taking a shine

How lab-made diamonds are stealing the shine (and market share) from natural ones

More than 95% of industrial diamonds are synthetic, so why aren't more people using them in engagement rings?

Lab-made, synthetic diamonds are becoming increasingly similar in quality, cut, and clarity to natural ones. Technological advances has resulted in their growing use and acceptance in industry – but cracking the luxury consumer market is the final frontier. This is in large part to do with the the way consumers place value on products.

The idea of creating diamonds in a laboratory is not new. Scientists have been at it since the mid-19th century, armed with the knowledge that diamonds are the product of carbon that’s exposed to high heat and pressure. But applying this in a lab environment remained elusive until the 1950s. Since then, three different techniques have been developed to produce increasingly authentic-looking synthetic diamonds. This applies to their appearance, as well as their physical properties such as thermal conductivity, electron mobility and hardness, which can even be superior to natural diamonds.

Thus, synthetic diamonds are increasingly used in high-tech laser cutting and polishing tools. Electronic applications are also being developed for various industries, such as power stations. Analysts estimate that more than 95% of all industrial diamonds are synthetic.

Two types of threat  

An immediate threat that synthetic diamonds pose to the traditional industry is from those that are falsely marketed as natural. With the labour costs of cutting and polishing natural diamonds on the rise, there is a growing concern that synthetic versions are being passed off as the real deal to make savings. Synthetic variants are around 15% to 25% cheaper.

But this is a relatively manageable threat. Preventive measures such as devices that allow quick detection of synthetics and a new Natural Diamond Quality Assurance programme have been put in place. And discussion is ongoing regarding laws that require retailers to explicitly mark synthetic diamonds.

The bigger threat comes from losing market share to consumers who might consciously choose synthetic diamonds over natural ones. The natural diamond industry is still suffering from increased awareness of “blood diamonds” – diamonds that have been used to finance conflict. The synthetic diamond industry has exploited this trust by marketing theirs as “conflict-free” and “ethical”.

But there’s another issue, which cuts to the core of why diamonds are considered so valuable and are such a mainstay of the jewellery industry. It’s all to do with what people perceive to be valuable.

Value is in the eye of the beholder  

Price is always determined by what people are willing to pay for products – and this is no different with diamonds. Research carried out by my team over the years, continuously demonstrates that value is multidimensional in nature. There are three specific dimensions that matter: social, personal and functional value.

Social value represents how valuable we perceive something to be in relation to other people – will it make us look good, will it boost our image or status? Personal value reflects how it will satisfy our wants and desires. And functional value represents how useful the product is perceived to be. For every purchase, we assign different levels of importance to each of these dimensions.

When it comes to value perception of natural against lab-grown diamonds, the difference is clear. The fact that synthetic diamonds have such a greater acceptance when it comes to their industrial applications (such as high-end precision tools) is predominantly driven by the functional nature of their use here. So when synthetic diamonds satisfy their needs at a comparatively lower prices they buy this category of diamonds.

But for consumers – and buyers of engagement rings especially – diamonds have a far more significant emotional attachment. Diamonds actually surged in popularity as a result of an exhaustive marketing campaign by De Beers, which used to have a monopoly on the global supply of diamonds. The company created demand for diamond engagement rings with a massive, and incredibly effective, campaign that included the slogan: “A Diamond is Forever”.

The strong emotional element to the way that diamonds have been marketed cannot be captured through their functional value. They therefore have substantial personal value – the very cost being marketed as a reflection of the amount the buyer loves the person they are giving them too.

As with other luxury goods, diamonds have an enormous social value. To most consumers they are not just an item of acquisition, but something to show off. And if they are being bought as part of an engagement ring there is an element of showing how much you value the other person.

This is a real barrier for the synthetic diamond industry. Even the term “synthetic” undervalues the regal association with diamonds. In this regard, the synthetic diamond industry needs a substantial strategy to crack the market. The positioning based on calling the diamond “conflict-free” is helpful but it’s not sizeable enough, as the natural diamond industry is increasingly scrutinising its supply chain to remove conflict-zone diamonds.

Something on which the synthetic diamond industry has not yet focused (but could) is this emotional connection that makes these diamonds socially desirable, as well as encouraging pride in buying them. It will require substantial efforts at an industry level and not just from one or two firms.

Until then, the price-conscious consumer who is more interested in the functional value of diamonds will provide a small market for synthetic diamonds. But if they want to reach the mainstream they’ll need to market themselves to appeal to the societal and personal value perceptions people have. Meanwhile, the natural diamond industry should make the most of its market dominance.

Paurav Shukla, Professor of Marketing, University of Essex.

