Ethics in Scientific Research

Last summer I was privileged to visit Germany for the first time. It was a very humbling and moving experience to be able to visit Dachau, the first prominent and leading Holocaust concentration camp outside of Munich. The camp was well preserved, and in one of the main buildings of the camp had been erected one of the most fascinating and impressive museums I have ever been to. Accompanying my visit were a flood of emotions: curiosity, sadness, anger, and disgust. One particular section of the museum was of particular interest to me - medical research and experimentation on camp prisoners. 

I learned of some of the most horrific and inhumane experiments one could possible imagine: cutting twins open all the way down the side of their body and trying to stitch them together to make one person; throwing prisoners out of airplanes at high elevations without parachutes to see how their bodies reacted in low pressure environments (meant to help German pilots who have to eject from their airplanes during a dog fight); removing bones, nerves, muscles, and connective tissues without anesthesia and trying to implant them in other prisoners' bodies; and trying to see how long a human could stay alive drinking only salt water, among dozens of others. Tens of thousands of prisoners were killed in these experiments. Obviously, this inhumane behavior is disgustingly abhorrent, and it remains a dark stain in the history of German and in all of humanity. 

One experiment that I learned of has carried with it ethical controversies that exist even today. Camp doctors would submerge prisoners in tanks of freezing cold water for several hours until they were nearly dead, and then take them out and test what worked best to revive them. They would warm them slowly, or quickly, or pour boiling hot water on them, often scalding them to death. Though horrific in nature, these experiments have provided modern medical experts with some of the most relevant, informative information in this field of study.

Not too long ago, Doctor Robert Pozos, the Director of the Hypothermia Laboratory at the University of Minnesota of Medicine at Duluth, attempted to use some of the results of Nazi experimentation in a paper he submitted to have published by the New England Journal of Medicine.  His research is devoted to methods of rewarming frozen victims of cold. After observing as many cases of reviving frozen patients as he could in hospitals and clinics around the world, he came across impelling data from the Dachau experiments that seemed to fill the gap in his own research. Pozos remarked that "It could advance my work in that it takes human subjects farther than we're willing."  He finished his paper and submitted it to NEJM for publication, after which it was flatly vetoed by the Journal's editor.

Obviously, The New England Journal of Medicine, one of the world's leading publishers of scientific discovery, found that because the research was obtained unethically, they would not publish it. This set a major precedent in the scientific community for ethics in research. However, many were of the opinion that while the prisoners' deaths were cruel and inhumane, one cannot change the past. All you can do is make positive change for the future. They argue that not using the data to save future lives would be letting the prisoners die in vain. They argued that to use the information would be to posthumously turn their lives into legends. 

The Unfortunate Misalignment in a (had been) Promising Sales Company

With nearly six years of door-to-door sales under my belt, I have come to know a great deal about the door-to-door industry. I find it interesting to see how sales companies run their businesses: what products they try to sell, how they attract and train salespeople, how salespeople are compensated, what kind of door approach they take, and what new sales “schemes” they think up to actually get sales. One particular industry that I follow is the door-to-door alarm companies. Living in the door-to-door alarm company Mecca, I’ve seen the rise and/or fall of the best of them – APX (now Vivint), Pinnacle, Northstar, Elite, Amp, Firstline, Security One, Peak, ADT, Brinks, Broadview, Signature Alert . . . and the list goes on and on. As I follow these companies, especially as a student of business, it is becoming easier to recognize when these companies make wise business decisions, and when they make poor ones. Unfortunately, since most of the owners of these companies are simply just champion door-knockers, they are subject to make poor (and frequent) bad business decisions. Often their day-to-day operations, recruiting efforts, perceived goals, and leadership styles run contrary to what they all really want – to become a first class, profitable alarm company with a solid base of happy customers and a great reputation. One such company that I personally worked for that has fallen subject to a misalignment of goals and actions is Platinum Protection.

