Outside directors account for less than a third of the board members on a typical Internet start-up. That's bad business in the long run. Here's why.

New research shows that the top-performing dot-coms aren't necessarily the ones with the best business models--they're the ones with the quickest, most responsive marketing.

The case is a unique insight into the preparation to avoid the Y2K bug striking at the world economy's financial nerve centre. It tells the real story of how a global network was swiftly formed, procedures set in place, and norms introduced.

Four years ago, Diane Ashton and Sundeep Lal were working together at MIT on a titanium extraction project. Durable and highly heat resistant, titanium is a key constituent of many specialty alloys, but it's also very expensive to produce. So when Diane discovered a solution that isolated titanium efficiently, the partners recognized that the technology would be worth billions to large manufacturers. Sundeep and Diane secured a $20 million investment from a prominent VC and drew up a business plan. Within six months of their discovery, Titrolyte Inc. was born. But Diane and Sundeep soon discovered that what had been a fairly straightforward operation in the confines of an MIT lab was difficult to reproduce on a large scale. In just two years, they had to go back to investors for more money. Sundeep thinks that Titrolyte is ready to go public. Besides, he's concerned that if they don't IPO now, they might miss the bus. But Diane is worried that they're moving too fast. They haven't perfected the technology yet, and Titrolyte's business systems leave a great deal to be desired. Should Titrolyte risk going public now, while the market is still open? Five commentators offer advice in this fictional case study. In R0102A and R0102Z, William Bourne, Tim Draper, Sarah Mavrinac, Neil Jones, and David Perry offer advice on this fictional case study.

When Roger Brown and Linda Mason decided to start a child care and early-education company 15 years ago, they knew about the challenges inherent in the industry: no barriers to entry, low margins, few economies of scale, heavy regulatory oversight--to name just a few. But that didn't stop them. They eventually built Bright Horizons Family Solutions, a company that now has more than 340 high-quality child care centers, serving 40,000 children and employing 12,000 people. How did they do it? Sheer determination helped. But even more important, they developed a business model that took advantage of industry weaknesses. When the couple sat down to hash out a plan for the company, they realized that the key to achieving profitability and creating barriers to entry was to partner with companies. They could achieve higher returns by having those companies build and outfit the centers and, at the same time, boost customer loyalty. Brown's first-person account describes the difficulties the couple and their company faced along the way, including the struggle for funding and a board that questioned Bright Horizons' business model and basic philosophy of good child care. But, Brown says, the commitment to a singular business model and the determination to make strengths out of weaknesses made the impossible possible.

Many top executives say they routinely make big decisions without relying on any logical analysis. Instead, they call upon their "intuition," or "gut instinct"--but they can't describe the process much more than that. What exactly is gut instinct? In this article, author Alden Hayashi interviews top executives from companies such as America Online and Johnson and Johnson to find out how they make decisions. Hayashi also presents the research of leading scientists who suggest that our emotions and feelings might not only be important in our intuitive ability to make good decisions but may actually be essential. Specifically, one theory contends that our emotions help us filter various options quickly, even if we're not consciously aware of the screening. Other research suggests that professional judgment can often be reduced to patterns and rules; indeed, truly inspired decisions seem to require an ability to see similar patterns across disparate fields. But various traits of human nature can easily cloud our intuitive decision making. One potential pitfall is our tendency to see patterns where none exist.

The high cost of experimentation has long put a damper on companies' attempts to create great new products. But new technologies are making it easier than ever to conduct complex experiments quickly and cheaply. Companies can now take innovation to a whole new level, contends Stefan Thomke, if they're willing to rethink their R&D from the ground up. Thomke argues that new technologies affect everything, from the development process itself--including the way an R&D organization is structured--to how new knowledge is created. So companies that are trying to be more innovative face both managerial and technical challenges. Drawing on his research in the pharmaceutical, automotive, and software industries, Thomke introduces the following four rules for enlightened experimentation: organize for rapid experimentation; fail early and often, but avoid mistakes; anticipate and exploit early information; and combine new and old technologies. The article uses real-world examples to explain each rule in detail. It also suggests how this system of experimentation will affect other industries and examines the implications for knowledge workers.

