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Strategic alliances are assuming increasing prominence in the strategy of leading firms, large and small. Yet many alliances fail to meet expectations because little attention is given to nurturing the close working relationships and interpersonal connections that unite the partnering organizations. This case study follows the strategic alliance between two Fortune 500 firms (referred to as Alpha Communications and Omega Financial Services) as they developed a cobranded product. It explores the social architecture of the alliance and identifies the communication patterns that united the participants & #8212; and the beliefs that divided them. The researchers gathered data from the entire network of alliance participants, including the core team and a cadre of senior executives in the two firms. The result is a vivid and comprehensive portrait of the intricate web of relationships that formed in this alliance and the flow of communications within and across the partnering organizations. The interviews in the study revealed, for example, that fears of ulterior motives preoccupied managers on both sides, leading to a lack of trust. There was also a perceived imbalance in the degree of importance that each partner assigned to the alliance. One appointed senior managers, the other lower level managers, which led to significant pacing issues. Although managers in both firms agreed that the alliance made sense, inattention to the inner workings revealed bothersome incompatibilities. The firms’ different personnel structures also contributed to high levels of frustration. Omega used a centralized approach to control the outward flow of information, whereas Alpha used a decentralized approach. The researchers’ findings suggest that positive personal connections are crucial to the success of a partnership. Initial negotiations and senior management advocacy set the tone for the alliance, galvanizing support and promoting effective interpersonal ties. A well-integrated communication and work-flow network is required within and across the firms, so firms must carefully select team members who will match in rank and specialization those from the partnering organization. Regularly auditing the evolving ties between the organizations is valuable in gauging alliance health.

When faced with a global IT infrastructure transition project, Xerox managers decided to launch a knowledge-sharing initiative called the Transition Alliance. When fully functional, the Alliance comprised fifty IT professionals responsible for managing 70,000 desktop workstations, nearly 1,200 servers, and networking hardware on five continents. Storck and Hill observed that community members provided high-quality, validated solutions; handled unstructured problems well; and dealt effectively with new developments in hardware and software. The authors also point out that the motivation for learning and developing at an individual level seemed greater in this community structure than in other organizational forms, which has important implications for the longer-term job performance of the participants. The Alliance was more than simply a group that met occasionally to discuss common issues related to a single functional or professional area. It had a defined relationship to formal organizational objectives yet was not formally required to report back to headquarters on its activities. Within the Alliance, the communication repertoire was built upon the leadership training required for all Xerox employees. Work processes that developed within the Alliance supplemented those used elsewhere in the organization. Handling action items, creating meeting agendas, and developing other processes were evidence of the self-directed nature of the group and provided a context for communication. Storck and Hill identified six guiding principles that were instrumental to Alliance success and are applicable whenever circumstances require organizational learning: -- Design an interaction format that promotes openness and allows for serendipity. -- Build upon a common organizational culture. -- Demonstrate the existence of mutual interests after the initial success at resolving issues and achieving corporate goals. -- Leverage those aspects of the organizational culture that respect the value of collective learning. -- Embed knowledge-sharing practices into the work processes of the group. -- Establish an environment in which knowledge sharing is based on processes and cultural norms that are defined by the community rather than other parts of the organization.

A company's sales workforce must be able to present their products and services using state-of-the-art personal computer technology. To communicate effectively with the company's main office, a salesforce working in the field must also be able to collect and transmit order data from remote locations. The authors studied how a company combined salesforce automation with a telecommuting program to create two new business strategies designed to improve organizational performance. The authors not only describe a successful "telework" program, but they also provide a framework for conducting a cost/benefit analysis. They conclude that the start-up cost of the telework program was high because the IT infrastructure was not current; however, the direct costs and savings offset each other within 3 to 4 years. In addition, they report that ongoing costs declined rapidly, depending on the number of new teleworkers joining the organization. The telework program enhanced accountability because the new software applications allowed managers greater oversight of employee activities. Productivity also increased. After learning how to increase the speed and accuracy of internal operations, the salesforce spent more time with customers and generated more sales. By integrating0 technology into business processes, the telecommuting program also spurred organizational adjustments and cultural change. Gradually, business managers adjusted policies and procedures to conform to the program's technical and business needs. They shifted from managing by attendance to managing by results, which depended on a reliable IT infrastructure and technical tools for communicating with their employees. The telework program quickened the pace of IT adoption at this company by linking IT improvements to the organization's mission and survival. This mobilized the salesforce, the information systems staff, and middle managers to adapt to and accept the new business environment.

