Articles

In the wake of corporate scandals and ensuing concerns about board oversight, various suggestions for reforming boards and redefining the role of directors have been put forward. The proposals have focused on issues such as board composition and ways to ensure board independence from management. Such recommendations, while useful, do not deal with the fact that directors, no matter how dedicated and diligent, cannot serve as adequate monitors of management without sufficient information and the means to analyze it. The author urges companies to provide directors with that information in the form of detailed discounted-cash-flow (DCF) valuation models & #8212; the tool that can help them understand how the company intends to create value over time. In conjunction with observed financial results, review of the evolution through time of the valuation models can give directors the critical information they need to discharge their duties to shareholders. The author stipulates that DCF models are not the silver bullet that will forever safeguard investors from management chicanery & #8212; the models can be manipulated. But a sequence of DCF models serves two important purposes. It forces management to translate its vision into specific numbers that show how shareholder value will be created, and it forces the board to continually monitor and evaluate those numbers in light of ongoing financial performance and stock market valuation.

Long-term focus, not cosmetic ethics initiatives, will regain the public trust.

Over the last decade, supply-chain-management concepts have sparked a boom in internal cross-business coordination. But although definitions have broadened and shifted, many executives believe that the field is mainly about installing IT systems for streamlined processes. Wrong, say two researchers from Dartmouth’s Tuck School of Business. Their data on companies that lead in supply-chain management illuminate six ways it spurs more-creative thinking on growing a business. The researchers predict that current trends toward restructured supply networks and improved coordination will continue, with more supplier integration and a proliferation of product customization, business complexity and uniquely defined customer relationships. But supply-chain management also will affect industry structure in new ways. Companies in the middle of the supply chain & #8212; contract manufacturers, logistics-service providers and distributors & #8212; will redefine themselves. Also, rebranding and repositioning will occur. Companies across the chain will vie for control of the customer relationship and will find that when value propositions derive from supply-chain capabilities, new cobranding and copositioning strategies are critical. When executives look back after another decade, they’ll understand that supply-chain management, having shifted business focus in its first 10 years, created an opportunity for the second 10 years to redefine the competitive landscape.

Many managers in traditional product-oriented organizations are struggling to turn their companies into solutions-oriented businesses, widely considered the route to success in the 21st century. A good shortcut may be to establish corporate consultancies & #8212; consulting units that offer customers solutions based on the traditional business’s products or expertise. Thus computer companies such as IBM are moving toward integrated information-technology solutions, and telecom-equipment manufacturers such as Nokia are providing turnkey network solutions. Changing from a product-oriented manufacturer to a customer-focused solutions provider can be rewarding, but because it involves a sweeping reorientation of the organization, it is also difficult. That’s why the less radical approach of a consultative component often works best. But even that strategy has its challenges, with success depending on determined managers who know what the pitfalls are and how to avoid them. Without firm management, the consultancy may be swept away by forces that draw it too far into the product business or too far away from it. By thinking through the mission, identity and structure challenges and choosing the right strategy for handling them, leaders can both manage the consultative component and attain synergies between the product-centric business and the corporate consultancy’s customer solutions.

Research reveals factors that affect the likelihood of transacting business over mobile phones.

Leadership has become the hottest topic in business. Companies see this hard-to-pin-down ability as essential to organizational success, and they want their executives to learn how to exercise it. As a result, they are investing heavily in leadership-development programs and honing eloquent statements about the importance of developing next-generation leaders at every organizational level. And yet these speeches and investments have often failed the companies seeking to create a pipeline of leaders. The authors have identified three pathologies at the root of many leadership-development failures. They cite outdated thinking about ownership of the efforts, a product-focused, quick-fix mentality, and make-believe metrics that measure activity rather than capability. The danger is that these pathologies will sour companies on leadership development, leading them to cut investment and go back to waiting passively for leaders to emerge. But that approach has failed in the past and will continue to do so. Companies that make leadership development a core business process can overcome the pathologies and prepare the individuals and teams they will need to take their organizations to greater heights.