Rory M. McDonald

Article | Harvard Business Review

Rory McDonald and Kathleen M. Eisenhardt

Brand-new markets are like the wormholes of science fiction, where the usual rules of time and space do not apply. When a market has just been born, the forces of competition there are constantly in flux, it’s unclear who your customers really are, and conventional strategies just don’t make sense. How then can you navigate this constantly shifting terrain?

Over the past few years, we have interviewed entrepreneurs and corporate innovators in new fields such as genomics, augmented reality, and fintech. We discovered that the most successful ones practice something called “parallel play,” exploring and testing the world the way preschoolers do. Instead of trying to differentiate their businesses, they observe what others in the market are doing and borrow ideas. After relentless experimentation, they commit to a single template for creating value. But rather than quickly optimizing that template, they leave it partially undetermined and pause, watch, and wait. As they gather serendipitous insights and the market begins to settle, they refine their models bit by bit.

Keywords: new markets; Business Model; Strategy; Framework; Innovation and Invention; Value Creation;

Citation:

McDonald, Rory, and Kathleen M. Eisenhardt. "The New-Market Conundrum." Harvard Business Review 98, no. 3 (May–June 2020): 75–83. View Details

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Article | Organization Science

Pivoting Isn't Enough? Managing Strategic Reorientation in New Ventures

Rory McDonald and Cheng Gao

New ventures often experience deviations from their plans that oblige them to reorient in pursuit of better fit between their evolving products and their target customers. Yet research is largely silent on how managers explain such changes and justify their ventures in the wake of fundamental redirections in strategy. Ventures initially attain legitimacy and amass resources on the strength of aims that audiences find compelling; later, those early claims can complicate course corrections. To shed light on how ventures manage strategic reorientations, we conducted an inductive, comparative-case of software-based financial advisors. The ventures pursued parallel reorientations and produced comparable end products, but diverged conspicuously in managing audiences during transitions. Our process model, inspired by these differences, proposes a sequence of stratagems that may enable entrepreneurs to alter strategy while portraying faithfulness to enduring aims. Our theoretical framework posits that for ventures, reorientation without penalty may depend on how they anticipate, justify, and stage changes to various audiences.

Keywords: strategic reorientation; technology entrepreneurship; innovation; product development processes; organizational adaptation; qualitative methods (general); Entrepreneurship; Technology; Organizational Change and Adaptation; Strategy; Innovation and Invention; Product Development; Communication Strategy;

Citation:
McDonald, Rory, and Cheng Gao. "Pivoting Isn't Enough? Managing Strategic Reorientation in New Ventures." Organization Science 30, no. 6 (November–December 2019): 1289–1318. View Details

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Article | Administrative Science Quarterly

Parallel Play: Startups, Nascent Markets, and the Effective Design of a Business Model

Rory McDonald and Kathleen Eisenhardt

Prior research advances several explanations for entrepreneurial success in nascent markets but leaves a key imperative unexplored: the business model. By studying five ventures in the same nascent market, we develop a novel theoretical framework for understanding how entrepreneurs effectively design business models: parallel play. Similar to parallel play by preschoolers, entrepreneurs engaged in parallel play interweave action, cognition, and timing to accelerate learning about a novel world. Specifically, they (1) borrow from peers and focus on established substitutes, (2) test assumptions, then commit to a broad business-model template, and (3) pause before elaborating the activity system. The insights from our framework contribute to research on optimal distinctiveness, and to the learning and evolutionary-adjustment literature on search. More broadly, we blend organization theory with a fresh theoretical lens—business-model processes—to highlight how organizations actually work and create value.

Keywords: search; legitimacy; organizational innovation; organizational learning; mechanisms and processes; institutional entrepreneurship; qualitative methods; business model design; Business Model; Business Startups; Entrepreneurship; Emerging Markets; Adaptation; Competition; Strategy;

Citation:
McDonald, Rory, and Kathleen Eisenhardt. "Parallel Play: Startups, Nascent Markets, and the Effective Design of a Business Model." Administrative Science Quarterly 65, no. 2 (June 2020): 483–523. View Details

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Article | Journal of Management Studies

Disruptive Innovation: An Intellectual History and Directions for Future Research

Clayton M. Christensen, Rory McDonald, Elizabeth J. Altman and Jonathan E. Palmer

The concept of disruptive innovation has gained considerable currency among practitioners despite widespread misunderstanding of its core principles. Similarly, foundational research on disruption has elicited frequent citation and vibrant debate in academic circles, but subsequent empirical research has rarely engaged with its key theoretical arguments. This inconsistent reception warrants a thoughtful evaluation of research on disruptive innovation within management and strategy. We trace the theory’s intellectual history, noting how its core principles have been clarified by anomaly-seeking research. We also trace the theory’s evolution from a technology-change framework—essentially descriptive and relatively limited in scope—to a more broadly explanatory causal theory of innovation and competitive response. This assessment reveals that our understanding of the phenomenon of disruption has changed as the theory has developed. To reinvigorate academic interest in disruptive innovation, we propose several underexplored topics—response strategies, performance trajectories, and innovation metrics—to guide future research.