Eager to capitalize on the Internet's potential, many companies have allowed scores of on-line projects to bubble up throughout their organizations. The result? More harm than good, as companies find themselves confusing customers, irritating employees, and wasting bushels of money. In this article, consultant Anthony Tjan explains how companies can do better. By adapting classical portfolio strategy to the digital age, executives can coordinate their Internet initiatives to avoid the needless headaches and spending, he says. Much of the market and industry data that underpin traditional portfolio analysis is unavailable for the Internet space, so Tjan replaces the two criteria used in traditional portfolio analysis--market position and industry attractiveness--with business viability and business fit. Viability captures the available quantitative data about an investment's likely payoff. Fit is qualitative; it measures the degree to which an investment dovetails with a company's existing processes, capabilities, and culture. Using viability and fit to assess their on-line initiatives, companies can then plot these efforts onto a simple matrix, called an Internet portfolio map. Their location on the matrix will suggest whether each initiative should be invested in, redesigned, sold or spun out, or killed.

Unspoken, subtle parts of a bargaining process--also known as the shadow negotiation--can set the tone for a successful negotiation. Deborah Kolb and Judith Williams, whose book The Shadow Negotiation was the starting point for this article, say there are three strategies businesspeople can use to guide these hidden interactions. Power moves are used when two negotiating parties hold unequal power. These strategies, such as casting the status quo in an unfavorable light, can help parties realize that they must negotiate: they will be better off if they do and worse off if they don't. Process moves affect how negotiation issues are received by both sides in the process, even though they do not address substantive issues. Working outside of the actual bargaining process, one party can suggest ideas or marshal support that can shape the agenda and influence how others view the negotiation. Appreciative moves alter the tone or atmosphere so that a more collaborative exchange is possible. These strategic moves don't guarantee that all bargainers will walk away winners, but they help to get stalled negotiations moving--out of the dark of unspoken power plays and into the light of true dialogue.

With help from a team of ethnographers and senior organization specialists, authors Mark Maletz and Nitin Nohria recently conducted a unique research project that focused on "whitespace": the large but mostly unoccupied territory in every company where rules are vague, authority is fuzzy, budgets are nonexistent, and strategy is unclear--and where entrepreneurial activity that helps reinvent and renew an organization most often takes place. The researchers shadowed entrepreneurial managers operating in the whitespace and met with top managers about their efforts to oversee whitespace activities. Using examples from the financial services, computer, and e-commerce industries, the authors explain when it's imperative to operate in the whitespace--and when it's wiser to stay in the traditional blackspace. They describe how effective whitespace managers subtly and resourcefully lead successful efforts, and how senior executives nurture whitespace projects by putting aside their traditional planning, organizing, and controlling techniques. Finally, they examine the ultimate issue for any successful whitespace project: should it be moved into the blackspace, kept in the whitespace indefinitely--or, despite its apparent success, killed off? If companies leave this valuable territory to the scattershot whims and talents of individual managers, the authors say, they are likely to miss out on many of the opportunities that come from exploring the next frontier.

One of the world's most enduring companies, Nestle epitomizes everything that today's high-flying, headline-grabbing companies are not. It respects technology but doesn't consider it central to strategy. It values growth but prefers it controlled. It seeks talented professionals but wants only those who are modest in word and deed. Nestle CEO Peter Brabeck is skeptical of the relentless push for radical transformation heard from every quarter. He believes, instead, in continuous improvement through slow and steady change. While he acknowledges that every company must change in order to compete in today's turbulent marketplace, Brabeck makes the focus of his work identifying and strengthening those aspects of Nestle that should stay the same. For example, Nestle eschews the noise and energy swirling around technology. Many companies make technology the focal point of strategy, Brabeck says, but Nestle is about people, products, and brands. Brabeck also talks candidly about how to fight complacency in a successful company, how to institutionalize collaboration in a decentralized organization, and how to resist pressure from analysts and money managers and focus on long-term, sustainable and profitable growth--in short, how to win the war without the revolution.

