Operations →
- 07 Aug 2012
- Research & Ideas
Off and Running: Professors Comment on Olympics
The most difficult challenge at The Olympics is the behind-the-scenes efforts to actually get them up and running. Is it worth it? HBS professors Stephen A. Greyser, John D. Macomber, and John T. Gourville offer insights into the business behind the games. Open for comment; 0 Comments.
- 07 Aug 2012
- Working Paper Summaries
When Supply-Chain Disruptions Matter
Disruptions to a firm's operations and supply chain can be costly to the firm and its investors. Many companies have been subjected to such disruptions, and the impact on company value varies widely. Do disruption and firm characteristics systematically influence the impact? In this paper, the authors identify factors that cause some disruptions to be more damaging to firm value than others. Insight into this issue can help managers identify exposures and target risk-mitigation efforts. Such insights will also help investors determine whether a company is exposed to more damaging disruptions. Key concepts include: The type of disruption matters in identifying the magnitude of a disruption's impact on a firm's share price. Disruptions attributed to factors within the firm or its supply chain are far more damaging than disruptions attributed to external factors. A higher rate of improvement in operating performance aggravates the impact of internal disruptions but not external disruptions. Management should be prudent about decisions to streamline operations and to reduce buffers and excess capacity. Some efficiency improvements may be attractive during periods of relative operational stability, but firms with high rates of improvement in operational performance could face distressing reductions in market value if they subsequently experience an internal disruption. Closed for comment; 0 Comments.
- 16 May 2012
- Research & Ideas
Can Decades of Military Overspending be Fixed?
Costs tend to rise in all organizations unless managers and their staffs have the motivation and skill to control them. Professor emeritus J. Ronald Fox analyzes this phenomenon during 50 years of US military overspending. Key concepts include: Costs tend to rise in all organizations unless managers and their staffs are skilled in industrial management and strongly motivated to control and reduce costs. In the US military, weapon programs can take 10 or more years to design, develop, produce, and deploy, with cost increases of 20 to 40 percent occurring frequently. More than 20 reform initiatives have been offered over the decades, but cultural barriers to change have worked against change. Open for comment; 0 Comments.
- 03 May 2012
- Working Paper Summaries
Learning by Supplying
Offshore outsourcing of manufacturing and related activities to China and other emerging economies is changing the competitive landscape in many industries. Some predict that lessons learned by emerging market firms in their role as suppliers to major branded producers will allow them to develop the capabilities necessary to become viable world-class competitors, possibly at the expense of current market leaders. In this paper Juan Alcacer and Joanne Oxley subject this "learning by supplying" hypothesis to the test, analyzing data on evolving technological and marketing capabilities of suppliers in the mobile handset industry. Contrary to some of the more alarmist commentary in the popular press, the researchers' observations suggest that the progression from trusted supplier to threatening competitor among electronics manufacturing firms is far from inevitable. Findings also point to the existence of quite distinct pathways to technological and market learning for suppliers. The divergent learning outcomes for suppliers serving operators and branded producers reinforce the idea that, while operators involve suppliers in all aspects of production, branded producers strictly limit access to customer-facing activities, thus reducing suppliers' opportunities for learning in this domain. Key concepts include: This paper provides the first systematic firm-level evidence of learning by supplying. It also contributes to developing understanding of firm boundaries and capabilities, particularly in emerging industries. Counter to received wisdom, the accumulation of technological capabilities is not a necessary or sufficient condition for successful introduction of own-brand products. There are significant switching costs and inertia in customer-supplier matches. Suppliers' choices of branded producers and operators may have a strong influence on suppliers' long-term capability development and strategic alternatives. Both the means and the motives for knowledge sharing are important in inter-firm arrangements. Suppliers working with leading branded producers may find themselves effectively locked into a subordinate role, thwarting ambitions to move up the value chain and develop as viable independent participants in the industry. Closed for comment; 0 Comments.
- 16 Apr 2012
- Research & Ideas
The Inner Workings of Corporate Headquarters
Analyzing the e-mails of some 30,000 workers, Professor Toby E. Stuart and colleague Adam M. Kleinbaum dissected the communication networks of HQ staffers at a large, multidivisional company to get a better understanding of what a corporate headquarters does, and why it does it. Closed for comment; 0 Comments.