Keywords: disruptive innovation; innovation metrics; competitive strategy; systemic industries; technology trajectories; Disruptive Innovation; Theory; History; Competitive Strategy; Research;

Citation:
Christensen, Clayton M., Rory McDonald, Elizabeth J. Altman, and Jonathan E. Palmer. "Disruptive Innovation: An Intellectual History and Directions for Future Research." Special Issue on Managing in the Age of Disruptions. Journal of Management Studies 55, no. 7 (November 2018): 1043–1078. View Details

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Article | Harvard Business Review (website)

Managing Political Misfits

Y. Sekou Bermiss and Rory McDonald

Not all employees agree with your politics. That's OK.

Keywords: Management; Organizational Culture;

Citation:
Bermiss, Y. Sekou, and Rory McDonald. "Managing Political Misfits." Special Issue on HBR Big Idea: Leadership in a Hot-Button World. Harvard Business Review (website) (March–April 2018). View Details

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Article | Academy of Management Journal

Ideological Misfit? Political Affiliation and Employee Departure in the Private-Equity Industry

Y. Sekou Bermiss and Rory McDonald

Though organizations are increasingly active participants in the political realm, little research has investigated how an organization’s heightened focus on political ideology impacts employees. We address this gap by exploring how an individual’s political ideological misfit with an organization’s prevailing ideology impacts mobility. By tracking the movements of over 40,000 investment professionals in the U.S. private equity industry over 10 years, we investigate the consequences of the ideological misfit that arises when individuals’ political ideologies diverge substantially from the prevailing ideology of their firms. We hypothesize that ideological misfit increases the likelihood of mobility, though the effects vary with liberal/conservative ideological orientation. Polynomial regression analyses reveal that the fit relationship between individual and organizational political ideology deviates from the idealized congruence relationship that underlies prevailing theory. Through a supplemental, qualitative investigation, we propose some potential interpretations for our findings.

Keywords: Values and Beliefs; Employees; Organizational Culture; Resignation and Termination; Financial Services Industry; United States;

Citation:
Bermiss, Y. Sekou, and Rory McDonald. "Ideological Misfit? Political Affiliation and Employee Departure in the Private-Equity Industry." Academy of Management Journal 61, no. 6 (December 2018): 2182–2209. View Details

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Other Article | Harvard Business Review

Entrepreneurship: Every Pivot Needs a Story

Rory McDonald and Cheng Gao

Citation:
McDonald, Rory, and Cheng Gao. "Entrepreneurship: Every Pivot Needs a Story." Harvard Business Review 95, no. 4 (July–August 2017): 24. (Summary of “Pivoting Isn’t Enough: Principled Pragmatism and Strategic Reorientation in New Ventures”.) View Details

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Article | Obstetrics & Gynecology

Relationship Between Labor and Delivery Unit Management Practices and Maternal Outcomes

Avery C. Plough, Grace Galwin, Zhonghe Li, Stuart R. Lipsitz, Shehnaz Alidina, Natalie J. Henrich, Lisa R. Hirschhorn, William R. Berry, Atul A. Gawande, Doris Peter, Rory McDonald, Donna L. Caldwell, Janet H. Muri, Debra Bingham, Aaron B. Caughey, Eugene R. Declercq and Neel T. Shah

OBJECTIVE: To define, measure, and characterize key competencies of managing labor and delivery units in the United States and assess the associations between unit management and maternal outcomes. METHODS: We developed and administered a management measurement instrument using structured telephone interviews with both the primary nurse and physician managers at 53 diverse hospitals across the United States. A trained interviewer scored the managers' interview responses based on management practices that ranged from most reactive (lowest scores) to most proactive (highest scores). We established instrument validity by conducting site visits among a subsample of 11 hospitals and established reliability using interrater comparison. Using a factor analysis, we identified three themes of management competencies: management of unit culture, patient flow, and nursing. We constructed patient-level regressions to assess the independent association between these management themes and maternal outcomes. RESULTS: Proactive management of unit culture and nursing was associated with a significantly higher risk of primary cesarean delivery in low-risk patients (relative risk [RR] 1.30, 95% CI 1.02–1.66 and RR 1.47, 95% CI 1.13–1.92, respectively). Proactive management of unit culture was also associated with a significantly higher risk of prolonged length of stay (RR 4.13, 95% CI 1.98–8.64), postpartum hemorrhage (RR 2.57, 95% CI 1.58–4.18), and blood transfusion (RR 1.87, 95% CI 1.12–3.13). Proactive management of patient flow and nursing was associated with a significantly lower risk of prolonged length of stay (RR 0.23, 95% CI 0.12–0.46 and RR 0.27, 95% CI 0.11–0.62, respectively). CONCLUSION: Labor and delivery unit management varies dramatically across and within hospitals in the United States. Some proactive management practices may be associated with increased risk of primary cesarean delivery and maternal morbidity. Other proactive management practices may be associated with decreased risk of prolonged length of stay, indicating a potential opportunity to safely improve labor and delivery unit efficiency.

