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  • Premium Price, Poor Performance

    A graphic look at how the United States stacks up against other countries in the Organisation for Economic Cooperation and Development on health care expenditures and life expectancy.
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  • Learning When to Stop Momentum

    This is an MIT Sloan Management Review article. "Dysfunctional momentum" occurs when people continue to work toward an original goal without pausing to recalibrate or reexamine their processes, even in the face of cues that suggest they should change course. In the authors' study of firefighting teams as a metaphor for business organizations, where dysfunctional momentum arises daily, they found that it has at least five possible causes: (1) an overemphasis on action and decisiveness, which often precludes meaningful assessment along the way; (2) evaluating people, processes and outcomes against plans rather than reevaluating the plans themselves; (3) the cumulative effects of small changes that can ripple and grow throughout the organization; (4) the tendency to ignore or co-opt disconfirming evidence; and (5) deference to authority even when leaders are not especially in the know. To overcome dysfunctional momentum, the authors conclude, we have to create interruptions -points at which we can ask: What's the story now? Is it the same story as before? If not, how has it changed? And how, if at all, should we adjust our actions? The people in charge need to stop and reassess what is happening around them. Two interconnected factors tend to be instrumental, say the authors. First, individuals have to recognize their own inability to understand fully and predict the unfolding situation by themselves -they have to develop "situated humility."Second, they must actively create or seek out disruptive information -they have to accept interruptions so that people may reevaluate the story they are maintaining in their minds.
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  • Online Reputation Systems: How to Design One That Does What You Need

    This is an MIT Sloan Management Review article. User-generated content platforms, open source software, crowdsourcing and knowledge markets -these are all possible only because of the "social web," the interlinked virtual universe that to so many executives seems to offer the irresistible promise of providing something -ideas, work, decisions -for (almost) nothing, if only they could manage it right. Managing it right means understanding that even though the new platforms are all about harnessing crowds and communities, in the end those crowds and communities are nothing but a sum of individuals. And your company's social web efforts will succeed only to the extent that you are able to attract good individuals, motivate them to perform good work, and empower them to get to know and trust one another enough to collaborate toward the end goals of the community. The question is, How do you do that? The answer: by capitalizing on the motivational power of in reputation -that is, by designing and building an online reputation system that triggers and nourishes the kind of web community that will serve your company's needs. Using examples such as Amazon, eBay, Epinions and Yelp, the author describes how design choices of a reputation system can profoundly affect a community's culture, making an otherwise collaborative and cordial community into a competitive and even combative space.
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  • What Execs Don't Get About Office Romance

    This is an MIT Sloan Management Review article. Should coworkers have sex with each other? Should employers try to stop them? The answer to the first question is that the question isn't worth answering -because office romance is inevitable anyway. The answer to the second is more interesting. And due to recent shifts in the legal climate, for companies, it's also more scary. There is a misunderstanding at the epicenter of the office romance debate, even as it attracts increasing scrutiny due to famous examples such as the recent episode involving CBS's "Late Show With David Letterman" host. Contrary to some commonly misread signals, managers are not interested in stamping out employee dating. However, sexual relationships and romances change office dynamics in potentially problematic ways, presenting legal challenges such as allegations about sexual harassment and a hostile work environment, and those challenges need to be managed skillfully This article explores the changing legal and managerial landscape regarding office romance, and explains what practices companies should take to avoid trouble.
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  • Can Product Returns Make You Money?

