Articles

Ask any executive to describe how their company interacts with others in their supply chain, and it isn't long before words such as "marriage," "partnership" or "relationship" come up. However, if there is one truism at all about relationships today, it is that of constant communication. Yet in some of the most "strategic" supplier relationships, this simple concept is almost never deployed. The literature on supply chain management offers a range of metrics for suppliers, including "hard" metrics such as cost and quality and "soft" metrics such as service and innovation and the need for sophisticated models to evaluate supplier performance. But where is the discussion of holding the buyer company accountable for its end of the bargain? In very few cases do buyers adhere to supply chain metrics for themselves. Nonetheless, buyers have as much influence as suppliers on the success or failure of a supply chain relationship. Some companies are addressing this notion with mechanisms that emphasize dual accountability. Dual accountability requires a fundamental shift in the psychology of buyer-supplier relationships. Not only is tangible accountability demanded from both partners, but suppliers and buyers also must show greater communication, openness and trust. The article explores the genesis of the dual accountability concept, outlines the benefits -- which range from decreased risk to improved reputation to lower total cost -- and illustrates how dual accountability can be profitably applied by suppliers and buyers working together. One means of achieving dual accountability is the Two-Way Scorecard, a performance tool that measures supplier and buyer results across a balanced set of categories and, within those categories, tailors metrics for each party. As such, it is a concrete means of embedding cooperation in the supplier-buyer relationship. Experiences with implementation of the Two-Way Scorecard and other methods of dual accountability are discussed for Johnson & Johnson Group of Consumer Companies and other corporations. The article offers keys to implementation of dual accountability and discusses the crucial role of technology.

Two Unisys studies indicate there's a wiser use of your IT resources.

For many years now, companies seeking to deliver higher business performance by harnessing IT have focused on alignment -- the degree to which the IT group understands the priorities of the business and expends its resources, pursues projects and provides information consistent with them. In practical terms, that means there must be shared ownership and shared governance of IT projects. However, the authors contend that their research -- a survey of more than 500 senior business and technology executives worldwide, followed up with in-depth interviews of 30 CIOs -- reveals a troubling pattern: Even at companies that were focused on alignment, business performance dependent on IT sometimes went sideways, or even declined. That's because underperforming capabilities are often rooted not just in misalignment but in the complexity of systems, applications and other infrastructure. The complexity doesn't magically disappear just because an IT organization learns to focus on aligned projects rather than less aligned ones. On the contrary, the authors say, in some situations it can actually get worse. Costs rise, delays mount and the fragmentation makes it difficult for managers to coordinate across business units. The survey also showed that almost three-quarters of respondents are mired in the "maintenance zone." IT at these companies is generally underperforming, undervalued and kept largely separate from a company's core business functions. Corporate management budgets the amounts necessary to keep the systems running, but IT doesn't offer enough added value to the business and often isn't expected to. Drawing on the experiences of Charles Schwab & Co., Selective Insurance Group, De Beers, First Data Corp. and National City, among others, the authors identify a group of best practices that constitute "IT-enabled growth." The companies that achieve the highest growth at a low cost manage complexity down, source IT staffing and software wherever it makes the most sense and create start-to-finish accountability connected to business results. Then, and only then, the best performers tightly align their entire IT organization to the strategic objectives of the overall business, using governance principles that cross organizational lines and making business executives responsible for key IT initiatives.

To understand how breakthroughs in creativity occur, managers must understand how most collaborations work.

How can companies design products and product lines to maximize profits? Out of all the potential configurations available to them, how should they decide which ones to offer? The authors have developed a framework for balancing the costs of developing and offering a rich line of products and services against customer demand for additional choice. Their methodology helps managers make informed decisions about which features to include in the product; which variations to include in a product line; and how the offerings should evolve with technology and competition. Using examples from the music, software and media industries and citing companies including Apple, Dell, Microsoft, The New York Times, and ESPN, the authors describe five basic types of product offerings: the _ la carte offering, the specialization offering, the all-in-one offering, the basic/premium offering, and the have-it-your-way offering. By highlighting how costs influence product design, they depart from the standard product-success metrics, such as revenue and market share, which are the main focus of most of the work on product bundling. The authors note that the decision to offer a product and how it is designed generally affects both the fixed costs and the marginal costs. They argue that product architects need to expand their definition of fixed and marginal costs beyond those that they typically track and account for to cover costs across the entire supply chain. Although some of these costs may be hard to quantify, they are often too significant to ignore.

Recent evidence shows that some discounts and sales can be detrimental.

The expectations aren't being met.

How are companies approaching intellectual property strategy, and what are successful strategies for managing IP? To explore such questions, the author and his research team conducted a detailed survey of senior IP executives at 34 companies. The survey findings indicate that IP has become an area of focus for the executive committee and the board at many companies. What's more, the study found that top executives' involvement in IP strategy was correlated with better IP performance. Analysis of the survey data suggests another intriguing point: Some companies are now using an approach to IP strategy that the author calls "full-fledged IP protection." This "full-fledged IP protection" strategy includes seeking technical and nontechnical IP protection for even minor inventions, in an attempt to "pack" technology spaces with IP claims. This practice differs from a classic IP strategy of using IP to support core research and development. At least in some industries, this change in IP use may, the author suggests, be causing the nature of IP competition to shift from the world of "real" products to that of "potential" products. The study also found that, in the companies surveyed, IP-related tasks often entail cooperation among staff from different functional areas within a company, such as product designers and patent and trademark attorneys. Having clear-cut rules about IP at the functional level was associated with better IP performance in the companies surveyed, as was having corporate management devote time to listening to the company's most senior IP officers. On the other hand, failure to sell or license out IP when circumstances facilitated or necessitated such a trade was associated with significantly lower IP performance. In addition to the survey data, the author conducted interviews with senior executives from two of the participating companies: Lars Rebien Sorensen, the CEO of Novo Nordisk A/S, a healthcare company with a specialty in diabetes care; and Dr. Gottlieb Keller, a member of the corporate executive committee of the healthcare company F. Hoffmann- La Roche Ltd. In these interviews, Sorensen and Keller discussed the role of corporate leaders in IP strategy at their respective companies.

A new planning process, tested at established companies, puts e-business into perspective and helps make it manageable.

Should executives make decisions based on what their "gut" tells them? Lately that idea has lost some favor, as technology's ability to accumulate and analyze data has rapidly increased -- supplanting, according to some accounts, the high-level manager's need to draw heavily on intuition. But intuition needs some rescuing from its detractors, and the place to start is by clarifying what it really is, and how it should be developed. Intuition is not a magical sixth sense or a paranormal process; nor does it signify the opposite of reason or random and whimsical decision making. Rather, intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning, and on facts, patterns, concepts, procedures and abstractions stored in one's head. In this article, the authors draw on examples from the worlds of chess, neuroscience and business -- especially Austria's KTM Sportmotorcycle AG -- to show that intuitive decision making should not be prematurely buried. They point out that although the study of intuition has not been extensively explored as a part of management science, studies reveal that several ingredients are critical to intuition's development: years of domain-specific experience; the cultivation of personal and professional networks; the development of emotional intelligence; a tolerance for mistakes; a healthy sense of curiosity; and a sense of intuition's limits. Companies should, of course, continue to exploit their abilities to mine data as a means of obtaining a competitive edge. But they shouldn't overlook the continuing value of experienced executives who can draw on their intuition to make decisions when the numbers yield a question rather than an answer: Now what do we do?