that in the early stages of a project, before the team had had a chance to establish healthy relationships, Philip would target individuals in whom to plant the seeds of conflict. In one case he worked subtly to convince “Mary” that “Tom” did not want to work with her, and shortly thereafter convinced Tom that Mary was reluctant to be his teammate. In no time a dysfunctional relationship between the two became obvious to all. Philip then expertly resolved the conflict, using his insider knowledge of its causes. Management’s suspicions about Philip’s behavior were confirmed when early team dynamics improved after Philip had been removed from team roles. Munchausen at work runs the spectrum from highly destructive tactics like Philip’s to nuisance behaviors that quietly corrode organizational effectiveness. It may involve simply embellishing a real problem or making it appear that one looms on the horizon. Just as solving a problem of one’s own creation can generate rewards, so can bringing an inflated or predicted “crisis” to the attention of others. Some MAW perpetrators – I call this type the “reluctant hero” – withhold valued but discretionary contributions at work in order to generate problems that will lead others to implore them to return to duty. For example, an employee may create some dependency within the organization by volunteering to mentor new hires and then threaten to give up the role, citing competing obligations. The perpetrator doesn’t necessarily want to withdraw but does want to win attention for remaining. Of course employees often have legitimate reasons for shedding discretionary duties. But MAW perpetrators engage in a regular, destabilizing pattern of commitment and withdrawal. Another type, the “do-looper” (named after computer routines that run repeat-

edly if conditions are right), constantly lights small fires and then puts them out. Most do-looping involves first creating and then remedying shortages of supplies, information, or other resources. One do-looper I encountered was brilliant at fixing travel-agency mistakes for his boss, and was often praised for his efforts. It was eventually discovered that the mistakes he “fixed” had never actually occurred. Many managers I’ve spoken with nod knowingly when I describe MAW. However, diagnosis is difficult. A manager who suspects an employee of Munchausen at work should ask these questions: • Is the employee disproportionately involved in identifying and fighting fires? • Is the employee unusually resistant to offers of help in addressing problems he or she has identified? • Does the employee deflect management’s efforts to understand a problem’s underlying cause?

at odds with the employee’s claims about a problem’s existence or severity? • Are problems with a project, a customer, or a process, or between colleagues, frequently resolved in the employee’s absence? “Yes” answers to these questions don’t conclusively confirm MAW, of course. But they signal that managers may want to be on the alert for repeated episodes and to validate their suspicions with multiple observers. If Munchausen at work seems likely, the best remedies are to reduce the attention and other rewards that are tied to solutions and, more broadly, to limit perpetrators’ opportunities for creating specific problems. Nathan Bennett ([email protected]) is the Catherine W. and Edwin A. Wahlen Professor of Management at Georgia Tech’s College of Management in Atlanta. Reprint F0711A

TWO-SIDED MARKETS

A Staged Solution to the Catch-22 by Andrei Hagiu and Thomas Eisenmann

Companies launching two-sided platforms – businesses that connect two groups of users, as credit card companies do – have often subsidized one group to get it to use the platform. This is a risky approach, because it requires a big up-front investment. A staged approach is safer: It establishes the platform in two distinct steps. Some of the Internet’s biggest success stories have been launched this way, including Google and Amazon. The staged approach addresses a catch-22 faced by any company hoping to capitalize on a two-sided platform: Prospective users on each side will avoid the platform until they are confident that the other side will have enough users to

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make it worth their while. Who’s going to sign up for a new type of credit card if no merchants accept it? And what merchant will accept the card if no customers carry it? (For more detail see “Strategies for Two-Sided Markets,” by Thomas Eisenmann, Geoffrey Parker, and Marshall W. Van Alstyne, HBR October 2006.) A company using a staged strategy begins by selling products or services to customers on just one side of a potential two-sided platform – products or services whose value to that side does not depend on the existence of the other. Once the company has built a big base of customers on the first side, it can target the second side for development.

