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What Successful Project Managers Do

Traditional approaches to project management emphasize long-term planning and a focus on stability to manage risk. But today, managers leading complex projects often combine traditional and “agile” methods to give them more flexibility — and better results.

In today’s dynamic and competitive world, a project manager’s key challenge is coping with frequent unexpected events. Despite meticulous planning and risk-management processes, a project manager may encounter, on a near-daily basis, such events as the failure of workers to show up at a site, the bankruptcy of a key vendor, a contradiction in the guidelines provided by two engineering consultants or changes in customers’ requirements.1 Such events can be classified according to their level of predictability as follows: events that were anticipated but whose impacts were much stronger than expected; events that could not have been predicted; and events that could have been predicted but were not. All three types of events can become problems that need to be addressed by the project manager. The objective of this article is to describe how successful project managers cope with this challenge.2

Coping with frequent unexpected events requires an organizational culture that allows the project manager to exercise a great amount of flexibility. Here are two examples of advanced organizations that took steps to modify their cultures accordingly.

A group of 23 project managers who had come from all over NASA to participate in an advanced project management course declared mutiny. They left the class in the middle of the course, claiming that the course text, based on NASA’s standard procedures, was too restrictive for their projects and that they needed more flexibility. With the blessing of NASA’s top leadership, the class members then spent four months conducting interviews at companies outside of NASA. This led to a rewriting of numerous NASA procedures. Among other things, NASA headquarters accepted the group’s recommendation to give NASA project managers the freedom to tailor NASA’s standard procedures to the unique needs of their projects. A similar movement to enhance project managers’ flexibility occurred at Procter & Gamble, where the number of procedures for capital projects was reduced from 18 technical standards and 32 standard operating procedures to four technical standards and four standard operating procedures.

Concurrent with these changes at NASA and P&G, a heated debate emerged within the wider project management profession regarding the need for flexibility, as opposed to the traditional approach, which emphasizes that project success depends on stability. According to the traditional approach, project success can be achieved by focusing on planning and on controlling and managing risks. Although the popularity of this approach has sharply increased across industries, research covering a wide variety of projects consistently reveals poor performance. A large percentage of projects run significantly over budget and behind schedule and deliver only a fraction of their original requirements.3

The other side in this debate is best represented by a newer project management approach popular within the software industry. Called the agile method, it asserts that project success requires enormous flexibility throughout the project’s life. However, even proponents of the agile approach acknowledge that this approach is best suited to small projects and teams.4

Our studies, employing experiential data collected from more than 150 successful project managers affiliated with more than 20 organizations, indicate that today’s successful project managers cope with unexpected events by a combination of the traditional and agile approaches, assuming four roles. (See “About the Research.”) Two of the roles are intention-driven and two are event-driven, with each role assumed on its own time schedule throughout the life of the project. The first role, developing collaboration, is performed early on during the project. The second role, integrating planning and review with learning, is performed periodically. The third role, preventing major disruptions, is performed occasionally. The fourth role, maintaining forward momentum, is performed continuously.5

The Four Roles of the Project Manager

Our research found that today’s successful project managers assume four roles that help them cope with unexpected events.

The Four Roles of the Project Manager

About the Research

In recent years, many researchers have concluded that one reason for the widespread poor statistics about project results is the wide gap between research and practice.i The overall objective of our research was to develop a practice-based theory of project management.ii To this end, we used three complementary approaches to collect firsthand data on the practices of successful project managers. Believing that management is best learned by emulating exemplary role models, we focused our studies on a selective sample of the best practitioners in their respective organizations.

1. Develop Collaboration

Since project progress depends on the contribution of individuals who represent different disciplines and are affiliated with different parties, collaboration is crucial for the early detection of problems as well as the quick development and smooth implementation of solutions. The importance of collaboration can be demonstrated by the following two examples in which projects failed.

Tim Flores analyzed the causes for the different outcomes of three Mars exploration missions initiated by NASA’s Jet Propulsion Laboratory: Pathfinder, Climate Orbiter and Polar Lander. Although all three projects were conducted under the same guiding principles, were of comparable scope and shared many elements (even some of the same team members), Pathfinder was a success, whereas the other two missions failed. Flores expected to find that the Pathfinder project differed from the other projects in a variety of factors, such as resources, constraints and personnel. Although this was true to some extent, he found that the primary factor distinguishing the successful mission from the failed missions was the level of collaboration. The Pathfinder team developed trusting relationships within a culture of openness. Managers felt free to make the best decisions they could, and they knew that they weren’t going to be harshly punished for mistakes. That trust never developed in the other two projects.6

A different NASA project, the Wide-Field Infrared Explorer (WIRE) mission, was designed to study the formation and evolution of galaxies. Its telescope was so delicate it had to be sealed inside a solid hydrogen cryostat. When, shortly after launch, a digital error ejected the cryostat’s cover prematurely, hydrogen was discharged with a force that sent the Explorer craft tumbling wildly through space, and the mission was lost.

Jim Watzin, a project manager at NASA and a member of the WIRE project team, had this to say regarding the official report that NASA issued following the WIRE failure: “WIRE failed because people could not or would not communicate well with each other. … Individuals … simply were uncomfortable allowing others to see their work.” Watzin added: “The real [lesson] from this loss is that any team member that does not participate as a true team player should be excused [from the project].”7

In the next two examples, project success can be attributed to the project manager’s deliberate attempt to develop collaboration. (Note that in the discussions that follow, we use only the project managers’ first names.)