The owners of Platinum Protection had the best of intentions. A group of four top-selling regional managers from APX decided that they were sick of all the injustices in their company. They didn’t like the reputation the company had, they weren’t impressed with the quality of sales reps it attracted, and they were quite displeased with the controversial nuances associated with compensation. So, they did what everyone else before them did – broke away from APX to start their own company. This time, though, it was a “by salesman, for salesman” type company. No longer would the upper management be so out of touch with the day-to-day grind that they couldn’t make informed decisions on behalf of their workers. No longer would there be pay injustice with sales reps. They would start a company that attracted the most honest of reps, one that prided itself for its fantastic customer service, and one that was run like a publicly traded company . . . or at least so they thought initially.

However, what we see in Platinum is a classic misalignment of their actions and strategies. Their first problem was that they set up shop right next door. By remaining in Utah Valley, right off the bat they were perceived as “just another Provo alarm company.” Next, most of the owners never rose above the salesman image. They drove their hundred thousand dollar trucks, wore their $300 jeans, and acted in every other way just like all of the other reps in the company. After all, that’s what they were. They never seemed to gain the respect from the reps that executives of other companies earn.

One of their largest misalignments lays in their compensation structure. In an industry known for up to six figure signing bonuses, Platinum knew the problems associated with giving reps something for nothing – it attracts arrogant workers who think they deserve more than they're worth. They shop around, sacrificing friendships and relationships and company loyalty in order to look out for number one. In order to avoid these problems, Platinum knew how they could avoid these problems. In fact, it’s so simple to see, why didn’t all of the other companies do this? No more signing bonuses. After all, does ADT give huge signing bonuses? No. Did Brinks when they were around? No. By cutting out signing bonuses, they would attract only hardest working, most honest, company loyal sales reps. Wrong.

What Platinum didn’t consider strongly enough was that door-to-door sales is not an intrinsically rewarding or motivating profession. Nobody knocks their guts out day in and day out, in 100+ degree weather, for 10 hours a day, six days a week, for all 118 days of summer with no vacation or days off just because it’s fun or because they like it. They do it for one reason and one reason only – money, and LOTS of money. With that being said, no signing bonuses and no negotiating of pay scales killed their rep base. In their first year in business, they came out of the gate bigger and faster than any first year alarm company . . . ever. They did more accounts in their first year of operation than APX, Pinnacle, or even ADT. They attracted reps by promising them quick management opportunities, tons of room for growth, and large future manager pay scales. In fact, Platinum did so well their first year in business that they scared the daylights out of all the other companies in their market. In year two, their volume doubled.

Year three is when their true colors started coming out. Managers weren’t promoted as fast as they were promised. Those that were promoted didn’t earn near as much as they thought. Reps felt the owners were so tight with their compensation that they were unjust. The company’s Better Business Bureau rating dropped to a D-, after which they removed themselves from the Bureau all together. If you were to type “Platinum Protection” into Google, the first hit that came back is “Platinum Protection scam.” They have 37,000 complaints online about dishonest, scamming reps. So what happened? All of the reps left to go work for someone else. Regional managers took $250,000 signing bonuses to bring multiple offices of reps with them to other companies. The average starting rep realized they could get five or ten grand to go sell the same equipment the same way, just wear a different name badge, so why would they ever go to Platinum?  

Where did it all go wrong? What was the root of their misalignment? Clearly, we see a profound misalignment between the company's strategy, their structure systems, shared goals, and staff. For what they “wanted” to be, they opened up in the wrong market, with the wrong image, with a weak leading coalition, and ultimately with a poor company. The founders goals were not shared by the reps. They ended up recruiting people they didn't really want or need. They looked like, acted like, and recruited like a typical Provo summer sales company, but they didn’t pay like one, and their company structure and system are struggling because of it.  Is it too late to re-align? Not necessarily. But what they need is to relocate their company headquarters out of the state of Utah. This way, they have no reputation for being just like all the others before them. They could attract the career-motivated reps that they desire. The rivalry wouldn’t be as intense, so reps wouldn’t have as many other options for which to shop around. Next, they need to lose their $100,000 lifted trucks and hummers and designer jeans and start acting like company executives. Stop calling your reps “bro,” and start wearing suits. Last, they need to pay their reps like a publicly traded company would. In fact, they could keep paying them the way they have been. When it all comes down to it, if you live in an ocean with sharks, look like a shark, swim like a shark, but fight like a minnow, you’re going to starve to death. Either learn to fight like a shark, or move to a smaller pond.

