Showing papers in "MIT Sloan Management Review in 2007"

Why Companies Should Have Open Business Models

Abstract: Because of two trends ? rising R&D costs and decreased product revenues (due to shorter product life cycles) ? companies are finding it increasingly difficult to justify investments in innovation. Business models that embrace open innovation address both issues. The development costs of innovation are reduced by the greater use of external technology in a firm?s own R&D process. This saves time, as well as money. And the firm no longer restricts itself to the markets it serves directly. Now it participates in other segments through licensing fees, joint ventures and spinoffs, among other means. These different streams of income create more overall revenue from the innovation. To partake more fully in the benefits of open innovation, companies need to develop the ability to experiment with their business models, finding ways to open them up. Building that capability requires the creation of processes for conducting experiments and for assessing their results. Although that might seem obvious, many companies simply do not have such processes in place. In most organizations, no single person short of the CEO bears responsibility for the business model. Instead, business unit managers (who are usually posted to their jobs for just two to three years) tend to take the business model for granted. To understand how an organization can open its business model, the author provides case examples of IBM, P&G and Air Products, three companies that operate in different industries with vastly different technologies and products. Each used to function with a very internally focused, closed business model. And each has since migrated to a business model that is substantially more open.

Strategic Innovation at the Base of the Pyramid

Abstract: Brazil?s poorest households have an annual total income of around $73 billion per annum; China?s have an annual income of about $691 billion; and India?s have an income of about $378 billion. However, even though there has been a burst of interest in recent years in how economic growth is unfolding in the developing world, most of the research is still focused on how growth occurs in developed markets. Strategic innovation in developing markets is fundamentally different from what occurs in developed economies, the authors argue. It is not about locating ?new whos? (assuming the products and services are affordable, there are plenty of under- and nonconsuming customers to tap). More often, it involves adapting existing products to customers with fewer resources or different cultural backgrounds and creating basic market ingredients such as distribution channels and customer demand from the ground up. Using examples from mobile telephony in the Philippines; consumer goods, power equipment, and auto industries in India; the personal care market in Brazil; and the appliance industry in China, the authors discuss cases from companies including Smart Communications, Hindustan Unilever, Tata Motors, Eveready, and Haier. They present a framework for strategic innovation based on four factors (affordability, acceptability, availability and awareness) and show how companies can create value.

Collaborating for Systemic Change

Abstract: Today, as consumer choices on one side of the planet affect living conditions for people on the other side and complex supply chains span the globe, businesses are facing a host of ?sustainability? problems ? social and ecological imbalances created by this globalization. Beginning in the late 1990s, organizational members of the Society for Organizational Learning (including Shell, Harley-Davidson, HP, Xerox and Nike, among others) began a variety of initiatives focusing on collaborative solutions to a variety of sustainability issues. The group?s goals have included the application of systems thinking, working with mental models, and fostering personal and shared vision to face these complex sustainability issues. Through its work, SoL (of which two of the authors are founding members) has learned that successful collaborative efforts embrace three interconnected types of work ? conceptual, relational and action-driven ? which together build a healthy ?learning ecology? for systemic change. In this article, the authors offer examples from particular projects in which this learning ecology provided an important foundation for substantive progress, and they draw lessons for companies and managers regarding each of the three types of work. Ultimately, the authors conclude that conceptual, relational and action-driven work must be systemically interwoven and that there is little real precedent for that. They offer several guidelines for how it can be accomplished, emphasizing leadership and transactional networks. Finally, they pose three questions that must be answered if systemic solutions are to be successful: (1) How can we get beyond benchmarking to building learning communities? (2) What is the right balance between specifying goals and creating space for reflection and innovation? (3) What is the right balance between private interest and public knowledge?

