Articles

Popular wisdom holds that blue-chip companies can somehow grow continuously. According to the authors, however, the struggle of corporate icons like Kodak, Digital and Xerox demonstrate that natural limitations, managerial complexity, a lack of stakeholder harmony and antitrust concerns make continuous growth increasingly difficult. Rather than seeking growth at any cost, they suggest that companies seek alternative ways of moving beyond natural growth limits. The authors draw on a host of examples -- from Microsoft, J.P. Morgan, IBM and others -- suggesting that companies finding themselves confronting this scenario can either break up their company, create new corporate forms or make a graceful growth-to-value transition. In evaluating their options, say the authors, the corporate executives must consider their company's position in its life cycle -- growth, stall or post-stall. Stalls can be anticipated by assessing the natural limits of the company's dominant growth strategy and its pattern of financial performance. Executives must also realistically assess their company's capacity for both innovation and new-business creation in order to decide whether their capital and talent would be better spent on core business development than on the reckless pursuit of high growth. Choosing alternate options is not easy, suggest the authors, given the pervasive culture of continuous growth. The first step toward making constructive decisions for a company's future, however, is to acknowledge that unbounded growth may indeed be a myth.

Sellers know things about their customers' businesses that the customers don't know and can't find out on their own yet value immensely. Because they come into contact with many and varied buyers, sellers have a bird's-eye view of the forest -- the industry's competitive landscape -- in contrast to customers, who often see only the trees. And they can use their wide range of experience to teach customers about their own businesses. This isn't a matter of divulging confidential aspects of clients' businesses to their competitors. The challenge is to translate an industrywide perspective into knowledge that customers can use. Companies that can do that successfully reduce their customers' costs or operating risks and are rewarded in turn with customer loyalty, pricing flexibility or both. The authors lay out three strategies that companies can adopt to turn a view of the forest into value for customers and competitive advantage for the business. They also explain the steps companies should take to collect, aggregate, adapt and share customer experiences.

When executives began outsourcing substantial portions of their operations more than a decade ago, they did it to offload activities they declared to be noncore in order to cut costs and improve strategic focus. Today, however, companies are looking outside for help for more fundamental reasons -- to facilitate rapid organizational change, to launch new strategies and to reshape company boundaries. In doing so, they are engaging in transformational outsourcing: partnering with another company to achieve a rapid, substantial and sustainable improvement in enterprise-level performance. On the basis of research on 20 companies that have attempted the practice, the author has identified four broad organizational categories that can benefit from transformational outsourcing. Startups such as TiVo, for example, need partners to scale up rapidly. "Crouching tigers" such as Family Christian Stores are being stymied by a deficiency in some key capability from meeting their strategic aspirations. "Fallen angels" -- such as BP in the mid-1990s -- settle into the wrong performance trajectory and need strong action to change their tack. And organizations on the edge of survival -- as Britain's National Savings and Investments was several years ago -- need transformational outsourcing to become "born again."

Brands may be less vulnerable to the vagaries of extension than is commonly feared.

Data from a decade-long research project puts advice to managers in context, country by country.

It is not uncommon in many companies for tactical planners to use computer models to optimize the supply chain -- while, in a completely separate activity, senior managers formulate strategy. The endeavors are understandably separate as they differ fundamentally in nature. But today, the author posits, a few leading organizations are discovering the benefits of having the tactical planners in close communication with the big-picture strategists early on. A new approach called strategic supply-chain planning can ensure that critical supply-chain details inform a company's business strategy and that supply-chain management aligns with the strategic direction -- a synergy companies could benefit from at any time but is often most urgently needed after mergers or acquisitions. Companies routinely weigh long-term supply-chain-related decisions in light of alternative sources of supply, new geographic markets or new products, but tactical managers think about the issues differently than strategic managers. According to the author, a step-by-step approach can leverage the best of both worlds, and his research suggests how to combine the strategist's scenario planning with the tactical planner's optimization modeling while avoiding the downsides of each approach. As long as the two teams work together, he says, strategic supply-chain planning can improve a company's competitiveness.

A great variety of companies -- cell phone operators, rental car companies, video rental chains and many others -- price their products and services in ways that confuse and irritate their customers, according to the authors. They lure people in with teaser rates, two-for-one-deals, "free" gifts and so on, and then slap them with late fees, charges for "extra" usage and other unanticipated costs. The conventional wisdom is that such tactics are a good idea; after all, they allow companies to boost profits while seeming to price competitively. But, say the authors, hidden pricing can be harmful not only for consumers who can't figure out what something really costs, but also for the businesses that engage in it. That's because it isn't enough to fool customers. Companies also have to fool their competitors with pricing games, and that is much harder to do. Rivals are equally good at fooling customers and will spend heavily to attract them. If competition forces a business to spend an extra $1 today in order to attract a customer worth an extra $1 tomorrow, neither the business nor the customer ends up any better off. Using examples from the appliance industry and restaurant business, the authors show how companies that engage in honest pricing can enjoy important benefits -- happier customers, clearer product differentiation and, consequently, higher profits.

Most consumption experiences that people have are the routine stuff of life -- filling the gas tank, buying groceries, grabbing a quick lunch. Such tasks for the most part are neither fun nor painful; they're simply things that need to get checked off the list. Indeed, the authors say, they are so neutral that people often choose the seller with little thought and forget the experience in a matter of hours. Some providers of neutral services want to keep things that way. They want to be so convenient and reliable that people continue to use them unthinkingly. For certain mature service businesses, however, the addition of fun can be an important differentiator. The authors present three case studies taken from industries not known for fun -- furniture retailing, consumer banking and the grocery business -- to show how it can be turned to profitable advantage. Jordan's Furniture, Commerce Bank and Stew Leonard's operate their basic business models at a very high standard of excellence. But they also have what it takes to make a routine experience into something positive: strong leadership, a clear vision, a discriminating filter for new employees, a focus on hiring for attitudes rather than skills, and the ability to come up with the unexpected. The authors offer some general guidelines and cautionary notes to help managers who may want to try to emulate these successful companies.