Articles

Utopian visions of frictionless, knowledge-sharing, global supply chains are somewhat overstated.

In an attempt to increase both efficiency and service quality, more and more companies are outsourcing to third-party suppliers some key business processes, such as human resources, information technology and procurement. The universe of potential suppliers is diverse and growing, made up of locally based specialists, offshore providers with comparatively low labor costs, and global suppliers who are able to apply sophisticated management techniques and technology. The challenge for clients is to understand their own requirements and to identify providers whose capabilities and objectives are best aligned with their particular needs. Drawing on extensive research, the authors identify three potentially critical areas of supplier competency: delivery competency, transformation competency and relationship competency. Within that context, they discuss 12 capabilities through examples drawn from the outsourcing experiences of firms such as BAE Systems, Lloyd's of London, Deutsche Bank and Bank of America. By benchmarking supplier capabilities against its strategic and operational intent, a company can work to establish relationships that support its business objectives.

People categorize themselves on the basis of demographics, social roles and shared consumption patterns, and these various identities are both numerous and fluid, changing over an individual's lifetime and across situations. That fact is not fully recognized by traditional demographic and psychographic techniques, and the labels that consumers use to define who they are do not necessarily correspond to the variables that marketers typically rely on. A new approach -- identity marketing -- better captures the complex process of how people's sense of who they are influences their purchase decisions. To be sure, the complexity of identity-based judgments presents both opportunities and obstacles for marketers, but companies often fail to appreciate this. In fact, many marketing blunders can be traced back to a fundamental misunderstanding of customer identity. Common mistakes include the following: (1) selling new products solely on their features, (2) failing to solidify first-mover advantage, (3) fighting the competition head-on, (4) sticking with what's worked before, (5) underestimating low-involvement products, and (6) attacking negative word-of-mouth. Identity marketing helps companies avoid such mistakes by providing a deeper understanding of how customers become strongly attracted to the brands and products that are linked to their multiple -- and sometimes seemingly contradictory -- identities.

Forming close relationships with suppliers or customers is a popular business strategy, but such partnerships can develop problems. The authors observe that many close business relationships -- whether joint ventures or loose alliances -- fail. They describe a phenomenon they call the "dark side" of close relationships and maintain that close relationships that seem quite stable can, in fact, be vulnerable to decline and destruction. The authors draw both on their own surveys of business relationships and on other examples. The authors point out that the same factors that strengthen a partnership can also open the door to relationship problems. For example, when an automaker and a supplier built up personal relationships between employees at the two firms to facilitate their alliance and just-in-time manufacturing process, the trust and personal relationships also enabled the supplier more easily to cut corners in the production process. While observing that business relationships with problems can linger on for a surprisingly long time, the authors recommend strategies to prevent the "dark side" from taking over a business relationship. One such strategy is to ensure that both parties in the relationship make investments in it, in effect swapping "mutual hostages." If, however, damage to the relationship has already occurred, possible strategies include turning the crisis into an opportunity to improve the partnership, rotating in new personnel, reconfiguring the relationship or terminating it.

Information technology is undergoing an inexorable shift from being an asset that companies own -- in the form of computers, software and myriad related components -- to being a service that they purchase from utility providers. Three technological advances are enabling this change: virtualization, grid computing and Web services. Virtualization erases the differences between proprietary computing platforms, enabling applications designed to run on one operating system to be deployed elsewhere. Grid computing allows large numbers of hardware components, such as servers or disk drives, to effectively act as a single device, pooling their capacity and allocating it automatically to different jobs. Web services standardize the interfaces between applications, turning them into modules that can be assembled and disassembled easily. The resulting industry will likely have three major components. At the center will be the IT utilities themselves -- big companies that will maintain core computing resources in central plants and distribute them to end users. Serving the utilities will be a diverse array of component suppliers -- the makers of computers, storage units, networking gear, operating and utility software, and applications. And finally, large network operators will maintain the ultrahigh-capacity data communication lines needed for the system to work. IT's shift from an in-house capital asset to a centralized utility service will overturn strategic and operating assumptions, alter industrial economics, upset markets and pose daunting challenges to every user and vendor. The history of the commercial application of IT has been characterized by astounding leaps, but nothing that has come before -- not even the introduction of the personal computer or the opening of the Internet -- will match the upheaval that lies just over the horizon.