Allan, the payload manager for NASA’s Advanced Composition Explorer project at the Jet Propulsion Laboratory, has described how he developed trust between his team and the 20 groups of scientists developing instruments for the project, who were based at universities throughout the United States and Europe. Allan devised a three-stage plan. First, he selected team members who could operate in a university environment — people who knew when to bend or even break the rules. Second, he relocated his JPL team to a university environment (California Institute of Technology), recognizing that it might be difficult to develop an open, flexible culture at JPL. Third, he came up with an uncommon process for interacting with the scientists.8

The challenge, with regard to interaction, was getting the scientists to regard his JPL team as partners. Having dealt with NASA before, they tended to believe that someone coming from JPL would demand a lot of paperwork, lay out sets of rules to be followed and expect things to be done a certain way. In fact, many of the scientists weren’t sure they should share with Allan’s team the problems they were encountering along the way — problems that could slow down the project’s progress.

The primary role of Allan’s team was to review the development of the instruments, and Allan believed that the best way to do this was by focusing on trust and convincing the scientists that his team was there to help them solve their problems. To facilitate this, Allan and his team of five to eight members traveled to each university and stayed on site for an extended period of time. By spending days and nights with the scientists and helping them solve their problems — not as auditors but as colleagues — the JPL team gradually became accepted as partners.9

Most projects are characterized by an inherent incompatibility: The various parties to the project are loosely coupled, whereas the tasks themselves are tightly coupled. When unexpected events affect one task, many other interdependent tasks are quickly affected. Yet the direct responsibility for these tasks is distributed among various loosely coupled parties, who are unable to coordinate their actions and provide a timely response. Project success, therefore, requires both interdependence and trust among the various parties.10

However, if one of the parties believes that project planning and contractual documents provide sufficient protection from unexpected problems, developing collaboration among all the parties may require creative and bold practices.

This was the case in a large construction project that P&G launched at one of its European plants. After the contractor’s project manager, Karl, brushed off numerous team-building efforts, Pierre, the P&G project manager, finally found an opportunity to change Karl’s attitude. Three months into construction, the contractor accidentally placed a set of foundations 10 inches inside the planned periphery and poured about 600 lineal feet of striped foundation in the wrong place. Instead of forcing the contractor to fix his mistake and start over — a solution that would have damaged the contractor’s reputation and ego — Pierre chose a different approach. Through several intensive days of meetings and negotiations with the project’s users and designers, he was able to modify the interior layout of the plant, thereby minimizing damage to the users without having to tear down the misplaced foundations and hurt the project’s schedule. The financial cost of making the changes incurred by the contractor’s mistake was significant, but the loss in reputation was minimal. As a result, Karl gradually embraced Pierre’s working philosophy — namely, “If they fail, we fail.” The realization that the organizations involved in the project are all interdependent led to the development of a collaborative relationship.

2. Integrate Planning and Review With Learning

Project managers faced with unexpected events employ a “rolling wave” approach to planning. Recognizing that firm commitments cannot be made on the basis of volatile information, they develop plans in waves as the project unfolds and information becomes more reliable. With their teams, they develop detailed short-term plans with firm commitments while also preparing tentative long-term plans with fewer details. To ensure that project milestones and objectives are met, these long-term plans include redundancies, such as backup systems or human resources.11

One key difference between the traditional planning approach, in which both short- and long-term plans are prepared in great detail, and the rolling wave approach becomes evident when implementation deviates from the plan. In the traditional planning approach, the project team attempts to answer the question: Why didn’t our performance yesterday conform to the original plan? In the rolling wave approach, project managers also attempt to answer the question: What can we learn from the performance data to improve the next cycle of planning? In particular, they attempt to learn from their mistakes — to prevent an unexpected event from recurring.12

Successful project managers do not limit the learning process to the planning phase but also use it for project reviews. For example, after a review session in the midst of a project at NASA’s Goddard Space Flight Center, Marty was a frustrated project manager. The existing review process may have fulfilled upper management’s need to control its operations, but Marty felt it did not fulfill his team’s need to learn. Therefore, he modified the process to give his team the best input for identifying problems and the best advice for solving them. This meant doing away with the usual “trial court” atmosphere at NASA review sessions, where team members’ presentations were often interrupted by review board members’ skeptical comments and “probing the truth” questions. In its place, Marty developed a review process that provided feedback from independent, supportive experts and encouraged joint problem solving rather than just reporting.

The first thing Marty did was unilaterally specify the composition of the review panel to fit the unique needs of his project, making sure that the panel members agreed with his concept of an effective review process. The second thing he did was change the structure of the sessions, devoting the first day to his team’s presentations and the second day to one-on-one, in-depth discussions between the panel and the team members to come up with possible solutions to the problems identified on the first day. This modified process enabled Marty to create a working climate based on trust and respect, in which his team members could safely share their doubts and concerns. At the end of the second day, the entire panel held a summary meeting. It was agreed that the review session had been a big success. In fact, other NASA project managers quickly adopted Marty’s process, including it in their managerial tool kits.13

