Articles

Research reveals factors that affect the likelihood of transacting business over mobile phones.

Leadership has become the hottest topic in business. Companies see this hard-to-pin-down ability as essential to organizational success, and they want their executives to learn how to exercise it. As a result, they are investing heavily in leadership-development programs and honing eloquent statements about the importance of developing next-generation leaders at every organizational level. And yet these speeches and investments have often failed the companies seeking to create a pipeline of leaders. The authors have identified three pathologies at the root of many leadership-development failures. They cite outdated thinking about ownership of the efforts, a product-focused, quick-fix mentality, and make-believe metrics that measure activity rather than capability. The danger is that these pathologies will sour companies on leadership development, leading them to cut investment and go back to waiting passively for leaders to emerge. But that approach has failed in the past and will continue to do so. Companies that make leadership development a core business process can overcome the pathologies and prepare the individuals and teams they will need to take their organizations to greater heights.

When it comes to thinking about scale, the assumption of corporate leaders since Henry Ford’s day has been that bigger is better. And in many situations, such thinking is inarguably correct because of the cost efficiencies that size provides. But sometimes efficiencies can mask opportunities. In their research, the authors found that small-scale operations provide significant advantages in four areas. They allow companies to locate hot spots and tap into local knowledge networks; they make it possible to respond more rapidly to customer needs and to trends in regional demand; they enable companies to monitor potentially disruptive technologies; and they help hold down labor costs while developing managerial talent. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches to corporate needs. They conclude that executives who develop a deeper understanding of scale and learn when it is better to think small can have a potentially huge impact on their companies’ long-term success.

As the shadow of corporate scandals looms ever larger, government’s role in regulating and influencing core business practices also has grown more prominent. As a result, businesses are struggling to reconcile the spotlight of increased regulation with the goals of corporate strategy. To navigate these difficult straits, businesses need to understand how governments can help or hinder their business objectives while they develop hybrid strategies that focus on shaping the rules. It becomes essential that companies better understand the games business and government play and the roles of each in making and enforcing the rules. Michael D. Watkins, associate professor of business administration at Harvard Business School, identifies two major types of games: value-net games, which relate to cooperation and competition among businesses, and public-interest games, in which coalitions of businesses and industry associations are pitted against nonbusiness organizations, such as unions, consumer groups and environmental entities. Watkins believes that the most effective businesses craft their strategies by combining different approaches from each game, which in turn helps to shape how governments regulate future corporate activity.

How the industry's evolution can inform all e-tail enterprises.

Developing the right strategy for product innovation requires a fundamental understanding of how technical modularity affects R&;D. In a modular design, a change in one component of a product has relatively little influence on the performance of the system. In a nonmodular, or coupled, design, the components are highly interdependent, and the result is that a minor change in one part can cause an unexpectedly huge difference in the functioning of the overall system. Generally speaking, modular designs make R&;D more predictable, but they tend to result in incremental product improvements instead of important advances. Coupled designs are riskier to work with, but they are more likely to lead to breakthroughs. This trade-off between predictability and innovation can be visualized as a technology landscape, with gently sloping hills corresponding to incremental product improvements that are based on modular components & #8212; and with soaring, craggy peaks representing breakthrough inventions that rely on tightly coupled parts. Developing new products requires a search across such technology terrain, and companies should first choose the type of landscape that suits them best and then develop the appropriate strategy for navigating that topography.

Disruptive strategic innovations are not necessarily superior to the traditional ways of competing, nor are they always destined to conquer the market. Rushing to embrace them can be detrimental for established companies when other responses, including ignoring the innovation, make more sense.