Is diversity (un)biased? Project selection decisions in executive committees

Problem definition: Is a committee comprised of more or less cognitively diverse members better at approving the “good” projects and rejecting the “bad” ones? Academic/Practical Relevance: We contribute in the operations management literature by accounting for the fact that critical selection decisions are often made by a committee rather than a single decisionmaker. Understanding how the magnitude of diversity affects the decision quality of such a committee is an important consideration for practitioners. Results: We utilize a game-theoretic model to show that diverse perspectives are rarely “averaged out”. Instead, diversity leads to systematic biases in project selection. To mitigate the effect of diverse perspectives, managers need to uncover the sources of diversity: do they originate from different individual valuations and preferences, or they express different assimilations of the information that arises during the project execution? We show that this distinction is crucial. Higher preference diversity always leads to higher likelihood of making the wrong decision. Higher interpretive diversity, may be beneficial for the organization. Managerial Implications: A clear managerial action is the need to identify and reduce such preference diversity. Senior management can achieve this by highlighting the need for more transparency in the pipeline of the business units. Moreover, our analysis shows that interpretive diversity can be a powerful managerial lever to influence the propensity for Type I and II errors. The latter might be easier to manage than the organizational structure

How do you search for the best alternative? Experimental evidence on search strategies to solve complex problems

Through a controlled two-stage experiment, we explore the performance of solution search strategies to resolve problems of varying complexity. We validate theoretical results that collaborative group structures may search more effectively in problems of low complexity, but are outperformed by nominal structures at higher complexity levels. We call into question the dominance of the nominal group technique. Further close examination of search strategies reveals important insights: the number of generated solutions, a typical proxy for good problem-solving performance, does not consistently drive performance benefits across different levels of problem complexity. The average distance of search steps, and the problem space coverage play also critical roles. Moreover, their effect is contingent on complexity:a wider variety of solutions is helpful only in complex problems. Overall, we caution management about the limitations of generic, albeit common rules-of-thumb such as "generate as many ideas as possible”

Product selling vs. pay-per-use service: a strategic analysis of competing business models

We present a model that suggests possible explanations for the observed proliferation of “pay-per-use" (PPU) business models over the last two decades. Delivering “fractions" of a product as a service offers a cost advantage to customers with lower usage but requires extra delivery costs. Previous research focused on information goods (with negligible production costs) and predicted that PPU, when arising as a differentiation to selling in equilibrium, fundamentally achieves lower profits than selling. We extend the theory by covering goods with any production cost, in duopolistic competition. We show that PPU business models can be more profitable than selling (especially at mid-range production costs), as long as their delivery costs are not too high, a requirement that is more easily fulfilled as new technologies reduce these costs. Moreover, if firms are imperfectly informed about their customers' usage profiles, PPU's effective pricing of customers' varying usage offers an additional advantage over selling. This requires companies to employ accounting methods that do not inappropriately allocate production costs over stochastic usage levels. If PPU service provision suffers from queueing inefficiencies, this does not fundamentally change the relative profitability of the PPU and selling models, provided that PPU providers can attract sufficiently high demand to benefit from pooling economies

The limits of planned obsolescence for conspicuous durable goods

An extensive body of literature argues for the benefits of planned obsolescence, the strategy of designing products with low durability to induce repeat purchases from the consumers and allow the firm to sell a larger volume. Yet, several firms avoid planned obsolescence and instead offer products with high durability. In this paper, we offer a demand-side rationale for a high-durability product design strategy: the exclusivity seeking consumer behavior associated with conspicuous consumption. In the presence of consumers who value exclusivity, we find that firms benefit from designing products with higher durability in conjunction with a high-price, low-volume introduction strategy. A higher durability in such a context leads to greater resale value, allowing the firm to charge a higher price and lower the sales volume to achieve the product exclusivity valued by the consumers. This contrasts with the planned obsolescence strategy that capitalizes on the high sales volume achieved by setting a low new product price. We also show that offering higher durability and charging a higher price are complementary levers to respond to consumers who value exclusivity. Our analysis unearths insights regarding the effect of exclusivity-seeking behavior on a firm’s demand and pricing. We show that firms’ durability choice may explain the joint increase in price and demand for conspicuous goods

