Showing papers in "MIT Sloan Management Review in 2003"

The Era of Open Innovation

Abstract: Is innovation dead? Actually, innovation is alive and well ? as underscored by the recent advances in the life sciences, including revolutionary breakthroughs in genomics and cloning. But the way companies generate ideas and bring them to market has been undergoing a fundamental change. In the old model of closed innovation, enterprises adhered to the following philosophy: Successful innovation requires control. In other words, companies must generate their own ideas, then develop, manufacture, market, distribute and service those ideas themselves. For most of the 20th century, that model worked well, as evidenced by the spectacular successes of central R&D organizations such as AT&T's Bell Labs. Today, though, the internally oriented, centralized approach to R&D is becoming obsolete in many industries. Useful knowledge is widely disseminated, and ideas must be used with alacrity. If not, they will be lost. Such factors create a new logic of open innovation, in which the role of R&D extends far beyond the boundaries of the enterprise. Specifically, companies must now harness outside ideas to advance their own businesses while leveraging their internal ideas outside their current operations. That fundamental change offers novel ways to create value ? along with new opportunities to claim portions of that value.

The New Frontier of Experience Innovation

Abstract: As competition intensifies and profit margins shrink, managers are under overwhelming pressure to create value. Traditional prescriptions such as cost reduction, reengineering and outsourcing, while critically important, cannot solve the problem. The need to innovate is greater than ever, but the focus of innovation must change, say the authors. Managers are discovering that neither value nor innovation can any longer be successfully and sustainably generated through a company-centric, product-and-service-focused prism. By synthesizing societal trends and early experimentation in companies such as General Motors, LEGO and Medtronic, the authors paint a picture of the "next practices" of innovation in which the locus of value creation will inevitably shift from products and services to "experience environments." The intent of experience innovation is not to improve a product or service, per se, but to enable the co-creation of an environment in which personalized, evolvable experiences are the goal, and products and services are a means to that end. Profitable company growth will then result from individual consumers co-creating their own unique value, supported by a network of companies and consumer communities. From that perspective, say the authors, managers must learn to view existing and emerging technologies not as enhancers of products, features and functions, but as facilitators of experiences. They offer examples of how technological capabilities such as miniaturization, networked communication and adaptive learning are fostering experience innovation at companies such as Sony, Apple, Microsoft and TiVo, illustrating their contention that technology will be the key facilitator of the nascent trend toward experience innovation.

The challenges of innovating for sustainable development

Abstract: Over the past decade, companies have become increasingly aware of the social and environmental pressures facing business. Many management scholars and consultants have argued that these new demands offer terrific opportunities for progressive organizations, and innovation is one of the primary means by which companies can achieve sustainable growth. But, say the authors, the reality is that managers have had considerable difficulty dealing with sustainable-development pressures. Specifically, their innovation strategies are often inadequate to accommodate the highly complex and uncertain nature of these new demands. In response, the authors propose the concept of sustainable-development innovation, or SDI. In contrast to conventional, market-driven innovation, SDI considers the added constraints of social and environmental pressures. SDI is therefore usually more complex, because there is typically a wider range of stakeholders, and more ambiguous, as many of the parties have contradictory demands. Furthermore, sustainable-development pressures can be driven by science that has yet to be accepted fully by the scientific, political and managerial communities. Organizations that fail to understand such issues could well find themselves making costly mistakes in bringing new technologies to market.

Responses to disruptive strategic innovation

Abstract: When upstarts overthrow an industry's business model with disruptive strategic innovations (not the same as disruptive technological innovations), many established companies hurry to imitate. But others worry about playing two games at once. They contend that adopting the new way may damage the existing business because attackers utilize strategies that are not only different from but also in conflict with the industry leaders'. Two London Business School authors explain when to use which option or one of several new ones. Research into established companies' responses suggests five current approaches: focusing on one's own game and investing in it; ignoring the new strategy when it is not a threat; disrupting the disruptive innovation; playing two games; and scaling up the disruption. How a company responds depends on two main factors: motivation and ability. The company's motivation is determined by the rate at which the innovation is growing, how threatening it is to the main business and how strategically the new business is related to the existing one. The ability of an established company to respond is determined by its skills, resources, time, and the nature and size of the conflicts between the traditional and the new business. But, the authors say, just appreciating that the new ways of competing are not inherently superior is half the battle.

