Articles

Renowned management thinker Henry Mintzberg and business professor Frances Westley zero in on three ways the best managers make decisions. To hone their decision-making skills, business leaders can start by admitting that real-world decisions are not always made through logical steps -- and that often they shouldn't be. Most managers believe they make decisions by using analysis. Define the problem, they say, diagnose its causes, design possible solutions, choose and, finally, implement the choice. But, in reality, they may make their best decisions in some other way -- for example, after a flash of intuition or by trying out several things and keeping what works. In fact, the authors show that a focus on "thinking first" before choosing may interfere with a deep understanding of the issues dividing people and prevent a good decision. A decision-making approach the authors call "seeing first" -- literally creating a picture with others in order to see everyone's concerns -- can surface differences better than analysis and can force a genuine consensus. "Doing first" -- going ahead with an action in order to learn -- is the third approach. Each route is best under particular circumstances. "Thinking first" works best when the issue is clear, data is reliable, the context is structured, thoughts can be pinned down and discipline can be applied -- for example, in an established production process. "Seeing first" works best when many elements must be combined into creative solutions, commitment to those solutions is key and communication across boundaries is essential -- for example, in new-product development. "Doing first" works best when the situation is novel and confusing, when complicated specifications might get in the way and a few simple relationship rules could help people move forward -- for example, when companies face a disruptive technology. If managers learn when to apply each approach, they can increase their effectiveness and give their companies the competitive edge required in uncertain times.

To learn about creating change during a crisis, how about studying a real crisis in an industry where crises can have the broadest impact? That's what MIT Sloan School of Management professor John Carroll and doctoral candidate Sachi Hatakenaka did. Their multiple-year study of Millstone Nuclear Power Station in Connecticut offers practical lessons for managers who may find themselves trying to implement change in a high-pressure environment. When Millstone's CEO for nuclear power arrived to help the organization find its way out of a crisis, he encountered a deeply fractured culture. To propel the organization in the right direction required an amalgam of powerful forces: an unprecedented regulatory fiat from the U.S. Nuclear Regulatory Commission, mandated third-party oversight but, above all, leaders at every level who were open to learning. The resolution of the crisis confirms the precept that organizations are more likely to emerge stronger if leaders avoid oversimplifying the situation and instead allow a gradual understanding to emerge and be tested in action. The authors guide readers though the key events, explaining how each generated useful insights. Though practical, the ideas are not formulaic. One of the main lessons is that change is an evolving process. Like other companies that have emerged from crisis, Millstone still faced challenges. Moreover, lingering mistrust and feelings of anger and hurt can surface in new situations. However, the organization had developed better ways to recognize and deal with the signs of trouble. The defusing of potential crises can be a springboard for change. In any industry that is facing rapid change, ambiguous internal and external signals, alienation and mistrust, or dysfunctional human relationships, managers face an array of challenges. But as Millstone shows, leaders can arise throughout an organization and can be changed by the journey out of crisis -- a journey that, like learning itself, never ends.

Many companies find that it's not enough to "increase customer satisfaction" or "raise product quality." They must know conclusively how such departmental pursuits affect the profitability of the company as a whole. Typically, this requires some kind of profitability modeling, in which links are established between specific actions and the resulting profit to the organization. Although the concept is not new, profitability modeling, to date, has been limited to individual departments or business functions. Although firms develop models that are more comprehensive and cross-functional, these efforts are sporadic, relatively expensive and time-consuming. More companies might attempt this kind of modeling if they had an explicit framework and procedure for establishing links to guide them. Marc Epstein and Robert Westbrook, professors at Rice University's Jones Graduate School of Management, have studied companies' efforts to develop models that link action to profit and have devised a general model that managers can use to link any departmental action to overall corporate profitability. By customizing their general model, firms can more quickly arrive at specific links between an action and its impact on profitability. The action-profit linkage model helps managers identify and measure key drivers of business success and profit, develop causal links among them and estimate the impact of actions to bring them about. This process forces managers to narrow their strategies to the areas with the highest payoff. Attention shifts from a preoccupation with individual performance metrics to an awareness of how those metrics work as a system and how they lead to increased profit and more shareholder value. The process of getting to the final model is valuable because managers gain tremendous insight into how their organizations' various metrics interrelate. The model also fosters a common management focus on the variables that matter most in achieving success. More importantly, it helps develop disciplined thinking about profit drivers by tracing them through the customer, product offering and ultimately the company's actions. Focusing the management team on a common thought process is among the most important things a CEO can do to improve management decision making in both strategy and its implementation.

