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This is an MIT Sloan Management Review article. Established companies in industries as diverse as airlines, media, and banking have seen their markets invaded by new disruptive business models. The newcomers succeed not only by stealing customers from the established firms but also by attracting new customers into the market. As a result, established companies need to decide how to keep their existing customers while taking advantage of the new ones. One options is to use existing business models to cater for both markets. Another is to develop a new business model specifically for the new market. This is not an easy decision because entering a new market can be risky. But if a firm decides to do so, it must decide on what business model to adopt and then make sure that the new business model co-exists peacefully next to its existing business model. Based on research into 65 companies that chose to enter markets created by disruptive business models (including Nestlä, Edward Jones, Waitrose, Reuters, and Tesco), the authors say that established firms should develop new business models that are different from their existing business models and different from the business model of the disruptor. However, designing these business models is not only difficult in its own right but also raises the challenge of how to operate two different and conflicting business models in the same company. The authors argue that the usual prescription of creating a separate unit to house the new business model is not enough. The company needs to achieve a delicate balance: establishing enough separation between the two business models to avoid conflicts, but not so much to take advantage of synergies between the two. To achieve this balance, the company needs to create an ambidextrous organizational environment.

In recent years, much has been written about evidence-based- or fact-based- decision making. The core idea is that decisions supported by hard facts and sound analysis are likely to be better than decisions made on the basis of instinct, folklore or informal anecdotal evidence. And many organizations have invested heavily in data processing infrastructure and analytical tools based on assumption that better evidence-based decision will follow from these investments. But research by the authors suggests that evidence is not as frequent an input to a decision process as managers like to think. Instead, what occurs is decision-based evidence making -sometimes without managers even understanding, that it's happening. The authors address three key questions: Why does decision-based evidence making occur in organizations? Is decision-based evidence making the necessarily bad? And, if decision-based evidence making is inevitable in organizations, what can be done to lessen its negative impacts? To help answer those questions, the authors explain how decision making is affected by the contexts in which problems are presented- and how those contexts can demand different ways of using evidence, depending on whether the evidence is being used to make, inform or support a decision.

Scientific Glassware is a fast-growing, privately held company that provides specialized glassware for laboratory and research facilities. Excess inventory is tying up extra capital needed to fund the company's expansion plans. The newly hired Manager of Inventory Planning is tasked with developing an effective strategy for managing inventory without requiring additional capital investment. The company has launched several initiatives, such as adding a dedicated domestic sales force, which directly affect inventory requirements. At the same time, the company has announced a commitment to improve customer responsiveness and reduce the "fill rate," the time it takes to fulfill new orders. These changes may require adding warehouses or outsourcing fulfillment services. This case focuses on the business challenges of inventory control and order processing, particularly the tradeoffs between centralized and decentralized inventories. Students must complete a quantitative analysis of the costs and benefits of several alternatives.

Spreadsheet Supplement for 4208.

Demand for folding and stackable chairs and tables at FoldRite Furniture Co. is unexpectedly strong. The company spent the previous two years improving manufacturing quality and efficiency, dropping poor-performing product lines, developing new products that are stylish and environmentally friendly, and instituting a program that allows customers to customize their orders and still get delivery within two weeks. As a result, sales interest in the new products is higher than forecast, in the U.S. and in Europe, where favorable exchange rates make American products highly competitive. In response to the surge in demand, Martin Kelsey, the production manager, must create a manufacturing plan that controls manufacturing and inventory costs, mitigates risk, and aligns with the strategic goals of the company. Students must complete a quantitative assignment as part of case analysis.

Spreadsheet Supplement for 4555

In 2000, Dr. Gary Kaplan became CEO of the Virginia Mason Medical Center in Seattle, Washington. The hospital was facing significant challenges: It was losing money for the first time in its history, staff morale had plummeted, and area hospitals presented ardent competition. Considerable change was imminent. Within his first few months, Kaplan had rallied the organization around a new strategic direction: to become the quality leader in health care. What Kaplan and his administrators lacked was an effective tool to execute their strategy. Soon thereafter, a series of serendipitous events led to the discovery of the Toyota production system, and the Virginia Mason Medical Center became entrenched in an overwhelming challenge: how to institute a production model in health care.

