Ethical Dilemma

I encountered an ethical dilemma last year in my internship. I was working in Data Analytics, and the client (a national retailer) asked my team to analyze its shrinkage (theft) data from its many stores.

After analyzing the company's data in conjunction with US Census data, we came to a number of politically incorrect conclusions. Specifically, we concluded that the percentage of certain ethnic groups in the population in the zip code of each store had a statistically significant influence on the store's theft rate. That is, large amounts of certain ethnic groups were strongly correlated with high theft in the company's stores.

This conclusion presented an ethical dilemma because we had two competing values we wanted to uphold. The first value was accuracy; that is, presenting the information we found in a clear, actionable, accurate way. This value alone would lead us to present the data exactly was we found it by telling the company that stores in areas with large percentages of these ethnic groups were at risk for having high theft. The second value was political correctness; that is, we didn't want to present the information in such a way that could offend the company's board or bring accusations of discrimination or profiling against the company. This value alone would lead us to deliberately leave our politically incorrect findings out of our report completely.

While I finished my internship before this ethical dilemma was completely sorted out, I proposed a solution that I thought balanced these two competing values. My solution was to present the data in another context: the percentages of all of these ethnic groups were highly, positively correlated with population density (the higher the population density, the higher the percentages of these ethnic groups). While leaving out the specific ethnic groups whose population percentages were highly correlated with high theft, just reporting the population density finding captured most of the predictive power of the ethnic group percentages (since the two variables were so well correlated), allowing us to uphold our value of accuracy. Also, since this report would not mention specific ethnic groups, it could not reasonably be labelled as discrimination or profiling to act on the report. Thus, this solution helped to preserve, as much as possible, both of our competing values.

Misalignment: US Border Patrol

A CNSNews.com report today summarized data reported by the office of Congressman John Culberson, a Republican from Texas. According to the report, 83.6% of illegal immigrants apprehended by the US Border Patrol last year were never prosecuted.

Assuming the report is accurate, this data represents a misalignment between the Border Patrol's superordinate goals and systems (or processes). Ostensibly, the superordinate goal of the Border Patrol is to prevent illegal immigration to the United States (and to prosecute offenders). However, the systems of the Border Patrol are not set up to prosecute those that break immigration law, which is presumably of key importance in preventing offenses, particularly by repeat offenses. The end result is that many illegal immigrants are apprehended, released, and then illegally cross the border again. If the Border Patrol really wants to achieve its superordinate goal of preventing illegal immigration, it will need to change its systems to allow for greater prosecution of immigration law offenders.

Of course, it could be argued that the superordinate goal of the Border Patrol (an arm of the US government) of preventing illegal immigration is misaligned with the United States' shared value of welcoming immigration. But that's another issue entirely, and one that I wouldn't want to touch with a ten-foot pole.

Changing the iPhone's value curve

An article hit Bloomberg today (read it by clicking here) describing a plan by Apple (though the company has not officially announced it) to create a new iPhone that will be cheaper and smaller than the current version of the iPhone, as well as a plan to create a new iPhone that will allow the device to be used on any mobile network (the iPhone currently can only work on AT&T and Verizon wireless networks in the U.S. and only on certain networks in other countries).

This news clearly shows an intention by Apple to change the iPhone's value curve in the future. Since its introduction to the market, the iPhone's value curve has been quite stable: very high on design, very high on functionality, very high on performance, very high on available applications and software, medium on size, low on price (since the price is higher than that of other smartphones), and low on versatility (because it can only be used with certain wireless carriers).

The new plan will change the following components of the iPhone's value curve: the size dimension will go from medium to high (since the device will be smaller), versatility will go from low to high (since it should now be able to operate on any wireless network), price will go from low to medium (the article says the new price will be $200, about the same as other smartphones), and performance will go from very high to medium (the new iPhone will use the same components as the current iPhone; since the iPhone will not be improving performance while competitors' will, its value for performance will decrease). Overall, three dimensions will significantly improve, while one dimension will significantly decrease.

As with any value curve shift, the success of this plan will depend on whether customers value the increasing dimensions more than they value the decreasing dimensions. The article mentions one reason for the new plan being to target large untapped markets in China and India, the wireless networks of which the current iPhone software cannot support and the customers of which cannot afford the iPhone's current price. For this reason alone, the plan should be successful. Furthermore, the new iPhone value curve should be much more attractive to many American consumers than the current value curve (in particular, American customers seem very sensitive to price). As the only dimension decreasing with this plan is performance, customers sensitive to performance are likely the only customers who would prefer the old value curve. The article mentions that Apple is also developing a newer, higher-performance iPhone that should satisfy these customers. So, all in all, based on this value curve proposition, this new plan looks to be a surefire win for Apple.

The Strategy of the "Tiger Mother"

A book was published recently by a woman who has nicknamed herself the "Tiger Mother." An article was published on the Wall Street Journal's website (click here to view) that is essentially a brief synopsis of the content of the book.

