Pahalwan's was a chain of four outlets that offered sweets, snack food and fast food in Jammu, India. It had a major presence in the state of Jammu and Kashmir and was delivering products to other parts of India, such as Delhi. However, local, national and international food retailers had entered the market, increasing the competition. Changing consumer preferences had also started affecting the company. Pahalwan's did not believe in advertising its products and focused little energy on branding activities. Thus, there was a need to plan for an innovative and cost-effective communication strategy to boost its sales. Pahalwan's also needed to think about new products and new markets to stay in business.
One of the great challenges for organizations in the current economy is making strategy under the uncertainties posed by turbulent environments, intensified competition, emerging technologies, shifting customer tastes and regulatory change. Executives often know they must break with the status quo, but there are few signposts indicating the best way forward. Executives have long been exhorted to conduct analyses of internal and external environments and construct scenarios of the future. However, seeing strategy in this way has some serious weaknesses. It assumes that accuracy can be achieved through rigorous analysis and conscientious efforts to overcome individual biases in perception. It also assumes that the process will be relatively frictionless and primarily analytical. But research has found that most forecasting efforts fail to attain the desired precision. To study how managers make strategy in conditions of considerable uncertainty, the authors took an in-depth look at five technology strategy projects inside the Advanced Technology Strategy Group at a communications technology company that was experiencing a period of high industry turbulence. The authors observed managers'struggles to forecast the future and discovered that managers could not imagine new futures for the company without rethinking the past and reconsidering present concerns. A new future could not shape strategic choices unless it was connected in a narrative that showed how it relates to the past and the present. When managers settled on a particular narrative, they could make choices. Strategy making amid volatility thus involves constructing and reconstructing strategic narratives that reimagine the past and present in ways that allow the organization to explore multiple possible futures. In comparing strategy projects, the authors found that the more work managers do to create novel strategic narratives, the more likely they are to explore alternatives that break with the status quo.
But this limited perspective of the law does not explain how some leading companies, such as Qualcomm and the Walt Disney Co., have managed to deploy their legal departments to shape the legal environment in order to secure long-term competitive advantage. In their research, the authors have developed a framework that can help executives identify the different ways in which legal strategies can be used to achieve various corporate goals, including the identification of value-creating opportunities. The framework consists of five different legal pathways, which the authors describe using examples such as Qualcomm, Microsoft, United Parcel Service and Xerox. In order of least to greatest strategic impact, the five legal pathways are (1) avoidance, (2) compliance, (3) prevention, (4) value and (5) transformation. In the avoidance pathway, managers see the law as an obstacle to their desired business goals. Companies operating in the avoidance pathway will often have lax internal controls or a failure to perform due diligence, and this approach can lead to disaster. Companies in the compliance pathway recognize that the law is an unwelcome but mandatory constraint, and they think of compliance basically as a cost that needs to be minimized. For businesses in the prevention pathway, managers take a more proactive approach, using the law to preempt future business-related risks. The value pathway represents a fundamental shift in mind-set, from risk management to value creation; managers use the law to craft strategies that increase ROI in ways that can be directly tied to a profit-and-loss statement. For companies in the transformation pathway,executives have integrated their legal strategy not only within the organization's various value-chain activities but also with the value chains of important external partners.
This is an MIT Sloan Management Review article. Managers often must make decisions about complex strategic issues, and they are expected to make choices carefully and objectively. A retailer, for example, may need to decide whether to bid more in a highly competitive auction. Or a manufacturer may want to determine how long to hold onto a money-losing plant as the economy sinks into a recession. In boom times, deals are often in demand and expensive (and acquirers tend to know it); but when the economy cools off, acquisitions fall out of favor and prices decline. Conventional capital budgeting methods for valuing acquisitions and investments (such as discounted cash flow) may result in overpricing in "hot"deal markets and underpricing in "cold"deal markets. By setting potential deals in the context of real options theory and behavioral economics, authors Han Smit and Dan Lovallo write, executives can compensate for potential biases. Investor exuberance, the positive sentiments of boards and interest by rivals can cause executives to view acquisition opportunities as more attractive than they actually are in "hot"deal markets. Loss aversion and a narrow perspective that does not consider long-term growth options, meanwhile, can subdue acquisition behavior during "cold"markets. The article is designed to improve the use of valuation methods and help mitigate decision biases. Treating acquisition decisions as simple go/no-go choices based on expected cash flows, the authorswrite, creates an unhealthy dynamic. Because it's difficult for executives to recognize their own biases, the authors suggest using a formalized process to de-bias the decision-making team. First, managers must determine whether they are facing an investment in a "hot"or "cold"deal market (something that can often be revealed by the number of deals), after which the authors propose taking a broader view, supported by checklists.