Rethinking the Knowledge-Based Organization

Abstract: Many companies have embraced the notion that to operate effectively in today's economy, it is necessary to become a knowledge-based organization. But few truly understand what that means or how to carry out the changes required to bring it about. Perhaps the most common misunderstanding is the view that the more a company's products or services have knowledge at their core, the more the organization is, by definition, knowledge based. But products and services are only what are visible or tangible to customers ? they're the tip of the iceberg. Like the iceberg, most of what enables a company to produce anything lies below the surface, hidden within the so-called invisible assets of the organization ? its knowledge about what it does, how it does it and why. In the course of working with more than 30 companies over the past eight years, the author found that a knowledge-based organization is made up of four elements. Each one forms a basis for evaluating the degree to which knowledge is an integral part of the organization and the way it competes. Executives who understand how the four elements interact will be able to start changing their companies to take advantage of the intellectual assets hidden below the surface.

Creating a Superior Customer-Relating Capability

Abstract: In most markets, one or two companies outperform their rivals by staying more closely connected to their customers. Their advantage does not have much to do with customer-relationship-management tools and technologies; the author's research confirms, rather, that superior performance is about how a business builds and manages its organization. In particular, successful companies orchestrate three components of the customer-relating capability. First, they have an organizational orientation that makes customer retention a priority and gives employees wide latitude to satisfy customers. Second, they use metrics, incentives and structure (organizing on the basis of customer groups) to produce the proper "configuration." And third, they gather and use information about customers that is in-depth, relevant and available through IT systems in all parts of the company. The author uses case studies involving two major credit-card companies and a high-quality chain of hotels to demonstrate how sustained advantage with customers results when companies build these components of the capability. The combination of a true customer-directed orientation, the right technology for generating and distributing information, and the proper organizational configuration can help turn a company into a market-driven leader.

Toward an innovation sourcing strategy

Abstract: Companies are increasingly looking beyond their boundaries for help with innovation ? working with customers, research companies, business partners and universities, and even competitors. They are also expanding the purposes for which they consider external sources appropriate. Businesses today are using external sources for all phases of innovation, from discovery and development to commercialization and even product maintenance. While these changes sound good and are benefiting a great many companies, they add a new layer of complexity to the manager's tasks. And unfortunately, despite the growing acceptance of external innovation, the authors have found that many companies lack a sourcing strategy to guide them in managing it. They often take an ad hoc approach that produces uneven results, the very problem they are trying to avoid. Instead of dealing with external sources one by one and one at a time, companies should systematically examine and rationalize the increasingly important activity of innovation sourcing. The authors explain how companies can organize their use of external sources holistically, using innovation channels just as they manage specific distribution channels to reach end customers.

What Creates Energy in Organizations

Abstract: People in organizations commonly talk about the energy associated with a project, team or individual. But is energy related to performance or learning in organizations? And how is it created and transferred in groups? To answer those questions, the authors assessed energy within seven large groups in different organizations. They collected data that allowed them to map social networks and, more specifically, determine who the "energizers" and "de-energizers" were in those groups. Their analyses, supplemented by interviews with network members, also reveal why energy is important for performance and learning and how it is created (or destroyed) in organizations. And they gave rise to a set of questions that can help managers and the people they oversee increase the energy they generate in their interactions with colleagues. By mapping relationships, managers can see where energy is being created and where it is being depleted. They can then take action, encouraging simple changes in behavior to increase energy in places where its lack is hindering the progress of important organizational initiatives.

