Articles

Effective philanthropy must be run as professionally as the core business.

Too much familiarity with customers can backfire, but engaging in multisided conversations can manage the risks.

Most managers see strategy development as serious business. It is ironic, then, that some of the most remarkable strategic breakthroughs in organizations emerge not from well-ordered processes but from messy, ambiguous and sometimes irrational activities -- pursuits that can best be described as play. Referring to research in the fields of developmental psychology and anthropology, the authors argue that play can stimulate the development of cognitive, interpretive skills and engender an emotional sense of fulfillment. It can help establish a safe environment for introducing new ideas about market opportunities, generating debate about important strategic issues, challenging old assumptions and building a sense of common purpose. The authors draw on their own experiences working with managers at the Imagination Lab Foundation and Templeton College, Oxford University, and they make sure to point out that play is no substitute for rational, conventional strategy development. Indeed, after the creative sessions are over, plenty of hard work remains to translate the ideas and insights into processes and actions. However, the authors argue that organizations seeking to differentiate themselves from competitors and overcome strategic obstacles can benefit by making time for managers to interact creatively with follow-up on the insights that emerge.

A company’s installed business processes are typically designed to execute routine activities. As such, they can have great difficulty handling novel initiatives, particularly when important work needs to be coordinated across different business units. Such cases are often better handled by a new framework that views the organization as a nexus of personal promises that employees make to each other. As defined by the authors, a “commitment” is a promise made by a performer to satisfy the concerns of a customer within the organization. “Customer” and “performer” refer simply to roles: An individual acts as a customer when making a request, and a performer when fulfilling a request. In committing to a customer, a performer promises to fulfill the customer’s “conditions of satisfaction,” that is, the specific terms (such as cost, timing and quality) required to meet the customer’s needs. In general, the most powerful commitments are public, active, voluntary, explicit and motivated. Moreover, effective commitments tend to arise out of ongoing discussions between the customer and performer that proceed through four basic steps & #8212; preparation, negotiation, execution and acknowledgment.

The principle that financial markets accurately reflect the underlying value of traded stocks has been widely accepted in the investment world since the 1960s. It is predicated on the assumption that investors make buy or sell decisions based on a rational view of a company's future cash flow, after considering all the relevant information. The role of the markets is to allocate capital to companies efficiently. Recently, however, this rational view has been under attack from adherents of behavioral finance, who argue that stock markets do not reflect economic fundamentals as well as people think they do. The authors maintain that there are instances when stock market valuations can and do make significant and lasting deviations from a company's intrinsic value. However, according to the authors' analysis, the significant discrepancies between market value and intrinsic value are both rare and short-lived. The article cites several examples, including the late 1970s, when inflation-conscious investors pushed stock valuations too low, and the "Internet bubble" of the late 1990s. On the whole, the authors argue, financial markets value investments efficiently -- even if some people invest irrationally some of the time. Although managers may occasionally find ways to take advantage of short-term discrepancies, the authors say the only way they will be able to do so is by understanding the real underlying values.

In this article, the authors review various streams of research suggesting that although companies are increasingly under pressure to manage conflicting or difficult-to-reconcile stakeholder demands, managers are still largely behind the curve in recognizing, justifying and developing the capabilities to do so. In contrast to primary stakeholders such as customers, suppliers and shareholders, secondary stakeholders are often difficult to identify beforehand, or they may not be willing or able to engage, negotiate, compromise or clearly articulate their positions -- a phenomenon the authors refer to as stakeholder ambiguity. Citing examples involving companies such as Monsanto, Conoco-Philips, Texaco and the French oil company Perenco, the authors present research indicating that managers are often ill-prepared to deal with the idiosyncratic and context-specific nature of stakeholder ambiguity and typically revert to formulaic decision-making frameworks, such as discounted cash flow and cost-benefit analysis, which misrepresent the challenges. Some research indicates that stakeholder ambiguity may actually erode the competitive advantage of large multinationals. Although such companies possess significant competencies, technological capabilities and economies of scale, they may be at a disadvantage when trying to determine and align the interests of secondary stakeholders.

Recent research has greatly improved management's ability to anticipate customer wants.

Futurists have long anticipated the day when computers would relieve managers and professionals of the need to make certain types of decisions. But for a variety of reasons -- including management skepticism and concerns about solution complexity -- automated decision making has been slow to materialize. Automated decision making is finally coming of age, the authors argue, and the new generation of applications differs substantially from prior decision-support systems. Today's applications are easier to create and manage than earlier systems. Rather than require people to identify the problems or to initiate the analysis, companies typically embed decision-making capabilities in the normal flow of work. Those systems then sense online data, apply codified knowledge or logic, and make decisions -- all with minimal amounts of human intervention. They can help businesses generate decisions that are more consistent than those made by people, and they can help managers move quickly from insight to decision to action. This can help companies reduce labor costs, leverage scarce expertise, improve quality, enforce policies and respond to customers. As automating decisions becomes more feasible, organizations need to think about which decisions have to be made by people and which can be computerized.

The importance of properly identifying the strategies, and anticipating the actions, of rivals.

To succeed, executives must manage a myriad of relationships.