Category Archives: Operational Strategy

More than one way to be multinational

Global expansion is a core goal of many major corporations, but some are beginning to rewrite the multinational rules of the road. With 300 locations around the world, General Electric (GE) is one such pathfinder, recently rethinking which functions should be regionalized and which should remain local.

Global Operations Executive Leader, Oleg Bodiul, SF ’13 took on the vast transformation role as part of a GE leadership team tasked with creating a global shared-services organization that would centralize many of the company’s key functions, including accounting, finance, and commercial operations.

Among the top 100 firms in the world, GE is a digital-industrial player providing software-defined machines and solutions for markets ranging from aviation, power generation, and oil and gas to renewables, healthcare, and financial services. “Historically, functions like accounting and order management were performed in hundreds of locations around the globe. The objective was to centralize, where possible, into a few locations to leverage scale and deliver better outcomes for our customers, employees, and shareholders.”

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Impossible turnaround? Keep that flywheel spinning.

“No smart business strategist would start a business in the small diesel engine marketplace,” says Tana Utley, SF ’07. But that’s exactly the project she was charged with turning around at Caterpillar, Inc. recently. Utley is vice president with responsibility for the large power systems division at Caterpillar, one of the world’s leading engine manufacturers.

What’s so bad about small diesel engines? The list is long. Small diesel engines are being made all over the world and the competition is stiff as companies in emerging markets try to gain a toehold by keeping their prices at rock bottom. “It’s almost impossible for us to sell our equipment at prices that low,” Utley says. “On top of that, there’s an overcapacity of small diesel engines in the global marketplace, bringing the market price even lower.” Getting out of the business was not an option, however. Caterpillar needs those small engines; they power a variety of the company’s machines, generator sets, and some external applications.Continue reading

In “The Conversational Firm,” MIT Sloan’s Catherine Turco Looks at Motivating a Millennial Workforce

Is it possible for a company to shed some of the key trappings of traditional bureaucracy and still be competitive in the marketplace? Catherine J. Turco, an associate professor of work and organization studies at MIT Sloan, went undercover for ten months at a fast-growing social media marketing company to find the answer.

In her illuminating new book The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media, Turco takes an in-depth look at a young enterprise called TechCo, a pseudonym she uses to protect the identity of company and employees. She finds that TechCo has developed a deeply engaged workforce by promoting open company-wide dialogue. That sense of freedom, she notes, has contributed to a culture that is invested, innovative, and adaptable to change. She calls this new style of company “the conversational firm.”

One of the principal tools of the conversational firm, Turco reports, is social media. TechCo provides its employees—who are primarily millennials—with social media vehicles so that they can offer input into major business issues. Because millennials relate to the world through social media, she says, it only makes sense that they would feel comfortable relying on apps to register ideas and opinions in the workplace.

In The Conversational Firm, Turco leverages her interviews with 76 employees, her attendance at hundreds of company meetings, and insights from cultural and economic sociology, organizational theory, economics, technology studies, and anthropology, to portray a company that has found a way to be open without relinquishing control.

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How much is a living wage? MIT Sloan faculty experts weigh in

Arguably, a living wage is the goal of all civilized societies—that is, the amount of money a person needs to maintain a basic standard of living. But what exactly is a sufficient wage? And will increasing the minimum wage create a knee-jerk effect among employers to hit the brakes on hiring?

At present, the hourly minimum wage in the United States is $7.25, and the Democratic Party platform is advocating more than doubling that rate to $15. MIT Sloan asked three of the School’s top economic and labor experts to weigh in on the idea of raising the minimum wage. Here’s what they had to say:

ErikErik Brynjolfsson
MIT Sloan Professor of Information Technology
Director, MIT Initiative on the Digital Economy

Having more people working and earning good wages is good not just for the people we help, but for all of us: People who work are more engaged in community, creating a virtuous cycle. If we do these three things, we’ll be on track to becoming a richer, more engaged, and more dynamic nation.

#1 Expand the Earned Income Tax Credit
Suppose that someone is earning $12 per hour, and we’d like them to earn $15. With an Earned Income Tax Credit (EITC) they’d get an additional $3 per hour worked from the government. The money to pay for this would come from general tax revenue including income taxes, or ideally increased taxes on carbon dioxide emissions, congestion, and other things we’d like to discourage.

#2 Reinvent Education
The wage gap between the most and least educated workers has grown enormously since the 1980s, and better-educated workers also have much lower unemployment rates and higher rates of workforce participation. But it’s not enough to simply do more of the same. We need to reinvent education for an age where machines are increasingly doing cognitive tasks—the second machine age. That means a greater emphasis on skills like teamwork, project management, persuasion, leadership, coaching, and creativity.

#3 Reduce unnecessary occupational licensing
Over 25 percent of workers now require a license to do their jobs, a five-fold increase since the 1950s. While some licenses are important for safety or other reasons, research has shown that excessive licensing requirements reduce employment and mobility.

