Articles

Today's workforce is increasingly made up of volunteers -- at least in spirit if not in fact. How will the traditional management tasks of motivating and directing employees change in the face of that new reality? The authors answer this question by examining an example of an economic enterprise that acts in many ways like a voluntary organization: the open-source software movement. The authors became interested in the movement during the course of their work with a knowledge-based organization that was seeking a new model of organizational governance. After hearing open-source proponent Eric Raymond speak at a public forum, they began to think that the movement might offer just the model the organization needed. They then embarked on a case study that focused on the motivation of open-source participants and the coordination of their software development work. The authors posed the following essential questions: What motivates people to participate in open-source projects? And how is participation governed in the absence of employment or fee-for-service contracts? The answers revealed some important lessons for traditional organizations about the challenges of keeping and motivating knowledge workers and the process of managing in the new arena of networked or virtual organizations. The first lesson is that traditional organizations should plan for a broader array of employee motivations than they often do today. Money is only one, and not always the most important, motivation of open-source volunteers. Professional contributors are also motivated by the personal benefit of using an improved software product and by a number of social values such as altruism, reputation and ideology. In many cases, several motivations operate together and reinforce one another. Second, traditional organizations should consider ways to shift from the management of knowledge workers to the self-governance of knowledge work. Despite their clear potential for chaos, open-source projects are often surprisingly disciplined and successful by means of multiple, interacting governance mechanisms. Membership management, rules and institutions, monitoring and sanctions, and reputation build on the precondition of shared culture to self-regulate open-source projects.

In the New Economy, speed is everything, as both start-ups and traditional businesses attempting new ventures have experienced. Three Andersen Consulting researchers assess a new approach, fast venturing, which taps operational partners -- incubators or professional-services firms -- as well as outside investors. Operational partners, called in at various stages of the venture's development, can offer support with whatever specific skills are needed at any given time. The author's e-mail and telephone surveys of companies that have launched ventures quickly suggest that new ventures should (1) set up a distinct equity structure, (2) get participation from financial partners, and (3) call on a network of operational partners to help build the business quickly by designing and implementing strategies and processes to access markets at scale. Using outside partners is more promising, say the authors, than creating new ventures inside an established company, where too often, strong incentives are lacking and company traditions or politics get in the way. Although internal venturing might work in a few companies, the strategy is probably too difficult and too slow for most. The authors describe a three-stage model: developing ideas, lining up support and scaling up quickly. They suggest choosing a lead partner by assessing both existing relationships and the venture's needs at its particular stage of development. At a pre-funded stage, the venture requires investment partners. If the venture is farther along, it might need a lead partner that can provide temporary managers, experienced in setting up warehouses, or a multitude of other critical functions. The authors provide managers with a list of questions that can help identify the critical capabilities needed to ensure speed to market and help them decide if they should fast venture. Then a step-by-step process helps companies define the venture's most urgent requirements; select appropriate, committed partners; clarify roles and responsibilities; and tap strong, independent leaders. Whether the fast venturing company chooses to partner with an incubator that provides most needs under one roof or a venture network with geographically dispersed support functions, the best chance of success lies with nimble outside partners that have a stake in the profits.

The author argues that to sustain a competitive advantage, Web retailers must align their strategies with the product characteristics and buying practices of customers in their market segment. He divides the dot-com retail market into four segments on the basis of the type of good sold and describes the strategies needed to succeed in each. In the first segment, undifferentiated commodity products, such as barrels of oil, have no brand image, and consumers care little about the seller's identity. It is a buyer's market in which sellers compete on price and delivery. Competitive advantage goes to the low-cost provider with economies of scale, low overhead, low-cost production and efficient distribution. Since entry barriers are low, many competitors will enter these markets and even the slimmest profit margins will be difficult to maintain. In the second segment, quasi-commodity products, such as books and toys, are differentiated by their features, functions, and product niche. The quasi-commodity market segment has attracted many dot-com retailers, including Amazon.com and eToys. However, product brands and characteristics in this segment confer no advantage to the e-commerce retailer, since customers can use search technology to find the identical product at the lowest price. First movers can gain competitive advantage by branding their Web site using site-specific loyalty programs, virtual communities, and timely delivery. Late entrants will encounter extreme difficulty, especially if they are established brick-and-mortar operations unwilling to cannibalize their current business model. In the third segment, "look and feel" goods, such as clothes, homes and furniture, are differentiated by their quality and reliability. Customers want to experience them in person before making a purchase. Here, branded products enjoy the advantage since customers already trust them. Vertically integrated makers of branded products who control product creation and distribution will be able to charge higher prices than dot-com retailers who resell unbranded products. Dot-coms that don't create the products they sell will be forced to compete on price and will find margins difficult to maintain. In the fourth segment, "look and feel" goods with variable quality, such as fresh produce and original artwork, each individual product differs from every other one. Even if they recognize the brand, customers want to experience these products to ascertain their quality before buying, particularly if the product is expensive. Dot-coms that establish a reputation for quality and sell low-priced goods to repeat customers have the best chance of success. Companies selling expensive goods will need to engage trusted intermediaries or establish return policies to mitigate the customer's risk. This market segment is the most difficult to enter, but will confer the highest profits to Web retailers that "crack the code."