The Industrial Revolution brought the decline of small-scale, cottage production and the rise of large, integrated businesses; Adam Smith's invisible hand was replaced with what business historian Alfred D. Chandler Jr., called the "visible hand"of management. But now that pendulum appears to be swinging the other way -to a system of loose networks, virtual businesses and peer-to-peer interactions. A supposed hallmark of the new economy has been the decline of managerial authority. Management gurus, consultants and pundits have proclaimed that hierarchy is out. Modern organizations such as online retailer Zappos have come to favor flat hierarchies with widely distributed authority. And yet, given the demands of the current environment, authors Nicholai J. Foss and Peter G. Klein argue that managerial authority is still essential in situations where (1) decisions are time-sensitive; (2) key knowledge is concentrated within the management team; and (3) there is need for internal coordination. Such conditions, they observe, are also hallmarks of our networked, knowledge-intensive and hypercompetitive economy. While it is true that many knowledge workers no longer need a boss to direct them to tasks or monitor their day-to-day progress, the authors contend that the role of managers and the definition of "authority"needs to change. Managers need to move away from specifying methods and processes in favor of defining the principles they want people to apply or the goals they want people to meet. In other words, the main task for top management is to define and implement the organizational rules of the game. To be sure, procedures for defining rules and frameworks can themselves be delegated and nested. Indeed, when a company's key assets are knowledge workers whose skills and behaviors are difficult to assess objectively, companies will need to increasingly rely on more subjective assessments of performance, which must be carried out by managers.
This is an MIT Sloan Management Review article. In a world where business models are evolving rapidly and new competitors can emerge almost overnight, strategic thinking -especially at the top of the company -is more important than ever to a company's survival. However, the authors argue, boards of directors have no clear model to follow when it comes to developing the strategic role that is best suited to the company they oversee. As with other leadership roles, the one played by the board varies with the company's culture and the norms and legal requirements of its home country, as well as the norms of the industry. More importantly, the board must play a role that matches the strategic needs of the company and the state of its sector. The board of a young company, for example, usually needs to wrestle with different strategic issues than the board of a long-established company. In the authors'view, three dimensions shape the board's contributions to strategy: 1. A Definition of Strategy Companies define strategy in different ways, depending on their place in their industry and the nature of their industry. Often boards go wrong simply because they have not defined the right measures of competition or the right challenges on which to focus. 2. The Role of the Board The board's role in strategy may range from that of advisers who supervise the strategy to full coauthors of the company's game plan. 3. The Context of the Company The board's involvement in strategy also depends on the context or environment in which the company competes. If the company operates in a market that has a fairly simple and stable competitive dynamic, the board may be well advised to remain distant and largely hands-off on strategy questions. In a more chaotic context, however, a board may choose to take a stronger, hands-on approach to strategy development.
This is an MIT Sloan Management Review article. Rising labor costs in China and other emerging economies, high supply chain and logistics costs, and wide differentials in energy costs in different parts of the world are provoking a fresh round of relocation of manufacturing and production. While some labor-intensive jobs are moving out of China to Southeast Asia or the next emerging low-cost regions, some manufacturing work is also returning to the United States. Wal-Mart is facilitating reshoring efforts among its suppliers, and consultants are offering reshoring conferences, reports and lots of advice. While the data on comparative labor and factor costs may be compelling, reshoring -bringing assembly work back from abroad -is hard work, notes author Willy C. Shih. This is especially true when needed resources (the supplier base, the workforce and even the company's own internal product design capabilities) have atrophied. Shih studied several initiatives aimed at rebuilding regional capacity in the United States (including at GE's Appliance Park in Kentucky and two Flextronics International plants in Texas) and other examples in Europe and Asia to identify lessons about what works. The benefits were no surprise. Placing manufacturing close to the market minimizes inventory in the pipeline, reduces delivery times and shortens ordering cycles. The challenges were less apparent: the need to stabilize the workforce, address skill gaps, rethink the capital/labor ratio, localize the supply base and rethink product design to leverage the proximity to manufacturing. In many ways, Shih writes, the challenges of reshoring to the United States are the challenges of reshoring in any market in the world. Managers must design supply chains for the production of goods that balance proximity to diverse markets with the locations of their capabilities and their supply ecosystems. Doing that well, Shih argues, will always be a source of competitive advantage.
