During his nearly 14 years at the helm of networking giant Cisco Systems, Chambers has developed an uncanny ability to sense market trends long before others do. He predicted, for instance, that voice transmission would become free long before computer networks could even carry it. And Cisco was one of the first to shift from call centers to web-based customer service. Seeing the future is essential for a company that must start developing a product some six years before it goes to market. How does Chambers do it? He looks for what he calls "market transitions" - subtle social, economic, or technological signs of an impending disruptive shift - which, he says, start turning up five to seven years before the market actually grasps their significance. The move to open-source software development was one that Chambers saw and Microsoft did not. Early on, Chambers learned to sense market transitions by listening closely to customers, connecting individual dots of behavior into patterns that indicated future trends. Later, he realized he needed to turn Cisco's management processes upside down to benefit from that foresight. In this interview, Chambers describes how he was able to surrender his role as a command-and-control CEO and institute a collaborative decision-making model that allows the company to respond speedily to emerging transitions. Managers throughout Cisco now form cross-functional teams, working together to identify and exploit new opportunities quickly. The model allows Cisco to simultaneously implement 22 major sales initiatives as effectively as most companies do one or two.
Multinational corporations from developed and developing economies alike are aggressively expanding their global presence, particularly in emerging markets. Industry traits largely determine the winners - but that needn't always be the case, say Ghemawat, of IESE Business School, and Hout, of the University of Hong Kong. Companies can break the pattern by anticipating or creating new customer segments, managing cost convergences, or reworking the value chain. Some established MNCs are succeeding in production- and logistics-oriented businesses, where local rivals usually have an advantage. One way is by using technology and capital to accelerate segments' growth. Samsung, Sharp, and others surprised Chinese producers with vicious price competition in flat-screen TVs, which quickly collapsed the demand for conventional TVs, bottoming out Chinese profits. Another way established MNCs are beating emerging players is on costs, as home appliance companies in the United States did when Haier tried to enter the U.S. market for midsize refrigerators. Conversely, some emerging-market challengers are outperforming established MNCs in knowledge- and brand-intensive industries. Bharti Airtel has built the largest mobile-services operation in India by specializing in a limited part of the value chain (customer care and the regulatory interface) and outsourcing the rest, which freed up capital, made Bharti's cost structure more variable, and allowed the company to radically undercut advanced-market prices. Firms such as India's Suzlon Energy are also spotting opportunities to bundle ancillary services and products in which they have an advantage. The authors point to these examples and others to suggest that conditions are right for aggressive global players to move outside their industry comfort zones.
In the continuing quest for business growth, many CEOs are turning to their CIOs and IT organizations because technology is absolutely essential to two compelling sources of growth: innovation and enterprise integration. The speed of innovation often depends on the ability to coordinate across organizational boundaries. Innovations cannot reach a sufficient level of scale and impact unless they are integrated into the larger operations of the corporation. And yet, say recently retired Harvard Business School dean Cash, Oxford dean Earl, and nGenera director of research Morison, the two endeavors remain "unnatural acts": Far too many large businesses are better at stifling innovation than at capitalizing on it, better at optimizing local operations than at integrating them for the good of the enterprise and its customers. To make both pursuits seem more natural, the authors recommend creating two dedicated, IT-powered teams: a distributed innovation group (DIG) and an enterprise integration group (EIG). The DIG serves as the center of expertise for innovation techniques, considers new uses for technology already being developed inside the company, looks for new developments outside the company, and provides experts for internal innovation initiatives. The EIG selects the most promising from among competing integration projects, provides resources to give them a strong start, and then folds them into the operating model of the enterprise. Without such agencies, the authors maintain, innovation and integration won't spread far enough or fast enough throughout a large organization to keep pace with the smaller, younger, more technology-based competitors to which innovation and integration come much more naturally.
Free customers who are subsidized by paying customers are essential to a vast array of businesses, such as media companies, employment services, and even IT providers. But because they generate revenue only indirectly, figuring out the true value of those customers - and how much attention to devote to them - has always been a challenge. Traditional customer-valuation models don't help; they focus exclusively on paying customers and largely ignore network effects, or how customers help draw other customers to a business. Now a new model, devised by professors Gupta, of Harvard Business School, and Mela, of Fuqua School of Business, takes into account not only direct network effects (where buyers attract more buyers or sellers more sellers) but also indirect network effects (where buyers attract more sellers or vice versa). The model calculates the precise long-term impact of each additional free customer on a company's profits, factoring in the degree to which he or she brings in other customers - whether free or paying - and the ripple effect of those customers. The model helped an online auction house make several critical decisions. The business made its money on fees charged to sellers but recognized that its free customers - its buyers - were valuable, too. As competition heated up, the company worried that it wasn't wooing enough buyers. Using the model, the business discovered that the network effects of buyers were indeed large and that those customers were worth over $1,000 each - much more than had been assumed. Armed with that information, the firm increased its research on buyers, invested more in targeting them with ads, and improved their experience. The model also helped the company identify the effects of various pricing strategies on sellers, showing that they became less price-sensitive over time. As a result, the company raised the fees it charged them as well.
