U.S. health care costs currently exceed 17% of GDP and continue to rise. One fundamental reason that providers are unable to reverse the trend is that they don't understand what it costs to deliver patient care or how those costs compare with outcomes. To put it bluntly, few health care providers measure the actual costs for treating a given patient with a given medical condition over a full cycle of care, or compare the costs they incur with the outcomes they achieve. What isn't measured cannot be managed or improved, and this is all too true in health care, where poor costing systems mean that effective and efficient providers go unrewarded, and inefficient ones have little incentive to improve. But all this can be remedied by exploring the concept of value in health care and carefully measuring costs. This article describes a new way to analyze costs that uses patients and their conditions-not organizational units or narrow diagnostic treatment groups-as the fundamental unit of analysis for measuring costs and outcomes. The new approach, called time-driven activity-based costing, is currently being implemented in pilots at the Head and Neck Center at MD Anderson Cancer Center in Houston, the Cleft Lip and Palate Program at Children's Hospital in Boston, and units performing knee replacements at Schon Klinik in Germany and Brigham & Women's Hospital in Boston. As providers and payors better understand costs, they will be positioned to achieve a true "bending of the cost curve" from within the system, not in response to top-down mandates. Accurate costing also unlocks a whole cascade of opportunities, such as process improvement, better organization of care, and new reimbursement approaches that will accelerate the pace of innovation and value creation.

Business life has always featured the unpredictable, the surprising, and the unexpected. But in today's hyperconnected world, complexity is the norm. Systems that used to be separate are now intertwined and interdependent, and knowing the starting conditions is no guide to predicting outcomes; too many continuously changing interactive elements are in play. Managers looking to navigate these difficulties need to adopt new approaches. They should drop outmoded forecasting tools-for example, ones that rely on averages, which are often less important than outliers. Instead, they should use models that simulate the behavior of the system. They should also make sure that their data include a good amount of future-oriented information. Risk mitigation is crucial as well. Managers should minimize the need to rely on predictions-for instance, they can give users a say in product design. They can decouple elements in a system and build in redundancy to minimize the consequences of a partial system failure, and turn to outside partners to extend their own company's capabilities. They can complement hard analysis with "soft" methods such as storytelling to make potentially important future possibilities more real. And they can make trade-offs that keep early failures small and provide the diversity of thought needed in a nimble organization faced with complexity on virtually every front.

As the world has become more complex, companies have steadily increased their performance requirements: Now they strive to offer low prices and high quality; to customize products for local markets and standardize them for greater returns; to innovate and be efficient. The typical corporate response to such conflicting goals complicates things further: Firms restructure and try to align their organizations with extra coordinating functions, processes, and incentives. This approach does more harm than good. Managers' time gets sucked up by reports and meetings, leaving little time to work with employees. But there is a better way, says BCG senior partner Yves Morieux: Instead of strangling employees with new rules and procedures, create an environment in which they're compelled to work with one another to develop solutions to complex challenges. Managers can create this environment by applying six "smart rules": (1) improve understanding of what coworkers do and the real constraints they face, (2) determine which people are the firm's natural integrators and strengthen their roles, (3) expand the amount of power available to everyone, (4) increase the need for reciprocity in the system, (5) make employees feel the "shadow of the future," and (6) hold uncooperative people accountable. By tapping employees' ingenuity through the use of smart rules, firms can manage complexity quickly and creatively-and streamline their organizations.

Mauboussin is the chief investment strategist at Legg Mason Capital Management and a leading exponent of how to navigate complex systems in financial markets and other aspects of life. He points out that biology is full of complex adaptive systems: an ant colony is a prime example. Each ant has a decision role but works only with local information; it has no sense of the global system. Ant colonies solve very complicated, very challenging problems with no leadership or strategic plan. People, however, are hard-wired to link cause and effect-which aren't clear in complex adaptive systems-and they believe that certain causes will lead to particular effects. In addition, they tend to listen to experts and to aggregate information poorly. To best deal with complexity, managers should surround themselves with cognitive diversity and extract unshared information for evaluation. Small experiments with controls can be a valuable aid.

In 2009, as financial institutions faced plummeting profits and public scorn, the star of Standard Chartered Bank was on the rise. The bank posted its seventh straight year of income growth (with no help from government funding) and increased its lending by 13%. Why was it thriving in such a difficult time? Because a different approach to leadership had taken hold there, say the authors, a team from the TruePoint consultancy. Mervyn Davies, who took Standard Chartered's reins in 2001, and his successor, Peter Sands, represent a new breed of CEO. Not content with achieving only strong economic returns, these CEOs drive their companies toward high performance on three fronts at once: creating long-term value, producing benefits for the wider community, and building strong social capital within the organization. Many CEOs do well in one of these areas, but what sets these "higher-ambition leaders" apart is their ability to excel in all three. In pursuing their aggressive agendas, higher-ambition leaders do three things: They draw on a much broader view of their companies' organizational and cultural assets to forge more-powerful strategic visions. They build widespread commitment to achieve those visions by turning their companies into communities of shared purpose. And they demonstrate the grit to commit to their visions over the long term. As each of these activities reinforces the others, the full human and business potential of the organization is unlocked, allowing these CEOs to lead their companies to remarkable success, even in the face of daunting challenges.

