Articles

To achieve lasting competitiveness through IT, according to the authors, companies face three enduring challenges: focusing IS efforts to support business strategies and using IT innovations to develop new, superior strategies; devising and managing effective strategies for the delivery of low-cost, high-quality IS services; and choosing the technical platform on which to mount IS services. Three strands of research -- on the CIO's role and experience, the CIO's capabilities, and IS/IT outsourcing -- demonstrate that businesses need nine core IS capabilities to address these challenges: 1. Leadership. Integrating IS/IT effort with business purpose and activity. 2. Business systems thinking. Envisioning the business process that technology makes possible. 3. Relationship building. Getting the business constructively engaged in IS/IT issues. 4. Architecture planning. Creating the blueprint for a technical platform that responds to current and future business needs. 5. Making technology work. Rapidly achieving technical progress -- by one means or another. 6. Informed buying. Managing the IS/IT sourcing strategy that meets the interests of the business. 7. Contract facilitation. Ensuring the success of existing contracts for IS/IT services. 8. Contract monitoring. Protecting the business's contractual position, current and future. 9. Vendor development. Identifying the potential added value of IS/IT service suppliers. IS professionals and managers need to demonstrate a changing mix of technical, business, and interpersonal skills. The authors trace the role these skills play in achieving the core IS capabilities and discuss the challenges of adapting core IS capabilities to particular organizational contexts. Their core IS capability model implies migration to a relatively small IS function, staffed by highly able people. To sustain their ability to exploit IT, the authors conclude, organizations must make the design of flexible IS arrangements a high-priority task and take an anticipatory rather than a reactive approach to that task.

While franchising has become the dominant mode of retailing in the United States, three-quarters of new franchise systems fail within twelve years. This high failure rate makes it important for potential franchisees to identify new franchisors that are likely to succeed and for franchisors to be aware of policies and practices that enhance long-term survival. To meet these needs, the authors present a model, based on a twelve-year study of 157 companies in 27 industries, of what makes new franchise systems succeed. The story of Newfran, a fictional composite of the successful new franchisors in the study, illustrates the key characteristics of success and their relationships to one another. For potential franchisees, the example of Newfran offers six criteria for selecting a new franchise system: 1. Seek franchisors that are expanding rapidly. Establishing brand name is crucial to success. A slowly growing franchise system may not be able to promote its brand name cost-competitively. 2. Do not seek a franchise system that promises a lot of field support. Field support is costly. New franchisors are better off devoting scarce resources to growing the franchise system. 3. Do not be dismayed by the lean headquarters of a new franchise system. A lean operation enhances growth and brand-name development. 4. Seek franchisors that are developing strong brand names. Indicators of brand-name value include a large system size relative to the industry average and the system's ranking in Entrepreneur Magazine. 5. Look for membership in the International Franchise Association and registration with state authorities. These associations provide a quality check on the franchise system and signal the franchisor's reliability. 6. Be wary of new franchisors that offer masterfranchising. Selling the responsibility to recruit and manage franchisees to another party allows the franchisor to grow more quickly but increases the probability of system failure. For new franchisors, these criteria highlight the need to develop the brand name, expand rapidly, and show a trustworthy nature to potential franchisees. Following the policies identified in the study does not guarantee success but significantly increases a franchise system's prospects.