Even the best-intentioned senior managers may find it difficult to translate aspirations into action, when molding a more market-driven company. Although the underlying principles and prescription of generic change programs offer valuable guidance, a firm must tailor its own change program to the particular challenges it faces in understanding, attracting, and keeping its valuable customers. In this article, Day discusses six conditions that ensure change-process success. He uses the experiences of four corporate change programs (Fidelity Investments; Sears, Roebuck and Co.; Eurotunnel; and Owens Corning) and post-audits of some failed change initiatives to illustrate this change model and explain the necessary conditions for a firm's durable shift to a market orientation. Two pressures initiate a firm's change process: (1) its inclination to focus inwardly and become remote from its customers and unresponsive to competitive challenges; and (2) external market, technology, and competitive forces that pull the business out of alignment with its present market. The interplay of these forces leads to one or more of the following triggers for change: market disruptions that threaten a firm's business model, continuing erosion of market alignment that results in a market disadvantage, strategic necessity, or intolerable opportunity costs. Successful change programs have six overlapping stages: 1. Demonstrating leadership commitment. A leader owns and champions the change, invests time and resources, and creates a sense of urgency. 2. Understanding the need for change. Key implementers understand market responsiveness, know the changes needed, and see the benefits of the initiative. 3. Shaping the vision. All employees know what they are trying to accomplish and understand how to create superior value. 4. Mobilizing commitment at all levels. Those responsible have credibility and know how to form a coalition of supporters to overcome resistance. 5. Aligning structures, systems, and incentives. Key implementers have the resources they need to create a credible plan for alignment. 6. Reinforcing the change. Those responsible know how to start the program and keep attention focused on the change and benchmark measures. Any program to create a market-driven organization must begin quickly but be sustained over many years. Fidelity's approach, which took five years to reach 60 percent completion, resulted in increased customer-retention rates and a doubling of "share of wallet" -- two results that would justify and sustain any firm's change efforts.

Faced with increasing global competition, many firms are finding that price-based or target costing is emerging as a key strategic tool. The target cost is a financial goal for the full cost of a product, derived from estimates of selling price and desired profit (which top management sets on the basis of firm strategy and financial goals). Product selling price is constrained by the marketplace and is determined by analysis along the entire industry value chain and across all functions in a firm. Common to most target-cost applications is a belief that large-scale cost planning and reduction must occur early in the product life cycle. However, Shank and Fisher believe there is no conceptual reason the methodology cannot be a value-added exercise applied to existing products during manufacturing. They posit that if managers were to believe that, during manufacturing, only incremental (i.e., slight) change is possible (through kaizen costing or controlling costs with standard-cost systems), firms would likely miss significant strategic opportunities. Shank and Fisher present a case study that demonstrates the relevance of target-costing techniques for a process-industry plant built in the 1890s that had been making largely the same products for fifty years. The firm's managers, who had used a standard-cost system for many years, might have concluded that kaizen costing was most appropriate for this plant. However, competitive realities necessi-tated a major strategic change that employed target costing as an important ingredient in cost-reduction efforts leading to strategic revitalization. At the beginning of this field study, plant managers focused too much attention on standard cost versus actual cost. There was heavy pressure to move standard cost toward actual cost in order to minimize unfavorable variances for public financial reporting. Managers focused too little attention on ideal manufacturing cost, and target costing received no attention. At the end of the field study, the most useful cost-management tool focused on ideal manufacturing cost versus target cost in relation to actual cost. The standard cost concept essentially dropped out of the picture. Target costing forced managers to rewrite the rules of the game by changing the way the mill delivered value to the customer. Because standard costing accepts the existing game rules and the existing value chain, the authors believe that fundamental cost breakthroughs are much more probable when using target costing.

