Serguei Netessine

Serguei Netessine
  • Dhirubhai Ambani Professor of Innovation and Entrepreneurship
  • Professor of Operations, Information and Decisions
  • Vice Dean for Global Initiatives

Contact Information

  • office Address:

    3730 Walnut Street
    548 Jon M. Huntsman Hall
    Philadelphia, PA 19104

Research Interests: innovation, entrepreneurship, supply chains, sustainability, revenue management, incentives

Links: CV


Serguei Netessine is Vice Dean for Global Initiatives and Professor at the Operations, Information and Decisions Department at the Wharton School, University of Pennsylvania. He lived and worked in Russia, USA, France and Singapore.

Prof. Netessine received BS/MS degrees in Computer Science and Electrical Engineering from Moscow Institute of Electronic Technology and, after working for Motorola and Lucent Technologies, he also received MS/Ph.D. degrees in Operations Management from the University of Rochester.  His current research focuses on business model innovation and operational excellence and he worked on these topics with numerous government and Fortune-500 organizations including Federal Aviation Administration (USA), Government of Singapore, Lockheed Martin, Procter & Gamble, McDonald’s, Rolls Royce, Comcast, Expedia, ABB and US Air Force.  He serves on advisory boards of multiple startup companies and he is an active angel investor. Prof. Netessine also regularly participates in industry and government-organized forums on Innovation and Entrepreneurship, including World Economic Forum in Davos and World Knowledge Forum in Seoul. He was a member of the “Future of the Economy” committee for Singapore Government.

Professor Netessine has been the recipient of several teaching awards for delivering classes to MBA and Executive MBA students at the Wharton School and INSEAD, and he frequently teaches and directs Executive Education Programs, including teaching in Massive On-Line program for Microsoft (10,000+ participants). Professor Netessine holds senior editorial positions at several leading academic journals and he co-authored dozens of publications in prominent management journals, including Management Science, Marketing Science, Operations Research, Harvard Business Review and other. His work has received extensive media coverage in CIO Magazine, The Economist, Forbes, Huffington Post, Multichannel Merchant, New York Times, US News, Business Standard and Strategy & Business and other press.  He regularly blogs about innovation on and HBR Network.

His latest book “The Risk-Driven Business Model: Four Questions that will Define Your Company” was published by Harvard Business Press in 2014.  It received 2015 Axiom Business book award for “Business Theory”.

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  • Christian Kaps, Simone Marinesi, Serguei Netessine (2021), When the Wind of Change Blows, Build Batteries? Optimum Renewable Generation and Energy Storage Investments, Under Review.

    Abstract: Renewables have become the cheapest energy source in most of the world, but their generation remains variable and difficult to predict. Recent technological advances have rendered large-scale electricity storage economically viable, thus mitigating the renewable intermittency issue and enabling combinations of renewable generation plus storage, e.g., wind farms and batteries, to be potentially viable candidates to replace fossil fuel power plants. However, it is not yet well-understood how to jointly determine optimal capacity for their generation and storage. Our work aims to shed light on this question by developing a two-product newsvendor model of a utility's strategic capacity investment in renewable generation and storage to match demand with supply, while using fossil-fuel backup, if needed. We establish optimal capacity guidelines contingent on market and technology parameters. We find that renewable generation and storage are strategic complements, except in cases with very high penetration of either technology, when they surprisingly turn into strategic substitutes. We also develop sufficient and necessary conditions, as well as a simple heuristic, to determine which of the many storage technologies can turn a profit in the broadest set of market conditions, and thus is likely to be adopted first (for multi-hour storage). In particular, we show that low-efficiency, cheap technologies, such as thermal, can turn a profit easier than high-efficiency, expensive ones, such as lithium-ion batteries. Using real-life data from Europe and the US, we calibrate our model to provide insight on the role that large-scale storage plays in both the short- and long-term, while technology improves, emission taxes are levied, and renewables become cheaper. Finally, we show that, when generation and storage investment decisions are made by different players, investment levels decrease relative to the monopoly outcome.

  • Jingxing (Rowena) Gan, Gerry Tsoukalas, Serguei Netessine (Draft), To Infinity and Beyond: Financing Platforms with Uncapped Crypto Tokens.