Keywords: Health Care and Treatment; Management Practices and Processes; Performance Evaluation; Outcome or Result; United States;

Citation:
Plough, Avery C., Grace Galwin, Zhonghe Li, Stuart R. Lipsitz, Shehnaz Alidina, Natalie J. Henrich, Lisa R. Hirschhorn, William R. Berry, Atul A. Gawande, Doris Peter, Rory McDonald, Donna L. Caldwell, Janet H. Muri, Debra Bingham, Aaron B. Caughey, Eugene R. Declercq, and Neel T. Shah. "Relationship Between Labor and Delivery Unit Management Practices and Maternal Outcomes." Obstetrics & Gynecology 130, no. 2 (August 2017): 358–365. View Details

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Article | Strategic Management Journal

Entrepreneurial Beacons: The Yale Endowment, Run-ups, and the Growth of Venture Capital

Y. Sekou Bermiss, Benjamin J. Hallen, Rory McDonald and Emily Cox Pahnke

This paper investigates the social context of entrepreneurship in organizational sectors. Prior research suggests that firm foundings are driven by collective patterns of activity—that is, by patterns of prior foundings—including support from related markets as well as institutional activism in a given sector. Building on research of social salience and signals, we consider the influence of singular sector-level triggers, which we call entrepreneurial beacons. We argue that the actions or outcomes of salient organizations attract and motivate entrepreneurs, thus increasing the rate of foundings. To test this logic, we examine the impact of the Yale University endowment's investment choices and of venture-capital-backed IPO run-ups on venture-capital foundings between 1984 and 2011. The results pinpoint the aspects of the social environment that most heavily influence entrepreneurial activity and the dynamics of organizational sectors.

Keywords: entrepreneurship; organizations; signals; social salience; venture capital; Venture Capital; Higher Education; Organizations; Entrepreneurship; Investment;

Citation:

Bermiss, Y. Sekou, Benjamin J. Hallen, Rory McDonald, and Emily Cox Pahnke. "Entrepreneurial Beacons: The Yale Endowment, Run-ups, and the Growth of Venture Capital." Strategic Management Journal 38, no. 3 (March 2017): 545–565. View Details

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Article | Harvard Business Review

What Is Disruptive Innovation?

Clayton M. Christensen, Michael Raynor and Rory McDonald

For the past 20 years, the theory of disruptive innovation has been enormously influential in business circles and a powerful tool for predicting which industry entrants will succeed. Unfortunately, the theory has also been widely misunderstood, and the "disruptive" label has been applied too carelessly anytime a market newcomer shakes up well-established incumbents. In this article, the architect of disruption theory, Clayton M. Christensen and his coauthors, correct some of the misinformation, describe how the thinking on the subject has evolved, and discuss the utility of the theory. They start by clarifying what classic disruption entails—a small enterprise targeting overlooked customers with a novel but modest offering and gradually moving upmarket to challenge the industry leaders. They point out that Uber, commonly hailed as a disrupter, doesn't actually fit the mold, and they explain that if managers don't understand the nuances of disruption theory or apply its tenets correctly, they may not make the right strategic choices. Common mistakes, the authors say, include failing to view disruption as a gradual process (which may lead incumbents to ignore significant threats) and blindly accepting the "Disrupt or be disrupted" mantra (which may lead incumbents to jeopardize their core business as they try to defend against disruptive competitors). The authors acknowledge that disruption theory has certain limitations. But they are confident that as research continues, the theory's explanatory and predictive powers will only improve.

Keywords: Disruptive Innovation;

Citation:

Christensen, Clayton M., Michael Raynor, and Rory McDonald. "What Is Disruptive Innovation?" Harvard Business Review 93, no. 12 (December 2015): 44–53. View Details

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Article | Academy of Management Journal

Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation

Emily Cox Pahnke, Rory McDonald, Dan Wang and Benjamin Hallen

This paper investigates the impact of early relationships on innovation at entrepreneurial firms. Prior research has largely focused on the benefits of network ties, documenting the many advantages that accrue to firms embedded in a rich network of inter-organizational relationships. In contrast, we build on research emphasizing potential drawbacks to examine how competitive exposure, enabled by powerful intermediaries, can inhibit innovation. We develop the concept of competitive information leakage, which occurs when firms are indirectly tied to their competitors via shared intermediary organizations. To test our theory, we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally-invasive surgical segment of the medical device industry over a 22-year period. We find that indirect ties to competitors impede innovation, and that this effect is moderated by several factors related to the intermediary's opportunities and motivation to leak important information.

Keywords: Competition; Intellectual Property; Entrepreneurship; Innovation and Invention; Medical Devices and Supplies Industry;

Citation:

Pahnke, Emily Cox, Rory McDonald, Dan Wang, and Benjamin Hallen. "Exposed: Venture Capital, Competitor Ties, and Entrepreneurial Innovation." Academy of Management Journal 58, no. 5 (October 2015): 1334–1360. View Details

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Article | Strategic Management Journal

Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets

Eric L. Chen, Riitta Katila, Rory McDonald and Kathleen M. Eisenhardt

Prior work examines competitive moves in relatively stable markets. In contrast, we focus on less stable markets where competitive advantages are temporary and R&D moves are essential. Using evolutionary search theory and an experiential simulation with in-depth fieldwork, we find that the relationship between performance and subsequent competitive moves depends on the type of market, not just on whether performance is high or low. High performers seek to maintain status quo, but this requires different strategies in different markets. They are conservative in established markets and bold in new ones. In contrast, low performers seek to disrupt the status quo. Again, this requires different strategies in different markets. Unlike high performers, low performers are bold in established markets and conservative in new ones where they lack understanding of how to disrupt rivals. Overall, our results incorporate unstable markets in theories of competitive dynamics and competitive interaction in theories of evolutionary search. By examining R&D moves, we also extend competitive dynamics research to include technology-based firms for whom temporary advantages are often essential.

