Showing papers in "Harvard Business Review in 1991"

The performance measurement manifesto.

Abstract: The leading indicators of business performance cannot be found in financial data alone. Quality, customer satisfaction, innovation, market share--metrics like these often reflect a company's economic condition and growth prospects better than its reported earnings do. Depending on an accounting department to reveal a company's future will leave it hopelessly mired in the past. More and more managers are changing their company's performance measurement systems to track nonfinancial measures and reinforce new competitive strategies. Five activities are essential: developing an information architecture; putting the technology in place to support this architecture; aligning bonuses and other incentives with the new system; drawing on outside resources; and designing an internal process to ensure the other four activities occur. New technologies and more sophisticated databases have made the change to nonfinancial performance measurement systems possible and economically feasible. Industry and trade associations, consulting firms, and public accounting firms that already have well-developed methods for assessing market share and other performance metrics can add to the revolution's momentum--as well as profit from the business opportunities it presents. Every company will have its own key measures and distinctive process for implementing the change. But making it happen will always require careful preparation, perseverance, and the conviction of the CEO that it must be carried through. When one leading company can demonstrate the long-term advantage of its superior performance on quality or innovation or any other nonfinancial measure, it will change the rules for all its rivals forever.

Corporate imagination and expeditionary marketing.

Abstract: In the 1980s, competitive success came mostly from achieving cost and quality advantages over rivals in existing markets. In the 1990s, it will come from building and dominating fundamentally new markets. Core competencies are one prerequisite for creating new markets. Corporate imagination and expeditionary marketing are the keys that unlock them. McKinsey Award winners Gary Hamel and C.K. Prahalad argue that corporate imagination quickens when companies escape the tyranny of their served markets. (Motorola, for example, sees itself as a leader in wireless communications, not just as a maker of beepers and mobile phones). Think about needs and functionalities instead of marketing's more conventional customer-product grid. Overturn traditional price/performance assumptions. (Fidelity Investments unlocked a vast new market by packaging sophisticated investment vehicles for middle-income investors.) And lead customers rather than simply follow them. Creating new markets is a risky business, however--a lot like shooting arrows into the mist. Imaginative companies minimize the risk not by being fast followers but through the process the authors call expeditionary marketing: low-cost, fast-paced market incursions designed to bring the target quickly into view. Toshiba introduced laptop computers to the market at such a blistering pace that it could explore every conceivable niche--and afford an occasional failure without compromising its credibility with customers. To stimulate corporate imagination, top management needs to redefine failure and develop new time- and risk-adjusted yardsticks for managerial performance. Managers must be encouraged to stretch their company's opportunity horizon well beyond the boundaries of its current businesses.

La ventaja competitiva de las naciones

Abstract: En este articulo publicado originalmente en 1990, Michael Porter actualiza la teoria clasica de Adam Smith sobre la riqueza de las naciones, asi como la preponderancia de los factores tradicionales de esa riqueza: tierra, recursos naturales y el trabajo. En la economia actual, globalizada y cada vez mas competitiva, esos factores ya no pueden producir y explicar por si mismos las razones de por que ciertos paises generan mayor riqueza que otros. La clave esta en la competitividad y particularmente en la productividad de las naciones y de sus industrias en particular, la que se expresa en diversas exportaciones a diversos lugares y en una solida inversion fuera de las propias fronteras. Un estudio de cuatro anos de duracion efectuado en 10 naciones que examina los patrones del exito competitivo en los paises mas importantes concluye que las empresas logran obtener una ventaja competitiva mediante actos de innovacion. La capacidad de una nacion para innovar es afectada por cuatro caracteristicas amplias, el ?diamante? de la ventaja nacional: 1) condiciones de los factores; 2) condiciones de la demanda; 3) industrias relacionadas y de apoyo; y 4) estrategia, estructura y rivalidad de las firmas. Basandose en este analisis, los gobiernos deberian actuar como catalizadores y provocadores, pero no deberian involucrarse directamente en la competencia. El autor ilustra su argumento con los clusters italianos del calzado, las diversas industrias japonesas con sus distintos grados de competitividad y muchos ejemplos mas. El articulo es muy contundente a la hora de descartar las explicaciones tradicionales que se dan a la competitividad de un pais: no tiene que ver con el tipo de cambio, con el costo de la mano de obra, con un balance comercial positivo, con el nivel de intervencion gubernamental ni con las tasas de interes. La competitividad se trata de otra cosa y para afrontar correctamente sus desafios es necesario un muy buen liderazgo, tanto en el ambito privado como en el publico.

The way to win in cross-border alliances.

