As a result of fast-developing mobile technology, companies must deal with increasing business complexity in a high-velocity environment. The Uber vs. Didi case illustrates a wide range of strategic issues that a company may face when creating a new business model, generating unprecedented value for customers, challenging traditional business and regulatory frameworks, and expanding into an emerging market to compete with local rivals. The case is about Uber's competition with Didi, its local rival in China. The first part describes the traditional taxi industry, using the illustration of the US taxi medallion system. It explains Uber's platform-based business model, value innovation, challenge to government regulation, and surge pricing model, as well as associated ethical issues. The second part describes the emergence of Didi in China and how it challenged Uber when it entered China's ride-hailing market. Unlike its rapid expansion in the US and other countries, Uber had a bumpy ride in China. In June 2015, Didi was reported to have 80.2% of the market, outperforming Uber's meagre 11.5%. With China's internet giants joining the battle as strategic investors-Baidu (backing Uber), Alibaba and Tencent (both backing Didi), and from Silicon Valley-Apple (backing Didi), the race between Uber and Didi has far-reaching implications.
The authors concluded that organizational agility required routines in four areas: strategizing, perceiving, testing, and implementing. Routines and capabilities, the authors note, allow organizations to perform key activities reliably and repeatedly. Management processes -- the fundamentals of planning, organizing, controlling, and motivating -- operationalize the routines and capabilities. To support agility, management processes need to be designed well, and some processes must be designed for change. While the authors found that good management processes were a prerequisite for agility, good processes were no guarantee for success. Sustaining high performance was a function of whether certain processes were flexible and fast. They illustrate their argument using two companies from their research: the Brioche Pasquier Group, a multinational bakery headquartered in Les Cerqueux, France, and Netflix Inc., which is based in Los Gatos, California, and streams digital content to more than 80 million customers in more than 190 countries. Both companies demonstrated an ability to operate effectively without being tied to a rigid set of steps. At Brioche Pasquier Group, for example, twice a year individuals and teams identify objectives and actions related to their work that they think can improve short-term performance or develop future capability, and they also review the previous plans. Brioche Pasquier Group uses this as an opportunity to distribute monetary bonuses (funded by savings or new value realized) to the individuals and teams whose actions contributed to the results. At Netflix, executives are committed to putting information into the hands of the people who do the work and making sure that the information flows up and down to everyone who needs it.
The alliances highlight the fact that companies may not need to own all of the resources, skills, and knowledge necessary to undertake key strategic growth initiatives. When conditions are uncertain and the stakes are high, partnerships can be an attractive alternative to going it alone or to mergers and acquisitions. Accordingly, many companies now maintain alliance portfolios. As a result, executives must manage multiple alliances with diverse partners across the globe simultaneously. However, the skills required to develop and manage alliances are still not well understood. In this article, the authors attempt to address these shortcomings by offering an integrative and holistic framework of alliance management along with practical guidance. Although strategic alliances are often viewed as a critical tool for pursuing growth opportunities, recent survey data suggest that roughly half of alliance portfolios underperform. Although the assessments of performance are subjective, it is fair to say that many alliances fail to live up to expectations. Why? As the authors found in their research, companies move at different rates down the learning curve related to managing alliances. Smaller companies may have advantages in this relative to larger partners because they are usually less complex internally and have stronger incentives to learn. Moreover, the benefits of alliance experience depend on the extent to which the organization can actively capture and leverage its experience (for instance, one partner may be able to draw additional benefits from an alliance, while the other may continue to make the same old mistakes). Hence, the authors argue, companies need to take a holistic and strategic approach. Tesla, for instance, doesn't view its alliances as individual deals but as part of an overall strategy to establish a new standard in automotive technology and, along the way, to gain a competitive advantage.
Although the term "robot"connotes visions of electromechanical machines that perform human tasks, the term as it relates to service automation refers to something less threatening: software that performs repetitive and dreary service tasks previously performed by humans, so that humans can focus on more unstructured and interesting tasks. In this article, authors Mary C. Lacity and Leslie P. Willcocks focus on "robotic process automation"-- software tools and platforms that deal with structured data, rules-based processes, and deterministic outcomes. They focus on this area (as opposed to more advanced automation technology known as "cognitive automation") because this is where most companies begin their service automation journeys. Currently, companies use robotic process automation for tasks such as those associated with validating the sale of insurance premiums, generating utility bills, paying health care insurance claims, keeping employee records up-to-date, and even generating news stories. In one case, the authors describe how a business process and technology services provider helped an insurance industry client automate a multistep process for processing premiums for new insurance policies. Humans still handle the unstructured parts of the work. However, the structured parts of the process, including finding errors, retrieving the online data, creating the official sales record, and notifying insurance brokers when the process is complete, are now managed by the robotic process automation software. By studying organizations that were early adopters in deploying software robots, the authors were able to identify three ways the companies generated tangible benefits: (1) by developing an approach to service automation supported by top management; (2) by initiating effective processes that deliver value to customers and employees; and (3) by building enterprisewide skills and capabilities.