- 22 Feb 2012
- Working Paper Summaries
The Dynamic Effects of Bundling as a Product Strategy
This paper investigates the practice of bundling as a product strategy, and identifies how consumers make choices between products and bundles in a dynamic environment. Authors Timothy Derdenger and Vineet Kumar look at the handheld video game market to study bundling in a platform setting with the goal of investigating several key questions of interest to practitioners who make product decisions: First, do consumers value bundles over and beyond their component products, indicating a synergy, which some researchers have hypothesized? Second, have there been differing opinions on whether mixed bundling, that is offering both the bundle and individual products for sale, is more effective than offering only pure bundles or even compared to offering only the products for sale? Given the prevalence of bundling in technology markets, it is critical to understand whether bundling is more effective in environments with strong network effects or with weak network effects. Key concepts include: Consumers have a negative synergy effect, that is they are willing to pay less for the bundle than for the individual console and game, leading to the question of whether introducing such bundles can increase revenue. Because bundles act similar to damaged goods, they work well in dynamically segmenting consumers and allow for purchases to occur earlier in time—the presence of bundles induces consumers to purchase earlier rather than wait. The time shifting of hardware purchases has a strong effect on software sales, since more consumers who own consoles will purchase video games over a longer time frame. Mixed bundling is especially effective compared to pure bundling, and the authors find that moving to pure bundling would reduce sales by over 20 percent. Strong network effects do not enhance the value of bundling, suggesting that bundling may instead prove more useful in settings with weak network effects. Bundling is thus a strategy that could serve as a substitute to creating stronger network effects. Closed for comment; 0 Comments.
- 06 Feb 2012
- Research & Ideas
Kodak: A Parable of American Competitiveness
When American companies shift pieces of their operations overseas, they run the risk of moving the expertise, innovation, and new growth opportunities just out of their reach as well, explains HBS Professor Willy Shih, who served as president of Eastman Kodak's digital imaging business for several years. Key concepts include: Outsourcing ends up chipping away at America's "industrial commons"—the collective R&D, engineering, and manufacturing capabilities that are crucial to new product development. If the United States wants to keep from slipping any further in its ability to compete on the industrial stage, the government must increase its support of scientific research and collaborate with the business and academic world. Open for comment; 0 Comments.
- 31 Jan 2012
- Working Paper Summaries
Observation Bias: The Impact of Demand Censoring on Newsvendor Level and Adjustment Behavior
As the fundamental model for managing inventory under demand uncertainty, the newsvendor model has received significant research attention, but behavioral issues—the focus of this paper—have been less well studied. Nils Rudi and David Drake demonstrate how different aspects of the newsvendor model, a rather complex managerial decision setting, result in a combination of behavioral deviations from the normative solution prescribed within existing literature. The results can help managers prioritize order quantity improvements based on product margins and the degree of demand feedback available in the setting that they operate in. Key concepts include: In general, changing how order quantity decisions are made preferably comes through training by building awareness of level and adjustment costs and their sources. This research provides managers with insight into how adjusting order quantity policy over time and ordering at a suboptimal level combine to erode profits. These results also provide guidance on which of sources of behavioral cost (adjustment cost and level cost) managers are likely to be most exposed to given a product's unit cost and margin and the degree of demand visibility. Closed for comment; 0 Comments.
- 23 Jan 2012
- Research & Ideas
Break Your Addiction to Service Heroes
In their new book, Uncommon Service, coauthors Frances Frei and Anne Morriss show it is possible for organizations to reduce costs while dramatically enhancing customer service. The key? Don't try to be good at everything. Interview and book excerpt from HBS Alumni Bulletin. Closed for comment; 0 Comments.
- 09 Jan 2012
- Research & Ideas
Location, Location, Location: The Strategy of Place
Business success in one geographic location doesn't necessarily follow a company to a new setting. Professor Juan Alcácer discusses the importance of taking a long-term strategic view. Key concepts include: Many companies think of geographic strategy as a short-term checkers match rather than as a long-term chess game. Establishing new locations is resource intensive, so a wrong decision can sap the energy out of an organization and cause it to lose focus. Open for comment; 0 Comments.