It was June 5, 2008 and the senior promotions coordinator was beginning to feel the pressure of managing a major sponsorship event for the Toronto Sun, a daily newspaper publication in Ontario, Canada. She had recently been hired and had received the responsibility of organizing the Toronto Sun's presence in the city's annual Caribana Parade after her colleague failed to make any progress following months of handling the assignment. With only eight weeks until parade day (August 2), she felt challenged to make the company's float a success. The Toronto Sun earned its place in the parade as the primary print media sponsor for the event. Pulling the company's float from the biggest parade event in the city would mean forfeiting valuable marketing exposure. This case was designed for use in an undergraduate or MBA operations management or introductory project management course. Developed to aid instructors in facilitating discussions of key project management concepts, the case content allows for an analytical approach to covering the basic skills in planning a project, including precedence relationships, critical path, due dates, uncertainty (PERT tasks), crashing, etc. It can be used to teach students MS Project or other project management software. It can also be used for a less analytic, more managerial discussion of project management.

In this article, we focus primarily on operational capabilities, developing the concept in a way that is easy to understand and visualize. We then briefly differentiate between operational capabilities and other closely related concepts, focusing on implications for managers.

Cambridge NanoTech (CNT) is an interesting example of how a successful university research project was used to build a small scale business which designs and manufactures research equipment for a new class of chemical reactions called Atomic Layer Deposition (ALD). CNT's business model is particularly interesting since the university researchers/founders developed a product that was specifically meant to serve other university researchers rather than trying to immediately jump to commercial, high volume manufacturing applications. Their product was specifically designed to be low cost, easy to use, flexible, and to have very short delivery times which made it very attractive to university researchers operating large research projects (typically on the order of millions of dollars/year). A large profit margin was possible due to the lack of competition and the perceived high value associated with having these technical capabilities since commercial machines of this type were typically a significant fraction of a million dollars. After a successful launch in 2005, the company experiences serious friction between the co-founders which is resolved when one of the co-founders buys out the other. In 2010, the company is profitable but is facing increased competition and the need to grow its business. The company is considering several different strategies.

As Zuo Zongshen drove the transformation of the Zongshen Industrial Group from an early imitator in the motorcycle business to a company that increasingly focused on innovation as a way to get out of the hyper-competitive commodity business, he continually faced new challenges. The company had become a leader in gasoline powered motorcycles and small gas engines, but increasing taxes and restrictions on the use of motorcycles in congested urban areas had spawned a new industry, electric motorbikes, which posed a threat to the company's core business. Sourcing the technology for these e-bikes, and hiring and retaining the management and creative talent the company needed, were continuing challenges. The case traces the development of capabilities in the Zongshen Industrial Group, how it used the early imitation phase to foster rapid technological learning and upgrading, and how it used a unique corporate structure and listing strategy to finance the acquisition of important technologies.

Appropriate for general management courses emphasizing lean operations strategy implementation and large-scale change management across a network of global manufacturing facilities. In this case, site-level leadership, including senior, midlevel, and supervisory positions, must respond to a critical corporate directive to achieve a 25% cost reduction. Under the direction of an advisory firm, the development and implementation of an operational Transformation strategy is the responsibility of the new VP of operations. Three key elements of the Operational Excellence Transformation Program are described in detail and year-one progress in three first-wave sites is presented through interviews. Students must critique the progress and offer suggestions for the VP, who must evaluate the results at the three sites and plan for a continuation of the rollout across other sites. A teaching note (OM-1400TN) is available.

The North West Company cases allow students to take a cross-enterprise leadership approach in looking at the dilemma facing the president and chief executive officer of The North West Company (North West), a food and general merchandise retailer operating primarily in Northern Canada. In early 2003, North West had negotiated a master franchisor agreement with Giant Tiger Stores Limited (Giant Tiger) with the objective of opening stores west of Winnipeg. In contrast with North West's push system of product replenishment, Giant Tiger had developed a successful pull system that gave individual store managers tremendous leeway in ordering decisions. The president and CEO wonders whether there is an opportunity to drive better results by adopting Giant Tiger's pull system within its Northern stores. The upside potential may include higher sales and reduced inventory levels as merchandise is tailored for each community. On the other hand, North West may face logistics and human resources issues in attempting to adopt this new system. This supplement to The North West Company (A): Cross-enterprise Strategy, product 9B07M047, discusses the supply chain issues.

