Predictive Accuracy of Customer Churn Models,” Journal of Marketing Research 43, no. 2 (2006): 204–211.
43
The Economist, “Subscribers Are the New, New Thing in Business,” Medium, April 11, 2018, accessed October 22, 2018,

https://medium.com/@the_economist/subscribers-are-the-new-new-thing-in-business-855b389e02e.
44
Clare Brindley and Diane Wright, “Personalized Relationship E-Marketing and the Small Medium-Sized Enterprise,” chap.
5 in Fang Zhao, Entrepreneurship and Innovations in E-Business: An Integrative Perspective (Hershey, PA: Idea Group Publ.,
2006), 89–106.
45
In late 2017, Pricewaterhouse Coopers (PwC) conducted a global consumer insights survey (GCIS), which surveyed 22,000
respondents in 27 territories. Mike Baccala, Chris Curran, Dan Garrett, Scott Likens, Anand Rao, Andy Ruggles, and Michael
Shehab, 2018 AI Predictions: Eight Insights To Shape Business Strategy (Pricewaterhouse Coopers, 2018), accessed
October 22, 2018, www.pwc.com/us/AI2018.
46
Steve Barr and Ellen Davis, “Today’s Retail Needs Both Tech and the Human Touch,” Strategy & Business, May 17, 2018,
accessed October 22, 2018, www.strategy-business.com/article/Todays-Retail-Needs-Both-Tech-and-the-Human-Touch.
47
Jeff Beer, “How REI Is Keeping the #OptOutside Magic Alive on Black Friday,” Fast Company, November 22, 2018, accessed
December 01, 2018, www.fastcompany.com/90271139/how-rei-is-keeping-the-optoutside-magic-alive-on-black-friday.
48
Barr and Davis, op. cit.
49
Baccala et al., op. cit.
50
Ibid.
51
Ibid.
52
John Maxwell, Denise Dalhoff, and Claire-Louise Moore, “Competing for Shoppers’ Habits,” Strategy & Business, April 10,
2018, accessed October 22, 2018, www.strategy-business.com/feature/Competing-for-Shoppers-Habits.
53
Emily Adler, “‘Reverse Showrooming’: Bricks-and-Mortar Retailers Fight Back,” Business Insider, July 13, 2014, accessed
November 19, 2018, http://uk.businessinsider.com/reverse-showrooming-bricks-and-mortar-retailers-fight-back-2-2014-2;
and Quiqup, “‘Showrooming’ and ‘Webrooming’ Are Changing How People Experience Fashion: This Is How Your Business
Should Catch Up,” Medium, May 12, 2017, accessed November 10, 2018, https://medium.com/quiqup/showrooming-and-
webrooming-are-changing-how-people-experience-fashion-this-is-how-your-172a18412bc4.
54
Marc Vermut, “Why Omnichannel Is the Future of Retail for Millennials (and Everyone Else, Too),” AdAge, September 27,
2018, accessed November 9, 2018, https://adage.com/article/neustar/omnichannel-future-retail-millennials/315054.
55
Leo Sun, “The Bears Are Right: Amazon Is Killing This Retailer,” Motley Fool, April 19, 2018, accessed December 17, 2018,
www.fool.com/investing/2018/04/19/the-bears-are-right-amazon-is-killing-this-retaile.aspx.
56
Sun, “Should You Buy Bed Bath & Beyond Stock?,” op. cit.
93
10.
9B19M108
MOVIEPASS: DISRUPTION THROUGH SUBSCRIPTION1
Ram Subramanian wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
On August 7, 2018, MoviePass Inc. (MoviePass), the New York City–based movie ticket subscription

