Articles

Responding to competitive pressures, a growing number of corporate managers are dismantling organizations and cultures that were built on selling particular products and replacing them with new structures designed to be more responsive to customer needs. The push to restructure around customers is more than a new management fad. It is supported by success stories at companies including IBM, Cummins India, Fidelity Investments and Imation. Companies transitioning from product-oriented to customer-centered organizations progress along a continuum. They begin with informal coordination to overcome the deficiencies of product or functional silos, adding integrating functions (such as key account managers and customer segment task forces) as needed. The market logic for becoming customer-focused is often compelling. In surveying 347 companies, the author found that companies that embraced this approach saw accountability for customer relationships improve, and information about customers was more readily shared. These companies were also easier to do business with, according to customers. However, the author found that transforming product-centered cultures can be difficult and that the potential benefits do not necessarily translate into superior performance.

A company's market value actually increases when its known rivals innovate.

Most large-scale change efforts fail to meet their expectations. A major problem is that even the most advanced change models will stumble when they face organizational designs and management practices that are inherently anti-change. The truth is that the effectiveness of change efforts is largely determined by organizational design, or how a company's structure, processes, reward systems and other features are orchestrated over time to support one another as well as the company's strategic intent, identity and capabilities. In a world that is perpetually changing, an organization's design must support the idea that the implementation and reimplementation of a strategy is a continuous process. However, a number of traditional organizational design features tend to discourage -- and not encourage -- change. Thus, to transform themselves into organizations that are "built to change," companies need to rethink a number of these basic design assumptions with respect to managing talent (forget about job descriptions and redefine the relationship between company and worker), reward systems (implement a "person-based" pay system), structure (redesign the organization to maximize its "surface area"), information and decision processes (scrap the annual-budget process and move decision making closer to the front lines), and leaders (replace hierarchical command-and-control with shared leadership).

Launching new ventures outside a corporation's core business is risky and failure-prone -- yet often perceived as vital to innovation and organic growth. Can investing in new ventures add value to a company despite the risks? To explore that question, the authors conducted an in-depth study of corporate venturing at Nokia Corp. between 1998 and 2002; the study included two years of dissertation research by one of the authors. The research yielded a number of lessons about corporate venturing. For example, Nokia discovered that looking at the success or failure of an individual project as a business was the wrong way to evaluate the effectiveness of the venturing program. Whether or not they succeeded as businesses, Nokia's corporate ventures often added important capabilities to the core business, such as familiarity with a new customer segment for the company. In fact, seemingly unrelated investments sometimes led to technologies that later benefited the company's core business. The authors conclude that, to extract value from corporate ventures, companies must use different management practices than in their established businesses, structure new ventures so that they don't face pressure to deliver immediate results, and emphasize learning. Although 70% of Nokia's corporate venturing investments during the period studied were either discontinued or completely divested, the capabilities and technologies developed nonetheless played an important role in helping the company's core businesses respond to change.

According to conventional wisdom, companies resemble organisms destined to pass through the stages of start-up, scaling, maturity and decline. In reality, business opportunities & #8212; and not firms & #8212; pass through these stages, and most organizations consist of multiple opportunities arrayed across the different stages of the life cycle. Executives who understand this crucial distinction can view their organization as a portfolio of opportunities that requires constant re-jiggering to balance the demands of the present with the promise of the future. The authors suggest that, when assessing any opportunity portfolio, executives should remain on the lookout for the following common pathologies: waiting too long to exit a declining business, failing to salvage usable pieces of a business that is shutdown, shunning promising new markets because of an overly conservative fiscal approach, trying to scale too many business opportunities so that none of them receives the necessary resources), applying the same management style to business opportunities at different life cycle stages, and erring on the side of loss aversion.

Early research in e-commerce projected that online retailing would spiral into a never-ending price war, but recent research has shown that customers are more likely to pay higher prices to online retailers of high quality that they trust. But how do customers evaluate quality in online retailing? What are the specific aspects of an online transaction that customers value and use to distinguish one site from another? The authors explored these issues by surveying customers who had recently engaged in an online retail transaction to determine how they evaluate the quality of their experiences with online retailers. The results demonstrated that customers' perceptions of quality and satisfaction with online purchases depend upon three things: interaction with the Web site, delivery of the product and how prepared retailers are to address problems when they occur. Of the three, product delivery has the strongest influence on customers' satisfaction and future purchase intentions. The authors further break down each of the three aspects of quality to create a complete picture of what it takes to build a trusting relationship with customers in an e-commerce environment.

Conflict is inevitable in any large organization, and these conflicts, particularly in the board of directors, can often be costly to a firm both in terms of real dollars and in lost organizational focus. However, drawing on best practices in conflict management, the author suggests that organizations can take a comprehensive approach to quickly settle conflict inside the board, making use of four resources available to any organization. The first is the board itself. Directors and boards should take the lead in addressing their own problems and disagreements using the most constructive approaches possible. Boards also need to establish a set of internal and external resources. Internally, they can rely on resources such as general counsel, the chief ethics officer, and the organizational ombudsman. Externally, organizations can rely on mediation and arbitration as well as investigative counsel. In cases of last resort, the board can rely on public resources such as the courts and government agencies. However, this approach may not be enough. The authors suggest a new role: the board ombudsman, for a highly competent, independent and confidential resource who can help directors and boards to solve problems through effective, informal methods, such as assisted negotiation or shuttle diplomacy.

Multicultural experience tends to facilitate creative thinking and problem solving.

Information about intangibles and the opportunity they offer are a valuable part of a company's portfolio.

Innovation is typically a group effort, but how exactly do researchers collaborate with one another to innovate? To answer this question, the authors compiled a dataset identifying all co-authorship relationships of U.S. patent inventors from 1975 through 1999. That dataset revealed that the social network of innovators is a "small world," with various clusters of people interconnected by different "gatekeepers," individuals who bridge one group with another. Historically, engineers and scientists tended to work within local clusters of collaboration that were isolated within a company. Recently, though, people have become increasingly mobile, changing jobs with greater frequency, and these formerly isolated clusters have begun to interconnect into larger networks through which information flows more freely between companies. Such environments provide both strategic opportunity and potential threat: They can increase creativity within a company, but they also aid in the diffusion of creative knowledge to other firms through personnel and knowledge transfer. The trick, then, is to manage innovation in ways that exploit the opportunities while minimizing the risks.