The article (and book, apparently) proposes a very strict parenting style advertised as "stereotypically Chinese" that will (supposedly) produce high-achieving children (since Asian children are stereotyped in America as being high-achieving). The parenting style consists mainly of forcing children to work long hours in academics and music study, while prohibiting them from doing such things as attending sleepovers and watching television.

While the effectiveness of this parenting style in producing high-achieving children can be debated (as it is, heatedly, in the more than 7,000 comments in response to the article on the WSJ website), the article is very interesting from a strategy standpoint. Michael Porter discusses in his seminal article "What is Strategy?" that the essence of strategy is making choices and trade-offs. Nowhere outside of the business world have I seen this principle so vividly illustrated. According to Amy Chua, the author of the article, if a parent wants his children to succeed academically, they must give up (or rather, he must give up for them) the hours of television watching common among American children. If he wants the children to be successful in music, they must not spend hours having playdates with other children.

As pointed out in the comments to the article and in other articles written in response, this parenting style does indeed imply other, larger trade-offs. One example is that, while emphasizing academic achievement, it does not encourage critical thinking or curiosity, or even the ability to pursue a child's interests or native talents. It also "trades off" the teaching of social and other interpersonal skills that are becoming increasingly important in the modern workplace. It may also give up a child's emotional well-being in pursuit of success. Ultimately, it demonstrates that in parenting, serious, difficult choices must be made in determining what to emphasize and what to de-emphasize in childrearing.

The article also illustrates Porter's principle of the "Activity System" which is commonly used to describe the interconnections of a company's activities performed in pursuit of its strategic goals. In the case of the "Tiger Mother," strict rules, a confrontational parenting style, and forced practice for academics and music would be the main hubs in the activity system web. Offshoots of these activities would be prohibition of video games, calling the children names in an effort to motivate them, and two hours of forced music practice per day, respectively.

While I don't believe Chua's philosophy is the best for raising children in America today, it has allowed me to stop and think about my own goals in parenting my (future) children. When the time comes, my wife and I will have a series of serious discussions regarding our goals for our children, what trade-offs we will have to make in achieving those goals, and how to set up our activity system to support the achievement of those goals. We will also be careful in making sure that our activity system really will produce the achievement of the goals we set, rather than containing activities we hope will achieve our goals (as I believe Chua has done). In so doing, I hope that we can have a greater likelihood of achieving true parenting success.

Wal-Mart targets health-conscious customers with new food program

A story hit the web yesterday about Wal-Mart's new 'healthy' food program.

According to the story, this program includes two elements: pressuring national packaged food vendors (from whom Wal-Mart purchases) to create 'healthier' items with less sugar and sodium and smaller portion sizes; and selling more locally grown produce in stores across the country. (I put the word 'healthier' in quotations because, really, how healthy can a bag of Chips Ahoy! actually be?)

This news is interesting to me for two reasons. First of all, it's an interesting strategy relating to Wal-Mart's postitioning. Wal-Mart is the quintessential low-cost, broad-scope retailer. While this initiative doesn't change that at all, it will add a smaller-scale positioning within Wal-Mart's positioning as a whole. Health-conscious consumers can visit one of the chain's low-cost, broad-scope stores and find a narrow-scope, not-as-low cost section targeted to them (though, as the story states, part of the initiative will be selling local fruits and vegetables at a lower cost than will competitors).

Of course, this type of activity isn't totally new for Wal-Mart. For years, the chain has sold regional items: L.D.S. books in Utah, 'potato' souvenirs in Idaho, local university apparel, and so forth. However, to my knowledge, this is the first time Wal-Mart has created a section for a non-geographic customer segment. Whether the new food program will be successful remains to be seen, but it is interesting that Wal-Mart has become so large that it has the ability to create narrow-scope, higher-cost sections inside of its low-cost, broad-scope stores. It will also be interesting to see if the chain follows up with similar sections in the future. Will Wal-Mart begin offering sections for minority ethnic groups or the L.G.B.T. community?

Another, less interesting aspect of this news is Wal-Mart's ongoing attempt to rehabilitate its public image, which is another strategic decision. Wal-Mart has been seen as something of an "Evil Empire" for a while, and this new food program is not the first attempt to change that. The news story mentions past attempts by the chain to pressure laundry detergent producers to create more environmentally friendly packaging, for example. The 'social responsibility crowd' has been growing in recent years, demanding that companies provide responsible options in regards to the environment, food choices, and so forth. The food initiative is an example of Wal-Mart coordinating its web of activities to be attractive to this market segment. Of course, this segment of the consumer base isn't very large right now; the fact that Wal-Mart is catering to it implies that the chain believes this segment will continue to grow. The chances are that Wal-Mart has done some serious research to come to this conclusion; the chances also are that more and more companies are going to follow suit.