Improving Work Conditions in a Global Supply Chain

Abstract: Many multinational companies attempt to monitor working conditions in suppliers? factories in developing countries through corporate codes of conduct, along with monitoring to determine compliance with these codes. There is considerable debate about the merits of this approach. As part of a larger research project on globalization and labor standards, the authors conducted a comparison of two Mexican garment factories that supply Nike Inc. Both plants (referred to as Plant A and Plant B) received very similar scores on a Nike factory audit, and both manufacture T-shirts for Nike and other companies. Workers in both plants are unionized. However, a closer examination revealed that working conditions in the two factories are in some respects quite different. Compared to workers in Plant B, workers in Plant A earn more per week, report greater job satisfaction and have greater say in workplace decisions. Furthermore, in Plant A overtime is voluntary and kept within Nike workweek limits, but in Plant B both forced overtime and excessive overtime occur. What factors contribute to these differing working conditions? The authors conclude that, while there are a number of differences between the factories, a key variable is the way each plant is managed. Plant A has made the transition to lean manufacturing, and, in the process, workers received training and were empowered to participate in more decisions on the shop floor. Quality, worker productivity and worker salary all increased at Plant A. The authors conclude that global brands could help improve working conditions in supply chain factories by working with suppliers to help them introduce new management systems.

Sustainability Through Servicizing

Abstract: As companies are increasingly taking on the challenge of global sustainable development, they are forced to rethink the standard business plan based on increasing consumption of products. Drawing from case studies involving Gage Products, PPG Industries Inc. and Xerox Corp., the author shows that some companies are already building their business plans around services and a few key products, and that they are seeing benefits both to the bottom line and in customer retention and acquisition. The author identifies six keys to the new model: building on existing service strengths, redesigning contracts to redefine the basis of profit to create win-win situations when product consumption is reduced and services are improved, communicating the new business plan to current customers, changing sales incentives, acquiring new organizational skills to ensure a better understanding of consumption, and learning to highlight the potential benefits from taking steps to improve the environment

The Trouble With Enterprise Software

Abstract: Drawing upon a wealth of data, informed experience and expert opinion ? from Thomas Friedman to Bjarne Stroustrup, from David Gelernter to Nicholas Carr ? the author builds a case that enterprise software in large organizations has not delivered on its promise to fully integrate and intelligently control complex business processes while remaining flexible enough to adapt to changing business needs. Instead, ERP systems ? including both software applications and the data they process ? are variegated patchworks, containing 50 or more databases and hundreds of separate software programs installed over decades and interconnected by idiosyncratic, Byzantine and poorly documented customized processes. To manage this growing complexity, IT departments have grown substantially: Today?s IT departments spend 70% to 80% of their budgets just trying to keep existing systems running. The research shows, says the author, that the typical IT structure is so dense and extensive that it?s often a miracle that it works at all. Enterprise systems that were supposed to streamline and simplify business processes instead have brought high risks, uncertainty and a deeply worrying level of complexity. Rather than agility, they have produced rigidity and unexpected barriers to change, a veritable glut of information containing myriad hidden errors and a cloud of questions regarding their overall benefits. How did this happen? Rettig points to the inherent limitations in the nature of software, the costs of implementation and the vagaries of data. Indeed, she offers, enterprise software may be just too complex to deliver on its promises. She also suggests that the next new thing ? service-oriented architecture (SOA) ? is not likely to fare much better, for many of the same reasons. There are no easy fixes, cautions Rettig, save a large dose of sobriety, clear-eyed analysis and emphasis on simplicity and efficiency.

Finding the Right Job for Your Product

Abstract: The way a company views its markets determines what it decides to produce, how it will take those products to market, who it believes its competitors to be, and how large it believes its market opportunities to be. Most companies segment along lines defined by the characteristics of their products (category or price) or customers (age, gender, marital status and income level) because that is the most easily accessible type of data, but product and customer characteristics are poor indicators of customer behavior because that is not how markets are structured from the customer?s perspective. Customers simply need to get things done, whether that be fixing their car, staving off boredom, or finding something fun to do with their kids. These situational needs for which customers are looking to ?hire? products or services go unnoticed during traditional market research and segmentation. As a result, the true breadth of competition often goes unnoticed too. When companies understand what they are up against in the mind of the customer, they can piece together the real size of the market in which they compete. Using examples from the fast food industry, furniture retailing, the automobile industry and health care, and citing a wide variety of companies and brands, including FedEx, Starbucks, Google, Blackberry, TurboTax and OnStar, this article describes the benefits that executives can reap when they segment their markets by job (the risk and cost of innovation is minimized), the methods that those involved in marketing and new-product development can use to identify the job-based structure of a market (interviews, surveys, observation, empathic and co-evolution techniques), and how the details of business plans can be made more coherent and focused when innovators understand the job to be done.

