Articles

Managing returns, structuring the physical distribution network and deploying product inventories are all key.

Leadership mandates tend to fall into one of three major categories: continuity (we should continue business as usual), good to great (we’ve been doing fine, but we need to do even better) and turnaround (we need to make dramatic changes to survive). Myriad problems can arise when an executive is given one leadership mandate while others are operating under a different, conflicting set of directives. Such stealth mandates are no-win situations, leading to the executive constantly butting heads with his or her boss, colleagues and others in the organization. To identify the true leadership mandate for a position, executives need to ask three crucial questions about the business unit they lead: (1) What needs to be changed within the next 12 months? (2) What needs to be honored or maintained during the next 12 months? (3) What must be avoided at all costs? Different constituencies should be queried, including key customers, and each of the questions should elicit a discussion about technology, business processes, culture and people. When executives discover that a stealth mandate is in play, they need to renegotiate mandates. One important goal is to establish realistic frameworks that will then become the basis for their future performance evaluation. Of course this is much easier said than done. But when an executive continues to operate in the shadow of a stealth mandate, he or she is setting himself or herself up to fail.

Over the last decade, the Internet has transformed many aspects of the way business is conducted -- from how goods are bought and sold to where work is done. To explore what might constitute the next generation of Web technologies and what effect they will have on the nature, purpose and management of organizations, MIT Sloan Management Review contributing editor Martha E. Mangelsdorf talked with two leading experts: Erik Brynjolfsson, director of the MIT Center for Digital Business and the George and Sandra Schussel Professor of Management at the MIT Sloan School of Management, and Andrew P. McAfee, associate professor of business administration in the Technology and Operations Management Unit at Harvard Business School. Brynjolffsson and McAfee are confident that the future emphasis of some businesses will be on the use of Web 2.0 technologies to support innovation, creativity and information sharing rather than just to achieve cost cutting. They discussed the complementary relationship between traditional managerial tools, such as ERP and CRM, and the evolving modes of collaboration and communication, such as wikis. McAfee pointed out that one set of tools allows good ideas to percolate upward, after which the very structured process-management technologies can be used to replicate the innovation -- with brutal efficiency in some cases. Companies in very turbulent, information-intensive industries tend to be the ones that have gone the furthest with deploying the new Enterprise 2.0 infrastructure and the mindset that goes along with it, said McAfee. There are "softer cultural things" that companies can do to promote creativity among employees, Brynjolfsson said, which gives them the freedom to work laterally or diagonally within their organizations. The cultural shift away from the classic notions of productivity and output, such as billable hours, is more difficult for some companies to manage, and neither Brynjolfsson nor McAfee sees any technology that by itself will resolve this dilemma. According to Brynjolfsson and McAfee, technology innovation is engendering a whole set of complementary innovations in organizations that actually heighten the role of managers and executives. In fact, they said, it will be managers who will have to increase the ambient level of participation in and contribution to these Enterprise 2.0 environments. Companies cited in the discussion that are integrating the new technologies and cultivating the complementary cultural changes include Google, retail pharmacy chain CVS, Spanish fashion retailer Zara and Canadian software developer Cambrian House.

A company’s policies provide insight into its culture.

Societal consequences give power to formal sanctions.

Most companies segment their markets by customer demographics or product characteristics and differentiate their offerings by adding features and functions. But the consumer has a different view of the marketplace. He simply has a job to be done and is seeking to & #x201C;hire” the best product or service to do it. Marketers must adopt that perspective.

Although the Internet has become an indispensable tool for 21st-century organizations, a 2005 report of the President's Information Technology Advisory Committee bluntly states that the information technology infrastructure of the United States is highly vulnerable to terrorist or criminal attacks. In a brief overview of this sobering situation, MIT applied mathematics professor and Akamai Technologies chief scientist Tom Leighton, who served on PITAC and chaired its cyber-security subcommittee, describes two of today's big Internet security threats: denial of service attacks and "pharming" -- both of which could be used to disable individual companies or critical infrastructure, such as the nation's utilities. At the present time, little is being done to fix these problems, says Leighton, though the advisory committee recommended that the U.S. government lead the way by funding long-term, fundamental research on cyber-security issues. Doing so, would promote wider adoption of improved Internet protocols, and that, he says, would lead to a more secure, reliable Internet infrastructure.

Even the most seasoned executives may have strongly opposing views about the wisest course of action for an organization, particularly given their diverse personal backgrounds or previous immersion in other corporate cultures. But such differences in approach don't necessarily lead to conflicts that are unproductive and damaging to an organization. To investigate such issues, the authors conducted a study of the organizational values of the top management teams in 31 companies. (As defined by the authors, organizational values are the objectives that an individual or group believes are important in running a business, such as industry leadership, employee welfare, and profit maximization.) The authors investigated two specific types of team conflict: task and relationship. Task conflict is characterized by substantive, issue-related differences in opinion. This type of disagreement can be beneficial when it ensures that a greater number of possible solutions are explored and that ideas are battle-tested within the group before significant resources are deployed. In contrast, relationship conflict -- characterized by disagreements over personalized, individually oriented matters -- is generally detrimental. It corrodes trust, hinders communication, slows the acceptance of ideas and leads to isolation and politicization among group members. When it comes to both task and relationship conflicts, the study results showed that behavior is driven by perception rather than reality. Specifically, the greater the perceived difference in organizational values among members of a top management team and their CEO the greater the conflict. Interestingly, any actual dissimilarity was not a factor. Thus, the bottom line is that many top management teams are unnecessarily encountering difficulties because of members' faulty assumptions. To lessen this tendency, the authors advise companies to consider the following: establish an appropriate atmosphere for the team; because perceptions become reality, understand and manage them; investigate the gaps between perceptions and reality; and act decisively to correct gross misperceptions.

IBM discovered decades ago that adding programmers to a software project that was late did not help. Indeed, progress slowed even more. The "resource-driven mindset," sometimes known as "throw more money at the problem," is limited, the authors argue. Yet this mindset has so dominated the research agenda that it has clouded our consideration of many situations in which scarce resources (precisely because they are scarce) are desirable, potentially leading to breakthrough performance. Resource constraints fuel innovation in two ways: through entrepreneurial, social-network approaches to securing the missing funds or the required personnel, and because teams often produce better results as a direct result of the constraints. The human mind is most productive when restricted, the authors maintain. Limited -- or better focused -- by specific rules and constraints, we are more likely to recognize an unexpected idea. Witness the outcome of a Cold War-era race between General Electric and BMW teams to design adequately cooled jet engines. The U.S. team had a virtual blank check, used the most advanced materials and spent nearly twice as much as the Manhattan Project did. The German team, which had significantly less funding at its disposal, came up with a simple yet elegant design principle that remains in use to this day.

What is the optimum growth rate to maximize total return to shareholders? This is a critical question facing both managers and investors. An answer is found in the concept of a company's growth corridor, which is set by the upper bounds of a financially sustainable growth rate and the lower bounds of the competitive growth rate. Using data from Fortune Global 500 companies, the authors find that those companies that grow within their respective growth corridor create above average total shareholder returns. Drawing examples from companies such as AES, BMW, Marks & ; Spencer, Nestle, and Wal-Mart, they show how managers can identify their growth corridors, and how they can restore healthy and smart growth.