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Google used this strategy: It originally launched as a vendor of web search services, operating Google.com and licensing its search engine to Yahoo and other portals. Initially Google.com carried no advertising; its sole (and modest) source of revenue was licensing fees. But after amassing end users, Google added advertisements and became extraordinarily profitable by serving searchers on one side and advertisers on the other. It brought new functionality to existing services as a means of transitioning to a two-sided platform. An alternative approach is to provide more of the same – to broaden a firm’s existing product line by hosting third parties that market similar goods and services, as Amazon did. Charles Schwab deftly managed such a transition years ago by adding third-party mutual funds and independent financial advisers to its in-house offerings. Staged strategies reduce investment risk but can be tricky to implement. Companies must earn the trust of new platform users. Third-party suppliers, for example, may worry about ceding control of their customer relationships to platform providers, who can favor their own products. Likewise, close communication is essential to maintaining the confidence of existing customers, suppliers, employees, and investors, who may be confused or alienated when a firm fundamentally changes its value proposition. Although Google successfully transitioned into a platform through improvisation rather than a careful plan, the road is littered with the casualties of poorly executed platform strategies. Think of eight-track cassettes, RCA’s VideoDisk, and IBM’s OS/2. By studying platform strategies that have worked, companies can hedge their bets.

The Best Advice I Ever Got

Andrei Hagiu ([email protected]) and Thomas Eisenmann (teisenmann@hbs .edu) are professors at Harvard Business School in Boston. The research reported here is described in detail in “Staging Two-Sided Platforms” (HBS teaching note #808004), available at www.harvard

by Fred Carl, Jr. Founder and CEO, Viking Range

In 1986 I was working full-time in the construction business and renting an unfinished one-room office in an old cotton exchange building in downtown Greenwood, Mississippi, trying to start a company in my spare time. I had dozens of detailed sketches for what would be the first Viking range, and little else. My wife has a cousin named Michael Zito who back then was the managing partner of the Touche Ross office down in Jackson. Every time he came to town, he would stop by and see how things were going with my little start-up company. During one of those conversations he gave me the single best piece of advice I ever got – advice that laid the groundwork for Viking’s success. “Freddie,” he said, “you should run this from day one like it’s a public company. Treat it like it’s going to be big. Hire a top-notch accounting firm and get audited every year. Work with the best law firms you can – ones that do securities work. Invest for the future, don’t ever settle for second best, and start this thing off right.” I could have busted out laughing, because I was doing good to make payroll, let alone hire a top accounting firm and lawyers, but I realized Mike was right. By nature I hate cutting corners, and yet I wasn’t approaching the business itself with the same standards as the product I had in mind. To create the company I wanted to, I had to look into the future and pretend I was already there. I had to stop treating the infrastructure of the company like some necessary evil, invest in it more than I thought possible, and trust the investment would work. Right away I asked Mike to take me on as a client, and after some cajoling he agreed. (For years we were that office’s smallest account.) Then I hired one of the sharpest law firms in the state – after a deep breath, because they’re not cheap. It wasn’t too long before the advice paid off: In 1992 we were able to take on a major financial partner, Stephens, Inc., because we had great advisers, clean financials, and no question marks next to our name – none of that receipts-in-ashoebox stuff that can kill entrepreneurial deals. Mike’s advice continues to guide me in a broader way. When someone uses our product, works in our plant, or comes to the Delta and visits Greenwood, I never want us or our town to be perceived as anything less than the absolute best – game faces on all the time. We could make our ranges in Podunk plants, but instead we use the Toyota Production System. We built our company hotel as if Architectural Record would come and critique. We offer top-of-the-line employee benefits: Anybody working here can get their high school, college, or graduate degree, and we’ll pay their full tuition. Now, don’t get me wrong: Shooting for the top isn’t always easy. It can be difficult and risky to do by yourself, and harder still to get others throughout your company and community to commit to your vision of what’s ahead. Walking through our downtown 15 years ago, I knew not everyone saw the possibility. But we built the hotel, and a gourmet restaurant and cooking school, and that got some new merchants to open stores. Step by step as the community redevelops, more people share that vision of what Greenwood and the Delta can be – and they’re aiming high, too. Viking now sells in 82 countries, and we have 99% retention and attendance rates for our employees, who refer to the Viking “family” – a word I’d never used. Following Mike’s advice wasn’t cheap, but we got our money back and then some.

– Interviewed by Daisy Wademan

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