Provides an overview of some current issues in logistics: the rise of third party logistics, substitution of information flows for physical flows, the economics of logistics, and international logistics.
The world's largest oil-service company has revolutionized the way it buys supplies: instead of a central purchasing office, its e-procurement system lets employees buy goods from their desktops.
Retailers have long assumed that bigger is better: megastores mean broader product selection and lower operating costs. But by networking smaller stores, retailers can replicate big-store advantages and offer shoppers greater convenience.
Many companies view the Internet as a self-service channel; they let customers help themselves. But self-service can frustrate customers. Smart players use technology to do more for the customer.
When Biogen received approval for a breakthrough drug for treating multiple sclerosis, it had to quickly get the product to market. So it circumvented the traditional supply chain and joined with partners to become a virtual manufacturer.
The drivers of customer satisfaction vary greatly from country to country. But traditional customer surveys rarely uncover those variations. Now there's a better way.
Today's fast-paced economy demands that businesses change or die. But few companies manage corporate transformations as well as they would like. The brutal fact is that about 70% of all change initiatives fail. In this article, authors Michael Beer and Nitin Nohria describe two archetypes--or theories--of corporate transformation that may help executives crack the code of change. Theory E is change based on economic value: shareholder value is the only legitimate measure of success, and change often involves heavy use of economic incentives, layoffs, downsizing, and restructuring. Theory O is change based on organizational capability: the goal is to build and strengthen corporate culture. Most companies focus purely on one theory or the other, or haphazardly use a mix of both, the authors say. Combining E and O is directionally correct, they contend, but it requires a careful, conscious integration plan. Beer and Nohria present the examples of two companies, Scott Paper and Champion International, that used a purely E or purely O strategy to create change--and met with limited levels of success. They contrast those corporate transformations with that of UK-based retailer ASDA, which has successfully embraced the paradox between the opposing theories of change and integrated E and O. The lesson from ASDA? To thrive and adapt in the new economy, companies must make sure the E and O theories of business change are in sync at their own organizations.
A disturbing trend is going on in corporate America--CEO churning. Top executives are rapidly coming and going, keeping their jobs for increasingly shorter periods of time. The reason? Most boards are so unclear about the definition of leadership, they are picking the wrong people. CEO churning needn't be, say leadership experts Warren Bennis and James O'Toole. Boards can reverse the trend by following several guidelines. First, boards must come to a shared, accurate definition of leadership. Simply put, leaders must be able to move human hearts--to challenge people and make them want to scale steep peaks. Second, boards should strengthen the CEO selection process by resolving strategic and political conflicts amongst themselves. An agreed-upon strategic direction will make choosing the CEO with the right vision for the company that much easier and can clarify the job for the new CEO. Third, the board needs to measure every CEO candidate's soft qualities. Economic measures are important, but integrity, the ability to provide meaning, and the talent for creating other leaders are critical. Fourth, boards should beware of candidates who act like CEOs. Charisma and glossy pitches can be enticing, but they're rarely the stuff of true leadership. Fifth, boards should accept that real leaders will more than likely overturn the status quo. Sixth, boards need to know that insider heirs usually aren't apparent, and finally, boards should always avoid making a hasty decision. Hiring the right CEO is a slow process at best. Ultimately, the surest way for boards to pick the right CEO is to cultivate and nurture talent in the making.
Akamai Technologies is attracting investors, employees, partners, and customers like a supercharged magnet. The Cambridge, Massachusetts, company is transforming the way the Internet works, and everybody, it seems, wants to be "Akamaized." But will the attraction last? Will the company meet the challenges of explosive growth? Will it maintain its technological edge? Will it fulfill the giddy expectations of investors? Much of that depends on the performance of George Conrades, Akamai's chairman and CEO. In this interview, Conrades explains how Akamai pushes Web content and services closer to end users through the use of distributed servers and proprietary software. He shares the challenges and thrills of working at Internet speed--forging partnerships with site operators, ISPs, and application providers; setting and achieving short-term business goals while preserving the company's intellectually combative corporate culture; and maintaining a customer focus. Conrades discusses the company's "virtuous circle" business model--better technology attracts more content providers, which begets more ISP participation, which begets better technology--and reveals the strategies and processes Akamai uses to keep that circle spinning. He discusses his own role as an absorber of uncertainty: by taking on the inevitable risks of competing in the networked economy, he frees up the rest of company to act. Conrades, who's been in business long enough to see the industrial era give way to the Internet era, says the new economy is all about "speed and scale." But it's also about risk-taking, innovation, and teamwork. Bureaucratic CEOs need not apply.
