Articles

User innovation communities present a great advantage over manufacturer-centered development systems.

The external environment for innovation is an important driver, and industrial clusters offer special advantages.

Five leading venture capitalists explain that even in today's tough economy, entrepreneurs should search for the 'smart money.' Facilitator: Howard Anderson, founding partner and senior managing director of YankeeTek Ventures of Cambridge, Massachusetts. Participants: Scott Lawin, a founding member and COO of GSVentures in New York City; Vernon Lobo, managing director of Mosaic Venture Partners in Toronto; Craig London, vice president and general manager of Safeguard Scientifics in Palo Alto, California; and Russell Siegelman, general partner at Kleiner Perkins Caufield & ; Byers in Menlo Park, California. Raising capital for new ventures may have suffered a setback when the dot-com bubble burst, but that has not impeded the flow of bright ideas that cry out for funding. A panel of venture-capital experts recently met at MIT -- arguably innovation headquarters of the world -- to discuss venture capital today and to answer questions from an audience of inventors, entrepreneurs and others. The panel discussion offers practical insights not only into what entrepreneurs should look for in a VC firm, but also what venture capitalists seek from startups.

The Internet has created new markets, customers, products and modes of conducting business. But it also has given currency to some dangerous half-truths. Admonishing Internet businesses to “stop grabbing the land and start cultivating it,” Subramanian Rangan and Ron Adner, professors of management and strategy at INSEAD in France, explain why seven popular strategies are not the path to profitable growth. First-mover advantage, for example, gets too much credit for e-business success. Companies believe that they can lock in customers and trigger a winner-take-all dynamic, but there is no guarantee that those benefits will go to first movers. The allure of reach & #8212; increasing the number of customer segments & #8212; causes many companies to ignore fit, the coherence with which their activities reinforce one another. Digital Equipment Corp. paid the price when it sacrificed fit to reach, attempting to make PCs, workstations, minicomputers and mainframes under one roof. Another tempting growth strategy is to provide customer solutions, offering products or services that complement a company’s core offering. But offering solutions can dilute a company’s focus. Targeting the right Internet sector is one way to maintain focus. When companies view the Internet as undifferentiated landscape, they are less able to distinguish the drivers of customer value and performance & #8212; or the metrics to measure them. Some companies see best-of-breed-partner leverage as the secret of profitable growth. But although the Internet makes it easier and cheaper to align activities across company boundaries, it does not do much to align interests & #8212; a requirement for the creation of joint value. Another misconception is the belief that an Internet business will automatically be successful abroad. As MTV, Wal-Mart and Honda discovered, companies first must be successful at home and then move outward in a way that accommodates local differences. The last, and perhaps most dangerous, misconception is managers’ belief that technology can substitute for strategy. Technology and strategy are strong complements. Companies that understand their technology better than they understand their customers and competition won’t succeed in any economy, old or new. The authors provide thoughtful guidelines for avoiding misconceptions and taking a sensible approach to business on the Internet.

Two new studies reveal that successful CRM systems go beyond sales, marketing and customer service.