Showing papers in "MIT Sloan Management Review in 2018"

Building Scalable Business Models

Abstract: THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED. WINTER 2018 MIT SLOAN MANAGEMENT REVIEW 65 BUSINESS MODEL INNOVATION has become an increasingly hot topic in management circles, and understandably so. No management activity is more important than having clarity about how the organization creates, delivers, and captures value. It requires, among other things, knowing what customers want, how value can be best delivered, and how to enlist strategic partners to achieve maximum benefit. Although the ability to develop strong value propositions can enable companies to “get by,” in our view many of today’s most successful businesses are those that are able to place themselves in the “sweet spot” of business model scalability. Scalability is about achieving profitable growth and is therefore a fundamental consideration for managers and investors alike. If managers are incapable of factoring scalability attributes into their business model design, they risk being left behind, much the way bookstores owned by Borders Group Inc. were eclipsed by Amazon.com Inc. Over a five-year period, we studied scalability in the context of more than 90 Scandinavian businesses and also examined the experiences of a number of wellknown businesses, including Google, Apple, and Groupon. (See “About the Research,” p. 67.) In the course of our research, we identified five patterns by which companies can achieve scalability. The first pattern involved adding new distribution channels. The second entailed freeing the business from traditional capacity constraints. The third involved outsourcing capital investments to partners who, in effect, became participants in the business model. The fourth was to have customers Building Scalable Business Models S T R AT E G Y

What Sets Breakthrough Strategies Apart

Abstract: Strategy advice has taken a rather negative tone of late. Consultants and scholars alike seem obsessed with eradicating bias and error in human judgment and decision-making. A virtual cottage industry has emerged to advise how to accomplish this, often pushing managers to replace flawed human judgment with Big Data analytics and various computational tools. Given this abysmal view of human judgment, it’s no wonder that some authors have suggested that algorithms and artificial intelligence (AI) should play a greater role in strategic decisions. No doubt bias and error are important concerns in strategic decision-making. Yet it seems quite a stretch to suggest that the original strategies developed by people like Apple’s Steve Jobs, Starbucks’ Howard Schultz, or even Walmart’s Sam Walton had much to do with error-free calculations based on Big Data. Their strategies, like most breakthrough strategies, emerged in settings with remarkably little data to process and little basis for calculation — situations in which the paths to value creation were highly uncertain and evidence was sparse. We are highly skeptical that debiasing decision-making, eradicating errors, or ceding strategy to AI will improve strategizing, let alone lead to breakthrough strategies.

Your Customers May Be the Weakest Link in Your Data Privacy Defenses

Abstract: Does your company have consumer data it isn’t legally authorized to possess? Don’t be too quick to answer. Many ethical, lawfully-managed businesses do have such data and it comes from a surprising source: their customers, who inadvertently share the personal data of their peers, such as family, friends, and colleagues.

Beyond the Speed-Price Trade-Off

Abstract: Advances in inventory and sales analytics make it possible to deliver products both cheaply and quickly, meeting the demands of today’s consumers.

Moving beyond the speed-price tradeoff

Abstract: In the early days of online retailing, e-commerce retailers fulfilled consumer demand from a small number of large-scale warehouses that carried a similar catalogue of items. Retailers stocked inventory for low-volume products in as few locations as possible while maintaining service levels that met customer expectations. It was a way to keep inventory costs low and take advantage of the economies of scale that accompany large fulfillment centers. Since consumers were willing to wait for their deliveries, proximity and speed were less important than cost savings. But the online retail market has changed. Today’s shoppers want more than low prices--they also want the products they order delivered quickly. To achieve same-day delivery, retailers are experimenting with new business and operations models, including using third parties (such as local city-specific delivery services), crowdsourcing (such as paying individuals by the task to shop for and deliver groceries), self-service (such as setting up physical lockers from where customers retrieve their packages), and even flying drones (whereby unmanned aerial vehicles can deliver packages in less than 30 minutes). At the same time, many retailers such as Amazon, Nordstrom, and Macy’s have recently redesigned their distribution networks. A growing number of omnichannel retailers are using their physical store networks to fulfill online orders (for example, shipping online customers’ orders from physical stores and allowing online customers to pick up their packages at physical stores), while online-only retailers are adding warehouses, particularly near major urban markets.