Successful managers of more traditional projects, such as designing and building manufacturing facilities, also practice learning-based project reviews. P&G has replaced review panels composed of external experts or senior managers with peer-review panels. These last four to eight hours and follow a simple protocol: First, the project team concisely communicates its technical and execution strategies, and then the floor is opened to all the invited peers for comments, critique and clarifying questions. Out of the numerous notes documented throughout the review process, five to 10 “nuggets” usually emerge that the project team uses to improve the technical, cost and scheduling aspects of the project. Sometimes, the invited peers even take one or two of the “nuggets” back to their own projects.14

3. Prevent Major Disruptions

In their book Great by Choice, Jim Collins and Morten T. Hansen describe one of the core behaviors of great leaders as “productive paranoia.” Even in calm periods, these leaders are considering the possibility that events could turn against them at any moment and are preparing to react.15 Similarly, successful project managers never stop expecting surprises, even though they may effect major remedial changes only a few times during a project. They’re constantly anticipating disruptions and maintaining the flexibility to respond proactively.16 The following two examples illustrate that, when convinced that a change is unavoidable, a successful project manager acts as early as possible, since it is easier to tackle a threat before it reaches a full-blown state.

NASA’s Advanced Composition Explorer project, discussed earlier, was plagued from the start with severe financial problems arising from internal and external sources. Internally, the development of the nine scientific instruments led very quickly to a $22 million cost overrun. Externally, the project, which was part of a larger NASA program, inherited part of a budget overrun in an earlier project. As a result of these internal and external factors, the ACE project experienced frequent work stoppages, forcing the manager to constantly change his contractors’ and scientists’ work priorities.

Don, the project manager, believed that without immediate changes the project would continue down the same bumpy road, with the likely result that cost and time objectives would not be met. To prevent this, he made an extremely unpopular decision: He stopped the development of the instruments, calling on every science team to revisit its original technical requirements to see how they could be reduced. In every area — instruments, spacecraft, ground operation, integration and testing — scientists had to go back and ask such questions as: How much can I save if I take out a circuit board — and how much performance will I lose if I do take it out?

At the same time, Don negotiated a new agreement with NASA headquarters to secure stable funding. To seal the agreement, he assured them that, by using descoping tactics, the project would not go over budget. With the newly stable budget and the project team’s willingness to rethink its technical requirements, the ACE project gradually overcame its technical and organizational problems. Completed early and below budget, the spacecraft has provided excellent scientific data ever since.

The second example of preventing a major disruption from occurring took place during the Joint Air-to-Surface Standoff Missile, or JASSM, project. In this case, the Pentagon had decided to make another attempt to develop JASSM after the first attempt was aborted due to a cost overrun of more than $2 billion. The original project manager for the second attempt was dismissed in midcourse due to poor performance, and a new project manager, Terry, replaced him.

To keep costs under control, Terry decided to have two contractors compete for the final contract. Terry quickly realized that both contractors were approaching the development too conservatively and that unless he took a more radical approach, the project would be canceled again. Therefore, he told the contractors to completely disregard the military standards and adhere to only three key performance parameters. One of the contractors, Lockheed Martin, took this directive seriously and changed its approach dramatically. It decided to build the missile fuselage not out of metal but out of composites. And to accomplish this, it found a company that made baseball bats and golf club shafts. The company had never built a military product, but it knew how to weave carbon fiber and was open-minded. Following trials with several prototypes, this company was able to manufacture a product of the highest quality. Lockheed Martin transformed this small company from a baseball bat provider to a cruise missile supplier, which led to Lockheed Martin winning the contract — as well as to remarkable cost reductions.

4. Maintain Forward Momentum

As noted earlier, when unexpected events affect one task, many other interdependent tasks may also be quickly impacted. Thus, solving problems as soon as they emerge is vital for maintaining work progress. As Leonard R. Sayles and Margaret K. Chandler wrote in their 1971 book Managing Large Systems, “In working to maintain a forward momentum, the manager seeks to avoid stalemates. … Another penalty for waiting is that in a good many situations, corrective action is possible only during a brief ‘window.’ … The heart of the matter is quickness of response.” In a study of project managers on construction sites, it was found that they addressed (not necessarily solved) 95 percent of the problems during the first seven minutes following problem detection.17

In a recent knowledge development meeting, a group of 20 project managers at The Boldt Company, a construction services company based in Appleton, Wisconsin, focused on how best to cope with unexpected events. It became evident that most of the managers employed three complementary practices: hands-on engagement; frequent face-to-face communication; and frequent moving about.

Regarding hands-on engagement, one project manager, Charlie, said that to solve problems he often engaged in activities such as making phone calls, convening urgent meetings and taking trips to local retail stores to purchase missing parts. Documenting the time it took him to resolve 10 recent problems, Charlie reported that three were resolved within 30 minutes, three within 60 minutes, and three in less than one day; one problem took two days until it was resolved. Charlie also said that, because of his quick responses, he made one mistake. However, he was able to quickly repair its damage the following day. The entire group at Boldt agreed that maintaining forward momentum was more important than always being right.18

The second practice, frequent face-to-face communication, was described by Matt, one of the project managers, in terms of “daily 10-minute huddles” with all the on-site team members (the superintendent, field engineers, project coordinator and safety officer). Matt used these informal morning meetings to share the latest instructions from the client and to ensure that team members understood one another’s current workloads and constraints and understood how they could help one another. Very often, the meetings enabled the team to identify and resolve conflicting priorities before they became problems. Matt noted that, while the primary purpose of the huddle was to update everyone, it also reinforced a spirit of camaraderie and a sense of shared purpose. As a result, these meetings turned out to be very valuable for sustaining teamwork.19

