MIT Sloan Management Review

Although many organizations initiate business process outsourcing to reduce costs or acquire new skills, it can evolve into much more. Sometimes, service providers deliver substantial long-term improvements to the client’s operating efficiency and strategic performance. But these improvements seldom happen unless clients and providers implement a process that combines acculturation across organizations, a method for generating ideas, adequate funding and a system for managing change.

Although executives understand the difference between efficiency and responsiveness, many are confused about when to apply each strategy. In recent years, companies have been caught in the bind in which Dell Inc. found itself in 2008, when it needed to transform its supply chain to serve new customers in new channels. The question was: how to do that? Dell decided to create multiple supply chains, configured so that the company could reduce complexity and benefit from economies of scale.

Innovative companies fund internal research and development to gain an edge in the marketplace. They also work closely with suppliers to offer greater functionality and performance for their customers. However, some critical new product insights don’t come from suppliers and customers working together but from the customer’s customers. Drawing on numerous examples from technology companies, this article explores the various ways parties can collaborate so that everyone benefits.

Logistics clusters are local networks of businesses that provide a wide array of services, including transportation carriers, warehousing companies, and freight forwarders. Logistics clusters address several challenges that economies face, including the need for good jobs. In addition to helping companies navigate global supply networks, logistics clusters are contributing to the efficiency of global supply chains and, in the process, increasing international trade and global trade flows.

Everyone has experienced the frustration of having to repeat voice commands multiple times before finally asking to speak to a service representative. Many large companies have become so focused on optimizing their business processes and systems that they have become all too willing to forget about cultivating emotional connections with customers. But in order to detect and respond to shifting customer needs, companies need to show more, not less, empathy with their customers.

New research shows that people who borrow money often have a “self-serving bias” and recall having paid back a larger proportion of the loan than they actually have. If you lend money to a friend, you should be prepared to have to walk out of your life.

”As long as we cheat by only a little bit, we can benefit from cheating and still view ourselves as marvelous human beings,” writes behavioral economist Dan Ariely in his new book “The (Honest) Truth About Dishonesty: How We Lie To Everyone — Especially Ourselves.”

In industrial sectors such as consulting, advertising, filmmaking, software, architecture, engineering and construction, most individual businesses, by definition, are “project-based firms.” This article proposes the term “baronies” to describe the organizational units that direct the projects within project-based firms, and highlights the roles that barons play in three basic types of project-based firms: dominions, tight federations and loose federations.

Since the mid-1990s, many companies have outsourced or offshored their manufacturing operations. For most, one crucial enabling factor was cheap oil: Long supply lines were economically feasible because transportation costs were relatively low. Hence, companies emphasized reducing manufacturing costs through (1) offshoring or outsourcing; (2) plant rationalization; and (3) consolidating distribution centers and warehouses to reduce inventory levels and minimize fixed facility costs.

Business analytics projects are often characterized by uncertain or changing requirements — and a high implementation risk. So it takes a special breed of project manager to execute and deliver them.

Charts explain how to execute a plan to brand a project to internal audiences to get it funded, to rally teams and to create visibility and engagement.

Consumers were surprised in October 2009 by the first of a series of highly publicized recalls of Toyota vehicles in the United States. Citing a potential problem in which poorly placed or incorrect floor mats under the driver’s seat could lead to uncontrolled acceleration in a range of models, Toyota announced that it was recalling 3.8 million U.S. vehicles. The article discusses two root causes for Toyota’s quality problems.

Project leaders should sequence and articulate messaging about their projects in the same way a marketing manager would organize an external branding effort to promote a company’s products and services. Just as product branding creates awareness and sustains value in the minds of an organization’s external customers, shareholders, and constituents, a brand mindset can empower a project leader to develop strategically-timed messages to create visibility and engagement among key targets.

Products and markets with nothing in common “taxonomically” can have “thematic similarity,” which may open up important business opportunities.

MIT Sloan’s Andrew McAfee reflects on “the amazingly bad design and execution of customer-facing processes among financial services firms.” He wonders if they’ll only get better “when competitors appear who take process design and execution seriously, and digitize them to the maximum extent possible.”

Finding the expertise to handle complex, knowledge-intensive team projects is challenging. That’s where a project network comes in.

From time to time a company’s project truly stands out, creating exceptional value and having an impact on the industry. IBM’s AS/400 development effort in the 80s was a game changer and gave IBM a competitive edge. Apple Inc.’s success in creating the iPod portable media player and iTunes online store is another more recent example of a great project — one that changed the way people listen to and buy music. Why are such projects so rare — and why can’t more projects be like them?

What does it mean to “deliver customer value through flexible operations”?

David Simchi-Levi, professor of engineering systems at MIT, explained his ideas in a recent webinar.

With complex products such as automobiles, integration is a key element of performance. That means managers must understand which activities and competencies they can safely outsource and which they need to keep.

The increase in outsourcing and offshoring of complex work has resulted in innovation efforts that require coordination across cultural, geographic and legal boundaries. If that coordination is mishandled, companies can find themselves needing to make multimillion- or even billion-dollar changes. The complexity of the task makes midcourse corrections likely. Managers must anticipate and adapt their processes in order to reduce risk and, ultimately, cost.