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Renowned management thinker Henry Mintzberg and business professor Frances Westley zero in on three ways the best managers make decisions. To hone their decision-making skills, business leaders can start by admitting that real-world decisions are not always made through logical steps -- and that often they shouldn't be. Most managers believe they make decisions by using analysis. Define the problem, they say, diagnose its causes, design possible solutions, choose and, finally, implement the choice. But, in reality, they may make their best decisions in some other way -- for example, after a flash of intuition or by trying out several things and keeping what works. In fact, the authors show that a focus on "thinking first" before choosing may interfere with a deep understanding of the issues dividing people and prevent a good decision. A decision-making approach the authors call "seeing first" -- literally creating a picture with others in order to see everyone's concerns -- can surface differences better than analysis and can force a genuine consensus. "Doing first" -- going ahead with an action in order to learn -- is the third approach. Each route is best under particular circumstances. "Thinking first" works best when the issue is clear, data is reliable, the context is structured, thoughts can be pinned down and discipline can be applied -- for example, in an established production process. "Seeing first" works best when many elements must be combined into creative solutions, commitment to those solutions is key and communication across boundaries is essential -- for example, in new-product development. "Doing first" works best when the situation is novel and confusing, when complicated specifications might get in the way and a few simple relationship rules could help people move forward -- for example, when companies face a disruptive technology. If managers learn when to apply each approach, they can increase their effectiveness and give their companies the competitive edge required in uncertain times.

Managers don't need to be told that globalization is accelerating, that new technologies are proliferating or that change is the only constant. Nor do they need anyone to point out how difficult it is for organizations to keep adapting to all the change. They have lived that story. What they may not realize, however, is the extent to which they may be the stumbling blocks to their organizations' transformation and growth. That is because the personal assumptions that undermine their decision making are often quite unconscious. Recent research shows that despite the genuineness and dedication of executives' attempts to manage change, "social projection," or the "false-consensus effect," keeps getting in the way. Projection involves making intuitive judgments about other people and places on the basis of one's own beliefs, knowledge and experience rather than on anything objective about the particular people or places. It leads to overestimating consensus, undervaluing objective assessments or different views, turning away constructive feedback and taking on new ventures without reaching consensus -- a dangerous scenario. Authors Robert L. Cross, a lecturer in the organizational behavior department at Boston University and a research fellow at IBM's Institute for Knowledge Management in Cambridge, Massachusetts, and Susan E. Brodt, a professor of management at Duke University's Fuqua School of Business, use industry examples to support their concrete advice on how to tackle the detrimental effects of projection. They suggest techniques such as creating and maintaining an individual's awareness of projection, practicing looking at ideas from a different perspective, encouraging conflict, and disentangling self-worth from consensus. Because well-honed intuitive judgment is an executive necessity, no manager should let it fall prey to projection. After managers have learned to identify that invisible barrier, they can gain insight into the workings of their own minds and make sense of others' actions. Having done so, they will be able to move ahead in implementing change while managing organizations that can excel in the global arena.

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.

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.

Firms can derive significant benefits from consciously, proactively, and aggressively managing their explicit and explicable knowledge, which many consider the most important factor of production in the knowledge economy. Doing this in a coherent manner requires aligning a firm's organizational and technical resources and capabilities with its knowledge strategy. However, appropriately explicating tacit knowledge so it can be efficiently and meaningfully shared and reapplied -- especially outside the originating community -- is one of the least understood aspects of knowledge management. This suggests a more fundamental challenge, namely, determining which knowledge an organization should make explicit and which it should leave tacit -- a balance that can affect competitive performance. The management of explicit knowledge utilizes four primary resources that the author details: repositories of explicit knowledge; refineries for accumulating, refining, managing, and distributing the knowledge; organization roles to execute and manage the refining process; and information technologies to support the repositories and processes. On the basis of this concept of knowledge management architecture, a firm can segment knowledge processing into two broad classes: integrative and interactive -- each addressing different knowledge management objectives. Together, these approaches provide a broad set of knowledge-processing capabilities. They support well-structured repositories for managing explicit knowledge, while enabling interaction to integrate tacit knowledge. The author presents two case studies of managing explicit knowledge. One is an example of an integrative architecture for the electronic publishing of knowledge gleaned by industry research analysts. The second illustrates the effective use of an interactive architecture for discussion forums to support servicing customers. Zack also discusses several key issues about the broader organizational context for knowledge management, the design and management of knowledge-processing applications, and the benefits that must accrue to be successful. In summary, organizations that are managing knowledge effectively (1) understand their strategic knowledge requirements, (2) devise a knowledge strategy appropriate to their business strategy, and (3) implement an organizational and technical architecture appropriate to the firm's knowledge-processing needs.

