After a global bribery investigation that lasted several years, the CEO of Siemens was asked to resign in 2007, and Loscher, then the president of Merck, was brought in to replace him. There was no question that the company needed to change--and quickly. The scandal provided the necessary sense of urgency in the company's ranks, and the new CEO set out to reorganize the top three levels of management, replacing from 40% to 80% of executives in each. To make the process transparent, each of the positions was benchmarked externally. He centralized decision making in the managing board, streamlined board membership, and created a new position for legal counsel and compliance. Then he turned to the country organizations, whose strength was one of Siemens's secrets to success, but whose growing autonomy had created an eclectic collection of local businesses. Loscher made one person accountable for global performance in every business, grouped the country operations into one fifth as many clusters, and established a steering group to oversee the whole. He added an environmental portfolio to the company's strategy and refocused the top managers on customers. And he put two women on the managing board. "If you want to change a big, complex organization like Siemens," he says, "you have to make your agenda known, and you have to communicate in simple terms."
The old ways of setting and implementing strategy are failing us, writes the author of Leading Change, in part because we can no longer keep up with the pace of change. Organizational leaders are torn between trying to stay ahead of increasingly fierce competition and needing to deliver this year's results. Although traditional hierarchies and managerial processes--the components of a company's "operating system"--can meet the daily demands of running an enterprise, they are rarely equipped to identify important hazards quickly, formulate creative strategic initiatives nimbly, and implement them speedily. The solution Kotter offers is a second system--an agile, networklike structure--that operates in concert with the first to create a dual operating system. In such a system the hierarchy can hand off the pursuit of big strategic initiatives to the strategy network, freeing itself to focus on incremental changes to improve efficiency. The network is populated by employees from all levels of the organization, giving it organizational knowledge, relationships, credibility, and influence. It can liberate information from silos with ease. It has a dynamic structure free of bureaucratic layers, permitting a level of individualism, creativity, and innovation beyond the reach of any hierarchy. The network's core is a guiding coalition that represents each level and department in the hierarchy, with a broad range of skills. Its drivers are members of a "volunteer army" who are energized by and committed to the coalition's vividly formulated, high-stakes vision and strategy. Kotter has helped eight organizations, public and private, build dual operating systems over the past three years. He predicts that such systems will lead to long-term success in the 21st century--for shareholders, customers, employees, and companies themselves.
In 1886, addressing the nascent American Society of Mechanical Engineers, Henry R. Towne proposed that "the management of works" be considered a modern art--thereby heralding the Management Century, when management as we know it came into being and shaped the world in which we work. Kiechel, a past editorial director of Harvard Business Publishing, elucidates the three eras that punctuate this period: the years leading up to World War II, during which scientific exactitude gave wings to a new managerial elite; the early postwar decades, managerialism's apogee of self-confidence and a time when wartime principles of strategy were adapted, sometimes ruthlessly, to the running of companies; and the 1980s to the present, years that saw fast-moving changes, disequilibrium, and a servitude to market forces but also ushered in globalism, unprecedented innovation, and heightened expectations about how workers are to be treated. Along the way he examines the contributions of thinkers such as Frederick Taylor, Elton Mayo, Peter Drucker, and Michael Porter. What lies ahead? Perhaps the biggest challenge facing the 21st-century company, Kiechel posits, is to truly free the spark of human imagination from the organization's tidal pull toward the status quo. There's almost always a better way, he concludes--and management will continue to seek it.
HBR's 90th anniversary is a sensible time to revisit a basic question: Are organizations more likely to succeed if they adopt good management practices? The answer may seem obvious to most HBR readers, but these three economists cast their net much wider than that. In a decade-long study of thousands of organizations in 20 countries, they and their interview teams assessed how well manufacturers, schools, and hospitals adhere to three management basics: targets, incentives, and monitoring. They found that huge numbers of companies follow none of those fundamentals, that adopting the basics yields big improvements in outcomes such as productivity and longevity, and that good nuts-and-bolts management at individual firms shapes national performance. At 14 textile manufacturers in India, for example, an intervention--involving free, high-quality advice from a consultant who was on site half-time for five months--cut defects by half, reduced inventory by 20%, and raised output by 10%. A control group saw no such gains. The authors' global data set suggests that implementing good management at schools and hospitals yields change more slowly than at manufacturers--but it does come eventually. And the macroeconomic potential--for incomes, productivity, and delivery of critically needed services--is huge. A call for "better management" may sound prosaic, but given the global payoffs, it's actually quite radical.
