This is an MIT Sloan Management Review article. The word of the hour is "uncertainty"; it permeates all of modern life and business. Uncertainty so strongly affects companies' project management, for example, that three project management experts decided to study companies that successfully embrace it. The authors acknowledge the challenges of increased complexity, the shrinking of development cycles, and the inadequacy of traditional risk management in shifting markets. But they observe that, counterintuitively, projects conducted in such environments often have high returns. The secret is a willingness to redefine everything in midcourse on the basis of the predominant type of uncertainty. Arnoud De Meyer, Christoph H. Loch, and Michael T. Pich, professors of technology management at INSEAD Singapore, observed 16 major projects in a variety of industries. Using interviews and research on project documentation, they identify four major uncertainty categories. In variation, the project plan is detailed and stable, but project schedules and budgets drift from their projected values. Foreseen uncertainty is characterized by identifiable and understandable influences that the team cannot be sure will occur. Unforeseen uncertainty and chaos are the hardest categories to address because they require a balance between planning and learning. Projects featuring unforeseen uncertainty or chaos are common when the technology is in upheaval or when research, not development, is the main goal. At such times, a project may have successful results that are completely unexpected. Companies must learn to ascertain what kind of uncertainty is likely to dominate a project. For those that do, the authors reveal the best mix of tools and techniques to select when managing each type.
This is an MIT Sloan Management Review article. Regardless of the industry, all companies are operating on ever faster evolutionary tracks and at ever greater risk. A company's real core capability--perhaps its only sustainable one, say authors Charles Fine, Roger Vardan, Robert Pethick, and Jamal El-Hout--is its ability to redesign its value chain continually, reshuffling structural, technological, financial, and human assets to find maximum, albeit temporary, competitive advantage. The ultimate goal of strategic value chain analysis, say the authors, is building an organizational capability for fast response to rapidly evolving industry dynamics. To execute such an analysis, the authors developed a value chain strategy framework during a year-long strategic assessment at the General Motors Powertrain organization. The framework seeks to answer four key questions: Where is value being created and what activities are not adding to overall enterprise value? What areas of the business should remain in-house vs. be outsourced? Where should investments be made and how should they be leveraged? How can the value chain be organized to optimize existing and emerging alliances? To answer those questions, the authors employ not only traditional economic value-added analysis, but also their own strategic value assessment, which considers factors such as customer preferences, the rate of change of underlying technology, competitive position in the marketplace, depth of the supply base, and the integral or modular nature of the asset. The wide applicability of the framework is illustrated in the authors' discussion of IBM's decision to outsource its first PC microprocessor to Intel, a consumer products company's decision to outsource the manufacture of a branded product, and the Recording Industry Association of America's decision to quell rather than acquire Napster's file-sharing capability.
In their guarded use of language, CEOs reveal more about themselves and their companies than they realize, says Stanford linguist and NPR commentator Geoffrey Nunberg.
Everyone knows that industries start out fragmented and then consolidate. But new research suggests that most industries do so in a predictable way. They go through four stages, each one requiring companies to employ a different competitive strategy.
Managing corporate projects as though they were a portfolio of financial options appears to be an exact science. But it's not. That's because decisions to drop projects are never made as objectively as decisions to sell shares.
A small software company has remarkable success repairing its dysfunctional organizational dynamics through a form of improvisational theater. The key is an exercise in which actions truly speak louder than words.
The marketing manager for a hockey team has been told by senior management that revenues for the next season must increase or the franchise will be sold. The previous year's high-budget advertising campaign did not bring in the single-ticket sales results he expected. A database of past ticket holders is available and the question arises how to use this database. Using pivot tables, and recency, frequency and monetary value analyses, he must determine how to increase the return on the marketing investment. An Excel spreadsheet, product 702A22, is also available.
The new director of logistics at Holt Renfrew, a high-end retailer of men's and women's fashions, has been asked to prepare a detailed plan for dealing with the company's $40 million warehoused inventory and its chronic stock-out problems. Given the opportunity to prove how logistics can benefit the company's profit margin, the director prepares a three-fold strategy: improve the physical layout and process flow in the distribution center, upgrade the distribution systems and business processes, and re-allocate human resources. His challenge is augmented by the need to receive merchandise from international suppliers and distribute it quickly to compete in the fast-paced fashion industry.
Air New Zealand is a national airline faced with a number of important strategic and financial issues. The company's recent acquisition of Ansett Australia had proved to be disastrous and a severe financial drain for Air New Zealand. Key issues facing Air New Zealand include the long-term strategic positioning of the business, and determining anticipated financing needs, the appropriate gearing ratio or capitalization (debt-to-equity) rate, and available sources of financing. A recent research report had summarized two fundamental questions that impacted on the company's stock price and needed to be addressed: Would the New Zealand government relax Air New Zealand's ownership restrictions in order to allow Singapore Airlines to increase its stake from 25 per cent to 49 per cent? If so, would any proposal fix Air New Zealand's balance sheet to allow Air New Zealand and Ansett to once again become viable airline competitors? Supplement to this case is Air New Zealand: The Recapitalization Decision (B), product number 902N20. .
This is a supplement to Air New Zealand: The Recapitalization Decision (A), product 902N17. The chairman of Air New Zealand is chairing the company's first annual meeting and is faced with a number of financial and strategic issues that have an impact on the survival of the airline.
