Search Results

In an article written well before Enron became a euphemism for corporate irresponsibility, the authors make the case that such misdeeds, so prevalent in recent months, are symptoms of a syndrome of selfishness that has taken hold of our business institutions, our societies and our minds. Drawing on history, literature, philosophy and management thinking, they argue that the syndrome is built on a series of half-truths & #8212; or fabrications & #8212; each of which has driven a debilitating wedge into society. Our narrow view of ourselves as “economic man” has driven a wedge of distrust between our individual wants and our social needs. A distorted view of shareholder value has driven a wedge of disengagement between those who create economic performance and those who harvest it. Our obsession with heroic leadership has created a wedge of disconnection between leaders and everyone else. The glorification of the “lean and mean” organization has driven a wedge of discontinuity between short-term and long-term goals. And the convenient, widely held notion that “a rising tide lifts all boats” has ratified a wedge of disparity between the prime beneficiaries of stock-price increases and the large numbers of people disadvantaged by the corresponding actions. The authors challenge and deconstruct each of these flawed premises and offer an alternative. Real prosperity, they say, combines economic development with social generosity & #8212; and that requires a new philosophy of social and managerial engagement.

Storytelling has emerged as the preferred approach for teaching leadership effectiveness in many companies.

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.

When companies first plunged into e-commerce, they thought success meant cutting out middlemen. That approach didn’t work, in part because e-businesses misunderstood the role of intermediaries. Middlemen are not costly, necessary evils. They solve problems for customers and, in so doing, they enable sales and create value for producers. INSEAD’s Philip Anderson and Erin Anderson show how intermediaries are helping smart companies realize the promise of the Web. They explain intermediaries’ nine ways of adding value, suggesting that three will change, three will survive in a new form, and three (reducing uncertainty about quality, preserving customer anonymity and tailoring offerings to customer needs) present growth opportunities. Middlemen can co-opt the Internet by offering services that would be too difficult for individual producers to provide. However, the authors caution, intermediaries must be open to new ways of doing business with suppliers and vice versa. The Web transforms but does not eliminate the advantages of the middleman’s central lookout position. But what was once thought of as a straight distribution channel from supplier through middleman to customer is now more accurately described as a service hub. The player that takes the customer order & #8212; possibly a Web site & #8212; occupies the center and interacts with many partners. The authors specify appropriate, fair incentives (for example, because Ethan Allen has quasi-independent furniture stores that customers browse before buying directly from the manufacturer’s Web site, the company automatically gives the nearest retailer a 10% tip). And they describe service-hub management that will generate enough trust to permit producers to get closer to customers & #8212; indirectly.

The information age has created a host of digitized products & #8212; in the realms of software, databases, music, videos and electronic books & #8212; for which the potential for piracy, defined as duplication and distribution of a product without the permission of or payment to the content owner, is extremely high. Up to now, efforts to control piracy have been primarily legal in nature, relying upon the assumption that creators of digital products have absolute ownership rights to the content they create. Under the same assumption, companies have also sought to limit piracy with technological safeguards such as click-wrap contracts, encryption, password-limited access to distribution sites and copy proofing. However, say the authors, the belief in absolute ownership of digital content is incorrect from a legal standpoint, and antipiracy tactics that rely upon it will ultimately prove ineffective. What’s more, these tactics may even reduce authorized usage by paying customers. A far better solution, the authors suggest, is to recognize the dynamics of the marketplace, segment that market into innovators (potential pirates) and the mainstream (potential paying customers), and address each segment differently to gather information and establish market leadership. The authors use a variety of cases to illustrate the tactics whereby content creators can coexist with the innovator segment of their audiences while still controlling product price and distribution standards. The key to setting an effective, “priced” value proposition for majority users lies in incorporating the innovator’s technology before it reaches the mainstream. In such a scenario, brand identity encourages the majority to recognize quickly the content provider as the standard source for the product. Brand strength is then enhanced through fair pricing, product enhancement and superior distribution mechanisms.

What shapes strategy today and how has it changed? While many executives were focused on the implications of the Internet, a more powerful force was at work, contends Stanford University professor Kathleen M. Eisenhardt: globalization. Globalization has quietly transformed the economic playing field. The traditional strategic paradigms (positioning, core competence and the like) are not dead, but they are less germane than they were. Schumpeter’s “creative destruction” and similar economic views are coming into their own. The new economics is more entrepreneurial. It centers on disequilibrium, fleeting opportunities to capture competitive advantage, and the creation and destruction of wealth. Successful strategy in today’s world is simple; it uses a few clear guidelines and allows for flexibility. It is supported by organizational design; it is not handed down from on high. And timing is everything. Eisenhardt cites Colgate’s use of simplicity in a key strategic process, global product management. Colgate has found success through allowing product managers considerable freedom within a couple of simple guidelines (Maintain the Brand; Keep Relative Product Positioning Stable). That thinking also has been a boon to Ispat International, which uses uncomplicated rules for choosing and integrating acquisitions and has thus become one of the world’s fastest-growing steel companies. In contrast, Intel and SAP stumbled with their joint venture for e-commerce services, Pandesic. Although the companies had ample resources and a clear vision of their desired strategic position, their plan’s complexity kept them from adjusting as the market unfolded. Eisenhardt explains how managers can refocus their strategy on key processes and simple rules, mapping their individual businesses to market opportunities and employing an evolutionary form of timing to move from one competitive advantage to the next.

