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Development, Democracy, and the Village Telephone
Conventional thinking about Third-World development rejects the idea of state-of-the-art technology for villages that lack adequate water, power, food, and literacy. But the author argues that modern telecommunications and electronic information systems are completely appropriate technologies even for the poorest regions of the world. Why? First, telecom is indispensable in mobilizing the resources necessary to meet basic human needs. Second, information technology is the greatest democratizer the world has ever seen. -
Pyramid of Decision Approaches
Under increasing pressure to make better decisions in less time, managers often use the quickest and easiest decision-making method: going on "gut feel." But recent decision research shows that intuition is much less reliable than most people believe. Managers need to use more sophisticated methods. This article describes a series of increasingly accurate (and demanding) decision-making approaches. It starts with purely intuitive choices, which are quickest and least accurate, and then examines heuristic shortcuts and rules of thumb. It then discusses more demanding and reliable methods, such as bootstrapping and value analysis. It examines the strengths and weaknesses of each approach in terms of speed, accuracy, and justifiability, with illustrative applications to managerial practice. Finally, the authors offer practical advice for managers on how the more sophisticated techniques can be incorporated into the organization. -
Link Between Individual and Organizational Learning
This is an MIT Sloan Management Review article. The topic of organizational learning has gained a lot of attention, but there is little agreement on what organizational learning means and even less on how to create a learning organization. The critical issue is how individual learning is transferred to the organization. The author develops a model that links individual and organizational learning through mental models--the thought constructs that affect how people and organizations operate. This model can guide the search for new tools to help organizations learn. -
Riding the Marketing Information Wave
Faced with the costs of building customer information systems, some managers question whether or not marketing technology can achieve competitive miracles. But the author believes that retailers and consumer goods companies can't afford to ignore the new economies of scale the best marketing information systems offer. Today's sophisticated technologies help companies sort massive amounts of information to target small groups of highly responsive customers almost automatically. The great Atlantic and Pacific Tea Co. (A&P), for example, is using point-of-sale scanning and frequent-shopper programs to build a sophisticated customer database. The mail-order company Fingerhut bases every catalog mailing and promotion on statistically determined predictions about customer behavior. And R.R. Donnelley and Sons, the world's largest printer, is using leading-edge technology to offer customers everything from consumer and life-style data to customized individual publications. Through such technology, big companies can own niches the way smaller competitors do. But it's not just a matter of size. Large companies without the vision to develop their own marketing IT will be left behind. -
Empowerment or Else
Nine years ago, the author bought a small manufacturing company with marginal profits, poor union relations, nit-picking work rules, and high labor costs. Today he has flexible work rules, lower relative labor costs, fewer benefits, excellent union relations, and superior profitability. How did he do it? The simple answer is profit sharing and empowerment. The process began when Frey cut wages, vacations, and holidays. The ensuing strike failed, leaving him with lower costs but an angry, embittered work force. After a year of bickering, Frey decided he wanted to implement profit sharing. To get his employees to grasp the cause-and-effect relationship between the way they worked and the profits they shared, he used every means he could muster. He refused contract wage hikes but shared 30% of pretax profits. He opened his books to the union. He offered training in new skills. He hired new managers. He learned to listen. For workers, profit sharing is now a 36% increment to income, while productivity has risen by almost a third. Best of all, the workers themselves now push for ongoing change and increasing responsibility. -
Managing by Wire
Rather than follow the make-and-sell strategies of industrial-age giants, today's successful companies focus on sensing and responding to rapidly changing customer needs. In order to survive in this sense-and-respond world, big companies need to consider a strategy called "managing by wire." In aviation, flying by wire means using computer systems to augment a pilot's ability to assimilate and react to rapidly changing environmental information. In a similar way, managing by wire is the capacity to run a business by managing its informational representation. Coherent corporate behavior needs more than blockbuster applications and network connections; it must be governed by a coherent information model that codifies "how we do things around here," and "how we change how we do things around here." This article describes managing by wire at Mrs. Fields Cookies, Brooklyn Union Gas, and a financial services organization that the authors call Globe Insurance. -
Putting the Balanced Scorecard to Work
