In the business world, "creativity" has become the latest buzzword. How to attract, nurture, and direct the extraordinarily talented people who will come up with the next Lipitor, Sony Walkman, or iPod is an enduring topic among businesspeople. As the director of the MacArthur Fellows Program, Daniel J. Socolow has considerable experience with the process of rooting out creativity. In this conversation with HBR senior editor Diane Coutu, he describes how recipients of the "genius grant"--half a million dollars with no strings attached--are chosen. As significant as the money is, the recognition that comes with a fellowship may be more so. MacArthur grants provide powerful validation of the fellows' work, Socolow says, and that validation opens doors for people, whatever the field. Although the program keeps a lookout for entrepreneurs who are on the brink of major new advances, he believes that the market does a good job of rewarding the best ideas in the business. Replicating the MacArthur model in a company would entail giving some employees unlimited time and lots of money to follow their own inclinations--not very feasible in most contexts. Nevertheless, the program has learned a lesson that may be valuable for business: The kind of creativity that leads to important breakthroughs is extremely hard to find. And, says Socolow, exceptionally creative people aren't always the obvious suspects, who may simply be good at promoting themselves: "Listen to others and look in the least likely places ...Extend your networks and try to get information from as many people as possible, just as we do."
The high failure rate among new business ventures is usually chalked up to the fundamental uncertainty of the process. In actuality, say McGrath and Keil, flawed ways of assessing and managing ventures may account for the disappointing amount of value they generate. Instead of taking the go/no-go approach, whereby a project either advances toward launch or is killed, decision makers should consider a range of alternatives: recycling the venture by aiming it at a new target market; spinning it off to other owners or a joint venture; spinning it into an established business unit; or salvaging useful elements such as technologies, capabilities, knowledge, and patents. Firms that excel in value extraction--the "value captors" whose practices and mind-set this article explores--have created formal processes to systematically mine successes, failures, and everything in between. They know that a venture should be treated like a scientific experiment, in which learning plays a critical role. They are ready to seize new opportunities if a venture falters on its original course. They foster networks to promote cooperation and collaboration between established business leaders and venture teams and involve people from throughout the company in the venture review process. They don't allow financial criteria to dominate the reviews, and they recognize that the best people to launch a business may not be the ones who developed the idea. If your innovation pipeline is dry, your promising projects are being strangled for lack of a speedy payback, or someone else has made a fabulous business out of a slightly altered idea that you abandoned, consider the value captor's path.
Health insurer IFA and grocery chain ShopSense have formed an intriguing partnership, but it threatens to test customers' tolerance for sharing personal information. For years, IFA's regional manager for West Coast operations, Laura Brickman, had been championing the use of customer analytics--drawing conclusions about consumer behaviors based on patterns found in collected data. She came away from a meeting with the grocer's analytics chief, Steve Worthington, convinced that ShopSense's customer loyalty card data could be meaningful. In a pilot test, Laura bought ten years' worth of data from the grocer and found some compelling correlations between purchases of unhealthy products and medical claims. Now she has to sell her company's senior team on buying more information. Her bosses have some concerns, however. If IFA came up with proprietary health findings, would the company have to share what it learned? Meanwhile, Steve is busy trying to work out details of the sale with executives at ShopSense. Many have expressed support, but COO Alan Atkins isn't so sure: If customers found out that the store was selling their data, they might stop using their cards, and the company would lose access to vital information. Though CEO Donna Greer agrees, she knows that if things go well, it could mean easy money. How can the two companies use the customer data responsibly? Commenting on this fictional case study in R0705A and R0705Z are George L. Jones, the CEO of Borders Group; Katherine N. Lemon, an associate professor of marketing at Boston College; David Norton, the senior vice president of relationship marketing for Harrah's Entertainment; and Michael B. McCallister, the president and CEO of Humana.
Six Sigma has become a popular management philosophy adopted by several large companies including Maple Leaf Foods as a means of reducing waste systematically. The plant manager at the Rivermede plant is preparing for a meeting with the senior manager to discuss the new initiative Six Sigma @ the Edge. Based on the success of Six Sigma at this plant, it was chosen as a pilot for this new initiative. Students will develop a deeper understanding of Six Sigma and the challenges associated with embedding it in the organization.