The quality initiative Six Sigma is sweeping the United States. Is it good for whatever ails your company? Consultant Michael Hammer thinks not. He warns that many business leaders, in their quest for operations-performance improvement, fail to distinguish its strengths from its weaknesses. Hammer presents a strategic, holistic approach & #8212; business-process management & #8212; in which Six Sigma is only one of many useful initiatives. If a business process, such as billing customers, is fundamentally defective, why use Six Sigma to improve the performance of it? Companies that Hammer calls process enterprises (Caterpillar, Johnson & ; Johnson, Merck, Progressive Casualty Insurance, Bombardier and IBM) have found more success redesigning whole processes. Certainly, Six Sigma’s ability to unearth root causes of problems is outstanding for narrow cost-saving improvements. But it deploys statistical analytic tools to uncover flaws in the execution of an existing process without asking whether the process itself is flawed. Six Sigma assumes that the existing design is fundamentally sound & #8212; a dangerous assumption. For peak performance, companies should position Six Sigma in the context of process management and assign process owners. When a problem is amenable to a Six-Sigma solution, the process owner convenes a project team. If deeper change is needed, then a process-redesign team is organized. Process owners ensure that all performance initiatives (Six Sigma, enterprise resource planning, balanced scorecard, customer-relationship management and so on) are integrated to support strategic goals. Fitting Six Sigma into the process-management framework allows organizations to enjoy Six Sigma’s benefits while keeping it away from areas where it doesn’t belong. Process enterprises already are reaping cost savings, accelerated new-product introduction, improvements in customer satisfaction and increases in profitability.

In following the traditional model of strategy development, a company seeks to craft the best possible plan so that it can be handed off for a predetermined course of execution involving a predictable set of events and a specific final goal. This scripted approach resembles traditional theater: The actors speak the same lines and the action comes to the same satisfying conclusion, night after night. The model works well when business is going through a relatively stable period. The current situation, however, is not stable: Companies are still trying to navigate the technological tsunami created by the Internet. Under the circumstances, it makes much more sense for companies to follow an improvisational model & #8212; that is, to throw out the script, bring in the audience and trust the actors to innovate on the spot. The metaphor of improvisational theater helps executives think about the way in which an entire organization can become an arena for staging experiments that can transform a company’s overarching strategy. Harvard Business School professor Rosabeth Moss Kanter lays out the six elements of strategic improvisation and illustrates how companies have made use of each one to get the most out of new technologies. Senior managers who understand these elements can create an atmosphere in which improvisational theater thrives; change then becomes an organic process rather than a painful reaction to circumstances beyond the company’s control. Although this approach does not advocate a big plunge into something totally new, it is anything but conservative. Companies that engage in continual improvisation through innovative projects of all sizes and shapes are much better equipped to explore highly threatening disruptive technologies and embrace quite radical changes.

During the 1980s, everybody marveled at Benetton, the Italian casual-wear company with a penchant for provocative advertising. The archetypal network organization, it used subcontractors and independent agents for production processes, distribution and retail. But recognizing that times change, Benetton decided on a new approach & #8212; in advance of external pressures. Without giving up the strongest aspects of its networked model, it is integrating and centralizing, instituting direct control over key processes throughout the supply chain. The company also is diversifying into sportswear, sports equipment and communications. Vertical integration has meant establishing state-of-the-art production poles in Benetton’s foreign locations. The Castrette pole, near its headquarters, decides what each of the foreign poles should produce (on the basis of the skills and experience of the local population), and the foreign poles contract out production tasks. Benetton also has increased its upstream vertical integration to exercise greater control over its supply of textiles and thread. At the retail end, the company is supplementing its network of small, independently owned shops with large, directly controlled megastores. To stay ahead of fashion’s ever-changing whims, Benetton is streamlining its brands and collections, supplementing two basic collections with smaller, flash collections. In its recently acquired sports businesses, Benetton has invested in high-tech systems for designing sports equipment and has brought together designers from around the world for creative cross-fertilization. It has also reorganized its production processes and improved its retail network by establishing Benetton “corners” in the large sports shops of major distribution chains. In the field of communications, Benetton’s Fabrica workshop has produced award-winning films, and its new company, United Web, hopes to take advantage of the possibilities of e-commerce. Benetton knows that innovative businesses must pay attention to how knowledge is divided among producers, suppliers and retailers. Its new directions represent a major discontinuity from its past and divergence from industry practices.

Five leading venture capitalists explain that even in today's tough economy, entrepreneurs should search for the 'smart money.' Facilitator: Howard Anderson, founding partner and senior managing director of YankeeTek Ventures of Cambridge, Massachusetts. Participants: Scott Lawin, a founding member and COO of GSVentures in New York City; Vernon Lobo, managing director of Mosaic Venture Partners in Toronto; Craig London, vice president and general manager of Safeguard Scientifics in Palo Alto, California; and Russell Siegelman, general partner at Kleiner Perkins Caufield & ; Byers in Menlo Park, California. Raising capital for new ventures may have suffered a setback when the dot-com bubble burst, but that has not impeded the flow of bright ideas that cry out for funding. A panel of venture-capital experts recently met at MIT -- arguably innovation headquarters of the world -- to discuss venture capital today and to answer questions from an audience of inventors, entrepreneurs and others. The panel discussion offers practical insights not only into what entrepreneurs should look for in a VC firm, but also what venture capitalists seek from startups.