Here’s proof that Wall Street regulators listen to you — Andrei Kirilenko

MIT Sloan Professor Andrei Kirilenko

MIT Sloan Professor Andrei Kirilenko

From MarketWatch

Especially concerning business regulations, critics argue, an inside the Beltway mentality prevails. Only the lobbyists and industry insiders are heard.

I am sensitive to this criticism. Five and half years ago, the United States experienced the worst financial crisis since the Great Depression. In response to the crisis, Congress passed the Dodd Frank Wall Street Reform and Consumer Protection Act. One part of the legislation instructed a financial regulatory agency called the Commodity Futures Trading Commission (CFTC) to write rules that regulate “swaps” — the same derivatives that had been implicated in the financial crisis. As the Chief Economist of the CFTC during 2010-2012, I helped with the rulemaking process.

After leaving the federal government in December 2012 to join MIT Sloan School of Management as a finance professor, I set out to study the work that I and other staff members had done on designing new Wall Street regulations.

My goal was to create a scientific tool to evaluate whether thousands of public comments that were delivered in response to the rules proposed by the CFTC were meaningfully taken into account. I wanted to study how responsive the government is to its constituents. Is the government really for the people?

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Job creation to meet population growth a daunting task — S.P. Kothari

MIT Sloan Deputy Dean S.P. Kothari

From MoneyControl.com 

In an exclusive interview with CNBC-TV18’s Malvika Jain on July 02, 2014, SP Kothari, Deputy Dean, MIT Sloan School of Management gave his take on the expectations from Arun Jaitely’s maiden Union Budget and his outlook on the road ahead for the Indian economy.

Below is the verbatim transcript of the interview:

Q: Government is in the process of preparing its first Budget since it took charge. What should be the priority areas where the government should focus?

A: Mr. Jaitley has to recognize and Mr. Modi also has to recognize that changing the furniture around the house is not going to make the house look that much different. It might make it look somewhat different but that is not a game changer and they have to think in terms of policies that dramatically alter if the goal is to increase the per capita income from where it is currently at about 1500 to say about USD 5000 in 10 years. Those game changing policies will have to focus on population growth, they will have to focus on FDI, they’ll have to focus on how our governance is and how our law enforcement is. Just to name a few set of policies that Mr. Jaitley should pay attention to in the maiden budget that he would be presenting on the 10th of July.

Q: Arun Jaitley has indicated that sector specific FDI is something that the government is going to be looking at. Do you think that that is going to be sufficient to spur investment flow into the country?

A: People’s decision to spur investment only partially hinges on what sectors are open for an investment. People’s decision to invest is influenced to a large extent by what kind of climate there is; climate includes what kind of law enforcement there is, what kind of labour supply there is, what kind of tax regime there is, what kind of regulation exists in general and is it easy to do business or not – open new businesses as well as close new businesses. So, the look has to be much more holistic in attracting foreign investment rather than a piecemeal approach by saying that we will open certain sectors for investment and wait for foreign investment to flow. I don’t think that is going to change or make a dramatic improvement in the investment climate.

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The financial case for local manufacturing — Suzanne de Treville

MIT Sloan Visiting Professor Suzanne-de-Treville

MIT Sloan Visiting Professor Suzanne-de-Treville

From Outsource

In the last 20 years, we’ve seen a massive wave of manufacturing jobs move to low-labour-cost countries. Now, many companies are beginning to question whether the cost differential offered by distant suppliers compensates for the cost of working with an extended supply chain. These companies find themselves with massive inventories, yet in spite of those inventories they frequently are not able to meet all demand.

It has been difficult for managers to analyse the cost differential mismatch trade-off because mismatch costs are difficult to quantify. The intuition is that the mismatch costs are high, but the managers I discuss with have difficulty believing that overstocks and stockout costs are high enough to wipe out the cost advantage enjoyed by their offshore supplier. Without solid numbers, it’s difficult for managers to incorporate these costs into decision-making.

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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.

Maybe the search for the Malaysian Airlines plane needed a chief data officer — Stuart Madnick

MIT Sloan Professor Stuart Madnick

MIT Sloan Professor Stuart Madnick

From Quartz

The search for an airplane lost on a 2,500-mile international journey requires consolidating information from many organizations, both public and private, from all over the world. It involves analyzing vast amounts of radar, sonar, and satellite data, coming from many diverse sources, including military bases, air traffic controllers, naval ships, and other airplanes.

What if the authorities investigating the missing plane had been prepared to manage big data the way many corporations do? What if the investigation had an executive level position responsible for collecting and analyzing all of the dispersed and diverse data that were available and potentially relevant to the search? What if a multinational chief data officer (CDO) had been in place to manage all of the information that was available?

Companies have recognized the value of just such a position for some time. The first reported chief data officer was established in 2003 by Capital One Financial Corp., Yahoo, and Microsoft Germany were early adopters. In little over a decade, hundreds of organizations, including US federal and state agencies, have created chief data officer positions, although the jobs often are given different titles. In time, the initials CDO may become as familiar as CEO, CFO, and CIO.

Driving the trend is the phenomenon of big data—the explosion of information made possible by the great advances that we have seen in recent years in communications, computers, and storage.

Read the full post at Quartz.

Stuart Madnick is co-head of the MIT Total Data Quality Management and MIT Information Quality programs. He is also a professor at MIT Sloan School of Management.