In industries characterized by very large capital investment and fast-moving technological dynamics, cyclical behavior emerges as the setting in which firms have to strategize. The barriers to entry in such settings are extremely high, but they can be breached--as shown in the flat panel display industry, which has seen successive entries by Japanese, then Korean, then Taiwanese firms during the past decade. In its short history, this industry has already exhibited four cycles (the "crystal cycle") and a fifth downturn is now looming. However, the striking feature of the industry is that firms have successfully entered only during industry downturns, engaging in counter-cyclical investment; not a single firm has entered during an upturn. This provides the starting point for a strategic analysis of this fast-growing industry, conducted through a dynamic framework that complements the "competitive forces" framework introduced in a static setting by Michael Porter over two decades ago. It is critical to draw on both dynamic and static frameworks to comprehend fully the strategic options open to firms.
Analyzes the multiple innovation trajectories and changes in competitive strategy in Singapore as it evolves from an industrial economy to a knowledge-based one. In addition to the existing national innovation system in the well-heeled industrial manufacturing sectors such as electronics, chemicals, and precision engineering, a new mode of innovation has been evolving in the research-intensive biomedical industries cluster, which emphasizes a special role for the academic sector in the innovation milieu. Biotech investments at the moment appear to pose high risks due to the rather amorphous and unclear market signals coming out of the industry. However, as technologies become more speculative, governments need to spread their bets more widely to encourage more possibilities. The challenges and opportunities Singapore faces are relevant to other states seeking to adopt new policies for gaining competitiveness and national comparative advantage in an era of globalization.
Real options can be a powerful tool for quantifying the value of strategic and operational flexibility associated with uncertain IT investments. However, they also constitute a new way of thinking about how projects can be organized and managed to maximize upside potential while minimizing downside risk. Explains how practitioners can incorporate options thinking into contemporary IT project management. Options thinking means recognizing real options and how they add value. Just as important is managing projects so that the option value that exists in theory is realized in practice. Several real-world examples illustrate how the value of embedded real options can be realized through active project management. There are pitfalls associated with each option, as well as benefits and limitations of different approaches to valuing options. Organizations must decide whether to undertake the challenges of adopting options thinking as a project management philosophy.
Like many technology organizations in the late 1990s, Cisco was booming. It grew so quickly, in fact, that it was bringing in up to 1,000 new employees each month. Cisco's solution was to acquire talent by buying small firms, topping out in one year with 24 separate acquisitions. However, in 2000, the dot-com bubble burst and Cisco quickly realized that it had another human capital challenge on its hands: how to develop, rather than hire, the strategic thinkers and leaders needed for the future. Explores the challenges facing Mary Eckenrod, Cisco's vice-president of worldwide talent, in developing a new human capital strategy to identify and develop leaders from within the company--and to do this in a company with no tradition of developing people internally. How can Cisco move from a "buy" to a "make" human capital strategy?
This study of Banco Comercial Português ("BCP") raises broad issues relating to strategy by growth and acquisition and how market leadership can best be created and extended at home or abroad. The authors trace the history of the bank from a much-admired startup to becoming the largest publicly listed Portuguese financial institution and an up-and-coming player in other European retail banking markets.
This study of Banco Comercial Português ("BCP") raises broad issues relating to strategy by growth and acquisition and how market leadership can best be created and extended at home or abroad. The authors trace the history of the bank from a much-admired startup to becoming the largest publicly listed Portuguese financial institution and an up-and-coming player in other European retail banking markets.
The List is HBR's annual attempt to capture ideas in the state of becoming--when they're teetering between what one person suspects and what everyone accepts. Roderick M. Kramer says it isn't bad when leaders flip-flop. Julia Kirby describes new efforts to redefine the problem of organizational performance. Joseph L. Bower praises the "Velcro organization," where managerial responsibilities can be rearranged. Jeffrey F. Rayport argues that companies must refocus innovation on the "demand side." Eric Bonabeau describes a future in which computer-generated sound can be used to transmit vast amounts of data. Roger L. Martin says highly reliable corporate systems such as CRM tend to have little validity. Kirthi Kalyanam and Monte Zweben report that marketers are learning to contact customers at just the right moment. Robert C. Merton explains how equity swaps could help developing countries avoid some of the risk of boom and bust. Thomas A. Stewart says companies need champions of the status quo. Mohanbir Sawhney suggests marketing strategies for the blogosphere. Denise Caruso shows how to deal with risks that lack owners. Thomas H. Davenport says personal information management--how well we use our PDAs and PCs--is the next productivity frontier. Leigh Buchanan explores workplace taboos. Henry W. Chesbrough argues that the time is ripe for services science to become an academic field. Kenneth Lieberthal says China may change everyone's approach to intellectual property. Jochen Wirtz and Loizos Heracleous describe customer service apps for biometrics. Mary Catherine Bateson envisions a midlife sabbatical for workers. Jeffrey Rosen explains why one privacy policy won't fit everyone. Tihamer von Ghyczy and Janis Antonovics say firms should embrace parasites. And Jeffrey Pfeffer warns business-book buyers to beware. Additionally, HBR offers a list of intriguing business titles due out in 2005.