The Shareholders vs. Stakeholders Debate

Abstract: Corporate scandals at Enron and Global Crossing have caused many to question the shareholder theory of corporate governance ? that is, a manager's primary duty is to maximize shareholder returns. Many now advocate a stakeholder-oriented approach, balancing the interests of a company's various constituencies even if it reduces shareholder returns. But does the dominance of the shareholder theory reward socially destructive actions by corporations? The answer, says a Wake Forest University professor, lies in determining what each theory says and doesn't say. Referencing the observations of Milton Friedman, Michael Jensen and William Meckling, among others, the author analyses how each approach is often misinterpreted. He concludes that both theories suggest very different things from what conventional wisdom would suggest. For example, the common belief that shareholder theory advocates profit by any means, illegal or otherwise, does not hold up to logical scrutiny, and thus blaming the approach for recent scandals is misguided. Stakeholder theory, often thought not to take account of the interests of shareholders, in fact does so by seeking to ensure the long-term sustainability of the company. The author concludes that although shareholder theory is often inaccurately maligned, the stakeholder-theory approach may be more conducive to balancing a wide variety of corporate interests and thereby discouraging impropriety. He advocates that executives and boards take the perceptions of both theories into account when formulating strategy and enunciate their stance in all organizational communications. Only within that kind of clearly delineated context, he suggests, can managers be expected to make appropriate decisions.

The Digital Transformation of Traditional Businesses

Abstract: What kinds of companies and products can benefit most from the use of new information technologies (NIT), such as the Internet, broadband networks and mobile communications? Books and airline tickets sell readily over the Web whereas automobiles do not. Furthermore, what types of business transformations does NIT enable? A company might, for example, use NIT to eliminate middlemen, such as distributors, that separate it from its customers (called classic disintermediation). Or, instead of getting rid of middlemen, it might choose to embrace them (remediation). Or it might build strategic alliances and partnerships with new and existing players in a tangle of complex relationships (network-based mediation). All three mediation strategies depend on various factors, such as a product's customizability and information content. By fully understanding those drivers of NIT, companies can begin to predict the potential transformations of their industries, especially in terms of how products are marketed and sold. To that end, the authors have developed a systematic framework that identifies which drivers are important for each of the three mediation approaches. Using this tool, companies can determine both the optimum ways to transform their businesses and the NIT investments required to accomplish such changes.

The Power of Innomediation

Abstract: In recent years, many companies have learned to use the Internet as a powerful platform for collaborating directly with customers on innovation. But direct interactions -- facilitated by customer advisory panels, online communities and product-design tool kits -- have limitations. They don't always allow companies to reach the right customers at the right time and in the right context. Thus, to fully exploit the Internet as an enabler of innovation, companies need to complement their direct channels of customer interaction by using third parties that can help them bridge gaps in customer knowledge. The authors call this process of indirect, or mediated, innovation innomediation and the third-party actors at the center of it innomediaries. In their research, the authors identified three distinct types of innomediary and observed how each one can help companies acquire different forms of customer knowledge. Using case studies, they suggest ways in which companies can begin to think about exploiting the power of these emerging intermediaries. For businesses that learn to use customer knowledge from both direct and indirect sources, the Internet holds the key to a multichannel innovation strategy. I

The Supply-Chain Management Effect

Abstract: Over the last decade, supply-chain-management concepts have sparked a boom in internal cross-business coordination. But although definitions have broadened and shifted, many executives believe that the field is mainly about installing IT systems for streamlined processes. Wrong, say two researchers from Dartmouth's Tuck School of Business. Their data on companies that lead in supply-chain management illuminate six ways it spurs more-creative thinking on growing a business. The researchers predict that current trends toward restructured supply networks and improved coordination will continue, with more supplier integration and a proliferation of product customization, business complexity and uniquely defined customer relationships. But supply-chain management also will affect industry structure in new ways. Companies in the middle of the supply chain ? contract manufacturers, logistics-service providers and distributors ? will redefine themselves. Also, rebranding and repositioning will occur. Companies across the chain will vie for control of the customer relationship and will find that when value propositions derive from supply-chain capabilities, new cobranding and copositioning strategies are critical. When executives look back after another decade, they'll understand that supply-chain management, having shifted business focus in its first 10 years, created an opportunity for the second 10 years to redefine the competitive landscape.