As for the third practice, frequent moving about, one project manager, Tony, described the three primary outcomes of spending 30 minutes a day roaming around the project site. First, he was able to develop rich and open communication with his team members. Tony explained that while many workers did not feel safe asking him questions during various formal meetings, they felt very comfortable interacting with him freely during his on-site visits, which had a great impact on their motivation. Second, receiving immediate information, and in particular a greater range of information, enabled him to identify problems early on. At times, he was able to detect conflicts before they actually became an issue. Third, Tony developed a much better understanding of where the project was with respect to the schedule, rather than having to take someone’s word for it. He found that coming to the weekly and monthly planning and scheduling meetings equipped with firsthand, undistorted information allowed him to address questions and solve problems much better. The Boldt project managers did not agree on the preferred timing for moving about and, in particular, whether one should schedule the visits, as Tony did, or leave their timing flexible. However, they all agreed that moving about is a most effective practice that should be applied as often as possible.20

These three practices are not limited to construction projects. For example, in the previously mentioned JASSM project, which was geographically dispersed, all three practices necessary to maintain forward momentum were employed by the various project managers at each production site. Additionally, Terry, the customer’s project manager, spent much of his time moving about between all the different production sites.

Implications for Senior Managers

Although every project manager tries to minimize the frequency and negative impact of unexpected events, in today’s dynamic environment such events will still occur. Acknowledging the emergence of a problem is a necessary first step, allowing the project manager to respond quickly and effectively. Some organizations assume that almost all problems can be prevented if the project manager is competent enough — resulting in project managers who are hesitant to admit that they are facing an emerging problem. In fact, a recent study indicates that project managers submit biased reports as often as 60 percent of the time.21 When upper management fosters an organizational climate that embraces problems as an inherent part of a project’s progression, project managers are able to detect and resolve problems more successfully.

Management scholar Henry Mintzberg argues that today’s managers must be people-oriented, information-oriented and action-oriented. In contrast, the two prevailing project management approaches, the traditional approach and the agile approach, do not require project managers to encompass all three orientations. The traditional approach (primarily intention-driven) stresses information, whereas the agile approach (primarily event-driven) stresses people and action.

By assuming the four roles discussed in this article, the successful project managers we studied are both intention- and event-driven and embrace all three orientations. Developing collaboration requires them to be people-oriented. Integrating planning and review with learning requires them to be information-oriented. Preventing major disruptions requires them to be action-oriented. Finally, maintaining forward momentum, which is pursued throughout a project, requires them to adopt all three orientations. Senior managers must ensure that all three orientations are considered when selecting project managers and developing project management methodologies.22

-courtesy of MIT Sloan Management Review

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Yale Will Offer Web-Based Master of Medical Science Degree

How much of your business is online?

Degree for aspiring physician assistants is latest sign online learning is gaining acceptance from elite universities

Yale University is creating a Web-based master of medical science degree for aspiring physician assistants, the latest sign that online learning is gaining acceptance from the nation’s most prestigious institutions of higher education.

The Ivy League school on Tuesday will announce it is joining with education technology company 2U Inc. to offer an online version of its decades-old program in the fast-growing field. The campus-based version has space for only about 40 students each year, while more than 1,000 apply.

“It is a coming-of-age” for online education, said Lucas Swineford, executive director of Yale’s office of digital dissemination and online learning. “The stigma has certainly changed over the past five or six years. This is a Yale degree.”

The same admission standards will apply for prospective students as for the on-campus version of Yale’s physician assistant degree, and the online program will carry the same price. The 28-month program currently costs $83,162. Yale will split the revenue from the online degree with 2U, officials said.

The program will rely heavily on live, interactive online classes, as well as hands-on clinical stints at field sites near students and at least three meetings on Yale’s New Haven, Conn., campus for activities such as cadaver dissection.

Once the domain of for-profit colleges and schools seeking to boost enrollment, online learning—with its promise of lower costs for schools and sometimes for students—has grown increasingly mainstream in recent years.

About one-third of students enrolled in U.S. colleges in Fall 2012, or 7.13 million students, took at least one course online. That is up from 9.6% a decade earlier, according to a 2014 report by the Babson Survey Research Group.

For the past few years, Yale and other elite schools have shared their academic expertise with the masses via free Web classes—called massive, open, online courses or MOOCs—but don’t grant credit for them.

The new Yale program is expected to begin in January with 12 students, pending certain regulatory approvals. Yale could enroll 360 students across both the on-campus and online programs within five years, university officials said.

A few other Ivy schools, including Columbia University and Cornell University, offer online versions of select programs. And Yale has a nonclinical, doctoral nursing program that grants degrees online.

2U also runs the University of North Carolina, Chapel Hill’s online M.B.A., a master’s in counseling at Northwestern University and a nursing degree at Georgetown University, among other programs.

“We think it’s a transformative moment for the company,” said 2U Chief Executive Chip Paucek, though he noted the Yale course is a long-term play since the company put in a seven-figure upfront investment to get the program going.

Online learning data

One of the logistical challenges of the new Yale program is that students must complete 14 clinical rotations throughout the program. 2U said it would coordinate placement at medical facilities near the students nationwide.

Lawrence Herman, chairman of the board of the American Academy of Physician Assistants, said a number of PA training programs are beginning to put certain courses online, but students still need several thousand hours of in-person time with patients to gain certification.

