Articles

When it comes to thinking about scale, the assumption of corporate leaders since Henry Ford’s day has been that bigger is better. And in many situations, such thinking is inarguably correct because of the cost efficiencies that size provides. But sometimes efficiencies can mask opportunities. In their research, the authors found that small-scale operations provide significant advantages in four areas. They allow companies to locate hot spots and tap into local knowledge networks; they make it possible to respond more rapidly to customer needs and to trends in regional demand; they enable companies to monitor potentially disruptive technologies; and they help hold down labor costs while developing managerial talent. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches to corporate needs. They conclude that executives who develop a deeper understanding of scale and learn when it is better to think small can have a potentially huge impact on their companies’ long-term success.

As the shadow of corporate scandals looms ever larger, government’s role in regulating and influencing core business practices also has grown more prominent. As a result, businesses are struggling to reconcile the spotlight of increased regulation with the goals of corporate strategy. To navigate these difficult straits, businesses need to understand how governments can help or hinder their business objectives while they develop hybrid strategies that focus on shaping the rules. It becomes essential that companies better understand the games business and government play and the roles of each in making and enforcing the rules. Michael D. Watkins, associate professor of business administration at Harvard Business School, identifies two major types of games: value-net games, which relate to cooperation and competition among businesses, and public-interest games, in which coalitions of businesses and industry associations are pitted against nonbusiness organizations, such as unions, consumer groups and environmental entities. Watkins believes that the most effective businesses craft their strategies by combining different approaches from each game, which in turn helps to shape how governments regulate future corporate activity.

How the industry's evolution can inform all e-tail enterprises.

Developing the right strategy for product innovation requires a fundamental understanding of how technical modularity affects R&;D. In a modular design, a change in one component of a product has relatively little influence on the performance of the system. In a nonmodular, or coupled, design, the components are highly interdependent, and the result is that a minor change in one part can cause an unexpectedly huge difference in the functioning of the overall system. Generally speaking, modular designs make R&;D more predictable, but they tend to result in incremental product improvements instead of important advances. Coupled designs are riskier to work with, but they are more likely to lead to breakthroughs. This trade-off between predictability and innovation can be visualized as a technology landscape, with gently sloping hills corresponding to incremental product improvements that are based on modular components & #8212; and with soaring, craggy peaks representing breakthrough inventions that rely on tightly coupled parts. Developing new products requires a search across such technology terrain, and companies should first choose the type of landscape that suits them best and then develop the appropriate strategy for navigating that topography.

Disruptive strategic innovations are not necessarily superior to the traditional ways of competing, nor are they always destined to conquer the market. Rushing to embrace them can be detrimental for established companies when other responses, including ignoring the innovation, make more sense.

Ongoing innovation is essential for the enduring success of any company in a competitive industry. Innovation comes in two basic flavors: product innovation and business innovation (that is, process and marketing innovation). In technology-driven industries, the primary source of customer value shifts over time from the first to the second as technologies mature and the customer base becomes more mainstream. If technology-driven companies are to make the necessary shift to business innovation, they cannot avoid significant changes in company culture. Waiting until crisis strikes is dangerous. But many leaders avoid addressing cultural challenges early enough because they are uncomfortable with the invisible, difficult-to-measure nature of culture and its stubborn resistance to quick fixes. Early high-tech leaders must inevitably evolve their underlying cultural bias as the driving technology in their industry moves through the creation, transition and commoditization stages of development. Cultural change often requires managers to be jolted out of their comfortable grooves by a disaster. Premeditated change is preferable, but it takes courage and foresight. For the courageous manager, the author outlines ways to proactively guide the development of a company’s culture from one best suited for early entrepreneurship to one capable of enduring industry leadership.

With the economy and the equities markets increasingly unpredictable and faith in corporate governance in steep decline, it is not surprising that stakeholders of all types have growing interest in the sustainability of companies. Yet the word sustainability remains ambiguous and politically charged, particularly within the lexicon of business. When, as is commonly the case, the term is limited to encompass environmental management or social equity, sustainability is often perceived to be at odds with fiduciary responsibility and unlinked to business strategy. This article makes a business case for sustainability by adopting a broader view: A sustainable organization is one whose characteristics and actions are designed to lead to a desirable future state for all stakeholders. According to the author, intangible indicators that gauge sustainability also can be indicators of efficacy & #8212; that is, of how well a company is run & #8212; and companies that actively manage and respond to a wide range of such indicators are better able to create value for all stakeholders over the long term. Drawing on a number of studies, including Cap Gemini Ernst & ; Young’s formulation of its Value Creation Index, the author identifies a variety of intangible indicators, then suggests how they relate directly to sustainability and ultimately to company performance. The article concludes by sketching out the parameters of a company-level sustainability model that can be empirically tested and used to both manage operations and set strategy.

New research shows that companies owned by founding families have higher profits and valuations.

A new study finds that only a few large retail firms have a genuinely global presence.