Escaping the Identity Trap

Abstract: Organizations, like people, have essential natures ? defined by their formative experiences, their beliefs, their knowledge bases and their core competences ? which may remain tacit and unquestioned until some event, such as a new strategy or a radical shift in the environment, makes an old identity obsolete. A disruption in a strongly anchored identity can be fatal, unless managers can align their company's identity better with current business conditions. Hamid Bouchikhi, of France's ESSEC Business School and John R. Kimberly of the University of Pennsylvania's Wharton School note that while the "identity trap" threatens every organization, escaping a restrictive identity is possible. They identify two ways enterprises do this successfully ? through evolution (a gradual change in their strategic and organizational layers) and revolution (a change that bursts up through companies' outer layers). Through field-based and clinical research in a variety of industries and companies, including Moulinex, Polaroid, Groupe Danone and Aventis, the authors have developed an "identity audit" to help managers learn to recognize the conflicts and initiate identity change to make their companies more adaptive. By regularly assessing how well their identity fits with current business conditions, companies can rethink their identity before it becomes obsolete.

Sharing the Corporate Crown Jewels

Abstract: Intellectual property assets now account for 50% to 70% of the market value of all public companies, and corporate America is intensifying efforts to maximize the return on those assets. That explains why a small but growing number of Fortune 500 enterprises are moving away from a strict reliance on the "exclusivity value" of their patents and other intellectual property ? that is, their power to exclude or hinder competitors ? and are instead seeking to tap the often enormous financial and strategic value of their core technology assets by licensing them to other companies, including competitors. The practitioners of this strategic licensing, as it is called, are betting that any loss of market exclusivity that may result from making available their "crown jewel" technologies will be more than offset by the financial and strategic benefits gained. For this article, the author interviewed some of the pioneer practitioners of this emerging approach and got them to explain the nature and degree of the benefits their companies are now reaping. Although patent rights should always remain an important weapon in a company's competitive arsenal, strategic-licensing initiatives are encouraging managers to rethink what it means to create and sustain competitive advantage in business.

The Power of the Branded Differentiator

Abstract: If a brand fails to develop or maintain differentiation, consumers have no basis for choosing it over others. The product's price will then be the determining factor in a decision to purchase. Absent differentiation, says the author, the core of any brand and its associated business ? a loyal customer base ? cannot be created or sustained. In a time when the competitive terrain for most brands is difficult to brutal, the author describes a new tool that can help companies maintain an advantage: the branded differentiator. A branded differentiator can be a feature, service, program or ingredient. To be worthy of the term "differentiator" ? to be more than just a name slapped on a feature ? it must be meaningful to customers; that is, it must be both pertinent and substantial enough to matter when people are purchasing or using the product or service. It must also be actively managed (and thus be able to justify the investment of management time) over an extended period ? years or even decades ? so that it does not become stagnant. This article explores the different types of branded differentiators, the pros and cons of developing them internally versus looking outside for them, and questions about managing these brands-within-brands.

Sustainability and Performance

Abstract: With the economy and the equities markets increasingly unpredictable and faith in corporate governance in steep decline, it is not surprising that stakeholders of all types have growing interest in the sustainability of companies. Yet the word sustainability remains ambiguous and politically charged, particularly within the lexicon of business. When, as is commonly the case, the term is limited to encompass environmental management or social equity, sustainability is often perceived to be at odds with fiduciary responsibility and unlinked to business strategy. This article makes a business case for sustainability by adopting a broader view: A sustainable organization is one whose characteristics and actions are designed to lead to a desirable future state for all stakeholders. According to the author, intangible indicators that gauge sustainability also can be indicators of efficacy ? that is, of how well a company is run ? and companies that actively manage and respond to a wide range of such indicators are better able to create value for all stakeholders over the long term. Drawing on a number of studies, including Cap Gemini Ernst & Young's formulation of its Value Creation Index, the author identifies a variety of intangible indicators, then suggests how they relate directly to sustainability and ultimately to company performance. The article concludes by sketching out the parameters of a company-level sustainability model that can be empirically tested and used to both manage operations and set strategy.

The disruption opportunity

Abstract: Disruptive innovation has usually been considered by established businesses as an attack that must be met through defensive measures. And indeed, disruptive technologies and business models have toppled many established industry leaders and will likely continue to do so. The real story behind disruptive innovation, however, is not one of destruction, but of its opposite: In every industry changed by disruption, the net effect has been total market growth. Moreover, disruption can be a powerful avenue for growth through new market discovery for incumbents as well as for upstarts. There are several keys to the successful navigation of this growth path. The first is recognizing that disruption is not an immediate phenomenon ? it can take years and even decades before the upstart business encroaches heavily on the established market. The second is finding the new customers who are eager to be served by the disruption. The third key is building an organization that is capable of serving the new customers. The author explains each aspect in detail, drawing on extensive research involving online newspapers, minicomputers, cardiology and semiconductors.

