Articles

What is the optimum growth rate to maximize total return to shareholders? This is a critical question facing both managers and investors. An answer is found in the concept of a company's growth corridor, which is set by the upper bounds of a financially sustainable growth rate and the lower bounds of the competitive growth rate. Using data from Fortune Global 500 companies, the authors find that those companies that grow within their respective growth corridor create above average total shareholder returns. Drawing examples from companies such as AES, BMW, Marks & ; Spencer, Nestle, and Wal-Mart, they show how managers can identify their growth corridors, and how they can restore healthy and smart growth.

Personal investment puts management at risk.

Faster time to market and shorter product life cycles are pushing companies to introduce new products more frequently. While new products can offer tremendous value, product introductions and transitions pose enormous challenges to managers. In studying product introductions, the authors found that a common handicap was the lack of a formal process to guide managerial decisions. Drawing from research at Intel and examples from General Motors and Cisco Systems, the article develops a process to facilitate decision making during new product transitions. The proposed process analyzes the risks impacting a transition, identifies a set of factors across departments tracking those risks, monitors the evolution of these factors over time, and develops playbook mapping scenarios of risks and responses. The process helps level expectations across the organization, lessens the chance and impact of unanticipated outcomes, and helps synchronize responses among different departments. It assists managers in designing and implementing appropriate policies to ramp up sales for new products and ramp down sales for existing products, balancing the supply and the demand for both so that combined sales can grow smoothly.

Defining an innovation process increases companies' future value.

During the last few decades, companies have moved away from hierarchical, integrated supply chains in favor of fragmented networks of strategic partnerships with external entities. This change has caused ripples throughout the old supply network and raised questions about the future. The authors consider the impact of vertical disintegration in large-scale supply networks, particularly in the textile and electronics industries. They focus on supply chain strategies that have been adopted by network players in order to accommodate for the changing governance and ownership structures. Their broad hypothesis is that the process of disintegration in many industries is not sustainable from a coordination and control viewpoint, and therefore will be followed by eventual reintegration - although it may take different forms in different industries. They discuss the expanded role of the systems integrator, which, in many cases, goes beyond critical coordination services and extends into issues related to control and governance of portions of the supply network. They also explore the challenges that systems integrators are likely to face, and they contrast two different models of coordination and governance that could be adopted by such players.

In every large company, groups of creative individuals self-organize to explore and develop ideas that they care deeply about. These collaborative networks often include customers and others outside the company’s boundaries. Take, for instance, the automaker BMW, which posts numerous engineering challenges on its Web site, enabling customers and company designers to network and collaborate on developing various features of future cars. Now collaborative innovation is being extended from the realm of idea generation and product development to the very essence of doing business. In fact, some companies have based their entire business models on collaborative networks. The classic example is Wikipedia, the free online encyclopedia that relies on a swarm of people to write, edit and fact check the information listed in its entries. According to the authors, these “swarm businesses” pick up where the e-business craze stopped, with one crucial difference: e-businesses were primarily concerned with eyeballs (getting as many people as possible to visit a particular Web site), whereas swarm businesses strive mainly to create real value for the swarm. As companies like BMW, IBM, Novartis and others are discovering, swarm businesses require a completely new corporate mindset. Specifically, to reap the benefits of swarm innovation, companies must (1) gain power by giving it away, (2) share with the swarm and (3) concentrate on the swarm, not on making money. Although these principles differ from the traditional ways of doing business in a number of fundamental ways, they are crucial for companies to succeed in this emerging era of increased collaboration among innovators both inside and outside the organization.

Some weaknesses can be addressed with proper effort and resources, while others simply cannot be changed.

Organizations need to know the details about their performance in all areas of operations—customer service, order fulfillment, inventory management, and procurement—yet surprisingly few companies know what to measure or how to measure it. Most companies’ efforts at operational performance management fail because of common human mistakes; understanding these Seven Deadly Sins of performance management is key to correcting them.

Many corporations are failing to obtain the full value from their boards. This lost opportunity occurs not only in dysfunctional organizations but also in companies that perform well and are market leaders. Specifically, from a recent comprehensive study of board reviews, the authors found that many boards are suffering from the following fundamental problems: inadequate competencies, lack of diversity, underutilization of skills, dereliction of duties, and poor selection and assessment processes. To avoid those problems, organizations need to adopt a set of five basic practices: (1) Choose the right directors (four competencies are required: results orientation, strategic orientation, collaboration and independence). (2) Appoint the right chairman (in addition to the four competencies, candidates must be skilled in empowering others to encourage vigorous debate, coaching and mentoring directors, and holding key executives and other board members accountable). (3) Make succession planning the first priority (this starts with graduate recruitment practices at the organization and is complemented by management development programs). (4) Focus on a few key agenda items (at a minimum, boards should regularly address the following issues: conformance with governance codes and regulations, review of the CEO's performance and succession planning, discussion of ways in which the company will create and develop long-term value for shareholders, and monitoring of the company's operating and financial performance). (5) Review the board's collective and individual contributions (reviews should go beyond just compliance). Although these practices might seem obvious, the simple fact is that far too many organizations either neglect them or make costly mistakes in implementing them.

When conflicts aren't managed well, a company's ability to innovate may be at risk.