Keywords: Balance and Stability; Competitive Advantage; Supply and Industry;

Citation:
Chen, Eric L., Riitta Katila, Rory McDonald, and Kathleen M. Eisenhardt. "Life in the Fast Lane: Origins of Competitive Interaction in New vs. Established Markets." Special Issue on The Age of Temporary Advantage. Strategic Management Journal 31, no. 13 (December 2010): 1527–1547. View Details

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Working Papers

Working Paper | HBS Working Paper Series | 2020

Category-spanning Startup Entry and Investor Valuation of Incumbents: The Case of Fintech

Ryan T. Allen and Rory M. McDonald

Although previous work has examined how audiences evaluate category-spanning organizations, little is known about the conditions under which such spanners affect audience evaluations of other organizations. We posit that the emergence of atypical categorical combinations, pioneered by startups, signals an altered future state—and seeds doubt about certain incumbents’ future prospects within a re-ordered industry. We test this hypothesis using startup funding announcements as an information shock to investors evaluating incumbents in the financial services sector from 2010 to 2017—a period marked by significant category-spanning entry from non-traditional Fintech startups. We find that announcements by startups that spanned unusual combinations of industry categories led to lower cumulative average returns for incumbents, compared to entry by typical startups. Our theory and results contribute to research on categorization in markets and to theories of disruptive innovation, industry evolution, and technology change.

Keywords: category spanning; fintech; industry evolution; Business Startups; Information; System Shocks; Disruption; Technological Innovation; Financial Services Industry;

Citation:
Allen, Ryan T., and Rory M. McDonald. "Category-spanning Startup Entry and Investor Valuation of Incumbents: The Case of Fintech." Harvard Business School Working Paper, No. 20-109, April 2020. View Details

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Working Paper | HBS Working Paper Series | 2020

Shaping Nascent Industries: Innovation Strategy and Regulatory Uncertainty in Personal Genomics

Cheng Gao and Rory McDonald

In nascent industries—whose new technologies are often poorly understood by regulators—contending with regulatory uncertainty can be crucial to organizational survival and growth. Prior research on nonmarket strategy largely focuses on established firms in mature industries operating in novel domains where the rules of the game are underdeveloped, though such strategies are apt to differ for new ventures with limited resources and market power. How do ventures navigate regulatory uncertainty? To explore this question, we conduct an inductive multi-case research study in the nascent personal-genomics industry. Drawing on 86 interviews and extensive archival and qualitative data, we develop a theoretical framework that elucidates how ventures navigate regulatory uncertainty—specifying the range, content, and sequence of actions that ventures take to manage this uncertainty. The framework, organized around the sequential processes of anticipating, reacting to, and shaping regulations, introduces a novel logic of interaction—regulatory co-creation—that ventures can employ to shape emerging regulations. Taken together, our theory and findings challenge existing perspectives on strategy in nascent markets and shed new light on the dynamic interplay between ventures and regulators during the emergence of new technology industries.

Keywords: technological change; innovation; qualitative methods; Entrepreneurship; Technological Innovation; Governing Rules, Regulations, and Reforms; Risk and Uncertainty; Strategy;

Citation:
Gao, Cheng, and Rory McDonald. "Shaping Nascent Industries: Innovation Strategy and Regulatory Uncertainty in Personal Genomics." Harvard Business School Working Paper, No. 20-095, March 2020. View Details

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Working Paper | HBS Working Paper Series | 2020

Category Kings or Commoners? Market-Shaping and its Consequences in Nascent Categories

Rory McDonald

For a new market category to materialize, ventures must actively bring it into existence. Yet it remains a mystery how entrepreneurs, whose resources are stretched thin, can accomplish this task. Prior research emphasizes the importance of market-shaping but overlooks its impact on ventures. Through an inductive multiple-case study of a new financial-technology category, I develop theory centered on the conspicuous divergence in ventures’ cultural-resource use. My framework describes how the use of such resources co-evolves with the nascent market category, influencing the venture’s own trajectory. I also identify ways in which market-shaping can rebound back at a venture unexpectedly, contributing to strategic inflexibility and inertia. I pursue the contributions of the framework and discuss its implications for category creation, cultural entrepreneurship, and strategy in nascent markets.

Keywords: nascent markets; new categories; Cultural entrepreneurship; innovation; qualitative methods; Emerging Markets; Strategy; Innovation and Invention;

Citation:
McDonald, Rory. "Category Kings or Commoners? Market-Shaping and its Consequences in Nascent Categories." Harvard Business School Working Paper, No. 16-095, February 2016. (Revised January 2020.) View Details

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Working Paper | HBS Working Paper Series | 2017

The Right Mix: Angels, Venture Capitalists, and the Assembly of Entrepreneurial Resources

Benjamin Hallen and Rory McDonald

New ventures rely on external relationships for capital, knowledge, and networks. We examine how ventures assemble these resources—and whether they are all accessible from the same sources—in relationships with two types of investors: venture capital firms and angels. We argue the entrepreneurial investment landscape creates tensions between acquiring capital versus knowledge and networks, and secondarily between knowledge and networks pertinent to early operational execution versus long-term development. Through simultaneous relationships with both types of investors, we suggest, ventures can efficiently assemble both capital (via venture capitalists) and broad networks (via numerous angels). This inference is supported in a sample of 838 digital ventures. Our results address the nature and assembly of entrepreneurial resources, pinpointing the respective contributions of venture capital and angel investors.