Market capitalism, a system that has proven to be a remarkable engine of wealth creation, is poised for a breakdown. That sounds dire, and it is. Increasing income inequality, migration, weaknesses in the global financial system, environmental degradation, and inadequate government and international institutions are just a few of the forces that threaten to disrupt global market capitalism in the decades ahead. In conversations with business leaders around the world, the authors found that virtually all of them shared a deep concern for the sustainability of the market system, but their beliefs about how to respond varied widely. Some said that changing their behavior would be unnecessary or even inappropriate. Others were unsure how to deal with issues seldom thought to be the responsibility of individual firms. The authors call for business to be both innovator and activist in protecting and strengthening market capitalism. Instead of seeing themselves as narrowly self-interested players in a system that is overseen by others, business leaders must spearhead entrepreneurial activity on a massive scale-devising strategies that provide employment for the billions now outside the system, inventing business models that make better use of scarce resources, and creating institutional arrangements for coordinating and governing neglected and dysfunctional aspects of market capitalism.

Many companies in mature markets assume that the only reason to enter emerging markets is to pursue new customers. They haven't yet realized the potential for innovation in developing countries-though a few visionary multinationals are tapping that potential for much-needed ideas in products and services. General Electric, with its portable ultrasound technology, and Intel, with its inexpensive Classmate PC, are two examples. Other companies see the potential but find it hugely difficult to develop ideas in unfamiliar settings, much less turn them into global businesses: C-level executives may resist disruptive concepts, or their organizations may lack the processes necessary for absorbing outside innovation. The authors' research shows that a new kind of manager-a "global bridger"-can help these companies take advantage of the innovative energy that permeates emerging markets. Global bridgers tend to be good at developing and maintaining relationships of trust; they understand emerging markets; they have long tenure with their companies; and they are skilled at selling their ideas internally. They have learned to intentionally observe customers, suppliers, and competitors. They cultivate "translators"-people with insights into the local environment. And they test their ideas before taking them back to headquarters, where they rely on advocates to help promote their ideas.

Everybody knows that an empowered team enhances everyone's performance, including the manager's. Vlachoutsicos, of the Athens University of Economics and Business, argues that the vital, particular ingredient in buoying employees is fostering a sense of mutual dependence, or "mutuality," every time you interact with subordinates. He offers six lessons in achieving mutuality: (1) Be modest. Specifically, avoid talking about your track record and instead focus on your people's present needs, (2) Listen seriously-and show it. Don't assume that folks recognize how attentive you are. Make sure the outward signs reflect it, (3) Invite disagreement. But deliver the invitation artfully so that people really do pipe up, (4) Focus the agenda. Don't let discussion run amok in the name of openness. Streamline it so that the progress is palpable to all participants, (5) Don't try to have all the answers. See yourself more as a catalyst for problem solving than as a problem solver per se, and (6) Don't insist that a decision must be made. Give the decision-making process time to breathe, even if that sometimes means delaying a conclusion. The author richly illustrates each of these lessons with a compelling story from his lifelong experience.

Liu Peijin is the president of Almond China, a subsidiary of the German company Almond Chemical. Almond China's joint venture with Chongqing No. 2 Chemical Company, which is currently failing to thrive, involves a clash of views regarding business ethics. The Chongqing executives are chafing under European standards that preclude gifts and commissions-incentives routinely employed by Almond's competitors. And a huge sale for the joint venture may be at stake. But Liu is thinking of Almond's reputation and its future business dealings in China. Commentaries by Xu Shuibo, the CEO of TNT Mainland China's subsidiary TNT Hoau, and Zhang Tianbing, the global vice president and the director of the China Research Center at A.T. Kearney.

As a young woman, Bachelet was tortured and exiled by the Chilean government. She went on to become the country's first female president. Here's a look at her approach to leadership.

Liu Peijin is the president of Almond China, a subsidiary of the German company Almond Chemical. Almond China's joint venture with Chongqing No. 2 Chemical Company, which is currently failing to thrive, involves a clash of views regarding business ethics. The Chongqing executives are chafing under European standards that preclude gifts and commissions-incentives routinely employed by Almond's competitors. And a huge sale for the joint venture may be at stake. But Liu is thinking of Almond's reputation and its future business dealings in China. Commentaries by Xu Shuibo, the CEO of TNT Mainland China's subsidiary TNT Hoau, and Zhang Tianbing, the global vice president and the director of the China Research Center at A.T. Kearney.

