2017/10/11

How a self-taught designer built a $3 million hat business

Janessa Leoné was a University of San Diego graduate en route to law school when travel inspired her to change course. After finding a 1940s black fedora in Paris for just €10, Leoné noticed she shared a last name with the milliner. “I was like, oh my gosh, maybe somehow I need to go down this path,” she says. “I wanted to make something that could withstand that amount of time…still in its pristine condition and make that accessible to people at a modest price point.”

Pursuing this plan meant Leoné needed to save money. The English literature major spent two years living with her parents and nannying until she had socked away $10,000. In 2013, $2,000 went toward the first production run, to which she added hand-sewn feathers and leather trim. Another 5% sent samples to fashion editors. Two weeks later, Barney’s placed an order.

It’s been a perfect fit. The self-funded 30-year-old’s eponymous line now carries 24 hat varieties and handbags in 450 stores, including its own brick-and-mortar in Culver City, Calif. This year, Leoné, who landed a spot on Forbes’ 2015 30 Under 30list, anticipates $3 million in revenue on hats costing $200 to $300. “I’m not satisfied with staying stagnant, so I’m constantly going to evolve,” she says. “I think that will always be the case for the brand.”

Lo que pierde España con la separación de Cataluña: el papel clave de la economía

Lo que pierde España con la separación Cataluña: el papel clave de la economía “Cataluña se ha ganado el derecho a ser un estado independiente” dijo el Presidente de Cataluña Puigdemont al comparecer en el Parlamento después de hacer valer el referéndum en el que el pueblo catalán aprobó la separación del gobierno español. En esta búsqueda de Cataluña por su independencia, la economía juega un papel clave, siendo los números los principales argumentos que condenan y evidencian las aportaciones de la región a las arcas españolas por arriba de lo que recibe.
Cataluña busca independencia de España / Getty/AlexLMX

“Cataluña se ha ganado el derecho a ser un estado independiente” dijo el Presidente de Cataluña Puigdemont al comparecer en el Parlamento después de hacer valer el referéndum en el que el pueblo catalán aprobó la separación del gobierno español.

En esta búsqueda de Cataluña por su independencia, la economía juega un papel clave, siendo los números los principales argumentos que condenan y evidencian las aportaciones de la región a las arcas españolas por arriba de lo que recibe.
Una separación de Cataluña pone en riesgo a la economía española que en los últimos diez años se mantiene en cifras rojas en materia de desempleo y bajos índices de crecimiento.

¿Qué pierde España con la salida de Cataluña?

Ante los riesgos de una separación, el presidente del Instituto de Estudios Económicos (IEE), Jose Luis Feito, destacó cinco puntos clave en los que se vería afectada la economía de España.

Su región más próspera

La actividad económica de Cataluña representa el 19% del Producto Interno Bruto español. En 2016 la economía local registró un PIB récord de 223.629 millones de euros, cobijando el 18.4% de las empresas españolas.
De salir Cataluña, “El resultado sería un Estado más pobre. El PIB per cápita caería unos US$1.000 hasta los 23.250 euros”, destacó el experto del instituto español.

Recaudación Fiscal

La recaudación fiscal que España obtiene de Cataluña supera los 70 mil millones de euros  (unos US$82.300) , el mayor al resto de las regiones. De acuerdo a los datos del Ministerio de Hacienda, de esta cantidad el gobierno de Mariano Rajoy se queda con  US$11.500 que utiliza para ayudar a áreas más pobres como Extremadura o las ciudades de Ceuta y Melilla.
“En otras palabras, España hace negocio”, opinó Sagués.
La salida de la sociedad catalana podría poner en riesgo la calificación crediticia de España. El FMI se mostró preocupado por la situación y afirmó que las tensiones políticas en Cataluña podrían lastra la confianza de la inversión y el consumo.

Innovación y emprendimiento

Cataluña es la región de España que más ha invertido en innovación y representa el quinto lugar en Europa en materia de startups.
De 2006 a 2015, el 25.6% de las publicaciones científicas fueron emitidas por instituciones catalanas y en 2016 la región representó el 56% del total de inversiones realizadas en España en este sector.
La región también lidera las peticiones de patentes en el país; en 2016, el 35,1% de las 547 que se solicitaron en España se registraron ahí, según el último informe de la Oficina Europea de Patentes. Muy por delante del 20,6% de Madrid, que ocupó el segundo puesto.

Infraestructura

El puerto de Barcelona, el más importante del Mediterráneo quedaría fuera de España. En 2016 este puerto registró una derrama económica superior a los 48 millones de toneladas y resulta clave para l turismo: casi cuatro millones de pasajeros pasaron por ahí el año pasado. Además, cruceros como el Harmony of the Seas, el más grande del mundo, lo tienen de base.
En infraestructura aeroportuaria, ataluña, operan varios aeropuertos, entre ellos, El Prat, que rivaliza en número de pasajeros con el de Adolfo Suárez-Barajas, en Madrid. El año pasado vivió el mejor de su historia, con 44,1 millones de viajeros.
La región también acoge a dos de las seis centrales nucleares que hay en España y que producen el 40% de su energía nuclear.

