Category: Management

Why commonality sometimes fails

Posted by MIT Sloan Executive Education - 27 days ago

Commonality, or the reuse and sharing of components, manufacturing processes, architectures, interfaces, and infrastructure across the members of a product family, is a strategy targeted at improving corporate profitability. Companies from Toyota to GE use product platform strategies to deliver more variety to their customers and compete more effectively. For example, Black and Decker uses shared motors and batteries across a range of power tools. Volkswagen models such as the Jett and TT share similar underbody components and other aspects.

Typical benefits of a commonality, or a product platform strategy, include:

  • Shared development costs
  • Common testing procedures
  • Production economies of scale
  • Amortized fixed costs
  • Reduced inventory

By definition, commonality seems like an obviously good thing. Why incur the cost of making different parts for different products if the parts do the same thing?  Because as it turns out, commonality is not always the right thing to do. And even when it is right, it can be difficult to achieve.

Dr. Bruce Cameron is a lecturer in MIT's Engineering Systems Division and a consultant on platform strategies. His research at MIT uses a healthy dose of systems thinking to tease out when commonality makes sense and how to get companies to pull it off. Cameron oversaw the MIT Commonality Study, which closely examined 30 firms over eight years. The study was the first work to uncover that many firms fail to achieve their desired commonality targets, showing weaker investment return on their platform investments. "That type of behavior and phenomenon is seen in studies that we did in automotive, consumer products, and transport," says Cameron.

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Complex risk management--as seen on TV

Posted by MIT Sloan Executive Education - 3 months and 23 days ago

FV Northwestern

Reality TV is largely a wasteland of odd, meaningless drivel, in which business leaders rarely have the time (nor should they make the time) to invest watching. But within the very broad category, there are some meaningful glimpses of how people solve complex business problems. The stands-out show in this category might be  Discovery Channel's Deadliest Catch, which some herald as the "original" reality TV show.

For those not familiar with the show, now in its eleventh TV season, it focuses on a handful of boats fishing for crab in the Bering Sea off the coast of Alaska. And while many fans watch the show for the drama of the cold, vicious waters and the inherent danger in the job, others can glean some secrets for managing complex business operations. More than just entertaining TV, Alaskan red king crab (just one species caught and sold by the boats on the show) was valued at more than $90 million in 2012.

The title Deadliest Catch reflects the stark reality of the commercial fishing industry: since 1992, when the Bureau of Labor Statistics started publishing fatality rates by occupation, fishing has consistently ranked as the most deadly occupation. In 2006, the bureau found commercial fishing has an almost 75% higher fatality rate than that for pilots, flight engineers, and loggers (the next most deadly occupations). The fatality and injury statistics for Alaskan crab fisherman are even higher than the average for the industry, due to the dangerous conditions out on the Bering Sea.

When one watches the show with a discerning eye, it's apparent that crab fishing is, in fact, a very complex business. Each captain must manage multiple aspects of risk against hard deadlines, in real time. 

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Lessons in negotiation

Posted by MIT Sloan Executive Education - 3 months and 23 days ago

Contributed by Jeff Ton, as originally published on May 26th on the author's blog.

If MIT Sloan Professor Jared Curhan were a pirate, he would be the lovable, friendly kind like Johnny Depp or Keith Richards. Of all the classes, seminars, and workshops I have ever attended, I have to rank Professor Curhan near the top when it comes to educators who can captivate, entertain, and educate, even a very difficult subject like Negotiation for Executives.  In his closing remarks for the MIT Sloan Executive Education course, Professor Curhan confessed he struggled to summarize such an intense couple of days; he wanted the class to have a take-away with all the salient points, but it was too big to put into a single page, even a large page, even a poster-sized page. With that confession, he unfurled a beach towel … a huge beach towel. The beach towel was printed with a very detailed drawing of a pirate ship, buried treasure, mermaids, and other sea creatures, each one depicting a point from the class. We really did have Lessons in Negotiations from a Pirate! But, I am ahead of myself…

As in my previous posts about the classes I have attend at MIT Sloan Executive Education, I don't want give away the content of the course (you should attend one…or two…or three), but I do want to talk about the experience. I have to admit, of all the courses I have taken, I was most nervous about this one. I was not sure what to expect. Were we going to learn how to be cutthroat negotiators? Were we going to learn tricks and tactics to help us win at all costs? Was I going to learn my entire approach to negotiations was wrong?

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Better banking through IT innovation: A custom programs success story

Posted by MIT Sloan Executive Education - 4 months and 3 days ago

A decade ago, Commonwealth Bank of Australia--the largest retail bank on the continent--had been grappling with an IT operation that was costly, inefficient, and sometimes unreliable. Back then, the bank was determined to transform itself into an operation that was #1 in customer service with the lowest costs in class.

