Strategy

As the shadow of corporate scandals looms ever larger, government’s role in regulating and influencing core business practices also has grown more prominent. As a result, businesses are struggling to reconcile the spotlight of increased regulation with the goals of corporate strategy. To navigate these difficult straits, businesses need to understand how governments can help or hinder their business objectives while they develop hybrid strategies that focus on shaping the rules. It becomes essential that companies better understand the games business and government play and the roles of each in making and enforcing the rules. Michael D. Watkins, associate professor of business administration at Harvard Business School, identifies two major types of games: value-net games, which relate to cooperation and competition among businesses, and public-interest games, in which coalitions of businesses and industry associations are pitted against nonbusiness organizations, such as unions, consumer groups and environmental entities. Watkins believes that the most effective businesses craft their strategies by combining different approaches from each game, which in turn helps to shape how governments regulate future corporate activity.

Disruptive strategic innovations are not necessarily superior to the traditional ways of competing, nor are they always destined to conquer the market. Rushing to embrace them can be detrimental for established companies when other responses, including ignoring the innovation, make more sense.

New research shows that companies owned by founding families have higher profits and valuations.

A new study finds that only a few large retail firms have a genuinely global presence.

Many international business leaders consider a global mind-set desirable, but few know how to embed it companywide. A corporate global mind-set differs from having a few managers think globally. That comes first. But global thinking must be incorporated into an organization’s processes so that everyone knows how to handle the tug-of-war between local responsiveness and corporate efficiency. Two Northeastern University professors studied global companies and found that inculcating a corporate global mind-set lagged behind the will to do so. IBM made the most progress. Having originally overemphasized global consistency, it learned to embrace a more flexible approach, adopting global-policy-development teams, worldwide knowledge networks and appropriate performance measures. Unfortunately, many American executives regard globalization as pursuing standardized products through centralized decision making. In favoring global consistency, they often fail to secure local cooperation. Through a global mind-set, corporate-decision-making processes become more permeable to influences from beyond the home country. The authors show how managers can determine when an issue calls for a locally adaptive response, when it calls for a globally consistent response and when both elements are needed. The corporate global mind-set is a requirement for motivating a diverse and sprawling work force and giving it a common purpose.

Most companies invest a significant amount of time and effort in a formal, annual strategic-planning process & #8212; but many executives see little benefit from the investment. In the course of the authors’ research, one manager compared his company’s process with a “primitive tribal ritual,” and another likened it to the Soviet system: “We pretend to make strategy and they pretend to follow it.” The authors found that, although few truly strategic decisions are made in the context of a formal process, formal planning can be a real source of competitive advantage when it is approached with the right goal in mind: as a learning tool to help companies create within their management teams “prepared minds” (to borrow from Louis Pasteur). The key is getting right a host of seemingly mundane but actually critical details concerning the annual meetings that are at the heart of all formal processes & #8212; including who should attend the meetings, where they should be held and what kind of preparation is necessary to make them effective. Following an analysis of those details, the authors offer several examples showing prepared minds in action, in which formal planning helped managers make solidly grounded, real-time strategic decisions in a world of turbulence and uncertainty.

All organizations sense competitive pressure intuitively, but most, says the author, do not do a good job of managing it. That is, in part, because it is often difficult to see the overall pressure system & #8212; a complex, shifting pattern of overlapping contacts among rivals that continually alters the climate of an industry by changing the incentives for players to compete, mutually forbear or even formally cooperate. This article illustrates how pressure systems can be mapped and controlled to a significant extent. A map based on measured pressures has important implications for an organization’s market’ and competitor selection, growth plans, product-portfolio and diversification strategy, resource-allocation priorities, competitive-intelligence system, merger-and-acquisition strategy, and scenario-planning process. In any industry, companies can develop competitive strategy by using a pressure map to answer two critical questions: If the current pressure pattern continues, what position will my company ultimately hold? How can my company stabilize or shift the direction of pressure to reduce (or enhance) the predicted impact of the current pressure system? Through detailed discussion of the airline, automobile and European wireless-telecom industries, among others, the author demonstrates how pressure maps can reveal the underlying competitive dynamics of an industry. He then offers a variety of mechanisms by which organizations can and do affect their competitive landscapes & #8212; stabilizing or destabilizing them to greatest advantage.

The use of risk-assessment tools is far from pervasive.