service, announced that it would restore its popular US$9.952 per month plan, but in a change from the past,
subscribers would be restricted to three movies a month instead of having access to an unlimited number
of movies. In announcing the new pricing plan, MoviePass’s chief executive officer (CEO), Mitch Lowe,
noted that the new plan would reduce MoviePass’s cash burn rate by 60 per cent and help make its path to
profitability “more manageable.”3
While the summer of 2018 was the second-best year ever for the movie business, with $4.8 billion in ticket
sales,4 MoviePass faced significant challenges in its role as a disruptor. The first challenge was internal.
MoviePass was losing cash at a rate that caused its parent company’s auditors to express concerns about its
ability to continue operating.5 The second was external. AMC Entertainment Holdings Inc. (AMC), the
world’s leading theatre chain, had recently launched its own subscription service to compete with
MoviePass. While MoviePass had a massive lead in terms of its number of subscribers, AMC had
significant financial advantages in its pricing plan and unit economics.6
Lowe had been charged with increasing MoviePass’s subscription base to 5 million (from its current 3.2
million), which would enable the company both to offer analytical information about moviegoers’ likes and
dislikes to theatres and movie studios and to receive a share of theatres’ concession and other revenues in
return for driving traffic to the theatres.7 Lowe and his team needed to find a way to reach this subscription
goal ahead of the competition and before the company ran out of capital.
THE MOVIE EXHIBITION INDUSTRY
The movie exhibition industry in the United States consisted of businesses that enabled audiences to see
movies in indoor, drive-in, and outdoor movie theatres. According to an IBISWorld report, the industry
was expected to generate revenues of $17.5 billion in 2018—representing a 2.7 per cent per year growth
rate since 2013. However, its annual growth rate was expected to drop to 0.7 per cent due to a variety of
industry-specific and external factors, and the average ticket price remained steady at $9.00 in 2018.8
IBISWorld noted that consumers aged 40 and older represented 41 per cent of moviegoers and were the
largest demographic for the movie exhibition industry; they were followed by consumers in the 25–39 age
group (23 per cent) and those aged 18–24 (12 per cent), who had the highest per-person movie average of
6.5 movies a year.9 In what was seen as a positive trend for the business, the report noted that the 40 and
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older age group had the largest disposable income of the various groups and was the least likely to be
attracted by technology-based substitutes for watching movies in theatres, such as streaming content via
Netflix Inc. (Netflix) and other popular services.10 According to the Motion Picture Association of America,
51 per cent of the population identified themselves as “occasional” moviegoers who saw a theatrical movie
less than once a month, 29 per cent were non-moviegoers, 11 per cent were “frequent” moviegoers who
saw a theatrical movie once a month or more, and 9 per cent were “infrequent” moviegoers—that is, they
saw a movie once in 12 months. In terms of tickets sold, the “occasional” category accounted for 50 per
cent, the “frequent” category for 48 per cent, and the “infrequent” category, 2 per cent. In 2016, the average
number of tickets sold per moviegoer per year was 5.3, down from 5.6 in 2015.11
Moviegoers had a wide array of options in terms of their viewing experience. They could see movies in a
traditional two-dimensional (2-D) format that featured a 35-millimetre screen or (when it was offered) on an
enhanced 70-millimetre screen. For an additional $3–$5 charge, they could see movies in a three-dimensional
(3-D) format (if offered) or on a much larger IMAX screen (if offered). In addition to different screen types and
sizes, there were various sound and dining options (e.g., Dolby sound and AMC DINE-IN theatres).12
IBISWorld identified two key external drivers for the movie exhibition industry: per-capita disposable income

and number of broadband connections.13 Movie-going was a leisure activity that depended on household
disposable income, which in turn depended on employment income, tax rates, and people’s general perception
of the economy. IBISWorld noted that per-capita disposable income was expected to increase in 2018, indicating
a positive trend for the industry.14 A broadband connection enabled access to high-speed Internet that could be
used for a wide variety of purposes, including viewing streamed entertainment content. While there were 7.07
million broadband subscriptions (out of 104.71 million total households) in the United States in 2000, this
number increased to 109.84 million (out of 126.22 million households) in 2017.15 The rising penetration of
broadband posed a threat to the industry.
Movie exhibitors were part of an industry value chain consisting of studios, which created and produced content,
and distributors, who acted as intermediaries between the studios and the exhibitors (see Exhibit 1). Distributors
were responsible for marketing movies and handling the administrative tasks of networking between studios and
exhibitors (e.g., supplying movie prints and collecting a share of ticket sales). Six major studios—the Walt
Disney Company (Disney), Warner Bros. Entertainment Inc. (Warner Brothers), Twenty-First Century Fox Inc.
(21st Century Fox), Universal Pictures, Sony Pictures Entertainment Inc. (Sony), and Paramount Pictures
Corporation (Paramount)—dominated the industry in terms of both the number of movies produced (e.g., 88 out
of 144 widely released movies in 2018) and the market share in tickets (77.23 per cent of wide releases in 2018).16
The six major studios were also vertically integrated players—that is, they controlled both the process of movie
creation (e.g., Disney owned the Marvel, Pixar, and Disney studios) and distribution (Disney’s distribution arm
was Buena Vista Pictures).17
Ticket price revenue was split roughly 50:50 between exhibitors on the one side and distributors and studios
on the other. Exhibitors made about two-thirds of their total revenues (66.8 per cent) from their share of
ticket sales, 21.1 per cent from concessions, 10.9 per cent from parking and theatre rentals, and 1.2 per cent
from advertising.18
Movie exhibitors negotiated with studios for favourable theatrical release windows. Within this window—
usually the first three to four months after a movie’s release—theatres were the exclusive channel for exhibiting
a movie. This time window protected movie theatres from competition from other forms of exhibition such as
online streaming, premium cable channels, and digital video disc (DVD) sales or rentals. The theatrical release
window was a bone of contention between the studios and the theatres19.
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Three players—AMC, Regal Entertainment Group (Regal), and Cinemark Holdings Inc. (Cinemark)—
accounted for over 60 per cent of the market share in the movie exhibition industry.20 With a 29.4 per cent
market share, AMC, owned by the Chinese conglomerate Dalian Wanda Group, was the largest player in
the world.21 It owned 906 theatres with 10,558 screens (including 196 IMAX screens) in the United States
and Europe and reported operating income of $266.82 million on revenues of $5.137 billion in fiscal year
(FY) 2018.22 However, with 7,267 screens (96 IMAX screens) across 561 theatres in the United States and
a market share of 18.5 per cent, Regal was the largest domestic player. Regal reported operating income of
$335.20 million in FY 2018 on revenues of $3.234 billion.23 Cinemark, with a market share of 13.6 per
cent, operated 539 theatres with 5,998 screens (15 IMAX screens)24 and reported operating profits of
$341.08 million on revenues of $2.37 billion in 2018.25
THE SUBSCRIPTION ECONOMY
Following the Great Recession of 2008–09, a few pioneering companies in the industry attempted to overcome
growth roadblocks by persuading customers to join subscription plans.26 While leasing cars and renting homes
had been common practices since long before the economic downturn, these companies sought to convince
customers to subscribe to products and services that they had not previously thought of as being subscription-