Breakthroughs and the ¿Long Tail¿ of Innovation

Abstract: The largely erroneous perception that breakthroughs are impossible to predict arises from the tendency to focus on just the breakthroughs while ignoring the iterative process of invention and its distribution of outcomes. When all inventions are considered, they demonstrate a highly skewed distribution in which almost all inventions are useless, a few are of moderate value and only a very, very few are breakthroughs. Those breakthroughs constitute the ?long tail? of innovation. If managers wish to understand how those breakthroughs arise, they cannot ignore the process that generates the entire distribution. In particular, they need to keep in mind the following three measures of inventive success: shots on goal (the total number of inventions a company generates), average score (the mean value of those inventions) and maximum scores (the breakthrough inventions). Various factors can affect a company?s inventive output, including the presence of inventors who work alone, the type of collaboration among those inventors who work in teams, the amount of team diversity and the degree to which inventors apply science in the innovation process. Greater team diversity, for instance, will help generate more shots on goal although, on average, those shots will be less successful. But diversity also will increase the variance of the outcome, such that failures as well as breakthroughs are more likely. Thus companies first need to identify how they want to improve their innovation process and then take the appropriate measures to address any deficiencies. Only then can they improve their capacity to innovate in ways that make the best sense for the organization as a whole.

The Four Models of Corporate Entrepreneurship

Abstract: How can established organizations build successful new businesses on an ongoing basis? In their study of nearly 30 corporations as diverse as Google, DuPont and Cargill, the authors identified two dimensions under the direct control of management that consistently differentiated how companies approach corporate entrepreneurship. The first is organizational ownership: Will the primary ownership for the creation of new businesses be focused in a designated group, or will it be diffused across the organization? The second is resource authority: Will projects be funded from a dedicated corporate pool of money or in an ad hoc manner, perhaps through business-unit budgets? Together the two dimensions generate a matrix with four basic models of corporate entrepreneurship: the opportunist, the enabler, the advocate and the producer. In the opportunist model (example: Zimmer Holdings), the company has no deliberate approach to corporate entrepreneurship, and new businesses are built mainly from the grassroots efforts of a few ?project champions.? Enabler companies (example: Google) provide funding and senior executive attention to prospective projects. In the advocate model (example: DuPont), the company strongly evangelizes for corporate entrepreneurship, but business units provide the primary funding. Lastly, producer companies (example: Cargill) establish and support a full-service group with a mandate for corporate entrepreneurship. Each of the four models has a different objective, function and set of challenges. Whichever model is chosen, the crucial thing to remember is that corporate entrepreneurship needs to be nurtured and managed as a strategic, deliberate act.

Overcoming Consumer Resistance to Innovation

Abstract: Some successful innovations, such as the microwave oven and the dishwasher, were initially slow to achieve consumer acceptance. When consumers resist adopting an innovation because it requires them to alter established habits, the innovation is called a resistant innovation. The authors use a case study involving the diffusion of screwcap wine closures in three countries ? Australia, New Zealand and the United States ? to analyze strategies for marketing a resistant innovation. For winemakers, screwcap closures represent a solution to ?cork taint,? a quality problem that can be caused by poor-quality corks and that can affect wine flavor. But consumers have shown resistance to screwcap closures, associating them with cheap wines or preferring the tradition associated with cork. However, among wine consumers in Australia and New Zealand, screwcaps have now achieved widespread acceptance. But 2005 wine industry statistics showed that less than 5% of U.S. wineries used screwcaps on fine wines. What is the reason for this difference? Earlier research in 2004 had found few differences between U.S. wine consumers and those in Australia and New Zealand ? except in their attitudes toward screwcaps. Garcia, Bardhi and Friedrich interviewed decision makers at more than two dozen wineries in the three countries. The authors concluded that winemakers in Australia and New Zealand had generally taken a different approach to marketing screwcap wine closures than United States wineries did. United States winemakers tended to employ vertical cooperation strategies that involved working with distribution channels to market screwcaps. New Zealand and Australian winemakers, on the other hand, used coopetition strategies involving cooperation among wineries, such as a New Zealand wine industry group called the New Zealand Wine Seal Initiative. The authors conclude that, under certain circumstances, coopetition strategies, which involve some cooperation among competitive firms, can be an effective strategy for marketing a resistant innovation. To determine whether or not coopetition is an appropriate strategy, the authors suggest that managers should analyze the marketing problem the new innovation faces and the resources available to address it; consider the kind of specific resources and knowledge that might be exchanged during coopetition; and evaluate the industry climate, including the role of trade associations and industry experts.

