Steve & Barry's grew rapidly in the mid-2000s, transitioning from a chain of small stores selling inexpensive collegiate-branded merchandise near university campuses into a $1 billion mall-based giant selling a wide variety of low-priced, celebrity-endorsed apparel. While the company had a wide following, elements of its growth strategy-potentially exacerbated by economic conditions-contributed to its quick downfall. By 2008 Steve & Barry's had declared bankruptcy, and various private equity firms were investigating whether some or all of the company should be saved. This requires analyzing the underlying business strategy pursued by Steve & Barry's before and after its growth phase and specifically diagnosing the explanations for its failure.
By early 2009 Starbucks had nearly 17,000 stores worldwide, with about a third of these outside the United States. Despite multibillion-dollar annual revenues, the giant coffee retailer's yearly growth had declined by half, quarterly earnings had dropped as much as 97 percent, same-store sales were negative, and its stock price was languishing. Factors such as a global economic downturn and increasing competition in the specialty coffee market from large players such as McDonald's and Dunkin' Donuts had driven this decline, resulting in the closings of hundreds of domestic stores already, with many more planned. Founder Howard Schultz, who had recently returned as CEO, and his executive team were convinced that Starbucks's growth opportunities lay overseas, where the firm already had a strong foothold in markets like Japan and the United Kingdom and was preparing to open hundreds of new stores in a variety of locations. But recent international challenges, including the closing of most Australian stores due to sluggish sales, made clear that Starbucks had more to learn about bringing its value proposition-a combination of premium coffee, superior service, and a "coffeehouse experience"-to foreign soil. The key question was not whether Starbucks could transport its value proposition overseas, but how the value proposition's three elements would play in recently entered and new markets. And the stakes of making the right international moves rose with each U.S. store closure. Schultz and his team also faced a broader question, one that applied to both their U.S. and foreign stores: Could they "grow big and stay small," remaining a huge retailer that delivered both high-quality products and a consistently intimate and enjoyable experience to consumers worldwide? This case presents this challenge in the context of Starbucks's history, well-established value proposition, and domestic and international growth and vision.
Ontela, a technology start-up company, has introduced an innovative service called PicDeck that improves the mobile imaging experience for wireless subscribers. Ontela sells PicDeck to wireless carriers, who in turn private-label the service to their subscribers. Ontela must decide which customer segments it should target for the service and how to create a positioning strategy and a marketing communication plan to promote it. It must also consider the value proposition of the PicDeck service for wireless carriers (its direct customers), who need to be convinced that the service will lead to higher monthly average revenue per user (ARPU) and/or increased subscriber loyalty. Part A of the case provides qualitative information on customer personae that represent different customer segments. Students are asked to develop a targeting and positioning strategy based on this qualitative information. Part B provides quantitative data on customer preferences that can be used to identify response-based customer segments, as well as demographic and media habits information that can be used to profile the segments. Students are asked to revise their recommendations based on the additional quantitative data.
Ontela, a technology start-up company, has introduced an innovative service called PicDeck that improves the mobile imaging experience for wireless subscribers. Ontela sells PicDeck to wireless carriers, who in turn private-label the service to their subscribers. Ontela must decide which customer segments it should target for the service and how to create a positioning strategy and a marketing communication plan to promote it. It must also consider the value proposition of the PicDeck service for wireless carriers (its direct customers), who need to be convinced that the service will lead to higher monthly average revenue per user (ARPU) and/or increased subscriber loyalty. Part A of the case provides qualitative information on customer personae that represent different customer segments. Students are asked to develop a targeting and positioning strategy based on this qualitative information. Part B provides quantitative data on customer preferences that can be used to identify response-based customer segments, as well as demographic and media habits information that can be used to profile the segments. Students are asked to revise their recommendations based on the additional quantitative data.
Ontela, a technology start-up company, has introduced an innovative service called PicDeck that improves the mobile imaging experience for wireless subscribers. Ontela sells PicDeck to wireless carriers, who in turn private-label the service to their subscribers. Ontela must decide which customer segments it should target for the service and how to create a positioning strategy and a marketing communication plan to promote it. It must also consider the value proposition of the PicDeck service for wireless carriers (its direct customers), who need to be convinced that the service will lead to higher monthly average revenue per user (ARPU) and/or increased subscriber loyalty. Part A of the case provides qualitative information on customer personae that represent different customer segments. Students are asked to develop a targeting and positioning strategy based on this qualitative information. Part B provides quantitative data on customer preferences that can be used to identify response-based customer segments, as well as demographic and media habits information that can be used to profile the segments. Students are asked to revise their recommendations based on the additional quantitative data.
The case depicts Krispy Kreme's franchise system growth and decline as a lesson to entrepreneurs running a company as a franchisor. Burton D. Cohen, retired senior vice president and chief franchise officer for McDonald's Corporation from 1980 to 1999, explains the strengths and weaknesses in Krispy Kreme's franchising strategy during the period from 1997 to 2006. Areas examined in the case include: franchisee agreements, accounting practices, volatility in stock valuation, franchise system growth, franchise ownership structure, product distribution strategy, and commissary growth. The case depicts how Krispy Kreme started and how it ended up in a low point.