Choosing a distinctive strategic position involves making tough choices on three dimensions: who to target as customers, what products to offer, and how to undertake related activities efficiently. The most common source of strategic failure is the inability to make clear, explicit choices on these three dimensions. Unfortunately, not only will aggressive competitors imitate attractive positions, but, perhaps more importantly, new strategic positions will be emerging continually. In industry after industry, once formidable companies with seemingly unassailable strategic positions are humbled by relatively unknown companies that base their attacks on creating and exploiting new strategic positions. Markides describes incursions into established markets by strategic innovators such as Canon and the brokerage firm Edward Jones. The hallmark of their success is strategic innovation -- proactively establishing distinctive strategic positions that are critical to shifting market share or creating new markets. To prepare for the inevitable strategic innovation that will disrupt its market, an organization should: -- Identify turning points before a crisis occurs by regularly monitoring indicators of strategic rather than financial health in the market. -- Prevent cultural and structural inertia by creating a culture that welcomes change and is ready to accept new strategic innovation even if it disrupts the status quo. -- Develop processes that allow experimenting with new ideas to reveal the potential of a new innovation. -- Develop the required competencies and skills. -- Manage a transition to the new strategic position by clearly deciding whether to adopt the new position and by ensuring that old and new coexist harmoniously. Designing a successful strategy is a never-ending, dynamic process of identifying and colonizing a distinctive strategic position; excelling in this position while concurrently searching for, finding, and cultivating another viable strategic position; simultaneously managing both positions; slowly making a transition to the new position as the old one matures and declines; and starting the cycle again.

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.

Why do companies frequently make bad investment decisions and continue to blunder, even after the weaknesses in their capital budgeting analyses are evident? Because, according to the authors, they don’t integrate capital budgeting into their overall strategy. Boquist et al. offer a capital budgeting framework that has six key features: (1) it is dynamic, (2) it is integral to the firm’s strategy, (3) it recognizes sequences of options, (4) it is cross-functional, (5) it aligns employee compensation with capital allocation, and (6) it emphasizes performance-based training. The authors’ framework for dynamic capital budgeting has three simultaneous steps: 1. Identify a status quo strategy and how it must perform to maximize shareholder value. The strategy will help the company determine the trade-off in capital budgeting between cycle time and risk. The more time and resources it commits to collecting information about a project, the more it can learn about cash flows and the lower the risk. But it achieves this risk reduction at the expense of a longer cycle time. 2. Establish a system for evaluating projects and preparing capital allocation requests that is consistent with the strategy. The system has four phases & #8212; a new idea phase, preliminary evaluation phase, business evaluation phase, and go-ahead or reject phase & #8212; and three tollgates & #8212; strategic, preliminary, and business. For approval, a project must pass through all three tollgates. 3. Develop a culture consistent with the strategy and the evaluation system. The company’s long-term commitment to the strategy should be evident to employees. Employees from all functional areas should be trained in the system’s underpinnings. The employee compensation system should tie bonuses to performance measures that correlate with shareholder wealth. Only by implementing an integrated framework, say the authors, can a company make intelligent investment decisions with long-term strategy in mind.

With the increasing number of mergers and acquisitions, particularly across national borders, the importance of knowing how to approach delicate negotiations has grown. In this case study and interview, James Sebenius traces an Italian copper-products company's negotiations to provide important lessons for anyone involved in cross-border transactions. Sebenius interviewed Sergio Ceccuzzi, management board member of KM Europa Metal AG and chairman of its subsidiary, Europa Metalli SpA. Together they discuss the growth of the holding company, SMI (Societa Metallurgica Italiana SpA). In 1965, SMI was one of many small and medium-sized copper transformation companies in Italy. Over the years, it developed a strategy of growth by acquisition, but only in areas that amplified its line of business. It first acquired Finmeccanica, a state-owned competitor, at a time when privatization in Italy was anathema. Next, through skillful negotiations, it acquired its major French competitor, Tr_fim_taux, also a state-owned firm. And, in its most difficult transaction, it overcame formidable obstacles to acquire Kabel-metal AG, a German competitor. Throughout his conversation with Ceccuzzi, the author indicates specific lessons to be learned from each deal. In summary, he encapsulates the lessons into twelve major points, among them: be willing to wait, sometimes for years, for the right circumstances to culminate the deal; establish good personal relationships; map out the likely players in the deal and assess their interests, not yours; figure out how to deal with potential deal blockers; and, perhaps most important, remember that, even after the deal is done, negotiation does not stop.

As companies continue to downsize, they need to consider how to maintain their employees' morale in order to realize gains such as higher productivity and more flexibility. Those who survive layoffs and the managers who must implement those layoffs frequently exhibit reduced commitment. Their trust in the company may be destroyed and they may feel powerless in the wake of top management's actions. Mishra et al. propose a four-stage approach to downsizing, gleaned from interviews and surveys, that will retain workers' trust and sense of empowerment. First, the company should consider its decision to downsize only as a last resort, not to be taken lightly. Downsizing should be part of a clearly defined, long-term vision that fits into the company's overall strategic plan. Second, the company should consider all stakeholders' needs -- survivors, laid-off employees, the community, local and national press, and any affected government agencies. The company should form a cross-functional team to represent all stakeholders' interests, hire outside experts for outplacement and counseling, ensure that managers know how to deal with all questions, and give employees full information on the company's finances. Third, at the announcement stage, senior managers should explain why the downsizing is necessary and how it will help the firm in the long term. The fourth stage, implementation, is the most important. Management should communicate frequently and be open and honest. The company should do its best to ensure that laid-off employees are employed elsewhere and offer them generous benefits packages. It should seek remaining employees' ideas about restructuring work processes and provide training, particularly in new technologies, to work in the new environment. According to the authors, each stage, if well executed, will mitigate workers' mistrust and disempowerment and will help build a better company.