Important managerial decisions can be of two types. Decisions about operational efficiency and decisions about strategic efficiency. In operational efficiency, goals and outcomes are known. The question that managers face is: How do I minimize costs to achieve a known outcome? In strategic efficiency, instead, goals and outcomes are not well-defined. They are uncertain. The question in this case is: Should I invest today to obtain an uncertain outcome in the future? The premise of this course is that management matters. By this, we mean that managerial practices affect firm performance. However, the managerial practices that affect operational efficiency are different from the managerial practices that affect strategic efficiency. The course focuses on strategic efficiency, and in particular, on how managerial decisions in which uncertainty is important affect firm performance. However, as a starting point, it is useful to clarify the notion of operational efficiency. Harvard professor Raffaella Sadun, together with colleagues Nick Bloom from Stanford University and John Van Reenen from MIT, conducted a survey of 12,000 executives worldwide on the adoption of 18 classical managerial practices. These practices range from target settings to operations management, performance monitoring, and talent management. Their study produced two main results. First, there are more differences in the adoption of managerial practices across firms than across countries. Of course, there are more better-managed firms in advanced countries than in less advanced countries. However, even within the advanced countries, there are quite a few firms that do not adopt many of these practices and that are not managed well. There are firms in the less advanced countries that adopt good practices and are managed well. The second result of this study shows that the adoption of managerial practices is correlated with firm performance. In particular, firms that adopt these practices enjoy higher profits, more output growth, higher productivity, more patents, more R&D expenditures. Another set of studies by MIT professor Erik Brynjolfsson and Toronto professor Kristina McElheran show that today an increasing number of firms use data to make decisions. In addition, the use of data to make decisions is associated with investments in information technology, employment of qualified individuals, adoption of advanced managerial practices, and, of course, performance. However, standard managerial practices and data are not the whole story. Practices in decision-making can be different, and they also matter. We need to understand better, what data and decision-making practices can do, and more generally, how firms cope with strategic efficiency. We turn to these issues in the next session.