This is an MIT Sloan Management Review Article. The combination of new analytical capabilities and burgeoning data assets are being used to form value-added "data products."Such products have powered rapid growth in the value and success of online companies, but the expansion of analytics means the standard model for developing these products needs to evolve. An updated model needs to reflect new "time to market"expectations and input from a variety of stakeholders.
Executives should evaluate whether a business model innovation they are considering is consistent with the current priorities of their existing business model. This analysis matters greatly, the authors write, since it drives a whole host of decisions about where the new initiative should be housed, how its performance should be measured, and how the resources and processes at work in the company will either support it or extinguish it. Business models, the authors point out, "by their very nature are designed not to change, and they become less flexible and more resistant to change as they develop over time."Interdependencies between different elements of the business model grow over time, and the business unit develops increasingly ingrained approaches to solving problems. The authors describe the development of a business model across time as a journey whose progress and route are predictable -- although the time that it takes a business model to follow this journey will differ by industry and circumstance. In the authors'view, a business model, which in an established company is typically embodied in a business unit, travels a one-way journey, beginning with the creation of the new business unit and its business model, then shifting to sustaining and growing the business unit, and ultimately moving to wringing efficiency from it. Each stage of the journey supports a specific type of innovation, builds a particular set of interdependencies into the business model, and is responsive to a particular set of performance metrics. The authors argue that this road-map view of business model evolution helps explain why most attempts to alter the course of existing business units fail. Unaware of the interdependencies and rigidities that constrain business units to pursuing their existing journey, managers attempt to compel existing business units to pursue new priorities or attempt to create a new business inside an existing unit.
In this article, author William R. Kerr, who has researched global ventures for two decades, examines subtle but critical differences in how globalization is leveraged even among organizations that seem on the surface to be quite similar (for example, businesses engaged in outsourcing). Traditional approaches to globalization start with a mindset of taking the company's best products or services to global markets and often use cross-border opportunities to lower costs (what the author describes as "globalizing the best that your company can offer"); the core focus is on how globalization can enhance existing products and profit formulas. However, other organizations, the author notes, build their businesses on top of globalization (what he calls "harnessing the best that the world has to offer"). Such businesses display a sharp external focus, harness the resources and ideas of others, and aspire to achieve a large global footprint quickly. Although the digital economy can enable these ventures, the real differentiator, the author argues, is the managerial approach taken toward the business. In addition to looking at Airbnb and Uber, the article examines the global strategies of several companies, including Upwork Global, Alvogen, Rocket Internet, and Home Essentials (HK) Limited. The article highlights best practices that can support managers in globalizing their businesses, ranging from tailoring the businesses for the local environment to leveraging global network effects. Moreover, it looks at the issue of operational complexity and how considering the trade-offs between the benefits and costs can help managers find the optimal global footprint for their organization.
This is an MIT Sloan Management Review Article. Digitally savvy executives are already aligning their people, processes, and culture to achieve their organizations' long-term digital success.
This is an MIT Sloan Management Review Article. We found that obtaining business value using the connections the IoT creates between an organization and its customers, suppliers, and competitors depends on companies'willingness to share data with other organizations.
During her career, Cheryl Bachelder had been a senior executive at two other food franchising companies, Domino's and KFC, and she'd learned to love the model. But when she took office at Popeyes, in 2007, which was struggling from a lack of strategy and too much short-term thinking, she found that the company's relationship with its franchisees was severely strained. As she and her team worked to turn Popeyes around, they would have to both regain the owners' trust and fire up their enthusiasm for the future. They would also have to create an arsenal of brand-building ideas and a national advertising campaign to build consumer awareness. In talks about how they should lead and which stakeholders should be their primary focus, the team members settled on a model called "servant leadership," in which the people of an enterprise come before self-interest. And they agreed that Popeyes franchisees should be their most important customers: "No one," Bachelder writes, "has more skin in the game." The company conducted its first in a series of franchisee satisfaction surveys and began measuring what matters most to owners, namely restaurant-level profitability. It launched a number of winning new products and acquired sophisticated software to help franchisees choose the best locations for new restaurants. The result has been eight years of steady growth.