The rhythm of change

Abstract: Dispelling the notion that today's business milieu is one of unremitting change, Huy and Mintzberg urge managers to realize that we perceive our environment to be in constant flux because we tend to notice only those things that do change. While conceding that some important changes have taken place in recent decades, they point out that stability and continuity actually form the basis of our experience, providing the contextual meaning of change. And because many things remain stable, change has to be managed with a profound appreciation of stability. Accordingly, there are times when change is sensibly resisted; for example, when an organization should simply continue to pursue a perfectly good strategy. Having acquired in-depth familiarity with many organizational-change situations (some gleaned from their experiences as consultants or when working in managerial capacities, others as part of research projects to track the strategies actually used by companies over many decades), the authors present a framework in which pragmatic, coherent approaches to thinking about change can be explored. Although a lot of attention is focused on the type of change that is imposed dramatically from the top, Huy and Mintzberg believe that this view should be tempered by the realization that effective organizational change often emerges inadvertently (organic change) or develops in a more orderly fashion (systematic change). Because dramatic change alone can be just drama, systematic change by itself can be deadening, and organic change without the other two can be chaotic, the authors argue that they must be combined or, more often, sequenced and paced over time, creating a rhythm of change. When functioning in a kind of dynamic symbiosis, dramatic change can instead provide impetus, systematic change can instill order, and organic change can generate enthusiasm. The authors illustrate their framework with older and newer examples, saying that this highlights another crucial point: The problem with change is the present. Today's obsession with change tends to blind managers to the fact that the basic processes of change and continuity do not change.

Brand Equity Dilution

Abstract: As companies realize that brand names associated with their products or services are among their most valuable assets, creating, maintaining and enhancing the strength of their brands have become a growing management imperative. A key advantage of a strong brand is that it facilitates the acceptance of brand extensions ? that is, new products launched using that brand name. But what happens when brand extensions are not successful? Does a failed extension damage the parent brand? Kevin Keller and Sanjay Sood provide an overview of research aimed at better understanding how and why brand dilution occurs. The good news emerging is that, by and large, parent brands are not particularly vulnerable to failed brand extensions. The rule of thumb arising from early academic research and industry experience suggests that an unsuccessful brand extension is likely to damage the parent brand image only when a high degree of similarity or "fit" is involved. More-recent research, the authors point out, has examined the moderating factors or "boundary conditions" that provide qualifications to the earlier findings; it also has identified other circumstances leading to brand dilution. For example, a strong experience with a brand extension is required for a consumer to update his or her feelings and opinions about the parent brand. Subbranding strategies can thus alter whether consumers hold the parent brand directly responsible for failed extensions. An experimental study noted that sudden acceleration problems associated with the Audi 5000 automobile had greater spillover to the Audi 4000 model than to the Audi Quattro ? a phenomenon the researchers attributed to different branding and marketing for the latter model. The authors explain three factors in brand dilution that they believe the research suggests, and they advocate active management of consumers' brand knowledge. Creating a strong brand with powerful brand equity not only permits further growth opportunities but also helps to provide a defense against failed brand extensions. This review includes a comprehensive sidebar of all referenced and relevant research.

Unleashing Organizational Energy

Abstract: Long-term research conducted with companies such as ABB and Lufthansa has helped the authors identify four organizational energy zones that, harnessed properly, can provide a powerful boost for achieving strategic goals. The researchers offer insight on selecting the type best suited to a company's culture and its leaders' personal style. They find that analytical approaches to management are increasingly incorporating a greater understanding of the major role that emotions play in corporate behavior. Today's challenge for leaders, the authors say, is to ensure that the company's vision and strategy capture employees' excitement, engage their intellect and fill them with urgency for action taking. First, they show that companies operating in what they call the aggression zone (responding to a threat) or the passion zone (responding to an exciting goal) are more likely to be successful. Companies in the low-energy comfort zone coast dangerously on past success, and those in the resignation zone have nearly given up. Second, they describe two strategies for unleashing organizational energy and the circumstances that indicate which to use. Finally, they point out ways to avoid common energy traps. Without a high level of energy, the authors contend, a company cannot achieve radical productivity improvements, grow fast or create major innovations. The researchers give examples of enlightened managers who are focusing on unleashing that energy and are leading their companies to outstanding performance.