Abstract: Global competition has paved the way to new corporate combinations--and opened up new pitfalls along the way. In "The Way to Win in Cross-Border Alliances," Joel Bleeke and David Ernst offer the unconventional lessons of their study of 49 cross-border alliances. For example, alliances between a weak and a strong company usually don't work; but fifty-fifty ownership of joint ventures actually improves decision making.

The service-driven service company.

Abstract: For more than 40 years, service companies like McDonald's prospered with organizations designed according to the principles of traditional mass-production manufacturing. Today that model is obsolete. It inevitably degrades the quality of service a company can provide by setting in motion a cycle of failure that produces dissatisfied customers, unhappy employees, high turnover among both--and so lower profits and lower productivity overall. The cycle starts with human resource policies that minimize the contributions frontline workers can make: jobs are designed to be idiot-proof. Technology is used largely for monitoring and control. Pay is poor. Training is minimal. Performance expectations are abysmally low. Today companies like Taco Bell, Dayton Hudson, and ServiceMaster are reversing the cycle of failure by putting workers with customer contact first and designing the business system around them. As a result, they are developing a model that replaces the logic of industrialization with a new service-driven logic. This logic: Values investments in people as much as investments in technology--and sometimes more. Uses technology to support the efforts of workers on the front lines, not just to monitor or replace them. Makes recruitment and training crucial for everyone. Links compensation to performance for employees at every level. To justify these investments, the new logic draws on innovative data such as the incremental profits of loyal customers and the total costs of lost employees. Its benefits are becoming clear in higher profits and higher pay--results that competitors bound to the old industrial model will not be able to match.

How the Baldrige Award really works.

Abstract: "How the Baldrige Award Really Works" by David A. Garvin draws on a series of in-depth discussions with Baldrige Award judges and senior examiners to give the first clear account of the real purpose and operation of the prestigious--and contentious--award. Accompanying the article is "An Open Letter on TQM," a call from James D. Robinson III, Harold A. Poling, John F. Akers, Robert W. Galvin, Edwin L. Artzt, and Paul A. Allaire for closer cooperation between business and universities to promote quality.

Marketing is everything.

Abstract: Technology is creating customer choice, and choice is altering the marketplace. Gone are the days of the marketer as salesperson. Gone as well is marketing that tries to trick the customer into buying whatever the company makes. There is a new paradigm for marketing, a model that depends on the marketer's knowledge, experience, and ability to integrate the customer and the company. Six principles are at the heart of the new marketing. The first, "Marketing is everything and everything is marketing," suggests that marketing is like quality. It is not a function but an all-pervasive way of doing business. The second, "The goal of marketing is to own the market, not just to sell the product," is a remedy for companies that adopt a limiting "market-share mentality." When you own a market, you lead the market. The third principle says that "marketing evolves as technology evolves." Programmable technology means that companies can promise customers "any thing, any way, any time." Now marketing is evolving to deliver on that promise. The fourth principle, "Marketing moves from monologue to dialogue," argues that advertising is obsolete. Talking at customers is no longer useful. The new marketing requires a feedback loop--a dialogue between company and customer. The fifth principle says that "marketing a product is marketing a service is marketing a product." The line between the categories is fast eroding: the best manufacturing companies provide great service, the best service companies think of themselves as offering high-quality products. The sixth principle, "Technology markets technology," points out the inevitable marriage of marketing and technology and predicts the emergence of marketing workstations, a marketing counterpart to engineers' CAD/CAM systems.

Services under siege--the restructuring imperative.

Abstract: Recent job losses in the U.S. service sector do not reflect a temporary recession. Those jobs are gone, the result of a massive restructuring of the sector that is just getting under way. The explanation for the restructuring is quite simple. Until recently, services have been shielded by regulation and confronted by few foreign competitors. They have allowed their white-collar payrolls to become bloated, their investment in information technology to outstrip the paybacks, and their productivity to stagnate. Now competition is heating up and exposing these inefficiencies. Just as intense competition forced the restructuring of Smokestack America in the 1980s, deregulation and foreign direct investment are shaking out service companies that cannot confront their shortcomings. The need for sweeping change in the service sector may come as a great shock to Americans who saw services as the means to continued economic prosperity. But there is a painful irony at work: job creation, the very thing proponents use to demonstrate the U.S. service sector's strength, is in fact a symptom of the sector's chronic neglect of economic efficiency. It is precisely that neglect that makes the service sector vulnerable as the race for market share intensifies and new players shift the terms of competition. Services must respond to the new competitive environment, but not by indiscriminate cost cutting. Instead, they should balance financial discipline with a comprehensive and immediate reexamination of strategy.

The new productivity challenge.