    Abstract: Problem: Initial Coin Offerings (ICOs) are an emerging form of crowdfunding for blockchain-based startups. While ICO design varies greatly in practice, many service-based platforms (e.g., Ethereum), use "uncapped" structures that forego limits on token supply, subjecting early investors to dilution risk. In this paper, we examine the conditions under which such ICOs are optimal and provide guidance for their optimal design. Relevance: Despite their popularity in practice, uncapped ICOs are understudied and not as well understood as their capped counterparts. Methodology: We model game-theoretic interactions among various stakeholders in an infinite-horizon setting with network effects, taking account of operational details. Results: We show that uncapped ICOs weakly dominate capped ones in the context of service platforms. In terms of design, a platform commission and regulation are generally "substitutes" when it comes to overcoming moral hazard, but can also be combined to make ICOs more accessible, especially for platforms with high initial setup costs. ICO accessibility can also be increased by employing a dual token offering (security & transaction tokens), at the cost of reduced expected profit. Implications: The paper provides a theoretical underpinning for the use of uncapped ICOs in practice. At a high level, it shows that ICOs succeed more easily in the presence of regulation, and platforms with low (high) setup costs should preferably issue utility (dual token) type ICOs.

  • Jingxing (Rowena) Gan, Gerry Tsoukalas, Serguei Netessine (2020), Initial Coin Offerings, Speculation, and Asset Tokenization, Management Science, forthcoming.

    Abstract: Initial Coin Offerings (ICOs) are an emerging form of fundraising for Blockchain-based startups. We examine how ICOs can be leveraged in the context of asset tokenization, whereby firms issue tokens backed by future assets (i.e., inventory) to finance growth. We (i) make suggestions on how to design such \asset-backed" ICOs---including optimal token floating and pricing for both utility and equity tokens (aka, Security Token Offerings, STOs)---taking into account moral hazard (cash diversion), product characteristics and customer demand uncertainty, (ii) make predictions on ICO success/failure, and (iii) discuss implications on rm operating strategy. We show that in unregulated environments, ICOs can lead to significant agency costs, underproduction, and loss of rm value. These inefficiencies, however, fade as product margins and demand characteristics (mean/variance) improve, and are less severe under equity (rather than utility) token issuance. Importantly, the advantage of equity tokens stems from their inherent ability to better align incentives, and thus continues to hold even absent regulation.

    Description: 2019 INFORMS Section on Finance Best Student Paper Award Honorable Mention

  • Serguei Netessine (2019), At Your Service on the Table: Impact of Tabletop Technology on Restaurant Performance, Management Science.

    Abstract: Some industries such as healthcare and financial services have reported significant productivity gains from introduction of new technologies. However, more traditional, labor-intensive industries are lagging behind. We use granular data to examine the impact of a customer-facing technology (a tabletop device that facilitates the table service process) on the check size and meal duration aspects of restaurant performance. The restaurant chain in our study implemented tabletop devices in a staggered manner, offering us a quasi-experimental setting in which to apply a difference-in-difference technique and identify the causal effect of the technology. We find that the tabletop technology is likely to improve average sales per check by 2.91% and reduce the meal duration by 9.74%, which increases the sales per minute or sales productivity by approximately 10.77%. Various robustness checks of our empirical strategy and post-hoc analyses find that efficient customers, who have lower cost of adopting new technology, generate more sales and have shorter meal duration than the inefficient customers do. Tabletop technology allows low-ability waiters to improve their performance more significantly than high-ability waiters. Overall, our results indicate great potential for introducing tabletop technology in a large service industry that currently lacks digitalization.

  • Marshall L. Fisher, Santiago Gallino, Serguei Netessine (2018), Does Online Training Work in Retail?, M&SOM.

    Abstract: A knowledgeable retail sales associate (SA) can explain the features of available product variants and give the customer sufficient confidence in her choice or suggest alternatives so that she becomes willing to purchase. Although it is plausible that increasing an SA’s product knowledge will increase sales, training is not costless and turnover is high in retail, so most retailers provide little or no training. Thus, an important question is how much, if at all, does training increase an SA’s sales productivity? To answer this question, we partnered with Experticity, a firm that provides online, self-guided training modules for retail SAs, and Dillard’s, a leading department store chain whose more than 50,000 SAs had access to the Experticity modules. We assembled a data set of the training history and sales productivity of Dillard’s associates over a two-year period. We found that as SAs engaged in training over time, their sales rate increased by 1.8 percent for every online module taken, which is a much higher benefit than the direct or indirect costs associated with this training. We also found that willingness to engage in voluntary training was an indicator of raw talent; those SAs who engaged in training were 20 percent more productive prior to any training and 46 percent more productive after training than those who took no training. Surprisingly, brand-specific training did not significantly affect the sales of the focal brand but did improve overall sales of all brands. Our evidence of successful online learning may be of general interest given that, to date, analysis of massive open online courses has shown poor engagement by participants and questionable outcomes.