The Need for a Corporate Global Mind-Set

Abstract: 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.

Open-Source Software Development

Abstract: By reviewing the history of the open-source movement and highlighting recent research on its unique developmental processes, the author suggests that there are general lessons for anyone seeking to encourage innovation in any field or industry. What incentives, for instance, spark these Internet-based communities of software developers to innovate voluntarily outside the company's boundaries without formal work agreements? Research shows that open-source software developers freely reveal and share information because they garner personal benefits, such as reputation enhancement, expertise refinement and, quite simply, enjoyment. Researchers also note that, since most of these benefits are contingent upon membership in well-functioning developer enclaves, a sense of community is important to the open-source phenomenon. For example, identification with the highly esteemed Linux operating-system project instills a sense of responsibility and loyalty among contributors, who are motivated by their perceived indispensability to the team. Researchers point out, however, that developers also are motivated by a pragmatic desire to customize software. Much of the referenced research explores the unusual nature of open-source licensing agreements and intellectual-property protection. That is, open-source licenses guarantee the rights not of developers, but of future users against appropriation, and developers guard their work zealously with online sanctioning, brands and logos. Noting that the products emanating from open-source projects are often commercially attractive and widely used in business and government (for example, at IBM, NASA, Sun Microsystems, the German government), the author concludes by discussing the implications for future business activities.

When Too Much IT Knowledge Is a Dangerous Thing

Abstract: In recent years, large companies have invested a great deal of money ? and faith ? in process-enabling information technology, IT that facilitates the execution of entire business processes rather than individual tasks. But all too often, such investments fail to pay off: The new systems fail to live up to expectations, register a measurable financial impact, improve work processes or bring about organizational change. Technical snafus, a scarcity of good advice for managers and failure to follow such guidance are not the problems. The fundamental issue is that managers usually follow what amounts to a universal checklist, one that assumes that all implementations are basically alike. Taken as a whole, the list is merely a collection of undifferentiated findings and conclusions rather than a synthesis that would help with the particular implementation effort at hand. The executive in charge of the effort is left to discern which findings apply, under what circumstances and why. Instead of a longer or different list, this article offers a synthesis that highlights how big IT implementations differ from one another and how managers should handle the differences in order to realize the full promise of technological change.

The Real Value of Strategic Planning

Abstract: Most companies invest a significant amount of time and effort in a formal, annual strategic-planning process ? 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 -- 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.

The Future of Corporate Venturing

Abstract: During the late 1990s stock market boom, many large companies established corporate-venturing units, seeking to develop innovative new businesses and spur growth However, with the downturn of the economy, many of these units ceased operations ? while others managed to survive and a few even thrived What went wrong with failing companies, and how do those that still have corporate-venturing units manage to succeed? The authors studied nearly 100 venturing units, proposing that failures often occurred because such groups lacked clarity ? both in their objectives and in their business models Using the example of successful venturing units, such as Intel Capital, Mustang Ventures at Siemens, Lucent New Venture Group and GE Equity, the authors outline four common types of venturing scenarios that, by using a careful, steady approach, companies can execute well: ecosystem venturing, innovation venturing, harvest venturing and private-equity venturing They discuss the characteristics and benefits of each and how successful companies avoid the pitfalls that snare others In the end, the authors conclude, there are many ways to do corporate venturing But to succeed, companies must define their goals clearly and narrowly, understand the differences among the various types, and use the appropriate type for the appropriate activity The ultimate key to accomplishing that, say the authors, lies in effectively employing the differences to their advantage