Companies generally set prices on the Internet in two ways. Many start-ups offer untenably low prices in a rush to capture first-mover advantage. Many incumbents simply charge the same prices on-line as they do off-line. Either way, companies are missing a big opportunity. The fundamental value of the Internet lies not in lowering prices or making them consistent but in optimizing them. The Net lets companies optimize prices in three ways. First, it lets them set and announce prices with greater precision. Different prices can be tested easily, and customers' responses can be collected instantly. Second, because it's so easy to change prices on the Internet, companies can adjust prices in response to even small fluctuations in market conditions, customer demand, or competitors' behavior. Third, companies can use the clickstream data and purchase histories that it collects through the Internet to segment customers quickly. Then it can offer segment-specific prices or promotions immediately.

In recent years, companies have increasingly seen the benefits of creating a corporate brand. Rather than spend marketing dollars on branding individual products, giants like Disney and Microsoft promote a single umbrella image that casts one glow over all their products. A company must align three interdependent elements--call them strategic stars--to create a strong corporate brand: vision, culture, and image. Aligning the stars takes concentrated managerial skill and will, the authors say, because each element is driven by a different constituency: management, employees, or stakeholders. To effectively build a corporate brand, executives must identify where their strategic stars fall out of line. The authors offer a series of diagnostic questions designed to reveal misalignments in corporate vision, culture, and image. The first set of questions looks for gaps between vision and culture; for example, when management establishes a vision that is too ambitious for the organization to implement. The second set addresses culture and image, uncovering possible gaps between the attitudes of employees and the perceptions of the outside world. The last set of questions explores the vision-image gap--is management taking the company in a direction that its stakeholders support? The authors discuss the benefits of a corporate brand, but they also point to cases in which a corporate brand doesn't make sense.

Corporate America and the U.S. Navy share one big problem: employee retention. Today's knowledge workers hop from start­-up to start-up. And 40% of the navy's new recruits leave the service before their four­-year tours of duty are up. D. Michael Abrashoff came face to face with the navy's retention problem when he took command of the USS Benfold. Before he became captain, sailors couldn't get away from the ship fast enough. Today the vessel is the pride of the Pacific fleet, and sailors from other ships are clamoring to join its crew. In this firsthand account, Abrashoff explains how he got the ship and its crew back on course by breaking bad habits-per­sonal and professional ones-and jettisoning old attitudes. During his 21 months aboard the Benfold, Abrashoff came to realize that in today's technology-intensive U.S. Navy, the traditional command-and-control style wouldn't work. And it hadn't-the Benfold's 310 sailors had cheered derisively when Abrashoff's predecessor had left the ship. So he defied 225 years of navy tradition in his quest to engage the sailors in their work, increase their performance, and keep them around for their entire tours of duty. He retained his crew by redeeming them-showing them how to be not just better sailors but better people, too. That meant breaking them down when they were at their worst and then building them up to reach their best. It also meant personal redemption for Abrashoff; he resolved to really listen to what his sailors were saying. The result? Cost-saving ideas for the entire navy and surging confidence and commitment among crew members.

The music industry, described in breezy prose in John Alderman's Sonic Boom: MP3, Napster, and the New Pioneers of Music, is coming under intense pressure from Internet-based technologies that challenge traditional property rights. Industry executives are denouncing the upstarts, but Napster and companies like it are actually producing efficiency, not anarchy. To understand the full force of the Napster challenge, reviewer Clay Shirky says, one has to look beyond Sonic Boom's collage of people and events. Music has always been a business of high fixed costs and low marginal costs, and Internet technology is reducing marginal costs to practically zero. Before Napster, music industry executives assumed they would apply traditional per-unit pricing to sales over the Internet. Napster's success means the all-you-can-eat model has won. Newspaper and software publishers have already begun to adapt to this reality, and now it's the music industry's turn. This shift actually represents a big revenue opportunity for the industry, not a clear loss. Per-unit pricing imposes enormous psychological barriers to purchase, so shifting to an unlimited-access, subscription-based model will unleash pent-up demand for music. And the industry's abilities to develop and screen talent will be even more important to consumers in a Napster world.