Patrimonio cultural

España es una potencia turística y el año pasado batió récords con 75,3 millones de visitantes extranjeros, casi un 10% más que en 2015.
Pero casi una cuarta parte (el 22,5%), tiene como destino Cataluña, que en 2016 recibió a 17 millones de viajeros foráneos. Unos cuatro millones menos que la región que ocupó la segunda posición: las islas Baleares.
La región también tiene una importante oferta cultural gracias a su riqueza en Patrimonios de la Humanidad como las obras del arquitecto Antonio Gaudíque se reparten por toda Barcelona. Entre ellas, se encuentran el Parque Güell, la Sagrada Familia y la Casa Milà.
El gobierno español hizo un llamado al diálogo para resolver el problema. El presidente catalán, Carles Puigdemont, declaró el día de hoy que Cataluña se ha ganado el derecho de ser un Estado independiente con respecto al gobierno de España, pero ha dejado en suspenso la declaratoria de independencia a fin de emprender un “diálogo” y encontrar un acuerdo con las autoridades españolas.

How TAG Heuer Pivoted to Digital

picFor centuries, the Swiss have been renowned for their luxury watchmaking industry. It survived two world wars and the flood of quartz watches from the U.S. and Japan. Today, the industry is being disrupted by Apple Watch and other wearables. TAG Heuer faced the challenge by embracing the new technology even though it is not something the Swiss have mastered, making them dependent on Silicon Valley.
The story of how the company overcame technological and cultural hurdles to develop its connected watch, the TAG Heuer Carrera, is encapsulated in a case study by Felipe Monteiro, a professor at INSEAD and senior fellow at Wharton’s Mack Institute for Innovation Management. He recently spoke with Knowledge@Wharton about his study.
An edited transcript of the conversation follows.
Knowledge@Wharton: Can you tell me how you came to write this case study of TAG Heuer?
Felipe Monteiro: I have been studying the Swiss watchmaking clusters for many, many years. Switzerland is really the epicenter of the world’s luxury watchmaking industry. A few years back, I started to wonder, what would happen to Swiss watchmaking if a new type of watch emerged? Around eight or 10 years ago, there was an idea of what a connected watch might look like, but nobody really knew. And it was very far from the Apple Watch.
Over the years, I started inviting people from the industry. I invited Jean-Claude Biver, who is the CEO of TAG Heuer and the president of the LVMH watch division, to come to my classes. A couple of years ago, the conversation about the connected watch started to become a very important one because we knew that Apple was going to launch its connected watch, and that would be a game changer.… He very generously opened the doors of the company for us to study it and the launch of the connected watch.
Knowledge@Wharton: Let’s set the historical context first for our listeners who may not be aware of the significance of the Swiss watchmaking industry. Tell us how TAG Heuer came out of that storied history, and what challenges it faced when Apple Watch and other wearables came out.
Monteiro: This is a really fascinating story. If you go back in time, Switzerland has been the epicenter, really the main cluster, for luxury watchmaking for centuries. And when we look at Switzerland, what we can see is that it really has all of the conditions that we want to see in a cluster.… We have very specialized workers; a lot of them in the past were jewelers that really were very good at miniaturizing, so they were very good at working with mechanical watches.
“We knew that Apple was going to launch its connected watch, and that would be a game changer.”
We have very sophisticated demand in Switzerland because historically Switzerland has always been a place where very wealthy individuals went for banking and other reasons. So they were very demanding about what type of watches they wanted. There was a lot of competition among different watchmakers.
Also we have all of the related industries — we have not only the watchmakers but we have the people who are doing the components for the watches. So Switzerland has been this very important cluster for watchmaking for many, many years. The interesting part of that story, too, is that 40 years ago, in the 1970s and 1980s, Switzerland as a cluster was really threatened when the quartz watches came around, from the U.S. and then from Japan. The Swiss dominance in that industry was threatened.
And a lot of people at that time [worried that the] cluster, that location which has been really the main point for that industry, maybe will no longer be. And Switzerland managed really to turn it around.… When people look back they typically say two people were fundamental to that change. One of them is Nicolas Hayek, who was the CEO of Swatch. He introduced Swatch. It redefined watchmaking, making it fashionable, cheap, more provocative. It was not really the classic Swiss watch. So Nicholas Hayek was really important in changing the industry at that time.
The other person is Jean-Claude Biver. At the time, he took a very famous Swiss brand, Blancpain, and he said, you know, Blancpain has existed for 300 years, and it has never done a quartz watch, and it never will. He meant that [at its heart it is] a mechanical watch and Switzerland is about mechanical watches — it’s really about eternity. And that’s what we’re good at. They really reinvented the value of the mechanical watch, and managed to take Switzerland away from the threat of the quartz watches, and maintain it as a center for the watchmaking industry.
