This is an MIT Sloan Management Review article. For many teenagers and young adults, cell phones, personal digital assistants and other handheld devices have become a necessity of everyday life. That fact has not escaped the attention of companies that have had great difficulty reaching young consumers through traditional marketing approaches. In theory, the mobile platform provides the perfect mechanism for reaching young consumers. A large retailer might, for example, send a group of teenagers who are at a shopping mall various electronic coupons on their phones to promote special discounts. Many global corporations, including Burger King, MTV, Procter & Gamble and Ford, have initiated programs that enable consumers to search for the nearest restaurant location using their cell phones, receive electronic coupons or participate in other mobile marketing activities. Such campaigns have generated click-through rates up to 10 times those of traditional Internet banner ads, and recent forecasts for global mobile marketing spending range from $9 billion to $19 billion by 2011. That said, several brands, including Budweiser, ESPN, Sprite and adidas, have launched mobile marketing efforts only to see some successes amidst an equal number of disappointments. To investigate what truly influences whether young consumers will participate in mobile marketing activities, the authors recently conducted a survey in the United States and Pakistan. The study looked at the relative importance of a number of factors, including consumers' personal attachment to their cell phones, their concerns for privacy and their willingness to "opt in" and accept permission-based marketing. An analysis of the results uncovered important insights in consumer behavior. Such results hold a number of important implications for companies developing mobile advertising campaigns across global markets.
Initiatives to build and maintain trust with various stakeholders, including customers, employees, suppliers and investors, are at the top of the executive agenda at many organizations. But most companies don't really understand how to manage stakeholder trust effectively. In fact, the authors' research suggests that many trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually be counterproductive. Managing stakeholder trust is difficult because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it's not obvious which dimension executives need to focus on when dealing with any particular constituency. To answer such questions, the authors conducted a study of stakeholder trust in four different organizations. They analyzed the relevance (if any) of various factors: benevolence, integrity, managerial competence, technical competence, transparency and value congruence. In essence, the study asked what matters -- and to whom. Some of the results were unexpected, and a few were even counterintuitive, leading to the following key insights: Transparency is overrated; integrity is not enough; the right kind of competence matters; building trust with one group can destroy it with another; and value congruence matters across the board. The new framework challenges some existing beliefs and sheds light on areas that companies would be wise not to ignore. Indeed, as the authors illustrate, fundamental misunderstandings about stakeholder trust have tripped up corporations such as Coca-Cola, Google, Apple, Delta Air Lines, Mattel and Sprint. A deeper knowledge of stakeholder trust will help businesses reap numerous benefits, including improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers and higher levels of support from investors.
In recent years, researchers and consultants have advanced a number of customer metrics to explain the connections between customer behavior and growth. But these efforts have generated more smoke than heat. Despite claims to the contrary, the authors argue that the most popular metrics have shown only modest correlations to growth. None of them appear to be universally effective across all competitive environments. Early customer metrics tried to explain why people buy. To many companies, it came down to marketing. Yet, as the authors explain, the issues that affect customer loyalty are complex and go beyond standard marketing. This gave rise to a new category of metrics aimed at understanding customer experience. Although managers have learned a lot about the components of service quality (including reliability, responsiveness and empathy), the approach doesn't point managers to specific actions t. Beginning in the 1990s, many managers began paying closer attention to customer retention -- in particular, understanding dissatisfaction and satisfaction. But as the authors note, the linkages among satisfaction, customer behavior and positive financial outcomes have been modest. Today's most popular metric, the Net Promoter Score, focuses on how customer word of mouth -- both negative and positive -- can advance growth. Developed by Bain & Company Inc. consultant Fred Reichheld, it claims the ability to predict future growth from customer replies to one question: "How likely is it that you would recommend this company to a friend or colleague?" The authors found that the linkage between the NPS and subsequent customer behavior was modest at best; models based on multiple variables consistently outperformed models based on NPS. The authors are skeptical that there can be a single metric that reduces complex, multifaceted constructs to one or two dimensions; if there is, they write, "there's a good chance it will ignore one or more important aspects of the equation."
Many Western managers were introduced to lean production in 1990, with publication of "The Machine That Changed the World," based on a five-year study of Toyota by MIT's International Motor Vehicle Program. Since then, thousands of managers have used the principles of lean management to achieve faster cycle times, reduced defect rates and sharp gains in on-time deliveries. Lean management permits a marked reduction in inventory levels across the supply chain, which should result in better financial performance -- especially because companies achieve simultaneous declines in manufacturing and service costs. But, as the authors point out, the transition takes time and is full of obstacles. One predictable hurdle is the crisis in confidence that occurs when management isn't able to improve financial performance quickly. Lean transformations generally have short-term adverse impacts on the company's bottom line (that is, things get worse before better). Management needs to anticipate these challenges and explain them clearly. To help managers overcome the financial hurdles on the path to lean, the authors offer new tools for anticipating the deterioration in financial performance that occurs as a mass producer goes lean and for understanding the real performance improvements that take place during this period. Their approach, called "value-stream accounting," helps managers plan for the short-term financial impact, monitor progress, understand the operational improvements and develop strategies to maximize the longer-term benefit. Managers need to understand that the "bad" news isn't really bad -- it's part of the necessary process of establishing a stronger, more productive organization. The authors' approach replaces the traditional cost-accounting system with a transparent accounting system that tracks the company's value streams, which incorporate all of the value-adding and non-value-adding activities required to bring a product or service from start to finish.