Organizational enablers for NPD portfolio selection

Despite substantial research that advocates the “right” portfolio of new product development initiatives for the firm, one important aspect has been overlooked: Creating a portfolio of new product development initiatives is not equivalent to choosing from a menu of initiatives. Rather, these initiatives are defined by and within the organization. Thus, portfolio selection rests upon two challenges: 1) the cross-functional nature of collaborative tasks; and 2) the role of explicit and implicit incentives on innovative outcomes. This paper explores how these factors ultimately determine the initiatives an organization pursues. We abstract a new product development organization as two functional managers who report to senior management and analyze the strategic interactions between all three stakeholders. Senior management decides whether to empower the functional managers to define the initiative and how to reward them contingent on the outcome. We evaluate how the asymmetry of information regarding each function’s capability, and the explicit and implicit rewards and penalties imposed on the functional managers affect the upfront resource allocation. We find a profound effect of the information asymmetry: the set of initiatives the firm deems profitable is reduced, thus impeding the organization’s potential to innovate. To counter such a shortcoming, senior management may optimally misalign the objectives of the stakeholders

When should customers control service delivery? Implications for service design

What do a Mongolian stir-fry restaurant and a medical lab providing home testing solutions have in common? They are both innovative services that base their success on customers controlling part of the service delivery. These providers allow service tasks to be performed by the customers as a means of shaping the overall experience and not strictly as a means of "outsourcing" the service. Motivated by such practices, we explore whether and how should providers allocate the control of different tasks of their service to the customers. We model services as multi-step processes with each step affecting customers' experience at other steps. At certain steps the provider may hold an “expert" role and be more capable of performing than the customers, whereas at other steps she holds an “administrative" role and is less capable of performing than the customers. We distinguish between routine services, where the service outcome must conform to standardized specifications, and non-routine services, where the value of the service outcome relies on subjective dimensions. We show that the optimal design is determined by an economically intuitive rule whereby the provider controls the steps based on the marginal benefit she can derive compared to self-service. For routine services, this rule translates to managing “blocks" of steps because the provider benefits from containing the volatility of the experiences across the service even when this implies the provision of service steps with a negative marginal benefit, i.e., steps which she is less capable of performing than the customers. Instead, in non-routine services providers should focus on the value advantage they can ensure through a "core provision" even if this implies forgoing control of steps for which they are more capable of performing than the customers and from which they can derive positive marginal benefit. This implies that in non-routine services the provider exercises more control up to a certain process length; beyond that she delegates more steps to the customers. When customers differ in their abilities to perform the different steps, the provider may offer a service line. Service lines facilitate better segmentation than a single service offering, but their economic benefit exhibits an inverted “U-shaped" relationship with respect to the number of steps that a service comprises. Finally, we find that competition between two providers who differ in their capabilities to perform a service results in service design differentiation where the more capable provider offers a higher-end "focused service" against a lower-end "super-service" offered from the less capable provider

The Brustkrebs-Studien.de website for breast cancer patients: User acceptance of a German internet portal offering information on the disease and treatment options, and a clinical trials matching service

<p>Abstract</p> <p>Background</p> <p>The internet portal <url>http://www.brustkrebs-studien.de</url> (BKS) was launched in 2000 by the German Society of Senology (DGS) and the Baden-Württemberg Institute for Women's Health (IFG) to provide expert-written information on breast cancer online and to encourage and facilitate the participation of breast cancer patients in clinical trials. We describe the development of BKS and its applications, and report on website statistics and user acceptance.</p> <p>Methods</p> <p>Existing registries, including ClinicalTrials.gov, were analysed before we designed BKS, which combines a trial registry, a knowledge portal, and an online second opinion service. An advisory board guided the process. Log files and patient enquiries for trial participation and second opinions were analysed. A two-week user satisfaction survey was conducted online.</p> <p>Results</p> <p>During 10/2005-06/2010, the portal attracted 702,655 visitors, generating 15,507,454 page views. By 06/2010, the website's active scientific community consisted of 189 investigators and physicians, and the registry covered 163 clinical trial protocols. In 2009, 143 patients requested trial enrolment and 119 sought second opinions or individual treatment advice from the expert panel. During the two-week survey in 2008, 5,702 BKS visitors submitted 507 evaluable questionnaires. Portal acceptance was high. Respondents trusted information correctness (80%), welcomed self-matching to clinical trials (79%) and planned to use the portal in the future (76%) and recommend it to others (81%).</p> <p>Conclusions</p> <p>BKS is an established and trusted breast cancer information platform offering up-to-date resources and protocols to the growing physician and patient community to encourage participation in clinical trials. Further studies are needed to assess potential increases in trial enrolment by eligibility matching services.</p