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Whereas companies once focused primarily on outplaying competitors at a fixed game, now their central focus is on understanding the relationship between an environment's turbulence and their choice of strategy. By doing so, managers can develop better strategies that lead to and maintain strategic supremacy. This process begins with analysis of a firm's current competitive environment, followed by an understanding of the rules of the game in that industry. If a firm lacks the capabilities to succeed in the environment or wishes to challenge the status quo to improve its position, it might consider changing the rules. The ability to establish the rules of the game to control evolution is one facet of strategic supremacy. The player with strategic supremacy shapes the field and basis of competition for its rivals. Studies of hypercompetitive environments provide insight into the inextricably intertwined relationships among disruption, patterns of turbulence, the rules of competition, and definition of the playing field. Why is changing the environment important? Some strategies may work well in one environment but not in another. For example, strategies that are successful in fairly stable environments may be a liability in unstable ones. Whereas profits previously depended on stability and lack of rivalry, profits in hypercompetitive environments like those of the 1990s result from increased rivalry that focuses on defining a new basis of competition for customers. Extending the insights gained from hypercompetitive markets, D'Aveni suggests that turbulence creates competitive environments characterized by distinct patterns of disruption determined by frequency and their competence-destroying or competence-enhancing nature. The four competitive environments (equilibrium, fluctuating equilibrium, punctuated equilibrium, and disequilibrium) require different strategies. The goal of incumbent leaders and challengers in each environment is to achieve strategic supremacy by controlling the degree and pattern of turbulence. But, because rivals and customers are never content with the status quo, the battle for strategic supremacy is continuous.

Traditional strategic planning draws from forecasts of parameters like market growth, prices, exchange rates, and input costs that managers are unable to predict five or ten years in advance with any accuracy. Nevertheless, some firms meticulously construct strategic plans on the basis of forecasting that, in all probability, will be wrong. These companies tend to overinvest in building assets and capabilities that are highly specific to a particular strategy, relative to what would be optimal if planning explicitly acknowledged that forecasts would likely be off the mark. While companies may focus on executing a single strategy at any particular time, they must also build and maintain a portfolio of strategic options on the future. They must invest in developing new capabilities and learning about new, potential markets. By establishing a set of strategic options, a company can reposition itself faster than competitors that have focused on "doing more of the same." Williamson discusses a strategy that embodies a coherent portfolio of options, sketches a process managers can use to develop this kind of strategy, and explains how planning and management opportunism can reinforce each other. Creating a portfolio of future options involves: -- Uncovering the hidden constraints on a company's future -- both capability constraints and market-knowledge constraints. -- Establishing processes to minimize the costs of building and maintaining the portfolio. -- Optimizing the portfolio by considering (1) alternative capabilities that could profitably meet customer needs and (2) future markets or new customer behaviors. -- Combining planning and opportunism, both of which are essential to the proactive creation of strategic options. Williamson cautions that a company must keep tactical opportunism within the bounds of its overall direction, ruling out options that might cause it to deviate from its long-term mission. Short-term opportunism must determine which precise option a company chooses to exercise.

In rapidly changing markets, decisions that changeåÊa company's direction arise much more often.

Managers typically assess what competitors do and strive to do it better. Using this approach, companies expend tremendous effort and achieve only incremental improvement -- imitation, not innovation. By focusing on the competition, companies tend to be reactive, and their understanding of emerging mass markets and changing customer demands becomes hazy. During the past decade, Kim and Mauborgne have studied companies of sustained high growth and profits. All pursue a strategy, value innovation, that renders the competition irrelevant by offering new and superior buyer value in existing markets or by enabling the creation of new markets through quantum leaps in buyer value. Value innovation places equal emphasis on value and innovation, since innovation without value can be too strategic or wild, too technology-driven or futuristic. Hence, value innovation is not the same as value creation. Although value creation on an incremental scale creates some value, it is not sufficient for high performance. To value innovate, managers must ask two questions: "Is the firm offering customers radically superior value?" and "Is the firm's price level accessible to the mass of buyers in the target market?" A consequence of market insight gained from creative strategic thinking, value innovation focuses on redefining problems to shift the performance criteria that matter to customers. Kim and Mauborgne ask five key questions contrasting conventional competition-based logic with that of value innovation and describe the type of organization that best unlocks its employees' ideas and creativity. Rather than follow conventional practices for maximizing profits, successful value innovators use a different market approach that consists of (1) strategic pricing for demand creation and (2) target costing for profit creation. Value innovation as strategy creates a pattern of punctuated equilibrium, in which bursts of value innovation that reshape the industrial landscape are interspersed with periods of improvements, geographic and product-line extensions, and consolidation.