Abstract: "The single greatest challenge facing managers in the developed countries of the world is to raise the productivity of knowledge and service workers," writes Peter F Drucker in "The New Productivity Challenge" Productivity, says Drucker, ultimately defeated Karl Marx; it gave common laborers the chance to earn the wages of skilled workers Now five distinct steps will raise the productivity of knowledge and service workers--and not only stimulate new economic growth but also defuse rising social tensions

Research that reinvents the corporation

Abstract: It's not enough to create new products. You need to build the prototype of the continuously innovating company.

What does it mean to be green

Abstract: Today a company is not considered environmentalist unless it moves beyond mere compliance with government regulations to behavior its competitors, and even customers, do not expect How should it set its agenda? Author Art Kleiner proposes that, to be green, a company must ask three questions: What products should we bring to market? How much disclosure of pollution information should we support? And how can we reduce waste at its source? These questions can't be answered, Kleiner says, unless managers insist on sustainable growth In this sense, a big investment in environmentalism is like a big one in R&D--both presuppose patient capital and managerial maturity What are green products? Kleiner cautions against giving in to misinformed public opinion--as McDonald's did in giving up its styrene "clamshells," which were more recyclable than the composite papers it switched to Rather, companies should rely on literature that analyzes the product life cycle As for public disclosure, the benefits may be unexpected Federal legislation requiring companies to report the emission of potentially hazardous waste to a central data bank has not made environmentalists attack them Rather, it has forced companies to learn what chemicals they inadvertently produce and how much--knowledge that helps them improve production processes Sharing it helps ecological researchers study the combined effects of plant emissions As for pollution prevention, Kleiner notes the analogy to quality and observes that it is better to design harmful waste products out of the system than catch them at the end of the line(ABSTRACT TRUNCATED AT 250 WORDS)

How networks reshape organizations--for results.

Abstract: Recently a new term-networks-has entered the vocabulary of corporate renewal. Yet there remains much confusion over just what networks are and how they operate. Ram Charan, a leading international consultant, has spent four years observing and participating in the creation of networks at ten companies in North America and Europe. These companies--which include Conrail, Dun & Bradstreet Europe, Du Pont, and Royal Bank of Canada-are clear about why they are creating networks, what networks are, and how they operate. A network is recognized group of managers (seldom more than 100, often fewer than 25) assembled by the CEO. Membership criteria are simple but subtle: What select group of managers, by virtue of its business skills, personal motivations and drive, and control of resources is uniquely positioned to shape and deliver on the strategy? Networks begin to matter when they change behavior-the frequency, intensity, and honesty of the dialogue among managers on priority tasks. The process of building a network starts at the top. Senior managers work as change agents to build a new "social architecture." Once the network is in place, they play three additional roles: 1. Define with clarity the business outputs they expect of the network and the time frame in which they expect it to deliver. 2. Guarantee the visibility and free flow of information to all members of the network who need it. 3. Develop new criteria for performance evaluation that emphasize horizontal collaboration and leadership.

The return map: tracking product teams

Abstract: With a new product, time is now more valuable than money. The costs of conceiving and designing a product are less important to its ultimate success than timeliness to market. One of the most important ways to speed up product development is through interfunctional teamwork. The "Return Map," developed at Hewlett-Packard, provides a way for people from different functions to triangulate on the product development process as a whole. It graphically represents the contributions of all team members to the moment when a project breaks even. It forces the team to estimate and re-estimate the time it will take to perform critical tasks, so that products can get out fast. It subjects the team to the only discipline that works, namely, self-discipline. The map is, in effect, a graph representing time and money, where the time line is divided into three phases: investigation, development, and manufacturing and sales. Meanwhile, costs are plotted against time--as are revenues when they are realized after manufacturing release. Within these points of reference, four novel metrics emerge: Break-Even-Time, Time-to-Market, Break-Even-After-Release, and the Return Factor. All metrics are estimated at the beginning of a project to determine its feasibility, then they are tracked carefully while the project evolves to determine its success. Missed forecasts are inevitable, but managers who punish employees for missing their marks will only encourage them to estimate conservatively, thus building slack into a system meant to eliminate slack. Estimates are a team responsibility, and deviations provide valuable information that spurs continuous investigation and improvement.

Does privatization serve the public interest

Abstract: This article looks at the issue of privatization of government assets and services. The privatization of government-owned companies has grown steadily since the 1980s, with no signs of slowing down. Developing countries have quickly jumped on the privatization bandwagon, most of the time simply to raise revenue. Privatization is likely to be at the top of the economic agenda of newly liberated countries in Eastern Europe, with the most change taking place in the former German Democratic Republic. The article also examines some of the issues brought forth by critics of privatization: unimproved efficiency; and profit-making strategies that exclude the poor or disabled.