In the fall of 2002, the directors of process engineering at Rogers Cable had discovered that a significant portion of Rogers Cable's installations and service activities had been followed by repeat visits within the following 30 days. This meant that services were not properly completed the first time. If high numbers of repeat and rework problems continued, customers would readily take their business elsewhere in the highly competitive environment. Eliminating repeat visits is the focus and driving force behind the First Time Right initiative, aimed to satisfy customers on the first try. The directors must devise an action plan that will motivate and retain behavioral change among field service technicians.
AMB Property Corporation set out to be a leader in corporate governance and financial reporting. The company, a publicly traded real estate investment trust (REIT) that acquires, develops, and owns industrial properties, believed that its governance and reporting practices were among the best in the industry. The implementation of good disclosure practices in the REIT industry was not a simple undertaking. Historically, the real estate industry was dominated by private partnerships and institutional investors who used tax and partnership accounting rather than generally accepted accounting principles (GAAP). As a result, there was a need for new financial terms that were meant to bridge the differences between GAAP and private partnership accounting, notably funds from operations. However, because such industry-specific metrics were not consistently calculated, it was difficult for users of REIT financial statements to compare operating results across companies. Public REITs that used non-GAAP metrics were required to reconcile these metrics to GAAP standards, a process which added significantly to the length of REIT financial reports. In addition, companies were required to apply GAAP accounting standards that were mostly designed for industries other than real estate and had the unintended consequence of making it difficult to evaluate the operating performance of REITs and compare those results across periods. Explores the issue of financial reporting in the REIT industry, including important FASB standards that potentially distort REIT financial results, the use of Funds From Operations as a metric of financial performance, and different approaches for valuing REITs.
The spring of 2002 had been grueling for the owner of Pet Care Veterinary Services, a small-animal veterinary practice with two clinics in Southwestern Ontario. Everything seemed to be going wrong at Pet Care's Avery, Ontario location. Profitability was disappointing, medication had disappeared, and the owner had serious concerns about her associate veterinarian's quality of animal care. The owner wondered what would be her best course of action. She could afford to keep the clinic open for another year and try to either fix the operational issues or leave things as they were and see if the problems resolved themselves. The owner wondered whether it would be best to sell and avoid future problems. What price would she ask for the clinic if she chose to sell? Whatever her choice, she knew she had to make a decision quickly, because the uncertainty and stress of running two clinics were beginning to take their toll.
The newly appointed executive director of the Office of Alliance Management (OAM) at Eli Lilly and Company (Lilly) was returning to his office after his first meeting with his supervisor, the senior vice-president of Corporate Strategy and Business Development (CSBD). The executive director had been promoted to the position just a week earlier, and now the senior vice-president has asked him to conduct a complete review of the OAM strategy. The senior vice-president made it clear that it was fine to leave the strategy as it currently existed, or to change it radically if the situation warranted. Now the executive director must decide what Lilly should do to build and maintain its leadership in alliance capability.
According to a World Bank report written in 2001, "in a modern, globally integrated Mexican economy, it is hard to argue for the continued existence of an institution such as INFONAVIT." The report went on to argue that the first-best option was "closing INFONAVIT." In the same year Victor Borras and a new team of managers took control of INFONAVIT under the new PAN government of Vicente Fox. In 2005 the fund issued 376,444 mortgage loans, one and a half times the number issued by INFONAVIT in 2000. During this same period of expansion INFONAVIT had: reduced its defaulted loan rate from 21.7 percent in 2000 to 6.6 percent in 2005; increased its productivity from 51 loans granted per employee to 98 per employee through outsourcing and the modernization and streamlining of operations; launched a new vivienda economica (affordable housing) program to target the majority of its members who earned less than four times the minimum wage (TMW); helped jump-start a nascent housing development industry; increased the real return to the pensioners' funds from 2 percent to 3.5 percent per year; and issued approximately $4.5 billion in mortgage-backed bonds. The case can be used to teach about government innovation, privatization, strategic management, and the public provision of financial services. It would also be appropriate for a course in international development or international housing. It raises questions about the appropriate role of government in the provision of financial services, as well as the role outsourcing and privatization can play in promoting the efficiency and effectiveness of public services, especially when the government is a major purchaser in a market of relatively small suppliers. HKS Case Number 1878.0`
The president and founder of a premier luxury car rental agency located throughout Europe must decide on the composition of the fleet of cars for the upcoming summer season. She has to balance a desire for high utilization versus the possibility of having to turn away clients if they request a car that is not in stock. Can be used to introduce or reinforce a number of concepts, including break-even analysis, basic descriptive statistics, and the new vendor model.
