Articles

How can companies ensure that their data warehouse delivers as promised?

Markets develop according to the specific paths by which innovations in a given field occur.

Consumer-centered product design is an emerging best practice in many industries, particularly those characterized by practical products that hold no emotional appeal; or in which competition is based on increasingly less profitable attempts to cut cost or improve performance; or in which once distinctive products are becoming commoditized; or in which there is little room left for product innovation. Among the best practitioners, design is understood to be a core activity conferring competitive advantage by bringing to light the emotional meaning products and services have, or could have, for consumers and extracting the high value of such emotional connections. The authors discuss how companies such as Master Lock, Procter & ; Gamble, BMW and Cambridge SoundWorks have employed design research -- including the use of multidisciplinary teams and a variety of ethnographic and psychophysiological techniques -- to build organizationwide identification with the customers' needs and aspirations, keeping everyone's eyes on the same prize.

Companies deploying dishonest tactics toward customers, suppliers, distributors and others typically do so to increase short-term profits, and in that regard they might succeed. But the misconduct is likely to fuel social psychological processes within the organization that have the potential for ruinous fiscal outcomes, outweighing short-term gains. There are three types of consequences to organizational dishonesty: reputation degradation, (mis)matches between values of employees and the organization, and increased surveillance. These outcomes can lead to decreases in repeat business and job satisfaction -- and increases in worker turnover, employee theft and other hidden costs. These consequences will, like tumors, spread and eat progressively at the organization's health and vigor. They will also be difficult to identify through typical accounting methods and might lead to corrective efforts that overshoot the true causes of poor productivity and profitability. Without a thorough understanding of the three types of consequences, an organization could try to control one financial hemorrhage (for example, losses from employee theft) by creating another (namely, investments in increasingly expensive security systems).

The author argues that the dominant challenge for the innovative firm may not be to command marketplace premiums for its innovation, but to strategically identify and opportunistically exploit subsidies for that innovation. For example, Microsoft's final stage of Windows 95 development was effectively subsidized to the tune of $900 million when the company drew upon a highly valuable technical population to test and help improve the quality of its new operating system. An innovation subsidy is the deliberate contributionof a business resource -- money, time, information, expertise, personnel or equipment -- in support of the development of a novel offering with no explicit expectation of a financial return. It is not, however, an outright donation or favor but rather the cost-effective bartering of resources by individuals and institutions that amounts to a gray-market mechanism for mitigating risk. (The article offers other subsidy scenarios referring to Gillette, 3M, IBM. Goldman Sachs and Citigroup.) The core differences in perceived and real risk among economic entities represent the richest source of ideas for opportunistic innovation subsidies. Such scenarios are clearly not merely about money, but about creating and managing relationships that tap the resources of a company's savviest customers. In the management of innovation risk, social capital can be as valuable as financial capital. Seeking out the innovation subsidy challenges firms to rethink the underlying economic relationships between their customers and suppliers.

Many companies keep their suppliers and partners at arm's length, zealously guarding internal knowledge. Toyota Motor Corp., however, embraces its suppliers and encourages knowledge sharing through established networks. Toyota has developed interorganizational processes that facilitate the transfer of both explicit and tacit knowledge. The three key processes revolve around supplier associations (for general sharing of information), consulting groups (for workshops, seminars and on-site assistance from Toyota) and learning teams (for on-site sharing of know-how within small groups). With Toyota's help, suppliers have fine-tuned their operations until, compared with their work for Toyota's rivals, they have 14% higher output per worker, 25% lower inventories and 50% fewer defects. Quality improvements enable Toyota to charge price premiums for its products. Toyota's experience suggests that competitive advantages can be created and sustained through superior knowledge-sharing processes within a supplier network. The authors believe those principles have applicability in other types of alliances, too, including joint ventures. In fact, they contend that establishing effective interorganizational knowledge-sharing processes with suppliers and partners can be crucial for any company. The authors claim that knowledge sharing with suppliers is the reason for Toyota's dynamic learning capability and might be the company's one truly sustainable competitive advantage.

In recent years, leaders at such high-profile companies as Xerox, Procter & ; Gamble, Lucent, Coca-Cola and Mattel have flamed out early in their tenures. Why did such promising and previously successful individuals fail so quickly in the CEO role? And why is such failure happening today with relatively high frequency? The individuals in charge bear some of the responsibility, of course. But the authors' research also uncovered other major forces at play. First is the impact of the predecessor CEO's actions on his or her successor's performance. While outgoing CEOs do not intend to contribute to the failure of their successors, their personal needs and actions can lay the groundwork for derailment. A second force is often the succession process itself. Once again, the outgoing CEO may be responsible, having failed to prepare a successor adequately; and the board is also often guilty of lack of oversight. A third reason for failure by new CEOs is their often narrow expertise and inability to set a proper context as a leader. The authors explore these issues and then offer advice to outgoing CEOs, directors and incoming leaders that may help them avoid the troubles that some companies have faced in making a leadership transition.

Charismatic and controversial former CEOs like General Electric Co.’s Jack Welch and Tyco’s Dennis Kozlowski are giving way to a new breed of leader dedicated to reviving the forward-thinking legacies of Old Economy titans, such as GE’s ingenious Thomas Edison and IBM’s visionary Tom Watson Jr. After years of focusing on the art of the deal, says the author, this renewed emphasis on innovation encourages corporate giants to again ground their organizations in what they do best. Many of today’s emergent corporate leaders, like MCI’s Michael Cappellas, IBM’s Sam Palmisano and GE’s Jeff Immelt, emulate the legendary standard bearers of invention by emphasizing technological engineering over financial engineering, product over marketing and real science over junk science. Critical to their leadership is an unrelenting drive for self-improvement, a strong interest in learning, an appreciation of a motivated work community and longer time frames than those dictated by a preoccupation with the daily stock price. For example, MCI is emerging from the years of WorldCom scandal by consciously drawing upon its legacy of telecommunications innovation. IBM actively seeks to again become the epitome of prestige, employee loyalty and innovation. GE creates a hothouse of R&;D while sharpening its innovative capability in the media and medical sectors through advantageous acquisitions. In addition, executives at 3M, DuPont and Pfizer, who increasingly emphasize research and innovation over promotion and hype, have helped their companies reassert their leadership roles in their respective fields.

Most management advice today -- whether it's from books or articles, prescribed in courses or by consultants -- says that change is good and more change is better. Advice on how to change varies quite a bit, but it has three features in common: "Creative destruction" is its motto. "Change or perish" is its justification. And "no pain, no change" is its rationale for overcoming a purportedly innate human resistance to change. The author admits that creative destruction may be necessary, and even preferable, in certain situations. Companies that have enjoyed captive markets, docile suppliers and government support may need the rude awakening it provides. In such instances, organizational stability is so ingrained that creative destruction may even be the best way to achieve change with the least amount of pain. But for every change avoider today, he says, there are many more "change-aholics" -- companies that have changed more aggressively, quickly and repeatedly than any organization could hope to do successfully. In the process, they have often suffered from "more pain, less change." The author urges executives at such companies to continually monitor their organizations for symptoms of repetitive change syndrome: initiative overload, change-related chaos, employee cynicism and burnout.