New ideas are the precious currency of the new economy, but generating them doesn't have to be a mysterious process. The image of the lone genius inventing from scratch is a romantic fiction. Businesses that constantly innovate have systematized the production and testing of new ideas, and the system can be replicated by practically any organization. The best innovators use old ideas as the raw materials for new ideas, a strategy the authors call knowledge brokering. The system for sustaining innovation is the knowledge brokering cycle, and the authors discuss its four parts. The first is capturing good ideas from a wide variety of sources. The second is keeping those ideas alive by playing with them, discussing them, and using them. Imagining new uses for old ideas is the third part--some knowledge brokers encourage cross-pollination by creating physical layouts that allow, or even force, people to interact with one another. The fourth is turning promising concepts into real services, products, processes, or business models. Companies can use all or part of the cycle. Large companies in particular desperately need to move ideas from one place to another. Some will want to build full-fledged consulting groups dedicated to internal knowledge brokering. Others can hire people who have faced problems similar to the companies' current problems. The most important lesson is that business leaders must change how they think about innovation, and they must change how their company cultures reflect that thinking.
Most retailers on the Web spend more to acquire customers than they will ever get back in revenue from them. Many think that sky-high spending on marketing is necessary to stake out their share of Internet space. But is it really? How do retailers know how much to pay? Consider CDnow, which has developed a multifaceted customer-acquisition strategy that reflects a clear understanding of the economics of an on-line business. At the heart of its strategy is affiliate marketing, a concept the company pioneered. Under its BuyWeb program, anyone can put a link to CDnow on his or her Web site, and if a customer uses that link to arrive at CDnow and make a purchase, the referring site owner gets a percentage of the sale. CDnow pays no money if no sale is made, which makes the marketing program completely efficient. But CDnow didn't stop there. Being a Web store, it had complete data on the number of visitors to its site and what they bought, which it used to work out the lifetime value of an average customer. CDnow used that figure to determine how much to wager on the expensive and risky world of traditional advertising to reach a wider audience that wasn't already on-line. CDnow's experience, still a work in progress, contradicts John Wanamaker's oft-quoted lament: "I know half the money I spend on advertising is wasted, but I can never find out which half." As the CDnow example demonstrates, there is a way to find out which half really works.
Electronic hubs--Internet-based intermediaries that host electronic marketplaces and mediate transactions among businesses--are generating a lot of interest. Companies like Ariba, Chemdex, and Commerce One have already attained breathtaking stock market capitalizations. Venture capitalists are pouring money into more business-to-business start-ups. Even industrial stalwarts like GM and Ford are making plans to set up their own Web markets. As new entrants with new business models pour into the business-to-business space, it's increasingly difficult to make sense of the landscape. This article provides a blueprint of the e-hub arena. The authors start by looking at the two dimensions of purchasing: what businesses buy--manufacturing inputs or operating inputs --and how they buy--through systematic sourcing or spot sourcing. They classify B2B e-hubs into four categories: MRO hubs, yield managers, exchanges, and catalog hubs, and they discuss each type in detail. Drilling deeper into this B2B matrix, the authors look at how e-hubs create value--through aggregation and matching--and explain when each mechanism works best. They also examine the biases of e-hubs. Although many e-hubs are neutral--they're operated by independent third parties--some favor the buyers or sellers. The authors explain the differences and discuss the pros and cons of each position. The B2B marketplace is changing rapidly. This framework helps buyers, sellers, and market makers navigate the landscape by explaining what the different hubs do and how they add the most value.