Developing Versatile Leadership

Abstract: Modern models of leadership generally acknowledge that effective leaders must possess a number of seemingly contradictory qualities and skill sets. However, say the authors, inadequate performance is usually defined as displaying a lack of those qualities and skills; the idea that performance problems can just as easily spring from taking a given behavior to an extreme has received far less attention. Therefore, those models miss the chance to identify imbalance, which in the authors' view is the most common impediment to developing effective leadership. The authors view versatility, the absence of imbalance, as the key to high performance levels. Versatile leaders are able to continually adjust their behavior, deftly applying the right approach or blend of approaches to the right degree for the circumstances at hand. The authors' research, comprising comprehensive assessments of scores of senior managers, indicates that most managers, when presented with two opposing approaches, such as forceful vs. enabling leadership, will lean strongly toward one and be biased against the other. Employing a 360-degree survey they designed to measure such imbalance, called the Leadership Versatility Index, they then demonstrate clearly that high performance levels are correlated with balance and versatility. The challenge for the versatile leader is thus to meet what F. Scott Fitzgerald called "the test of a first-rate intelligence": to hold two opposed ideas in the mind at the same time and still retain the ability to function. The authors conclude with a discussion of how leaders can begin to improve themselves and those they manage. They identify a number of root causes of imbalance, ranging from uneven skill development, skewed mental models and one-sided values to fear of inadequacy and a natural human tendency to polarize issues, and they suggest ways to moderate these factors.

Navigating the Technology Landscape of Innovation

Abstract: Developing the right strategy for product innovation requires a fundamental understanding of how technical modularity affects R&D. In a modular design, a change in one component of a product has relatively little influence on the performance of the system. In a nonmodular, or coupled, design, the components are highly interdependent, and the result is that a minor change in one part can cause an unexpectedly huge difference in the functioning of the overall system. Generally speaking, modular designs make R&D more predictable, but they tend to result in incremental product improvements instead of important advances. Coupled designs are riskier to work with, but they are more likely to lead to breakthroughs. This trade-off between predictability and innovation can be visualized as a technology landscape, with gently sloping hills corresponding to incremental product improvements that are based on modular components -- and with soaring, craggy peaks representing breakthrough inventions that rely on tightly coupled parts. Developing new products requires a search across such technology terrain, and companies should first choose the type of landscape that suits them best and then develop the appropriate strategy for navigating that topography.

Why Leadership-Development Efforts Fail

Abstract: Leadership has become the hottest topic in business. Companies see this hard-to-pin-down ability as essential to organizational success, and they want their executives to learn how to exercise it. As a result, they are investing heavily in leadership-development programs and honing eloquent statements about the importance of developing next-generation leaders at every organizational level. And yet these speeches and investments have often failed the companies seeking to create a pipeline of leaders. The authors have identified three pathologies at the root of many leadership-development failures. They cite outdated thinking about ownership of the efforts, a product-focused, quick-fix mentality, and make-believe metrics that measure activity rather than capability. The danger is that these pathologies will sour companies on leadership development, leading them to cut investment and go back to waiting passively for leaders to emerge. But that approach has failed in the past and will continue to do so. Companies that make leadership development a core business process can overcome the pathologies and prepare the individuals and teams they will need to take their organizations to greater heights.

Selectively Pursuing More of Your Customer's Business

Abstract: Most suppliers lack sufficient customer knowledge to implement anything but the most sales-oriented growth strategies and tactics. If they wish to achieve profitable, sustainable growth and a larger share of their customers' wallets, they need a fine-grained, disciplined approach to obtaining, leveraging and documenting customer knowledge. James C. Anderson of Northwestern's Kellogg School and James A. Narus of Wake Forest University have been conducting management-practice research with companies that have superior knowledge of their customers and use it to devise and implement focused, inventive strategies that create profitable growth while increasing the value delivered. Using the examples of best-practice suppliers such as Bank of America, Seghers, Technische Unie, KLM Cargo and Telindus, the authors suggest a strategic framework to guide supplier managers in the selective pursuit of a greater share, predicated on estimating the current share of each customer's business, selecting and pursuing appropriate and inventive opportunities to increase that share, and carefully documenting the profitability efforts. According to Anderson and Narus, building the scope of the market offering, broadening collaboration and using multiple single sourcing each represent ways of growing business share selectively with a customer while improving profitability for both the supplier and customer.