By 2006, the Point Lisas Industrial Estate (PLIPDECO) consisted of approximately 44 industrial sites on 1,000 hectares of land. Some in Trinidad advocated the creation of additional estates as well as expansion into business like aluminum, which required a great deal of energy. The government of Trinidad had continued a menu of tax exemptions and incentives, and substantial additional foreign investments were expected. Meanwhile, Hugo Chavez had become President of Venezuela and had instituted a socialist, anti-American regime that was seizing assets and rewriting contracts with foreign investors. Trinidad looked like a favourable investment site compared with Venezuela. However, not all was happiness. The businesses involved with PLIPDECO needed relatively few employees. Some in Trinidad referred to this reality as the "curse of oil."
The new CEO of a small manufacturing firm pursues growth through the launch of Entrepreneurial Subsidiaries. While the firm grows revenues from $600 million to over $2 billion in 10 years, problems surface as the subsidiaries are integrated into the established business
This case illustrates ratio analysis using financial data for a global power company. It is best suited for an introductory discussion of ratio analysis for both the cross-section and time-series. Ten years of standard ratios pertaining to profitability, efficiency, liquidity, solvency, capital structure, and market multiples are provided. The case highlights the correspondence between firm performance and equity values.
Alan Kendricks struggles to address many challenges facing him as a recently promoted medical director for Cardiology Associates at Southeastern Pennsylvania University Hospital. He must balance his time taking care of patients, running a practice, managing up, down, and laterally, managing stars with little formal authority, allocating resources fairly, developing his people, providing strategy and direction, building an organization, and spending time with his family. Offers insights into the dilemmas of a "producing manager," a person who is simultaneously responsible for producing and managing.
In the summer of 2006, Nike announced a major corporate reorganization that would shift the company's focus to a category-driven approach. The six major business categories were running, men's training, basketball, soccer, women's fitness, and sportswear. For years, Nike had organized its business around footwear, apparel, and equipment. Integration between these three business units was inconsistent at best. The goal of the reorganization was to take a more consumer-oriented approach to the market to give customers holistic collections of everything they want and need in a particular sports category. This would require the organization to break down its product-oriented silos and collaborate on a more formal, ongoing basis. The reorganization also reflected a change in Nike's corporate strategy. The elevation of women's fitness to a major focus for the company was a substantial victory for the team that had been fighting for the increased prominence of this market segment for years. Darcy Winslow, general manager of Nike's global women's fitness business, and a team of individuals across the company working across traditional boundaries within Nike's complex, matrixed organization to achieve the required level of cross-business integration to deliver cohesive collections of footwear, apparel, and equipment to the women's market. Focuses on Winslow and her team as they tackled challenges related to product development, operations management, organization structure, reporting relationships, change management, and stakeholder buy-in.
A non-profit organization, partnered with a microfinance organization would send undergraduate students from a business school to teach entrepreneurship in Third World countries: Kenya, India and South Africa. The case requires students to develop fairly straightforward cash budgets and to consider sensitivity analysis based on exchange rate fluctuations. Students are introduced to the concept of micro financing as an effective tool for improving the socio-economic status of entrepreneurs in Third World countries. Students are encouraged to think about relevant issues in gaining sponsorship for a non-profit venture.
In January 2007, "MedNet.com" is a leading website that provides science-based health information free of charge to online visitors. MedNet communicates with traditional web journalism, interactive software, and social media tools such as blogs, video reports and virtual reality tours. The site operates conservatively within the government-regulated health information market. MedNet's business model relies on advertising sales, primarily to pharmaceutical companies. MedNet competes for advertising dollars with large search engines, category specific sites, and clinical trial sites. In 2007, large search engines charge for "results," or "click throughs." Other sites, such as online newspapers, charge for impressions. Advertising campaigns depend on numerous variables (an efficient audience size, audience frame of mind, willingness to complete a transaction, etc.) In the face of fierce advertising competition, MedNet is forced to defend key elements of its business model vis-a-vis a large search engine. However, in defending the advertising value MedNet delivers, MedNet executives may be building the case for why niche sites may be a better investment for the advertiser's budget.