Articles

Service companies shouldn’t worry about teaching their customers too much.

In business and in personal life, people look for easy solutions to solve complex problems. Unfortunately, most quick fixes don't work because the problem is rarely fed by a single cause. If you want to confront persistent problems, the authors argue, you need to apply several different kinds of influence strategies simultaneously. Their approach is based on three separate studies -- two examining organizational issues within companies and a third exploring destructive individual behaviors such as smoking, overeating and excessive alcohol use. The authors document the success of this multipronged approach across different problem domains (from entrenched cultural issues in companies to leader-led change initiatives to stubborn personal challenges). They found that those who employed only one influence strategy (for example, managers offered training, redesigned the organization or held a high-visibility retreat) were far less likely to achieve significant results than those who used four or more sources of influence in combination. The same went for those tackling personal challenges. Many had attempted to alter their behavior by using a single approach (joining a gym, following prescriptions in a book or attending Alcoholics Anonymous meetings) -- but nearly all had failed. Using examples from such companies as AT&;T, Lockheed Martin, OGE Energy and Spectrum Health Systems, the authors describe six influence strategies. The first two, personal motivation and ability, relate to sources of influence within individuals that determine their behavioral choices. The next two, social motivation and ability, relate to how other people affect an individual's choices. And the final two, structural motivation and ability, encompass the role of nonhuman factors, such as compensation systems, the role of physical proximity on behavior, and technology. "Too often," the authors argue, "[leaders] bet on a single source of influence rather than tapping a diverse arsenal of strategies. We have learned that the main variable in success or failure is not which sources of influence leaders choose. By far the more important factor is how many."

Providing support, training and opportunities from day one is critical.

The way we think about strategy is woefully incomplete, the authors contend. The traditional idea of focusing on the positioning of products (or services) underplays much of what most would agree makes a company truly competitive. Not only does it give short shrift to what a company knows, it ignores completely the fact that in today’s dynamic economy, organizations have to continually reinvent who they are and what they do in large and small ways. And one important means of doing so is through innovation. An effective strategy, then, is comprised of three key components: product/market, knowledge and innovation positions. But even if a company masters the three strategic positions of product/market, knowledge and innovation independently, it is still at risk. Only when all three positions are aligned and mutually reinforcing can a strategy succeed. In adopting the notion of alignment, organizations need to view each position & #8212; product/market, knowledge and innovation & #8212; as aspects of an organization’s overall strategy. Creating an integrated strategy thus requires focusing not on each position separately, but rather on all three positions simultaneously. The authors introduce the notion of competing based not only on what an organization makes or the service it provides, but on what it knows and how it innovates. Each aspect represents a competitive position that must be evaluated relative to the capabilities of the organization and to others in the marketplace battling for the same space. And each component must not only be aligned with the other two, but it needs to be adjusted as circumstances warrant. When done correctly, organizations & #8212; such as Buckman Laboratories, which is profiled here & #8212; thrive. When done badly, the company can suffer, and perhaps fatally so, as the history of Polaroid points out.

The role of procurement within global companies has changed dramatically over the past 25 years from that of simply buying goods and services to overseeing an integrated set of management functions. This brings new challenges and opportunities to procurement. Offshoring and the increased emphasis on specialization and fragmentation of production enhance the strategic character of procurement decisions. Increasingly, procurement decisions have become intertwined with strategic management in general. In this article, the authors discuss the changes in procurement from the perspective of transaction cost economics. They separate transaction costs into “soft” and “hard” costs and differentiate between the internal and external factors that affect these costs. In making procurement decisions, the authors argue, managers need to consider the full range of cost elements. In addition to traditional transaction costs such as transport costs and tariffs, managers need to recognize such elements as cultural and legal differences, government regulation, social preferences, environmental issues, political stability and risks involved in unethical business behavior. The authors argue that knowing the risks and opportunities of the different exposures is a critical management competence. Although management decisions originate in many different parts of the company, procurement managers need to keep a close eye on the various cost exposures and flag concerns as they arise. Procurement, therefore, will need to become more closely connected with strategic decisions throughout the company. This broader view represents a major extension of the concept of total cost of ownership in procurement decisions. Global sourcing creates many new opportunities for value creation, which well-run companies must learn to take advantage of.

