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Outside Perspectives

Friday, May 20, 2016

The best way to notice the impact of business research is to see it being implemented by companies, organizations, and even individuals. For many years, Professor and Land O’Lakes Chair in Marketing Kathleen Vohs studied how choice affects consumers. She found that the process of making choices drains a person’s cognitive resources, affecting their later concentration. Hence, Steve Jobs, Mark Zuckerberg, and President Barack Obama—all in high-pressure decision-making environments—were all noted to wear basically the same outfits every day.

There are several ways companies learn about new research findings—from speaking to colleagues, reading the relevant journals, or working hand-in-hand with researchers on specific problems. We interviewed representatives from several companies to learn about their connections with Carlson School research and how they found value in the findings.

How to manage product quality issues

One day, Luann Pendy, the senior vice president of global quality for Medtronic, was approached by Carlson School student George Ball who was working on his PhD under Associate Professor Rachna Shah in the Supply Chain and Operations Department. They were studying product recall phenomenon and how firms manage difficult decisions related to product quality issues. “He asked if Medtronic might participate in this research to determine the factors—organizational, functional, risk—that influence whether, and when, a firm might decide to recall a product,” Pendy says.

Pendy was intrigued. Her job entails overseeing the quality of Medtronic’s devices and services from R&D to operations as well as after the products are out in the field. One tenet of the Medtronic mission is “to strive without reserve for the greatest possible reliability and quality in our products, to be the unsurpassed standard of comparison,” Pendy says, so a major focus of her role is to make sure processes and operating mechanisms are in place to ensure the company meets its mission.

Pendy says they saw the value in Ball’s research study. After several on-site meetings and conversations with George Ball, Rachna Shah, and Associate Professor Karen Donohue (another faculty member in the Supply Chain and Operations department), she agreed to ask their quality employees to participate in an experimental study. The research team returned to Medtronic to share its insights after the data were analyzed.

Medtronic and Luann Pendy worked hand-in-hand with Carlson School Researchers to study decision-making in product recalls.

"The study was valuable since we hadn't considered the potential organizational dynamics that might influence our decision-making for quality issues," Pendy says. "For example, is an individual less likely to support a recall if he is directly responsible for the cause of the quality deficiency? Or, how does the relationship with the regulatory body influence an individual's likelihood to support a product recall?"

The most important responsibility in the medical device industry is to provide safe and effective products to the patients who benefit from their therapies, Pendy says. "In management, we depend on our operating mechanisms to derive 'rules' for the definition and escalation of risk decisions," she says. "Their research provided me with a different perspective on writing requirements to ensure that decisions are made without bias due to function, position, or regulatory status."

Pendy feels the research is of value not just to the medical device industry, but to all companies. “If you consider the recent highly publicized recalls in the automotive industry, General Motors, Takata, and Volkswagen, one might utilize the conclusions to understand how decisions are made, how defects are analyzed, and most importantly, how risk evaluations are escalated for management review and approval,” she says, adding how much she enjoyed working with Shah, Ball, and the others. “While they brought a significant amount of knowledge on the subject of recalls, they did not hesitate to ask for our actual experiences and to use our knowledge to make their research more material than theoretical.”

New angles and new ways to face new challenges

Georg Muller is a director at Deloitte Consulting in its strategy service line. His focus is on helping companies drive growth through revenue management and pricing strategy. His work takes him across a number of industries, with most of his clients being in the industrial and consumer products segments.

“With the advent of new technologies that are disrupting conventional pricing models in industries spanning automotive, hospitality, music, and more, the area I focus on—pricing strategy—is a tremendously exciting place to be and many of the things we do are heavily influenced by ideas emanating from the Carlson School,” he says.

Muller adds that there is a breadth of ideas being produced by the Carlson School that he has found particularly valuable. Some of the most prominent examples that Muller refers to regularly in his work include articles written by Professor and James D. Watkins Chair in Marketing Mark Bergen and Professor Akshay Rao on price wars or how to manage grey market activity, such as “How to Fight a Price War” (Harvard Business Review, 2000). “These articles are seminal pieces that companies regularly reference when navigating competitive price moves in their markets,” he says.