Global work force 2000: the new world labor market.

Abstract: Just as there are global markets for products, technology, and capital, managers must now think of one for labor. Over the next 15 years, human capital, once the most stationary factor in production, will cross national borders with greater and greater ease. Driving the globalization of labor is a growing imbalance between the world's labor supply and demand. While the developed world accounts for most of the world's gross domestic product, its share of the world work force is shrinking. Meanwhile, in the developing countries, the work force is quickly expanding as many young people approach working age and as women join the paid work force in great numbers. The quality of that work force is also rising as developing countries like Brazil and China generate growing proportions of the world's college graduates. Developing nations that combine their young, educated workers with investor-friendly policies could leapfrog into new industries. South Korea, Taiwan, Poland, and Hungary are particularly well positioned for such growth. And industrialized countries that keep barriers to immigration low will be able to tap world labor resources to sustain their economic growth. The United States and some European nations have the best chance of encouraging immigration, while Japan will have trouble overcoming its cultural and language barriers.

The fallacy of the overhead quick fix.

Abstract: Facing pressure from a few large, low-cost competitors, Thornton, an old-guard specialty-equipment manufacturer, fought back by eliminating overhead. Over two-years, it outsourced components and consolidated operations. But instead of cutting overhead, it added more and became still more uncompetitive. Thornton is not alone in either its predicament or its failed reaction. Many large manufacturing companies are finding themselves at a cost disadvantage in markets they have dominated for years. One reason is excessive overhead structures, the result of an unchecked buildup of indirect employees needed to control rising organizational complexity. Another reason is the emergence of the "robust" competitor, comparable in size and product scope but able to produce at a lower unit overhead cost. Data collected from more than 100 manufacturing plants worldwide illustrate the differences between overhead cost structures of bureaucratic, niche, and robust companies. The gulf between these groups highlights the need for action by bureaucratic companies, and, in some cases, by niche companies. But high-overhead companies are doomed if they cut overhead out of the system either by outsourcing or downsizing. If they expect to retain their size and also become more cost competitive, they must rethink their manufacturing systems. Well-designed and well-controlled processes mean higher product quality, faster cycle time, improved flexibility, and lower overhead costs. Sustainable overhead reduction means a commitment to continuous improvement. This includes segmenting, mapping, and measuring existing processes and then working to improve them.(ABSTRACT TRUNCATED AT 250 WORDS)

The making of a French manager.

Abstract: France's recent successes make it more important than ever to understand what makes its managers tick. This year, France surpassed Japan and the U.K. in acquisitions of U.S. companies. And many French companies are world leaders, including Michelin and L'Oreal. According to the authors, who have studied the French model of management development, the system stands as a coherent whole. Its clear logic and rules provide unambiguous signals that shape managerial action. Thus French industry has a focus and sense of purpose that the rest of the world should not underestimate as a key to strong economic performance. In France, management is a "state of mind" rather than an interpersonally demanding exercise. It is managers' cleverness, not skills, that distinguishes them. And these managers are not simply born. They are molded through an elaborate education and induction into the managerial elite. Alumni of the grandes ecoles dominate the upper echelons. These elite colleges have grueling entrance exams resembling Japan's "examination hell." Graduates automatically enter the tight-knit cadre circle--the managerial elite who enjoy the same social prestige as doctors or lawyers. French managers prefer to put things in writing, even informal interactions. They excel in quantitative expression, at ease with putting figures to proposals. Hierarchy in French companies is often literal--the head of L'Air Liquide works on the top floor, while the typing pool is in the basement.(ABSTRACT TRUNCATED AT 250 WORDS)

Demand better results--and get them.

Abstract: This HBR classic, first published in 1974, asks and answers one of management's most important questions: Why do so few organizations reach their productivity potential? The answer: because most senior executives fail to establish expectations of performance improvement in ways that get results. They fail because making heavy demands involves taking risks and threatens those who have the demands imposed on them. It's safer to ask for less. To avoid facing the reality of underachievement, managers may rationalize that their subordinates are doing the best they can or that better performance requires more authority or greater resources. They may put their faith in incentive plans that don't need their personal intervention. They may actually set high goals but let subordinates escape accountability for results. To get out of these doldrums, executives have to be willing to invest time and energy; responsibility can be delegated only so far. The key to the recovery strategy is to set a specific, modest, measurable goal pertaining to an important problem in the organization. If this goal is met, management uses the success as a springboard for more ambitious demands, each one carefully supported by plans, controls, and persistence directed from the top. Resistance can be expected from many levels. But as the organization registers genuine achievement, consciousness-raising in the form of recognition transforms expectations into positive factors. The fact is, most people like to work in a results-oriented environment. In a retrospective commentary, the author writes that while companies today are more impressed with the need for performance improvement, the ability to establish high expectations is still the most universally underdeveloped managerial skill.