Four years ago, Diane Ashton and Sundeep Lal were working together at MIT on a titanium extraction project. Durable and highly heat resistant, titanium is a key constituent of many specialty alloys, but it's also very expensive to produce. So when Diane discovered a solution that isolated titanium efficiently, the partners recognized that the technology would be worth billions to large manufacturers. Sundeep and Diane secured a $20 million investment from a prominent VC and drew up a business plan. Within six months of their discovery, Titrolyte Inc. was born. But Diane and Sundeep soon discovered that what had been a fairly straightforward operation in the confines of an MIT lab was difficult to reproduce on a large scale. In just two years, they had to go back to investors for more money. Sundeep thinks that Titrolyte is ready to go public. Besides, he's concerned that if they don't IPO now, they might miss the bus. But Diane is worried that they're moving too fast. They haven't perfected the technology yet, and Titrolyte's business systems leave a great deal to be desired. Should Titrolyte risk going public now, while the market is still open? In R0102A and R0102Z, William Bourne, Tim Draper, Sarah Mavrinac, Neil Jones, and David Perry offer advice on this fictional case study.

Four years ago, Diane Ashton and Sundeep Lal were working together at MIT on a titanium extraction project. Durable and highly heat resistant, titanium is a key constituent of many specialty alloys, but it's also very expensive to produce. So when Diane discovered a solution that isolated titanium efficiently, the partners recognized that the technology would be worth billions to large manufacturers. Sundeep and Diane secured a $20 million investment from a prominent VC and drew up a business plan. Within six months of their discovery, Titrolyte Inc. was born. But Diane and Sundeep soon discovered that what had been a fairly straightforward operation in the confines of an MIT lab was difficult to reproduce on a large scale. In just two years, they had to go back to investors for more money. Sundeep thinks that Titrolyte is ready to go public. Besides, he's concerned that if they don't IPO now, they might miss the bus. But Diane is worried that they're moving too fast. They haven't perfected the technology yet, and Titrolyte's business systems leave a great deal to be desired. Should Titrolyte risk going public now, while the market is still open? In R0102A and R0102Z, William Bourne, Tim Draper, Sarah Mavrinac, Neil Jones, and David Perry offer advice on this fictional case study.

Outlines many of the supply-side innovations, such as improved transportation, communication, and technological developments, that greatly expanded the productive capacity of the United States in the late 19th century. Explores a range of demand-side shifts, including rising incomes, population growth, and urbanization, that changed consumers' wants and needs. These developments, taken together with those on the supply side, altered the nature of the American economy, ushering in widespread industrialization, markets of unprecedented size, and consumption on an entirely new scale. Investigates how, within this context, H.J. Heinz created a successful food-processing business in the last three decades of the 19th century.

Provides a rigorous description of the economic dynamics that may produce inherent advantages for large and/or first-mover firms within an industry, as well as those factors that may result in disadvantages for such leading firms. The leader advantages discussed include both size advantages, such as economies of scale and scope, network effects, and learning effect, as well as timing advantages, such as preemption, reputation effects, buyer switching costs, and patents or institutional barriers. The leader disadvantages analyzed include pioneering costs, demand uncertainty, technological uncertainty, and incumbent inertia. Throughout the note, the experiences of Intel Corp., the world's largest manufacturer of semiconductors, are used to provide specific examples of the causes and consequences of leader advantages and disadvantages.

In 2000, Accrue is one of three survivors of the initial consolidation of the Web traffic analysis software industry. However, entry from CRM software providers and consultants, as well as ASPs offering Web analysis services, has introduced new threats to Accrue. Newly tapped Interim CEO Greg Walker must develop a plan to help Accrue navigate through the transitions shaking this industry.