Information Digest- Research on tap

STRATEGY

Why computer users accept new systems

A study of factors affecting ease-of-use perceptions indicates that just-in-time training alone won’t win over reluctant computer users. What’s the point of implementing an expensive, strategic IT system if user resistance prevents it fulfilling its promise? Fortunately, a clearer picture has emerged of user-acceptance factors that could boost the success rate of IT projects.

Viswanath Venkatesh concludes that six variables significantly contribute to how users perceive the ease of use of specific systems over time. These variables involve user attitudes toward technology rather than how the particular system functions, and they were shown to account for 60% of the variance in the way users perceive ease of use. The depth of understanding resulting from this study – twice what was previously understood, according to the author – should enable IT managers to be more successful with their implementations.

Sloan Management Review

mitsloan

The offline impact of online prices

When competing on price, traditional retailers have more to fear from each other than from online rivals. How much of a threat does electronic commerce pose to the bricks-and-mortar world today? Not much, suggests data collected by the US Department of Commerce. Despite all the hype, online retail sales were estimated to amount to a mere $8.7bn in the fourth quarter of 2000 or only 1% of retail revenues overall. (These figures exclude sales made by travel services, financial brokers and dealers, and ticket agencies – whether online or offline.)

But measuring aggregate sales is a relatively crude method of assessing the competition that offline merchants face from online sellers. A more sophisticated strategy is to determine how relative price changes affect the choice of where to buy: over the Internet or in a local store.

Austan Goolsbee, associate professor of economics at the University of Chicago Graduate School of Business, applies this approach in a working paper entitled Competition in the Computer Industry: Online Versus Retail.

On the basis of a December 1998 survey of 90,000 US households commissioned by Forrester Research, Goolsbee constructed a price index measuring the offline cost of a computer in different cities. He then calculated how likely a computer buyer would be to purchase remotely, given the bricks-and-mortar prices.

Sloan Management Review

mitsloan

Managing for value: it’s not just about the numbers

In theory, value-based management programmes sound seductively simple.

Just adopt an economic profit metric, tie compensation to agreed-upon improvement targets in that metric, and voila! Staff will start making all kinds of value-creating decisions.

If only it were that easy. In reality almost half of the companies that have adopted a VBM metric have met with mediocre success. That’s because, the authors contend, the successful VBM programme is really about introducing fundamental changes to a big company’s culture. Results from their major research project reveal that putting VBM into practice is complicated, requiring a great deal of patience, effort, and money. According to the study, companies that successfully use VBM programmes share five main characteristics.

First, nearly all made explicit and public their commitment to shareholder value. Second, through training, they created an environment receptive to the changes the programme would engender. Third, they reinforced that training with broad-based incentive systems closely tied to the VBM performance measures, which gave employees a sense of ownership in both the company and the programme. Fourth, they were willing to craft major organisational changes to allow all their workers to make those value-creating decisions.

Finally, the changes they introduced to systems and processes were broad and inclusive rather than focused narrowly on financial reports and compensation.

A VBM program is difficult and expensive. Still, the authors argue, properly applied, it will put your company’s profitability firmly on track.

Harvard Business Review

harvard

Lead for loyalty

The greater the loyalty a company engenders among its customers, employees, suppliers, and shareholders, the greater the profits it reaps. Frederick Reichheld, a director emeritus of Bain & Company, offers advice on improving loyalty that is based on more than a decade of research. Primarily, he says, outstanding loyalty is the direct result of the decisions and practices of committed top executives with personal integrity.

The “loyalty leader” companies are a diverse group, including Harley-Davidson and Intuit. But they share six similar relationship strategies:

– Preach what you practice. Executives must preach the importance of loyalty in clear, precise, powerful terms.

– Play to win-win. It’s not enough that your competitors lose; your partners must win. There’s a clear connection, for instance, between a company’s treatment of its employees and its attitude toward customers.

– Be picky. A truly humble company knows it can satisfy only certain customers, and it goes all out to keep them happy. Careful selection of employees also plays an important role.

– Keep it simple. Great leaders understand that they must simplify rules for decision making.

– Reward the right results. Many companies reward employees who grab short-term profits and shortchange those who build long-term value and customer loyalty.

– Listen hard, talk straight. Long-term relationships require honest, two-way communication and learning.

Exemplary leaders break through the cynicism of the times by showing they believe that an organisation thrives when its partners and customers do.

Harvard Business Review

harvard