All executives have two basic drives: to add value to products or services, and to deploy resources with a certain amount of efficiency. The first drive can be inferred by a business's gross margin and the second by its relative indirect expenses. Together, the two numbers constitute an executive's "financial signature." There are four extreme categories of signatures: (1) gross margin and expenses are both high, (2) high gross margin and low expenses, (3) low gross margin and high expenses, and (4) gross margin and expenses are both low. The categories are labeled "venture capitalist," "buccaneer," "mercantilist" and "discounter," respectively, and each has a characteristic set of financial behaviors. Certain financial signatures are best suited for particular industries. Mercantilists, for example, are ideal for commodity markets with high fixed costs. Moreover, companies might need executives with different financial signatures at various stages in their life cycle. A startup, for instance, might be better off with a venture capitalist at the helm. Later, that same firm might need to fill its executive suites with discounters. No matter how capable the leader, a mismatch between an organization's requirements and the actual financial signature of its CEO can lead to management problems, possibly even to company failure.

Corporate social responsibility has become a vital part of the business conversation. The issue for most companies is no longer whether to engage in socially responsible activities but how to achieve the maximum benefit from the resources available for social projects while still increasing shareholder value. In this article, the authors draw on years of quantitative and case-based studies of major corporations to conclude that CSR activities work best for society and the corporate participants when they are managed strategically and in collaboration with an array of commercial and noncommercial partners. The authors cite exemplars such as Avon Products, whose name is synonymous with responses to women's healthcare issues, and The Home Depot, whose foundation involves suppliers and government agencies in large-scale efforts to combat housing problems in the United States. The authors point to five core principles behind effective CSR strategies, from the need to contribute "what we do" to the importance of accommodating government's regulatory and taxation influences.

The authors contend that a number of factors, both external and internal, are increasingly necessitating a strategic approach to corporate communications. Yet, despite regulatory imperatives, organizational complexities and a growing need for companies to increase their credibility with their various constituencies, many companies still take a tactical, short-term approach to communication that is not only nonstrategic but may, in fact, be inconsistent with the corporate strategy or even impede it. The authors conducted more than 50 interviews with CEOs, CFOs and heads of corporate communications and investor relations at companies that represent the state of the art in corporate communications (Dell, FedEx and PepsiCo), companies that have faced and survived major crises (Cendant, Knight Trading and Textron), and some that are great corporate communicators but not usually recognized for their efforts (Cognex, Infosys, Jet Blue, the New York Times Co. and Playboy Enterprises). They also included a pharmaceutical company (GlaxoSmithKline), given the formidable communications issues in that industry. On the basis of that research, the authors offer best practice lessons and a framework to enable executives to think carefully about their organization’s objectives for each specific communication, determine which constituencies are critical to meeting that objective and understand what kinds of messages to deliver through which channel.

On the basis of two different studies -- a survey of CIOs at 256 enterprises in the Americas, Europe and the Asia/Pacific region and a set of 40 interview-based case studies at large companies such as Johnson & Johnson, Carlson Companies, UPS, Delta Air Lines and ING DIRECT -- the authors conclude that when senior managers take the time to design, implement and communicate IT governance processes, companies get more value from IT. Toward that end, they offer a single- page framework for designing effective IT: a matrix that juxtaposes the five decision areas (principles, architecture, infrastructure, business-application needs, and prioritization and investment decisions) against six archetypal approaches (business monarchy, IT monarchy, federal, duopoly, feudal and anarchy). The authors illustrate how successful companies use different approaches for different decisions to maximize efficiency and value for both IT and the overall enterprise. They then offer recommendations to guide effective IT governance design.

To optimize a portfolio of brands, companies can use a five-step approach. First, managers decide on the brands to review. Second, they analyze all of the brands on the resulting short list with respect to each one's contribution to the company. Third, they assess the brands according to current market performance (traction) and future prospects (momentum). Fourth, the brands are classified along those three dimensions (contribution, traction and momentum), allowing managers to identify both challenges and opportunities. The process enables companies to sort their brands into different categories: power (a brand that needs to be defended ferociously and deployed judiciously), sleeper (a brand that with a little fast tracking can build into a power brand), slider (a valuable brand that has lost momentum, is slipping backwards and needs immediate intervention to prevent meltdown), soldier (a solid brand that contributes quietly without the need for much management attention), black hole (a brand that sucks up resources and may or may not ever pay out), rocket (a brand that is on its way to power-brand status), wallflower (a small, underappreciated brand with very loyal customers, often underpriced and undermarketed) and discard (a brand that should have been mothballed years ago). Lastly, the objectives for each individual brand are tied together into an overall plan, which will include any changes to the roster, brand architecture and resource allocation.