Keywords: Business Ventures; Venture Capital; Entrepreneurship;

Citation:
Hallen, Benjamin, and Rory McDonald. "The Right Mix: Angels, Venture Capitalists, and the Assembly of Entrepreneurial Resources." Harvard Business School Working Paper, No. 17-082, March 2017. View Details

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Working Paper | HBS Working Paper Series | 2019

The Past is Prologue? Venture-Capital Syndicates' Collaborative Experience and Start-Up Exits

Dan Wang, Emily Cox Pahnke and Rory McDonald

Past research has produced contradictory insights into how inter-organizational collaboration—and the network structures associated with them—impacts organizational success. We theorize that the effect of network structure on collaborative success is contingent on the type of success under consideration and develop a typology of two different kinds of success. We test our hypotheses about the benefits of collaborative networks on a sample of almost 11,000 U.S. VC-backed start-ups, using VCs’ previous collaborative experience to predict the type of success that the start-ups they support will experience. Our findings indicate that more prior collaborative experience within a group of VCs leads a jointly funded start-up to achieve a successful equity exit by acquisition – what we call a local success – whereas less prior experience among the group leads a jointly funded start-up to exit by IPO – a global success. Our results provide a deeper understanding of the connections between organizational performance and collaborative networks and contribute to entrepreneurship research on the role of investors in technology ventures.

Keywords: Venture Capital; Experience and Expertise; Business Startups; Strategy;

Citation:
Wang, Dan, Emily Cox Pahnke, and Rory McDonald. "The Past is Prologue? Venture-Capital Syndicates' Collaborative Experience and Start-Up Exits." Harvard Business School Working Paper, No. 17-080, March 2017. (Revised November 2019.) View Details

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Cases and Teaching Materials

Case | HBS Case Collection | August 2019 (Revised April 2020)

The Walt Disney Company: Theme Parks

Rory McDonald, Allison Mnookin and Iuliana Mogosanu

As he seeks to place the division he leads on a firm footing for the future, Tom Staggs, chairman of Walt Disney Parks and Resorts, is considering a range of investments designed either to upgrade the guest experience in the company’s existing parks or to expand access to “the Disney magic” beyond the company’s current efforts. The case invites students to reflect on the “job to be done” that the parks perform for their guests, as well as on how far Disney can go to accommodate those for whom the parks are out of reach while still maintaining a premium experience.

Keywords: Entertainment; Investment; Expansion; Decision Making; Customer Satisfaction;

Citation:
McDonald, Rory, Allison Mnookin, and Iuliana Mogosanu. "The Walt Disney Company: Theme Parks." Harvard Business School Case 620-039, August 2019. (Revised April 2020.) View Details

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Teaching Note | HBS Case Collection | February 2020

Marcus by Goldman Sachs

Rory McDonald and Anibha Singh

Citation:
McDonald, Rory, and Anibha Singh. "Marcus by Goldman Sachs." Harvard Business School Teaching Note 620-107, February 2020. View Details

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Teaching Note | HBS Case Collection | January 2020

Parrot: Navigating the Nascent Drone Industry

Rory McDonald and Anibha Singh

Teaching Note for HBS No. 619-085.

Citation:
McDonald, Rory, and Anibha Singh. "Parrot: Navigating the Nascent Drone Industry." Harvard Business School Teaching Note 620-086, January 2020. View Details

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Case | HBS Case Collection | November 2019 (Revised December 2019)

Marcus by Goldman Sachs

Rory McDonald, Samir Junnarkar and David Lane

Five years on from the 2008 financial crisis, Goldman Sachs remained wounded. Revenues at the global investment bank had stagnated below pre-crisis levels, and the firm had yet to rebound from a substantial decline in securities-trading revenues. Marcus by Goldman Sachs was one response—an effort that operated as a start-up but was sponsored by senior Goldman executives—to grow the firm’s revenues by entering consumer banking with digital-only offerings. The move marked a dramatic cultural as well as product shift: the 150-year-old institution historically served only businesses and the wealthiest of individuals. In 2016, Marcus launched unsecured personal loans for the mass market; it rolled out high-yield deposits in 2017 and a credit card in partnership with Apple in 2019. By autumn of that year, Marcus had $5 billion in loans outstanding and $55 billion in deposits. It also faced a dilemma—ceaseless and rapid expansion had strained its people and infrastructure, yet Goldman expected Marcus to generate $1 billion in revenues in 2020. What now was the better bet, to pause to allow performance to catch up with growth or to seize the additional opportunities that beckoned for Marcus to diversify into consumer finance products?

Keywords: Corporate Entrepreneurship; Banks and Banking; Innovation Leadership; Growth and Development Strategy; Growth Management; Organizational Culture; Financial Services Industry; United Kingdom;

Citation:
McDonald, Rory, Samir Junnarkar, and David Lane. "Marcus by Goldman Sachs." Harvard Business School Case 620-005, November 2019. (Revised December 2019.) View Details

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Teaching Note | HBS Case Collection | December 2019

Under Armour

Rory McDonald and Matt Higgins

Teaching Note for HBS No. 618-020.

Citation:
McDonald, Rory, and Matt Higgins. "Under Armour." Harvard Business School Teaching Note 620-070, December 2019. View Details

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Background Note | HBS Case Collection | October 2019 (Revised January 2020)

Evolution of the Drone Industry

Rory McDonald, Andy Wu, Emilie Billaud and Ryan Bayer

This note focuses on the development of the drone industry in recent years and provides insights on the drone technology, regulations, applications, market size, top players, and ecosystem. This note was written in conjunction with the case study “Parrot: Navigating the Nascent Drone Industry” (HBS No. 619-085).