“Rigorous is, perhaps, an understatement to describe these programs,” he said. “This is not a shortcut in any way.”

 

By Melissa Korn, Wall Street Journal

 

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Here’s What Will Truly Change Higher Education: Online Degrees That Are Seen as Official

Three years ago, technology was going to transform higher education. What happened?

Over the course of a few months in early 2012, leading scientists from Harvard, Stanford and M.I.T. started three companies to provide Massive Open Online Courses, or MOOCs, to anyone in the world with an Internet connection. The courses were free. Millions of students signed up. Pundits called it a revolution.

But today, enrollment in traditional colleges remains robust, and undergraduates are paying higher tuition and taking out larger loans than ever before. Universities do not seem poised to join travel agents and video stores on the ash heap of history — at least, not yet.

The failure of MOOCs to disrupt higher education has nothing to do with the quality of the courses themselves, many of which are quite good and getting better. Colleges are holding technology at bay because the only thing MOOCs provide is access to world-class professors at an unbeatable price. What they don’t offer are official college degrees, the kind that can get you a job. And that, it turns out, is mostly what college students are paying for.

Now information technology is poised to transform college degrees. When that happens, the economic foundations beneath the academy will truly begin to tremble.

Traditional college degrees represent several different kinds of information. Elite universities run admissions tournaments as a way of identifying the best and the brightest. That, in itself, is valuable data. It’s why “Harvard dropout” and “Harvard graduate” tell the job market almost exactly the same thing: “This person was good enough to get into Harvard.”

Degrees give meaning and structure to collections of college courses. A bachelor’s degree signifies more than just 120 college credits. To graduate, students need a certain number of upper- and lower-division credits, a major and perhaps a sprinkling of courses in the sciences and humanities.

College degrees are also required to get graduate degrees. It didn’t used to be that way. Back in the 19th century, people interested in practicing law could enroll directly in law school. When Charles Eliot became president of Harvard in 1869, he set to work making bachelor’s degrees a prerequisite for admission to Harvard’s graduate and professional schools. Other colleges followed suit, and by the turn of the century a large and captive market for their educational services had been created.

Most important, traditional college degrees are deeply embedded in government regulation and standard human resources practice. It doesn’t matter how good a teacher you are — if you don’t have a bachelor’s degree, it’s illegal for a public school to hire you. Private-sector employers often use college degrees as a cheap and easy way to select for certain basic attributes, mostly the discipline and wherewithal necessary to earn 120 college credits.

Free online courses won’t revolutionize education until there is a parallel system of free or low-fee credentials, not controlled by traditional colleges, that leads to jobs. Now technological innovators are working on that, too.

The Mozilla Foundation, which brought the world the Firefox web browser, has spent the last few years creating what it calls the Open Badges project. Badges are electronic credentials that any organization, collegiate or otherwise, can issue. Badges indicate specific skills and knowledge, backed by links to electronic evidence of how and why, exactly, the badge was earned.

Traditional institutions, including Michigan State and the University of Illinois at Urbana-Champaign, are experimenting with issuing badges. But so are organizations like the National Oceanic and Atmospheric Administration, 4-H, the Smithsonian, the Dallas Museum of Art and the Y.M.C.A. of Greater New York.

The most important thing about badges is that they aren’t limited to what people learn in college. Nor are they controlled by colleges exclusively. People learn throughout their lives, at work, at home, in church, among their communities. The fact that colleges currently have a near-monopoly on degrees that lead to jobs goes a long way toward explaining how they can continue raising prices every year.

The MOOC providers themselves are also moving in this direction. They’ve always offered credentials. In 2013, I completed a semester-long M.I.T. course in genetics through a nonprofit organization run by Harvard and M.I.T., called edX. You can see the proof of my credentials here and here.

Coursera, a for-profit MOOC platform, offers sequences of courses akin to college majors, followed by a so-called capstone project in which students demonstrate their skills and receive a verified certificate, for a fee of $470. The Coursera Data Science sequence is taught by Johns Hopkins University and includes nine four-week courses like exploratory data analysis, regression models and machine learning. The capstone project requires students to build a data model and create visualizations to communicate their analysis. The certificate is officially endorsed by both Coursera and Johns Hopkins. EdX has similar programs.

Inevitably, there will be a lag between the creation of such new credentials and their widespread acceptance by employers and government regulators. H.R. departments know what a bachelor’s degree is. “Verified certificates” are something new. But employers have a powerful incentive to move in this direction: Traditional college degrees are deeply inadequate tools for communicating information.

The standard diploma has roughly the same amount of information that prisoners of war are required to divulge under the Geneva Conventions. College transcripts are a nightmare of departmental abbreviations, course numbers of indeterminate meaning, and grades whose value has been steadily eroded by their inflation.

This has the effect of reinforcing class biases that are already built into college admissions. A large and relatively open-access traditional public university might graduate the same overall number of great job candidates as a small, exclusive, private university — say, 200 each. But the public 200 may graduate alongside 3,000 other students, while the private 200 may have only 300 peers. Because diplomas and transcripts provide few means of reliably distinguishing the great from the rest, employers give a leg up to private college graduates who probably had some legs up to begin with.

The new digital credentials can solve this problem by providing exponentially more information. Think about all the work you did in college. Unless you’re a recent college graduate, how much of it was saved and archived in a way that you can access now? What about the skills you acquired in various jobs? Digital learning environments can save and organize almost everything. Here, in the “unlabeled” folder, are all of my notes, tests, homework, syllabus and grades from the edX genetics course. My “real” college courses, by contrast, are lost to history, with only an inscrutable abbreviation on a paper transcript suggesting that they ever happened at all.