So if that has been a success story for the Swiss, a lot of us wondered what was going to happen when a new technology comes in that was as disruptive as the quartz technology in the past. Will the Swiss again find a solution for it? How are they going to cope with it? And this has been a debate for many, many years. But I think since the moment Apple came in with the Apple Watch, [underscoring] the increasing importance of the connected watch, people started asking, what are the Swiss going to do?
That was a challenge for TAG Heuer. TAG Heuer is a luxury watch, but luxury at the entry level. We are not talking about watches of $100,000; we’re talking about watches of a few thousand dollars. And the question is, what will they do when they see the emergence of the connected watch? It’s no longer a specialist, niche type of product for people who are tech lovers. When you have a company as mainstream as Apple launch a connected watch, what should they do? This was an important moment, and that was a main challenge I saw TAG Heuer facing.
Knowledge@Wharton: TAG Heuer is very proud to be Swiss made, and they faced a dilemma of having to adopt technologies that they are not experts in, and that also come from overseas. And that’s a problem for the company. What was the fundamental choice they faced here?
Monteiro: There are at least two important choices. The first one is, do we enter this market or not? One answer could have been that this is a completely different market: “It’s not what we do; we are really in a different segment. We should not care about it. Let the consumer goods companies like Apple take care of it.”
The first choice was, do we enter that market, yes or no? They were pretty sure that they wanted to enter. They said, “Listen, we should be there.… We should embark on that journey. We should board that train and see where it goes. We should be there.” That was the first choice, and I think the decision was, yes, we’re going to board the train. But the question was, “How do we do this? Can we do this by ourselves? Can we really fully develop the watch? The operating system, the microprocessor?” They quickly realized they could not do it by themselves.
“They decided to go with partners … and they ended up choosing Intel and Google.”
A subsequent choice was, “Who are we going to partner with?” … Although Switzerland is the cluster for watchmaking, they soon realized that for this segment — for this conceptualization of watches as connected — the technology, the expertise is not coming from Switzerland anymore. It was critical for them to realize … that the emergence of this new technology does not come from the Swiss cluster but from Silicon Valley. So now, “how do we find partners in Silicon Valley that we could work with, and jointly develop this new connected watch?”
The first choice was, do we enter, yes or no? The answer was yes. The second choice was, do we do this by ourselves or with partners? They decided to go with partners. And then a third one was identifying the right partners — and they ended up choosing Intel and Google.
Knowledge@Wharton: In your case study, you say that both Jean-Claude Biver and one of the other executives at TAG Heuer, Guy Semon, did not do any market research before deciding to develop a smart watch. What do you think about that?
Monteiro: The first reaction was surprise. We’re in the digital age where a lot of decisions are data-driven: How come they decided to launch that watch without any consumer research? … But as we mentioned, Jean-Claude Biver and Guy Semon, without exaggeration, are legends in this industry. These are people who know how the industry works, who are really at the forefront of the industry.
So although they didn’t do any market research per se, they really understood the new trends, what the competitors were doing, what was possible to do and how the industry has evolved over time. They were in a very privileged position to make that call. I would not encourage all companies to go and launch a product without doing market research, but we should appreciate how special these leaders were in the industry they know so well.
Second, and I think this is a critical point about what they decided to do, is that they knew the very traditional luxury watchmaking company has a completely different culture. [By choosing to act fast, they introduced an] almost lean startup-type of project, as if to say “we will not spend years developing this project and see what happens, instead we are going to develop this very quickly, we’re going to work with partners, we’re going to launch. If we need to make changes, we’re going to make them in the second version.” … There is also a real consideration about time to market. They didn’t want to let Apple get all of the success of the connected watch. It was important to [follow] quickly.… They had to be there fast, and they decided to launch.
Knowledge@Wharton: TAG Heuer didn’t let their legacy hamper their future endeavors. So how can other businesses do the same?
Monteiro: This is a very important question, especially if you think about today’s world with all of the digital disruption that is coming. The question is, to what extent do you realize that you have to start a new journey? In this case, you have to start a digital journey. And for that, what’s going to be important is how do you learn and learn fast, rather than how would you continue to build on the same existing capability you had in the past? The realization that to compete … in this digital world, what would be necessary was to learn about it, create an agile structure and a flexible mindset, rather building on the past.
