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Category Archives: Operations Strategy

How the digital marketplace is redefining customer relationships

Many people today buy their household telecommunications services—house landlines, Internet access, and digital TV—in bundles. Yet go to the average telecommunications services provider’s website and you have to select which product you are inquiring about or need fixed.

From an organization’s perspective, this makes complete sense. There’s a division for phone service, a division for Internet service, and a division for television. Specialists and technicians exist in each department to help you with whatever you need. But you get one bill each month, so why can’t the company recognize you as one customer with multiple products, instead of three separate customers?

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The “Good Jobs Strategy”

Consumers can help the economy not by just choosing to buy goods, but also by being selective in where they buy goods. Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, urged the more than 650 attendees of TedxCambridge, to shop, dine, and patronize businesses that employ what Ton calls the “good jobs strategy.”

Ton argued that bad jobs—such as many low-paying positions in retail—contribute to a bad economy. “The problem is not that there aren’t enough jobs; the problem is that too many jobs are simply bad jobs,” said Ton.

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The design structure matrix: helping to see complexity in systems

Many global business organizations develop and manage complex systems with multiple interacting parts. In an effort to become more effective, efficient, and profitable in the face of growing complexity, businesses seek process innovations that help them streamline their systems. Perhaps that’s why the design structure matrix (DSM), originally developed in the 1970s to model design problems and used at MIT since the 1990s to research system complexity, has become a powerful tool for developing products and systems.

In their recent book, Design Structure Matrix Methods and ApplicationsSteven Eppinger, Professor of Management Science and Engineering Systems at MIT Sloan School of Management, and co-author Tyson Browning, show how DSM analysis helps companies streamline the process of product and system design.

“Engineering work can be procedural and systematic,” says Eppinger. “People think of engineering as a matter of always developing something new, unlike business operations, where you do something over and over again. But we’ve learned that while you may repeat engineering work five or 20 times in your career instead of 100 times a day, there’s a process there. And if you can capture that process, you can improve it.”

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Three ways to profit from business complexity

Business complexity is usually seen as an obstacle to increased profit margins. A publication of The Global Simplicity Index revealed that complexity is costing 200 of the biggest companies in the world 10.2% of their annual profits—which, collectively, totals over $237 billion. But other recent studies show there is a profitable flipside to business complexity—a relatively unexplored area of opportunity hiding in plain site. For some companies, managing business complexity can be a unique opportunity to grow their market share.

Not All Complexity in Business is Value Destroying

According to Martin Mocker, Research Scientist at MIT’s Sloan Center for Information Systems Research (CISR), not all complexity in business is value destroying. In fact, in some instances business complexity can be value-adding, offering companies an opportunity to grow their market share. The key, says Mocker, is to focus on complexity that delivers “variety seeking, one-stop-shopping, customization, or seamless integration.” Finding balance, “keeping the complexity of their processes and systems—both internal and customer-facing—under control,” is the way to manage business complexity toward a profitable advantage.

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Happier employees sell more fries

The signs held by recent striking fast food employees say, “We are worth more.” They are, in fact, right. Retail employees are worth more, and paying them more can result in higher profits.

Those retailers who doubt this should take a close look at Costco, Trader Joe’s, and QuikTrip Corporation (a convenience store chain). Those firms, according to Zeynep Ton, Adjunct Associate Professor of Operations Management at MIT’s Sloan School of Management, pay their employees well—and it shows in the firms’ profits.

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