INFORMATION DIGEST – Research on tap

An international research project led by the Institute for Management Development shows that senior managers view strong IT practices, competent management of information, and good information behaviours as components of one higher-level idea – “Information Orientation” or “IO” – which measures a company’s capabilities to effectively manage and use information. IO is also a predictor of business performance.

The co-authors compare two retail banks to illustrate the differences between high – and low – IO companies.

The guidelines include: focus your best IT resources on what makes you distinctive; companies should actively manage all phases of the information life cycle, from identifying new information to processing and maintaining it; managers and employees must develop an explicit, focused view of the information necessary to run the business; do not compromise on information integrity. Employees must use information in an ethical and appropriate way.

Sloan Management Review

Outsourcing innovation: the new engine of growth

Innovation today calls for the complex knowledge that only a broad network of specialists can offer. That is why many companies are starting to outsource innovation. For example, pharmaceutical companies may outsource some basic research, whereas other companies may outsource business-process innovation or launches of innovative products.

Four forces are enabling this change: demand is doubling every 15 years; the supply of knowledge workers is skyrocketing; interaction capabilities have grown; and new incentives have emerged. The most effective companies, however, keep core-competence activities in-house, outsourcing the rest to best-in-world suppliers.

Successful outsourcing of innovation involves first scanning for opportunities, not unlike a surfer scanning waves. With many waves of change occurring simultaneously, innovation surfers cannot be sure of riding the right one. They position themselves where experience and intuition tell them many waves will be forming. When an attractive one emerges, they speed into the curl and try to adapt quickly to shifts.

Outsourcing companies have other challenges as well. As one notes: “The key to success is both sides getting the relationship right at the outset.

There must be mutuality of interest, common objectives and an agreed-on scorecard.” To attract partners, a company must have some capabilities that supplier-inventors cannot duplicate to get to desired markets.

Companies also need: people who are “process masters” to keep the innovation processes moving along; open and interactive software; shared stretch goals, or “figures of merit”; and a way to share gains achieved by exceeding the targets and to reward those who make alliances work. Moreover, once a company evaluates suppliers’ past practices, it needs to give them freedom, concentrating on what needs to be accomplished and not dictating the how.

“Managed chaos” used to describe successful innovation processes within companies. But with today’s speed and numerous outside suppliers, the chaos is not so much “managed” as “somewhat orderly.” No one manager has total control. People who work co-operatively have the best chance of success.

Sloan Management Review

Get the right mix of bricks and clicks

The bright line that once distinguished the dotcom from the incumbent is rapidly fading. Success in the new economy will go to those who can execute clicks-and-mortar strategies that bridge the physical and virtual worlds. But how executives forge such strategies is under considerable debate. Many executives now assume that Internet businesses have to be separate to thrive. They believe that the very nature of traditional business – its protectiveness of current customers, its fear of cannibalisation, its general myopia – will smother any Internet initiative.

Authors Ranjay Gulati and Jason Garino contend that executives don’t have to make an either/or choice when it comes to their clicks-and-mortar strategies. The question is: “What degree of integration makes sense for our company?”.

To determine the answer, executives should examine four business dimensions: brand, management, operations, and equity. The authors show the spectrum of strategies available and discuss the trade-offs involved.

Harvard Business Review

E-hubs: the new B2B marketplaces

Electronic hubs – Internet-based intermediaries that host electronic marketplaces and mediate transactions among businesses – are generating a lot of interest.

The likes of Ariba and Chemdex have already attained breathtaking stock market capitalisations and venture capitalists are pouring money into more B2B start-ups.

This article provides a blueprint of the e-hub arena. The authors look at the two dimensions of purchasing: what businesses buy – manufacturing inputs or operating inputs – and how they buy, through systematic sourcing or spot sourcing. They classify B2B e-hubs into four categories: MRO hubs, yield managers, exchanges, and catalogue hubs, and they discuss each type in detail.

Harvard Business Review

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