Articles

Companies with connections to a nation’s government may be less productive.

When technology changes rapidly, outsourcing looks more attractive.

What's behind every industry-shaking innovation? Countless, but crucial, "mini-innovations," as Joe Fox calls them. Along with his brother, Avi, Fox has founded two companies -- in entirely different industries -- that aimed to challenge the traditional business models. But in an interview with MIT Sloan Management Review, Fox explains that these large-scale innovations don't dawn on him all at once. Instead they arrive in fragments, some of which are conceived by his management team of original thinkers. The Fox brothers set the group to work after they've spotted a broader opportunity, which happens when they aren't looking for one. Their first business, an online brokerage called Web Street, grew out of their own experience trading equities. And they constructed the framework for BuySide Realty, an online real estate brokerage -- which they currently operate, along with a subsidiary called Iggys House -- when prowling around for a vacation home. After the initial inkling, Fox's market research consists not only of asking potential customers, but also of actually paying attention to their answers. What he's looking for is not their opinion of whether an idea can possibly be executed; he just wants to know if they would pay for such a service, assuming he could bring it into existence. Not that he's had an easy time bringing a notion to fruition. He's never been able to strike a deal with any institutional investors, although Web Street did successfully go public during the dot-com boom in 1999. He had hoped to repeat that feat with his current venture last year, but opted to wait for Wall Street's appetite to improve. In the meantime, Fox is counting on a steady supply of "mini-innovations" to keep the business ahead -- by a half-step, at least -- of its megacompetitors. Can he do it? Clearly, he thinks he knows how.

Initiatives to build and maintain trust with various stakeholders, including customers, employees, suppliers and investors, have risen to the top of the executive agenda at many organizations. But the problem is that most companies don't really understand how to manage stakeholder trust effectively. In fact, the authors' research suggests that many of the trust-building initiatives and approaches that organizations invest in may be of questionable value. Others might actually be counterproductive. One of the reasons managing stakeholder trust is difficult is because there are many different stakeholder groups, each with its own particular needs and perspective. That is, trust is multidimensional, and it's not obvious which dimension executives need to focus on when dealing with any particular constituency. What, for example, is more important for building trust with employees and customers: a reputation for kind-hearted benevolence or for fair-minded integrity? To answer such questions, the authors conducted a study of stakeholder trust in four different organizations. The research analyzed the relevance (if any) of various factors: benevolence, integrity, managerial competence, technical competence, transparency and value congruence. In essence, the study asked what matters -- and to whom. Some of the results were unexpected, and a few were even counterintuitive, leading to the following key insights: Transparency is overrated; integrity is not enough; the right kind of competence matters; building trust with one group can destroy it with another; and value congruence matters across the board. The new framework challenges some existing beliefs and sheds light on a number of areas that companies would be wise not to ignore. Indeed, as the authors illustrate, fundamental misunderstandings about stakeholder trust have tripped up a number of corporations, including Coca-Cola, Google, Apple, Delta Air Lines, Mattel and Sprint. In the future, a deeper knowledge of stakeholder trust will help businesses become more adept at managing stakeholder trust so that they can reap the numerous benefits, including improved cooperation with suppliers, increased motivation and productivity among employees, enhanced loyalty from customers and higher levels of support from investors.

Group brainstorming excels at generating both very good and very bad ideas.

Researchers hope a new Web-based platform will enable better deliberation on complex problems.

CEOs need to scan for the faint — but vital — signals that will help give their companies an edge.

Despite the general understanding that leaders learn from experience, only a few organizations, such as Toyota, Boeing and General Electric, have truly taken it to heart by putting programs into place specifically to take advantage of experiential learning. Most companies stay within a narrow comfort zone. They certainly encourage aspiring and emerging leaders to "get experience," to take on "stretch" assignments and to take risks. But they provide precious little guidance on how to learn from experience -- how to mine it for insight about leading and adapting to change over the course of one's life. Organizations generally don't look outside their industry, or business itself, for new approaches. Instead, a banking model of learning predominates -- a semi-industrial process in which cost per unit is the key performance measure and knowledge is something deposited in aspiring leaders' heads for later use. That is unfortunate, because organizations are missing the opportunity to develop leaders by integrating their life and work experiences, especially those experiences the authors call "crucibles." Crucible experiences can be thought of as a kind of superconcentrated form of leadership development. Surprisingly, the best examples of organizations that deliberately employ such alchemy do not come from the business world. The authors draw on lessons from The Church of Jesus Christ of Latter-day Saints, better known as the Mormons, and the Hells Angels Motorcycle Club to develop four lessons for helping to develop managers. First, both the Mormons and the Hells Angels demonstrate how it is possible to craft or convert core activities to serve as practice fields for leaders. Second, they engage in elaborate preparation before sending would-be leaders out into the field. Third, they provide a supporting infrastructure while members are in the midst of a crucible. Finally, they recognize the need for renewal in individuals and the organization.

Eager to grow through innovation, companies are looking to customers to guide them toward unmet needs. But these entities often end up with vague, unusable -- or even misleading -- customer input. Why? The authors studied 10,000 customer need statements from many industries and discovered that companies have not even established a definition of what a customer need is or how user input should be standardized in terms of structure and format. Too often, companies ask customers to react to potential solutions, rather than zeroing in on their expertise: the "job" they need to accomplish with the product or service, and at which steps that experience could use improvement. By deconstructing the job, companies can identify opportunities that are universal and long-standing. In addition, the authors say, companies can collect data that fits their innovation strategy. What the authors propose is a disciplined process for gathering customer requirements that will then be addressed by innovative ideas. They outline the six characteristics that a useful customer statement must possess, including measuring value strictly from a user's perspective -- and not from the factors the company believes should form the basis for the customer's evaluation. The most helpful statements also prompt a clear course of action, specifying what dimensions of the "job" need improvement, such as its sluggish pace or inconsistent quality. The authors set forth six rules for eliciting feedback that will yield the right raw data to craft customer statements that resonate across company functions, so that departments can unite around a single growth strategy. Finally, they define the two broad categories of customer requirements -- job statements and desired-outcome statements -- and link which type works best for different innovation strategies. For CEOs, the authors' message is forthright: Successful innovation is about process, not just the result of brainstorming good ideas.

Thanks to a variety of online social applications -- including blogs, social networking sites like MySpace, user-generated content sites like YouTube and countless communities across the Web -- people are increasingly connecting with and drawing power from one other. In fact, customers are now beginning to define their own perspective on companies and brands, a view that's often at odds with the image a business wants to project. But organizations need not be on the defensive. Indeed, some savvy executives have already been turning this groundswell of customer power to their advantage. To investigate how, the authors interviewed managers and employees at more than 100 companies that were rolling out social applications. From this research, they developed a strategic framework that businesses can use to implement social applications in a number of departments, including research and development, marketing, sales, customer support and operations. The potential benefits are numerous: Social applications can generate research insights, extend the reach of marketing, energize sales efforts, cut support costs and stoke the innovation process. (And for companies that tap into employee groundswells, the result can be increased opportunities for collaboration across departments and geographical locations, as well as greater productivity and decreased inefficiencies.) But the greatest benefit might be cultural, because social applications help weave two-way customer communications into the fabric of an organization. But anything that changes culture tends to face resistance, and this is especially true of social applications, because they require managers to embrace an unknown communications channel, one that responds poorly to attempts to control it. Based on an analysis of companies that succeeded or failed in deploying social applications, the authors have derived a number of key managerial recommendations for any organization attempting to harness the power of the groundswell.