Keywords: drones; Technology; Disruption; Strategy; Entrepreneurship; Engineering; Product Development; Technology Industry; Asia; Europe; North America; United States;

Citation:
McDonald, Rory, Andy Wu, Emilie Billaud, and Ryan Bayer. "Evolution of the Drone Industry." Harvard Business School Background Note 620-053, October 2019. (Revised January 2020.) View Details

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Case | HBS Case Collection | June 2019 (Revised September 2019)

Parrot: Navigating the Nascent Drone Industry

Rory M. McDonald, Emilie Billaud and Vincent Dessain

In 2018, Henri Seydoux, CEO and Founder of Parrot, believed that his company was at an inflection point in its history. Parrot had been a European leader in consumer electronics since the 1990s, first developing Bluetooth kits for cars before moving on to electronic toys and, significantly, the AR Drone in 2010—a remote-controlled quadcopter that was way ahead of its time. In the years that followed, Parrot’s sales volumes and popularity quickly increased. But new players were entering the market. Giant Chinese rival DJI, in particular, aggressively lowered its prices, forcing weaker companies out of the market. If Parrot was to survive the shakeout, Seydoux would have to figure out how to compete in an industry where even well-capitalized companies were collapsing. The questions that he faced were both strategic and urgent. Where to compete and how to win?

Keywords: Forecasting and Prediction; Disruption; Entrepreneurship; Corporate Strategy; Technological Innovation; Leading Change; Competitive Advantage; Technology; Competitive Strategy; Consumer Products Industry; Electronics Industry; Entertainment and Recreation Industry; Motion Pictures and Video Industry; Technology Industry; Video Game Industry; Europe; France; Paris;

Citation:
McDonald, Rory M., Emilie Billaud, and Vincent Dessain. "Parrot: Navigating the Nascent Drone Industry." Harvard Business School Case 619-085, June 2019. (Revised September 2019.) View Details

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Module Note | June 2019

Purpose Brands

Rory McDonald, Clayton M. Christensen and Shaye Roseman

Citation:
McDonald, Rory, Clayton M. Christensen, and Shaye Roseman. "Purpose Brands." Harvard Business School Module Note 619-075, June 2019. View Details

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Supplement | HBS Case Collection | December 2018

Amazon Acquires Whole Foods (B)

Rory McDonald, Sarah Mehta and Shaye Roseman

This short case, meant for pairing with HBS No. 615-013, “AmazonFresh: Rekindling the Online Grocery Market,” explores Amazon’s rationale for acquiring Whole Foods.

Keywords: Mergers and Acquisitions; Growth and Development Strategy; Technology Industry; Food and Beverage Industry;

Citation:
McDonald, Rory, Sarah Mehta, and Shaye Roseman. "Amazon Acquires Whole Foods (B)." Harvard Business School Supplement 619-029, December 2018. View Details

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Case | HBS Case Collection | January 2018

Under Armour

Rory McDonald, Clayton M. Christensen, Daniel West and Jonathan E. Palmer

After 20 years of growth unprecedented in the sports apparel industry, Under Armour finds itself with a new record to beat: making the leap from $5 to $10 billion in sales—a feat only accomplished to date by competitors Nike and Adidas. At the heart of this challenge is how Under Armour can maintain its brand’s authenticity while adding new products that fuel future growth. The case traces the evolution of Under Armour’s brand and describes how the company chose to extend or not extend its brand into adjacent categories and markets in the past. Now Under Armour needs to decide on their next steps. Should the company focus on its core markets? Should it stretch the brand into more adjacencies? Or should it consider something more radical, like app-related sales through subscriptions and wearable technologies?

Keywords: Under Armour; Nike; Adidas; ＂Jobs to be Done; Purpose Brands; Entrepreneurship; Customer Focus and Relationships; Innovation Strategy; Business Growth and Maturation; Growth Management; Innovation Leadership; Sports Industry; Apparel and Accessories Industry; Fashion Industry; Health Industry; Technology Industry; Retail Industry; United States; Maryland; Baltimore;

Citation:
McDonald, Rory, Clayton M. Christensen, Daniel West, and Jonathan E. Palmer. "Under Armour." Harvard Business School Case 618-020, January 2018. View Details

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Case | HBS Case Collection | September 2017

Under Armour: Evolution of a Purpose Brand

Rory McDonald, Clayton M. Christensen, Daniel West and Jonathan Palmer

After twenty years of growth unprecedented in the sports apparel industry, Under Armour finds itself with a new record to beat: making the leap from $5 to $10 billion in sales — a feat only accomplished to date by competitors Nike and Adidas. At the heart of this challenge is how Under Armour can maintain its brand’s authenticity while adding new products that fuel future growth. The case traces the evolution of Under Armour’s brand and describes how the company chose to extend or not extend its brand into adjacent categories and markets in the past. Now Under Armour needs to decide on their next steps. Should the company focus on its core markets? Should it stretch the brand into more adjacencies? Or should it consider something more radical, like app-related sales through subscriptions and wearable technologies?