Open credentialing systems allow people to control information about themselves — what they learned in college, and what they learned everywhere else — and present that data directly to employers. In a world where people increasingly interact over distances, electronically, the ability to control your online educational identity is crucial.

This does present a new challenge for employers, who will have to sift through all this additional information. College degrees, for all of their faults, are quick and easy to digest. Of course, processing large amounts of information is exactly what computers are good for. Scientists at Carnegie Mellon University are designing open badges that are “machine discoverable,” meaning that they are designed to be found by employers using search algorithms to locate people with specific skills.

Protecting private, personal information is a big part of navigating the digital era. But people want certain kinds of information to be as public as possible — for example, that they are very good at specific jobs and would like to find an employer looking for such people. Companies such as LinkedIn are steadily building new tools for people to describe their employable selves. College degrees, by contrast, say little and never change.

In the long run, MOOCs will most likely be seen as a crucial step forward in the reformation of higher education. But their true impact won’t be felt until students and learners of all kinds have access to digital credentials that are also built for the modern world. Then they’ll be able to acquire skills and get jobs for a fraction of what colleges cost today.

This essay was adapted from “The End of College: Creating the Future of Learning and the University of Everywhere,” published by Riverhead Books on Tuesday. Kevin Carey directs the education policy program at the New America Foundation.

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Indian Outsourcers Struggle to Evolve as Growth Slows

Indian technology outsourcing companies look to create off-the-shelf software instead of peddling services of programmers

BANGALORE, India—As its growth slows, India’s technology services outsourcing industry is struggling to become less dependent on peddling the services of inexpensive programmers and trying to enter new businesses like off-the-shelf software and helping customers with big data and cloud computing.

India’s leading outsourcers, including Tata Consultancy Services Ltd. and Infosys Ltd. , said last month that their profit growth was squeezed last quarter by dwindling demand from the U.S. and Europe.

The National Association for Software and Services Companies says the industry’s revenue growth—which was more than 30% seven years ago—will be less than 15% in the fiscal year ending March. Many analysts think even that figure is optimistic.

Executives agree, there is just not as much demand for the information-technology services provided by thousands of Indian programmers that can build bespoke software solutions for each company.

Companies “are not pouring incremental money,” into their IT infrastructure, said U.B. Pravin Rao, the chief operating officer of Infosys, at a Nasscom leadership conference in Mumbai this month. “Earlier we used to see increases in technology budgets. But today, it’s unheard of.”

Bangalore’s outsourcing industry—which grew at breakneck speeds for years and changed the way the world of IT works—has matured. While it will continue to find ways to peddle the talents of India’s inexpensive programmers and engineers, it needs to find new businesses if it wants to thrive.

Industry leaders met at the conference in Mumbai earlier this month to talk about the next steps.

“The ways in which services are delivered to customers need to be reimagined,” said Krishnakumar Natarajan, the chief executive of medium-size software exporter Mindtree.

In the traditional outsourcing model, armies of programmers were sent to company sites around the globe. Working in tandem with code writers in India, they focused on stitching together and maintaining systems built around software from global software companies such as SAP and Oracle Corp.

The Indian industry is now moving towards having fewer basic code writers but more statisticians and specialist programmers who can create off-the-shelf and branded software.

“The difficulty before these service providers is shifting from somebody who tinkers with, integrates and maintains somebody else’s software to becoming the people who actually produce the software,” said Siddharth Pai, president for the Asia-Pacific region at outsourcing advisory firm ISG.

Indian companies will be looking to compete with SAP and others by carving out their own software niches with competitive pricing and specialization. Among the new areas of focus will be software for banking, logistics and cloud computing.

Big data could also be an opportunity for Indian companies. Firms need software to manage and mine reams of data generated as their systems go online.

Tata Consultancy and Infosys, for example, are both looking to hire thousands statisticians, specialist code writers and data scientists to create software that can scrub and crunch data.

“You need to build statistical models to understand the correlation between usage pattern X and person Y and after that be able to take it to the next level where you can predict the behavior of person Y,” said ISG’s Mr. Pai.

Of course entering a new business doesn’t automatically lead to new revenues. A few years ago Infosys and other software companies set their eyes on the highly profitable technology consulting business of International Business Machines Corp. and Accenture but failed to make much headway. Consulting was hardly mentioned as a new avenue for revenues at this month’s software conference.

It will take a few years, analysts say, but the companies that can reinvent themselves will remain relevant and become global software brands. Those that are stuck in the labor-intensive businesses will continue to see their revenue growth and profit margins continue to dwindle.

“Unless these companies make the shift to selling patented software and products as well as retune for digital transformation, a shift to higher growth may be hard to come by,” said Ray Wang, principal analyst and founder of U.S.-based Constellation Research Inc.

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Service innovation in a digital world

New digital upstarts are threatening the bottom lines, growth prospects, and even business models of traditional service providers. It’s time for incumbents to innovate—or be left behind.

