Knowledge that Transforms

A large midwestern hospital is expecting an increase in surgical caseload. New operating room (OR) capacity can be had by building new ORs or extending the working hours in the current ORs. The choice among these options is complicated by the fact that patients, surgeons and surgical staff, and hospital administrators are all important stakeholders in the health service operation, and each has different priorities. This paper investigates the trade-offs among three performance criteria (wait to get on schedule, scheduled procedure start-time reliability, and hospital profits), which are of particular importance to the different constituencies. The objective is to determine how the hospital can best expand its capacity, acknowledging the key role that each constituency plays in that objective. En route, the paper presents supporting analysis for process improvements and suggestions for optimal participation-inducing staff contracts for extending OR hours of operation.

Reducing manufacturing lead times and minimizing work-in-process (WIP) inventories are the cornerstones of popular manufacturing strategies such as Lean, Quick Response, and Just-in-Time Manufacturing. In this paper, we present a model that captures the relationshipbetween facility layout and congestion-related measures of performance. We use the model to introduce a formulation of the facility layout design problem where the objective is to minimize work-in-process (WIP). In contrast to some recent research, we show that layouts obtained using a WIP-based formul ation can be very different from those obtained using the conventional quadratic assignment problem (QAP) formulation. For example, we show that a QAP-optimal layout can be WIP-infeasible. Similarly, we show that two QAP-optimal layouts can have vastly different WIP values. In general, we show that WIP is not monotonic in material-handling travel distances. This leads to a number of surprising results. For instance, we show that it is possible to reduce overall distances between departments but increase WIP. Furthermore, we find that the relative desirability of a layout can be affected by changes in material-handling capacity even when travel distances remain the same. We examine the effect of various system parameters on the difference in WIP between QAP- and WIP-optimal layouts. We find that although there are conditions under which the difference in WIP is significant, there are those under which both layouts are WIP-equivalent.

Selecting program portfolios within a budget constraint is an important challenge in the management of new product development (NPD). Optimal portfolios are difficult to define because of the combinatorial complexity of project combinations. However, at the aggregate level of the strategic allocation of resources across product lines, investment in a program is not an all-or-nothing decision, but can be adjusted, resulting in a higher or lower program benefit (e.g., higher or lower quality). In some cases, resources can be adjusted even for individual projects. With this insight, one can use marginal analysis to optimally allocate the scarce budget. This article develops a dynamic model of resource allocation, taking into account multiple interacting factors, such as independent or correlated, uncertain market payoffs that change over time, increasing or decreasing returns from the NPD investment, carry-over of the investment benefit over multiple periods, and interactions across market segments. We characterize optimal policies in closed form and derive qualitative decision rules for managers.

In this paper, we analyze the variance of accounting profitability among a broad cross-section of forms in the American economy from 1981 to 1994. The purpose of the analysis is to identify the importance of year, industry, corporate-parent, and business-specific effects on accounting profitability among operating businesses across sectors. The findings indicate that industry and corporate-parent effects are important and related to one another. As expected, business-specific effects, which arise from competitive positioning and other factors, have a large influence on performance. The analysis reconciles the results of previous studies by exploring differences in method and data. We also identify the broad contributions and limitations of the research, and suggest avenues for further study. New approaches are necessary to generate significant insights about the relationships between industry, corporate-parent, and business influences on firm profitability.

Several studies have demonstrated an order-of-entry effect on market share, suggesting that pioneers outperform later entrants. However, other research has pointed out the limitations of these studies and found evidence that many pioneers fail or have low market share. Given this background, the purpose of this research is to understand the conditions under which pioneers are more likely and also less likely to have an advantage. We propose a game-theoretic model that includes important sources of pioneer advantages as well as disadvantages. Specifically, we incorporate a pioneer advantage due to preemption in markets with heterogeneous tastes. In addition, we incorporate a potential pioneer disadvantage due to technology vintage effects, where later entrants utilizing improved technology can have lower costs and higher quality. The model allows us to evaluate the extent of vintage effects necessary to overcome a pioneer's advantage. Key relationships are found between the magnitude of the pioneer advantage or disadvantage and consumer valuations of product attributes (e.g., variety and quality). We empirically validate the model with vintage effect data in 36 product categories, and measures of consumer valuations of product variety and quality for 12 of these 36 categories. The results show that pioneers do better in product categories where variety is more important and worse in categories where product quality is more important. Pioneers in categories with high vintage effects are shown to have lower market shares and higher failure rates. Similar results appear when analyzing persistence of market leadership over time, further validating our model's major implications. We also present two case studies that illustrate key elements of the model.