Keywords: Under Armour; Nike; Adidas; ＂Jobs to be Done; Purpose Brands; Entrepreneurship; Customer Focus and Relationships; Innovation Strategy; Business Growth and Maturation; Growth Management; Innovation Leadership; Sports Industry; Apparel and Accessories Industry; Fashion Industry; Health Industry; Technology Industry; Retail Industry; United States; Maryland; Baltimore;

Citation:
McDonald, Rory, Clayton M. Christensen, Daniel West, and Jonathan Palmer. "Under Armour: Evolution of a Purpose Brand." Harvard Business School Case 618-010, September 2017. View Details

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Case | HBS Case Collection | March 2017 (Revised April 2017)

Floodgate: On the Hunt for Thunder Lizards

Rory McDonald, Alix Burke, Emma Franking and Nicole Tempest

Founded in 2008, Floodgate pioneered the “micro-VC” category, a new type of investment firm that raised smaller funds and made earlier, smaller investments in technology startups than traditional venture-capital firms. By 2015, Floodgate had raised three funds totaling $225 million and achieved outsize success with investments in high profile startups like Twitter, Twitch, Cruise Automation, and Lyft. Floodgate measured success in terms of its coverage of the top 10-15 exits in any given year. These “Thunder Lizards,” which had the potential to change the business landscape and grow to Godzilla-like scale, accounted for 97% of returns. With increasing competition from micro-VCs and alternatives like crowdfunding, opportunity funds, and incubators, partners Ann Miura-Ko and Mike Maples wondered how Floodgate could continue to compete successfully in a rapidly changing venture-capital landscape. Should Floodgate stay with the micro-VC model it helped invent, or raise more capital, leveraging its successful track record to make investments at the scale of more traditional VC firms? In selecting a path, they needed to consider Floodgate’s dual responsibility to entrepreneurs and LPs.

Keywords: innovation; business models; angel investors; crowdfunding; incubators; accelerators; Entrepreneurship; Venture Capital; Business Startups; Technology;

Citation:
McDonald, Rory, Alix Burke, Emma Franking, and Nicole Tempest. "Floodgate: On the Hunt for Thunder Lizards." Harvard Business School Case 617-044, March 2017. (Revised April 2017.) View Details

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Teaching Note | HBS Case Collection | March 2017

Floodgate: On the Hunt for 'Thunder Lizards'

Rory McDonald

Teaching Note for HBS No. 617-044.

Citation:
McDonald, Rory. "Floodgate: On the Hunt for 'Thunder Lizards'." Harvard Business School Teaching Note 617-045, March 2017. View Details

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Case | HBS Case Collection | June 2016 (Revised September 2016)

chotuKool: 'Little Cool,' Big Opportunity

Rory McDonald, Derek van Bever and Efosa Ojomo

In 2013, a team led by Gopalan Sunderraman, vice president of corporate development at Godrej & Boyce Mfg. Co. Ltd.—one of the companies owned by Godrej Group, a large Indian conglomerate—was preparing to launch an innovative low-cost refrigerator. Developed expressly for the approximately 80% of Indians who lacked access to refrigeration (a market Godrej had never before targeted), the chotuKool represented a technological marvel—a small, inexpensive thermoelectric appliance powered by a rechargeable battery. The case traces chotuKool’s development and evolution from an initial product concept inspired by theories of innovation and the strategic vision of Jamshyd Godrej (managing director and chairman at Godrej & Boyce Mfg.) to a promising new line of business that emerged from a process of learning and discovery through market feedback. As the company geared up for the broader rollout of chotuKool, Sunderraman and his team faced some tough questions. What was the proper target and scope for the launch? Which strategy gave them the best chance of success? Could chotuKool really redefine the company and bring refrigeration to hundreds of millions of Indians?

Keywords: Disruptive Innovation; Consumer Products Industry;

Citation:
McDonald, Rory, Derek van Bever, and Efosa Ojomo. "chotuKool: 'Little Cool,' Big Opportunity." Harvard Business School Case 616-020, June 2016. (Revised September 2016.) View Details

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Teaching Note | HBS Case Collection | March 2017

chotuKool: 'Little Cool,' Big Opportunity

Rory McDonald

Teaching Note for HBS No. 616-020.

Citation:
McDonald, Rory. "chotuKool: 'Little Cool,' Big Opportunity." Harvard Business School Teaching Note 617-040, March 2017. View Details

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Case | HBS Case Collection | February 2016 (Revised March 2016)

America's Cup in 2013: Oracle Team USA vs. Emirates Team New Zealand (A)

Rory McDonald, Alan MacCormack and Vanessa Ampelas

Four teams across the world are furiously designing, building, testing, and learning to sail a boat that would be one-of-a-kind in order to win the 2013 America's Cup. Choosing the best development path was a challenge as the teams had less than three years to prepare, and each decision would affect the performance of the boat as well as the duration of the sailors' training. The case traces the dilemma faced by the favorite, Oracle Team USA (OTUSA), as rumors grew that the challenger was pursuing a revolutionary technology that would enable its six-ton boat to literally fly above waves. With only a year left before the Cup, should OTUSA keep refining its current technology, called "skimming," or should it pivot towards "foiling" (flying)? At this stage foiling could be a red herring, and even if it was not, the limits of the performance of a foiling boat would remain a mystery for some time. The case explores the dilemma of managing innovation in an uncertain environment, where the decision would be sanctioned a year later by a win or a loss.

