The global financial crisis of 2008 represents one of the best possible examples of the dangers posed by narrow mental models, say the authors. Before the crisis, people either failed to make sense of what was happening or chose to ignore it because of the profit opportunities. Some of the most basic assumptions implicit in the prevailing worldview before the collapse - such as ever-rising home prices and stock markets - were patently false, but this mindset was so powerful that by and large, objections were not raised. While such narrow mental models can obscure potential threats, the right mental models can open up new opportunities, they say. The authors provide eight strategies for developing a portfolio of mental models and overcoming inhibitors to change. In the end they prove that mental models are not just an abstract concept: millions of dollars will be won or lost based on the mindset of the person making the decision.
Recent economic turmoil has forced companies around the globe to re-evaluate their core business strategies. In order to thrive - indeed, to survive - organizations have to carefully consider how to remain relevant going forward. To do this, the author explains that firms must pay close attention to their customers and what they are demanding. We are now in the Age of Meaning, he says, where businesses and their brands create value and competitive advantage only when they deliver a compelling, holistic experience that is authentic, unique and relevant. Recent behavior on Wall Street has only deepened this trend, amplifying the desire for authenticity and meaning on Main Street. The author provides four key strategies for thriving in the Age of Meaning.
Organizations cannot make significant gains unless some individuals within the organization take significant personal risks that catalyze effective collective action. The authors show that these individuals - whom they call 'Consistent Contributors' -- can change other group members' perceptions by modeling cooperative behavior, thereby increasing the chances for additional cooperation. These individuals, they explain, always contribute, regardless of others' choices. They describe their research findings, which indicate that characterizing consistent contributors as 'suckers' is both misleading and fallacious: indeed, their data leads them to believe that consistent contributors are actually 'saviors' rather than suckers. A serious challenge for managers, then, is the creation of contexts that encourage and support the emergence and recognition of Consistent Contributors.
Today's companies prosper when they tap into a power that each of us already possesses, say the authors: empathy. People in organizations with a widespread sense of empathy share an intuitive vibe for what's going on in the world that helps them see new opportunities faster than their competitors. Creating an 'Open-Empathy Organization' entails a long-term process of organizational change, but the first steps are simple. The authors describe ten strategies that can enable an organization to hear what people outside of its walls are talking about, feel what they are feeling, and see the world through their eyes.
Roger Martin interviews best-selling author Malcolm Gladwell about his latest book, Outliers: The Story of Success (Little, Brown and Company, 2008) and finds that success is much more complex than we might think. Gladwell explains that, if we want to understand why some people thrive and others don't, we should spend the bulk of our time looking around the individual - at such things as their family, their birthplace, even their birth date. Along the way he touches on 'disadvantages that turn into advantages'; the powerful learning strategy of compensating for one's weaknesses; and why only 30 per cent of any outcome can be correlated with general intelligence.
For years, Rotman School of Management Vice Dean Jim Fisher has been bringing Shakespeare's Henry V to business-school classrooms, and in this interview he explains why. He explains how, despite having the cards stacked squarely against him, Henry ends up with the outcome he wants. As he shows, this involves a recognition that with your authority, all you can do is get people to do the minimum necessary to keep their job: everything they give you over and above the minimum, they volunteer to do - every shred. Along the way he provides tips from bringing Henry's approach into the modern day workplace.
This is an MIT Sloan Management Review article. Two very different ways of thinking about investment and risk are in competition. One emphasizes the financial risk of investing; the other concerns the competitive risk of not investing. In normal times, the bearishness of the former tends to complement the bullishness of the latter. But during extremes in the business cycle, the author argues, the balance between the two can break down. Specifically, companies seem to overemphasize the financial risk of investing at the bottom of the business cycle, at the expense of the competitive risk of not investing. This is dangerous, in the author's view, because it can create a lasting competitive disadvantage. Using examples from the semiconductor, paper and diamond industries, the author argues that it doesn't make sense to stamp out either financial or competitive risk, even though financial risk could be eliminated by investing not at all and competitive risk could be eliminated by investing indiscriminately. Instead, managers need to strike a balance between the errors implicit in these two types of risk: the error of pursuing too many unprofitable investment opportunities as opposed to the error of passing up too many potentially profitable ones. The original version of this article was published in the Sloan Management Review in Winter 1993. In this updated version, the author expands his views in light of the 2008 economic downturn.