John Clough, the CFO of NetRF, a tech firm in Salt Lake City, gets an offer he's not sure he wants to refuse. Benchmark, a Fortune 500 packaged goods company, is looking for someone to join its audit committee. "Would you be interested?" the executive recruiter asks. John's experience with publicly held companies is limited, but he's highly regarded in the financial community for his acumen and probity. At NetRF, a maker of wireless communications equipment, John had championed expensing stock options when it was uncommon for high-tech firms to do so; he'd received a lot of admiring press for that move. In mulling over the offer, the 39-year-old executive and flight enthusiast considers his situation. He loves his work, his Cessna time-share, and the skiing in the Salt Lake area. Board membership would confer a certain amount of prestige, but would he be spreading himself too thin? One colleague extols the virtues of board membership--the opportunity to learn and expand your business network. But the chief outside counsel to NetRF warns that the hours can be considerable and board members' responsibilities (post-Sarbanes-Oxley) substantial. Subsequent meetings with Benchmark's nominating committee, its CEO, and its audit committee leave John with more questions than answers. Should he join the board? This fictional case study outlines the risks and rewards of board service. Commenting on this fictional case study in reprints R0502B and R0502Z are Peter Goodson, a strategic adviser to corporate boards; John F. Olson, chair of the ABA Business Law Section's Corporate Governance Committee; David J. Berger, a partner at the law firm Wilson Sonsini Goodrich & Rosati; and Charles H. King, managing director at Korn/Ferry International.
The CEO succession process is broken. Many companies have no meaningful succession plans, and few of the ones that do are happy with them. CEO tenure is shrinking; in fact, two out of five CEOs fail in their first 18 months. It isn't just that more CEOs are being replaced; it's that they're being replaced badly. The problems extend to every aspect of CEO succession: internal development programs, board supervision, and outside recruitment. While many organizations do a decent job of nurturing middle managers, few have set up the comprehensive programs needed to find the half-dozen true CEO candidates out of the thousands of leaders in their midst. Even more damaging is the failure of boards to devote enough attention to succession. Search committee members often have no experience hiring CEOs; lacking guidance, they supply either the narrowest or the most general of requirements and then fail to vet either the candidates or the recruiters. The result is that too often new CEOs are plucked from the well-worn Rolodexes of a remarkably small number of recruiters. These candidates may be strong in charisma but may lack critical skills or otherwise be a bad fit with the company. The resulting high turnover is particularly damaging, given that outside CEOs often bring in their own teams, can cause the company to lose focus, and are especially costly to be rid of. Drawing on over 35 years of experience with CEO succession, the author explains how companies can create a deep pool of internal candidates, how boards can consistently align strategy and leadership development, and how directors can get their money's worth from recruiters. Choosing a CEO should be not one decision but an amalgam of thousands of decisions made by many people every day over years.
Companies are becoming more dependent on business partners, but coordinating with outsiders takes its toll. Negotiating terms, monitoring performance, and, if needs are not being met, switching from one partner to another require time and money. Such transaction costs, Ronald Coase explained in his 1937 essay "The Nature of the Firm," drove many organizations to bring their activities in-house. But what if Coase placed too much emphasis on these costs? What if friction between companies can be productive? Indeed, as John Hagel and John Seely Brown point out, interactions between organizations can yield benefits beyond the goods or services contracted for. Companies get better at what they do--and improve faster than their competitors--by working with outsiders whose specialized capabilities complement their own. Different enterprises bring different perspectives and competencies. When these enterprises tackle a problem together, they dramatically increase the chances for innovative solutions. Of course, misunderstandings often arise when people with different backgrounds and skill sets try to collaborate. Opposing sides may focus on the distance that separates them rather than the common challenges they face. How can companies harness friction so that it builds capabilities? Start by articulating performance goals that everyone buys into. Then make sure people are using tangible prototypes to wrangle over. Finally, assemble teams with committed people who bring different perspectives to the table. As individual problems are being addressed, take care that the underpinnings of shared meaning and trust are also being woven between the companies. Neither can be dictated--but they can be cultivated. Without them, the performance fabric quickly unravels, and business partnerships disintegrate into rivalrous competition.