How can organizations make their negotiations more efficient and rewarding? Managers must recognize that negotiations inside the organization strongly influence the outcome of negotiations outside the organization. Using the example of Alta Systems, an information technology consulting services company, the author illustrates how internal and external negotiations processes are integrally linked and describes how managers can enhance negotiation results by improving those processes. Alta's difficult negotiations with an important client demonstrate the obstacles that arise when organizations are balancing internal and external negotiations: negotiators walk away from good deals because these do not match the organization's stated position or they agree to suboptimal deals because the organization views any agreement as better than no agreement; negotiating parties fail to explore underlying interests and see the other's perspective; negotiators function as advocates rather than as joint problem solvers; internal and external negotiations are compartmentalized; and the parties do not discuss the negotiations process. Managers of negotiators can take the following actions to overcome these obstacles: Choose wisely among options and alternatives. Use internal prenegotiations to gain agreement on the organization's best alternatives and to clarify the negotiator's role and authority in gathering information, sharing interests and alternatives, and committing to deals. Change the negotiator's role. Treat negotiators as "handymen" who undertake different tasks at different times; negotiators may serve, for example, as meeting facilitators or problem solvers as the need arises. Integrate internal and external negotiations. Institute flexible processes that survey the interests of all parties and encourage ongoing interaction among internal and external groups. Explicitly discuss the negotiations process. Encourage negotiators to set meeting agendas that focus on establishing the long-term plans, goals, and purposes of the negotiations. Communications within organizations too often sabotage the success of negotiations with suppliers, customers, and clients. By taking steps to align internal and external negotiations, managers can significantly increase the value that their organizations derive from any agreement.

Compared to new companies or niche players, established companies find it difficult to innovate strategically -- to reconceptualize what the business is all about and, as a result, to play the game in an existing business in a dramatically different way. Drawing on examples of highly profitable companies in diverse industries, the author explains how long-time players can overcome the four chief obstacles to strategic innovation. 1. Inertia of success. Strategic innovators monitor their strategic health for early signals of trouble and are willing, if necessary, to abandon the status quo for the uncertainty of change. These companies also work to convince employees that current performance is good but not good enough. They develop a new challenge to galvanize the organization into active thinking, and they expend significant time and effort selling the challenge to everyone. 2. Uncertainty about what to change into. Strategic innovators challenge their dominant way of thinking and shift emphasis away from determining how they need to compete toward questioning who their customers are and what they really want. They institutionalize a questioning attitude and find ways to shake up the system every few years. 3. Uncertainty surrounding new strategic positions. At a given time, a company does not know which idea will succeed and which core competencies will be essential. Successful strategic innovators follow the model of capitalism: they create internal variety, even at the expense of efficiency, and allow the outside market to decide the winners and losers. 4. The challenges of implementation. Successful companies set up a separate organizational unit to support a new strategic innovation and create a context that supports integration between different units within the company. In managing the transition from the old to the new, they let the two systems coexist but gradually allocate resources to the new so that it grows at the expense of the old. For established companies, the challenge of strategic innovation is organizational: developing a culture that questions current success while promoting experimentation. Strong leadership is essential in creating that culture. Only those companies that strive for self-renewal, the author argues, will succeed in the long term.

Faced with the possible closing of his NCR subsidiary in Dundee, Scotland, manager Jim Adamson worked on improving manufacturing quality and restoring the confidence of customers. He also began to develop a vision for Dundee as NCR's strategic center for the ATM business. When the Ohio headquarters resisted Adamson's plans, he persevered, cooperating with people there while sponsoring independent research in Dundee. Five years later, the Scottish subsidiary won NCR's global ATM business; the next year, its market share surpassed world competitors IBM and Diebold. The Dundee case is an example of subsidiary initiative: the proactive, deliberate pursuit of a new business opportunity by a subsidiary company undertaken to expand the subsidiary's scope of responsibility. Subsidiary initiative enables MNCs to tap into opportunities around the world, and, through competition among units, it enhances operational efficiency. But these initiatives face obstacles. Managers often encounter a "corporate immune system" that works against their efforts. They need savvy, persistence, and luck to break through corporate barriers. Studying subsidiary initiatives in five countries, the authors found that they took two forms: externally focused, involving new opportunities in the marketplace, and internally focused, involving opportunities within the boundaries of the corporation. Common to both types was an entrepreneurial component. In external initiatives, a champion emerged in the early stages. These individuals tested the idea in a small way. As the project took shape, they sought allies -- local customers or mentors in the home office. Finally, once the product was viable, they formally presented it to headquarters. In internal initiatives, subsidiary managers were on the lookout for new activities in the corporation that dovetailed with their capabilities. These units needed to be well integrated into the corporate system and have a good reputation; champions of internal initiatives had to pursue a more orthodox line of attack through the formal lines of authority. Based on these observations, the authors suggest two key roles for foreign subsidiaries: market development, in which the subsidiary identifies and acts on new business opportunities in its local market, and network optimization, in which the subsidiary seeks out and eliminates inefficient activities within the multinational network. Subsidiary initiative can yield outstanding successes for large multinationals. But subsidiary and parent-company managers will have to make shifts in their roles. For those who foster the attitudes and behaviors that allow initiatives to flourish, the rewards will be substantial.