Every decade or two, a big idea in management thinking takes hold and becomes widely accepted. The next big idea must enable businesses to improve the hit rate of strategic initiatives and attain the level of renewal necessary for successful execution. Scientific research on complex adaptive systems has identified principles that apply to living things, from amoebae to organizations. Four principles in particular are relevant to new strategic work, as activities at Royal Dutch/Shell demonstrate: 1. Equilibrium equals death. The lure of equilibrium poses a constant danger to successful firms. In 1996, Shell was highly profitable, but fissures were forming below the surface. Downstream, Shell's oil products business faced grave competitive threats. Steve Miller, the business's group managing director and a student of complexity theory, recognized that to meet those threats, he would have to disturb equilibrium by bypassing the resistant bureaucracy and involving the front lines in renewal. By 1997, after a series of initiatives, Shell ranked first in share among major oil companies; by 1998, the business had made a contribution of more than $300 million to Shell's bottom line. 2. Complex adaptive systems exhibit the capacity of self-organization and emergent complexity. The living-systems approach focuses on the intelligence in the nodes. To tap the retailing potential of the forecourt of Shell's service stations, Miller drew on the insights of frontline troops. He assembled teams from operating companies around the world into "retailing boot camps," workshops for identifying and exploiting market opportunities. These generated many new ideas for beating the competition. 3. Complex adaptive systems move toward the edge of chaos when provoked by a complex task. Novelty emerges in the space between rigidity and randomness. At Shell, the coaching of country teams and the new project work that resulted led to a more direct, informal, and less hierarchical way of working. 4. One cannot direct a living system, only disturb it. Managers cannot assume that a particular input will produce a particular output. Miller has learned that "top-down strategies don't win ballgames. Experimentation, rapid learning, and seizing the momentum of success is the better approach." While leaders provide the vision and establish the context, solutions to ongoing challenges are generated by the people closest to the action.

Competitive discontinuities demand changes in how diversified multinational corporations create wealth. While executives agree that changes in the last decade are qualitatively different from those in the past, many fail to take action or they apply old solutions, such as cost cutting, to new problems. The challenge for companies is to move from the zone of comfort -- the familiar -- to the zone of opportunity -- the unfamiliar. Sources of discontinuity include more powerful, better informed consumers; the breakup of traditional channel structures; deregulation, privatization, and globalization; the convergence of traditional and new technologies; changing competitive boundaries; the evolution to new standards; shorter product life cycles; and the greater involvement of business in ecological and social issues. In this environment, managers must develop new capabilities. They need to think and act globally, regionally, and locally; adapt to a different pace and rhythm in all aspects of a firm's activities; integrate new technological knowledge with old and reconfigure that knowledge into new business opportunities; develop consensus-building skills; form alliances; and allocate resources under conditions of ambiguity. At the same time, they must ensure the profitability of current business. The obstacles to transformation are formidable. Many senior managers have little knowledge of, or experience with, alternate models of managing and responding to new customer expectations. They seek administrative clarity at the expense of strategic clarity and sometimes lack the stamina needed to sustain high performance. Transformation requires interrelated systemwide changes. The effort must be driven by a new concept of opportunity and involve the entire organization. The first step is to create a transformation agenda to mobilize the organization. Managers must then fight inertia, align the organization with the new direction, undertake projects that provide the basis for experimenting and learning, and evaluate failure and success. Innovations in how firms manage must precede innovations in how they compete and create wealth.

Innovation researchers and software experts have long advocated incremental approaches to technology implementation. Fichman and Moses offer a strategy for guiding the implementation of advanced software technologies based on the principle of results-driven incrementalism (RDI), or self-contained implementation sequences -- each of which achieves a specific business result. The authors present an explicit process model and describe their experiences using the RDI strategy at Herman Miller, a large manufacturer of office furniture systems, which implemented supply-chain planning and scheduling software at six sites on time and within budget. No longer only a tool to automate or speed up ways of working, advanced software enables fundamentally new policies and work organizations. As a result, implementing technological process innovations involves learning and adjustment costs, which may exceed the raw purchase cost of the technology itself. The RDI approach benefits firms by promoting organizational learning via multiple, short-horizon goals; maintaining implementation focus and momentum by providing recurring visible results; and negating the common tendency to overengineer technology solutions -- all of which speed the realization of business results and reduce the risk of implementation failure. Consultants using the RDI approach found that some managers do not understand the benefits of self-contained implementation sequences and may consider such a process marginally valuable or impossible to use in their contexts. The authors cite five reasons for resistance and discuss ways to overcome it. The three critical success factors of the RDI approach are technology divisibility, technology and methodology fit, and technology and organization fit. Determining the most effective delivery process for a particular software technology requires ongoing R&;D by someone. The authors advocate that technology vendors view effective implementation processes as crucial to success and worthy of their R&;D efforts.