Liu Peijin is the president of Almond China, a subsidiary of the German company Almond Chemical. Almond China's joint venture with Chongqing No. 2 Chemical Company, which is currently failing to thrive, involves a clash of views regarding business ethics. The Chongqing executives are chafing under European standards that preclude gifts and commissions-incentives routinely employed by Almond's competitors. And a huge sale for the joint venture may be at stake. But Liu is thinking of Almond's reputation and its future business dealings in China. Commentaries by Xu Shuibo, the CEO of TNT Mainland China's subsidiary TNT Hoau, and Zhang Tianbing, the global vice president and the director of the China Research Center at A.T. Kearney.

Lucy Normen, Chief Operating Officer of Sweetbriar Hospital, had just gotten off the phone with her Emergency Department Director, Dr. Max Warner. He was very upset with the present situation in the ED: people currently boarding in the ED hallways because there were no open inpatient beds; some patients waiting over 24 hours to be admitted; stressed out medical staff." Dr. Warner worried about possible mistakes-and likely drops in patient satisfaction scores. Lucy was puzzled. They had just spent millions of dollars on expanding the hospital's emergency department, yet in the three months since it re-opened things had gotten worse rather than better. She had a strong feeling that her problems were all related to inefficient patient flow throughout the hospital, but didn't quite know how to address them.

Lucy Normen, Chief Operating Officer of Sweetbriar Hospital, had just gotten off the phone with her Emergency Department Director, Dr. Max Warner. He was very upset with the present situation in the ED: people currently boarding in the ED hallways because there were no open inpatient beds; some patients waiting over 24 hours to be admitted; stressed out medical staff." Dr. Warner worried about possible mistakes-and likely drops in patient satisfaction scores. Lucy was puzzled. They had just spent millions of dollars on expanding the hospital's emergency department, yet in the three months since it re-opened things had gotten worse rather than better. She had a strong feeling that her problems were all related to inefficient patient flow throughout the hospital, but didn't quite know how to address them.

Lucy Normen, Chief Operating Officer of Sweetbriar Hospital, had just gotten off the phone with her Emergency Department Director, Dr. Max Warner. He was very upset with the present situation in the ED: people currently boarding in the ED hallways because there were no open inpatient beds; some patients waiting over 24 hours to be admitted; stressed out medical staff." Dr. Warner worried about possible mistakes-and likely drops in patient satisfaction scores. Lucy was puzzled. They had just spent millions of dollars on expanding the hospital's emergency department, yet in the three months since it re-opened things had gotten worse rather than better. She had a strong feeling that her problems were all related to inefficient patient flow throughout the hospital, but didn't quite know how to address them.

Dr. Barrett Rollins, Chief Scientific Officer of the Dana Farber Cancer Institute, attempts to engender cross-scientist collaboration by applying project management principles to medical research. The resulting innovation, Integrative Research Centers, are novel in this field and present a substantial challenge to the Institute's culture, which had previously allowed faculty scientists complete autonomy over their research. Center leaders are required to develop a business plan, adhere to agreed-upon performance metrics, and undergo regular progress reviews conducted by a peer-led oversight committee. The Center for Nanotechnology in Cancer, a new but crucial center in the program, has failed to meet almost all of its objectives in the first year. Furthermore, a heated dispute between two faculty members in the center has complicated matters significantly. Rollins is flummoxed by these problems because he thought he had provided resources and clear objectives to all of the centers. He must urgently diagnose the main reason(s) for the center's shortcomings and develop a plan of action so that this center's problems do not undermine the whole initiative toward greater scientific collaboration.

In May 2011, Chairman Chen Yuan of the China Development Bank (CDB) was thinking back on CDB's financing of a major project between Petroleo Brasileiro SA (Petrobras), Brazil's state-owned oil and gas producer and China Petroleum & Chemical Corporation (Sinopec), one of China's largest oil companies. Signed two years earlier, the deal was an oil-for-loan agreement in which Petrobras committed to a 10-year oil supply to Sinopec in exchange for a $10 billion loan from CDB. The case study describes the deal and its importance to both countries. The case also discusses CDB's evolution from a policy bank to more of a commercial enterprise.

This case is excellent for teaching both MBAs and executives how to create a blue ocean strategy that is hard to imitate and sustainable. It focuses on Wikipedia versus Britannica.com in the online encyclopedia industry. The case teaches participants the importance of aligning the three strategy propositions of value, profit, and people around both differentiation and low cost to break the value-cost trade-off and create a blue ocean that is hard to imitate. Compelling firsthand video interviews with Jimmy Wales, the founder of Wikipedia - along with other key executives, staff and volunteers, otherwise known as Wikipedians - bring this case to life in the classroom. It can be downloaded from https://www.blueoceanstrategy.com/teaching-materials/wikipedia/ The case is also available in Chinese.

New research shows that a surprisingly high number of technology projects go wildly over budget, sinking careers and companies. Managers contemplating technology initiatives need to take steps to avoid IT "black swans."

Having studied the relationship between how newly merged companies brand themselves and their subsequent stock performance, the authors find that a "fusion" branding strategy-one that combines elements of the two companies' names and logos-leads to superior financial returns three years out. The reason, they believe, is that this approach sends reassuring signals to employees, customers, and ultimately investors.