As a startup in the online sales incentives industry, SalesDriver had a unique product to offer: online sales contests. From its early stages, SalesDriver had a great product, e-tailer relationships and initial customers who were pleased with the service. What SalesDriver needed was personnel. SalesDriver's two co-founders were facing several challenges. They were both young and making their first independent leap into the dot-com industry. With limited funding and no hiring experience, they needed to put together a staff for their company and wanted to do so within a two-week time frame. Their first need was to hire a vice-president of sales, but their candidate of preference had 15 other job offers on his plate, so time was of the essence. How much should they offer? What incentives should they include? What kind of fit would they have as a working team and would they even have enough time to assess that fit? The two friends and business partners were faced with the difficult challenge of working out a winning offer that would persuade the right person to accept a position in their very young company.
The marketing manager for a hockey team has been told by senior management that revenues for the next season must increase or the franchise will be sold. The previous year's high-budget advertising campaign did not bring in the single-ticket sales results he expected. A database of past ticket holders is available and the question arises how to use this database. Using pivot tables, and recency, frequency and monetary value analyses, he must determine how to increase the return on the marketing investment. An Excel spreadsheet, product 7B02A022, is also available.
Casino gaming companies such as MGM Mirage, Harrah's and Park Place Entertainment, in addition to their traditional land-based casino properties, must consider the potential impact of Internet gambling on their existing operations. It appears that several Internet gaming companies have been quite successful and that the global market potential could be significant. Each of the United States gaming companies has taken very conservative approaches to Internet gaming in an effort to maintain their long-standing relationships with their respective state gaming authority. However, non-traditional casino companies have developed off-shore Internet gaming operations to circumvent traditional land-based gaming regulations. Going forward, traditional gaming companies will need to consider the possible legalization of Internet gaming on a large scale and how they would respond.
Cloverdale Paint Inc. is a family-owned paint manufacturer. Company sales have been falling and the logistics manager was looking at several options that would meet the company's long-term growth objectives. Two opportunities - private label development or dealer network expansion - seemed promising. He must determine if one or both alternatives will resolve the company's declining sales, and if so, whether the company has enough capital to pursue one or both ventures.
Two analysts have each been assigned to work on the conceptual and detail designs of two modules in a Web-based software solution. A week before the final design presentation, the analysts discover that their software designs are not integrated. The case focuses on the frustrations of one of the analysts and her concerns about the working relationship with the other analyst. They have had personal differences and are both prospects for early promotion. She considers how the project came to this point and how the situation might have been avoided. Supplement eProcure - Finishing the Project (B), product 9B02C021, discusses the analyst's strategies during the final week working on the design; supplement eProcure - Conversation with Claire (C), product 9B02C022 explores the analyst's decision to confront her co-worker and supplement eProcure - End of the Design Team (D), product 9B02C023, focuses on the outcomes for both analysts after the project is complete.
An orphanage and foster care home for young children in Guyana was staffed by women who were paid a small monthly stipend. The facility was in poor physical state, the 54-hour workweek was exhausting and absenteeism was rampant. The new director tried to turn the facility around by repairing the building, improving the working conditions and seeking staff input. On the country's national holiday, however, none of the staff reported for work. The director considered her options: resignation, asking for additional resources, giving the staff more responsibility or disciplining the staff. Supplement case Red Cross Children's Home: Building Capabilities in Guyana (B), product 9B02C047 describes the actions taken by the director and their outcome. In supplemental case Red Cross Children's Home: Building Capabilities in Guyana (C), product 9B02C048, the former director visits the children's home after an absence of nearly two years and reflects on her management efforts. A 22 minute video is available, product 7B02C042 and a PowerPoint slide presentation, product 5B02C42.
This is a supplement to Red Cross Children's Home: Building Capabilities in Guyana (A), product 9B02C042. An orphanage and foster care home for young children in Guyana was staffed by women who were paid a small monthly stipend. The facility was in poor physical state, the 54-hour workweek was exhausting and absenteeism was rampant. The new director tried to turn the facility around by repairing the building, improving the working conditions and seeking staff input. On the country's national holiday, however, none of the staff reported for work. The director decided to implement new rules and a system of accountability. When the local public hospital staff went on strike, the director of the children's home was asked to run the hospital with its volunteers. After eight weeks, she returned to the children's home to discover that it was thriving, despite her absence. She decided that her work was completed and she returned to Canada. In supplemental case Red Cross Children's Home: Building Capabilities in Guyana (C), product 9B02C048, the former director visits the children's home after an absence of nearly two years and reflects on her management efforts.
An orphanage and foster care home for young children in Guyana was staffed by women who were paid a small monthly stipend. The facility was in poor physical state, the 54-hour workweek was exhausting and absenteeism was rampant. The new director tried to turn the facility around by repairing the building, improving the working conditions and seeking staff input. On the country's notational holiday, however, none of the staff reported for work. The director decided to implement new rules and a system of accountability. When the local public hospital staff went on strike, the director of the children's home was asked to run the hospital with its volunteers. After eight weeks, she returned to the children's home to discover that it was thriving, despite her absence. She decided that her work was completed and she returned to Canada. Nearly two years later, the former director visited the children's home and reflected on her management efforts. This is a supplement to Red Cross Children's Home: Building Capabilities in Guyana (A), product 9B02C042 and Red Cross Children's Home: Building Capabilities in Guyana (B), product 9B02C047.
The head of salaried personnel at a large automotive manufacturer is faced with the unenviable task of implementing head count reductions. Several options are available including voluntary leave of absence, contract position reductions and early retirement packages. She must decide the best method to carry out the reductions and how to keep the targeted reductions fair to all employees at the company. Supplemental case Janet Michaels at American Car, product 9B02C054 discusses her decision.