Why the battle of computer services companies is good news for businesses — Charles Kane

MIT Sloan Senior Lecturer Charles Kane

MIT Sloan Senior Lecturer Charles Kane

In the early days of computers, companies used a fee-for-shared-service model for technology. It was common to pay a company like IBM rent for use of its mainframe machines. As computers became smaller and less expensive, businesses began to purchase their own equipment and the computer rental model went the way of the dinosaur. Interestingly, we’re now seeing a return to that old model, but instead of computers, businesses are renting web and cloud infrastructure services for apps and storage.

This is great news for small- and medium-size companies, as building the data centers to run those services is exorbitantly expensive. By only purchasing the infrastructure cloud services that they need from large companies like Microsoft, Google and Amazon, they eliminate the risk of that huge financial investment.

Even better, we’ve seen recent price wars among those service providers. Some of them slashed their prices by as much as 85 percent this spring in an effort to attract and retain customers.

I sit on the board of several companies that are dependent on web services and have seen this decision to rent play out several times. A good example is Carbonite, which is launching its computer backup services across Europe and recently joined the ranks of Amazon customers for web services. The decision for Carbonite was simple: If it were to build its own data center, not only would it cost excessive funds, it would have to maintain it and then (all too soon) upgrade it. It would be akin to building its own telephone or cable company instead of simply renting what it needs from a provider like Verizon or Comcast.

Read More »

The roadblock to commercialisation — Thomas Allen and Rory O’Shea

MIT Sloan Professor Thomas Allen

From Financial Times

Knowledge and innovation generated at universities can lead to the creation of high-impact spin-off businesses. Whether it is through the licensing of intellectual property, partnerships or other informal arrangements, the tech transfer process can play a critical role in shaping new industries and regional economic development.

Research by Eesley and Miller and Eesley and Roberts has demonstrated the role Stanford University has played in shaping the development of Silicon Valley and MIT’s contribution to building a world-class innovation hub in the Kendall Square district of Cambridge, Massachusetts.

Management Goes Mobile — Carl Stjernfeldt

MIT Sloan Sr. Lecturer Carl Stjernfeldt

It’s an old business rubric:  What gets measured, gets managed.

In the age of big data, the very basic set of measurements that managers used to rely on is expanding to a robust set of 24/7 sensor inputs from factory floors to off-shore petroleum platforms – all of it accessible across a wide variety of mobile devices to employees at many levels.

Management is now able to access data from varied locations, crunch it at headquarters and then return the enhanced data to managers out in the field, on the factory floor or on the oil fields. These new, more robust data sets will allow managers to make better decisions in a shorter amount of time than ever before. For companies in complex industries, such as Shell where I work, the potential for increased performance, efficiency and safety is enormous. Read More »

Behind Facebook and Google’s random acquisitions — Catherine Tucker

MIT Sloan Professor Catherine Tucker

MIT Sloan Professor Catherine Tucker

From Fortune

A lot of attention has been paid lately to big tech companies buying up smaller firms in billion-dollar deals: In January, Google acquired Nest for $3.2 billionFacebook purchased mobile message service, WhatsApp, the following month for $19 billion; last week, it acquired virtual reality gaming company, Oculus VR, for $2 billion. There is a lot of discussion about the motives behind these large deals. Some say they are attempts to block competition, while others maintain they are efforts to stay relevant.

I see these deals as a reflection of the uncertainty companies face as they try to identify the next big thing. This is especially true for successful companies like Facebook (FB) and Google (GOOG), which are known for doing what they do tremendously well. They’ve seen similarly successful companies like Kodak struggle as technology moves on, rendering its product obsolete. As a result, companies today are eternally motivated to look outside their current business.

Read More »

New MIT Sloan Management Review study: An advanced analytics culture outweighs all other factors — David Kiron

The Need for Culture

The Need for Culture

What distinguishes the winners from the losers among companies converting data and analytics into a positive force in their strategies and operations? And what practices are keeping the winners ahead?

The Analytics Mandate, a new research report from MIT Sloan Management Review and SAS Institute, takes several steps toward answering these questions.

Our most significant finding? Our study shows that an advanced analytics culture outweighs other analytics-related factors -including data management technologies and skills-among companies that strongly agree they are gaining a competitive advantage from analytics. Essentially, a strong analytics culture is the lynchpin in moving from competitive parity to competitive advantage.

The need for change within a corporation’s culture, and the best way to achieve it, are both nicely illustrated in a case study included in our report.  WellPoint, the largest for-profit managed care organization within the Blue Cross Blue Shield umbrella, knew that sharing insurance data with physicians would provide doctors with a 360-degree medical view of every patient. This in turn, would better enable them to spot patients more likely to go to the emergency room or be readmitted to a hospital, contributing to expenses that drive up the high cost of health care delivery.

Within WellPoint, creating the data reports for physicians initially became a classic showdown between IT and interests from the business side.

The initial reports, prepared by the IT team, were late and lacked fundamental functionality.  For instance, different units within the company reported an emergency room visit in different ways.  The IT team’s explanation: no one told them the definitions had to be the same. This much was true — the business side didn’t think it needed to specify that emergency room visits be consistent across reports. They had assumed this was a given.

The high-profile project was subsequently placed in Red status. At this point, senior management got involved. Problems were brought to executives who, in turn, ensured resources were allocated. Outside consultants and experts were hired. More resources were diverted to the project.

Finally, after many challenging discussions, IT and the business side began working together using an iterative development approach called “Agile”, which focuses on “user stories.”. This meant understanding the perspective of the end user—the provider—and the context in which he or she would be using the data, as opposed to just developing according to a static set of  requirements.

Early reaction to the data system from doctors has been highly positive.  Over time, WellPoint believes that the proactive, coordinated-care model made possible when providers have actionable insights at their fingertips can cut health care costs by as much as 20%. That could work out to billions of dollars, given that WellPoint reimbursed more than $99 billion in health benefits for commercial and individual members in 2013.

In short, to create strategic benefits with analytics WellPoint had to change its organizational behavior. Without an effective collaboration between the business side and IT, the program would have remained in jeopardy. Without leadership’s involvement, the program would have remained in jeopardy. Preparing data for a strategic role often means changing business conduct and that, more often than not, requires a top down process to create the necessary alignment of incentives and goals.

To read the full report, please visit “The Analytics Mandate.”

David Kiron is Executive Editor, Big Ideas initiatives, for MIT Sloan Management Review.