Muller adds that Bergen has been a leader in developing the idea that to do pricing well, companies need to make specific investments to build up a capability. “This idea is actually pretty revolutionary since conventional economic wisdom tells us that markets are efficient and that prices magically adjust to meet market demand. But it’s not true,” he says.

Carlson School research helps businesses and leaders like Georg Muller to continually look at the world from new angles. 

Bergen was one of the first to notice that companies spend inordinate amounts of time developing a price list, training sales people on the new pricing structure, and responding to customer complaints about price changes, Muller says.

“Changing prices is anything but fast and easy,” he says. “One of the things that I have dedicated my career to is helping companies develop the capabilities needed to become good at pricing—and putting into practice many of the ideas developed by Mark at the Carlson School.”

Another subject of research that Muller is finding influential is behavioral research. “Behavioral research is an area that has received a lot of attention in the past few years, especially as it relates to pricing, perceptions of value, and how to frame a ‘good deal,’ he says. Muller notes that Professor and Land O’Lakes Chair in Marketing Kathleen Vohs has contributed immensely to the understanding of how consumers think and some of the underlying, systemic biases that enter into their decision making.

“These examples are just a small sampling of relevant work done at the Carlson School. There is so much more on topics like cost pass-through, how to design sales incentives, and how to structure a distribution channel,” he says. “The work done at the Carlson School helps us to continuously look at the world from new angles and consider new ways for addressing the most challenging business problems our clients face.”

Attracting the best talent and keeping it

For some time, Professor Myles Shaver, the Pond Family Chair in the Teaching and Advancement of Free Enterprise Principles and the 2015-16 Fesler-Lampert Chair in Urban and Regional Affairs, has been studying Fortune 500 companies. Specifically, he has been looking into the reasons why Minnesota is the home to the headquarters of so many—17 at last count. He also has been examining how well the Twin Cites attracts and retains high-skilled talent.

Shaver’s research came to the attention of Albert Colianni, Jr. when they were both on the Greater MSP’s Talent Attraction and Retention task force, now known as Make It MSP. Colianni is the CEO of Marquette Companies, LLC, the holding company for the Pohlad family’s operating businesses and investment interests. He was the co-chair of the task force, along with Ecolab CEO and fellow Greater MSP Board Member Doug Baker.

Research demonstrated to Bert Colianni that the Twin Cities has an immediate need to attract and retain young professionals.

Shaver provided the task force with detailed analysis and research comparing the Twin Cities region with the top 25 metropolitan areas for psycho-demographic data, including education attainment, incomes, talent attraction rates, retention indicators, and diversity information. He also provided research about corporate headquarters in the region and their impact on overall employment and success rates.

“Myles’ research insights were most valuable as they allowed us to better understand our region’s true competitive employment attributes and our detractors,” Colianni says. “It allowed us to better understand the strategic importance and necessity of retaining and attracting a skilled and diverse workforce.”

Colianni says that because of the Twin Cities’ changing demographics, the region will not meet the needs of its employers or achieve the full opportunity for economic growth without greatly improving its success amongst these demographic groups. Other competitive cities are in fact doing much better on attracting young, skilled, and diverse talent.

“Myles’ work demonstrated that while our retention rates of highly skilled workers with families is extremely high, our need to attract and retain young, single, and diverse professionals is immediate,” Colianni says.

FDA inspectors and medical product recalls

Sometimes, good research is a matter of being at the right place at the right time. When Supply Chain and Operations Associate Professor Rachna Shah was at a Medtronic event, she met a senior administrator of the Food and Drug Administration (FDA) and talked about her interest in FDA inspection outcomes and product recalls in the medical device industries.

