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When it comes to tapping into the passions of employees, the opportunities and threats that sustainability presents are two sides of the same coin.

Grameen Bank and others know that you get the best answers by burying yourself in the questions.

Leaders of many of today's mature organizations don't have the right mind-set or practices to help their organizations survive. They grew up with management practices that are suited to a different age--one with higher barriers to entry, greater transaction costs, fewer capable competitors, growing and increasingly affluent markets and less information. But today's business environments are less predictable, more complicated and more volatile. The result is that many core businesses are themselves becoming more uncertain and in need of renewal. Established management tools, such as net present value, are built on a foundation of assumed certainty that it's realistic to forecast likely cash flows into the future and discount them to today. In volatile business environments, though, such thinking is no longer practical. As an alternative, the authors offer practices used by successful growth companies, entrepreneurs and corporate new-business-development groups to navigate unpredictable, resource-constrained and surprising environments. In an unpredictable world, trying to be right can lead managers terribly astray. The "discovery-driven" approach outlined in this article emphasizes finding the right answers and reducing the assumption-to-knowledge ratio.

Like most leading thinkers about the intersection of sustainability and business, Richard Locke got here from somewhere else. Trained as a political scientist, he became known early on for expertise in supply chain labor practices, and for advocating that social and economic concerns be integrated into curriculum and research. Now, as the Alvin J, Siteman Professor of Entrepreneurship at the MIT Sloan School of Management and a Professor in the political science department at MIT, Locke's interdisciplinary cast of mind is evident in all the work he does especially his exploration of sustainability. He has helped spearhead the development of MIT Sloan's Laboratory for Sustainable Business (S-Lab), which, notably, not only investigates sustainable-management issues in the classroom but puts students inside companies that are grappling with sustainability challenges on every front. Locke's own current research focuses on improving labor and environmental standards in global supply chains. As a result of his research on Nike and its efforts to improve working conditions among its suppliers, Locke was awarded the Faculty Pioneer Award from the Aspen Institute's Business and Society Program.

The role of procurement within global companies has changed dramatically over the past 25 years from that of simply buying goods and services to overseeing an integrated set of management functions. This brings new challenges and opportunities to procurement. Offshoring and the increased emphasis on specialization and fragmentation of production enhance the strategic character of procurement decisions. Increasingly, procurement decisions have become intertwined with strategic management in general. In this article, the authors discuss the changes in procurement from the perspective of transaction cost economics. They separate transaction costs into “soft” and “hard” costs and differentiate between the internal and external factors that affect these costs. In making procurement decisions, the authors argue, managers need to consider the full range of cost elements. In addition to traditional transaction costs such as transport costs and tariffs, managers need to recognize such elements as cultural and legal differences, government regulation, social preferences, environmental issues, political stability and risks involved in unethical business behavior. The authors argue that knowing the risks and opportunities of the different exposures is a critical management competence. Although management decisions originate in many different parts of the company, procurement managers need to keep a close eye on the various cost exposures and flag concerns as they arise. Procurement, therefore, will need to become more closely connected with strategic decisions throughout the company. This broader view represents a major extension of the concept of total cost of ownership in procurement decisions. Global sourcing creates many new opportunities for value creation, which well-run companies must learn to take advantage of.

New technology tools are offering insights into the power of ancient forms of human communication that Pentland calls honest signals. In this excerpt from his new book Honest Signals: How They Shape Our World (MIT Press, October 2008), Pentland describes how he and other researchers have been using a device called a sociometer to gain a new perspective on human behavior. (The sociometer is a wearable badgelike device equipped with sensors; it measures factors such as body movement and the amount of time people spend talking face-to-face.) Studies using data from sociometers show that certain types of subtle social signals affect outcomes significantly in a variety of settings, from business plan presentations to salary negotiations. Pentland focuses on four types of honest signals: influence, mimicry, activity and consistency. Influence, in this context, refers to the degree to which one person’s speech patterns in a conversation influence the other party’s. Mimicry is the extent to which one person copies another’s gestures and movements & #8212; such as head nodding or smiles & #8212; during an interaction. The activity variable reflects humans’ tendency to show increased activity levels when interested, and consistency in speech or movement may be a sign of focus, as well as of less openness to others’ influence. Such social signals are surprisingly powerful. For example, Pentland describes a study conducted by researchers Jeremy Bailenson and Nick Yee at Stanford University, in which students were shown a three-minute video encouraging them to carry their student identification card. Some students were shown a standard animated video, whereas others saw a video in which the animated figure mimicked their gestures four seconds later. Simply adding the mimicry feature caused the sales pitch for the ID card to be 20% more effective. Understanding the power of these nonverbal forms of communication can enable us to better design organizations, Pentland concludes. However, it is an open question whether we will use the new insights this type of research provides for good or for ill. Article 50118. The MIT SMR article was excerpted and adapted from Honest Signals: How They Shape Our World by Alex (Sandy) Pentland, published October 2008 by The MIT Press. Copyright in the name of The Massachusetts Institute of Technology. All rights reserved.