This is critical. If they were just thinking about building on the previous capabilities that they had, just manufacturing mechanical watches, they would never be able to do this. So it really requires a complete change of mindset. And a lot of it really depends on the mindset of the leader.
“It really requires a complete change of mindset. And a lot of it really depends on the mindset of the leader.”
Knowledge@Wharton: I was just going to ask you what you thought about the leadership style of Jean-Claude Biver, because it was really his decision to pivot the company so drastically from mechanical and quartz watches to digital.
Monteiro: As I was saying before, Jean-Claude Biver is really a legend in this industry. And if you Google his name, you’ll see what he has done. There are books written about him. There are two things that got my attention in terms of his leadership style. The first one is, you get the impression — not only when you see him publicly but in private conversations and talking to his team — he is very authentic.
Whatever he is saying is the way he thinks. He is completely passionate about this industry. He says that he wakes up very early in the day and he works non-stop. This is his passion. He’s not doing this to provide results for shareholders only. This is what he really loves. After talking to his team, talking to the people in the organization, I think this authentic passion for whatever he is doing is critical.
The second thing that caught my attention is to see how much you can reinvent yourself as a leader, too, and how you build on the past and build on your experience, but at the same time be ready to learn new things, change and adapt. He has been very good at doing this. He says that part of it is because he has a young son. So, he is kind of connected to the youth, and to this new generation, at home.
But also I think it is in the company, right? If the leader changes the culture and brings in this agile startup mentality, this entrepreneur mentality, it has an impact. There are some very important lessons that we can take from this. The first one is the importance of being open and having a flexible mindset. [Even though TAG Heuer came from a history of success, Biver] and his team, they were open enough and humble enough to say, “I can see a new technology coming. I see we have been very successful in the past, but we really need to partner now, and we need to look in other parts of the world for people who can work with us on something we don’t know.”
This openness, this humility, this flexible mindset is very important. One of the traps that very good companies fall into is the competence trap. You are so competent in doing something that with time you just become better and better at doing that same thing. You are not open to change, you don’t even realize that change is coming.
As a company, TAG Heuer embraced this idea that they will not be subject to this trap of just being competent with the capabilities of the past. They’re going to learn and adopt this entrepreneurial, agile culture and processes and structure. And I think they were quite successful at doing this.
Knowledge@Wharton: So how do you see other luxury brands tackling wearables?
Monteiro: This is probably a billion-dollar question. With all of the innovations — the Internet of Things and all of the changes we’re going to have on wearables — the big question is whether this is going to be a market for the electronic consumer goods companies, the Apples and Samsungs of this world. To what extent will luxury brands [adapt?] Are you are going to have connected bags? Louis Vuitton connected bags?
“Do I believe that Silicon Valley companies and digital companies have something to learn from the luxury world? Yes, definitely.”
Now you have Montblanc coming up with their connected watch, and Louis Vuitton also with a connected watch. It is opening the door for what I see as a very fruitful partnership between the luxury world and the technology world. Because I think in that world, in that partnership, in that dialogue, on that bridge, I think both parties have a lot to learn.
It’s clear that when we think about technology, when we think about digital technology, about platforms and operating systems and apps, most of the action happens in Silicon Valley. When we look Google, Facebook and Intel and all of the companies that are in the Valley, the novelty and the innovation is coming from there. I’m convinced that the luxury companies have a lot to learn from what is happening in Silicon Valley.
On the other hand, do I believe that Silicon Valley companies and digital companies have something to learn from the luxury world? Yes, definitely. Because companies like TAG Heuer and Louis Vuitton and many others, over the decades, they really understood consumer behavior very well. They know how to create this emotional connection with consumers — how status, scarcity and the luxurious experience matter to the point that people will pay thousands and thousands of dollars for a watch.
They pay all of this money not just to get a device that tells you what time it is, but something else. This something else is something I believe the digital companies still have to learn. Maybe TAG Heuer launching this connected watch and partnering with Google and Intel is just the first one that we’re going to see of potentially very fruitful partnerships between these two very impressive clusters: the luxury watchmaking cluster in traditional Europe and Switzerland, and the other cluster of digital technologies, platforms and apps in Silicon Valley.