February 2015 | byTony D’Emidio, David Dorton, and Ewan Duncan – McKinsey Quarterly

A growing number of companies are finding their service businesses under threat. The culprits are members of a new wave of digital upstarts that capitalize on changes in technology, customer behavior, and the availability of data to create innovative, customer-friendly alternatives to the services incumbents offer. Indeed, the sorts of digital disruptions that began in retailing with the likes of Amazon, two decades ago, are fast coming to an industry near you—if they haven’t already. Examples include Uber and Zipcar in transportation, Airbnb in hotels and hospitality, AngelList in venture capital, and Castlight Health and Healthgrades in healthcare. Attackers such as these may be small now, but they represent a growing challenge to traditional companies.

The attackers also highlight an uncomfortable truth: large companies rarely put as much sustained effort and management attention into transforming services as they do with products. Imagine the reaction of a time traveler from 50 or even 20 years ago upon visiting a contemporary hospital. The medical devices, tools, and products available to physicians would be largely unrecognizable, but the service experience, in many cases, would be largely the same. The service inertia big companies often suffer is understandably hard to shake. Change is difficult with a large base of legacy assets optimized for a certain way of working, as well as a large, distributed workforce steeped in the status quo. The incremental approach many companies take to improving services doesn’t help; processes that grind out small, steady cost reductions rarely deliver breakthroughs.

Nonetheless, some incumbents are fighting back successfully. These companies are learning from the attackers while mobilizing their own strengths—including scale, superior resources, and access to customers—to redefine service offerings, harness digital technology, and improve the customer experience. Some are lowering their costs as well. While few organizations have mastered the new environment, we can already see that winning approaches will combine three elements:

  1. a focus on service innovation matching the intensity and attention that product companies bring to R&D
  2. the ability to personalize the customer experience and to help customers do things themselves
  3. the will to simplify (and in some cases automate) the way services are delivered

To pull all this off, companies must find more collaborative ways of working to ensure that they remain focused on their customers, not their own internal processes. A closer look at how the environment is changing and what leading companies are doing about it should stir the imaginations of a wide range of organizations struggling to adapt to a more digital and competitive world.

The new service landscape

The nature of services and the pace of change have shifted dramatically in recent years, and mastering the traditional aspects of service delivery will no longer be enough. To seize the opportunities, companies must learn to tap the potential for service innovation made possible by four evolving trends.1

Higher customer expectations. More than ever, consumers demand greater involvement, customization, personalization, and mobility from services—with immediate results. When they see cutting-edge service innovations in one industry, they expect to find them in others as well; witness the spread of self-service kiosks from airline check-ins to the retailing and hospitality industries. As industry boundaries increasingly blur for customers, companies must look for new ideas beyond their immediate rivals.

The rise of the mobile Internet. About 1.5 billion smartphones are currently in use worldwide and more than 100 billion apps were downloaded in 2013, up from 64 billion in 2012.2 The resulting mobile and self-service possibilities are transforming service delivery. Uber’s disruption of the taxi business is just one prominent example. Advances in digital payments are increasingly spurring mobile commerce, with far-reaching implications in financial services and retailing. Remote access and monitoring in healthcare are also potential game changers made possible by increased connectivity. The proliferation of smart devices unlocks growth opportunities, reduces the cost to develop services, and dramatically lowers barriers to entry.

Big data and advanced analytics. Companies such as Amazon and Harrah’s are known for using customer data to personalize and tailor their services. Continued advances in analytic capabilities allow companies to draw insights from massive, previously untapped sources, leading to new service possibilities. SATMAP, for example, is a software solution that uses advanced analytics to improve service in call centers. It helps companies match callers to service agents with appropriate personalities, resulting in higher rates of customer satisfaction and service-to-sales conversion.

The Internet of Things. Pervasive machine-to-machine (M2M) connectivity3 is already facilitating real-time service delivery in a number of B2B applications, such as the sensors GE uses in aircraft engines to monitor performance and improve the efficiency of maintenance. In the B2C space, Nest (recently acquired by Google) uses M2M connectivity to link its smart thermostats to other home devices, including washing machines and personal-fitness bands, thus positioning the company as the network hub in a digitally connected home. The prevalence of connected devices opens up possibilities for proactive, even “touchless” service, as well as new commercial models quite unlike the traditional fee-for-service one.

Three imperatives

The benefits of mastering these shifts will be significant. Services, which currently represent about 65 percent of global GDP, are expected to account for about three-quarters of global growth over the coming decade. Companies that evolve quickly will better position themselves to capture this growth, while those clinging to traditional models will face growing pressure from digital attackers. To meet the challenges, forward-looking incumbents are pursuing three imperatives.

1. Institutionalize service innovation

Services, like products, have a shelf life. After all, customer demand evolves, service expectations change, and technological advances constantly bring new possibilities. Services, therefore, should be periodically examined and refreshed, just as products are. Many companies think of R&D as exclusively for product development.4 Yet when they dedicate resources and management attention to developing and refining their service offerings systematically, they can make significant improvements.

For example, a large retailer facing pressure from online attackers and incumbents created a cross-functional R&D lab that focuses on overhauling the retailer’s in-store customer experience and improving employee satisfaction. The lab takes an end-to-end approach, looking at every aspect of store operations, from customer checkout to storage-room processes. One of the lab’s early efforts involved using advanced analytics to optimize the tasks of employees and thus to help stores improve their services and efficiency.

The lab brings its cross-functional experience to tailor the rollout of new ideas so that they are more likely to stick—for example, by releasing them to stores in small batches that are easier for store managers to handle. These and other innovations significantly raised customer satisfaction, while helping the retailer to enhance store operations and refresh store formats much more quickly than it had before. The moves also generated significant labor savings and increased employee satisfaction.