- 15 Nov 2011
- Working Paper Summaries
Engaging Supply Chains in Climate Change
Managing a company's risks and opportunities associated with climate change—including its physical and regulatory implications—requires focusing not only on internal operations, but also on supply chains, especially since greenhouse gas (GHG) emissions in supply chains typically exceed those from a company's own operations. But this requires obtaining climate change information from suppliers, which some are reluctant to share. In this paper, Chonnikarn (Fern) Jira and Michael W. Toffel examine proprietary data from the Carbon Disclosure Project's Supply Chain Project, a collaboration of multinational corporations asking their key suppliers to share information about their GHG emissions and their vulnerabilities and opportunities associated with climate change. Jira and Toffel find evidence that a supplier is more likely to share this information when it faces several buyers requesting the information, when its buyers appear committed to actually using this information, and when the supplier is in a relatively competitive industry and is thus particularly vulnerable to being replaced by its rivals. These findings can help managers better predict which suppliers will be more willing to share climate change information, and which might require more incentives or pressure to share this information. Key concepts include: The research identifies several factors that predict which of a company's suppliers will be more willing to share information about their vulnerabilities and opportunities associated with climate change, as well as their greenhouse gas (GHG) emissions levels and trends. Buyers are more likely to be successful in their efforts to obtain climate change information from their suppliers when this information is incorporated in supplier scorecards and other formal mechanisms, and when they collaborate with other buyers to convince suppliers that the request represents a trend rather than an idiosyncrasy. Suppliers receiving requests to share climate change information by several buyers are more likely to share it not just with their buyers but also to disclose it publicly. When buyers seek climate change information from suppliers to incorporate it in supplier scorecards, suppliers are more likely to share this information just with their buyers, but not disclose it publicly. To encourage suppliers in competitive industries to share greenhouse gas (GHG) emissions data, buyers may need to convince suppliers that the information requested would not be shared with their competitors. Closed for comment; 0 Comments.
- 03 Oct 2011
- Research & Ideas
Transforming Manufacturing Waste into Profit
Every manufacturing process leaves waste, but Assistant Professor Deishin Lee believes much of this left-behind material can be put to productive—and profitable—use. Key concepts include: The concept of "by-product synergy" consists of taking the waste stream from one production process and using it to make a new product. Productively using waste instead of trashing it can cut costs by reducing disposal fees and opening up additional revenue streams through by-product sales. The greatest returns are realized when a company widens its scope to think strategically to consider waste processing as a joint-production process. In some cases, maximizing profit might mean, paradoxically, creating more waste. Closed for comment; 0 Comments.
- 01 Aug 2011
- Research & Ideas
Immigrant Innovators: Job Stealers or Job Creators?
The H-1B visa program, which enables US employers to hire highly skilled foreign workers for three years, is "a lightning rod for a very heated debate," says Harvard Business School professor William Kerr. His latest research addresses the question of whether the program is good for innovation, and whether it impacts jobs for Americans. Key concepts include: An uptick in the number of H-1B visas given to Indian and Chinese engineers correlates with an increase in the number of US patents. The H-1B program seems to have no overall effect on the number of jobs held by American-born scientists and engineers, nor does it affect the number of patents from inventors who have Anglo-Saxon names. Closed for comment; 0 Comments.
- 19 Jul 2011
- Working Paper Summaries
Signaling to Partially Informed Investors in the Newsvendor Model
Why might firms make operational decisions that purposefully do not maximize expected profits? This model looks at the question by developing scenarios using the example of inventory management in the face of an external investor. The research was conducted by Vishal Gaur of Cornell University, Richard Lai of the University of Pennsylvania, and Ananth Raman and William Schmidt of Harvard Business School. Key concepts include: Companies face pressure from external investors that leads them to make suboptimal operations decisions. This pressure arises from three forces: a strong prior belief that firms are of a "low" type (one with a low quality investment opportunity), an inability for firms to mitigate the information asymmetry regarding their actual type, and an emphasis on short-term valuation. Surprisingly, this scenario includes instances in which a firm with a high quality investment opportunity finds it attractive to underinvest. There have been relatively few applications of signaling games in the operations management literature and this model provides an important application of signaling game theory to the problem of inventory management in the face of an external investor. The researchers find several real-life examples in which firms faced pressure to underinvest, and how the firms chose to deal with those situations. One example is the decision by French upscale beauty brand Clarins Group to go private in 2008. The move relieved management of shareholder pressure for short-term profits and allowed them to pursue longer-term opportunities that eventually paid off. The model can be effectively applied regardless of whether the decision is about inventory or some other type of capacity investment, including plant expansions, capital expenditures, and contracting for production inputs. Closed for comment; 0 Comments.