Harvard Business Review was launched in 1922 by a Harvard Business School dean who wanted to equip managers-in-training with better tools of the trade. Its initial print run was only 6,000 copies, and its initial subscription price--$5--was a point of contention between the dean and his outside publisher. For the next 25 years the magazine barely broke even. But between its founding and World War II, the HBS faculty became competent at translating rigorous research into relevant reading for practicing managers, and by the end of the war HBR was poised to capitalize on the ensuing business boom. Circulation shot up from 14,000 in 1945 to 243,000 in 1985. Kirby, an editor at large for HBR, traces its history from the Roaring Twenties to the present day. "The threads being woven into HBR's fabric as the years passed," she writes, "were not just timely topics for consideration but distinct approaches to studying them." Those topics included "scientific management," women in the workforce, and the power of the consumer, to name just a few. And those distinct approaches brought names such as Peter Drucker, Michael Porter, and Robert S. Kaplan into our pages. Kirby writes as well about some of the colorful personalities behind the scenes at HBR, and about the magazine's falling and rising fortunes. As it enters its 90s, she says, "it does so with a special provenance, some special strengths, and a deeply informed notion of what the management agenda should be."
The dean of Harvard Business School recalls the powerful effect that reading Harvard Business Review had on him as an undergraduate studying engineering in India. It was his first exposure to management thinking, and he witnessed HBR's impact firsthand when the company where he was interning one summer reorganized its largest plant according to the ideas in one HBR article--dramatically improving its productivity. Today the magazine, its website, and its book program help fulfill the HBS mission of educating many more business leaders around the globe, not all of whom can come to the school campus.
Most big deals--megamergers, major sales, infrastructure projects--are built on a series of smaller ones. Each component deal presents a tactical challenge, but sequencing the parts in a way that achieves the target outcome is a strategic challenge that can unfold over months or years. This process, which the authors call a negotiation campaign, must generally be conducted on several fronts, each involving multiple parties. A multifront campaign can be much more effective than direct negotiation. After failed talks between longshoremen and the Pacific Maritime Association--a group of shippers and port operators--the PMA's president turned away from the bargaining table and embarked on a campaign to align member--firms, the business community, the U.S. government, and the public around his target outcome: the deployment of new information technologies to help unclog busy ports. The result was an agreement that was ultimately mutually beneficial. Designing and executing a negotiation campaign involves identifying the relevant parties, grouping them into fronts according to shared interests, determining whether to combine fronts (if, for instance, doing so would unite your allies), and deciding which fronts to approach early on and which to engage only after you've made progress elsewhere. The deal between the PMA and the longshoremen involved high stakes, but many small-scale deals--such as gaining approval for a new product--also play out on multiple fronts. Going straight to a key decision maker often makes sense, but in many cases a multifront campaign is the only way.
Though the term "family business" may call to mind visions of local mom-and-pop firms, family- controlled companies play a huge role on the global stage. Not only do they include sprawling corporations like Walmart and Tata Group, but they account for more than 30% of all companies with sales in excess of $1 billion. And over the long term, their financial performance exceeds that of traditional public companies, according to a new study by BCG and Ecole Polytechnique. Family-controlled companies surpass their peers because they focus on resilience, not short-term results. During economic booms, this approach leads them to forgo some opportunities (and hence do slightly worse than their counterparts), but it puts them in a position of strength during downturns, when they shine. The researchers identified seven specific ways in which family-run businesses build their resilience: 1) They're frugal in good times and bad; 2) They set a high bar for capital expenditures; 3) They carry little debt; 4) They acquire fewer (and smaller) companies; 5) They're more diversified; 6) They're more international; and 7) They retain talent better than their competitors do. Though these practices come more naturally to executives who feel an obligation to be stewards for the next generation, executives at any corporation can adopt them. Indeed, the researchers uncovered a number of nonfamily-controlled companies that mimicked the behaviors of family firms and saw very similar patterns of performance.
Getting product assortment right isn't easy, yet it's absolutely critical to retail success. Unlike inventory management and pricing, where retailers have lots of data and analytical tools to guide decision making, assortment optimization is still much more art than science. And making the wrong call can be disastrous. A new approach to assortment planning addresses this deficiency. The foundation for the approach is the notion that most of the time customers don't buy products; they buy a bundle of attributes. For instance, when customers consider buying a TV, they think about screen size, resolution, price, LCD or plasma, and brand. The new method uses sales of existing products to estimate the demand for their various attributes and then uses those estimates to forecast the demand for potential new products on the basis of their attributes. This technique helps retailers do a better job of replacing slow sellers with new ones, understanding whether customers are likely to settle for another choice if they don't find their ideal product, and customizing assortments of individual stores or clusters of stores.