Like the best-laid schemes of mice and men, the best-rehearsed speeches go oft astray. No amount of preparation can counter an audience's perception that the speaker is calculating or insincere. Why do so many managers have trouble communicating authenticity to their listeners? Morgan, a communications coach for more than two decades, offers advice for overcoming this difficulty. Recent brain research shows that natural, unstudied gestures - what Morgan calls the "second conversation" - express emotions or impulses a split second before our thought processes have turned them into words. So the timing of practiced gestures will always be subtly off - just enough to be picked up by listeners' unconscious ability to read body language. If you can't practice the unspoken part of your delivery, what can you do? Tap into four basic impulses underlying your speech - to be open to the audience, to connect with it, to be passionate, and to "listen" to how the audience is responding - and then rehearse your presentation with each in mind. You can become more open, for instance, by imagining that you're speaking to your spouse or a close friend. To more readily connect, focus on needing to engage your listeners and then to keep their attention, as if you were speaking to a child who isn't heeding your words. To convey your passion, identify the feelings behind your speech and let them come through. To listen, think about what the audience is probably feeling when you step up to the podium and be alert to the nonverbal messages of its members. Internalizing these four impulses as you practice will help you come across as relaxed and authentic - and your body language will take care of itself.
Leadership teams that can't reach consensus wait for the CEO to make the final call - and often are disappointed by the outcome. Frisch calls this phenomenon the dictator-by-default syndrome. Many companies turn to team-building and communication exercises to try to fix the situation. But that won't work, the author argues, because the trouble is not with the people, it's with the decision-making process. Attempting to arrive at a collective preference on the basis of individual opinions is inherently problematic. Once leadership teams realize that voting-system mathematics are the culprit, they can stop wasting time on irrelevant psychological exercises and instead adopt practical measures designed to break the impasse. They must begin by acknowledging the problem and understanding what causes it. When more than two options are on the table, the scene is set for the CEO to become a dictator by default. Even yes-or-no choices present difficulties, because they always include a third, implied alternative: "Neither of the above." When the CEO and the team understand why they have trouble making decisions, they can adopt the following tactics to minimize dysfunction: Clearly articulate the desired outcome, generate a range of options for achieving it, test "fences" (which can be moved) and "walls" (which cannot), surface preferences early, state each option's pros and cons, and devise new options that preserve the best features of existing ones. Teams using such tactics need to adhere to two ground rules. First, they must deliberate confidentially, because a secure climate for conversation allows members to float trial balloons and cut deals. And second, members must be given enough time to study their options and assess the counterarguments. Only then can they achieve genuine alignment.
Mark Landstad, relatively new to CliffBank's investment banking division, has a veteran teammate, Nicole Collins, who appears to be a reliable ally. However, when Mark needs her help in locating vital information for his part of a presentation they will be doing together, she feigns ignorance. During the meeting, Nicole produces the data out of the blue and wows the attendees with her analysis. Knocked off balance by the sabotage, Mark clumsily seeks advice from his boss, who is a brick wall when it comes to interpersonal dynamics. How should Mark deal with his backstabbing colleague? Three experts comment on this fictional case study in R0811A and R0811Z. Maggie Craddock, president of Workplace Relationships, classifies Mark as an anxious pleaser, one of four power styles identified by her firm's research. She surmises that Mark is actually sabotaging himself and recommends that he address his dilemma by first examining his own modus operandi. R. Dixon Thayer, former CEO of I-trax and himself once the victim of coworker sabotage, has empathy for Mark. However, he criticizes Mark's hasty, open-ended way of approaching his superior. Thayer lists four "rules for boss engagement" that Mark should follow, beyond proving that his sneaky colleague won't stop him from getting results at CliffBank. Deborah Kolb, of the Simmons School of Management, contends that Mark does not yet understand his division's culture well enough to know whether Nicole's behavior is the rule or the exception. Only by overcoming his political and interpersonal naivete, she argues, can he learn how to negotiate relationships in his new setting.
Why do shares in NEC Electronics, a publicly listed subsidiary of Japan conglomerate NEC trade at a discount to their fundamental value? Can Perry Capital, a U.S. hedge fund, restructure this subsidiary and generate significant returns? This case provides students with an opportunity to analyze Perry's decision to invest in NEC Electronics. In doing so, it asks for the reasons that NEC might take actions that destroy value and shift value away from NECE's minority shareholders. The events covered allow for a discussion of how ownership concentration constrains restructuring alternatives, how hedge fund investors might confront controlling shareholders, and how the mis-pricing of agency costs can give rise to ownership structures that allow for minority shareholder expropriation.