This is an MIT Sloan Management Review article. Capturing new growth opportunities is fundamental to strategy, innovation and entrepreneurship. These days, experimentation and improvisational change are in. But how should managers address the challenge? The answer, the authors argue, can be more complex and more crucial to a company's success than previously thought. Their research on mature corporations, growing businesses and new ventures suggests a paradoxical tension between focus and flexibility that can define or break a business. Based on more than 150 interviews with managers at 30 companies in North America, Europe and Asia, the authors conclude that focus is still critical and may be just as important as flexibility. What's more, they conclude that a company's focus may influence its flexibility and vice versa. There are two components to capturing a new business opportunity: opportunity selection and opportunity execution. Opportunity selection involves determining which customer problem to solve, whereas opportunity execution deals with solving the problem. The authors point out that most books, articles and thought leaders focus on opportunity execution -how to create value by developing solutions. But research suggests that innovation initiatives often move so quickly to identify a solution that the innovators have to cycle back to figure out which problem they are actually solving. The authors found that opportunity selection appears to matter as much as opportunity execution. More importantly, how managers approach opportunity selection (whether with flexibility or with focus) has a critical impact on how successful they are at opportunity execution. The authors observed that managers and entrepreneurs tend to fall into two groups: opportunists and strategists. Opportunists rely on a less scripted and more flexible approach to opportunity selection, letting emergent customer inquiries shape opportunity selection.
This is an MIT Sloan Management Review article. Customers are increasingly "omnichannel"-deploying both online and offline channels -in their thinking and behavior. In order to win in this new environment, sellers also must be omnichannel. That means having explicit strategies for the two core channel functions -provision of information about products and product fulfillment -and offering the right combination of experiences for their customers. The authors have developed a customer-focused framework for delivering these strategies, drawing on empirical research conducted with both offline-first retailers like Crate & Barrel and online first retailers like Warby Parker. Traditional, or offline-first, retailers need to leverage the online channel not only for fulfillment but also as a venue for delivering price, inventory and other information desired by customers. Using data from a natural experiment conducted at Crate & Barrel, a retailer of furnishings and housewares, the authors show that by providing accurate price and inventory information online, a traditional retailer can significantly increase sales and traffic to offline stores. Similarly, New York-based Warby Parker, an eyeglasses retailer that started out selling online, sells products with tactile features that some customers want to experience offline. The authors describe how Warby Parker has experienced significant benefits by developing an offline presence. For Warby Parker, offline showrooms that provide product inventory for customers to sample drive increased sales through the online channel. Furthermore, the authors note, when online-first retailers develop offline channels to deliver information, this allows customers to sort more appropriately into the channel that best suits them.
This is an MIT Sloan Management Review article. This year's MIT Sloan Management Review and Deloitte1 global survey found clear evidence that companies across industries are creating value with social business. A key finding is that social business value is a function of what we call social business maturity -the breadth and sophistication of its initiatives. In this year's report, we detail the drivers of that maturity and how companies are using social business to transform their organizations and reap greater gains from their social business efforts.