This technical note contains examples from other fields on the benefits of bonds of families, extended families, and communities for members of multi-generation family businesses.
In 2009 Wikia was the Internet's largest for-profit provider of hosted open-source wikis, with over a million daily users. After five years of existence, the organization had supported a wide range of exploratory activities, experiencing both success and failure. With approximately $3 million of cash on hand, Wikia turned cash flow positive in 2009, with revenues of approximately $4.5 million, affording it time and flexibility to try new things. Some of the company's employees and investors suggested that Wikia should attempt to expand and market itself more aggressively, but which strategic direction should receive priority? The case presents many of the issues and tradeoffs facing CEO Gil Penchina as he formulates these priorities.
Workplace weight-loss programs are a win-win tool that companies can use to boost both health and wealth. The financial payoff - for one Texas employer, about $2.50 in return for every dollar spent - stems from lower health care costs and reduced absenteeism.
A week before Christmas, Tim O'Connell, a manager at Driscoll Software, gets a call from Hybara Casinos. The former client's system has crashed, and the company wants to be rescued by New Year's Day. The project will generate much-needed revenue, but it involves six weeks' worth of work crammed into two - and over the holidays, no less. Tim's star programmer, Alessandra Sandoval, quit several months earlier, and the rookie Kristen Hammersmith has taken her place. Should Tim contract the project out to Alessandra or trust Kristen to lead the team? Three experts comment in this fictional case study in R0912B and R0912Z. Tim should hire Alessandra immediately, says Michael Schrage, a researcher at Sloan School of Management's Center for Digital Business. Kristen is in over her head. But more important, Tim is a shockingly poor manager. Carol A. Walker, the founder and principal of the consulting firm Prepared to Lead, agrees that Tim isn't doing his job and outlines a scenario whereby he demonstrates his confidence in, and support for, Kristen and prepares her to succeed. Paul Muller, Hewlett-Packard's vice president of strategic marketing for software products, says that in this severely condensed time frame, Driscoll and Hybara need to assess the risks and costs involved in rushing the project. If they decide to go ahead, Tim should empower Kristen to lead.
Realizing that customer retention is more critical than ever, companies have ramped up their efforts to listen to customers. But many struggle to convert their findings into practical prescriptions for customer-facing employees. Some companies are addressing that challenge, say three Bain & Company consultants, by creating feedback loops that start at the front line. They forgo elaborate, centralized feedback mechanisms in favor of quickly polling customers with the question, How likely are you to recommend us? Firms use the responses to calculate their Net Promoter Score (NPS), a metric everyone in the organization can track. The greatest impact comes from relaying the results immediately to the employees who just served the customers - and empowering those employees to act on any issues raised. Allianz used this method to pinpoint make-or-break customer experiences. Claims representatives in a European insurance operation, for instance, learned that delays in reimbursement were a huge source of frustration for customers. Workers rapidly solved the problem by developing a new set of protocols, which spurred a sizable increase in NPS - and in policy renewals. Over time, NPS feedback can also be compiled into a baseline of customer experience, which firms can then draw upon to field-test ideas or make process and policy refinements. The household fixture maker Grohe did this by tracking the effect that the number of sales calls had on NPS in one of its markets. Grohe saw that scores spiked at three visits and then fell off. In response, it cut back on unproductive customer contact and freed up 25% more sales capacity.
Peace and harmony are overrated. Though conflict-free teamwork is often held up as the be-all and end-all of organizational life, it actually can be the worst thing to ever happen to a company. Look at Lehman Brothers. When Dick Fuld took over, he transformed a notoriously contentious workplace into one of Wall Street's most harmonious firms. But his efforts backfired - directors and managers became too agreeable, afraid to rock the boat by pointing out that the firm was heading into a crisis. Research shows that the single greatest predictor of poor company performance is complacency, which is why every organization needs a healthy dose of dissent. Not all kinds of conflict are productive, of course - companies need to find the right balance of alignment and competition and make sure that people's energies are pointed in a positive direction. In this article, two seasoned business advisers lay down ground rules for the right kinds of fights. First, the stakes must be worthwhile: The issue should involve a noble purpose or create noticeable - preferably game-changing - value. Next, good fights focus on the future; they're never about placing blame for the past. And it's critical for leaders to keep fights sportsmanlike, allow informal give-and-take in the trenches, and help soften the blow for the losing parties.
"How do I find innovative people for my organization? And how can I become more innovative myself?" These are questions that stump most senior executives, who know that the ability to innovate is the "secret sauce" of business success. Perhaps for this reason most of us stand in awe of the work of visionary entrepreneurs such as Apple's Steve Jobs, Amazon's Jeff Bezos, eBay's Pierre Omidyar, and P&G's A.G. Lafley. How do these individuals come up with groundbreaking new ideas? In this article, Dyer, of Brigham Young University; Gregersen, of Insead; and Christensen, of Harvard Business School, reveal how innovative entrepreneurs differ from typical executives. Their study demonstrates that five "discovery skills" distinguish the most creative executives: Associating helps them discover new directions by making connections among seemingly unrelated questions, problems, or ideas. Questioning allows innovators to break out of the status quo and consider new ideas. Through observing, innovators carefully and consistently look out for small behavioral details - in the activities of customers, suppliers, and other companies - to gain insights about new ways of doing things. In experimenting, they relentlessly try on new experiences and explore the world. And through networking with diverse individuals from an array of backgrounds, they gain radically different perspectives.