Examines a struggling IT outsourcing project from the perspective of the customer--Tegan. It should be used in conjunction with Hrad Technika (9-609-039), which illustrates the supplier's point of view. When Tegan, a Welsh toy distributor, outsources the development of a new accounts payable system to Hrad Technika, a growing outsourcing firm from the Czech Republic, Tegan believes they are getting a problem off their hands. Unfortunately the project goes poorly, and Tegan is left with the decision of how to prevent a failure in accounts payable from halting the entire company's operations. The case allows the examination of how to manage an outsourcing project and permits a general discussion about IT outsourcing.
What caused the 1997-98 Asia Crisis: Asian nations' poor economic management, international financial contagion, close "crony" relations between local politicians and capitalists? This case examines how the crisis erupted in Thailand and spread in a chain of events that no one-neither Asian financial authorities nor Western economists-had foreseen. The crisis raises questions about how competently financial institutions such as mutual funds managed their global capital investments. It raises questions about how effective the International Monetary Fund's package of reforms was-and to what extent the IMF acted in the interest of Wall Street rather than developing nations. And the crisis raises questions about the development policies of Asian nations: Did too-close "crony" relations between politicians and owners of major banks or firms pave the way for crisis?
The North Star Foundation brings together partners with a shared strategic interest in combating HIV/AIDS in truck drivers. It has identified a successful model for roadside health clinics which, to be effective, needs to be applied on a country-wide scale, due to the mobile nature of trucking. This case examines challenges and best practices in scaling up innovative ideas.
The popularity of hedge funds grew in the volatile markets surrounding the technology bubble. Hedge funds take both long and short investment positions in the market, attempting to achieve reliable gains while insulating the fund's assets from market fluctuations. The challenge facing hedge fund managers is to demonstrate that investing in a combination of long positions, short positions and cash matching the strategy of the fund can, at an agreed level of risk, provide a higher return than that of traditional mutual funds.
In September 2001, Tony Fernandes left his job as vice president and head of Warner Music's Southeast Asian operations. He reportedly cashed in his stock options, took out a mortgage on his house, and lined up investors to take control of AirAsia, a struggling Malaysian airline. Three days later, terrorists destroyed the World Trade Center. Despite the negative aftermath of the 9-11 attacks, by 2003, AirAsia had demonstrated that the low-fare model epitomized by Southwest and JetBlue in the United States, and by Ryanair and easyJet in Europe, had great potential in the Asian marketplace. Now, Fernandes had to make plans to ensure that AirAsia maintained its momentum while considering the influx of new entrants into the low-fare segment of the airline industry in Asia.
The case illustrates the opportunities, challenges and trade-offs involved in the design, prototyping, and marketing of the Nano - the People's Car - by Tata Motors Ltd (TML), a Tata Group Company. The case is set nine months after the January 2008 unveiling of the Nano concept car in New Delhi, India. The company's managing director faces multiple dilemmas in rolling the Nano off the production lines at the manufacturing plant in Singur, including growing local and global competition in the emerging low-cost, low-emission market, rising manufacturing costs, and stakeholder pressures. The decision reviews critical developments in global automotive markets from the point of view of TML's and Tata Group's deeply ingrained values for sustainable economic development and Indian-grown competitive advantage. It plots the promise of a rampant market growth and the emergence of an India-based small car cluster against international outcry about the proliferation of urban transportation, congestion, and pollution in emerging markets (particularly India and China). Students are asked whether Nano is a disruptive or sustainable innovation for the company and the group, and respectively for the Indian and global automotive industry. Smaller and cleaner than its well-established rival in the west, the Toyota Prius, the Nano promises reliable, safe transportation to India's emergent middle class as a fraction of the cost; the Nano is also 1.5-4 times cheaper than its Indian based rivals. However, production bottlenecks threaten Nano's launch in the last quarter of 2008. Speculating that first mover advantage may sway customer perception and breed loyalty, several competitors are quickly setting up India-based manufacturing of competing models. Market projections estimate over one million adoptions, mostly by prior two-wheeler motorists, and limited switches from higher emission options for fuel and emission conscious consumers. The case addresses the issue of carbon neutrality, and more broadly the role of emerging market companies in addressing global climate change issues.
This note provides background information on the global wind industry and is meant to accompany HBS cases 708-051, The Suzlon Edge; 708-022, Cape Wind: Offshore Wind Energy in the USA; and 707-016, Supergrid.
What was the role of the Internet in the contest for the Democratic presidential nomination between Senators Obama and Clinton? How does the role change in the shift from the Primary to the National election? The case examines media and content choices by each candidate, and allows students to explore the role of new media in political campaigns. The focus is on fundraising in 2007 and campaigning for Primary delegate votes in 2008.