Organizations expect to see consistency in the decisions of their employees, but humans are unreliable. Judgments can vary a great deal from one individual to the next, even when people are in the same role and supposedly following the same guidelines. And irrelevant factors, such as mood and the weather, can change one person's decisions from occasion to occasion. This chance variability of decisions is called "noise," and it is surprisingly costly to companies, which are usually completely unaware of it. Nobel laureate Daniel Kahneman, a professor of psychology at Princeton, and Andrew M. Rosenfield, Linnea Gandhi, and Tom Blaser of TGG Group explain how organizations can perform a "noise audit" by having members of a professional unit evaluate a common set of cases. The degree to which their assessments vary provides the measure of noise. If the problem is severe, firms can pursue a number of remedies. The most radical is to replace human judgment with algorithms. Unlike people, algorithms always return the same output for any given input, and research shows that their predictions and decisions are often more accurate than those made by experts. Although algorithms may seem daunting to construct, the authors describe how to build them with input data on a small number of cases and some simple commonsense rules. But if applying formulas is politically or operationally infeasible, companies can still set up procedures and practices that will guide employees to make more-consistent decisions.
U.S. corporations spend enormous amounts of money-some $356 billion globally in 2015 alone-on employee training and education, but they aren't getting a good return on their investment. People soon revert to old ways of doing things, and company performance doesn't improve. To fix these problems, senior executives and their HR departments should change the way they think about learning and development: Because context is crucial, needed fixes in organizational design and managerial processes must come first. The authors have identified six common barriers to change: (1) unclear direction on strategy and values, which often leads to conflicting priorities; (2) senior executives who don't work as a team and haven't committed to a new direction or acknowledged necessary changes in their own behavior; (3) a top-down or laissez-faire style by the leader, which prevents honest conversation about problems; (4) a lack of coordination across businesses, functions, or regions due to poor organizational design; (5) inadequate leadership time and attention given to talent issues; and (6) employees' fears of telling the senior team about obstacles to the organization's effectiveness. They advocate six basic steps to overcoming these barriers and achieving greater success in talent development.
Hated by bosses and subordinates alike, traditional performance appraisals have been abandoned by more than a third of U.S. companies. The annual review's biggest limitation, the authors argue, is its emphasis on holding employees accountable for what they did last year, at the expense of improving performance now and in the future. That's why many organizations are moving to more-frequent, development-focused conversations between managers and employees. The authors explain how performance management has evolved over the decades and why current thinking has shifted: (1) Today's tight labor market creates pressure to keep employees happy and groom them for advancement. (2) The rapidly changing business environment requires agility, which argues for regular check-ins with employees. (3) Prioritizing improvement over accountability promotes teamwork. Some companies worry that going numberless may make it harder to align individual and organizational goals, award merit raises, identify poor performers, and counter claims of discrimination-though traditional appraisals haven't solved those problems, either. Other firms are trying hybrid approaches-for example, giving employees performance ratings on multiple dimensions, coupled with regular development feedback.
AT&T, which built the U.S. communiÂcations infrastructure in the past century, could once claim to be the company "where the future was invented." But now its legacy businesses are becoming obsolete. With its industry moving from cables to the cloud, AT&T is in a race to reinvent itself. As part of that transformation, it has initiated a massive effort to help its workers acquire new digital skills. In this article Cathy Benko, vice chairman of Deloitte, and John Donovan, AT&T's chief strategy officer, offer a look inside the company's ambitious program, dubbed Workforce 2020. The challenges are sizable: The firm employs 280,000 workers, and their average tenure is 22 years (not counting people in call centers). At least half the workforce has been assigned a new role and is expected to get the credentials or training to fill it. To manage the talent overhaul, the company has revised its performance metrics, raised performance expectations, and redesigned compensation plans. It is also providing workers with a host of tools for training and development through an online self-service platform, courses in new technologies, tuition reimbursement, and even online master's degrees in computer science, developed with Georgia Tech and Udacity.
When Jeffrey Joerres first joined Manpower, in 1993, the labor market was relatively stable and the company still focused largely on traditional office, clerical, and industrial staffing. But since then globalization and rapid advances in technology have dramatically reshaped the employment landscape. During his 15 years as CEO, Joerres expanded the company's international operations and moved into the increasingly competitive market for IT, finance, and engineering professionals. In this interview with HBR's editor, he describes how micromarket analysis reveals "geolocated pools of skills" that businesses can tap-until competitors muscle in, deplete the skills pool, and drive up wages. So companies must acquire a "nomadic mentality" that will allow them to establish more-temporary, smaller operations as well as large ones. He acknowledges that "when full-scale robotics and artificial intelligence arrive in a broad-based, affordable, easily justifiable way," hordes of workers will be displaced, with little or no preparation for very different jobs. Joerres advises companies that want to develop a workforce strategy to put multiple work models in place-crowdsourcing, distant manufacturing, temporary contractors moving to full-time-and truly practice them. "When are we done with this efficiency thing?" he says. "The answer is never."