As bricks-and-mortar companies battle Internet upstarts, some succeed in harnessing the Web to better serve consumers, generate profits and increase market share. Meanwhile others never get their e-business initiatives off the ground. What differentiates the "leaders" from the "laggards"? Leslie Willcocks, who is professor of information management and e-business at the Warwick Business School, University of Warwick, United Kingdom, and Robert Plant, an associate professor of computer information systems at the University of Miami, conducted a year-long research project and interviewed more than 130 executives in 58 established business-to-consumer (B2C) corporations spanning three continents and a range of industries. They have created a new framework for e-business, which explains strategies that have worked for traditional companies. The framework shows that "laggard" organizations typically lack a clear business model to govern their use of Web technologies, becoming mired in debates about the relevance of Web technology itself or spending vast sums on brand building without delivering on the promises their brand conveys. "Leading" organizations tie e-business to their bottom lines by following a distinctive path. Although these companies may start with the idea of achieving technology leadership, they shift attention to brand building and/or customer service and concentrate on generating profitable market share and differentiating the company from competitors. These e-business leaders share certain characteristics: They integrate Web technologies into the core business; they use information gathered via the Internet to gain insight into their customers; they augment their service; they focus on customers and marketing; and they adapt to the constantly changing Internet marketplace. All have identified ways of using Web technologies for competitive advantage and seek ways to sustain that advantage by focusing on brand, size and customer relationships as well as differentiation. Increasingly, companies trying to enter the field of B2C e-business will discover what leading organizations already know: E-infrastructure is a boardroom investment and ownership issue that is central to executing sustainable, anticipatory performance.

Recent studies suggest that the Internet's impact on pricing has been less dramatic than feared.

The gulf between visionary early adopters of new technologies and the pragmatists who make up the mainstream technology market was made famous by Geoffrey A. Moore in his book "Crossing the Chasm." But strategists who focus on that chasm alone will miss others that loom ahead and present significant challenges. In "Six Chasms in Need of Crossing," Babson College associate professor of marketing Anirudh Dhebar calls attention to the other gaps that business leaders must bridge if they are to implement new technology and achieve long-term success in the marketplace. Dhebar argues that changing business models can be as difficult as crossing the chasm between early and mainstream markets. This may also be true when moving from an existing technology to one that is improved but incompatible -- or from an existing technology to one that is not initially seen by current customers as an improvement (what management educator and author Clayton Christensen calls a disruptive technology). Transitioning from a product created as an expedient, short-term fix for a customer problem to a product designed to be a strategic, long-term solution is another potential imperative However, it is the chasm between established ways of thinking and fundamentally new business paradigms that is perhaps the most pervasive. Dhebar encourages managers and academics alike to take account of the broader spectrum of chasms, and he provides guidelines for crossing the chasms impeding technological progress and marketplace success. The guidelines include encouraging imagination in order to see and embrace alternatives to current realities, giving new ideas a fair hearing, working with suppliers of complementary products to build the infrastructure to support new kinds of products -- and developing markets that value the performance and value proposition of disruptive technologies.

Strategies to tackle some of the overlooked costs of outsourcing.

Is mass customization really the best way to deliver variety to consumers? Today, mass-customized products seem to be everywhere. Levi-Strauss sells custom-fitted jeans. Andersen Windows can build a window to fit any house. Consumers can get their names printed, sewn or embossed on nearly anything. But managers beware: Do not be seduced by the gaudy banner of mass customization. There are several ways to deliver variety, and mass customization may not always be the best. So argues Paul Zipkin, professor of business at Duke University's Fuqua School of Business. Mass customization actually requires unique operational capabilities. Several elements have to work well -- individually and together -- to ensure that mass customization is a plausible business strategy. Those key capabilities are elicitation (a mechanism to interact with the customer and obtain specific information); process flexibility (production technology that fabricates the product according to the information); and logistics (subsequent processing stages and distribution that are able to maintain the identity of each item and deliver the right one to the right customer). Not all companies -- or industries -- will be able to master these capabilities. Moreover, demand for customization is limited and likely to remain so. Current technology can support large-scale customization only for a few attributes of a few products. For mass customization to deliver real value, people must have sharply differing preferences for certain attributes. This signals opportunities for industries such as apparel, sports equipment and building accessories. But it also means that mass customization is not for every company. Managers should seek opportunities to add value through variety, Zipkin advises. But before committing their companies to a mass-customization strategy, they need to carefully analyze the technology, demand and costs and benefits.