Keywords: Risk Management; Competition; Innovation and Management; Sports; Sports Industry; New Zealand; United States;

Citation:
McDonald, Rory, Alan MacCormack, and Vanessa Ampelas. "America's Cup in 2013: Oracle Team USA vs. Emirates Team New Zealand (A)." Harvard Business School Case 616-045, February 2016. (Revised March 2016.) View Details

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Case | HBS Case Collection | November 2015 (Revised January 2017)

Upwork: Reimagining the Future of Work

Feng Zhu, Rory McDonald, Marco Iansiti and Aaron Smith

Upwork, the world's largest freelance talent platform, was the result of a merger between the two leading online freelancing companies in 2014, Elance and oDesk. After the merger, the company operated as Elance-oDesk and continued to manage two online platforms—Elance.com and oDesk.com—independently of one another. However in 2015 the company relaunched as Upwork, with both a new brand and a new platform. The company began to migrate Elance.com members and functionalities over to the new platform, which was based on the technical infrastructure of oDesk.com. This case helps students consider the challenges and opportunities associated with such a platform merger, from strategy to implementation.

Keywords: platforms; employment; information technology; job search; Employment; Market Platforms; Multi-Sided Platforms; Market Transactions; Business Processes; Information Technology; Online Technology; Job Search;

Citation:
Zhu, Feng, Rory McDonald, Marco Iansiti, and Aaron Smith. "Upwork: Reimagining the Future of Work." Harvard Business School Case 616-027, November 2015. (Revised January 2017.) View Details

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Case | HBS Case Collection | February 2015 (Revised May 2015)

Boeing 787: Manufacturing a Dream

Rory McDonald and Suresh Kotha

This case traces the design and development of the Boeing 787 Dreamliner. Emphasis is on executive leadership and firm strategy in coordinating across a global network of partners in the production of a new aircraft.

Keywords: innovation; operations strategy; production; project management; coordination; product development; Product Development; Operations; Production; Collaborative Innovation and Invention; Aerospace Industry; United States;

Citation:
McDonald, Rory, and Suresh Kotha. "Boeing 787: Manufacturing a Dream." Harvard Business School Case 615-048, February 2015. (Revised May 2015.) View Details

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Case | HBS Case Collection | December 2014

HomeAway: Organizing the Vacation Rental Industry

Rory McDonald, Feng Zhu and Cheng Gao

In less than 10 years, cofounders Brian Sharples and Carl Shepherd had transformed HomeAway from just another Internet startup into the world's leading vacation-rental marketplace—a global online platform that links customers seeking vacation-home rentals to the property owners and managers who supply them. The case traces HomeAway's founding and acquisition-led growth, its 2011 IPO, and the core elements of its subscription-based business model. By 2014, incumbent travel giants like TripAdvisor and high-profile startups like Airbnb had begun to enter the vacation-rental sector. To stay ahead, HomeAway initiated a pilot cross-platform collaboration to list some of its properties on Expedia's site. More momentously, Sharples was also weighing a new commission-based revenue model that promised to attract a broader array of property listings but at the risk of undermining HomeAway's existing business.

Keywords: strategy; innovation; entrepreneurship; technology; Acquisitions; operations management; Technology Platform; Acquisition;

Citation:
McDonald, Rory, Feng Zhu, and Cheng Gao. "HomeAway: Organizing the Vacation Rental Industry." Harvard Business School Case 615-036, December 2014. View Details

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Teaching Note | HBS Case Collection | March 2017

HomeAway: Organizing the Vacation Rental Industry

Rory McDonald

Teaching Note for HBS No. 615-036.

Keywords: strategy; innovation; entrepreneurship; technology; Acquisitions; operations management;

Citation:
McDonald, Rory. "HomeAway: Organizing the Vacation Rental Industry." Harvard Business School Teaching Note 617-042, March 2017. View Details

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Case | HBS Case Collection | July 2014 (Revised August 2014)

AmazonFresh: Rekindling the Online Grocery Market

Rory McDonald, Clayton Christensen, Robin Yang and Ty Hollingsworth

More than a decade after the high-profile failures of several early online grocers, grocery remains the largest single U.S. retail category and one of the few that has not yet migrated online. Amazon began testing its grocery-delivery service, AmazonFresh, in Seattle, in 2007; five years later, the company has made significant progress. The case traces the evolution of AmazonFresh's business model and describes the operating capabilities necessary to compete with brick-and-mortar supermarkets like Wal-Mart and Safeway and with new digital grocery startups. Now Amazon needs to decide on AmazonFresh's next step. Should the company continue refining its business model in Seattle or expand to another city? What factors should it take into account when planning its next move?

Keywords: innovation; new markets; grocery; operations strategy; Innovation and Invention; Strategy; Emerging Markets; Learning; Service Operations; Online Technology; Business Model; Food and Beverage Industry; United States;

Citation:
McDonald, Rory, Clayton Christensen, Robin Yang, and Ty Hollingsworth. "AmazonFresh: Rekindling the Online Grocery Market." Harvard Business School Case 615-013, July 2014. (Revised August 2014.) View Details

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Teaching Note | HBS Case Collection | March 2017

AmazonFresh: Rekindling the Online Grocery Market

Rory McDonald

Teaching Note for HBS No. 615-013.

Keywords: innovation; strategy; competition; new markets; learning; grocery; operations strategy; Innovation and Invention; Competition; Emerging Markets; Learning; Service Operations; Online Technology; United States;

Citation:
McDonald, Rory. "AmazonFresh: Rekindling the Online Grocery Market." Harvard Business School Teaching Note 617-043, March 2017. View Details

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