Of the many ideas that have entered the business world by way of the Internet, few have proved more potent than "online community" in which networked groups of people engage in many-to-many interactions. While community is central to the success of many consumer-oriented Web sites, companies in other industry segments are still learning how to best put community to work. The authors studied 15 online communities to determine how to best establish and maintain such communities. They developed a framework that identifies three activities central to the success of every online community: member development, asset management and community. Continuous member development is required to grow the community and replace members who leave. Communities need clearly defined goals and member demographics to be marketed effectively. Member acquisition and retention is best achieved by using a wide variety of communication tools. Community assets include content, alliances and infrastructure. Asset managers must create member profiles and topic-specific subcommittees, capture and disseminate useful knowledge, and create processes that facilitate member involvement. Communities must evolve over time to meet the changing needs of their members. Community relations establishes guidelines for community members and moderators. While conflict is often welcomed to spur participation, explicit rules help community members police themselves and guide moderators when intervention is required. Moderators must be experienced and rigorously trained. The authors illustrate these lessons in case studies of four kinds of online communities: Kaiser Permanente Online extends the HMO's services to members via the Web. The community improves outcomes and lowers costs by fostering preventive care. Community members interact with each other and with doctors in moderated sessions. Their feedback enables Kaiser to continuously improve its services. About.com operates a news and entertainment network comprised of more than 600 topic-specific Web sites known as GuideSites. About.com's virtual community delivers training services to GuideSite Webmasters, shares best practices, disseminates marketing materials, discusses corporate strategy and encourages collaboration between GuideSites. Sun Microsystems created the Java Center community to foster thought leadership and knowledge sharing among its most senior Java application developers. The community also serves more than 1,000 systems integrators and Sun customers. Community members post project and design documents, links to source code and to other useful Web sites. Ford Motor Company's virtual community encourages engineers to share knowledge, collaborate in work groups, and find knowledge using the company's intranet. Ford's community improves the speed, quality and cost efficiency of new product development. The community provides Ford's engineers access to more than 500,000 engineering documents.

Excellence at investing in and deploying IT isn't sufficient to achieve superior business performance: companies must also excel at collecting, organizing and maintaining information, and at getting their people to embrace the right behaviors and values for working with information. In this article, the co-authors present the results of a two-and-a-half-year international research project led by the Institute for Management Development. They show that senior managers view strong IT practices, competent management of information, and good information behaviors as components of one higher-level idea -- "Information Orientation" or "IO" -- which measures a company's capabilities to effectively manage and use information. IO is also a predictor of business performance. The authors compare two retail banks to illustrate the differences between high- and low- IO companies. Among the guidelines: -- Focus your best IT resources on what makes you distinctive. -- Companies should actively manage all phases of the information life cycle, from identifying new information to processing and maintaining it. -- Managers and employees must develop an explicit, focused view of the information necessary to run the business. -- Do not compromise on information integrity. Employees must use information in an ethical and appropriate way.

Strategically outsourcing innovation can put a company in a sustainable leadership position.