The author has worked in advertising for four and a half decades, and during those years he has spent a lot of time persuading clients to run ads that feel risky--maybe even dangerous--when they're first pitched. A client's risk appetite depends on the emotional makeup of the decision makers, the state of the company, the industry it's in, and many other variables. Strategy is the rigorous, behind-the-scenes part of Fallon's process: Driven by research and consumer insights, it helps to precisely define what the company is trying to accomplish with a campaign. Realizing that the agency has thought it through, the client becomes more comfortable taking the leap. The author describes three highly successful campaigns: "Live Richly" saturated New York City and other big markets with provocative signs that proved much more powerful than TV ads and created meaningful differentiation for Citibank in a category that had defied differentiation. "Just the Right Amount of Wrong" developed a niche market for the Cosmopolitan hotel of Las Vegas--people who like the spirit of the Strip but want something more refined. "Never Settle for Less" helped H&R Block expand its customer base by offering a free second look at tax returns in various locations. The company's professionals discovered thousands of dollars in additional refunds, and ads created from film footage of the event raised consumer awareness of a key selling point.
Since 1960 the U.S. economy has moved from largely financing the exploitation of natural resources to making the most of talent. The rewards to executives and financiers have skyrocketed as a result. But over the past two decades or so, the author argues, it has become increasingly clear that much of this talent is trading value rather than creating it: The fastest-growing group on the Forbes 400 list is hedge fund managers. What's more, stock-based incentives, which were intended to align the interests of top executives with those of long-term shareholders, are actually encouraging CEOs to serve the interests of short-term traders. The losers in this game are employees engaged in routine work, whose rewards are shrinking or whose jobs are disappearing. This state of affairs has created a growing--and unsustainable--inequality of income. Martin suggests that three things must happen if we are to avoid radical and talent-hostile steps imposed through the ballot box: (1) Talent must exert some self-discipline and lower its expectations. (2) Investors--primarily pension and sovereign wealth funds--must prioritize value creation. That means not voting in support of stock-based compensation and no longer supplying hedge funds with large amounts of capital or lending them stock. (3) Government should regulate the relationship between hedge funds and pension funds (if the latter don't do so voluntarily), tax "carried interest" as ordinary income, tax trades, and revisit the overall tax structure.
The open office is the dominant form of workspace design for good reason: It fosters collaboration, promotes learning, and nurtures strong culture. But what most companies fail to realize is that collaboration has a natural rhythm that requires both interaction and private contemplation. Companies have been trying for decades to find the balance between public and private workspace that best supports collaboration. In 1980 52% of U.S. employees lacked workspaces where they could concentrate without distraction. In response, high-walled cubicles took over the corporate landscape. By the late 1990s, the tide had turned, and only 23% of employees wanted more privacy, and 50% wanted more access to other people. Ever since, firms have been beefing up spaces that support collaboration and shrinking areas for individual work. But the pendulum seems to have swung too far: Once again, people feel a pressing need for privacy, not only to do heads-down work but to cope with the intensity of work today. To address these needs, according to the authors, we have to rethink our assumptions about privacy. Traditionally defined in physical terms, privacy is now about the individual's ability to control information and stimulation. In this article, the authors examine workspace design through the new lens of privacy and offer insights on how to foster teamwork and solitude.
To promote accountability, productivity, and shared learning, many organizations create open work environments and gather reams of data on how individuals spend their time. A few years ago, HBS professor Ethan Bernstein set out to find empirical evidence that such approaches improve organizational performance. What he discovered is that this kind of transparency often has an unintended consequence: It can leave employees feeling vulnerable and exposed. When that happens, they conceal any conduct that deviates from the norm so that they won't have to explain it. Unrehearsed, experimental behaviors sometimes stop altogether. But Bernstein also discovered organizations that had established zones of privacy within open environments by setting four types of boundaries: around teams, between feedback and evaluation, between decision rights and improvement rights, and around periods of experimentation. Moreover, across several studies, the companies that had done all this were the ones that consistently got the most creative, efficient, and thoughtful work from their employees. Bernstein's conclusion? By balancing transparency and privacy, organizations can capture the benefits of both, and encourage just the right amount of "positive deviance" needed to increase innovation and productivity.
Few companies measure whether the design of their workspaces helps or hurts performance, but they should. The authors have collected data that capture individuals' interactions, communications, and location information. They've learned that face-to-face interactions are by far the most important activity in an office; creating chance encounters between knowledge workers, both inside and outside the organization, improves performance. The Norwegian telecom company Telenor was ahead of its time in 2003, when it incorporated "hot desking" (no assigned seats) and spaces that could easily be reconfigured for different tasks and evolving teams. The CEO credits the design of the offices with helping Telenor shift from a state-run monopoly to a competitive multinational carrier with 150 million subscribers. In another example, data collected at one pharmaceuticals company showed that when a salesperson increased interactions with coworkers on other teams by 10%, his or her sales increased by 10%. To get the sales staff running into colleagues from other departments, management shifted from one coffee machine for every six employees to one for every 120 and created a new large cafeteria for everyone. Sales rose by 20%, or $200 million, after just one quarter, quickly justifying the capital investment in the redesign.