In an earlier, groundbreaking article, Balanced Scorecard -- Measures That Drive Performance, the authors proposed a new measurement system that provided managers with a comprehensive framework to translate a company's strategic objectives into a coherent set of performance measures. Now the authors show how several companies are putting the balanced scorecard to work. Effective measurement, the authors point out, must be an integral part of the management process. Much more than a measurement exercise, the balanced scorecard is a management system that can motivate breakthrough improvements in such critical areas as product, process, customer, and market development. Several examples--Rockwater, Apple Computer, and Advanced Micro Devices--illustrate how the scorecard combines measurement and management in different companies. From the experiences of these companies and others, the authors have found that the balanced scorecard is most successful when it is used to drive the process of change. -
Why Incentive Plans Cannot Work
It is difficult to overstate the extent to which most managers and the people who advise them believe in the redemptive power of rewards. But more striking is the rarely examined belief that people will do a better job if they have been promised some sort of incentive. According to numerous studies in laboratories, workplaces, classrooms, and other settings, rewards typically undermine the very processes they are intended to enhance. The findings suggest that the failure of a given incentive program is due less to a glitch in that program than to the inadequacy of the psychological assumptions that ground all such plans. Research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance. Kohn explains why rewards fail in a six-point framework: rewards do not motivate; they punish; they rupture relationships; they ignore reasons; they discourage risk taking; and finally, they undermine interest. Any manager thinking about a new incentive program--or attached to an old one--would do well to consider Kohn's argument. According to Kohn, incentives (or bribes) simply can't work in the workplace. -
From Complacency to Competitiveness: An Interview with Vitro's Ernesto Martens
Companies searching for a way to navigate the changes in Mexico would do well to study Vitro, Sociedad Anonima, an 84-year-old Mexican company with roughly $3 billion in sales and 44,000 employees. CEO Ernesto Martens-Rebolledo is transforming Vitro from a Mexican company to an international company, and from a complacent competitor to an aggressive one. As part of this transformation, Martens has made some controversial decisions. In 1989, he led the only hostile takeover of a U.S. company by a Mexican company when Vitro took over the Anchor Glass Container Corp. And in 1992, he laid off 3,000 workers - a first for a company that used to claim that it wasn't giving workers a job but a way of life. Through its proximity to the largest market in the world and its joint ventures with Ford, Corning, Samsonite, and Whirlpool, Vitro is well positioned to take advantage of the emerging North American market. But Vitro faces many challenges. For Martens, the most important and most difficult challenge is to convince people that they can no longer be complacent in the face of world competition. -
Making Mass Customization Work
Scores of companies have been trying to become mass customizers: businesses that produce individually customized goods or services at the cost of standardized, mass-produced goods. Mass customization entails breaking up the tightly integrated networks that form the backbone of the continuous improvement organization and creating a loosely linked collection of autonomous modules. Each module performs a different task and is perpetually reconfigured in response to customer demands. Automation typically is the key to linking these modules so that they can come together quickly and efficiently. Leaders of mass-customization organizations never know exactly what customers will ask for next. All they can do is strive to be ever more prepared to meet the next request. To that end, mass customizers are forever changing and expanding their range of capabilities. -
Leveraging to Beat the Odds: The New Marketing Mind-Set
When it comes to marketing, concentrating on the four Ps - product development, price determination, place of distribution, and promotion - no longer ensures competitiveness. Relying on short-term thinking, many companies base their marketing budgets on annual sales forecasts and then demand immediate results based on dollars spent. These companies are confusing cause and effect. They don't realize that developing a "quality" customer base - loyal customers who yield high profits - can take many years. And quality is what matters for long-term success. Companies would do better treating marketing expenditures the same way they treat capital outlays: as investments that drive revenue over time. Many industry giants - Ivory Soap, Heinz Tomato Ketchup, and Ritz Crackers, to name a few - got that way through cumulative investment of years and even decades. Newcomers can leverage to beat the odds, however, and, with a shrewd strategy, turbocharge their returns. -
Building a Learning Organization
Continuous improvement programs are proliferating as corporations seek to better themselves and gain an edge. Unfortunately, however, failed programs far outnumber successes, and improvement rates remain low. That's because most companies have failed to grasp a basic truth. Before people and companies can improve, they must first learn. And to do this, they need to look beyond rhetoric and high philosophy and focus on the fundamentals. Three critical issues must be addressed before a company can truly become a learning organization: meaning, management, and measurement. -
Managing Risks in Mexico
The authors warn that any company considering a move to Mexico must manage both the old risks of a developing country and the new uncertainties of an open market. Since the 1960s, U.S. companies have operated "maquiladoras," factories near the border that use Mexican labor to assemble products for export. As trade barriers come down, these factories will compete for the first time with the most successful Mexican companies, and other fierce competitors. Hiring local managers and finding local partners have helped some companies manage the inevitable risks. But depending on a company's size and core business, the risks of doing business in Mexico may outweigh the benefits. -