A recession often forces you to cut R&D as you refocus on your core. But innovation need not go by the wayside. By placing certain assets and projects outside your walls, you can actually preserve opportunities for future growth while you shore up the fortress. Chesbrough, of Haas School of Business, and Garman, of New Venture Partners, identify five strategic moves that open the door to innovation by, ironically, letting it out of the house. Some inside-out moves permit outside firms to invest in and develop your projects; others call for spinning off projects as separate ventures that still allow you to retain some equity. Whatever the specific approach, you can meet the inherent cultural and organizational challenges of inside-out open innovation by approaching it holistically and placing it under the leadership of senior executives in strategic roles.
Large companies say they want to be innovative, but they fundamentally mismanage their talent. Expecting innovators to grow along with their projects - from discovery to incubation to acceleration - sets them up to fail. Most people excel at one of the phases, not all three. By allowing innovation employees to develop career paths suited to their strengths, companies will create a sustainable innovation function.
In this conversation with HBR senior editor Anand P. Raman, McAfee, a principal research scientist at the MIT Sloan School of Management's Center for Digital Business, explains why Enterprise 2.0 tools - wikis, tags, Twitter, Google searches, and the like - are transforming companies' innovation processes. Procter & Gamble, for instance, uses its Connect + Develop website not only to publicize what it knows and what it can do but to highlight what it needs. That's radical, says McAfee. And the communities that form around innovation challenges can help sift the ideas, so the best ones quickly rise to the top.
A full-blown scandal can cause a company great turmoil, even if the organization isn't at fault. Crises easily extend beyond the original perpetrators, spilling over to other businesses along the value chain - and to those apart from the chain that resemble the guilty parties in some central way. For instance, the dairy, pet food, and toy-manufacturing scandals in China over the past few years have in many consumers' minds rendered all Chinese products suspect. Drawing on more than 10 years of research, marketing professors Tybout and Roehm have developed a framework for crafting just-right, just-in-time responses to scandals. They outline four important steps: assess the incident, acknowledge the problem, formulate a strategic response, and implement the response. The most effective approaches are carefully calibrated to the characteristics of the brand, the nature of the event, and the company's degree of seeming culpability. They can minimize brand damage and even, on occasion, provide firms with opportunities to deepen connections with customers. Antivirus-software maker Trend Micro, for example, reacted effectively after a flawed software update immobilized customers' computers. Within an hour and a half, the company removed the problematic file from its website and update servers, expanded its customer support staff, and held a press conference to apologize to customers and describe how the problem was being addressed.
"Aldi" is a word that strikes fear in the hearts of brand managers across Europe. A chain of low-budget retail stores with sales of $73.5 billion in 2008, Aldi invented what is commonly referred to as the hard-discount store, a format that is destroying between a quarter and a half trillion dollars in brand sales annually. Brand executives at major consumer packaged goods companies have mostly been caught off guard by this success. The authors' research identified four key misconceptions that explain why: (1) Hard discounters can succeed only in Europe; (2) they attract only the poor; (3) they offer inferior quality; (4) their success is a recessionary phenomenon. Aldi, Lidl, and other hard discounters keep costs low in part by restricting as much as 90% of their stock to their own private labels. But, as they are beginning to realize, that practice can gain only so much market share. A judicious mix of store labels and manufacturers' brands will win new customers for both. And brand manufacturers that fear sales cannibalization can take several proactive steps: sell unfamiliar sizes at the discounters, offer brands with a small market share, carefully manage the price gap, make shipping boxes attractive, and keep their brands dynamic.
What's the best way to buy or sell an asset? Should you hold an auction and accept the most attractive offer? Or should you identify the most likely prospects and negotiate with them privately? Auctions became increasingly popular after the internet opened wide the universe of potential bidders. The wrinkle is, auctions often set up win-lose relationships between buyers and sellers, says Subramanian, a professor at Harvard's schools of business and law. In many situations, negotiations lead to better results. Before you decide on a process, carefully consider the nature of the buyers, the characteristics of the asset in question, and your own priorities. If you can get enough of the right buyers to participate, an auction generally makes sense - unless you expect a wide range of valuations. In that case, an auction could leave a lot of money on the table - as it did in the sale of Cable & Wireless America. CWA's assets were uniquely strategic to the winner, but because it had to beat the second-highest bidder by only a little bit, the company got them at a price far below the value the deal actually generated. Can you write exact specifications for an asset? Then you probably won't go wrong with an auction. But specification can discourage creative collaboration between buyer and seller. If that will add value to your deal, or if a relationship is important, pursue a negotiation. Finally, examine your priorities. When discretion is critical, a negotiation will work better, but when you need a transparent, speedy process, an auction is the more sensible choice.