News — A new study out by looks at the effects of organizational structure and performance feedback on product phaseout, specifically in the mobile device industry.
New Study Title:
Accepted at: Organization Science
Researchers studied only what drives product culling. • If speedy culling is necessary, you want decision making vested with higher level management. Speedy culling is most likely needed with consumer electronics and other products that have a short life-cycle.
Termination decisions should be vested with senior level management to speed responsiveness (particularly in industries where responsiveness is important like those with high levels of tech innovation, short product life cycles or rapid obsolescence).
• Senior level execs oversee whole portfolios, across a variety of products in a variety of geographies. Their career is not dependent on a single product. They are more willing to terminate a project if necessary. Senior level managers have a different set of strategies at their disposal. They can shift resources from one project to another, where lower level management might try and salvage a product.
Senior level managers can more effectively gauge the ripple effect of termination decisions.
• There is a shift from products to ecosystems: a lot of different aspects to the industry – software, components, app store, carriers, content providers – lots of inter dependencies.
The fundamental organizational decision is whether to centralize or decentralize decision-making.
• Need to find a balance. Companies don’t want to overburden senior management with decisions and risk demotivating lower level managers.
Lessons learned: If speed is required, termination decisions should be made at higher management levels, especially for products characterized by technological change, short life cycles and fast obsolescence.
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