- 08 Jul 2011
- Working Paper Summaries
Delegation in Multi-Establishment Firms: Adaptation vs. Coordination in I.T. Purchasing Authority
Scholars have intensely studied the similarities and differences between organizations that are decentralized in their decision making versus those favoring more command-and-control central authority. What leads to a firm following a decentralized approach, and can that approach be predicted? Professor Kristina McElheran advances previous, largely theoretical, research on this subject to explore in the real world the economic determinants affecting how IT purchasing authority in 3,000 multi-establishment companies was allocated between central headquarters and outlying establishments. Key concepts include: Theoretically, organizations are expected to delegate authority when local choices are most important to the overall value of the firm, when local information advantages are significant, or when the cost of processing firm-wide information at the center grows too great. Centralization is predicted when the value of firm-wide coordination dominates these adaptation and information-processing concerns. The research confirmed most of those assumptions, but surprisingly, and contrary to leading models, found that the larger the size of the firm the less likely it was to delegate IT purchasing authority. Contrary evidence was also found in firms that produce a great variety of products and in units that operate outside the mainstream of the parent. These findings provide some of the first empirical evidence supporting prominent team theory models of organizational design, where demands for adaptation and coordination conflict within the organization and determine decision rights based on their relative importance as well as the information-processing and communication costs within the firm. Closed for comment; 0 Comments.
- 07 Jun 2011
- Working Paper Summaries
The Institutional Logic of Great Global Firms
In practice, many large firms are now realizing the importance of humanism in corporate management. But in academia, much of management theory is still stuck on the ideas of early industrialization - focusing solely on the idea that the only real value is financial value. In this paper, Rosabeth Moss Kanter discusses how social logic guides the practices of many high-performing companies. Kanter suggests that such successful practices should provoke the creation of new economic theory, which will in turn provoke other firms to take note. She puts forth several propositions to make the case. Key concepts include: Regarding the firm as a social institution is a buffer against uncertainty and change, and generates a longer-term perspective than merely considering financial concerns. Articulation and transmission of social values can evoke positive emotions, stimulate intrinsic motivation, and propel self- or peer-regulation among a firm's employees. Embracing globalization requires a concern for social issues that extend beyond the boundaries of the firm. Closed for comment; 0 Comments.
- 31 May 2011
- Research & Ideas
Japan Disaster Shakes Up Supply-Chain Strategies
The recent natural disaster in Japan brought to light the fragile nature of the global supply chain. Professor Willy Shih discusses how companies should be thinking about their supply-chain strategy now. Closed for comment; 0 Comments.
- 25 May 2011
- HBS Case
QuikTrip’s Investment in Retail Employees Pays Off
Instead of treating low-paid staffers as commodities, a new breed of retailers such as QuikTrip assigns them more responsibility and invests in their development, says professor Zeynep Ton. The result? Happy customers and even happier employees. Key concepts include: Unusual for a retailer, QuikTrip offers its operational employees above-average wages, job security, and significant benefits. By using operational efficiencies and standardization, QuikTrip reduces complexity to create higher employee productivity and fewer errors. By investing in employees and giving them more responsibility, QuikTrip enjoys a competitive advantage in service and benefits from continuous process improvement. Closed for comment; 0 Comments.
- 16 May 2011
- Research & Ideas
What Loyalty? High-End Customers are First to Flee
Companies offering top-drawer customer service might have a nasty surprise awaiting them when a new competitor comes to town. Their best customers might be the first to defect. Research by Harvard Business School's Ryan W. Buell, Dennis Campbell, and Frances X. Frei. Key concepts include: Companies that offer high levels of customer service can't expect too much loyalty if a new competitor offers even better service. High-end businesses must avoid complacency and continue to proactively increase relative service levels when they're faced with even the potential threat of increased service competition. Even though high-end customers can be fickle, a company that sustains a superior service position in its local market can attract and retain customers who are more valuable over time. Firms rated lower in service quality are more or less immune from the high-end challenger. Closed for comment; 0 Comments.
Can We Bring Back the “Industrial Commons” for Manufacturing?
Summing Up: Does the US have the political will or educational ability to remake its manufacturing sector on the back of an 'industrial commons?' Professor Jim Heskett's readers are dubious.