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Next time you read that some industrial accident or disaster was caused by a worker error, be a little skeptical.
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Increasing length, complexity and interdependence in supply chain contracts is resulting in more critical and costly supply disruptions, yet despite that risk, commodity procurement is mainly handled via long-term, fixed-price contracts containing naive terms and clauses in the case of breach. The risk of these breaches is very real.
An organization’s ability to recover from disruption quickly can be improved by building redundancy and flexibility into its supply chain. While investing in redundancy represents a pure cost increase, investing in flexibility yields many additional benefits for day-to-day operations.
By understanding the variety and interconnectedness of supply-chain risks, managers can tailor balanced, effective risk-reduction strategies. The authors show how smart companies use “stress testing” to identify parts of the supply chain that might break in the event of a natural disaster, terrorist strike or other upheaval. They then explain a variety of ways that supply-chain partners can collaboratively prepare for and effectively manage risk.
Although large-scale risks garner media attention, it is the everyday, small-scale risks associated with a lack of transparency in countries’ legal, economic, regulatory and governance structures that can confound global investment and commerce. New research identifies the causes and measures the effects of this phenomenon.
Companies should focus less on marketplace premiums for their innovations and more on opportunistically exploiting subsidies for innovations. Thus Microsoft‘s Windows 95 development effectively garnered a $900 million subsidy by drawing upon a valuable technical population to test and help improve the system. An innovation subsidy, says the author, is individuals‘ and institutions‘ cost-effective bartering of resources to reduce risk.
The product-development process is often seen as an undependable “black box” that rarely produces results that exceed business expectations. With an approach called “net present value, risk-adjusted,” the author offers an operational framework of quantitative tools that can be integrated into existing stage-gate methodologies to create a risk-adjusted NPV that considers the impacts of product portfolio, user needs, and technical and marketing risks.
Many companies proudly think of themselves as innovative. The great majority of them, however, are adept at producing only sustaining innovations — products or services that meet the demands of existing customers in established markets.
Traditional strategic planning draws from forecasts of parameters like market growth, prices, exchange rates, and input costs that managers are unable to predict five or 10 years in advance with any accuracy. The author discusses a strategy that embodies a coherent portfolio of options, sketches a process managers can use to develop this kind of strategy, and explains how planning and management opportunism can reinforce each other.
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