based. Two basic tenets drove the popularity of the subscription economy27. First, the subscription model had
the advantage of overcoming consumers’ reluctance to make a big investment upfront. For a small monthly
payment, subscribers could use the product or the service, which they would not have had access to in the
absence of such a model. Second, subscriptions enabled consumers to access state-of-the-art products and
services as and when they became available. For example, software clients could afford the latest version of
software because they had no legacy costs with respect to outdated products.
Citing the US market research company Forrester Research Inc., author Tien Tzuo provided a strong
rationale for the growth of the subscription economy:
Forrester sees a broad, systemic shift in capital models pivoting toward serving a newly empowered
generation of customers who have the ability to price, critique, and purchase anytime, anywhere.
. . . Customers have new expectations. . . . They want the ride, not the car. The milk, not the cow.
The new Kanye music, not the new Kanye record.28
A McKinsey report identified three types of subscription models: replenishment, curation, and access.
Replenishment subscriptions such as Dollar Shave Club and Amazon Subscribe & Save enabled customers
to automate the purchase of regular items such as razors or packaged goods. A curation subscription such
as Birchbox (cosmetics) or Blue Apron (meal kits) gave customers a regular selection of carefully selected
items. Access subscribers obtained lower-priced or members-only goods from services such as NatureBox,
which offered cookies and dried fruits (see Exhibit 2). The subscription economy generated more than $2.6
billion in revenues in 2016, a growth of more than 100 per cent a year since 2011. The typical subscription
customer was 25–44 years old and had an annual income of $50,000–$100,000. 29
The subscription model offered a number of benefits for supplying firms. It allowed them to build deeper
relationships with customers by analyzing their buying preferences. As Tzuo pointed out, the interaction
between traditional businesses and their customers ended the moment the transaction took place:
Ninety percent of all Americans live within twenty minutes of a Walmart store. Walmart . . . serves
more than 140 million shoppers a week. . . . This is a company with decades of institutional
experience with supply chains, transport logistics, inventory management. It knows how to buy and
sell products. . . . But what was the last thing you bought at Walmart? They certainly couldn’t tell
you. To Walmart, you’re basically just a vehicle for dispensing inventory. Once you pass the cash
register, you vanish off the map.30
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In contrast, subscription companies maintained ongoing relationships with their customers, which enabled them
to catalogue customers’ preferences using data analytics and to offer customized marketing messages in addition
to products and services. In addition, unlike inventory for sale companies, which essentially started each fiscal
year with zero sales, subscription companies carried over revenue from continuing subscribers from year to year.
MOVIEPASS’S BACKGROUND
In 2011, Stacy Spikes, a movie marketing executive, had the idea for a subscription model for movie-
going—a Netflix of movie theatres—and started a company called MoviePass with his partner, Hamet Watt.
The fledgling entrepreneurs’ first two attempts were not successful. In their first attempt, 19,000 people in
San Francisco signed up for their offer of one 2-D movie a day for a flat monthly fee, but theatre owners
pushed back and refused to honour the tickets. MoviePass had purchased the tickets in bulk from a third-
party supplier, and they were unable to implement their plan. Their second attempt also failed when both
moviegoers and theatre box office operators balked at the cumbersome processes that required moviegoers
to print out individual tickets and box office operators to manually key in long lists of numbers. Their third
iteration involved a smartphone application (app) and a debit card. For $29–$34 a month, each moviegoer
downloaded the MoviePass app, input their details, and received a debit card to use at the theatre. When a