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What Ants, Mice and Monkeys Can Teach Us About the Impact of Stress

steam-kettleStress is a common feeling, and it seems we’re dealing with more of it in our lives than ever before. Work, finances, relationships — all have the ability to create chronic stress that can lead to anxiety, depression and other issues. Two Penn Integrates Knowledge (PIK) professors — Michael Platt, a Wharton marketing professor and professor of neuroscience and psychology at Penn, and Shelley Berger, a Penn professor of cell and development biology and director of The Epigenetics Institute, have teamed up in an interdisciplinary approach to learn more about how stress affects individuals. Platt and Berger recently spoke about their research and its implications on the Knowledge@Wharton show on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
Following is an edited transcript of the conversation.
Knowledge@Wharton: Tell us the background behind this research.
Shelley Berger: It’s something we’ve been interested in for some time. The research I’ve been doing is focused on epigenetics, which has led into this interest in the environment and how it affects behavior. But in recent years, we’ve become very interested in the brain from work we started on the ant system. We actually have an ant lab at the Perelman School of Medicine. We’ve been interested in ants and studying their behavior. They’ve been a great model for behavior. Recently, we became interested in mouse behavior and studying the brain and epigenetics in the brain. Through conversations with Michael, that led to how this whole thing began on crossing species and studying mouse, primate and even human.
Knowledge@Wharton: Give us a better understanding of epigenetics.
Berger: Epigenetics is the study of how the environment affects the way genes are expressed. We commonly think about mutations affecting genes and gene expression. But epigenetics is the study of how the environment can affect the way genes are turned on and off without mutation. Specifically, it’s the effect of how chemicals coming in from the environment through our bodies can sort of decorate the proteins that associate with the DNA and change the way genes are turned on and off. That’s of great interest because many things are coming in from the environment, including stress. We’re talking about psychological effects and stress, and that can lead to changes in the brain. Post-traumatic stress disorder is a great example.
“Burnout is the number-one topic that I hear about from our MBA students, and they want to do how to deal with that…. Stress is everywhere.”–Michael Platt
Knowledge@Wharton: Michael, tell us about your interest in this research?
Michael Platt: We have been interested in behavior for a long time. We got interested in how genes affect the development of the structure and function of the brain and nervous system to ultimately produce behavior. Of course, that equation leaves out the central role of epigenetics that Shelley just described, which is that the same genes in the same body in a different environment can lead to very different outcomes. If you imagine yourself living with lots of family support, for example, you might respond better to the stresses of the environment — to a stock market crash, to problems in the economy, etc. But if you are living alone without any social support, then that stressful event or the long-term stress can be much more impactful on your body and your brain.
Shelley and I met two years ago, when I had just arrived here from Duke University…. As we were talking, we began to realize that we were interested in very similar things, although our expertise is very complementary. We had been working on the neurophysiology of behavior, the neurophysiology of social behavior and how genetics might influence that. But we had really no expertise in epigenetics at all.
Knowledge@Wharton: How will this research lead to a better understanding of the human brain and how it reacts to stress from environmental factors?
Berger: We’ve been studying mouse behavior for the past five years, and you can model stress in mice. There’s a method called “fear conditioning” by which you subject the mouse to stress, and then you can study what happens to the brain. How are learning and memory affected by the stress of fear conditioning?
We had been working with post-mortem human brains from people who had suffered neuro-degeneration from Alzheimer’s Disease, so we’d been developing a lot of methodology to study parts of the brain. Humans are difficult because, of course, they’re not experimental animals. We have to work out all the methods to carry out high-resolution studies of these chemical marks in the brain from human post-mortem samples. Then, starting to get interested in some results we had in mouse, we thought that the crossover between fear conditioning in mouse and PTSD in human could be really interesting. We got in touch with a guy who has a bio-bank of humans who had suffered from PTSD. We can take these methods that we’ve developed in mouse, then fine-tuned in human post-mortem brains through our work on Alzheimer’s, and now we can look at PTSD in humans. Michael filled in the middle part with primate research, which is a great link between the two.
Platt: Right. As useful as a mouse is for understanding a lot of the basic processes that we think are involved in the response of the human brain to stress, sometimes that translation is not perfect. That reflects the fact that mice and humans last shared a common ancestor much longer ago than humans and monkeys. For that reason, the human brain and the monkey brain are much more similar than the human brain and the mouse brain. There are certain aspects of behavior, in terms of behavioral complexity and social complexity, that are shared between humans and monkeys, that are less well-paralleled in the mouse.
The monkey gives us the capability to look at some of these other issues like social support and how that might help with the problems that one encounters with social competition. This is very different from what mice experience. People and monkeys live in groups for a good reason. It allows you to do things that you can’t do alone, like evade predators or chase away other groups and get resources. On the other hand, when you’re living in a group, you have to compete with everybody else. That’s a source of stress that I think we all can easily identify with.
This is a beautiful partnership because it has the potential to lead to understandings that can lead to new treasuries. Also, putting my Wharton hat on, this kind of project can potentially illuminate ways in which we might be able to mitigate stress, say, within the workplace. That’s a huge problem these days. Burnout is the number-one topic that I hear about from our MBA students, and they want to do how to deal with that. You hear the same thing from residents who are training in medicine. Stress is everywhere.