Groups of organizations are pervasive, although there is little systematic knowledge about how they affect their members. We examine one dimension of the operation of organization groups, the transfer of experience. Our core argument is that organization groups may create benefits for their members, but problems for those outside the group. Within the group they can facilitate the transfer of experience among their members by creating mechanisms for communication, incentives for helping, and by promoting understanding. The predicted pattern of experience transfer should improve performance of those within the group, but also has implications for those outside it. Experience accumulated in one organization group strengthens the competitiveness of its organizations, and thereby harms competitors outside the group. Thus, organization groups are fundamental both for the functioning of their members and the competitive dynamics of their industries. Our longitudinal analysis of the profitability of kibbutz agriculture supports both these claims. Between 1954 and 1965 (the years of this study), almost all kibbutzim were part of organization groups. Kibbutzim became more profitable as a function of the experience of others in their group. Their profitability was reduced, however, as a function of experience of others outside their group.

Integrated Product Development (IPD) creates overlap and interaction between activities in the new product development process and, because this increases the need to coordinate, compensates through other aspects of the new product development process (e.g., integrated tools), product definitions (e.g., incremental development), organizational context (e.g., reduced task specialization), and teaming (e.g., cross-functional teams). Since IPD has become an important new standard for managing new product development, this paper's general aim is to evaluate the research that has been conducted on it. Our three specific objectives include first critiquing the IPD literature by identifying problems with empirical research and recommending solutions. There are concerns about the overall approach, conceptualizing and operationalizing IPD characteristics, and selecting performance objectives. Second, we conduct a meta-analysis to evaluate relationships between specific IPD characteristics and project performance. We indicate where relationships do or do not exist and identify variables that may moderate these relationships. Third, we offer suggestions for extending IPD research into studies of (a) the hierarchy of teams working on a project, (b) one company managing a portfolio of projects over time, and (c) two or more firms collaborating in a strategic alliance.

This paper presents approximate analytical models to quantify the expected improvement in inventory investment when using a system approach to control inventory as opposed to a simpler item approach. A system approach ensures that a demand-weighted average fill rate is achieved at low inventory investment by assigning low fill rates to parts with high costs and high fill rates to parts with low costs. An item approach does not vary fill rates by parts but assigns identical fill rates to all parts. Using single-parameter functional representations of the skewness of unit costs and average demand across all parts in the system, simple approximate analytical expressions for the required inventory investment are derived for both approaches. The accuracy of the approximations is validated using data from a distribution center for computer spare parts. For these data, the solutions obtained by the approximations are very close to the exact values. The results show that inventory investments can be well approximated as a function of only a few cost and demand parameters. These expressions can be used to determine the percentage reduction in inventory investment for a particular target demand-weighted average fill rate when the superior system approach is used instead of the item approach. For increased ease of use, the percentage reduction in inventory when using a system as opposed to an item approach is computed over a range of realistic values for the key parameters of the model and a quadratic expression is fitted to the data. This fitted expression provides rough guidelines for the anticipated improvement with very limited data needed, prior to detailed modeling or implementation.

A practical model and an associated method are developed for providing consistent, deterministically correct responses to ad-hoc queries to a database containing a field of binary confidential data. COUNT queries, i.e., the number of selected subjects whose confidential datum is positive, are to be answered. Exact answers may allow users to determine an individual's confidential information. Instead, the proposed technique gives responses in the form of a number plus a guarantee so that the user can determine an interval that is sure to contain the exact answer. At the same time, the method is also able to provide both deterministic and stochastic protection of the confidential data to the subjects of the database. Insider threat is defined precisely and a simple option for defense against it is given. Computational results on a simulated database are very encouraging in that most queries are answered with tight intervals, and that the quality of the responses improves with the number of subjects identified by the query. Thus the results are very appropriate for the very large databases prevalent in business and governmental organizations. The technique is very efficient in terms of both time and storage requirements, and is readily scalable and implementable.

Traditional idea generation techniques based on customer input usually collect information on new product needs from a random or typical set of customers. The “lead user process” takes a different approach. It collects information about both needs and solutions from users at the leading edges of the target market, as well as from users in other markets that face similar problems in a more extreme form. This paper reports on a natural experiment conducted within the 3M Company on the effect of the lead user (LU) idea-generation process relative to more traditional methods. 3M is known for its innovation capabilities— and we find that the LU process appears to improve upon those capabilities. Annual sales of LU product ideas generated by the average LU project at 3M are conservatively projected to be $146 million after five years—more than eight times higher than forecast sales for the average contemporaneously conducted “traditional” project. Each funded LU project is projected to create a new major product line for a 3M division. As a direct result, divisions funding LU project ideas are projecting their highest rate of major product line generation in the past 50 years.