With that goal in mind, Michael Harte, a forward-thinking executive who joined CBA as CIO in 2006, connected with the MIT Center for Information Systems Research (CISR). (CISR develops concepts and frameworks to help executives and their organizations address IT-related challenges.) Soon after, MIT Sloan faculty and program designers from the Executive Education office collaborated to create a custom program that would help transform CBA's IT leaders from functional managers to strategic thinkers.

"We designed a program around what the bank needed to achieve in three to five years. It had three components that today's banks must have to be successful–one was effectively managing digitization or IT; second was strategy options for the company; and the third was organizational change," says Peter Weill, Senior Research Scientist and Chair of CISR. 

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Leader-led learning: The great differentiator

Posted by MIT Sloan Executive Education - 4 months and 15 days ago

Contributed by MIT Sloan Senior Lecturer Steve Spear. Spear teaches in Creating High Velocity Organizations and is author of The High Velocity Edge: How Market Leaders Leverage Operational Excellence to Beat the Competition.

Certain organizations "punch above their weight," generating far more value (that accrues to everybody, not just customers or just shareholders, etc.), faster, and more easily. This despite them having access to the same technical, financial, and human resources as all their counterparts--and thereby enjoying the same advantages and suffering the same constraints.1

This becomes a wickedly important differentiator: Either because of having to get more yield out of exactly the same resources available to everyone, or because of having to be on the cutting edge of bringing high value-add products and services to market ahead of rivals.

The difference? They know much better what to do and how to do it, so operate on a frontier of speed, timeliness, efficiency, effectiveness, safety, security, and so forth others barely perceive. As with all knowledge, the source of their profound knowledge is accelerated learning, and that accelerated learning is the consequence of garnering feedback out of experiences across the spectrum of operational, design, and developmental and using that to feed forward into the next cycle of experiences.

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Beware the negative review

Posted by MIT Sloan Executive Education - 5 months and 25 days ago

Business owners and foodies alike are relatively well versed in the dynamics around Yelp and other crowd-sourced review sites. Recently, trust is a primary area of concern. Just this week, Jonah Bromwich stately plainly in his New York Times article, "Two Apps to Guide you to Good Food," that "I don’t trust Yelp reviewers." And it appears he may have good reason.

negative review

recent study by MIT Sloan Professor Duncan Simester and Eric T. Anderson of Kellogg School of Management of Northwestern University, found that approximately 5% of product reviews on a large retailer's website were submitted by customers who had no record of purchasing the product. These insincere reviews were also significantly more negative than others. As a result of findings such as these, many businesses are now including language in their contracts to ban customers from (or even fine them for) writing negative reviews--a reaction that has created it's own ripple of controversy. Anti-disparagement clauses, however, are probably unenforceable and are now illegal in California and may soon become illegal in every state.

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So many bad bosses, so few good leaders?

Posted by MIT Sloan Executive Education - 6 months and 2 days ago

Search for the term "bad bosses" online and you might be shocked at the results. One survey reveals two in ten people say a manager has hurt their career; another states one in five workers have a bad boss; a third, as covered by Forbes studied the impact of bad bosses and found that a shocking "77% of employees experienced physical symptoms of stress from bad bosses."

Why do so many companies lack the team of leaders they envision, despite the time and resources they invest in leadership development programs? MIT Sloan Senior Lecturer Douglas Ready and Jay A. Conger, Professor of Organizational Behavior at London Business School, have studied leadership efforts at more than a dozen international companies over the last two decades, trying to answer that very question 

In the MIT Sloan Management Review article, "Why Leadership Development Efforts Fail," Ready and Conger reveal that most of these efforts are to no avail because of clear patterns of behavior that cause repeated failures and breakdowns over time. They also share and how IBM—one of the companies they worked with—cured these behaviors to create a leadership program that achieves results.

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Small moves equal big payoffs for office productivity

Posted by MIT Sloan Executive Education - 8 months and 6 days ago

Sometimes, effective organizational change requires major shifts in management and corporate culture. Other times it's as easy as moving chairs.

Recent research by MIT Sloan Professor Christian Catalini makes the case that simple changes in office environments can have a big impact on department dynamics, leading to more efficient work habits, collaboration, and overall increased productivity in the office. As recently reported in the Wall Street Journal, companies that shift employees from desk to desk every few months and rethink which departments to place side by side say they have seen an increase in productivity and collaboration.

For his research, Catalini studied the impact of proximity at an academic campus in Paris, France. When a group of scientists were forced to move to a different building because of an asbestos problem, innovative ideas abounded as well as a more accepting attitude of experimentation. In addition, colleagues spent more time collaborating on projects and even solidifying friendships.

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