    This is an MIT Sloan Management Review article. Many companies see customers' product returns as a major inconvenience and an eroder of profits. But recent studies have begun illuminating the potential benefits of allowing customers to return products with impunity. This research finds that when a company has a lenient product-return policy, which allows customers to return almost any product at any time, customers are more willing to make other purchases, thereby raising the company's revenues from sales. The authors' own research extended these studies by exploring the trade-offs between the costs of product returns -particularly when customers deem such experiences satisfactory -and their long-term benefits to the company. Analyzing six years of purchase, product-return and marketing-communications data from "Company 1"-a large national catalog retailer that sells apparel and accessories -they confirmed that ignoring product return behavior, or even trying to discourage it directly by not marketing to customers who return products (such as by not sending them catalogs), would be a mistake. In fact, managers should embrace customers' product-return behavior and offer them a satisfactory experience. In a field experiment with a second catalog retailer, "Company 2,"which sells footwear, apparel and other accessories through the Internet and mail-order catalogs, the authors found that under a lenient product-return policy, customers' purchases, induced profits and referrals were greater than under a strict policy (which discourages and limits product returns). These measures could be raised even further through a catalog-mailing strategy that takes into account the expected future profits from each customer and the relationship between purchases and product-return behavior -i.e., through an optimal allocation strategy.
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  • Business Crime: What To Do When the Law Pursues You (with updates by John L. Akula)

    This is an MIT Sloan Management Review article. Editor's Note: MIT Sloan Management Review first published "Business Crime: What to Do When the Law Pursues You" in our spring 2000 edition. In the article, author John L. Akula examined the state of how white-collar crime was being prosecuted in the United States. Given recent changes in both regulatory and legal standards affecting managers, we asked the author to explain how the landscape has changed for managers. His additions are published here alongside the 2000 article, annotating the original text.
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  • What Every CEO Needs to Know About Nonmarket Strategy

    This is an MIT Sloan Management Review article. Business strategy begins with operations, the competitive landscape and markets. But David Bach and David B. Allen of the IE Business School Center for Nonmarket Strategy argue that strategy should not end there. Rather, a robust nonmarket strategy that addresses government regulation, political and social movements, even activist opposition should figure strongly in any strategy. Nonmarket strategy starts with the premise that issues and actors "beyond the market" affect the bottom line. Which nonmarkets are most important? That depends on the key issues a company confronts. By identifying key issues, and then the actors who are shaping them, a company can begin to shape the nonmarket -- a crucial approach when the issue is core to the underlying market as well.
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  • A Business Plan? Or a Journey to Plan B?

    This is an MIT Sloan Management Review article. Nearly every aspiring entrepreneur or innovator has a business plan, and virtually all of these individuals believe that their business plan -- what we call Plan A -- will work. They can probably even imagine how they'll look on the cover of Fortune or Inc. And they are usually wrong. But what separates the ultimate successes from the rest is what they do when their first plan sputters. Do they lick their wounds, get back on their feet and morph their new insights into great businesses, or do they stick to their original plan? If the founders of Google, Starbucks or PayPal had stuck to their original business plans, we'd likely never have heard of them. Instead, they made radical changes to their initial models, became household names and delivered huge returns for themselves and their investors. How did they get from their Plan A to a business model that worked? Why did they succeed when most new ventures crash and burn?
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  • The Collective Intelligence Genome

    This is an MIT Sloan Management Review article. Google. Wikipedia. Threadless. All are platinum exemplars of collective intelligence in action. Two of them are famous. The third is getting there. Each of the three helps demonstrate how large, loosely organized groups of people can work together electronically in surprisingly effective ways -- sometimes even without knowing that they are working together, as in the case of Google. In the authors' work at MIT's Center for Collective Intelligence, they have gathered nearly 250 examples of web-enabled collective intelligence. After examining these examples in depth, they identified a relatively small set of building blocks that are combined and recombined in various ways in different collective intelligence systems. This article offers a new framework for understanding those systems -- and more important, for understanding how to build them. It identifies the underlying building blocks -- the "genes" -- that are at the heart of collective intelligence systems. It explores the conditions under which each gene is useful. And it begins to suggest the possibilities for combining and recombining these genes to not only harness crowds in general, but to harness them in just the way that your organization needs.
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  • Is Your Company As Customer-Focused As You Think?