  • Marshall L. Fisher, Santiago Gallino, Serguei Netessine (2018), Setting Retail Staffing Levels: A Methodology Validated with Implementation,.

    Abstract: We describe a three-step process that a retailer can use to set retail store sales staff levels. First, use historical data on revenue and planned and actual staffing levels by store to estimate how revenue varies with the staffing level at each store. We disentangle the endogeneity between revenue and staffing levels by focusing on randomly occurring deviations between planned and actual labor. Second, using historical analysis as a guide, we validate these results by changing the staffing levels in a few test stores. Finally, we implement the results chain-wide and measure the impact. We describe the successful deployment of this process with a large specialty retailer. We find that 1) the implementation validates predictions of the historical analysis, including the use of the variation between planned staffing and actual staffing as an exogenous shock, 2) implementation in 168 stores over a 6-month period produces a 4.5% revenue increase and a nearly $7.4 million annual profit increase, after accounting for the cost of the additional labor, and 3) the impact of staffing level on revenue varies greatly by store, and therefore staffing levels should also vary, with more sales staff relative to revenue assigned to those stores where sales staff have the greatest impact on revenue. Specifically, we found the largest impact of store labor in stores with the largest average basket sizes, located in regions with good growth potential, facing certain competitors (e.g., Wal-Mart), and run by long-serving managers.

  • Yuqian Xu, Tom Tan, Serguei Netessine (Under Review), When Is the Root of All Evil Not Money? The Impact of Load on Operational Risk at a Commercial Bank.

    Abstract: Operational risk is now among the three most significant types of risks in the financial services industry, and its management is mandated by Basel II regulation. This paper studies how bank operational risk event frequency (or error rate) and severity (potential losses) are affected by workload to inform better labor decisions. To achieve this goal, we use a unique operational risk event data set from a commercial bank in China that contains 1,441 operational risk events in two years. We find that workload has a U-shaped impact on operational risk frequency. More specifically, the error rate of operational risk events would decrease first as workload increases and then increase. In addition, we show that workload has an inverted-U shaped impact on bank profit. Based on the causal relationships between workload and operational risk events and profit, respectively, we discuss bank capital allocation impact of changing the staffing level among branches so as to reduce operational risk losses and improve profit. We compare our optimal staffing policy with bank’s original policy, and estimate that the new staffing policy would reduce the current number of employees by 7.56%, which would further decrease the number of risk events by 4.51%, cut the total losses by 4.58%, and increase profits by 1.24%.

  • Jun Li and Serguei Netessine (2017), Market Thickness and Matching (In)efficiency: Evidence from a Quasi-Experiment, Management Science.

    Abstract: Market thickness is a key parameter that can make or break a platform’s business model. Thicker markets can offer more opportunities for participants to meet and higher chances that a potential match would exist. However, they can also be vulnerable to potential search frictions. In this paper, using data from an online peer-to-peer holiday rental platform, we aim to identify and measure the causal impact of market thickness on matching efficiencies. In particular, we exploit an exogenous shock to market size caused by a one-time migration of listings from other platforms, which gave rise to a quasi-experimental design. We find that increased market thickness actually leads to lower matching efficiency. A 1% increase in market thickness results in a 0.13% decrease in matching probability. As a result, the platform lost 4.0% of potential matches due to the increased market size. We attribute the effect to increased search friction, which is especially prominent when the matching needs to take place within limited time. Within one month before travel, each additional inquiry made by the traveler will lead to a 34.0% increase in the average quoted price and a 68.3% decrease in matching rate, whereas it has barely any effect when the travel date is more than three months ahead. Our results offer insights for future empirical and theoretical research on matching market. They also highlight the importance for platform owners to watch out for increased search frictions as markets grow and invest in technologies to facilitate more efficient search.

  • Bhavani Shanker Uppari, Ioana Popescu, Serguei Netessine (2017), Selling Off-Grid Light to Liquidity Constrained Consumers, M&SOM.