This is an MIT Sloan Management Review article. In global supply chains, managers have consistently struggled with sharing valuable knowledge with buyers and suppliers across borders. Increasingly, talk of the "dark side" of collaborative relationships has left managers wondering who benefits most from knowledge-sharing activities: their companies or their partners. In order to find the answers to these questions, the authors conducted an in-depth study of more than 100 cross-national supply chain partnerships in the industrial chemicals, consumer durables, industrial packaging, toy and apparel industries in multiple locations in 19 countries. The authors found three types of knowledge sharing within the supply chain, each offering distinct benefits to buyers and suppliers: information sharing, joint sense making and knowledge integration. They also found that no matter how "diverse" the home cultures of the buyer and supplier companies, these differences had no impact on the propensity to share knowledge. Drawing on examples from the auto (Toyota), aerospace (Boeing, Lockheed Martin and United Technologies) and toy industries, they examine how different types of knowledge sharing can benefit buyers or sellers individually, but more importantly, how it can enhance the performance of the partnership as a whole. They conclude that, while suppliers generally benefit more from knowledge-sharing activities, both buyers and suppliers profit; understanding the benefits of absolute versus relative gains is critical when building world-class global supply chains. Sharing knowledge effectively means understanding that a disparity in benefits is part of what it takes to build partnerships that last.
This is an MIT Sloan Management Review article. Much lip service is given today to "values-based decision making," with the implication that the underlying values are "good" values, occupying high moral ground. But the fact is that all decisions--whether highly ethical, grossly unethical or anywhere in between--are values-based. That is, a decision necessarily involves an implicit or explicit trade-off of values. The values represented in a particular decision are not always easy to identify and evaluate, however, and the shortcuts that people often take in decision making can make deeper analysis of values all the more difficult. This article presents a framework designed to explore the values implicit in decisions. Moving systematically from concrete consequences to higher-ordered values, the framework, embodied in a decision-mapping technique, helps the decision maker think through what is gained and what is given up as a result of a decision. It also encourages an expansion of choice options, motivates a more balanced view of positive and negative consequences, and provides insight into the dynamics of decision making. When good people at times say yes to bad--unethical or illegal--actions, there are four possible reasons: (a) the organization's values are fuzzy to them, leading them to resort to undeveloped intuition and expedient criteria, (b) they may not be clear on their own values, (c) their interpretation of probability conveniently favors their a priori preferred option, or (d) they see no other options (they believe their hands are tied). Each of these possibilities reflects issues that senior managers need to account for directly in addressing ethical decision making in their organizations. Illustrating the framework through a case study based on actual events, the article aims to help managers build a culture that better integrates the organization's values into staff members' decisions.
New metrics have been introduced to a software technical support call center operation. These metrics have revealed a wide range of performance between employees both for time taken to answer customers' questions and the customer's perceived quality of service. The call center manager is wondering how to make use of these metrics. He is inclined to go public with them, whereas the head of human resources believes that this could be damaging to employee morale and will also make it more difficult for the company to recruit in a market experiencing labor shortages.
In 2006 officials of the Municipal Corporation of Greater Mumbai and the State of Maharashtra were beginning to implement a plan to improve the economic fortunes of the city. Mumbai, formerly known as Bombay, was India's richest city, with wealth based on trade, finance and filmmaking. But the city was also famous for its enormous slums, terrible traffic congestion, and poor infrastructure. And while India's economy had been growing rapidly since the late 1980s, Mumbai seems to be losing ground to other cities in India, such as Bangalore, and to other regional financial centers such as Shanghai and Dubai. The plan the city was considering would relax land use and rent control regulations and build new infrastructure in an effort to make Mumbai more affordable and livable. The case is designed to support a discussion of the rationale for regulation and of the political economy of regulatory reform. HKS Case Number 1917.0
Henry Ford's stubborn refusal to admit the changeability of consumer demand allowed Chrysler and GM to horn in on his market. Half a century later the whole U.S. auto industry made the same mistake: Enter the Japanese. But denial comes in many forms, as Sears, Digital Equipment, and Bear Stearns can attest.
Living alongside the roughnecks and roustabouts on two offshore oil platforms, the authors learned that when the men abandoned their macho behavior, they maximized the safety of their coworkers and did their jobs more effectively.
High interpersonal congruence-meaning alignment between team members' self-assessments and their appraisals of one another-improves the performance of diverse teams. And 360-degree feedback can help.
Choosing duty over pleasure today can cause regret down the road-whereas regret over the reverse is fleeting. Marketers of luxury products and services should consider prompting customers to predict their future feelings about choices made now.
Research shows that people favor pleasurable "want" options if the consequences are immediate, and good-for-you "should" options if the consequences will occur in the future. That finding offers potentially profitable opportunities.
Because board meetings involve two groups-directors and managers-and because directors play a difficult dual role as both cops and advisers, boardroom communication can suffer. Executive sessions and active in-meeting leadership will help.
When crucial financial estimates rely on judgment, companies can minimize their risk by turning to appraisers, actuaries, and evaluators, whether internal, external, or a combination.
A business historian reminds us that since the nineteenth century, predictions about globalization have been reliably wrong. Despite technology for the fast diffusion of knowledge, information-like wealth-seems to be concentrating even further.
Idea brokers are good at sparking cross-divisional innovation through their broad social networks. But implementation-marshaling resources and getting various stakeholders on board-requires dense webs of strong interpersonal relationships.
Employees who spend some or all of their bonuses on others-thereby creating what the authors call a "prosocial" workplace-are happier as a result. Managers can enhance that effect by providing opportunities to share the wealth.
MBA student Monroe Davies is asked by a potential employer to determine his own compensation package. This case follows Jim Hummer, President and CEO of Whole Health Management and Davies through a unique recruitment process that raises questions of compensation and employee incentives, negotiation strategy, and human resources management.