Companies' financial strength and market position depend on successful new product introductions, which, in turn, depend on successful product rollovers. Given the low success rate of product rollovers, companies need a formal process to plan and coordinate product rollovers and to reduce risk. This article presents a framework to help companies manage product rollovers, choose the best rollover strategy, and improve product rollovers. Companies need to plan their rollovers early, when they are planning the new product's introduction. First, they choose a primary rollover strategy, based in part on assessment of the uncertainties associated with the product's manufacturing, delivery, and market potential. Then they monitor product and market conditions. Finally, as product and market conditions change, they adopt a contingency strategy if necessary. Companies can consider two primary strategies for product rollovers. Solo-product roll, a high-risk, high-return strategy, aims to have all the old products sold out worldwide at the planned new product introduction date. The less risky dual-product roll plans to sell both old and new products simultaneously for a period of time and can be implemented in a variety of ways. If changed product and market conditions increase the product's risk, companies can choose from among four contingency strategies: making significant price markdowns, postponing the new product's introduction, introducing the new product earlier than planned, or combining two or more dual-product-roll strategies. Finally, while contingency strategies enable companies to modify their primary strategies if appropriate, companies can improve their product rollovers significantly by exploiting opportunities to reduce the product and market risks of each new product in the first place.

Are Japanese companies ending their practices of lifetime employment and seniority-based pay, as the popular press has reported? Data from published Japanese surveys offer insights into three key issues: Are Japanese employment practices changing? While changes are taking place, they are limited to seniority-based pay and promotion; lifetime employment remains intact in most large companies. The seniority system is gradually being replaced by a new job performance-based pay system that companies are using to raise white-collar productivity. Most companies plan to retain the lifetime employment system, the benefits of which outweigh the costs. Why are employment practices changing? In the 1980s and 1990s, internal and external factors placed pressure on large firms to change the seniority system. Internal factors include falling profit margins, decreases in white-collar productivity, an aging workforce, and changes in employee attitudes toward work and the seniority system. External factors include the maturing of the Japanese economy, a decline in large Japanese companies' international competitive position, and increasing internationalization of Japanese companies' operations. What are the implications of changes? Given the trends in Japanese employment practices, Western competitors should expect the following: a continuation of Japanese companies' market growth strategy with minor adjustments; innovative products and services as well as marketing and partnering strategies coming from Japanese companies; a resurgence in Japanese firms' competitiveness and productivity levels; increasing opportunities to enter into Japanese keiretsu networks as suppliers; and continued fierce competition in local Asian markets and lower prices from Japanese competitors in more mature product sectors as they move them increasingly to overseas production. The examples of Honda, Fujitsu, and Sony, three firms that revitalized themselves through use of performance-based pay systems, product innovation, and new partnering strategies rather than through layoffs of core employees, suggest that while change will be gradual, most large companies will eventually follow in the same direction.