Think you need exceptional employees, advanced IT, or rigid controls to build a high-performance organization? The dabbawalas of Mumbai prove otherwise. Six days a week, these 5,000 self-managed, semiliterate workers deliver upwards of 130,000 lunches from customers' homes to their offices with astonishing precision--negotiating the crowded city by train, bicycle, and handcart, without the aid of any technology or even cell phones. The 100-year-old service is legendary for its reliability: Despite monsoons, floods, riots, and terrorist attacks, mistakes by the dabbawalas are extremely rare. Thomke, an HBS professor, studied the dabbawalas to find the keys to their success. He uncovered a unique system with four pillars: organization, management, process, and culture. A flat structure, consisting of autonomous units of 25 people each, is well suited to providing low-cost service. The tight schedule of the train lines over which meals are ferried regulates everyone's work. Buffer capacity is built in to address extremely thin margins of error; each unit has extra workers who fill in wherever they are needed, and members are cross-trained in all activities. Variations that might derail the works are discouraged; the lunchboxes used, for instance, are all a standard size. A simple coding system helps workers quickly sort lunches and get them where they need to go. And democratic decision making and deep emotional bonds among workers promote a high degree of cooperation. The dabbawalas show that with the right system, even ordinary workers can achieve the extraordinary.
Organizations are inherently political, and pretending they're not is just plain impractical. But strategizing like a politician to advance your career doesn't have to mean compromising your integrity. You can craft a campaign plan that actually gets results without making you feel sullied. So argues Clark, who has worked with top-tier politicians and business executives as they strive to achieve their goals. She recommends that in business, as in politics, aspiring leaders choose their career milestones from the get-go and plan precisely what reaching each one will demand. That means taking inventory of the skills you'll need to acquire and figuring out exactly where and how you'll develop them. The best career planners work backward on the calendar: They start with the end points and carefully mark, in reverse, all the steps along the way. Then they set out on the course, identifying influential people whose favor they need to win and getting specific about how to garner it. They use power maps to home in on the most influential individuals and groups, and they aren't shy about courting votes. "Being political" still sounds negative to many people in business, but learning how to play the game doesn't have to be a Machiavellian endeavor. Indeed, harming people in the process won't help you at all, but if you eschew the political process altogether, you'll only harm yourself.
Charles Begley is the first ever managing director of diversity recruiting for GlobeBank, and he has worked hard to develop a pipeline of high-potential minority talent. He and his deputy director, Kumkum Bhatnagar, see an article their CEO has written for a business magazine website that downplays their efforts. Kumkum thinks the company should start pegging compensation to executives' minority hires and promotions. Charles resists her idea--particularly after his teenage son says he would never want to work for a company that used quotas. But two of Charles's high potentials complain about the low-level deals they're consistently stuck with, and when Charles approaches another senior executive to ask why, he gets stonewalled. Should he advocate for financial incentives to increase the number of minority promotions? With commentaries by Steve Reinemund, of Wake Forest University; John B. Veihmeyer, of KPMG; and George Borst, of Toyota Financial Services.
The critically admired author of 16 novels talks about the silence and mental rambling out of which his ideas emerge. "Characters walk to you as through a mist," he says. He values hesitation, loves solitude, and thinks one of the most potent forms of satisfaction available is achieving total absorption in something that interests and challenges him.
Charles Begley is the first ever managing director of diversity recruiting for GlobeBank, and he has worked hard to develop a pipeline of high-potential minority talent. He and his deputy director, Kumkum Bhatnagar, see an article their CEO has written for a business magazine website that downplays their efforts. Kumkum thinks the company should start pegging compensation to executives' minority hires and promotions. Charles resists her idea--particularly after his teenage son says he would never want to work for a company that used quotas. But two of Charles's high potentials complain about the low-level deals they're consistently stuck with, and when Charles approaches another senior executive to ask why, he gets stonewalled. Should he advocate for financial incentives to increase the number of minority promotions? With commentaries by Steve Reinemund, of Wake Forest University; John B. Veihmeyer, of KPMG; and George Borst, of Toyota Financial Services.