This is an MIT Sloan Management Review article. In their 1998 Sloan Management Review article "Preserving Employee Morale During Downsizing," the authors maintained that strong organizations need to develop resilience so they could take advantage of new opportunities that arise during periods of economic retrenchment. They detailed four stages of downsizing programs: deciding to downsize, planning the program, making the announcement and implementing the program. In this sequel, the authors argue that downsizing programs aren't just about "doing more with less."They also provide opportunities to build a sense of trust and empowerment between managers and employees, which can provide significant benefits going forward. In addition to examining the impacts downsizing has on surviving employees and how survivors can influence whether a program is successful, the article explores three new areas that the authors have come to recognize as important to the success of downsizing efforts: (1) how organizations must become more flexible, (2) how they must become more innovative and creative, and (3) how they must improve their communications with stakeholders who are increasingly skeptical of downsizing efforts.
This is an MIT Sloan Management Review article. In his 2004 MIT Sloan Management Review article "Principles of the Master Cyclist,"the author made the case for why companies need to learn how to integrate strategic business-cycle management into their tool kits. The article presented a set of principles that savvy managers can use in making tactical decisions (in areas such as inventory management, marketing and pricing) and strategic decisions (in areas such as capital expansion and mergers and acquisitions). At the time of publication, there was a growing perception that the business cycle had largely been "tamed" by the sophisticated application of discretionary fiscal and monetary policies. However, that myth has since been completely shattered--not just by the 2008-2009 recession but also by the U.S. Federal Reserve System's role in formulating the economic policies that helped trigger the crash. In this current article, the author discusses the heightened importance of economic and financial market literacy and how smart forecasting can help companies manage the business cycle more effectively than their competitors. The author highlights three major activities managers need to focus on: (1) developing and deploying forecasting capabilities to anticipate movements and key turning points in the business cycle, (2) applying well-timed business-cycle management strategies and tactics across the functional areas of the organization in a synergistic and integrative fashion, and (3) building an organization with a business cycle orientation, a facilitative structure and a supportive culture.
This is an MIT Sloan Management Review article. As we sift though the debris of today's crisis, economists and policy makers alike are trying to assess why risk management systems and regulatory constraints didn't kick in before the global economy became engulfed in a tsunami of red ink. But economist Andrew W. Lo, the Harris & Harris Group Professor at MIT's Sloan School of Management, director of the school's Laboratory of Financial Engineering and founder and chief scientific officer of AlphaSimplex Group LLC, an investment adviser in Cambridge, Massachusetts, is less surprised than most seasoned observers. Lo has studied the connections between financial decision making, neuroscience and evolutionary psychology for over a decade. Among his findings are that professional traders, far from being cool-headed and rational, can become transfixed by extreme price movements, their decision-making capabilities temporarily hijacked by emotions such as fear and anxiety. In Lo's view, "behavioral blind spots"(which he defines as evolutionarily hard-wired reactions to perceived risks and rewards) are particularly dangerous during periods of economic extreme: bubbles and crashes.
This is an MIT Sloan Management Review article. Clayton Christensen is best known for his ideas about how disruptive innovations can transform markets. In this wide-ranging interview, he discusses topics ranging from the downturn's effect on innovation to opportunities to improve the U.S. health care system. Christensen thinks the economic downturn will be good for innovation, because downturns force innovators to adapt their strategies to the market quickly and inexpensively. What's more, he notes that resource constraints stimulate breakthrough thinking. And, despite the recent problems in the financial markets, Christensen believes that, overall, innovation has been beneficial in financial services. He cites historical financial innovations, such as no-load mutual funds and index funds, as examples of the way disruptive innovations in financial services have benefited consumers. However, he also notes that there are markets in which regulation is necessary -and the securities industry is one. Christensen, who is the coauthor of a new book on health care, The Innovator's Prescription, also discussed how disruptive innovation might improve the U.S. health care system. He explains how disruptive innovation helps make goods and services inexpensive and accessible.