The Need for Third-Party Coordination in Supply Chain Governance

Abstract: During the last few decades, companies have moved away from hierarchical, integrated supply chains in favor of fragmented networks of strategic partnerships with external entities. This change has caused ripples throughout the old supply network and raised questions about the future. The authors consider the impact of vertical disintegration in large-scale supply networks, particularly in the textile and electronics industries. They focus on supply chain strategies that have been adopted by network players in order to accommodate for the changing governance and ownership structures. Their broad hypothesis is that the process of disintegration in many industries is not sustainable from a coordination and control viewpoint, and therefore will be followed by eventual reintegration - although it may take different forms in different industries. They discuss the expanded role of the systems integrator, which, in many cases, goes beyond critical coordination services and extends into issues related to control and governance of portions of the supply network. They also explore the challenges that systems integrators are likely to face, and they contrast two different models of coordination and governance that could be adopted by such players.

The Science and Fiction of Meetings

Abstract: Meetings are a central fact of organizational life. As a vehicle for communication, they can be extremely valuable mechanisms for disseminating vision, crafting strategic plans, and developing responses to challenges and opportunities. They can also be helpful for gathering ideas, brainstorming, and generating higher levels of employee involvement. But too many meetings are seen as a waste of time ? as a source of frustration rather than enlightenment. The authors explore some basic questions: How much time do people really spend in meetings? Are employees burning out from meeting overload? To what extent do people consider their time in meetings unproductive? And how can companies use meeting time better? To answer these questions, they look at a variety of sources: research and application literature; their own experiences working with clients; and data from two multinational studies of employees (including one that provided the basis of an article titled ??Not Another Meeting!? Are Meeting Time Demands Related to Employee Well-Being?? Journal of Applied Psychology 91, no. 1 (2006): 86-96, by Rogelberg, Leach, Warr and Burnfield). Based on these inquiries, they offer insights into the world of meetings and how organizations can use them more effectively.

Closing the Gap Between Strategy and Execution

Abstract: Many markets are affected by the complex interactions of multiple variables: geopolitics, technical innovation, capital market swings, competitive dynamics, shifting consumer preferences and so on. These volatile markets throw out a steady stream of opportunities and threats, and managers can neither predict nor control the form, magnitude or timing of future events with accuracy. In such environments, the traditional linear view of strategy ? plan then execute ? is woefully inadequate because it hinders people from incorporating new information into action. But instead of thinking of strategy as a linear process, why not consider it as inherently iterative ? a loop instead of a line? According to this view, every strategy is a work in progress that is subject to revision in light of ongoing interactions between the organization and its shifting environment. To accommodate those interactions, the strategy loop consists of four major steps: making sense of a situation, making choices on what to do (and what not to do), making those things happen and making revisions based on new information. Reconceptualizing strategy as an iterative loop is simple enough, but putting that new mindset into practice is not. Here, the crucial thing to remember is that discussions ? formal and informal, short and long, one-on-one and in groups ? are the key mechanism for coordinating activity inside a company. Thus, to put the strategy loop into practice, managers at every level in the organization must be proficient at leading discussions that reflect the four major steps (making sense, making choices, making things happen and making revisions). Companies such as Diageo Ireland, All America Latina Logistica and Onset Venture Services demonstrate that each of the four types of discussions has a different objective that requires a specific tone, supporting information, leadership traits and accompanying tactics.

The 7 Deadly Sins of Performance Measurement and How to Avoid Them

Abstract: In recent years, companies have developed much more sophisticated strategic measurement systems, based on such tools as the balanced scorecard, key performance indicators, computerized dashboards and the like. Nonetheless, there seems to be a widespread consensus that they measure too much, or too little, or the wrong things, and that in any event they don?t use their metrics effectively. Why?