patron was in the vicinity of a movie theatre, the Global Positioning System (GPS)-enabled MoviePass app
displayed the choice of nearby movie theatres and movies and unlocked the debit card for 30 minutes to
enable the purchase of a ticket. Within this 30-minute time frame, MoviePass loaded the patron’s debit card
with enough funds to buy a regular-priced ticket.31 Since an average ticket price in 2011 was around $8,
MoviePass would start losing money from the patron’s fifth movie ticket32; Spikes and Watt convinced
early investors of the validity of their business model:
We’ve studied this and similar subscription businesses for a while and have conclusive data that
reinforces our strong subscription model that includes incremental revenue streams. . . . We believe the
best way to have a successful business model is to have multiple revenue streams. This model is very
similar to that of a studio that is focused on more than just box office ticket sales. . . . Apart from the
subscription service, we have three planned revenue streams: advertising, sell-through and data. It’s
definitely not a one-trick pony.33
The founders reiterated the importance of data and revenue from data analytics as key components of their
business model:
But what’s really the beauty of this is the data. Just like Google can measure analytics online, we
can do that for movie theatres. Ninety-six percent of movie ticket transactions are walk-ups; they’re
the equivalent of cash transactions that don’t leave data trails. Our technology lets us say, “This is
the type of people who are going, this is when they went, this is what time of day it was.” We can
break it up by age, by race, by sex. The only thing we can’t tell you is what they ate for lunch and
what their blood type is.
We’ve met with some of the studios and the chains. Right now, they know what their gross numbers
are and some generalities about their demographics, based on which theatres customers visit and how
many tickets were sold. They don’t really know more than that. But we do.34
MoviePass’s traction was adversely affected by a lack of co-operation from the theatre chains. However, in
late 2014, AMC, the number-two chain in the United States, behind Regal, reacted to the 5 per cent drop in
movie attendance by agreeing to co-operate with MoviePass. The agreement enabled a patron, for $45 a
month, to see any number of movies, including 3-D and IMAX films.35
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Even with a first-mover advantage and the agreement with AMC, MoviePass’s subscriber growth was slow.
In June 2016, with fewer than 20,000 subscribers, founders Spikes and Watt sought help and recruited Lowe
to be the company’s CEO.36 Lowe had been a co-founding executive at Netflix and president of Redbox
Automated Retail LLC prior to becoming first an adviser and later the CEO of MoviePass.37
Lowe and the MoviePass team spent much of 2016 and the first half of 2017 experimenting with various
pricing models. Meanwhile, on August 15, 2017, the company announced that Helios and Matheson Analytics
Inc. (HMNY) had bought a majority stake. On the same day, MoviePass launched its $9.95 per month price.38
HMNY was a big data firm headquartered in New York City. It had undergone a number of ownership and
name changes (e.g., it was known as A Consulting Team in the early 1980s) and had grown via acquisitions.
A key acquisition, in November 2016, was Zone Technologies, a GPS-driven, real-time crime and navigation
map app. Following this acquisition, Zone Technologies’s CEO, Ted Farnsworth, became HMNY’s CEO and
chair of its board. To fund the MoviePass acquisition and help finance its growth, HMNY sold $150 million
of stock at a discounted price of $2.75 a share (reduced from its previous market closing price of $3.83).39

MOVIEPASS’S BUSINESS MODEL
Customers went through a series of steps to use MoviePass to watch movies. The first step involved signing
up for the service, either the monthly “pay as you go” plan or an annual plan. The customer was then mailed
a zero-value MasterCard debit card that needed to be activated prior to its use.40
Using the Card
The customer used the MoviePass app, available on both Android and iOS interfaces, to search for movies
and theatres. Once customers were within 90 metres (100 yards) of a theatre, they could use the app to activate
their debit card. When activated, MoviePass loaded the debit card with the exact value of a single full-price
ticket, and the debit card could then be used to purchase a ticket at the theatre box office.41
MoviePass customers had some restrictions: each customer could use the debit card only to buy a single
ticket for a 2-D movie; 3-D and IMAX movies were not included. While customers could see multiple
movies or the same movie multiple times, they could see only one movie a day. The card was not
transferable and could not be used for concession purchases, parking, or for any other activity. Customers
were not allowed to use the cards to make advance reservations. However, there were no blackout dates.42
Pricing
For the first five years of its existence, MoviePass offered subscribers a monthly price of $29–$34 (depending
on the subscriber’s location). In August 2017, the price was dropped to $9.95 a month—$7.95 a month plus
a $19.95 processing fee for an annual subscription. This move resulted in the breakup of the alliance with
AMC: the theatre chain posted signs in its theatres saying that MoviePass users were “not welcome here.”43
However, the pricing move was quite popular and prompted 150,000 subscribers to sign up in the first two
days and a million in the first four months. The company indicated that millennials made up 75 per cent of
its subscriber base.44
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By April 2018, MoviePass’s subscriber base was around 3 million. However, customers were complaining
about significant delays in the delivery of membership cards and other service issues, and the parent
company’s auditors expressed “substantial doubts about its ability to continue as a going concern.”45 In an
effort to control the significant net cash outflows, the company changed its pricing plan in July to $14.95 a
month and limited subscribers’ access to blockbuster movies (i.e., those that opened on 1,000 or more
screens). The company started by introducing “surge pricing”—adding a surcharge above the subscription
price for blockbuster movies—and then it revealed a plan to block subscribers’ access to blockbuster movies
during their first two weeks, starting with Paramount Pictures’ Mission: Impossible—Fallout. As the
surcharge rose to $8 a ticket in cities such as New York and Los Angeles, the company’s daily subscription
cancellation rate doubled. After studying customer responses to the pricing change and analyzing the
cancellation rates, MoviePass announced in early August that its subscription price would return to $9.95
a month and that blockbuster movies would no longer be subject to surge pricing. However, the new plan
would restrict subscribers to three movies a month. The company announced that subscribers would receive
discounts of $2–$5 for any tickets purchased through the MoviePass app after their three films each month46
(see Exhibit 3).