Berger: The beautiful thing about the primates, with respect to humans, is that humans are not an experimental animal — we don’t know exactly what their social situation is in its entirety. But scientists watch [primates] all the time. Michael has scientists working with him, watching these animals in their natural habitat, so they know exactly what sort of place they have in the social spectrum. We can’t know all that about humans. As much as we get metadata about humans — that we can get information about their background — they’re not experimental animals. We can’t control and know.
“We’re not talking about the kinds of stresses our kids go through over smartphones. We’re talking about the kinds of things that really impede your ability to function.”–Shelley Berger
Knowledge@Wharton: That space between mouse and monkey feels like it’s very important because there’s more of a more recent link between monkey and human than human and mouse.
Platt: I think that’s why these studies need to be done. There are very few places where you can really do them and where people will collaborate to try to discover those links and make the connections. I think what Shelley can do in her lab, with really exquisite techniques and technologies that allow you to hone in on the mechanism, we can closely approximate in primates. But it’s not the same kind of thing that we can do.
On the other hand, what we can provide is a much richer understanding of the social environment and all of the other factors that might affect an individual in how they respond to stress and how that ultimately leads to changes in behavior. The particular population of monkeys that we study evolves. This is a population in which individuals are free to fight and to flee and to breed. Some monkeys do better than others. That means that whatever traits those individuals have — traits that allow them to offer stress, to make alliances and connections — can be passed on to the next generation. We can see these kinds of changes in the population over time. That’s almost impossible to see in people.
Knowledge@Wharton: If you find enough links, you’re talking about being able to deal with a lot of prevalent medical issues — burnout, depression, suicide, PTSD.
Platt: It’s really compelling to see the data. There has been a lot of attention paid to a new report that analyzed the incredible increase in depression and anxiety, especially in teenagers, after the introduction of smartphones in the 2000s. There does seem to be, potentially, some link to the kinds of technological environments in which we find ourselves. I think one implication is that it leads to social disconnection, which I think reinforces what we’ve learned both in people and in monkeys that having social support is really critical. If you don’t have it, then things really fall apart.
Knowledge@Wharton: The social support is not as much of a factor when you’re talking about mice. But perhaps it is for ants because of how they live in colonies, correct?
Berger: That’s an astute observation. Ants are a great model for complex social interactions, and there are very few models like that. That’s why the medical school supports us to have an ant lab. They see the great translational aspects of studying ants and their social interactions.
Knowledge@Wharton: How do you think that information could play out when you’re talking about dealing with stress?
Berger: I’ll go back to our mouse research, which we’re translating both ways to the ants and would love to translate it to the monkeys and definitely to humans. We discovered that the machinery to make one of the chemicals that’s placed on the genes to regulate them is associated with the genes. It’s an enzyme that makes this chemical, and that enzyme can be inhibited. We think if we inhibit that enzyme, we can alter learning and memory in mouse. This is the kind of experiment you can do in mouse. We can’t do it in primates because they’re too complicated.
One of the things we’ve been talking about is whether an inhibitor like that could be relevant to humans. We’re not talking about the kinds of stresses our kids go through over smartphones. We’re talking about the kinds of things that really impede your ability to function.
Knowledge@Wharton: Going back to the business aspect, if these discoveries lead to treatments down the road, that could chip away at some pieces of the health care problem in this county.
Platt: Sure, and hopefully down the road is not so far down the road. The enzyme that Shelley’s talked about, it’s quite clear that one could imagine developing a drug to target that specific mechanism. If you had a combat veteran who was exposed to a blast or something else incredibly stressful, you could potentially deliver that drug at the right place and the right time and block the formation of bad memories. That would be an incredible opportunity.
“If you had a combat veteran who was exposed to a blast or something else incredibly stressful, you could potentially deliver [a] drug at the right place and the right time and block the formation of bad memories.”–Michael Platt
The other extension of this are ways of trying to mitigate stress before it leads to something. We’re talking about chronic stress rather than acute stress. Are there ways that we can prevent it? There are a lot of options that people are exploring, such as improving your social connections, mindfulness and meditation, exercise. We know those things are all really good. We just don’t know how they work.
Knowledge@Wharton: Is there a difference between people who handle stress really well and those who don’t?
Platt: This is a really tricky and interesting and important question. Is it something you’re born with or something you can teach? There is fabulous work from Penn professor Angela Duckworth on grit, which is this resilience. It seems like some people have a great reservoir of grit, while it’s harder for others to demonstrate it. That leads to the question of whether you can develop it. Can you train it? Can you educate people to display that grit more often? If so, then that’s another approach to dealing with life stress.
Berger: It seems to me that the monkeys are the place to study that because Michael’s group sees which monkeys are accepted.
Platt: One thing that’s really fascinating about the monkeys that we study is that they have personalities, just like people do. The big five personality instruments that you would apply to a person, you could do the same with a monkey. We’ve done that, and their personalities are consistent over time. A monkey who’s very timid and anxious when he’s 6 months old is going to be similarly timid and anxious when he’s an adolescent. A monkey who is very bold or very aggressive, you’ll see those patterns continue. It’s not 100%. It’s not like it’s genetically determined. I think that’s where the fascinating thing is. Maybe 25% or 50% is purely genetic, and the rest is environment in how they respond to it. That’s why this is so important.