Adesemi, an American start-up in Africa, had been trying for six years to blanket the developing world with desperately needed wireless communications services. It had raised more than $15 million in venture capital and launched the world's first fully integrated "virtual" phone system--which incorporated voice mail, pagers, and hundreds of pay phones--in one of its poorest countries, Tanzania. Then Adesemi crashed to earth, leaving its founder, Monique Maddy, with a company that was a shadow of the powerhouse she had envisioned. The company's demise was personally and financially devastating to Maddy, a Liberian-born entrepreneur who grew up wanting to work for the United Nations and who ultimately trained at Harvard Business School. But in this detailed first-person account, she says the failure taught her four important lessons about starting a business in an emerging-market country. The first is that entrepreneurs should avoid do-good investors and concentrate on do-well backers who are looking to make money and who understand risk. The second is that a start-up with a heterogeneous staff should appoint a seasoned HR guru to improve cross-cultural tolerance and understanding. The third is that entrepreneurs should conduct serious due diligence on potential partners, and partners should be required to invest their own money in a venture. And the fourth is that a start-up in the third world should find a visionary, deep-pocketed investor who is willing to ride out the inevitable bumps.
Mac Monroe had grand plans for Georgia Building Supplies, the company he had started with a friend almost 50 years ago, selling construction materials wholesale to contractors. In the mid-1980s, Mac bought out his disgruntled partner's share of the company and put his oldest son, Mac Monroe IV, at the helm. It was all falling into place. But Mac Four, as his parents called him, died tragically in a car accident. The family and the company never recovered. Mac sold GBS two years later. Now Mac is trying it again, bankrolling Carolina Construction Supply with his youngest boy, John "Little Bit" Monroe, at the helm. The tech-savvy Little Bit would like Mac and CCS to embrace the Internet for on-line transactions and service. But Mac keeps emphasizing sales, and he's lured two heavy-hitter salesmen from the competition--including his middle son, Mike Monroe. In its first two years, CCS has lost $1 million, and the ghost of Mac Four lingers at the company--Mac is constantly invoking his name, alluding to what Mac Four would have done if he were still alive. Complicating matters is the Monroe family's overprotective matriarch, Bea, who doesn't want to hear anything bad about her boys, and who'd like more time to spend with her 70-something husband. Mac's got plenty of doubts about CCS's future--that's why he's called on P. Dee Chambers, a consultant to small businesses, for advice. What should she tell him? Can Carolina Construction Supply be saved? In R00308 and R00315, five commentators, Gerry Boschwitz, Rudy Boschwitz, Mary F. Whiteside, Joe Mattos, and John L. Ward, review this fictional account and offer their advice.
Everyone knows that the way things are formally organized in most companies (their processes) is not the same as the way things are actually done (their practices). The difference between the two creates tension that can be very difficult for managers to handle. Lean too much toward practice and new ideas may bubble up and evaporate for lack of a structure to harness them. Lean too much toward process and you may get no new ideas at all. The goal, then, is to tap into the creativity at work in every layer of an organization with a combination of process and practice. Take, for example, the community of people who fix Xerox machines. Large machines, it turns out, are not as predictable as Xerox's documentation would suggest. So when following the service manual is not enough, the reps come together--over breakfast, at breaks, at the end of the day--and talk about their own best practices. So far so good. But Xerox goes a step further. It has set up a process similar to an academic peer-review system to gather, vet, and share those best practices across the company. The reps get much-welcome recognition for their creativity, and local best practices are deployed companywide. Dot-com companies are a hotbed of innovative practices. But as they mature, they, like Xerox, may find that they need seasoned managers who can harness those practices through the judicious application of constructive processes.
Syndication has long been a fundamental organizing principle in the entertainment world, but it's been rare elsewhere in business. The fixed physical assets and slow-moving information that characterized the industrial economy made it difficult, if not impossible, to create the kind of fluid networks that are essential for syndication. But with the rise of the information economy, flexible business networks are not only becoming possible, they're becoming essential. As a result, syndication is moving from business's periphery to its center. Within a syndication network there are three roles that businesses can play. Originators create original content, which encompasses everything from entertainment programming to products to business processes. Syndicators package that content, often integrating it with content from other originators. Distributors deliver the content to consumers. A company can play a single role, or it can play two or three roles simultaneously. Syndication requires businesses to rethink their strategies and relationships in radical ways. Because a company's success hinges on its connections to other companies, it can no longer view its core capabilities as secrets to protect. Instead, it needs to see them as products to sell. FedEx, for example, is succeeding by distributing its sophisticated package-tracking capability to other companies on the Internet. Syndication promises to change the nature of business. As this new way of doing business takes hold, companies may look the same as before to their customers, but behind the scenes they will be in constant flux, melding with one another in ever-changing, self-organizing networks.