Evidence indicates that satisfied customers defect at a high rate in many industries. Because satisfaction alone does not translate linearly into outcomes such as loyalty in terms of purchases, businesses must strive for 100 percent, or total, customer satisfaction and even delight to achieve the kind of loyalty they desire. Current studies attribute a higher degree of emotionality to the dissatisfaction end of the satisfaction continuum than in the past. For example, customers who have experienced service failures feel annoyed or victimized. Although victimization is felt at a deeper emotional level than irritation, both can result in outrage. By focusing on more intense customer emotions, such as outrage and delight, the authors explore the dynamics of customer emotions and their effect on customer behavior and loyalty. Schneider and Bowen base their conceptualization on people's needs rather than the more conventional model that focuses on customer expectations about their interactions with a firm. The authors propose a complementary needs-based model for service businesses that assumes customer delight and outrage originate with the handling of three basic human needs -- security, justice, and self-esteem. By recasting a situation as one that has violated any of a customer's fundamental needs, the deeper emotional outcome (e.g., outrage) does not seem incongruous. The authors describe each need and offer specific managerial tactics for avoiding outrage and creating delight. Recent emphasis on relationship marketing -- that is, attracting, developing, and retaining customers -- is pertinent because building relationships requires that companies view customers as people first and consumers second. Service is an exchange relationship in which customers swap their money and loyalty for what Schneider and Bowen argue is need gratification -- a psychological contract with service firms to have their needs gratified. The authors discuss strategies that help firms gratify and, in some cases, delight customers, while avoiding the perception that they do not respect customer needs. Companies must manage how they show concern for customer needs in all actions, including the activities of the back office (e.g., billing, shipping), not just front-office personnel who directly contact the customer.

How faulty decision making led to the ruin of a once profitable ordnance manufacturer.

A unifying framework for thinking about processes & #x2014;or sequences of tasks and activities & #x2014; that provides an integrated, dynamic picture of organizations and managerial behavior.

Are Japanese companies ending their practices of lifetime employment and seniority-based pay, as the popular press has reported? Data from published Japanese surveys offer insights into three key issues: Are Japanese employment practices changing? While changes are taking place, they are limited to seniority-based pay and promotion; lifetime employment remains intact in most large companies. The seniority system is gradually being replaced by a new job performance-based pay system that companies are using to raise white-collar productivity. Most companies plan to retain the lifetime employment system, the benefits of which outweigh the costs. Why are employment practices changing? In the 1980s and 1990s, internal and external factors placed pressure on large firms to change the seniority system. Internal factors include falling profit margins, decreases in white-collar productivity, an aging workforce, and changes in employee attitudes toward work and the seniority system. External factors include the maturing of the Japanese economy, a decline in large Japanese companies' international competitive position, and increasing internationalization of Japanese companies' operations. What are the implications of changes? Given the trends in Japanese employment practices, Western competitors should expect the following: a continuation of Japanese companies' market growth strategy with minor adjustments; innovative products and services as well as marketing and partnering strategies coming from Japanese companies; a resurgence in Japanese firms' competitiveness and productivity levels; increasing opportunities to enter into Japanese keiretsu networks as suppliers; and continued fierce competition in local Asian markets and lower prices from Japanese competitors in more mature product sectors as they move them increasingly to overseas production. The examples of Honda, Fujitsu, and Sony, three firms that revitalized themselves through use of performance-based pay systems, product innovation, and new partnering strategies rather than through layoffs of core employees, suggest that while change will be gradual, most large companies will eventually follow in the same direction.

The authors trace the development of Japanese subcontracting from just after World War I when the labor market in Japan divided into two areas: large firms, especially heavy industries, and the rest of the economy. During World War II, the demand for munitions, cheap labor, changes in infrastructure and technology, and politics led to the further development of subcontracting. After the war, government protections aided its continued growth, until a major transformation in the 1960s during Japan's high-growth economy. The modern form of Japanese subcontracting relies on distinct practices that have developed around the system of clustered control and joint problem solving: -- Target costing. Japanese manufacturers lower costs of new products at the design stage by first determining the sale price, decomposing the price into desired profit and costs, and then breaking down costs to evaluate and price every part. Throughout the process, suppliers provide input. -- Value analysis. In joint problem-solving with prime contractors and subcontractors, Japanese manufacturers decompose increasingly complex cost structures to identify cost-sensitive elements item by item. -- Bilateral design. Modularization, which leads to cost reductions and ease of design changes, results from suppliers' proposals. -- Subcontractor evaluation. The prime contractor continually evaluates subcontractors' performance on quality, price, delivery, engineering, management competence, and long-term viability. -- Purchasing agents' role. Purchasing agents are not mere negotiators but have the technical knowledge to evaluate subcontractors' competence and teach them new production systems. Nishiguchi and Brookfield address several prevalent theories for the evolution and growth of Japanese subcontracting: dualism, flexible specialization, transaction cost economics, and cultural specificity. In their view, no single theory can fully explain the growth of subcontracting. Instead, they posit, it is the product of interaction among market demand, politics, technology, and producer strategy.