How to Reap Higher Profits With Dynamic Princing

Abstract: Dynamic pricing, in which prices respond to supply and demand pressures in real time or near-real time, has long been used by airlines and hotels. Now dynamic pricing is making inroads in many different sectors including apparel, automobiles, consumer electronics, personal services, telecommunications and second- hand goods. These companies are making use of new findings on dynamic pricing and of increases in data-processing power to raise their average realized prices, thereby increasing revenues and profits. There are two mechanisms for dynamic pricing: posted prices that customers can see; and price-discovery mechanisms, in which customers determine prices through their own actions. These two mechanisms are employed in seven different forms: yield management (commonly used by airlines), demandbased pricing, three types of auctions, group buying and negotiations. The article describes eight situations for using the various forms of dynamic pricing. An important constraint in employing dynamic pricing is consumers? Latitude of Price Acceptance, which varies for different products and situations and which can be discovered through observation, surveys or analysis of demand elasticities. Customer participation in the pricing process decreases the chances of a consumer backlash. Customers also tend to embrace dynamic pricing in the following situations: where the price reflects intensity of demand for the product, there is communication between the seller and the consumer, and the price difference is explained by a difference in perceived value across channels through which the transaction occurred. The more the seller understands the buying cycles and habits of the customer, the more he is able to manage price margins to the rhythm of the customer?s shopping, to segment customers and to develop price discrimination.

The New Principles of a Swarm Business

Abstract: In every large company, groups of creative individuals self-organize to explore and develop ideas that they care deeply about. These collaborative networks often include customers and others outside the company's boundaries. Take, for instance, the automaker BMW, which posts numerous engineering challenges on its Web site, enabling customers and company designers to network and collaborate on developing various features of future cars. Now collaborative innovation is being extended from the realm of idea generation and product development to the very essence of doing business. In fact, some companies have based their entire business models on collaborative networks. The classic example is Wikipedia, the free online encyclopedia that relies on a swarm of people to write, edit and fact check the information listed in its entries. According to the authors, these "swarm businesses" pick up where the e-business craze stopped, with one crucial difference: e-businesses were primarily concerned with eyeballs (getting as many people as possible to visit a particular Web site), whereas swarm businesses strive mainly to create real value for the swarm. As companies like BMW, IBM, Novartis and others are discovering, swarm businesses require a completely new corporate mindset. Specifically, to reap the benefits of swarm innovation, companies must (1) gain power by giving it away, (2) share with the swarm and (3) concentrate on the swarm, not on making money. Although these principles differ from the traditional ways of doing business in a number of fundamental ways, they are crucial for companies to succeed in this emerging era of increased collaboration among innovators both inside and outside the organization.

Managing executive attention in the global company

Abstract: For executives running global companies, the challenge of keeping abreast of events in markets around the world is mind-boggling. The problem is not a lack of information ? it is having the time and energy to process the information. How should executives prioritize their time to ensure that it is focused on the countries and subsidiaries that need the attention? Which markets should they emphasize, and which ones can they allow to fall off their radar screen? The authors researched executive attention at global companies for five years, interviewing 50 executives at 30 corporations including ABB, Dun & Bradstreet, Nestle and Sara Lee. They found that executives end up prioritizing a handful of markets at the expense of the others, but they don?t always select the most promising ones. Because executive attention is so limited, executives tend to focus on the home market or on ?hot? markets, always at the expense of other opportunities. The authors examine the nature of executive attention and identify mechanisms by which subsidiary companies attract attention from the top executives. Although attention can be harmful as well as helpful, the article focuses on the positive aspects. In particular, the authors focus on three elements: support, in terms of how headquarters executives interact with and help subsidiary managers achieve their goals; visibility, in terms of the public statements headquarters executives make about how the subsidiary is doing; and relative standing, in terms of the subsidiary?s perceived status vis-a-vis other subsidiaries in the organization.

In Praise of Resource Constraints

Abstract: IBM discovered decades ago that adding programmers to a software project that was late did not help. Indeed, progress slowed even more. The "resource-driven mindset," sometimes known as "throw more money at the problem," is limited, the authors argue. Yet this mindset has so dominated the research agenda that it has clouded our consideration of many situations in which scarce resources (precisely because they are scarce) are desirable, potentially leading to breakthrough performance. Resource constraints fuel innovation in two ways: through entrepreneurial, social-network approaches to securing the missing funds or the required personnel, and because teams often produce better results as a direct result of the constraints. The human mind is most productive when restricted, the authors maintain. Limited ? or better focused ? by specific rules and constraints, we are more likely to recognize an unexpected idea. Witness the outcome of a Cold War-era race between General Electric and BMW teams to design adequately cooled jet engines. The U.S. team had a virtual blank check, used the most advanced materials and spent nearly twice as much as the Manhattan Project did. The German team, which had significantly less funding at its disposal, came up with a simple yet elegant design principle that remains in use to this day.