    This is an MIT Sloan Management Review article. When Peter Drucker first proposed his "marketing concept" back in 1954, the notion that meeting customer needs better than your competition as the driver of business success was a radical idea. Today most managers agree that achieving sustainable profit growth requires having a clear, relevant customer promise; delivering on that promise; improving it; innovating; and supporting all of that with an organization that's open to new ideas and market feedback. However, achieving all of this is difficult. Despite management's tendency toward wishful thinking, the authors believe managers can come to terms with their company's weaknesses by posing a set of five questions specifically designed to uncover their vulnerabilities. Drawing on examples from companies including Apple, Google, Procter & Gamble and Toyota, the authors explain the importance of each of these questions. "For those who are prepared to ask the tough questions and willing to hear the answers," they write, "the potential benefits to the business are significant.
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  • How to Manage Alliances Better Than One at a Time

    This is an MIT Sloan Management Review article. Companies are surprisingly obtuse, the authors say, when it comes to the formation of new alliances. What often happens is that a business unit will form a partnership that serves its own parochial interests. All too often, however, the value that such alliances add at the business-unit level is negated by the resulting harm to the company due to the incompatibility of the new alliance with existing ones. Forming a partnership with a company that is an arch rival of an existing partner, for instance, can create such ill will that it leads to the overall destruction of value in the company. The solution, the authors argue, lies in both structure and process: Companies should create a central "alliance function"-an individual or a department at the corporate level that is charged with overseeing and coordinating the formation of new alliances. And the decision of whether to enter into a proposed alliance should be subject to a rigorous set of analytical steps in which the company examines the costs and benefits of the proposed alliance, not only for the business unit that is directly involved but also for the company as a whole.
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  • Insights on the Future of Health Information Technology: An Interview with Pamela J. Pure, former President of McKesson Technology Solutions

    This article is an interview conducted with Pamela J. Pure, former President of McKesson Technology Solutions. In the interview, Ms. Pure is asked about the role information technology plays in healthcare, and the role it will serve moving forward with healthcare in the United States and worldwide.
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  • Healthcare Reform and its Implications for the U.S. Economy

    U.S. healthcare is currently a poor value proposition in relation to its cost. This must change. Driven by the fundamental forces of financing, consumer preferences, and technology, the U.S. is heading for a profound revolution in healthcare, one that will affect not only the system itself but also the larger U.S. business community. This new healthcare system will create vast opportunities and commensurately large risks for healthcare innovators. The outcomes of the present healthcare reform debate will either liberate or further shackle these innovators. Reforms that depend on governmental controls are more likely to dampen innovation than those achieved through control by consumers, and given the profound ramifications of healthcare reform outcomes, policy makers would be well-advised to harness the forces of consumerism in fashioning reform.
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  • Paperless Healthcare: Progress and Challenges of an IT-Enabled Healthcare System

    For most Americans, a trip to the doctor's office or a hospital stay necessitates that medical personnel search through paper charts and records as care is administered. This remains the status quo, despite the increasingly large role that electronic communication plays in other aspects of our business and personal lives. The elevated use of information technology (IT) in healthcare settings-primarily via utilization of electronic health records (EHRs), which allow information to be readily communicated and shared among healthcare providers-has been advocated as a means of improving quality of care and helping to control healthcare costs over the long term. Yet, hastened implementation of healthcare IT will require considerable cost incursion in the near term, and will present various other challenges that must be addressed. Herein, we examine the merits and benefits of healthcare IT, as well as the costs and other challenges that may serve as obstacles to its wider implementation and use. We conclude with a set of recommendations designed to increase the likelihood that extensive expansion in the use of healthcare IT will yield the desired benefits.
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  • Driving Health IT Implementation Success: Insights from The Christ Hospital

    The application of information technology to healthcare promises significant benefits, particularly with regard to innovations in improving both clinical and administrative processes. However, to date, few studies have been devoted to understanding the process of implementing a hospital's clinical and business systems and the drivers of success. In this article, we describe a major HIT implementation undertaken by The Christ Hospital (TCH). Specifically, we report on TCH's efforts to separate from a well-established, multi-facility healthcare delivery network and move toward providing world-class patient care on its own. Here, we examine how different stakeholder perspectives, rather than causing conflict, were capitalized on via a collaboration-intensive process. These stakeholders included administrators, physicians, nurses, and other hospital staff, as well as external vendors and TCH's consulting partner. This project is unique due to the speed and spirit of collaboration with which it was accomplished. Our findings have a number of generalizable lessons for practice and implications for research.
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  • The Normalization of Deviance in Healthcare Delivery