    Abstract: Problem Definition: A large proportion of the world's population has no access to electricity and so relies on noxious kerosene for their lighting needs. Solar-based solutions require a large upfront investment and are often unaffordable in this market owing to consumers' tight liquidity constraints. As an alternative, there are business models relying on rechargeable light bulbs that are sold at a subsidized price (which renders them affordable) and require regular micropayments for recharges (which eases liquidity constraints). These bulbs provide a cheaper and healthier light source than kerosene, yet their adoption is lower than expected and some consumers continue to use kerosene. This paper explores the potential drivers of such preferences and proposes strategies to alter them, thereby benefiting firms, consumers, and the environment. Academic Relevance: Unlike most of the existing operations management literature which focuses on the problems in developed economies, our paper studies a problem specific to the poor population. Our novel modeling approach, which incorporates several operational features of the impoverished regions, could also serve as a template for other potential modeling attempts in similar settings. Methodology: We propose a stylized consumer behavior model that accounts for { in addition to the monetary cost incurred while using a particular light source { the inconvenience cost (due to repeated travel to the purchase center) and blackout cost (due to liquidity constraints) associated with that source, to explain the consumer preference for kerosene and to recommend strategies that could mitigate that preference. Results: Although kerosene lighting is more expensive than bulbs, consumers who face either high inconvenience costs or high blackout costs prefer kerosene to bulbs because the former's flexibility, with regard to quantity, helps reduce whichever cost is dominating. At the firm level, there is an optimal bulb capacity and recharge price pair that maximizes the firm's revenue; furthermore, firm can reverse the preferences of kerosene consumers by increasing the flexibility of the bulbs (e.g., by allowing partial recharges). Although strategies { such as price discounts and mobile micropayments { based on alleviating liquidity constraints are not in themselves sufficient to ensure higher adoption rates, increased bulb use becomes more likely when they are combined with strategies to reduce consumers' inconvenience. Managerial Implications: Our paper sheds light on the structure of the market in which firms operate by identifying the characteristics of the market segments that prefer kerosene. It also helps the firms make better decisions by evaluating the efficacy of several strategies in terms of increasing the adoption of bulbs.

  • Jun Li, Serguei Netessine, Sergei Koulayev (2017), Price to Compete … with Many: How to Identify Price Competition in High Dimensional Space, Management Science.

    Abstract: We study price competition in markets with a large number (in magnitude of hundreds or thousands) of potential competitors. We address two methodological challenges: simultaneity bias and high dimensionality. Simultaneity bias arises from joint determination of prices in competitive markets. We propose a new instrumental variable approach to address simultaneity bias in high dimensions. The novelty of the idea is to exploit online search and clickstream data to uncover customer preferences at a granular level, with sufficient variations both over time and across competitors in order to obtain valid instruments at a large scale. We then develop a methodology to identify relevant competitors in high dimensions combining the instrumental variable approach with high dimensional l-1 norm regularization. We apply this data-driven approach to study the patterns of hotel price competition in the New York City market. We also show that the competitive responses identified through our method can help hoteliers proactively manage their prices and promotions.


Current Courses

  • OIDD614 - Innovation

    The course is first and foremost an intensive, integrative, project course in which student teams create one or more real businesses. Some businesses spun out of the course and now managed by alumni include Terrapass Inc. and Smatchy Inc. The project experience is an exciting context in which to learn key tools and fundamentals useful in innovation, problem solving, and design. Examples of these tools and fundamentals are: problem definition, identification of opportunities, generating alternatives, selecting among alternatives, principles of data graphics, and managing innovation pipelines. The course requires a commitment of at least 10 hours of work outside of class and comfort working on unstructured, interdisciplinary problems. Students with a strong interest in innovation and entrepreneurship are particularly encouraged to enroll. Please read carefully the syllabus posted on-line before registering for this course.

    OIDD614001 ( Syllabus )

    OIDD614003 ( Syllabus )

    OIDD614005 ( Syllabus )

    OIDD614007 ( Syllabus )

Past Courses


    The course is first and foremost an intensive, integrative, project course in which student teams create one or more real businesses. Some businesses spun out of the course and now managed by alumni include Terrapass Inc. and Smatchy Inc. The project experience is an exciting context in which to learn key tools and fundamentals useful in innovation, problem solving, and design. Examples of these tools and fundamentals are: problem definition, identification of opportunities, generating alternatives, selecting among alternatives, principles of data graphics, and managing innovation pipelines. The course requires a commitment of at least 10 hours of work outside of class and comfort working on unstructured, interdisciplinary problems. Students with a strong interest in innovation and entrepreneurship are particularly encouraged to enroll. Please read carefully the syllabus posted on-line before registering for this course.


    Concepts, models, and theories relevant to the management of the processes required to provide goods or services to consumers in both the public and private sectors. Includes production, inventory and distribution functions, scheduling of service or manufacturing activities, facility capacity planning and design, location analysis, product design and choice of technology. The methodological basis for the course includes management science, economic theory,organization theory, and management information system theory.

Awards and Honors


Latest Research

Christian Kaps, Simone Marinesi, Serguei Netessine (2021), When the Wind of Change Blows, Build Batteries? Optimum Renewable Generation and Energy Storage Investments, Under Review.
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