Finances
Soon after HMNY, bought a 53.71 per cent stake in MoviePass for $28.5 million in August 2017, MoviePass
increased its valuation to $210 million. From August 2017 to February 2018, HMNY loaned the company a
total of $90.5 million and subsequently converted the loans to equity. Since MoviePass’s valuation had
decreased during this time, HMNY was in the end able to acquire 91.8 per cent of the company for a total of
$119 million. The remaining stake in MoviePass was purchased by telecommunications company Verizon
Communications, which had telephone, wireless, Internet, and cable television businesses, and used a
secondary stock offering to fund the MoviePass purchase.47
On August 1, 2017, HMNY’s closing stock price was $2.80.48 As its stock price continued to fall, HMNY
was in danger of being delisted from the NASDAQ stock exchange.49 To prevent a delisting, on July 25,
2018, HMNY announced a reverse stock split of one share for every 250 shares previously held. NASDAQ
had given HMNY until December 18, 2018, to meet the two mandatory minimum requirements for a stock
listing: a market capitalization of $10 million (HMNY was above this threshold on August 7, 2018) and a
stock price of $1.50
On May 8, 2018, the company announced that MoviePass was running a cash deficit of $20 million–$21
million per month and had a cash balance of $43.4 million. The company also announced that it expected
its cash burn to decrease by at least 35 per cent due to a series of measures it had planned, including
restrictions on sharing MoviePass subscriptions and changes to the pricing plan.51 The subsequent pricing
change, in August 2018, was expected to decrease the burn rate even more. MoviePass bought tickets at
full price from theatre chains and sought to minimize its overhead by employing a small staff and spending
very little on marketing and related expenses.52 The company delayed filing its mandatory financial
disclosure forms (e.g., Form 8-K and a quarterly financial report) with the US Securities and Exchange
Commission (SEC)53 (see Exhibit 4).
In contrast to MoviePass, a theatre-based competitor such as AMC would have inherent cost advantages
because it would not pay the retail price for tickets whenever subscribers cashed in. In addition, AMC could
advertise its subscription in its theatres and offer concession discounts to its subscribers.54 The advantage
for a stand-alone subscription company such as MoviePass was that its subscribers had more theatres to
choose from and were not restricted to the issuer’s theatre network. But how could Lowe and his team
parlay the company’s first-mover and wider network advantages to profitability?
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EXHIBIT 1: THE MOTION PICTURE INDUSTRY ECOSYSTEM
Note: The Major Studios are comprised of the Walt Disney Company, Warner Bros. Entertainment Inc., Twenty-First Century
Fox Inc., Universal Pictures, Sony Pictures Entertainment Inc., and Paramount Pictures Corporation (Paramount).; DVD =
digital video disc.
Source: Created by the case author with information from Anna Miller, IBISWorld Industry Report 51213, Movie Theaters in
the U.S., 3, 7, April 2018, accessed August 23, 2018
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EXHIBIT 2: THE SUBSCRIPTION ECONOMY MODELS
Share of Total Key Acquisition/
Type of Key Value Key Churn
Description Subscriptions Continuation
Model Proposition Triggers
(%) Triggers
Replenishment  regular  savings of 32 Acquisition  dissatisfaction
replenishment time and  preference for
of the same or money  financial incentive buying when
similar items  convenience  recommendation needed
(e.g., Dollar (not having to
Shave Club) remember to Continuation
keep stock)
Primary  convenience
Categories:  value for money
 razors, food
ingredients,
vitamins
Curation  carefully  outsourcing 55 Acquisition  value for money

selected items the selection  dissatisfaction
with a wide process to  chance to try