    Many serious medical errors result from violations of recognized standards of practice. Over time, even egregious violations of standards of practice may become "normalized" in healthcare delivery systems. This article describes what leads to this normalization and explains why flagrant practice deviations can persist for years, despite the importance of the standards at issue. This article also provides recommendations to aid healthcare organizations in identifying and managing unsafe practice deviations before they become normalized and pose genuine risks to patient safety, quality care, and employee morale.
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  • Mistake-Proofing Healthcare: Why Stopping Processes May be a Good Start

    Two significant concerns in healthcare are spiraling costs and medical errors. These two concerns are correlated: eliminating medical errors leads to significant cost reductions. We provide an example, ThedaCare Inc., where both problems are improved by providing mechanisms that stop healthcare processes. While businesses often view having their processes stopped as a negative, increasing the stoppages, or creating process failures, is often a precursor to improved performance. A good rule of thumb is: if in doubt, stop. This concept of creating or engineering stoppages in the processes is linked to two "lean" concepts that come from the Toyota Production System: jidoka and poka-yoke. A spectrum of methods for stopping processes is discussed, ranging from warnings in the work environment to mechanical devices designed to stop processes and empower humans to stop the process. The preliminary results achieved at ThedaCare demonstrate the financial and medical improvements that may be obtainable from utilizing these methods.
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  • Innovative Healthcare Delivery

    Critics of the American healthcare system recite a long list of problems, including rising out-of-pocket costs, inconvenient access, overuse of emergency departments, uncoordinated medical records, and declining numbers of primary care doctors. To address these issues, some new venues have evolved, such as retail and urgent care clinics; however, the emergency department has become the only service provider available to all patients on a 24/7 basis. It is time to reinvent the system. The concept of patient-centered medical homes offers a structure for integrating innovations that can transform the delivery of healthcare. In this model, each patient develops an ongoing relationship with a primary care physician supported by a team of caregivers. An integral feature is the electronic medical record, which facilitates coordinated communication and decisions. Access expands beyond the traditional physician office visit to satellite services tailored to individual needs. Services center on whole-person care, including wellness and preventive counseling, as well as acute and chronic care. Adoption of the patient-centered medical home transforms healthcare delivery into a system that benefits everyone.
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  • The Promises and Constraints of Consumer-Directed Healthcare

    Consumer-directed healthcare promises to reduce costs and increase quality by expanding provider choice for prospective patients. High-deductible insurance, employer- or government-subsidized health savings accounts, transparent pricing, and accurate information on clinical performance help generate millions of patients shopping for healthcare. As in any other well-behaved market, when patients shop, there is a link between financial reward and value for the individual patient. Absence of price competition, agency problems, and high barriers to entry in local markets are market failures that currently break this link in U.S. healthcare. Consumer-directed health plans are already popular among many employers and have established a momentum that indirectly shapes discussion of reform by the Obama administration. Complexity of reporting clinical results, dependence of treatment success on at-home patient behavior, and scientific ignorance among consumers threaten delivery of results promised by theory. Successful implementation requires regulator attention to sophisticated data reporting that adjusts for clinical risk, avoidance of patient-focused marketing that leads to over-consumption, and adequate subsidy of health savings accounts. In the end, implementation shifts the locus of healthcare system control from cost-shifting negotiations between employers, providers, and payers to new-found purchasing power of prospective patients.
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  • The Brave New World of Valuing Life Sciences and Healthcare Enterprises

    Life sciences and healthcare enterprises represent the largest industry in the U.S. economy. Given the importance of this sector, there is increasing demand for financial valuation of both publicly and privately held companies. At the same time, accurate valuation is particularly difficult in light of shifting business models, the current economy, intellectual property rights issues, continuous innovation in the sector, changing population demographics, quality issues, and government involvement in healthcare debate, discussion, and regulation. Herein, we examine the changing and increasingly problematic valuation of life sciences and healthcare enterprises that have obvious importance from a social welfare perspective.
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