When it comes to combining a high level of customer service with a lean and efficient supply chain, few companies can match Saturn's after-sales service business. According to the four authors (a Saturn manager, a former manager from parent company General Motors, and supply-chain experts from the Wharton School and from Stanford University), Saturn has a twofold source of strength. It has a service-supply-chain strategy that can match the urgency of its customer's varying needs. And it shares both authority and risk with channel partners -- making them more willing to help execute the strategy. The company adopted and continues to refine the concept of jointly managed inventory, a variant of vendor-managed inventory that involves sharing inventory risks with Saturn retailers (dealers). The implications extend beyond the automotive industry: Companies that match their parts-supply strategy to the criticality of the customers need for the part can dramatically improve satisfaction in after-sales interactions. A key difference is Saturn's pull system -- a response to the highly unpredictable nature of parts demand. Saturn does not position inventory in advance on the basis of forecasted consumption but rather replenishes retailer's supplies on a one-for-one basis. The demand-based approach triggers movement of parts down the supply chain. But although Saturn determines what to stock, retailers may counteract the decision. And if a part sits for more than nine months at the retailer, Saturn buys it back. Saturn shares other costs as well. If a part cannot be found through the local retailer pooling groups (a rare event), Saturn bears the cost of the search. Managers in other industries can meet customer's needs efficiently if they align their companies service-network strategies with the urgency of a customers need. The authors show how to do that by plotting a company on a matrix that ties the company's service strategy to criticality (most service strategies are somewhere between centralized and distributed). Saturn's approach has helped it build strong and cooperative retailer relationships that end up benefiting the customer.

Many managers avoid confronting six common, silent killers of strategy implementation.

Many retailers proudly declare their commitment to customer convenience. However, few define convenience from the customer's point of view or systematically craft a convenience strategy. Confronting more retail options than ever, customers value speed and ease at every stage of the retail transaction. Pressed for time, they place a premium on such store features as one-stop shopping, clearly marked aisles, in-stock merchandise, clearly presented pricing, sufficient staffing, efficient checkouts, expanded hours, and easy returns. The retailer that meets these needs and spares its customers needless delays wins their loyalty and outperforms the competition. Some high-performing retailers demonstrate genuine respect for customers' time and effort by viewing the retail experience as an integrated whole consisting of distinct but related parts. These stores enhance the convenience of their market offerings in four main ways: by ensuring that the store's services and products are easy to reach, by enabling customers to speedily identify and select the products they want, by making it easy for customers to obtain desired products, and by expediting the purchase and return of products. The authors cite many real-life examples, including Walgreen, Staples, LensCsrafters, Dell, L.L. Bean, and Dial-A-Mattress, which demonstrate the innovative ways companies address forms of convenience. For example, access considerations may include physical location, parking, store hours, proximity to other stores, and telephone and Internet access. Intelligent store design and layout, knowledgeable salespeople, customer interactive systems, and clear signage are also critical aids in expediting the shopping experience. In regard to providing what a customer wants, in-stock merchandise, timely production, and timely delivery are relevant factors. Self-scanning at checkout counters, drive-through windows, and purchase guarantees are among the ways that retailers can make it easy for customers to complete or adjust their purchases. The most successful retailers invest in all four forms of convenience.

How can companies use brands to expand customer relationships? Many marketing strategists believe they can strengthen consumer brands by building online communities around brands. Observing the power of community spirit in noncommercial brand communities on the Internet, companies now want to establish dialogues with their loyal customers and provide consumer-to-consumer communication in realtime. If the digital pathway is the correct route for cultivating brand loyalty, how can companies nurture brand-based communities? Factors that can help the brand strategist, the author argues, include examining successful communities, addressing management issues, and developing community leadership skills. The popular Geocities Web site, for example, attracts "dwellers" to a familiar "environment" and offers community members a sense of involvement as well as entertainment. Managers also need to understand the difficulties inherent in creating and managing brand-based Web communities. Brand focus and strategic objectives will determine the characteristics of the content offered on the Web. But managers must also exercise community control, establish guidelines for authenticity and ethics, attract volunteer managers, and monitor community size and composition. Ultimately, managers must recognize that the brand community is not just another communications vehicle. Successfully managing a brand community requires professional managers to lead and promote interplay among community members, to manage community volunteers, and to exercise sound editorial judgment in content development. Equally important is integrating a brand-based online community with traditional marketing practices and a company's total brand strategy. When fully developed, says the author, this type of online community will become a vibrant public manifestation of the company.