array of levels experts in the something new
of consumer field  recommendation
involvement  exposure to
and decision products one Continuation
making (e.g., may not have
Birchbox, heard of  personalized
HelloFresh, experience
Blue Apron)  surprise and delight
Primary
Categories:
 apparel, food,
beauty
products
Access  exclusive  access to 13 Acquisition  value for money
access to what is not  dissatisfaction
products and/or available to  recommendation  preference for
services (e.g., the public at  chance to try buying when
Amazon Prime, large something new needed
NatureBox,  cost savings  financial incentive
Thrive Market)
Continuation
Primary
Categories:  personalized
 food, apparel experience
 convenience
Note: Amazon Prime provided access, while Amazon Subscribe & Save provided replenishment.
Source: Adapted from Tony Chen, Ken Fenyo, Sylvia Yang, and Jessica Zhang, “Thinking Inside the Subscription Box: New
Research on E-Commerce Consumers,” McKinsey & Company, February 2018, accessed September 7, 2018,
www.mckinsey.com/industries/high-tech/our-insights/thinking-inside-the-subscription-box-new-research-on-ecommerce-
consumers; “Schumpeter: The Subscription Addiction,” Economist, April 7, 2018, 58.
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EXHIBIT 3: COMPETITIVE COMPARISON OF SELECTED MOVIE SUBSCRIPTION PLANS
Number of
Pricing Plans (US$) Restrictions
Subscribers
Sinemia Unavailable  $3.99/month for one  no restrictions on 3-D or
movie IMAX movies
Turnkey-based start-up that  no initiation fee for
entered the United States in early  $14.99/month for annual billing
2018; present in several three movies  $19.99 one-time fee for
European countries monthly billing
 accepted in more than
4,000 theatres.
AMC Stubs A-List 260,000  $19.95/month for  subscription can be
three movies used only in AMC
Launched in summer 2018 by theatres
world’s largest theatre company
Cinemark Movie Club 350,000  $8.99/month for one  subscription can be

movie used only at Cinemark
Launched in late 2017 by the  unused tickets roll theatres
number-three theatre company over  2-D movies only
in the United States  20 per cent off on
concessions
 additional tickets can
be purchased at
$8.99 each
MoviePass 3.2 million  $9.95/month for  accepted in more than
three movies 5,200 theatres
First mover (launched in 2011);  $2–$5 discount on  2-D movies only
owned by Helios and Matheson additional tickets
Analytics Inc. since August 2017 purchased via
MoviePass app
Note: All rates as of August 23, 2018.

Sources: Compiled by the case author based on data from Sinemia, “Watch More | 2D/3D Movies | Any Theater,” accessed
August 23, 2018, www.sinemia.com/new-plans; AMC, “AMC Stubs A-List,” accessed August 23, 2018,
www.amctheatres.com/amcstubs/alist; cinemark.com/movieclub; MoviePass, “Go See It All,” accessed August 23, 2018,
www.moviepass.com/; Shen Lu, “MoviePass vs. Sinemia vs. AMC Stubs A-List vs. Cinemark Movie Club,” Magnify Money,
August 7, 2018, accessed August 23, 2018, www.magnifymoney.com/blog/news/moviepass-amc-cinemark-sinemia-best/.
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EXHIBIT 4: HELIOS AND MATHESON ANALYTICS INC. SUMMARY FINANCIAL STATEMENTS
(IN US$)
Summary Income Statement 3 Months Ending 3 Months Ending

March 31, 2018 June 30, 2018
Revenues:
Consulting 839,503 829,606
Subscription 47,162,447 72,403,640
Marketing/Promotional Services 1,440,910 935,488
Total 49,442,860 74,168,734
Cost of Revenue 135,968,976 178,766,719
Gross Profit (Loss) (86,526,116) (104,597,985)
Operating Expenses:
Selling, General, Administrative 19,709,831 20,508,528
Research & Development 224,771 154,693
Depreciation and Amortization 1,271,275 1,377,653
Total 21,205,877 22,040,874

Operating Profit (Loss) (107,731,993) (126,638,859)
Summary Balance Sheet (in US$) June 30, 2018

Current Assets 53,527,304
Other Assets 121,766,285
TOTAL 175,283,589
Current Liabilities 138,425,945
Long-Term Liabilities 311,705
Stockholders’ Equity 36,555,939
TOTAL 175,283,589
Summary Cash Flow Statement (in US$) June 30, 2018