In global supply chains, managers have consistently struggled with sharing valuable knowledge with buyers and suppliers across borders. Increasingly, talk of the "dark side" of collaborative relationships has left managers wondering who benefits most from knowledge-sharing activities: their companies or their partners. In order to find the answers to these questions, the authors conducted an in-depth study of more than 100 cross-national supply chain partnerships in the industrial chemicals, consumer durables, industrial packaging, toy and apparel industries in multiple locations in 19 countries. Knowledge sharing encompasses the sharing of information, but it doesn't stop there. Much of the information that companies share -- data on inventory levels, sales, production schedules and prices -- is easy to codify and transmit. But other types of knowledge are more difficult to codify: know-how, managerial and communication skills, and organizational memory. Intercompany knowledge sharing is a joint activity between supply-chain partners; the parties share knowledge and then jointly interpret and integrate it into a relationship-domain-specific memory that influences relationship-specific behavior. The authors found three types of knowledge sharing within the supply chain, each offering distinct benefits to buyers and suppliers: information sharing, joint sense making and knowledge integration. They also found that no matter how "diverse" the home cultures of the buyer and supplier companies, these differences had no impact on the propensity to share knowledge. Drawing on examples from the auto (Toyota), aerospace (Boeing, Lockheed Martin and United Technologies) and toy industries, they examine how different types of knowledge sharing can benefit buyers or sellers individually, but more importantly, how it can enhance the performance of the partnership as a whole. They conclude that, while suppliers generally benefit more from knowledge-sharing activities, both buyers and suppliers profit; understanding the benefits of absolute versus relative gains is critical when building world-class global supply chains. Sharing knowledge effectively means understanding that a disparity in benefits is part of what it takes to build partnerships that last.

What's behind every industry-shaking innovation? Countless, but crucial, "mini-innovations," as Joe Fox calls them. Along with his brother, Avi, Fox has founded two companies -- in entirely different industries -- that aimed to challenge the traditional business models. But in an interview with MIT Sloan Management Review, Fox explains that these large-scale innovations don't dawn on him all at once. Instead they arrive in fragments, some of which are conceived by his management team of original thinkers. The Fox brothers set the group to work after they've spotted a broader opportunity, which happens when they aren't looking for one. Their first business, an online brokerage called Web Street, grew out of their own experience trading equities. And they constructed the framework for BuySide Realty, an online real estate brokerage -- which they currently operate, along with a subsidiary called Iggys House -- when prowling around for a vacation home. After the initial inkling, Fox's market research consists not only of asking potential customers, but also of actually paying attention to their answers. What he's looking for is not their opinion of whether an idea can possibly be executed; he just wants to know if they would pay for such a service, assuming he could bring it into existence. Not that he's had an easy time bringing a notion to fruition. He's never been able to strike a deal with any institutional investors, although Web Street did successfully go public during the dot-com boom in 1999. He had hoped to repeat that feat with his current venture last year, but opted to wait for Wall Street's appetite to improve. In the meantime, Fox is counting on a steady supply of "mini-innovations" to keep the business ahead -- by a half-step, at least -- of its megacompetitors. Can he do it? Clearly, he thinks he knows how.

Innovation is the mandate of the day, and it has companies increasingly looking outside of their own organizations for new ways to grow. At the same time, shrinking federal research budgets are forcing universities to find alternate sources of funding for their research efforts. Consequently, just as companies are searching for new capabilities, sources of knowledge and means of growth, universities are feeling the urge to come down from the ivory tower to do business with corporations in order to keep their labs open. The convergence of these circumstances results in an unprecedented opportunity for successful partnerships between universities and corporations, and universities are making this easier every day. Recent years have seen a steep increase in the number of university-sponsored industrial or corporate liaison programs aimed at increasing university funding from private sources. But, given their differing needs, universities and corporations approach collaboration from different perspectives. How can managers reconcile the various needs of the two types of institutions? Drawing upon 20 years of experience as a corporate liaison officer, the author examines how best to manage relationships between companies and universities. He suggests that one point of common ground in corporate and academic partnerships is mutual respect for the use of the scientific method to solve problems. In such a context, academics feel more comfortable entering into dialogue with corporations without fear of "selling out," and corporate interests shed their aversion to so-called "pure" research. This allows both parties to follow the author's advice of shifting from a transactional approach to a relational approach. He examines three case studies and identifies three key factors in their success: The relationships moved beyond short-term vendor relationships to become lasting partnerships that built new capabilities for the companies; senior management was highly involved; and the companies involved the university in their strategy, not merely in technical tasks or isolated business problems.

Strategy is a mechanism through which a company makes sense of the world around it. It is a collection of ideas about how the company intends to win, the source code upon which everything else depends. Because strategy can only capture a company's best thinking at a given point in time, the author argues that strategy, much like a software program, needs to be updated and refined as people gain new experience and knowledge. With traditional approaches to strategy development, the author argues, planning is optimized for the original targets; it is difficult to change directions once implementation is under way. Adaptive processes, by contrast, help companies create and adapt strategy quickly and iteratively, so that people can effectively triage issues and allocate resources in changing environments; they are optimized to identify the best ideas and to ensure that individuals throughout the organization have access to the latest version so that everyday actions can be aligned with the most important strategic insights. Since people throughout the organization play roles in the company's strategic success, strategy development needs to tap into ideas from everywhere. This requires opening up the process to people throughout the organization, permitting extensive face-to-face collaboration, and arranging for individuals other than senior executives to facilitate important strategic discussions. Drawing extensive comparisons with software development and using examples from companies including Metrowerks and Shamrock Foods Co., the author focuses on three major themes: having an iterative, or "spiral," approach versus a linear approach; organizing the strategy-making process around people rather than processes; and the recognition that in strategy there is no such thing as a "silver bullet." Most managers operate in settings that are too dynamic and complex for simple success recipes. Instead of seeking long-term sustainable advantage, good managers need to create sustaining advantages on an ongoing basis.