Shah’s interest was to examine if the relationship between an FDA inspector’s decision on a facility’s process compliance and future product recalls was dependent on whether the inspector had visited the same site before or not. Seeing merit in the question, the administrator put Shah in touch with Ann Ferriter, the director of the Division of Analysis and Program Operations, Office of Compliance, Center for Devices and Radiological Health at the FDA.

To complete her research, Shah was provided with both public and private data to test the relationship. It turned out that inspectors who go back to the same facility time and again will fall into a “complacency” trap—they tend to miss mistakes and therefore, their decisions can no longer be considered a good predictor of future recalls. However, those who visit a facility once make decisions which are more predictive of future recalls. “You have this ‘newness’ of eyes, so you can identify more problems,” Shah says.

Carlson School research on FDA inspection outcomes has led Ferriter and the agency to reconsider its policies.

The FDA was intrigued by Shah and her coauthors’ results. At the time, the FDA was thinking of creating specialized investigators for certain types of regions and facilities. Shah’s research led the FDA to reconsider its policies.

“Dr. Shah’s work on investigators and FDA inspection outcomes has been very insightful,” Ferriter says. “Her work has informed our thinking as the FDA realigns our investigators and other district staff to the commodity-specific centers. As we transform, the FDA will need to address concerns of investigator bias and appropriate resource utilization.” The research was jointly conducted with George Ball, a PhD student who was being advised by Professor Shah and Associate Professor Enno Siemsen, another faculty in the Supply Chain and Operations Department at the time.

The pricing perspective

Pete Hoffman is the chief sales officer for Integrated Resource Management (IRM) in Chicago. Headquartered in Grand Rapids, Michigan, IRM is a privately held, early-stage technology company focusing on supply chain optimization.

“Specifically, we provide a cloud-based technology platform across a wide array of market verticals—healthcare, manufacturing, government, education, and many more,” he says. “We automate a buying organization’s purchase and procurement process and add an additional, patented asset management capability for those same organizations, saving them substantial operational and real dollar expense.”

Hoffman came on board a year ago to hire, manage, and grow the sales team. It has gone well, as the company is experiencing rapid sales growth and has been profitable since the inception of a public-facing product a year and a half ago. Many of Hoffman’s decisions have been influenced by pricing research done by Professor Mark Bergen.

Professor Mark Bergen's work on pricing provided IRM's chief sales officer, Pete Hoffman, with an new perspective.

Hoffman met Bergen when he took one of his marketing courses. “Mark was one of the best teachers I’ve ever had, and even though I had a significant professional background in marketing and advertising, I jumped at the chance to take another class with Mark, notably his pricing class,” he says. “It was terrific and it provided me with a business perspective and training to which I had not previously been exposed.”

Bergen’s research on pricing has proven to be valuable to Hoffman in his career. “I’ve spent the last 20 years working at venture-backed technology companies, some you’ve heard of like Google,, and others, and some you haven’t, often in management positions,” he says. “The perspective that Mark’s work has brought to my thinking has provided tangible benefits.”

As an example, Hoffman notes that with any new company, figuring out how an initial idea can be monetized is critical. Then, once a sense of a possible means of monetization is realized, figuring out how much to charge for it is equally critical, and fraught with danger. “Charge too much and you’re dead. Charge too little and you may also be dead, as you can leave enough money on the table so that you can’t cover your operational costs,” he says.

Another, real-world example occurred just recently. “My company is considering branching into a new—for us—area of product offering,” he says. “We typically take a flat percentage of sales we facilitate. Without getting too deep into the weeds, this new venture would have paid us somewhat less than our normal percentage. It was ‘close, but not quite.’”

Although he was generally for the idea, he was compelled to ask how that pricing model would affect his company operationally, if at all. “If those effects are substantial, then the deal is a nonstarter,” he says. “However, if those effects are trivial to nonexistent, it’s a great deal for us. Being able to ask those questions, understanding the effect pricing has on operations and the skill to evaluate that has helped me be a voice at the company to help ensure entering into an area that will be beneficial to us.”