Harvard Business Review's Centennial Issue Features Article by Robert S. Kaplan, ORIE Ph.D. '68
The January 2008 issue of the Harvard Business Review commemorates the 100th anniversary of the School by featuring articles on leadership and strategy by Harvard Business School professors. Among them is one by Robert S. Kaplan, ORIE Ph.D. '68 and his frequent coauthor, David P. Norton. Kaplan has authored or coauthored seventeen articles for the magazine, as well as fourteen books including Management Accounting, a leading accounting text.
In this latest article, "Mastering the Management System," Kaplan and Norton present a comprehensive overview of a "closed loop management system" specifically designed to align strategy and operations. The paper describes a sequence of five stages with associated management tools, including two -- the Balanced Scorecard and Activity Based Costing -- that Kaplan and his coauthors introduced and for which they have become internationally known. Beginning with the development of the strategy in Stage 1, the system proceeds through translation of the strategy "into objectives and measures that can be clearly communicated to all units and employees", and then to operations planning and execution. The remaining stages involve separate review meetings to monitor and learn from results and to test and adapt the strategy before starting another loop around the system. The article draws on the actual experience of companies putting the ideas into action. A book, The Execution Premium, expands on the article and will be published by HBS Press later this year.
Although Operations Research (OR) is not explicitly mentioned in the article, several of the tools rely on OR techniques, among them resource capacity planning using "a set of equations, based on historical experience, that describe how various transactions and demands consume the capacity of resources such as people, equipment, and facilities" and "statistical analysis to estimate correlations among strategy performance numbers." A case study of a convenience store chain shows how companies can use regression analysis for early detection of a defective strategy.
Kaplan recently wrote commending the school on its name change and on "educating students in the data analytics area, which I am seeing as the big payoff from all the ERP and data warehouse installations that have occurred over the past 15 years." He sees ORIE graduates as providing the "core capability for doing analytics on products and customers to inform operational and strategic decisions."
Kaplan completed his Cornell Ph.D. under Professor Howard Taylor, with a dissertation on "Optimal Policies for Sequential Inventory and Investment Models." He joined the faculty of Carnegie Mellon University, becoming Dean of the business school there in 1977. He moved to Harvard as a chaired professor of accounting in 1984. He most recently returned to Cornell in 2003 to deliver a joint lecture in the Roy H. Park and John R. Bangs series at the Johnson Graduate School of Management and the School of Operations Research and Information Management, respectively.
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