Cash Flow from Operations (219,209,083)
Cash Flow from Investing (1,171,098)
Cash Flow from Financing 210,972,318
Opening Cash 24,949,393
Ending Cash 15,512,810
Source: Helios and Matheson Analytics Inc., Form 10-Q: Quarterly Report for the Quarterly Period Ended June 30, 2018,
United States Securities and Exchange Commission, accessed September 7, 2018,
http://mysec.hmna.com/MYSEC/documents/html/hmny20180814_10-Q.htm.
104
Page 11 9B19M108
ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of MoviePass Inc. or any of its employees.
2
All currency amounts are in US dollars unless otherwise specified.
3
Ben Fritz, “MoviePass Has Fresh Plot to Right the Ship,” Wall Street Journal, August 7, 2018, B1, B2.
4
Jeremy Fuster, “2018 Summer Box Office Is Second-Best Ever—But It Got a Head Start,” The Wrap, September 4, 2018,
accessed December 8, 2018, www.thewrap.com/summer-box-office-is-second-best-ever-but-theres-a-catch/.
5
Lizzie Plaugic, “MoviePass Auditor Has Doubts about the Company’s Business Model after Significant Losses,” The Verge,
April 18, 2018, accessed January 8, 2019, www.theverge.com/2018/4/18/17251708/moviepass-business-model-finances-
profits-money-loss.
6
Compiled by the case author based on data from Sinemia, “Watch More | 2D/3D Movies | Any Theater,” accessed August
23, 2018, www.sinemia.com/new-plans; AMC, “AMC Stubs A-List,” accessed August 23, 2018,
www.amctheatres.com/amcstubs/alist; cinemark.com/movieclub; MoviePass, “Go See It All,” accessed August 23, 2018,
www.moviepass.com/; Shen Lu, “MoviePass vs. Sinemia vs. AMC Stubs A-List vs. Cinemark Movie Club,” Magnify Money,
August 7, 2018, accessed August 23, 2018, www.magnifymoney.com/blog/news/moviepass-amc-cinemark-sinemia-best/.
7
Rick Paulas, “The Guy Who Owns MoviePass Says Losing Money Was the Plan All Along,” Vice.com, June 12, 2018,
accessed June 9, 2019, www.vice.com/en_us/article/4355xn/ted-farnsworth-moviepass-interview-on-business-model.
8
Anna Miller, IBISWorld Industry Report 51213, Movie Theaters in the U.S., 3, 7, April 2018, accessed August 23, 2018.
9
Ibid.
10
Ibid.
11
Motion Picture Association of America, Theatrical Market Statistics—2016, 2017, accessed December 1, 2018,

www.mpaa.org/wp-content/uploads/2017/03/MPAA-Theatrical-Market-Statistics-2016_Final.pdf.
12
Case writer’s analysis based on industry trends in Miller, op. cit.
13
Miller, op. cit.
14
Ibid.
15
Number of Fixed Broadband Subscriptions in the United States from 2000 to 2017 (in millions),” Statista, accessed April 8,
2019, www.statista.com/statistics/187145/number-of-fixed-broadband-subscriptions-in-the-united-states-since-2000/.
16
Miller, op. cit.
17
The Walt Disney Company, “About”, The Disney Company, accessed September 10, 2019,
www.thewaltdisneycompany.com/about/.
18
Miller, op. cit.
19
Tom Huddlestone, Jr., “Movie Studios Are Thinking of Shrinking Theatrical Release Windows – Again,” Fortune, August
18, 2017, accessed September 12, 2019, https://fortune.com/2017/08/18/warner-bros-universal-apple-comcast-movie-
theaters/
20
Miller, op. cit.
21
Ibid.
22
AMC Entertainment, “Corporate Overview,” accessed November 14, 2018, www.investor.amctheatres.com/#.
23
Regal Entertainment Group, “About Regal,” accessed November 14, 2018, www.regmovies.com/static/en/us/about.
24
Cinemark Holdings Inc., “IR Overview,” accessed November 14, 2018, http://phx.corporate-
ir.net/phoenix.zhtml?c=192773&p=irol-homeProfile.
25
Ibid.
26
“Subscription Model Trend & Growth,” Slice Intelligence, accessed September 12, 2019,www.rakutenintelligence.com/wp-
content/uploads/2016/03/Subscription-Model-Trend-and-Growth-Slice-White-Paper.pdf
27
Ibid.
28
Tien Tzuo, Subscribed: Why the Subscription Model Will Be Your Company’s Future—And What to Do About It (New York:
Penguin Random House, 2018), 17.
29
Tony Chen, Ken Fenyo, Sylvia Yang and Jessica Zhang, “Thinking Inside the Subscription Box: New Research on e-Commerce
Consumers,” McKinsey & Company, February 2018, accessed November 14, 2018, www.mckinsey.com/industries/high-tech/our-
insights/thinking-inside-the-subscription-box-new-research-on-ecommerce-consumers.
30
Tzuo, op. cit., 25.
31
Jessica Bruder, “Taking a Third Pass at Selling Movie Subscriptions,” New York Times, February 13, 2013, accessed
November 3, 2018, https://boss.blogs.nytimes.com/2013/02/13/taking-a-third-pass-at-selling-movie-subscriptions/.
32
“Annual Average US Ticket Price,” NATO National Association of Theatre Owners, accessed September 10, 2019,
www.natoonline.org/data/ticket-price/.
33
Jessica Bruder, op. cit.
34
Ibid.
35
Brooks Barnes, “From AMC and MoviePass, a Film a Day for a Monthly Fee,” New York Times, December 16, 2014,
accessed November 2, 2018, www.nytimes.com/2014/12/16/business/from-amc-and-moviepass-a-film-a-day-for-a-monthly-
fee.html.
36
“MoviePass Names Mitch Lowe Chief Executive Office,” YahooFinance, accessed July 4, 2019,
https://finance.yahoo.com/news/moviepass-names-mitch-lowe-chief-140000184.html
37
Ibid.
105
Page 12 9B19M108
38
Helios & Matheson, “Helios and Matheson Analytics Inc. Buys Majority Stake in MoviePass, Today’s #1 Movie Theater
Subscription Service,” press release, August 15, 2017, accessed November 4, 2018, www.hmny.com/press-
release/2017/8/15/helios-and-matheson-analytics-inc-buys-majority-stake-in-moviepasstm-todays-1-movie-theater-
subscription-service.
39
Graham Rapier, “MoviePass’s Parent Company Is Getting Crushed after Selling Shares at Massive Discount (HMNY),”
Markets Insider, April 19, 2018, accessed November 2, 2018, https://markets.businessinsider.com/news/stocks/moviepass-
parent-hmny-stock-price-crushed-after-selling-shares-at-huge-discount-2018-4-1021595260.
40 Rick Broida, “Here’s How MoviePass Works,” CNET, August 1, 2018, accessed November 2, 2018, www.cnet.com/how-
to/how-moviepass-works/.
41
Ibid.
42
Ibid.
43
Andrew R. Chow, “Tracking MoviePass’s Bumpy History,” New York Times, July 31, 2018, accessed November 3, 2018
www.nytimes.com/2018/07/31/movies/moviepass-timeline.html.
44
Ibid.
45
Ibid.
46
Fritz, op. cit.
47
Trey Williams, “Helios & Matheson Is Increasing Its Stake in MoviePass with an Option for More,” MarketWatch, October
12, 2017, accessed November 3, 2018, www.marketwatch.com/story/helios-matheson-is-increasing-its-stake-in-moviepass-
with-an-option-for-more-2017-10-12; Richard Morgan, “MoviePass Owners Weighing Merger Despite Burning through Cash,”
New York Post, April 22, 2018, accessed November 3, 2018, https://nypost.com/2018/04/22/moviepass-owners-weighing-
merger-despite-burning-through-cash/.