Charles Begley is the first ever managing director of diversity recruiting for GlobeBank, and he has worked hard to develop a pipeline of high-potential minority talent. He and his deputy director, Kumkum Bhatnagar, see an article their CEO has written for a business magazine website that downplays their efforts. Kumkum thinks the company should start pegging compensation to executives' minority hires and promotions. Charles resists her idea--particularly after his teenage son says he would never want to work for a company that used quotas. But two of Charles's high potentials complain about the low-level deals they're consistently stuck with, and when Charles approaches another senior executive to ask why, he gets stonewalled. Should he advocate for financial incentives to increase the number of minority promotions? With commentaries by Steve Reinemund, of Wake Forest University; John B. Veihmeyer, of KPMG; and George Borst, of Toyota Financial Services.
The Ecobank case is a pan African strategy/business development case with strong elements of Human Resources and talent management issues as well as governance and organizational design. The case is an inspirational story about a group of visionary people from 14 West African countries who in 1984 - with limited resources - decide to create a pan African bank to further the development of Africa. Today, Ecobank has 8.3 million customers, 18,000 employees and a footprint that covers 32 African countries - more than any other bank. In July 2012 Ecobank was named "Best Bank in Africa" by Euromoney for the second year in a row. The case covers the three expansion stages of the bank, and the strategy it has employed in managing rapid growth both organically and through cross border acquisitions. It has a unique approach of "acting locally, while being one bank" which is strongly reflected in its governance systems and organizational design. And it has above all been phenomenally successful in attracting and developing local talent - perhaps the most scare resource of all in Africa. Learning objectives: This is an inspirational story that should be "told" rather than "read." Because of this, the written case is intentionally very short, but supported by video interviews with senior Ecobank executives. A total of 86 minutes of video (of which 28 minutes is designed to be watched by students before the session) structured in 12 "modules" gives the instructor great flexibility in how to use the case in class. The case and video modules can be used to demonstrate: strategy and business development in an African context. How to manage organic growth and growth through acquisitions across borders. Human Resources - how to attract, retain and motivate talent in an emerging market. Organizational design as an organization grows. Governance issues in emerging markets.
Iceland has two unique features. First it has one of the most unique landscapes in the world. A country twice the size of Switzerland, it has only 300,000 inhabitants and thus most of its regions are sparsely inhabited. Second, it also has access to significant amounts of "green energy" in the form of geothermal and hydroelectric power and in the future, possibly wind. Further in Iceland green energy is comparatively inexpensive. These two attributes have set in motion a major debate - should Iceland accelerate the development of its green energy resources by attracting more power intensive industries to locate in the country and perhaps export some of its power to Europe or should it slow the rate of power development and focus on preserving its unique natural resources and build up its tourism industry? This case addresses these two alternatives. It is built around two specific decisions - whether the government should build the generating facilities that would provide the electricity for a fourth aluminum smelter and whether to accept a new plan written by the national electric company to aggressively embrace additional development of its energy resources. Case Number 1968
This introductory case explores the venture capital (VC) and discounted cash flow (DCF) methods of valuing early-stage companies. OutReach Networks is an unusual start-up company in that it was profitable early in its development and did not have to seek VC funding to support its growth. The company has grown quickly and may soon be a candidate for an IPO. In November 2011, an experienced venture capitalist approaches the founder with an offer to invest $30 million in exchange for 30% of the company. While the founder sees some benefit from the VC's experience in preparing the firm for an IPO and the funding enabling it to scale more quickly, he cannot understand how the VC has arrived at this offer. The founder believes the funding should be worth no more than 15% of his firm. Potential reasons for the disagreement over the valuation are (1) differences in the founder's and investor's view of the company's risk, (2) disagreement over the appropriate set of comparable companies, and (3) differences in the methods used to calculate the percentage equity stake. The case is appropriate for use in courses covering entrepreneurial finance or venture capital.
This note is used in the course elective, Strategic Post-Merger Integration. This case is taught in Darden's Global EMBA Strategy course. Well suited for MBA, Executive MBA, GEMBA, and executive education programs, this case describes the circumstances at Leica Camera, the famed German manufacturer of high-end cameras, and allows for an analysis of the firm's competitive position. Although the company decides to stop production of its R-system camera and lenses, a backlash from users surfaces. That leaves the case open to exploring the uncertainty over achievable sales volume for the R-series lenses as well as where the company fits in the market as new and less-expensive competitor products gain popularity. The case provides an overview of the competitive style of major camera and lens manufacturers and allows a discussion of core capabilities of these competitors. What products would secure Leica's future? Was there development potential for a new universal system? The case describes an issue that many organizations face today-how to decide whether components are strategically critical.