Understanding and Managing Complexity Risk

Abstract: In the past, companies have tried to manage risks by focusing on potential threats outside the organization: competitors, shifts in the strategic landscape, natural disasters or geopolitical events. They are generally less adept at detecting internal vulnerabilities that creep into organizations and other human-designed systems. Indeed, as companies increase the complexity of their systems ? products, processes, technologies, organizational structures, legal contracts and so on ? they often fail to pay sufficient attention to the introduction and proliferation of loopholes and flaws. Ericsson, Barings Bank and Comair are but a few examples of companies that have suffered disastrous breakdowns in their complex internal systems. A crucial thing to remember is that the possibility of random failure rises as the number of combinations of things that can go wrong increases, and the opportunity for acts of malicious intent also goes up. Build new applications on top of legacy systems, and errors creep in between the lines of code. Merge two companies, and weaknesses sprout between the organizational boundaries. Build Byzantine corporate structures and processes, and obscure pockets are created where bad behavior can hide. Furthermore, the enormous complexity of large systems like communications networks means that even tiny glitches can cascade into catastrophic events. In fact, catastrophic events are almost guaranteed to occur in many complex systems, much like big earthquakes are bound to happen. So, without the benefit of perfect foresight, how can businesses uncover and forestall the fatal flaws lurking within their organizations? There are three complementary strategies: (1) Assess the risk to make better-informed decisions, such as purchasing an insurance policy to cover the risk; (2) spot vulnerabilities and fix them before catastrophic events occur; and (3) design out weaknesses through resilience. These ideas have been around for years, but researchers have recently had to reinvent them in the context of extremely complex, interconnected cascade-prone systems.

Intuitive Decision Making

Abstract: Should executives make decisions based on what their ?gut? tells them? Lately that idea has lost some favor, as technology?s ability to accumulate and analyze data has rapidly increased ? supplanting, according to some accounts, the high-level manager?s need to draw heavily on intuition. But intuition needs some rescuing from its detractors, and the place to start is by clarifying what it really is, and how it should be developed. Intuition is not a magical sixth sense or a paranormal process; nor does it signify the opposite of reason or random and whimsical decision making. Rather, intuition is a highly complex and highly developed form of reasoning that is based on years of experience and learning, and on facts, patterns, concepts, procedures and abstractions stored in one?s head. In this article, the authors draw on examples from the worlds of chess, neuroscience and business ? especially Austria?s KTM Sportmotorcycle AG ? to show that intuitive decision making should not be prematurely buried. They point out that although the study of intuition has not been extensively explored as a part of management science, studies reveal that several ingredients are critical to intuition?s development: years of domain-specific experience; the cultivation of personal and professional networks; the development of emotional intelligence; a tolerance for mistakes; a healthy sense of curiosity; and a sense of intuition?s limits. Companies should, of course, continue to exploit their abilities to mine data as a means of obtaining a competitive edge. But they shouldn?t overlook the continuing value of experienced executives who can draw on their intuition to make decisions when the numbers yield a question rather than an answer: Now what do we do?

Viewing Brands in Multiple Dimensions

Abstract: Contrary to the beliefs of many managers, their companies? product and corporate brands cannot truly be managed, much less owned. That much has become clear in recent years as many well-known brands have seemed to take on lives of their own, changing in the minds of many even though management may think of them as immutable. In this article, the authors introduce the concept of a ?brand manifold? in order to bring out two overlooked factors: first, that brands have multiple dimensions depending on who is valuing them, and second, that those dimensions change in space and time. Drawing on automotive industry examples such as Maybach, Morgan, and BMW?s Mini, the authors demonstrate the importance of managing a brand?s evolution so that the brand does not lose its roots in the past. The article goes on to highlight the importance of understanding that brands have a life and meaning independent of what their initiators intended ? as embodied by the thriving user community around Apple Computer?s long-obsolete Newton handheld and evident in the influence of Harley-Davidson owners over many of the company?s strategic decisions.