The city of McAllen, Texas and its partners have worked on attracting an automotive assembly plant to the region for over fifteen years. Under the North American Free Trade Agreement (NAFTA) provision, this region enjoys the advantages offered by both sides of the Mexican-U.S. border. Even during the economic downturn of 2007 to 2008, McAllen experienced a lower unemployment rate compared to other cities in the United States. One of the primary reasons was its close proximity and economic ties to Mexico. Lower labour cost, a right-to-work state and proximity to Mexico were some of this region's strengths, while a high illiteracy rate, limited numbers of automotive suppliers and small workforce were among its weaknesses. Based on publicly available data and aggregate score evaluation methods, McAllen is compared to other potential sites. The case addresses a wide range of issue regarding site selection factors within the automotive industry.

Executives know that how they respond to the sustainability challenge will profoundly affect the competitiveness of their organizations - and perhaps even their survival. Yet most are struggling with how to integrate environmental efforts into their core business strategies. Many have a hodgepodge of green initiatives but no overarching vision or plan. The problem is not that they don't see sustainability as a strategic issue. Rather it's that they think they're facing an unprecedented challenge. But there is a roadmap, say authors David Lubin and Dan Esty. They argue that sustainability is a "megatrend," a transformative change in the competitive landscape - like the rise of the quality movement in the 1970s and IT in the 1980s and 1990s - whose course can be predicted. By understanding how firms won in prior megatrends, executives can craft the strategies and systems they'll need to gain advantage in this one. The key: Companies that pulled ahead in prior megatrends developed early capabilities in leadership, tools and assessment methods, strategy development, management integration, and reporting and communication.

You've been ordered to reduce overhead by 10%, 20%, or even (wince) 30%. How do you do it? First, don't expect to reach your target with a single big idea; you'll need a combination of 10 or more separate actions. Second, match the kinds of opportunities you examine and implement to the degree of cost-reduction required. To cut 10%, use an incremental approach-for instance, reduce spending on department management, hold down pay increases, and repropose previously rejected cost-saving ideas. To get to 20%, think in terms of redesign or reorganization. Strive to eliminate any work for which the cost exceeds the value. This will involve changes in process, mind-set, and how departments serve one another. Finally, to reach 30%, you'll need to broaden your perspective even more. For example, try coordinating parallel activities in the organization, doing away with low-value meetings and forums, and eliminating entire programs.

There's a major cultural and demographic shift away from suburban sprawl. Businesses need to understand it and plan for it.

Founded in 1997, Subhiksha had grown from one store in 1997 to more than 1000 retail outlets in 2008. It sold FMCG, grocery, pharmacy, mobile products, and fruits and vegetables (F & V). It was the largest supermarket and mobile retail chain in India with presence in 90 cities. In 2008, organized retail accounted for about 4% industry share. Although organized retail was identified as high-growth area by the middle of 2008, players who had entered the Indian retail had realized that organized retail in India was going to be tough business. Various players (Reliance, Bharti, Birla, and the Future Group) were experimenting with different formats and models. Subhiksha decided to come up with its own model which in its view was suitable to the Indian context. Subhiksha targeted the middle and lower classes and not the high-end customers. To do so, it operated with an everyday low pricing model and located several smaller stores to move closer to the customer. At the operational level, it constantly planned to increase the supply chain process efficiency to deliver goods at low prices. The Subhiksha business model is explained through a detailed description of operations of a store (Indiranagar) located in Bangalore. It also describes operations of the distribution center which served the Indiranagar store apart from serving 58 other stores. The case discusses the challenges of organized retail in general and specific challenges of inventory and cost management for a discount retailer. It also provides detailed data which can be used for the diagnosis of the supply chain system at Subhiksha.

Two MBA students involved in a week-long kaizen event at a manufacturing plant in the Czech Republic must increase productivity and reduce gross inventory despite an uncooperative work group. Lean manufacturing principles are analyzed in the context of a deadline-driven process.

In the second part of a two-part case, two MBA students candidly evaluate their performance in a week-long kaizen event at a manufacturing plant in the Czech Republic.