The announcement in January of the merger between America Online and Time Warner marked the convergence of the two most important business trends of the last five years--the rise of the Internet and the resurgence of mergers and acquisitions. M&A activity is at a fever pitch, spurred in large part by the breathtaking influx of capital into the Internet space. And all signs indicate the trend will only accelerate. Against this background, an impressive group of experienced deal makers came together to share their experiences of what makes mergers work. They were assembled in Scottsdale, Arizona, under the auspices of the M&A Group, a professional society formed in 1999 for CEOs interested in M&A as a business strategy. Participants included top executives from Internet start-ups like Teligent; venture capital firms like Baroda Ventures; financial institutions like Merrill Lynch and PricewaterhouseCoopers; and major corporations like Allstate, Tyco International, SmithKline Beecham, Rohm and Haas, VF, Crown Cork & Seal, and Hughes Space and Communications. The spirited and surprisingly frank discussion cut a wide swath, considering issues such as whether most mergers fail to pan out as well as expected, how to increase the odds of success, the nuts and bolts of the integration process, the trade-offs between acquiring a company and growing from within, the importance of cultural issues, and why anyone would want to be on the board of a merged company.
The bright line that once distinguished the dot-com from the incumbent is rapidly fading. Success in the new economy will go to those who can execute clicks-and-mortar strategies that bridge the physical and virtual worlds. But how executives forge such strategies is under considerable debate. Despite the obvious benefits that integration offers--cross-promotion, shared information, purchasing leverage, distribution economies, and the like--many executives now assume that Internet businesses have to be separate to thrive. They believe that the very nature of traditional business--its protectiveness of current customers, its fear of cannibalization, its general myopia--will smother any Internet initiative. Authors Ranjay Gulati and Jason Garino contend that executives don't have to make an either-or choice when it comes to their clicks-and-mortar strategies. The question isn't, "Should we develop our Internet channel in-house or launch a spin-off?" but rather, "What degree of integration makes sense for our company?" To determine the best level of integration for their companies, executives should examine four business dimensions: brand, management, operations, and equity. Drawing on the experiences of three established retailers--Office Depot, KB Toys, and Rite Aid--the authors show the spectrum of strategies available and discuss the trade-offs involved in each choice. By thinking carefully about which aspects of a business to integrate and which to keep distinct, companies can tailor their clicks-and-mortar strategy to their own particular market and competitive situation, dramatically increasing their odds of e-business success.
Mac Monroe had grand plans for Georgia Building Supplies, the company he had started with a friend almost 50 years ago, selling construction materials wholesale to contractors. In the mid-1980s, Mac bought out his disgruntled partner's share of the company and put his oldest son, Mac Monroe IV, at the helm. It was all falling into place. But Mac Four, as his parents called him, died tragically in a car accident. The family and the company never recovered. Mac sold GBS two years later. Now Mac is trying it again, bankrolling Carolina Construction Supply with his youngest boy, John "Little Bit" Monroe, at the helm. The tech-savvy Little Bit would like Mac and CCS to embrace the Internet for on-line transactions and service. But Mac keeps emphasizing sales, and he's lured two heavy-hitter salesmen from the competition--including his middle son, Mike Monroe. In its first two years, CCS has lost $1 million, and the ghost of Mac Four lingers at the company--Mac is constantly invoking his name, alluding to what Mac Four would have done if he were still alive. Complicating matters is the Monroe family's overprotective matriarch, Bea, who doesn't want to hear anything bad about her boys, and who'd like more time to spend with her 70-something husband. Mac's got plenty of doubts about CCS's future--that's why he's called on P. Dee Chambers, a consultant to small businesses, for advice. What should she tell him? Can Carolina Construction Supply be saved? In R00308 and R00315, five commentators, Gerry Boschwitz, Rudy Boschwitz, Mary F. Whiteside, Joe Mattos, and John L. Ward, review this fictional account and offer their advice.