Strategic Thinking at the Top

Abstract: Business schools and others interested in management education and development have vigorously debated how best to teach strategy to future leaders. Some experts have questioned whether the topic should be taught at all ? or at least whether it should be taught to managers. Often missing from the debate, however, has been any in-depth discussion of how individuals learn to think strategically in the first place. What specific experiences are important and how do they contribute? Moreover, what are the different ways in which people absorb those experiences to develop the ability to think strategically? To answer these and other questions, the author conducted a study that identified executives who were considered the top strategic thinkers in their industry. The study then investigated the totality of experiences (educational, job related or other) that contributed to the high ability of those individuals. In addition, the research investigated the different ways in which the executives acquired their expertise in strategic thinking ? a process that typically took more than a decade The data showed that strategic thinking arises from 10 specific types of experiences ? for instance, spearheading a major growth initiative or dealing with a threat to organizational survival. Moreover, executives appear to gain their expertise in strategic thinking through one of three developmental patterns. These findings help demystify the process by which strategic thinking is learned, offering important implications for management development and the practice of strategy.

The Art of Managing New Product Transitions

Abstract: Faster time to market and shorter product life cycles are pushing companies to introduce new products more frequently. While new products can offer tremendous value, product introductions and transitions pose enormous challenges to managers. In studying product introductions, the authors found that a common handicap was the lack of a formal process to guide managerial decisions. Drawing from research at Intel and examples from General Motors and Cisco Systems, the article develops a process to facilitate decision making during new product transitions. The proposed process analyzes the risks impacting a transition, identifies a set of factors across departments tracking those risks, monitors the evolution of these factors over time, and develops playbook mapping scenarios of risks and responses. The process helps level expectations across the organization, lessens the chance and impact of unanticipated outcomes, and helps synchronize responses among different departments. It assists managers in designing and implementing appropriate policies to ramp up sales for new products and ramp down sales for existing products, balancing the supply and the demand for both so that combined sales can grow smoothly.

Avoiding the Alignment Trap in IT

Abstract: For many years now, companies seeking to deliver higher business performance by harnessing IT have focused on alignment ? the degree to which the IT group understands the priorities of the business and expends its resources, pursues projects and provides information consistent with them. In practical terms, that means there must be shared ownership and shared governance of IT projects. However, the authors contend that their research ? a survey of more than 500 senior business and technology executives worldwide, followed up with in-depth interviews of 30 CIOs ? reveals a troubling pattern: Even at companies that were focused on alignment, business performance dependent on IT sometimes went sideways, or even declined. That?s because underperforming capabilities are often rooted not just in misalignment but in the complexity of systems, applications and other infrastructure. The complexity doesn?t magically disappear just because an IT organization learns to focus on aligned projects rather than less aligned ones. On the contrary, the authors say, in some situations it can actually get worse. Costs rise, delays mount and the fragmentation makes it difficult for managers to coordinate across business units. The survey also showed that almost three-quarters of respondents are mired in the ?maintenance zone.? IT at these companies is generally underperforming, undervalued and kept largely separate from a company?s core business functions. Corporate management budgets the amounts necessary to keep the systems running, but IT doesn?t offer enough added value to the business and often isn?t expected to. Drawing on the experiences of Charles Schwab & Co., Selective Insurance Group, De Beers, First Data Corp. and National City, among others, the authors identify a group of best practices that constitute ?IT-enabled growth.? The companies that achieve the highest growth at a low cost manage complexity down, source IT staffing and software wherever it makes the most sense and create start-to-finish accountability connected to business results. Then, and only then, the best performers tightly align their entire IT organization to the strategic objectives of the overall business, using governance principles that cross organizational lines and making business executives responsible for key IT initiatives.