Why do companies frequently make bad investment decisions and continue to blunder, even after the weaknesses in their capital budgeting analyses are evident? Because, according to the authors, they don’t integrate capital budgeting into their overall strategy. Boquist et al. offer a capital budgeting framework that has six key features: (1) it is dynamic, (2) it is integral to the firm’s strategy, (3) it recognizes sequences of options, (4) it is cross-functional, (5) it aligns employee compensation with capital allocation, and (6) it emphasizes performance-based training. The authors’ framework for dynamic capital budgeting has three simultaneous steps: 1. Identify a status quo strategy and how it must perform to maximize shareholder value. The strategy will help the company determine the trade-off in capital budgeting between cycle time and risk. The more time and resources it commits to collecting information about a project, the more it can learn about cash flows and the lower the risk. But it achieves this risk reduction at the expense of a longer cycle time. 2. Establish a system for evaluating projects and preparing capital allocation requests that is consistent with the strategy. The system has four phases & #8212; a new idea phase, preliminary evaluation phase, business evaluation phase, and go-ahead or reject phase & #8212; and three tollgates & #8212; strategic, preliminary, and business. For approval, a project must pass through all three tollgates. 3. Develop a culture consistent with the strategy and the evaluation system. The company’s long-term commitment to the strategy should be evident to employees. Employees from all functional areas should be trained in the system’s underpinnings. The employee compensation system should tie bonuses to performance measures that correlate with shareholder wealth. Only by implementing an integrated framework, say the authors, can a company make intelligent investment decisions with long-term strategy in mind.

To remain competitive, manufacturers increasingly need a support system of transportation, telecommunications, services, and knowledge centers. In the United States, some cities and government agencies are building individual components of a supporting infrastructure. But a strategic approach in which public and private sectors cooperate to create a business environment that enhances manufacturing agility is needed. An example of such a system is the Global TransPark in North Carolina, which has fully integrated air, rail, highway, and sea transportation systems, as well as telecommunication and state-of-the-art electronic data interchange technologies to support manufacturers' logistical requirements. It contains the four elements that the authors say are necessary to agile manufacturers: 1. A seamless transportation network, with traffic management, vehicle control and safety systems, electronic toll payment, and emergency management systems. The network integrates air, sea, and land transportation through materials handling systems that accommodate various industries. 2. Telecommunications networks that provide information on markets and orders, track and manage material flows, and pool R&;D information. 3. Access to financial institutions, marketing and sales agents and consultants, legal services, exposition centers, and foreign trade zones. Agile manufacturers need commercial and service support, along with community amenities like good schools and cultural facilities. 4. A source of scientists, engineers, and managers. Such knowledge centers provide access to R&;D labs, colleges and universities, and a trained workforce. What is needed, according to Kasarda and Rondinelli, is a cooperative approach to create an environment that fills all these requirements. Such an approach needs government and industry to work together to integrate infrastructure components.

Commitment and competence are embedded in how each employee thinks about and does his or her work and in how a company organizes to get work done. It is, according to Dave Ulrich, a firm's only appreciable asset. As the need for intellectual capital increases, companies must find ways to ensure that it develops and grows. There are five tools for increasing competence in a firm, site, business, and plant. 1. Buy. The company goes outside to hire new talent. 2. Build. Managers invests in employee learning and training. 3. Borrow. A company hires consultants and forms partnerships with suppliers, customers, and vendors to share knowledge, create new knowledge, and bring in new ways to work. 4. Bounce. The company removes those employees who fail to change, learn, and adapt. 5. Bind. The firm finds ways to keep those workers it finds most valuable. Companies also need to foster employees who are not only competent but committed. Employees with too many demands and not enough resources to cope with those demands quickly burn out, become depressed, and lack commitment. A company can build commitment in three ways: 1. Reduce demand on employees by prioritizing work, focusing only on critical activities, and streamlining work processes. 2. Increase resources by giving employees control over their own work, establishing a vision for the company that creates excitement about work, providing ways for employees to work in teams, creating a culture of fun, compensating workers fairly, sharing information on the company's long-range strategy, helping employees cope with the demands on their time, providing new technologies, and training workers to use it. 3. Turn demands into resources by exploring how company policies may erode commitment, ensuring that new managers and workers are clear about expectations, understanding family commitments, and having employees participate in decision making. Only by fostering competence and commitment together can a company ensure the growth of intellectual capital, says the author.