Similarly, a large provider of commercial and residential services was struggling in the face of increasing customer expectations, customer dissatisfaction, and churn rates. To respond, company executives created a permanent in-house innovation team staffed with colleagues from different parts of the business, including customer care, scheduling and dispatch, finance, and marketing.

The team works its way through the service offerings of the company’s different business units on a three-month rotating cycle, troubleshooting problems and working with the businesses to spot opportunities. The rotations ensure that every business process can be examined regularly. To bring in fresh thinking and maintain momentum, team members are rotated periodically. By sending them back to their former jobs, the company solicits and spreads new service thinking throughout the organization.

This approach has led to practical and powerful ideas. For example, when the team examined the relationship between customer satisfaction and the scheduling of field services, it discovered that many customers were less concerned with the actual date of service than with getting a date rapidly. This insight allowed the company to optimize its scheduling for maximum efficiency, often by scheduling the service calls for a few days later than it might have otherwise. Nonetheless, customer-satisfaction scores have improved markedly because the uncertainty—and anxiety—around the scheduling process has been removed.

More recently, the team has been testing a mobile workflow app to help field technicians in densely populated urban areas balance their workloads in real time. The app acts as a sort of clearinghouse for service calls: when technicians realize that they may be late for the next visit, they can trade it to a nearby technician who has just finished a job early. While still in the pilot stage, this approach is intriguing because it promises to improve customer satisfaction further still, while requiring no additional centralized resources—the service techs manage the process themselves.

2. Personalize the customer experience

Companies have always sought to understand customers better to tailor services to their needs. Traditionally, this has meant focusing on customer segments or groups. While that wisdom still holds, the advent of massive new datasets and the spread of mobile devices mean that services can now be personalized cost effectively to a much higher degree.

A large credit-card provider, for example, partners with retailers to create personalized, real-time discounts for products and services through a mobile app. The app generates offers by matching customers’ locations (determined from their smartphones) to products and services that should appeal to them given their purchasing habits and preferences. The credit-card company also works with social-media players to draw on the preferences of participating customers, using “likes” and other markers to refine its offers. The initiative helps the company to strengthen its relationships with merchants and serve them better, while also staying relevant to younger, digitally savvy customers.

Some incumbents go further by giving consumers even more control over services (see “Redefining service innovation at Starwood”). Disney recently implemented a new service that uses wristbands with radio-frequency identification (RFID) chips to give patrons more control over their visits to the company’s theme parks and resorts. These MagicBands act as hotel-room keys, allow visitors to enter the park and purchase merchandise, and enable guests to schedule reservations for rides. When customers volunteer additional information, the experience can be personalized further. For example, the bands help costumed Disney characters to greet guests by name when encountering them or to extend personal birthday greetings.5

3. Simplify service delivery

Digital attackers tend to thrive on simplicity. Many adeptly combine new technology with process improvements to make services straightforward and more pleasing. Meanwhile, big incumbents, burdened by legacy IT systems and entrenched processes that have evolved over time, often struggle to keep things simple. Still, incumbents can bring more simplicity to their service operations by looking at the world the way their customers do.

Consider the experience of the healthcare distributor that faced increased pressure on margins and rising customer expectations. On closer examination, executives realized that unnecessary complexity was a factor. For example, each of the internal groups involved in providing the service used its own metric to gauge success. By optimizing their own contribution, they inadvertently overlooked the downstream effect on other internal groups and thus the overall effect on customers.

In response, the company dramatically simplified the metrics it used to measure success, choosing error-free orders as a target ensuring that it would stay focused on customers and not its own internal workings.6 The company also gave the front line additional decision-making authority, which helped employees resolve—and prevent—more customer-service problems. Together, these moves helped increase the proportion of error-free orders by nearly one-third.

Meanwhile, the company’s call centers began serving as the single point of contact for customer problems. (Previously, salespeople had played this role, believing that solving problems themselves strengthened relationships.) While the change represented a mind-set shift for the salespeople, it was one they were willing to make, since it boosted sales.

A large European bank combined technology with an effort to simplify its services, to improve the mortgage-application process. The company formed a team of project managers, mortgage specialists, and software developers who redesigned the process from end to end, eliminating unnecessary handoffs and simplifying the customer experience—all while keeping the process compatible with the company’s legacy IT systems. The resulting web solution has proved popular with customers, reducing approval times to 15 minutes, from several days. Moreover, the bank’s analysis suggests that the quality of loan decisions has improved—even as costs associated with the process have been reduced, on average, by 75 percent per mortgage.

The new services landscape is unlocking innovation opportunities in nearly every industry. Yet for many companies, managing day-to-day operations is all-consuming. Even the most forward-looking incumbents find that implementing an innovation mind-set can be daunting. Institutionalizing service innovation, for example, requires more than setting up a new R&D lab; the lab’s efforts must be hardwired into the company’s services strategy, investment cycles, sales, and operations. Similarly, personalizing the customer experience is about not only mining data and applying the latest analytic techniques but also marrying those capabilities with insights from service representatives, third parties, and customers.

And the quest for simplicity is rarely simple—especially as the pace of innovation and customization continues to grow. Companies that excel on these dimensions, while keeping the customer at the center of everything they do, will be best positioned to survive the mounting pressure from attackers and master the new services environment.

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