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By one informed estimate from the late 1990s, three-quarters of the Fortune 100's total market capitalization was represented by intangible assets, such as patents, copyrights and trademarks. In this environment, cautions the author, IP management cannot be left to technology managers or corporate legal staff alone -- it must be a matter of concern for functional and business-unit leaders as well as a corporation's most senior officers. To realize the full value of their companies' intellectual property, top executives must seek answers to the following questions: How can the company use intellectual property rights to gain and sustain competitive advantage? How do IP rights affect the industry's structure? What options do IP rights offer vis-à-vis competitors? How can IP rights grant incumbency advantage and establish barriers to entry? How can IP rights help the company gain vertical power along the value chain? What organizational design accommodates an IP strategy most effectively? The author explores each question, drawing on such company examples as Nokia, Motorola, Novo Nordisk and Leo Pharma, in the process helping lead intellectual property rights out of their shadowy existence in patent and legal departments.

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.

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.

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."

Performance variability frustrates managers everywhere. According to the authors, it takes a variety of forms: vastly different sales figures for similar retail stores in similar neighborhoods; significantly varying productivity rates at factories producing the same products; major differences in insurance payments for similar auto accidents. In their quest to reduce performance variability, however, managers often go too far, say the authors. By forcing workers to "copy exactly" or "follow instructions exactly" in every situation, they make it far more difficult for people to use their own judgment and knowledge to solve problems that would benefit from a new approach. Having studied this issue in depth, the authors found that the appropriate intervention to reduce differences in performance depends on individual work practices -- their frequency and predictability. Practices that are more frequent and predictable tend to be more conducive to rigid duplication, whereas those that are rare and unpredictable have greater need for flexibility and innovation. The authors contend that it's not enough to have a balance between uniformity and discretion at the company level: Each group of practitioners within an organization must also have it.

Many companies have embraced the notion that to operate effectively in today's economy, it is necessary to become a knowledge-based organization. But few truly understand what that means or how to carry out the changes required to bring it about. Perhaps the most common misunderstanding is the view that the more a company's products or services have knowledge at their core, the more the organization is, by definition, knowledge based. But products and services are only what are visible or tangible to customers -- they're the tip of the iceberg. Like the iceberg, most of what enables a company to produce anything lies below the surface, hidden within the so-called invisible assets of the organization -- its knowledge about what it does, how it does it and why. In the course of working with more than 30 companies over the past eight years, the author found that a knowledge-based organization is made up of four elements. Each one forms a basis for evaluating the degree to which knowledge is an integral part of the organization and the way it competes. Executives who understand how the four elements interact will be able to start changing their companies to take advantage of the intellectual assets hidden below the surface.

Companies with the best connections to their customers focus on the people and businesses that buy from them.

In recent years, many companies have learned to use the Internet as a powerful platform for collaborating directly with customers on innovation. But direct interactions & #8212; facilitated by customer advisory panels, online communities and product-design tool kits & #8212; have limitations. They don’t always allow companies to reach the right customers at the right time and in the right context. Thus, to fully exploit the Internet as an enabler of innovation, companies need to complement their direct channels of customer interaction by using third parties that can help them bridge gaps in customer knowledge. The authors call this process of indirect, or mediated, innovation innomediation and the third-party actors at the center of it innomediaries. In their research, the authors identified three distinct types of innomediary and observed how each one can help companies acquire different forms of customer knowledge. Using case studies, they suggest ways in which companies can begin to think about exploiting the power of these emerging intermediaries. For businesses that learn to use customer knowledge from both direct and indirect sources, the Internet holds the key to a multichannel innovation strategy.

Adapting to rapid structural change requires exploration, not contraction.

When an activity turns into a buzzword, the odds are high that managers will stop thinking consciously about the behavior they’re trying to elicit and the best way to set expectations clearly. That’s why it’s important to pay attention when buzzwords take over management’s most important responsibilities. Business writer Joan Magretta explains, for example, how thinking outside the box,” a phrase that makes many people cringe, is a useful metaphor when properly understood. The vital work of innovation in companies is sparked precisely because there is a box & #8212; a puzzle with rules that limit and define good solutions. Managers must clearly understand the constraints & #8212; the shape of the box & #8212; if they are to help their employees think sensibly about innovation. She also takes on “resource allocation,” a dry-as-dust technocratic phrase that actually refers to one of management’s most difficult and emotionally charged responsibilities. The crux of the matter is that providing resources for one project means not giving them to another. In other words, it means that managers often have to say no when it is easier to say yes. Last, she focuses on “respect for the individual,” a phrase that, even when used sincerely (and often it’s said insincerely), implies a kind of everyone-gets-treated-the-same ideal. In an organizational context, this phrase really refers to management’s need to match the right individual to the job & #8212; and harsh as it may sound, to fire those who are in jobs they can’t perform. Buzzwords and catchphrases can speed communication. But when it comes to the messy, human realities of management, a dose of straight talk & #8212; and clear thinking & #8212; can go a long way.