Knee-deep and rising: America's recycling crisis.

Abstract: Every year, Americans generate 180 million tons of solid waste, 70% of which goes into landfills. Since 1979, the United States has exhausted more than two-thirds of its landfills; another one-fifth will close over the next five years. Solving the problem will require a new understanding between industry and government--an understanding that combines industry competence and government authority. But the two sides are mired in an unfortunate combination of good intentions and failed systems. A classic example that epitomizes the problem is the recycling of plastics. Two stories capture the sense of chaos that pervades the recycling of plastics. The first is a comedy of errors played out in Minneapolis, Minnesota, where the city council passed a measure that would have banned all plastic packaging from the city. In this case, the government acted without the competence of industry. The second story involves McDonald's decision to abandon its polystyrene packaging and switch to plastic-coated paper. In this case, a single business's approach to recycling proved fruitless because of the lack of government authority. According to the authors, five principles provide the underpinnings to a new solid-waste management infrastructure: business and government are partners; the infrastructure is a system and must operate in balance; economics and politics must act as partners; all levels of government have roles to play; and generating less trash and recycling more depends on a workable system. Setting up the system will require an infrastructure that balances supply and demand, an advisory committee to manage the infrastructure, and a management system that uses incentives and disincentives to balance the system.

How does service drive the service company

Abstract: "How Does Service Drive the Service Company?" presents commentators on Leonard A. Schlesinger and James L. Heskett's September-October article. Commentators include Michael R. Quinlan, Ron Zemke, Jim Snider, Dinah Nemeroff, Steven S. Reinemund, Robert Ayling, Karmjit Singh, James A. Perkins, Joseph E. Antonini, and Walter F. Loeb.

Is American business working for the poor

Abstract: At first glance, poverty seems to have little to do with business. When most people--managers included--think about poverty, they assume that people are poor because they are isolated from the mainstream economy, not productive participants in it. But according to Harvard University professors Mary Jo Bane and David Ellwood, this is a misleading image of the true face of poverty in the United States today. Most poor adults--and a full 90% of poor children--live in families where work is the norm, not the exception. Poor people often work or want to work. But at the low-wage end of the American economy, having a job is no guarantee of avoiding poverty. Poverty is a business issue, then, because the American poor are part of the American work force. And this poses a problem for managers. In a more competitive and fast-changing economic environment, the performance of companies increasingly depends on the capabilities of their employees. In response to this human-resource challenge, more and more managers are embracing the language of "empowerment". And yet how can low-wage employees believe empowerment when their experience of work is, quite literally, impoverishment? It is unlikely that American companies can create the work force of the future with the poverty policies of the past. Fortunately, there are some simple policy mechanisms that can assist the working poor without putting an undue burden on business. Enacting them, however, requires managers to see poverty policy as one part of a national human-resource strategy that links the strategic concerns of companies to a broad social agenda.

Five ways to keep disputes out of court

Abstract: Even if you win, a lawsuit can be a disaster. Attorney fees eat up $20 billion a year in the United States alone, and that doesn't count the cost of diverting key personnel from productive work or of damaging profitable business relationships. But more and more managers are discovering that litigation can be avoided with inventive use of alternative dispute resolution, or ADR. All forms of ADR are designed to do two things: save time and money and soften the sharp edges of the adversarial system. In the majority of cases, disputants settle their differences quickly and to the satisfaction of both parties. In the best of cases, opponents resolve their disputes cooperatively and forge new ties. Arbitration, the oldest and most adversarial form of ADR, is now a compulsory prerequisite to litigation in about 20 states. Mediation, perhaps the most versatile and the least coercive, depends greatly on the skill and personality of the mediator. Other methods include the rent-a-judge program, summary jury trial, and minitrial, all of which simulate real litigation to one degree or another but with greater speed, more privacy, and less expense. (The last two have settled several bitter disputes in weeks-after years of litigation.) Variations and hybrids of ADR methods are limitless. In picking the ADR method best suited to your circumstances, factors to consider include: the extent to which both disputants are committed to ADR, the closeness of the business relationship between the two parties, the need for privacy, the urgency of reaching a settlement, the absolute and relative financial health of both parties, the importance of the principles involved, the complexity of the case, the size of the stakes, and the ability and willingness of company executives to get involved.