48
“Helios and Matheson Analytics Inc. (HMNY),” Yahoo! Finance, accessed December 8, 2018,
https://finance.yahoo.com/quote/HMNY/history?period1=871012800&period2=1537675200&interval=1d&filter=history&frequ
ency=1d; HMNY’s stock prices for all dates have been converted to reflect the July 2018 1:250 reverse stock split.
49
Graham Rapier, “MoviePass Shareholders Approve 2 Measures Meant to Keep the Company from Being Kicked off Its
Stock Exchange,” Markets Insider, July 23, 2018, accessed November 3, 2018,
https://markets.businessinsider.com/news/stocks/moviepass-hmny-stock-price-measures-to-avoid-nasdaq-delisting-2018-7-
1027391120.
50
Paul Ausick, “MoviePass Wants Another Reverse Stock Split,” 24/7WallStreet, September 17, 2018, accessed December
14, 2018, https://247wallst.com/media/2018/09/17/moviepass-wants-another-reverse-stock-split/.
51
Helios and Mattheson 8K Filing, accessed December 4, 2018, http://mysec.hmna.com/MYSEC/documents/html/hmny201
80508_8-K.htm, May 8, 2018.Helios
52
Helios and Mattheson Analytics Inc., “MoviePass Launches New Pricing Plan Built for the Mass Consumer,” press release,
August 6, 2018, accessed December 14, 2018, www.hmny.com/press-release/2018/8/6/moviepass-launches-new-pricing-
plan-built-for-the-mass-consumer.
53
“HMNY / Helios and Matheson Analytics Inc. Notification of Late Filing,” November 15, 2018, accessed December 4, 2018,
https://fintel.io/doc/sec/1040792/000121390018015874/extf10q0918_heliosandmath.htm.
54
Rick Munarriz, “3 Reasons AMC Is Beating MoviePass at Its Own Game,” MSN Money, September 15, 2018, accessed December
14, 2018, www.msn.com/en-us/finance/topstocks/3-reasons-amc-is-beating-moviepass-at-its-own-game/ar-BBNmBPK.
106
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Persuasion, Argument, and the Case Method................................................................................33

Arcenciel: Bottle Caps for Wheelchairs...........................................................................................41

Telenor Group: Developing a New Business Model.......................................................................51

CampusHash: Evolving Business Model of an Entrepreneurial Venture........................................59

Rocky Mountain Soap Company: The Move Toward Sustainable Packaging................................69

Bed Bath & Beyond: Is Online the Solution?..................................................................................81

MoviePass: Disruption Through Subscription.................................................................................95

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