Businesses constantly innovate to create new value--but unless they also focus on how they capture value, they won't realize maximum benefit from their breakthroughs. And even avid innovators often have a blind spot when it comes to value capture. Managers need to think about value capture more imaginatively and as a matter of course. A new framework developed by IMD business school's Stefan Michel can help them do so. Michel details 15 value-capture innovations, which fall under five broad categories. Firms can profit by changing the price-setting mechanism (think of Priceline), the payer (media businesses where advertisers subsidize content consumption), the price carrier (Netflix), the timing of the exchange (commodities futures), or the segment served (grocery coupons, which "fence off" customers who prioritize savings). The practical applications of the framework are proven: In workshops at a major airline and a global professional services firm, for instance, cross-functional teams using this tool quickly devised new ways to capture value that boosted their company's profits.
The best way for companies to improve the lives of the world's poorest people--those at the bottom of the pyramid--is to focus first on doing good business, not just on doing good. That's the contention of the authors, who say that a steady flow of profits from manageable ventures will pave the way for later investments in more-ambitious socially beneficial projects. The authors cite two main challenges in selling profitably to the bottom of the pyramid: changing consumers' behavior and changing the way products are made and delivered. To help companies see how these challenges affect various business prospects, they have developed an "opportunity map" that classifies opportunities along a spectrum from the least complex and resource-intensive to the most. At the simplest end are targeted marketing opportunities in mature markets. In the middle are opportunities in growth markets: efforts to redesign products, extend distribution channels, or create new ones. At the other end of the spectrum are frontier-market ventures to develop new products, conquer competitors' markets, expand into greenfield markets, develop new business models, or create altogether new markets. The authors present examples of each type and explain that companies can pursue multiple opportunities simultaneously. If they choose wisely, they can make profits and advance their social missions at the same time.
The technology industry has a big problem with diversity, one that seems to be getting worse: In 1991 women held 37% of computing jobs; today they hold only 26%. But if tech firms want to get serious about hiring, retaining, and promoting more women, they'll need something more effective than sensitivity or mentoring programs that "fix" individual behavior, and longer lasting than cultural change programs. The author suggests an approach that borrows from tech's own playbook on experimentation: Collect detailed data on bias in your organization, identify company-specific ways to measure its effect, create hypotheses about how to move those metrics, and then throw some spaghetti at the wall and see what sticks. Working women face four kinds of bias: prove-it-again (continually being asked to prove their competence), tightrope (backlash for being too assertive or too nice), maternal wall (erroneous assumptions about mothers), and tug-of-war (pressure to distance themselves from other women). All four affect hiring, work assignments, evaluations, and promotion and compensation. Companies need to understand how, and then thwart these biases with "interrupters," small changes to business systems that stop patterns of bias. They can be as simple as adding "salary negotiable" to want ads--which closed the pay gap between men and women by 45% in one study. Doing anything once will not change organizational culture. Bias needs to be disrupted constantly, and the iterative interrupter approach may well be the way to do that.
It's not easy to recover from a big career disappointment such as getting fired or being passed over for a promotion. Many people sink into anger or denial, blaming situational factors or company politics. Though that's a natural response, it can also prevent them from breaking free of the destructive behaviors that may have derailed them in the first place. People who successfully rebound from career losses take a different approach: They do the hard work of figuring out why they lost, identifying which new paths they could take, and then seizing the right opportunity--whether that's a different role in the same organization, a move to a new company, or a shift to a new industry or career. Drawing on in-depth research and the authors' consulting experience, this article offers practical guidance for transforming anger and self-doubt over what seems like a failure into focused exploration and excitement about the fresh possibilities the situation presents. To gauge your ability to rebound from career setbacks, take the self-assessment at hbr.org/assessments/mirror-test.