How Executives Can Enhance IP Strategy and Performance

Abstract: How are companies approaching intellectual property strategy, and what are successful strategies for managing IP? To explore such questions, the author and his research team conducted a detailed survey of senior IP executives at 34 companies. The survey findings indicate that IP has become an area of focus for the executive committee and the board at many companies. What?s more, the study found that top executives? involvement in IP strategy was correlated with better IP performance. Analysis of the survey data suggests another intriguing point: Some companies are now using an approach to IP strategy that the author calls ?full-fledged IP protection.? This ?full-fledged IP protection? strategy includes seeking technical and nontechnical IP protection for even minor inventions, in an attempt to ?pack? technology spaces with IP claims. This practice differs from a classic IP strategy of using IP to support core research and development. At least in some industries, this change in IP use may, the author suggests, be causing the nature of IP competition to shift from the world of ?real? products to that of ?potential? products. The study also found that, in the companies surveyed, IP-related tasks often entail cooperation among staff from different functional areas within a company, such as product designers and patent and trademark attorneys. Having clear-cut rules about IP at the functional level was associated with better IP performance in the companies surveyed, as was having corporate management devote time to listening to the company?s most senior IP officers. On the other hand, failure to sell or license out IP when circumstances facilitated or necessitated such a trade was associated with significantly lower IP performance. In addition to the survey data, the author conducted interviews with senior executives from two of the participating companies: Lars Rebien Sorensen, the CEO of Novo Nordisk A/S, a healthcare company with a specialty in diabetes care; and Dr. Gottlieb Keller, a member of the corporate executive committee of the healthcare company F. Hoffmann- La Roche Ltd. In these interviews, Sorensen and Keller discussed the role of corporate leaders in IP strategy at their respective companies.

Should Business Care About Obesity

Abstract: Since the 1980s, the percentage of obese Americans has risen from one-sixth of the population to nearly one-third ? and the problem is particularly acute among children and adolescents, where the obesity rate has tripled in 30 years. While this problem is certainly, in the first instance, one of personal responsibility and self-control, business leaders should be concerned, too ? for at least four reasons. The first reason is simple self-preservation: Food and beverage companies could find themselves in the trial lawyers? crosshairs. The second reason is closely related to the first: The food and beverage industry is the target of the public?s increasing ire over portion sizes and unhealthy ingredients. Third, companies will not be able to function efficiently if a significant proportion of their current and future employees suffer from obesity. And finally, opportunity knocks: Companies have the chance to develop new products and create a positive brand image that will fatten the corporate bottom line while simultaneously helping obese Americans shed dangerous pounds. The authors explain how several companies are actively pursuing several strategies to help solve America?s other ?energy crisis? ? too much consumption and too little movement. Kathleen Seiders is associate professor of marketing at Boston College?s Carroll School of Management in Chestnut Hill, Massachusetts. Leonard L. Berry is the M.B. Zale Chair of Retailing and Marketing Leadership at Texas A&M University?s Mays Business School in College Station, Texas, and a professor of humanities in medicine in the Texas A&M University System Health Science Center College of Medicine. Berry is a board member for several organizations, including two mentioned in this article: Darden Restaurants Inc. and Nemours.

How to Plan E-Business Initiatives in Established Companies

Abstract: Most of the economy is made up of firms that were created well before the advent of e-business Yet most e-business research has focused on ?pure-play? companies that were created specifically to take advantage of the Web The authors created an e-business planning process that can be used both to examine an established company?s existing operations and to identify promising new business opportunities The planning process has four steps The first is to identify potential e-business initiatives, according to whether they create business value or reduce costs The second step is to analyze the functional scope of each project, using an architecture of e-business processes The third step, analyzing the sustainability of each initiative?s benefits, is particularly important in the e-business context because Internet interactions are susceptible to being copied by competitors Finally, prioritizing among e-business projects depends on how they fit with other information technology elements The authors explore ways in which e-business can create opportunities for completely new products and markets, including adding information features, selling information as a product and finding new markets The authors detail how their e-business planning process was used at a mature global company A company task force considered two major projects The e-business planning process sharpened the definition of the projects, outlined the technical requirements and other resource needs and confirmed the sustainability of both projects

How Project Leaders Can Overcome the Crisis of Silence

Abstract: It is estimated that of the $255 billion spent per year on information technology projects in the United States, more than a quarter is burned up in failures and cost overruns. Project professionals and management experts have attempted to respond to these failures by improving the formal systems related to program governance, project management and project-related technologies. Though these new approaches have produced improved results, with more than two out of three projects continuing to disappoint, however, the authors argue that something is still missing. They suggest five crucial questions to ask to help prevent project failure ? are we planning around facts, is the project sponsor providing support, are we faithful to the process, are we honestly assessing our progress and risk and are team members pulling their weight. The authors examine the success of the project managers who do engage in these conversations and then lay out a plan for using them in the organization.