Receiving information more frequently isn’t always helpful.

Companies with better environmental risk management have a lower cost of capital.

Airline companies may be the businesses everyone fantasizes the most about trying to fix. And just now, the fixing would require more work than usual. A new round of mergers, a new climb in costs and a new wave of customer dissatisfaction all pose fresh challenges. Add to that an industry work force whose wages have plummeted by $15 billion since 2001 and whose morale is at a low ebb plus an air traffic infrastructure that experts as well as customers realize is overstressed, and the overall industry repair problem can seem impossible. Thomas A. Kochan, along with Greg J. Bamber, Jody Hoffer Gittell and Andrew von Nordenflycht, takes up the task in the forthcoming book Up in the Air: How the Airlines Can Improve Performance by Engaging Their Employees (Cornell University Press, January 2009). In this interview with MIT SMR editor Michael S. Hopkins, Kochan, who is a professor of management at MIT and a leading analyst of workplace relations, identifies the need for totally altering employee/employer relationships as the critical opportunity and threat faced by the airline industry. Kochan explores the airline industry models that have worked (and are working) along with those that haven’t. And he suggests that the airline industry isn’t alone in encountering fundamental choices about how collaborative their workplaces will become. One of the keys, Kochan explains, is employee engagement and empowerment of service employees on the front lines.

There are 12 million reasons why Marten Mickos isn’t afraid that his rivals in the database software industry will ever overtake him. “Let them try,” he says brazenly of his competitors. “Our secret is in the way we operate our culture, and I’m convinced others cannot imitate that.” MySQL AB, the business Mickos has built since 2001, has committed itself to “open-source” innovation since its founding, giving 12 million coders & #8212; who typically receive no compensation & #8212; permission to debug, add features or otherwise modify the product before redistributing it. Mickos, now a senior vice president at Sun Microsystems Inc. after it acquired MySQL AB for $1 billion, talks with Josh Hyatt, freely sharing his ideas about why this Internet-age version of a barn raising produces superior innovation and the strengths and limitations of in-house innovation. He also discusses how open-source innovation isn’t for every company and how many organizations fail to engage the community and thus are forced to fold their open-source innovation projects. Mickos discusses engaging software developers who are so devoted to a process they seldom get paid for, and how these contributors are even willing to spend their own money to be a part of the process. Finally, he talks about whether dangers exist in open-source innovation, including potential damage to the code from malicious entities, competitors stealing code or ideas, and whether people will perceive this style of innovation as just a passing fad.

New technology tools are offering insights into the power of ancient forms of human communication that Pentland calls honest signals. In this excerpt from his new book Honest Signals: How They Shape Our World (MIT Press, October 2008), Pentland describes how he and other researchers have been using a device called a sociometer to gain a new perspective on human behavior. (The sociometer is a wearable badgelike device equipped with sensors; it measures factors such as body movement and the amount of time people spend talking face-to-face.) Studies using data from sociometers show that certain types of subtle social signals affect outcomes significantly in a variety of settings, from business plan presentations to salary negotiations. Pentland focuses on four types of honest signals: influence, mimicry, activity and consistency. Influence, in this context, refers to the degree to which one person’s speech patterns in a conversation influence the other party’s. Mimicry is the extent to which one person copies another’s gestures and movements & #8212; such as head nodding or smiles & #8212; during an interaction. The activity variable reflects humans’ tendency to show increased activity levels when interested, and consistency in speech or movement may be a sign of focus, as well as of less openness to others’ influence. Such social signals are surprisingly powerful. For example, Pentland describes a study conducted by researchers Jeremy Bailenson and Nick Yee at Stanford University, in which students were shown a three-minute video encouraging them to carry their student identification card. Some students were shown a standard animated video, whereas others saw a video in which the animated figure mimicked their gestures four seconds later. Simply adding the mimicry feature caused the sales pitch for the ID card to be 20% more effective. Understanding the power of these nonverbal forms of communication can enable us to better design organizations, Pentland concludes. However, it is an open question whether we will use the new insights this type of research provides for good or for ill. Article 50118. The MIT SMR article was excerpted and adapted from Honest Signals: How They Shape Our World by Alex (Sandy) Pentland, published October 2008 by The MIT Press. Copyright in the name of The Massachusetts Institute of Technology. All rights reserved.