This is an MIT Sloan Management Review article. Executives tend to think of mass customization as a fascinating but impractical idea, implemented in only a small number of extreme cases, such as Dell Inc. in the PC market. But over the past decade, the authors have studied mass customization at different organizations, including a survey of more than 200 manufacturing plants in eight countries. From that investigation, they found that mass customization is applicable to most businesses, provided that it is appropriately understood and deployed. The key is to view it fundamentally as a process for aligning an organization with its customers' needs through the development of a set of three organizational capabilities. Those three fundamental capabilities are: (1) the ability to identify the product attributes along which customer needs diverge, (2) the ability to reuse or recombine existing organizational and value chain resources, and (3) the ability to help customers identify or build solutions to their own needs. Admittedly, the development of these capabilities requires organizational changes that are often difficult because of powerful inertial forces in a company, but many obstacles can be overcome by using a variety of tools and approaches, and even small improvements can reap substantial benefits. The trick is to remember that there is no one best way to mass customize: Managers need to tailor their approach in ways that make the most sense for their specific business.
This is an MIT Sloan Management Review article. Are corporate social responsibility programs beneficial to companies when they undertake overseas expansion? To address that question, the authors analyzed both financial and corporate social performance data for more than 800 U.S. public companies. In particular, the researchers set out to examine the relationship between corporate social responsibility and profitable international sales. The researchers found that those companies that had low or high levels of corporate social responsibility had significantly greater success internationally than those with moderate levels of corporate social responsibility. The authors suggest that companies with high levels of social performance may benefit internationally from their good reputation for corporate social responsibility, and companies with low levels may attain cost advantages from overseas expansion. However, companies in between may be "stuck in the middle"--and unable to obtain a competitive advantage internationally from their corporate social responsibility programs. Since retrenching from existing corporate social responsibility efforts can be viewed negatively by existing stakeholders, the authors recommend that companies that are "stuck in the middle" rethink their overseas corporate social responsibility programs--either to de-emphasize competitive advantage or to increase the programs' impact.
This is an MIT Sloan Management Review article. Managers will never be able to predict the future as clearly as The Amazing Kreskin. But by making a deliberate effort, they can develop the clairvoyance they -and those around them -already possess into a potent competitive weapon. Because their antennae are always aloft, executives naturally detect weak signals as they drift in and out of range from the outer edges of their marketplace. How they find, keep and make sense of those faint clues can make all the difference when it comes to getting an early start on confronting a threat or exploiting an opportunity. In this article, the authors draw from their research into companies that learn from the future. They outline the specific skills managers need to develop--and those they had better lose--to correct their fuzzy vision of what's ahead. First, the authors identify the different breeds of biases that most managers don't even realize they have, and provide them with the tools to rout out such distortions. Then they outline nine proven and practical strategies managers can use to find, understand and make use of the most meaningful distant data. Confronting reality isn't as straightforward as hushing hunches in favor of high-minded analysis; there has to be room for both. Finally, the authors encourage executives to consider new information within the context of as many wider views of the future marketplace as they can find -tapping the farsighted folks at their company and in their industry. By learning how to extract meaning, managers will grow to understand that the future is plainly ours to see, no matter what the song says. What takes work is piecing those glimpses into a plausible panorama so that managers can see where their company strategy fits -before anyone else does.
Studies that examine high-performing companies to unearth the secrets of their success have a critical flaw: Very few of those companies are truly remarkable. Data analysis reveals that most owe their success to luck, not smart practices. That puts the prescriptions of success studies in a whole new light.
Many are counting on the adoption of electronic health records to help the health care system save billions of dollars. But to realize IT's promise, hospitals and medical practices need to empower employees.
Often, the greater a firm's experience in forming alliances, the worse the performance of those alliances. That's most likely because those firms have become overconfident of their skills and drawn faulty conclusions about which practices lead to success. A focus on experimentation and adaptation can help break that pattern.
The CEO of CARE reveals what it was like to incite change at a sprawling nonprofit and how she built support for her plan to increase its global clout.