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Keep your eyes on the prize—your priorities

Picture1How to measure success? It’s how close you map your life to your priorities, says MIT Sloan Professor Thomas W. Malone. It might sound simple, but Malone asserts that few of us live by our priorities. “The success of the vast majority of people in business—and in life—can be measured by whether they worked on the things that mattered to them,” he says.

Malone is the founding director of the MIT Center for Collective Intelligence and its predecessor, the MIT Center for Coordination Science. He was also one of the two founding co-directors of the pioneering MIT initiative Inventing the Organizations of the 21st Century. The five-year project explored emerging ways of working, and Malone and his team documented the results in the eponymous book, Inventing the Organizations of the 21st Century.

One of the best strategies for success, Malone says, is knowing when to say no. “Think of strategy as the prioritization of efforts. So often, on both a personal and an organizational level, we tend to do what’s easy, what presents itself, rather than what we really consider a priority. We have limited time and resources and must come to terms with those limitations. We need to continually make sure that our time and resources are focused on the things that contribute to the outcome we are working toward.”

Malone recommends making a daily list, prioritizing that list, and sticking to that sequence throughout the day. When making the list, he says, keep in mind your key goals and map the list to the goals. Thinking strategically sometimes forces you to leave behind busywork that makes you feel productive but does not advance your mission.

Make a mission statement to live by

The human tendency, Malone notes, is to default to reactive behaviors that cause us to lose sight of priorities, and he confesses to being as guilty as the rest of us on that score. He says he recently realized he had been planning for years to write a book about his work on collective intelligence, but the rest of his life kept getting in the way. He then put the project at the top of his priority list, wrote a successful proposal to a publisher, and is now working on the book, tentatively titled The Age of Collective Intelligence.

Of course, many of us have a tough time finding the bandwidth to think about our priorities, but the exercise is not a luxury, Malone says. “Take time out. Go sit on a park bench by yourself to make that list of priorities—especially if you have several competing goals that require careful consideration. It’s definitely useful to take an hour or two away from day-to-day demands every now and then to think about strategic questions on a higher level and develop a mission statement for your job—and your life. Mission statements that you live and work by keep you on track.”

Learn about Inventing the Organizations of the 21st Century.

Find out more about the MIT Center for Collective Intelligence.

 

Tapping a world of collective intelligence

otto-scharmerTerrorism. Economic crises. Poverty. “We probably have never lived in a time when strategic thinking was more crucial,” says MIT Sloan lecturer Otto Scharmer. “Yet, the currency and quality of strategic thinking is actually plummeting. It’s an interesting—and frightening—contradiction.”

Scharmer is cofounder of the Presencing Institute, a revolutionary action-research community that creates holding spaces for strategic thinking around profound societal renewal. He believes that a key reason that leaders aren’t taking the time for conventional strategy work is because they often can’t wrap their heads around such a vague concept. “What exactly is strategic thinking, anyway?”

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Execution-style thinking can be the death of progress

Execute, execute, execute. Managers in large organizations are promoted for their ability to execute, which is useful when scaling up a successful business model. The execution mindset becomes an obstacle, however, when firms need to pivot to a new model. The search for insight, says Duncan Simester, NTU Professor of Marketing at MIT Sloan, starts in the weeds.

Duncan Simester “Although strategy asks big questions,” Simester believes, “the answers can be found by focusing on specific problems and concrete examples.” He uses the oil-drilling business to illustrate his point. In the past, it was common practice for a company to purchase rights to an oil field and start drilling multiple wells. The dilemma: drilling is costly and only one in a dozen or so wells will yield oil under that scenario. The more strategic oil companies are now thinking harder about where to drill before they begin—a practice that is bringing them closer to their goal of finding oil in half their wells.

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Minimum wages = maximum profits? Zeynep Ton says no.

Almost one in four working adults in America has a job that pays less than a living wage.

In large part, the situation persists because the corporate marketplace has long labored under the conventional wisdom that paying the lowest echelon of workers minimum wages is a bottom-line necessity. But is that economic truth or myth? Are low wages, minimal benefits, and inhumane schedules the most prudent way to keep costs down and prices low?

ZeynepTon.mitsloan.mit.eduAbsolutely not, says MIT Sloan associate professor Zeynep Ton. In her influential book The Good Jobs Strategy Ton contends that stranding employees in low-paying dead-end jobs is an organization’s choice, not a necessity—even in low-revenue settings. She has dubbed it “the bad jobs strategy.”

Ton draws on more than a decade of research to show how operational excellence makes it possible for companies to of­fer low prices to customers and superior results to their investors while still paying their employees a living wage. She points to four model retailers—Costco, Merca­dona, Trader Joe’s, and QuikTrip—to illustrate how investing in workers has a positive impact on the bottom line. All four companies have parlayed a generous investment in personnel into lower costs, higher profits, and greater customer sat­isfaction.

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