Governments, NGOs, companies, and community members must all be involved in programs to create shared value, yet they work more often in opposition than in alignment. A movement known as "collective impact" has facilitated successful collaborations in the social sector, and it can guide businesses in bringing together the various actors in their ecosystems to help remedy some of the world's most urgent problems. In the process, companies will find economic opportunities that their competitors miss. Five elements must be in place for a collective-impact effort to achieve its aims: (1) a common agenda, which helps align the players' efforts and defines their commitment; (2) a shared measurement system; (3) mutually reinforcing activities; (4) constant communication, which builds trust and ensures mutual objectives; and (5) dedicated "backbone" support, delivered by a separate, independently funded staff, which builds public will, advances policy, and mobilizes resources.
A business model that can link a new technology to an emerging market need is the key to industry transformation. When Apple coupled the iPod with iTunes, it revolutionized the audio devices market. But most attempts to introduce a new model fail. The authors did an in-depth analysis of 40 companies that had launched new business models in a variety of industries, and here they present the key takeaways from their research. They looked for recurring features in the models and found six: personalization, a closed-loop process, asset sharing, usage-based pricing, a collaborative ecosystem, and an agile and adaptive organization. No model displayed all of them, but having a higher number of features usually correlated with a greater chance of success at transformation. (The taxi service Uber can claim five of the six.) Companies that are thinking about changing their business model or entering an industry with a new model can rate themselves on the six features to assess the likelihood that they'll be transformative.
Carlos Ghosn's official title is CEO and chairman of the Renault-Nissan Alliance, but he's more colorfully known as "Le Cost Killer" and "Mr. Fix-It." He earned those nicknames by rescuing first Renault and then Nissan back in the 1990s. Now he's hoping for yet another turnaround--at struggling Mitsubishi, where Nissan recently acquired a controlling share. A Brazilian-born Lebanese-Frenchman, Ghosn deftly handles the challenges of managing companies on two continents. In this interview, he describes how he does it--meeting with his teams in Tokyo and Paris for a week each month and spending the rest of his time in operations, talking to suppliers and buyers, and looking for new opportunities. In the next five years, he says, "you'll see more electric cars, more autonomous drive, and more connectivity." He's excited about using technology "to make the car an indispensable personal space" and developing a fully self-driving vehicle by 2020. And he's not worried about competition in the electric-car market from companies like Apple or Google: "We have a long tradition of taking technology from the outside and putting it into our products." Ghosn believes the role of a CEO is to be "the guardian of the integrity and sustainability of the company." He sees his most important tasks as selecting the right people and directing strategy. "I want to make sure the Nissan-Renault Alliance continues to be solid," he says, "with good performance and good governance."
A paradox of power is that people gain it through virtuous behaviors such as collaboration, openness, fairness, and sharing, but once they enjoy a position of privilege, those finer qualities start to fade. Research shows that the powerful are more likely to engage in rude, selfish, and unethical behavior. This tarnishes their reputations, undermining their influence, and creates stress and anxiety among their colleagues, dragging down their teams' engagement and performance. Dacher Keltner, a psychology professor who has studied this phenomenon in a variety of professional settings, describes how executives can avoid succumbing to this syndrome. The first step is developing awareness: being attentive to the feelings that accompany a rise to leadership, practicing mindfulness, and looking for warning signals in your behavior. The second is to remember and try to practice the three ethics of good power--empathy, gratitude, and generosity--in your interactions, meetings, and communications every day.
Tela, a Lima-based company that uses local, sustainable materials to make fashionable ponchos, has a formidable competitor--a large U.S. firm with a globally recognized brand that markets its ponchos as "of Peruvian design" (although they are made in Bangladesh). Alejandra Chirinos, Tela's founder, has gathered her team to decide how Tela can best position itself against the U.S. company. She believes in Tela's social mission of employing and teaching weaving skills to underprivileged women, but her competitor has a simpler story to tell: Like TOMS with shoes and Warby Parker with glasses, it has a "buy one, give one" model whereby purchases support donations to people in need. In this context, can Tela successfully market its social mission? Or should it emphasize the authenticity of its products or its lower prices? Mark Rampolla (founder and former CEO of Zico coconut water) and Tomas Pando (cofounder and president of the Argentine footwear company Paez) offer expert commentary on Chirinos's dilemma.