Made in U.S.A.: A Renaissance in Quality
In the opinion of some journalists and business leaders, Japan's preeminence in product quality is a direct consequence of lectures delivered 40 years ago in Tokyo by two Americans - W. Edwards Deming and Joseph M. Juran. According to Dr. Juran, this view is pure chauvinist nonsense. Despite the shoddiness of Japanese consumer goods before the war, the Japanese did have a quality tradition. It was just that the Japanese had never devoted engineering expertise, capital, or management attention to the quality of exportable consumer goods. The shock of losing the war changed their mind-set. In Japan, senior executives took personal charge of managing for quality and pursued quality change at such a revolutionary pace that by the mid-1970s, Japan had passed the United States in quality manufacturing. The unsung heroes of the Japanese quality revolution were Japanese managers, not American experts. Now Dr. Juran sees the beginnings of a quality revolution in the United States as global competition drives managers to focus on their nondelegable responsibilities in quality management. -
How Bell Labs Creates Star Performers
The authors believe that defining the difference between star performers and average workers is the way to increase the productivity of knowledge professionals. The authors' research at the Bell Laboratories Switching Systems Business Unit (SSBU) has revealed that the difference between stars and average workers is not IQ but the ways top performers do their jobs. Their study has led to a training program based on the strategies of star performers. Once the SSBU training program, known as the Productivity Enhancement Group, got underway, respected engineers ran the training session, which included case studies, work-related exercises, and frank discussion. Participants and managers reported substantial productivity increases in both star and average performers. -
Informal Networks: The Company Behind the Chart
A formal organizational chart won't reveal which people confer on technical matters or discuss office politics over lunch. Much of the real work in any company gets done through an informal organization, with complex networks of relationships that cross functions and divisions. According to the authors, managers can harness the power in their companies by diagramming the advice network, which reveals the people to whom others turn to get work done; the trust network, which uncovers who shares delicate information; and the communication network, which shows who talks about work-related matters. -
From Value Chain to Value Constellation: Designing Interactive Strategy
In today's fast-changing competitive environment, strategy is no longer a matter of positioning a fixed set of activities along that old industrial model, the value chain. Successful companies increasingly do not just add value, they reinvent it. The key strategic task is to reconfigure roles and relationships among a constellation of actors--suppliers, partners, customers--in order to mobilize the creation of value by new combinations of players. The authors provide three illustrations of these new rules of strategy. IKEA has blossomed into the world's largest retailer of home furnishings by redefining the relationships and organizational practices of the furniture business. Danish pharmacies and their national association have reconfigured their relations with customers, doctors, hospitals, and drug manufacturers, to enlarge their role, competencies, and profits. French public-service concessionaires have mastered the art of conducting a creative dialogue between their customers--local governments in France and around the world--and a perpetually expanding set of infrastructure competencies. -
Japan's Dark Side of Time
Time-based competition, which yielded competitive advantage in the mid-1980s, revealed its dark side for many Japanese companies in the early 1990s. In industry after industry, a strategy that was supposed to produce variety ended up producing commodities. Pushing to get a greater number of products out faster, Japanese companies created a plethora of models yet stayed in the same place competitively. Today at least one strong competitor in every Japanese industry is leveraging a powerful combination of time-based competition and customer service. The success of these companies provides at least one crucial managerial lesson: strategy, to be meaningful, must link customer needs with employee capabilities and skills. -
Effective Supply Chain Management
This is an MIT Sloan Management Review article. In a time of shortening product life cycles, complex corporate joint ventures, and stiffening requirements for customer service, it is necessary to consider the complete scope of supply chain management, from supplier of raw materials, through factories and warehouses, to demand in a store for a finished product. Hewlett-Packard has developed a framework for addressing the uncertainty that plagues the performance of suppliers, the reliability of manufacturing and transportation processes, and changing customer desires. Describes several cases in which entire product families are reevaluated in a supply chain context. The methodology presented should help others to manage their own supply chains more successfully. -
Uncovering Your Hidden Occupancy Costs
Senior managers at large companies may think that occupancy costs are too insignificant to worry about, too technical to analyze, and too fixed to control. But occupancy costs can hurt a company's earnings, share value, and overall performance. To manage occupancy costs, managers must be able to identify their components, measure their impact, understand what drives them, and develop options to change them. Four basic tools help diagnose problems: a cost history, a loss analysis, a component analysis, and a lease aging profile. Executives also must understand cost drivers like leasing, location, and layout.