Pharma's Painful Changes to Trigger More M&A

After the passage of the Patient Protection and Affordable Care Act (PPACA) in March, 2010, the pharmaceutical industry faces a bit of a daunting environment with rising costs, enormous new tax burdens, and stagnant drug innovation. In one of the most heavily regulated industries in the world, another 2,046 page bill hardly adds to industry appeal. Mergers and acquisitions are common, with some of the world's largest firms acquiring 10 or more companies annually. GlaxoSmithKline, one of London's leading pharmaceuticals firms (which also has substantial operations in the United States), stated that the model the industry was following was flawed and as a result, pharma companies need to change their strategy.

The new strategy focuses even more on mergers and acquisitions, and also differentiating their market offering by breaking into consumer markets, vaccines, and emerging markets. To fill this gap in product offering, the company is taking a bold forward move to acquire small companies to allow them to expand. As the market consolidates, buyer power decreases, and the pharmaceutical company will have more bargaining power.  GlaxoSmithKline is leading the front for this new strategy, having completed 20 M&A deals in the last 2.5 years. Every one of the 20 is generating far more revenue than their cost of capital. With their expanded product line, GSK is hoping to elevate the revenue per dollar of research and development. Currently, they experience return on R&D of 11%, but have goals to raise it to 14% with their new umbrella of companies. Also on their agenda is breaking into new international markets, like China and Brazil, where sales growth is higher in the US and Europe.

Rivalry Getting Hot in China's Wind Market

The global wind turbine market is made up of a few big fish in a relatively confined pond - calling for some pretty fierce rivalries. Ten companies account for 80% of the market, with Vestas, from Denmark, leading the pack with 12.8% of the total market share (based on installed capacity). Following closely behind is GE, which controls 12% of the market.

However, Vestas' market share has decreased considerably in the past few years because of an expanding international market for wind. China, for instance, is the fastest growing wind market in the world. Its growing capacity has not only helped domestic wind farmers, but also international players expand to new markets as well. Chinese companies such as Sinovel, Dongfang, and Goldwind face stiff competition from their international counterparts - GE Energy, Vestas, and Suzlon - who have also begun to harvest wind in China. After China is India, whose future is also promising.

Now, when considering the forces that shape and determine an industry, namely the threat of substitutions, barriers to entry, power of suppliers and buyers, and rivalry, one might think that this is a fairly safe sandbox in which to play. Traditional energy sources are depleting at astronomical rates (not to mention how expensive they are), barriers to entry are high, keeping others from entering the market, and suppliers and buyers don't have much influence on prices - at least not yet. But somewhere along the line, somebody left the flood gates open long enough to let ten big fish in the pond - fish that are about equal in size and are all equally hungry. Only time will tell which one will come out on top.

T-Mobile Expanding their Target Market

While T-Mobile has historically focused on value conscious families and individuals for their revenue, they have just launched a massive plan to acquire a large share of an unfamiliar market - businesses. The No. 4 U.S. carrier plans to acquire some $3 billion in new sales from the business sector over the next three years. While their current B2B share is relatively small to its competitors (4%, compared to Verizon's 41%, AT&T's 35% and Sprint's 14%), it hopes to take a large portion of that in the upcoming years.

Executives blame T-Mobile's weak past U.S. performance with underfunding and poor sales efforts. They are confident that with increased funding and a more aggressive effort they can see a turnaround. To take away market share from their competitors, they either have to differentiate their service or be prepared to battle it out on the price field. Executives agree that they'll do the latter.

When considering Porter's Five Forces (barriers to entry, substitution threats, buyer power, supplier power, and rivalry among competitors), it seems as though they may need a little more to compete than just slightly lower prices. In an industry with extremely intense rivalries, high buyer power, and great threats to substitution, maybe T-Mobile should think about doing something different. Perhaps they should find a unique value-add, eliminating some of the threat of substitutions. Or incentivize businesses in a unique way to undercut their buying leverage. Whatever it ends up being, they're playing a risky game. They need to realize that they are vying for a position in a market in which they have essentially no current share, and their competitors are equipped as well, if not better, for the price war.