How Will McDonald’s Fare in India’s Burger Battle?

McDonald's India“Burgered,” headlined The Economic Times, India’s leading economic daily. The publication elaborated: “From worms to lizards to fungus to finger nails, all kinds of ‘foreign’ objects have been reportedly served to consumers along with burger and fries.” It’s happened before: in Japan, where McDonald’s had to apologize for a tooth being found in French fries, and in the U.S. itself when a customer field a lawsuit after biting down on a foreign object in her breakfast burrito.
But the issue in India is about more than lacertilian legacies. It’s about a full-blown war between the U.S. fast-food chain and one of its local franchisees — Connaught Plaza Restaurants Ltd (CPRL) and its head, Vikram Bakshi. The current state of affairs: Some 169 outlets in the northern and eastern region are closed. (The west and south come under a different franchisee – Amit Jatia’s Hardcastle Restaurants.) McDonald’s has told its suppliers not to serve CPRL. And that has probably compounded the problem of quality with both sides saying the other is to blame.
The problems between McDonald’s and Bakshi are long standing. CPRL was set up as a 50:50 joint venture between the two; there were differences from the beginning over financial issues. Both sides made offers to buy each other out. They were rejected. Bakshi was ousted as managing director of CPRL by McDonald’s India in August 2013. He moved the National Company Law Tribunal (NCLT) in Delhi, which ruled in his favor. McDonald’s went to the London Court of International Arbitration. The U.K. court has asked Bakshi to sell his stake in the joint venture to McDonald’s at a fair valuation in accordance with their agreement. In the meantime, the Delhi tribunal will take another look at the issues at the end of October. The U.S. company is believed to be negotiating with Hardcastle, Jubilant FoodWorks (which operates the Domino’s Pizza and Dunkin’ Donuts franchises in India) and Moon Beverages (Coca-Cola’s Indian authorized bottler) to take over from CPRL.
Delhi Switches to Subway
But while the courts act with judicial speed (McDonald’s has gone back to the Delhi tribunal), what is happening on the ground? Consumers in New Delhi and elsewhere are heading to the nearest Burger King, Burger Singh or Jumbo King — just three of the rival fast-food chains that are stepping on the gas. According to market research firm Kantar IMRB, since McDonald’s stopped operations in Delhi, fast-food rival Subway has gained 5% traffic and KFC 2%. Overall share for McDonald’s declined from 9% in June to just 3% in July.
“Until recently, the [quick service restaurant] space in India was shaped by the international players…. But now and going forward, Indian QSRs have come of age.”–Ankur Bisen
Even outstation rivals are stepping up. “Jumbo King is now on a high-growth trajectory,” says Dheeraj Gupta, managing director of Jumbo King Foods, an Indian-style (vada paav) burger chain. “We will close the current financial [year] at 100 stores in Mumbai and Pune, the cities of focus currently. This is a market of 500 stores for us. The plan is to get to at least 200 stores here and then look at national expansion.”
Burger King has just opened its 100th store in north India. “The Home of the Whopper,” as it describes itself, has doubled its footprint since last year; it opened shop in 2014. “India is a unique market, and we have consistently experimented with our menu to create offerings that are distinct from the global menu,” says Burger King India CEO Rajeev Varman. U.S.-based Burger King is the second largest fast-food hamburger chain in the world.
Burger Singh has recently announced expansion plans for 30 outlets. Says cofounder Nitin Rana: “These are the next steps in building Burger Singh into a great and enduring worldwide brand.” Burger Singh was founded in 2014 when two Indian students in the U.K. decided to give a spicy touch to common or garden burgers. The company has raised $1 million in funding.
King Takes on Singh
Others are clambering on to the bandwagon. According to The Economic Times: “Burger King has filed a case against a Mysore-based restaurant named King Burger and battled against the owner of a pushcart in Punjab called Mr Singh Burger King.”
But does the quick-service restaurant (QSR) sector merit such a scramble? KFC opened shop in Bangalore in June 1995 to be met with a host of leftist (anti-imperialism) and rightist (anti-meat consumption) protests. It later put more emphasis on its vegetarian fare — Paneer Zinger and Veg Rockin’ Burger. McDonald’s launched in India in 1996. One of its early offerings was the McAloo Tikki, a potato-based burger which is being adapted for other global market. “One of the key reasons for the success of McDonald’s in India has been its ability very early on to recognize the implications of unique Indian customer trends and preferences,” says Ankur Bisen, senior vice president at management consulting firm Technopak Advisors. “From day one, beef was never on the menu. (India’s majority Hindu population does not consume beef.) It even opened the only vegetarian McDonald’s anywhere in the world in a religious tourist spot.”
Bisen describes the structure of the Indian market. “The total size of the QSR segment is around Rs.18,500 crore ($2.82 billion at $1 = Rs.65.50),” he says. “Nearly half of it is dominated by the chain market (enterprises with two or more outlets) and the other half comprises stand-alone units. Four international QSR chains — Domino’s, McDonald’s, Subway and KFC — make up 60% of the chain market of QSRs and there are a few other foreign chains, like Burger King, on a growth spree. Until recently, the QSR space in India was shaped by the international players. They created the QSR space in the first place and defined the rules of the game on supply chain, outlet design, business model, etc.