Twenty years ago, it would have been shocking for a children's choir to sell singing telegrams or for an organization serving the homeless to dabble in property management. Today, it seems routine. Nonprofits increasingly feel compelled to launch earned income ventures--not only to appear more disciplined and businesslike to stakeholders but also to reduce their reliance on fundraising. There's plenty of hype about the value of earned income ventures in the nonprofit world, but such projects account for only a small share of funding in most nonprofit domains, and few of the ventures make money. Moreover, when the authors examined how nonprofits evaluate potential enterprises, they discovered a pattern of unwarranted optimism. The potential financial returns are often exaggerated, and the challenges of running a successful business are routinely discounted. But the biggest downside of such ventures is that they can distract nonprofits' managers from their core social missions and, in some cases, even subvert those missions. There are several reasons for the gap between the hype and the reality. One is that an organization's nonfinancial concerns--such as a desire to hire the disadvantaged--can hamper it in the commercial marketplace. Another is that nonprofits' executives tend to overlook the distinction between revenue and profit. For example, a youth services organization that had received funding to launch a food products enterprise hired young people and began making salad dressing. The nonprofit believed it spent $3.15 to produce each bottle of dressing that was sold for $3.50. But when expenses such as unused ingredients and managers' salaries were factored in, the cost per bottle reached a staggering $90. Earned income ventures do have a role in the nonprofit sector, the authors say, but unrealistic expectations are distorting managers' decisions, wasting precious resources, and leaving important social needs unmet.
In his 12 years at the helm of Siemens, CEO Heinrich von Pierer designed and directed a major transformation. Taking this German icon from a technically superb but slow-moving industrial giant to a disciplined yet nimble multinational has posed enormous challenges. Since 1992, Siemens has revamped its portfolio of businesses, expanded its reach into 192 countries, and created a more local-market-driven culture, gaining recognition as one of the best-managed and most competitive companies in the world. In this edited interview with HBR editor Thomas A. Stewart and consulting editor Louise O'Brien, von Pierer describes the requirements for transformation and culture change and how he broke down historical barriers at Siemens. He shares his insights about portfolio restructuring, his lessons from competing with GE, and the pros and cons of being based in Europe vs. America. He reflects on the true start of globalization after the fall of the Berlin wall and on how dramatically the company needed to change to counter the resulting pricing pressures across all of its businesses. He talks, too, about the biggest challenge on his successor's desk--"the particular challenge of China," he says. Amid all these topics, von Pierer reiterates the importance of people: "We all talk about people as our most important resource, but as a matter of fact, who's really taking care of people?...We need [their] backing. We can't afford to run into a situation where people no longer accept what we do."
For six years, Cynthia Cunningham and Shelley Murray shared an executive job at Fleet Bank: one desk, one chair, one computer, one telephone, and one voice-mail account. To their clients and colleagues, they were effectively one person, though one person with the strengths and ideas of two, seamlessly handing projects back and forth. Although their department was dissolved after the bank merged with Bank of America, the two continue to consider themselves a package--they have one resume, and they are seeking their next opportunity together. Their choice to share a job was not only a quality-of-life decision but one intended to keep their careers on course: "Taking two separate part-time jobs would have thrown us completely off track," they write in this first-person account. "We're both ambitious people, and neither of us wanted just a job. We wanted careers." In this article, the two highly motivated women reveal their determination to manage the demands of both family and career. Flextime, telecommuting, and compressed workweeks are just some of the options open to executives seeking greater work/life balance; the job share, as described by Cunningham and Murray, could well be the next solution for those wishing to avoid major trade-offs between their personal and professional lives. Cunningham and Murray describe in vivid detail how they structured their unusual arrangement, how they sold themselves to management, and the hurdles they faced along the way. Theirs is a win-win story, for the company and for them.
As globalization changes the basis of competition, sourcing is moving from the periphery of corporate functions to the core. Always important in terms of costs, sourcing is becoming a strategic opportunity. But few companies are ready for this shift. Outsourcing has grown so sophisticated that even critical functions like engineering, R&D, manufacturing, and marketing can--and often should--be moved outside. And that, in turn, is changing the way companies think about their organizations, their value chains, and their competitive positions. Already, a handful of vanguard companies are transforming what used to be purely internal corporate functions into entirely new industries. Companies like UPS, Solectron, and Hewitt have created new business models by concentrating scale and skill within a single function. As these and other function-based companies grow, so does the potential value of outsourcing to all companies. Migrating from a vertically integrated company to a specialized provider of a single function is not a winning strategy for everyone. But all companies need to reassess rigorously each of their functions as possible outsourcing candidates. This article presents a simple three-step process to identify which functions your company needs to own and protect, which can be best performed by what kinds of partners, and which could be turned into new business opportunities. The result of such an analysis is a comprehensive capabilities-sourcing strategy. As a detailed examination of 7-Eleven's experience shows, the success of the strategy often hinges on the creativity with which partnerships are organized and managed. But only by first taking a broad, strategic view of capabilities sourcing can your company gain the greatest benefit from all of its sourcing choices.