The role of brands and the ways of managing brands are changing. The authors review how brands aid the buyer and seller and, by focusing on the customer-oriented functions of brands, offer insight into how brand management is evolving. Factors propelling changes in brand management include: 1. Information technology. By simplifying customer search and by enabling retailers to collect real-time information about individual shoppers, IT shifts power away from consumer goods manufacturers and their brand managers. 2. Maturing consumer values. Changing demographics ensure that future markets will consist of experienced buyers. Skeptical of superficial blandishments, they seek to understand the relationship between quality and price, aided in their search by technology. 3. Brand mimicry and brand extension. An abundance of copycat or extension products degrade the brand as a marketing tool, confounding a consumer's attempts to differentiate among products. 4. Autonomy of retailers. Trade concentration, exemplified by supermarket retailing, is shifting the "center of marketing gravity" to retailers who are managing for product category profitability. The authors propose three scenarios for the future of brand management: In Scenario 1, current trends continue. Copycat and brand-extension products diminish as pressure on all but the leading brands increases due to restricted shelf space. Companies emphasize "umbrella" branding at the corporate and product-family levels; brand managers begin working on cross-functional teams organized around categories or processes. Scenario 2 is at least partially in place in some companies. Simplified brand and organizational structures focus on trade customers with whom manufacturers develop joint strategies. Scenario 3 differs radically from the past. By using increasingly economical, IT-based techniques, firms identify customers individually, enabling them to organize and manage customers rather than brands or products. The key lesson is that managers should focus on the dynamically evolving functional patterns of brands rather than on the brands themselves.

Understanding technical complexity is intrinsic to developing effective strategies for managing factory operations. The practices that the author observed during a three-year study of ten color picture tube factories highlight two contrasting forms of managing processes -- the control method (suitable when most contingencies are anticipated and the organization can be structured clearly) and the learning method (suitable when problem recognition, definition, and solution are likely to differ for every situation). Detailed survey data from fifty-four of sixty-three existing color picture tube plants also augment the author's in-depth case studies. Factors relevant to effectively managing production in a factory are logistical complexity (a high volume of transactions or tasks) and technological complexity (the inherent intricacy of the system and its technologies). This paper focuses on the special dictates of technological and process complexity that strain traditional information and process-control systems. A hybrid of flow/assembly and continuous processes, color picture tube manufacturing consists of 200 key production steps, involving more than two dozen process technologies -- chemical, electrical, optical, and mechanical. At the best-performing factories, appropriate problem-solving techniques, experiment-based learning methods, and organizational procedures for routine tasks aid in managing this complexity. Complex processes need "generalist engineers" who are knowledgeable about engineering functions and processes beyond their usual domains. Emphasis shifts from "local" process control to "process-wide" management -- managing process interactions and sharing and coordinating information from different processes. Company policies and incentives to develop problem-solving capabilities, acquire detailed engineering knowledge, and hone the analytical skills of workers are critical to the effective functioning of these complex operations. Adopting learning-based methods of process management promotes an organization's ability to create, acquire, process, and retain new knowledge in an era of increasing complexity and uncertainty.

Despite a downturn in the U.S. semiconductor industry in the 1980s, Intel, Micron Technology, and Texas Instruments exploited innovative technology and unique capabilities to shape their local environments and maintain their competitiveness. They employed combinations of the following generic strategies: 1. Blocking. A firm prevents others from imitating its innovation. Tactics include defending intellectual property in the courts and establishing a reputation for retaliating against new market entrants. 2. Running. Whereas blocking may give competitors time to catch up or leapfrog the innovator, running ensures that the innovator stays ahead by introducing new products, even if by "cannibalizing" its own products. 3. Teaming up. The opposite of blocking, teaming up encourages collaborative entry into markets to improve the chances of establishing an industry standard or dominant design. These strategies intertwine with a firm's competencies and endowments (brand name, patents, distribution channels), its national environment (enactment and enforcement of laws to protect copyrights, patents, trade secrets), and the nature of the technology underpinning a firm's innovation. Intel strategically allied itself with other companies, defended its intellectual property, speedily developed newer generations of microprocessor, and enhanced brand recognition with its "Intel Inside" advertising campaign. Unable to out-manufacture its Japanese rivals, Micron focused on its advanced design capabilities and successfully filed suit against six Japanese chipmakers for dumping below-cost chips on the U.S. market. Its success set the stage for the establishment of Sematech, a consortium funded by member firms and the U.S. government to build a local environment conducive to semiconductor manufacturing and related industries. Texas Instruments vigorously protected its voluminous patent portfolio, collecting royalties that exceeded operating income for a seven-year period. The firm also negotiated cross-licensing agreements and alliances to obtain manufacturing capabilities in Japan. Strategic corporate decisions in defense of profits work in tandem with national environment to ensure industry well-being.