Articles

Corporate executives typically have strategic explanations for their acquisitions: that buying the company in question makes sense geographically or that the products are synergistic. However, if you inquire two years later how the company has benefited, managers tend to focus on the "softer" factors with comments like, "They made us rethink our decision-making processes," or "They introduced us to a new approach to product development," or simply "They shook up our culture." To understand this apparent contradiction, the author analyzes the acquisitions and performance of a number of large, successful companies. Several of the companies included in the research suffered from rigidity. However, the author found that companies were able to use acquisitions to restore a sense of vitality to their businesses and unleash a subsequent surge in performance. The acquired companies often stimulated the acquiring companies to develop new perspectives and different ways of doing things at critical times. Acquisitions kept their organizations fresh and vital. Even if the enterprises did not pursue acquisitions for this reason, the process of buying businesses and deciding how to integrate them into their corporate structures enabled acquirers to renew themselves before their products and operating methods became outdated.

Good communication is a prerequisite for good teamwork. But how much is enough?

We can no longer envision the future by extrapolating the present.

A new report reveals that companies with significant levels of employee control systematically underperform.

This article contends that companies' traditional approach to purchasing misses the function's significant potential to add value by driving innovation and superior long-term cost performance. As a former senior vice president of technical purchasing for BMW, the author oversaw the transformation of the department's mission from functional to strategic, and he offers insights about the transformation. Strategic purchasing, he says, can only be effective if the purchasing department constantly expands and updates its technical knowledge to preserve credibility with both suppliers and internal departments. Toward that end, BMW's purchasing agents spent up to 20% of their time training -- in everything from foreign languages to technical know-how to contract law. In addition, BMW began to hire industry experts and train them as buyers who had as much in-depth knowledge as the suppliers with whom they would be dealing. The author describes how BMW associates become involved at the early concept stage of product development, often suggesting how certain design features will affect the technical equipment at the factory or the level of investment that will be required to execute the design. They also suggest what types of materials, components and systems best meet end-user requirements.

For several decades, research about large companies' internal corporate venturing has shown that such activities frequently exhibit substantial cyclicality. Companies may enthusiastically launch ICV initiatives, later shut them down, and still later launch new ICV programs again. In this article, the authors describe four common situations that occur in cycles of corporate venturing. They argue that, unless properly managed, corporate commitment to ICV is apt to fluctuate according to the availability of uncommitted financial resources and the growth prospects of the organization's primary businesses. For example, if the corporation has uncommitted financial resources but the growth prospects of the main business are perceived to be insufficient, then the company may launch a top-down "all-out ICV drive" that is vulnerable to costly mistakes. If, however, the growth prospects of the primary business are perceived to be adequate and there are few uncommitted financial resources, top management is likely to perceive ICV as largely irrelevant. The authors examine factors contributing to ICV cyclicality; they then suggest that companies can achieve better outcomes if executives recognize the strategic importance of internal corporate venturing activities and view them as a way of gaining insights into emerging opportunities.

Many complicated, proprietary systems attract a community of underground innovators who explore and alter them -- and not always in ways that manufacturers appreciate. These individuals have little regard for the business models that companies have carefully devised to profit from those systems. Instead, they are driven by utility, curiosity and occasionally even anger, bypassing technical and legal safeguards in their drive to explore. Called by different names -- hackers, phreakers, crackers and modders, among them -- these underground innovators have complex and often antagonistic relationships with the companies whose products they modify. Indeed, in many cases the underground innovation triggers a war between the community and the company. But if handled properly, it also can lead to cooperation between the two parties, potentially resulting in new business models and novel products. To achieve that, though, companies first need to understand how underground communities operate. Underground groups typically contain two distinct classes: elites and kiddies. "Elite" is a term reserved for those who truly innovate -- the wizards who understand the inner workings of a proprietary system and are able to make it do things never intended by its developers. "Kiddie" is short for "script kiddie," signifying someone who does not truly understand a system but merely uses tools created by the elites to exploit the system in some way. Most companies make the mistake of treating elites and kiddies the same way, often alienating those who might make positive contributions. A more effective approach is to nurture the constructive elites, rewarding and even supplying them with tools to encourage their efforts, all while deploying more aggressive means to thwart the destructive kiddies.

The seeds of effective change must be planted by embedding procedural and behavioral changes in an organization long before the initiative is launched.

In many companies, there has been a marked fall-off in the influence, stature and significance of the corporate marketing department. Today, marketing is often less of a corporate function and more a diaspora of skills and capabilities spread across the organization. By itself, the disintegration of the marketing center is not a cause for concern, argue the authors, but the decline of core marketing competence certainly is. For this article, the authors undertook a series of in-depth interviews with leading marketing executives and chief executive officers to clarify the root causes of the decline. Their research identifies eight distinct factors that contribute to marketing's waning influence -- among them a worrying "short-termism," significant shifts in channel power and marketing's inability to document its contribution to business results. The consequences are not immediate, but they are far-reaching: Absent a core of marketing competence, say the authors, the corporate brand will suffer, product innovation will weaken, and prices will be less robust. However, the fact that marketing does continue to influence corporate strategy in some companies suggests there are opportunities and viable approaches for building marketing competence as a source of competitive advantage. The article suggests four key issues facing marketing management, placing the focus not on restoration of the corporate marketing function but on the rebuilding of marketing competence across the organization.

Most agree that innovation ensures superior performance, but there is less agreement on which innovation strategy or strategies best sustain that performance over time -- that is, which lead to resilience. The authors seek to answer that question by analyzing a set of global companies that have successfully adapted to diverse and turbulent changes over a period of two decades, as evidenced by their book value per share, return on assets and sales growth. Among those that sustained superior performance are multinationals such as pharmaceutical, coating and chemical manufacturer Akzo Nobel, electronics company Philips, energy and petrochemical company Shell, consumer goods manufacturer Unilever, life-science products and chemicals manufacturer DSM, multimedia publisher Wolters Kluwers, information and media provider VNU, investment and fund management group Robeco and brewing company Heineken. The research shows that resilient companies continually orchestrate a dynamic balance of four innovation strategies: knowledge management, exploration (internal research and development), cooperation (acquisitions, alliances and other relationships) and entrepreneurship. The authors conclude that focusing on one innovation strategy to the exclusion of others may produce innovation, but it will not lead to resilience. Pursuing several different innovation strategies simultaneously maximizes a company's chances of successful adaptation. Investments in innovation, they say, should not be driven by costs or short-term returns but rather should flow naturally to the most effective strategy for the changing context. The timing of increasing or decreasing the emphasis on innovation strategies is important to maintain the dynamic balance, and that timing, they argue, is primarily the responsibility of leadership.