“But now and going forward, Indian QSRs have come of age,” adds Bisen. “There are QSRs, like Haldiram’s, that offer Indian cuisines and experience. There are QSRs, like Goli Vada Pav, that are plays on niche tastes and are taking the narrative national.” (But the real trouble is the multiplicity of Indian cuisines; one person’s fuchka is another’s panipuri).
QSRs have learned [from] and appreciated the international players on supply chain, customer experience and business model, and have imbibed these practices in their growth plans,” continues Bisen. “In doing so, they have kept the product offering uniquely Indian or fusion.”
“For the next decade at least, Indian consumers will continue taking a big bite of McDonald’s, and McDonald’s will continue to take a big bite of the Indian QSR market.”–Jagdeep Kapoor
He feels that the franchise battle facing McDonald’s is unlikely to have a lingering effect on the company or the industry. “The controversy around McDonald’s is not reflective of the Indian QSR segment in any way,” he says. “It is for reasons that are internal to the company, and such a controversy can happen in any company in any sector. If a car joint venture between a foreign player and an Indian company is called off, that does not cast doubts on the Indian automobile segment. My guess is that the appointment of the new franchise operator will happen soon and the business will be back to usual.”
“Overall, McDonald’s has a fairly strong brand equity in the rest of the country and is seen as a young, aspirational brand,” says Jagdeep Kapoor, brand consultant and CEO of Samsika Marketing Consultants. “The local chains, like Jumbo King and Burger Singh, will not get much benefit because the equity of McDonald’s is far stronger than any local brand. The brand which could benefit is Burger King.”
Different Views
Gupta disagrees. The franchise battle “is damaging the brand value,” he says. “It is a war of egos between two partners. We as members of the same industry do hope that they are able to resolve their differences soon.”
“The QSR sector is growing very fast in India,” adds Kapoor. “This is because what I call ‘the aspiration’ market is growing and the ‘perspiration’ market is declining. Eating out, eating western food, eating in-between meals and eating on the go are all accelerating QSR market growth.”
Kapoor continues: “The ethnic food QSR market is growing…. [But] I see McDonald’s doubling their stores and growing even faster. Brands are built in the minds and hearts of consumers, and McDonald’s has a premium, aspirational image. For the next decade at least, Indian consumers will continue taking a big bite of McDonald’s, and McDonald’s will continue to take a big bite of the Indian QSR market.”
“The 169 stores controlled by Vikram Bakshi’s company is less than 0.5% of the 37,000 McDonald’s outlets worldwide,” Gupta notes. “However, the Indian market will eventually become a very large market for them and for any multinational. It is better that they sort out their differences now.”
There is another issue lurking in the wings. McDonald’s has been losing brand value globally. After a decade among the top 10 global brands, Interbrand demoted it to No. 12 in 2016. “For 15 straight years, McDonald’s has always ranked within the top 10, peaking at No. 6 back in 2011,” wrote The Motley Fool. “This year is the first year that the Big Mac maker did not crack the elite ranking.”
“A burger can be replaced by not only a burger. The options are humongous. Burger’s loss can be pizza’s gain, or for that matter, vada paav’s.”–Harish Bijoor
“McDonald’s is certainly under threat the world over,” says Harish Bijoor, brand strategy specialist and founder of Harish Bijoor Consults. “The key problem is its perception of yore as typical American fast food. That perception worked when everything American was the way to be. Today, perceptual shifts have occurred that are tectonic. American burger and soda companies are considered unhealthy statements. Fast food is considered a sure way to a fast-deteriorating life.
“This shift has affected McDonald’s and other companies in the space of burgers and sugared sodas,” he continues. “The American himself is looking for better ways. The Walmartisation of the U.S. in the supermarket space has led to rebel supermarket movements such as Whole Foods that have elicited a big response in recent times. Therefore, the American way itself has changed. That’s quite like pulling the rug off from under the feet of burger and soda companies. The operating environment has turned different, and even hostile.”
In the background is the fact that a Western brand is no longer a recipe for success in India. Coke has been [in India] for two decades, but the brand the multinational purchased from Parle – Thums Up – still rules the cola roost. It is the market leader in the segment despite attempts by the company to kill it off and ease the path for the “Real Thing.” Today, small beverage companies – with cheaper products – are taking the big boys to the cleaners.
In India, local competition — at lower prices — is another danger. “The [franchise] controversy does provide entry/leverage points to competitors at the cost of McDonald’s,” says Bisen. “Competition will try to capitalize.”
“There are enough local options that could fill in the blanks that McDonald’s closures will leave,” adds Bijoor. “Getting those consumers back is another game. The risk also lies in the fact that a burger can be replaced by not only a burger. The options are humongous. Burger’s loss can be pizza’s gain, or for that matter, vada paav’s.”