This article first appeared on The Conversation.

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Harvard Business School’s HBX brings the future of business education to India with online programs

HBX is not only offering courses online, but also connecting students to the power of its network.

The classic design of the physical Harvard Business School (HBS) classroom was once a big innovation – precisely designed teaching amphitheaters laid out for every student to participate from his or her seat with a “pit” in the center of the room from which professors orchestrate discussions analyzing business cases like a symphony lead. When it came to designing the online experience of HBX—the school’s digital learning initiative—HBS faculty worked tirelessly to blend these tenets of the HBS classroom pedagogy with the power of new technology. With real-world problem solving, active learning, and social learning as its foundation, HBX offers immersive and challenging self-paced learning experiences through its interactive online learning platform.

Reimagining digital education, breaking the virtual learning mold

Typically, online courses follow a one-way broadcast mode – lectures are video recorded and reading material is shared – and students learn alone and are individually tested. Moving away from the passive learning model, HBX has developed an online platform that leverages the HBS ‘case-based pedagogy’ and audio-visual and interaction tools to make learning engaging.

HBX courses are rarely taught through theory. Instead, students learn through real-world problem-solving. Students start by grappling with a business problem – with real world data and the complexity in which a business leader would have to make a decision – and learn the theory inductively. Thus even as mathematical theories are applied to business situations, students come away with a greater sense of clarity and perspective, whether it is reading a financial report, understanding why a brand’s approach to a random sample population study may or may not work, or how pricing works.

HBX Platform | Courses offered in the HBX CORe program
HBX Platform | Courses offered in the HBX CORe program

“Learning about concepts through real-life cases was my favorite part of the program. The cases really helped transform abstract concepts into observable situations one could learn from. Furthermore, it really helped me understand how to identify situations in which I could use the tools that HBX equipped me with,” says Anindita Ravikumar, a past HBX participant. India’s premier B-school IIM-Ahmedabad has borrowed the very same pedagogy from Harvard. Learning in this manner is far more engaging, relatable, and memorable.

Most lessons start with a short 2-3 minute video of a manager talking about the business problem at hand. Students are then asked to respond on how they would handle the issue. Questions can be in the form of either a poll or reflections. Everyone’s answers are then visible to the ‘classroom’. In the words of Professor Bharat Anand, Faculty Chair, HBX, “This turns out to be a really important distinction. The answers are being updated in real-time. You can see the distribution of answers, but you can also see what any other individual has answered, which means that you’re not anonymous.” Students have real profiles and get to know their ‘classmates’ and learn from each other.

HBX Interface | Students can view profiles of other students in their cohort
HBX Interface | Students can view profiles of other students in their cohort

Professor Anand also says, “We have what we call the three-minute rule. Roughly every three minutes, you are doing something different on the platform. Everyone is on the edge of their seats. Anyone could be called on to participate at any time. It’s a very lean forward mode of learning”. Students get ‘cold-called’ – a concept borrowed from the classroom – where every now and then individuals will be unexpectedly prompted to answer a question on the platform and their response will be shared with other members of the cohort. It keeps students engaged and encourages preparedness. While HBX courses are self-paced, participants are encouraged to get through a certain amount of content each week, which helps keep the cohort together and enables the social elements of the learning experience.

More than digital learning

The HBS campus experience is valued by alumni not just for the academic experience but also for the diverse network of peers they meet. HBX programs similarly encourage student interactions and opportunities for in-person networking. All HBXers who successfully complete their programs and are awarded a credential or certificate from HBX and Harvard Business School are invited to the annual on-campus HBX ConneXt event to meet peers from around the world, hear from faculty and business executives, and also experience the HBS campus near Cambridge.

HBXers at ConneXt, with Prof. Bharat Anand
HBXers at ConneXt, with Prof. Bharat Anand

Programs offered today

HBX offers a range of programs that appeal to different audiences.

To help college students and recent graduates prepare for the business world, HBX CORe (Credential of Readiness) integrates business essentials such as analytics, economics, and financial accounting. HBX CORe is also great for those interested in an MBA looking to strengthen their application and brush up their skills to be prepared for day one. For working professionals, HBX CORe and additional courses like Disruptive Strategy, Leading with Finance, and Negotiation Mastery, can help deepen understanding of essential business concepts in order to add value to their organizations and advance their careers.

Course durations range from 6 to 17 weeks depending on the program. All interested candidates must submit a free, 10-15 minute application that is reviewed by the HBX admissions team by the deadlines noted on the HBX website.

For more information, please review the HBX website.

This article was produced by the Scroll marketing team on behalf of HBX and not by the Scroll editorial team.