Articles

For the past couple of decades, companies have focused on creating strong leaders of business units and influential heads of functions & #8212; men and women responsible for achieving results in one corner of an organization. But they have not paid as much attention to a more important challenge: developing leaders who see the enterprise as a whole and act for its greater good. And that perspective has become increasingly necessary as companies seek to provide not just products but broad-based customer solutions. The author explores the three key questions that companies must answer in order to link strategy to leadership development: What are the key elements of the enterprise leader’s job? Why is learning to lead at the enterprise level such a difficult challenge? And what can companies do to identify and develop enterprise leaders? He illustrates his points with examples from PricewaterhouseCoopers, Canada’s RBC Financial Group, IBM and others.

Measuring learning instead of short-term results is key.

Offshoring, the increasingly common practice among U.S. and European companies of migrating business processes overseas to India, the Philippines, Ireland, China and elsewhere, is often seen as a negative phenomenon that suppresses domestic job markets. On the contrary, says the author, offshoring is a critical component of next-generation business design, a dynamic process of continually identifying how to deliver superior value to customers and shareholders. Companies such as General Electric, Intel, J.P. Morgan Chase, Allstate, Prudential, Dell, Cisco and Motorola have all adopted it in some form as they shift their managerial frames of reference toward the requirements of the global-network era. Companies would do well, the author advises, to think rationally -- not emotionally -- about offshoring's relevant issues: What are their core competencies? What form of governance is optimal? How will work will be distributed and integrated?

By one informed estimate from the late 1990s, three-quarters of the Fortune 100's total market capitalization was represented by intangible assets, such as patents, copyrights and trademarks. In this environment, cautions the author, IP management cannot be left to technology managers or corporate legal staff alone -- it must be a matter of concern for functional and business-unit leaders as well as a corporation's most senior officers. To realize the full value of their companies' intellectual property, top executives must seek answers to the following questions: How can the company use intellectual property rights to gain and sustain competitive advantage? How do IP rights affect the industry's structure? What options do IP rights offer vis-à-vis competitors? How can IP rights grant incumbency advantage and establish barriers to entry? How can IP rights help the company gain vertical power along the value chain? What organizational design accommodates an IP strategy most effectively? The author explores each question, drawing on such company examples as Nokia, Motorola, Novo Nordisk and Leo Pharma, in the process helping lead intellectual property rights out of their shadowy existence in patent and legal departments.

How can companies ensure that their data warehouse delivers as promised?

Markets develop according to the specific paths by which innovations in a given field occur.

Consumer-centered product design is an emerging best practice in many industries, particularly those characterized by practical products that hold no emotional appeal; or in which competition is based on increasingly less profitable attempts to cut cost or improve performance; or in which once distinctive products are becoming commoditized; or in which there is little room left for product innovation. Among the best practitioners, design is understood to be a core activity conferring competitive advantage by bringing to light the emotional meaning products and services have, or could have, for consumers and extracting the high value of such emotional connections. The authors discuss how companies such as Master Lock, Procter & ; Gamble, BMW and Cambridge SoundWorks have employed design research -- including the use of multidisciplinary teams and a variety of ethnographic and psychophysiological techniques -- to build organizationwide identification with the customers' needs and aspirations, keeping everyone's eyes on the same prize.

Companies deploying dishonest tactics toward customers, suppliers, distributors and others typically do so to increase short-term profits, and in that regard they might succeed. But the misconduct is likely to fuel social psychological processes within the organization that have the potential for ruinous fiscal outcomes, outweighing short-term gains. There are three types of consequences to organizational dishonesty: reputation degradation, (mis)matches between values of employees and the organization, and increased surveillance. These outcomes can lead to decreases in repeat business and job satisfaction -- and increases in worker turnover, employee theft and other hidden costs. These consequences will, like tumors, spread and eat progressively at the organization's health and vigor. They will also be difficult to identify through typical accounting methods and might lead to corrective efforts that overshoot the true causes of poor productivity and profitability. Without a thorough understanding of the three types of consequences, an organization could try to control one financial hemorrhage (for example, losses from employee theft) by creating another (namely, investments in increasingly expensive security systems).

The author argues that the dominant challenge for the innovative firm may not be to command marketplace premiums for its innovation, but to strategically identify and opportunistically exploit subsidies for that innovation. For example, Microsoft's final stage of Windows 95 development was effectively subsidized to the tune of $900 million when the company drew upon a highly valuable technical population to test and help improve the quality of its new operating system. An innovation subsidy is the deliberate contributionof a business resource -- money, time, information, expertise, personnel or equipment -- in support of the development of a novel offering with no explicit expectation of a financial return. It is not, however, an outright donation or favor but rather the cost-effective bartering of resources by individuals and institutions that amounts to a gray-market mechanism for mitigating risk. (The article offers other subsidy scenarios referring to Gillette, 3M, IBM. Goldman Sachs and Citigroup.) The core differences in perceived and real risk among economic entities represent the richest source of ideas for opportunistic innovation subsidies. Such scenarios are clearly not merely about money, but about creating and managing relationships that tap the resources of a company's savviest customers. In the management of innovation risk, social capital can be as valuable as financial capital. Seeking out the innovation subsidy challenges firms to rethink the underlying economic relationships between their customers and suppliers.