John Clough, the CFO of NetRF, a tech firm in Salt Lake City, gets an offer he's not sure he wants to refuse. Benchmark, a Fortune 500 packaged goods company, is looking for someone to join its audit committee. "Would you be interested?" the executive recruiter asks. John's experience with publicly held companies is limited, but he's highly regarded in the financial community for his acumen and probity. At NetRF, a maker of wireless communications equipment, John had championed expensing stock options when it was uncommon for high-tech firms to do so; he'd received a lot of admiring press for that move. In mulling over the offer, the 39-year-old executive and flight enthusiast considers his situation. He loves his work, his Cessna time-share, and the skiing in the Salt Lake area. Board membership would confer a certain amount of prestige, but would he be spreading himself too thin? One colleague extols the virtues of board membership--the opportunity to learn and expand your business network. But the chief outside counsel to NetRF warns that the hours can be considerable and board members' responsibilities (post-Sarbanes-Oxley) substantial. Subsequent meetings with Benchmark's nominating committee, its CEO, and its audit committee leave John with more questions than answers. Should he join the board? This fictional case study outlines the risks and rewards of board service. Commenting on this fictional case study in reprints R0502B and R0502Z are Peter Goodson, a strategic adviser to corporate boards; John F. Olson, chair of the ABA Business Law Section's Corporate Governance Committee; David J. Berger, a partner at the law firm Wilson Sonsini Goodrich & Rosati; and Charles H. King, managing director at Korn/Ferry International.
John Clough, the CFO of NetRF, a tech firm in Salt Lake City, gets an offer he's not sure he wants to refuse. Benchmark, a Fortune 500 packaged goods company, is looking for someone to join its audit committee. "Would you be interested?" the executive recruiter asks. John's experience with publicly held companies is limited, but he's highly regarded in the financial community for his acumen and probity. At NetRF, a maker of wireless communications equipment, John had championed expensing stock options when it was uncommon for high-tech firms to do so; he'd received a lot of admiring press for that move. In mulling over the offer, the 39-year-old executive and flight enthusiast considers his situation. He loves his work, his Cessna time-share, and the skiing in the Salt Lake area. Board membership would confer a certain amount of prestige, but would he be spreading himself too thin? One colleague extols the virtues of board membership--the opportunity to learn and expand your business network. But the chief outside counsel to NetRF warns that the hours can be considerable and board members' responsibilities (post-Sarbanes-Oxley) substantial. Subsequent meetings with Benchmark's nominating committee, its CEO, and its audit committee leave John with more questions than answers. Should he join the board? This fictional case study outlines the risks and rewards of board service. Commenting on this fictional case study in reprints R0502B and R0502Z are Peter Goodson, a strategic adviser to corporate boards; John F. Olson, chair of the ABA Business Law Section's Corporate Governance Committee; David J. Berger, a partner at the law firm Wilson Sonsini Goodrich & Rosati; and Charles H. King, managing director at Korn/Ferry International.
In August 2002, the FDA had notified the executive steering committee for Abbott Laboratories' new rheumatoid arthritis drug to expect approval significantly ahead of schedule. If everything went smoothly, the compound D2E7 (brand name HUMIRA) would be approved for sale in the United States before the end of the year. This gave Abbott and its HUMIRA brand team no more than four months to complete preparations for the product's launch. Abbott acquired D2E7, a biologic disease-modifying antirheumatic drug, when the company purchased Knoll Pharmaceuticals in March 2001. With a significant head start and combined 2002 sales anticipated to exceed $2 billion, Enbrel (from Immunex, later acquired by Amgen) and Remicade (from the Johnson & Johnson subsidiary Centocor) would provide HUMIRA with tough competition. Yet, with the rheumatoid arthritis market expected to grow to over $7.5 billion by 2008, there was still a significant opportunity for Abbott. The executive steering committee knew that the HUMIRA team would have to orchestrate every aspect of the product's global launch carefully to quickly and effectively establish HUMIRA in this challenging market.
What are the agency costs of management-owner conflicts? In this case, Tyson Foods attempts to acquire WLR Foods. But WLR management and the poultry farmers who own 20% of it actively oppose the takeover. A B case (UV2530) and both student (UV4328) and instructor (UV4333) spreadsheets are available to enhance the learning experience.
What are the agency costs of management-owner conflicts? In this case, Tyson Foods attempts to acquire WLR Foods. But WLR management and the poultry farmers who own 20% of it actively oppose the takeover. A B case (UV2530) and both student (UV4328) and instructor (UV4333) spreadsheets are available to enhance the learning experience.