Stelios Haji-Ioannou, the 32-year-old CEO and founder of easyJet airlines, achieved profitability for the first time in 1999, almost four years after launching his London-based, low-cost carrier. The concept behind easyJet was to offer low-cost airline service to the masses, and the airline accomplished this by adopting an efficiency-driven operating model, creating brand awareness, and maintaining high levels of customer satisfaction. A key issue in the case is whether the airline will continue to grow and survive in the highly competitive, low-cost segment of the market. In 2000, Haji-Ioannou was anxious to try his hand at launching other businesses, so he started a chain of Internet cafes. Some questioned whether Haji-Ioannou would be able to transfer his low-cost business model successfully to Internet cafes. Undeterred, Haji-Ioannou moved ahead with his plan to create easyEverything, with the belief that he could make a profit by encouraging customers to surf the Internet, send e-mail, and shop online. A 2002 and 2001 ECCH award winner.
By February 2000, easyEverything, the first chain of large Internet cafes to be conceived anywhere in the world, had already successfully launched five shops in London. The company also aggressively planned to launch an additional 50 shops across Europe by 2002. EasyEverything was just one of several companies operating under the U.K.-based parent company easyGroup, which also managed easyJet airlines and several other start-up ventures. Stelios Haji-Ioannou, chairman and owner of easyGroup, was a charismatic and wealthy entrepreneur known for his down-to-earth, no-frills style that had come to exemplify the easy brand. His mission for easyEverything was simple: to make easyEverything the cheapest way to access the Internet. He also envisioned easyEverything as a virtual alternative to department stores, where users could shop, send e-mails, and surf the Internet. However, some industry experts questioned whether Internet cafes were a viable long-term concept because of rapid changes in technology, such as wireless Internet access.
In April 2000, Stelios Haji-Ioannou launched easyRentacar, his latest Internet-based business. EasyRentacar was just one of several companies operating under the U.K.-based parent company, easyGroup, which also managed easyJet airlines and easyEverything, a chain of Internet shops. Haji-Ioannou, chairman and owner of easyGroup, was a charismatic and wealthy entrepreneur known for his down-to-earth, no-frills style that had come to exemplify the easy brand. After signing a deal with DaimlerChrysler to lease 5,000 of its Mercedes A-Class vehicles, Haji-Ioannou entered the rental car business with the goal of offering low rates. He believed that established players in the rental car business, such as Budget, Avis, and Hertz, had formed a cartel that fed off the corporate client. He aimed to provide a low-cost alternative for consumers who paid out of their own pockets. Illustrates how Haji-Ioannou has once again entered a new business with the goal of redefining the existing industry business model to add shattering value for the customer.
In the summer of 1997, the executive team of GPS, a very successful French retailer in the one-hour photo finishing and one-hour eyewear business, is trying to decide whether to purchase Vision Express of the United Kingdom. Both companies are very entrepreneurial, fast growing, and have pioneered the one-hour service concept in their respective countries. The founder of Vision Express was Dean Butler, the American who previously founded Lens Crafters in the United States. In spite of their similarities, the formula for success of the two companies is rather different, with Vision Express relying heavily on advertisements that feature two-for-one sales and GPS competing on high service levels and repeat business. The acquisition, if made, would be GPS's first major expansion outside France.
GPS acquired Vision Express, but it is not going well. Two executives at GPS are proposing a revolution at Vision Express, which would change the company's business model to be more like the French model. Dean Butler, the founder of Vision Express, strongly opposes the change, arguing that it would ruin Vision Express. The business model may or may not be the problem. What should GPS management do?
Takes an inside look at ABB's unprecedented 1997 to 2000 transformation under Gvran Lindahl, the second CEO of this electrical engineering powerhouse, who succeeded Percy Barnevik during late 1996. After a highly successful first decade of existence under Barnevik (1988 to 1996), ABB found itself in the midst of a crisis by the end of 1997, after the combined effects of global deregulation, radical technological innovations, and an unpredictable but sweeping financial crisis across most emerging markets. ABB's response was to shift its strategic focus radically to favor knowledge- and service-based offerings across all of its businesses. The company's implementation of such strategy took place in two bold steps. The first one comprised a major global restructuring of ABB, as a result of which the company divested from mature manufacturing businesses such as power generation and transportation and became a global leader in areas such as industrial process automation and electrical distribution solutions. The second step was to transform ABB into a fast-growing high-technology company, moving from old to new economy Internet-based services and solutions. The case contains two mini-cases in ABB distribution solutions and ABB's global information systems group--two instances that show first-hand the pains of rapidly transforming a vast, manufacturing concern into an Internet- and solutions-based powerhouse as the new millennium unfolds.
The year 1998 was an excellent one for Toyota in Europe: The company posted record sales in 10 European countries and had topped Nissan's sales in Europe for the first time ever. However, on a global scale, the European market was still a weak spot for Toyota. The market share in Western Europe stood at only 3%, whereas the company had secured over 10% in other international markets such as the United States. Early 1999 marked a turning point and Toyota publicly announced its goal to raise the European market share to 5% by the year 2005. However, many executives considered the different positioning and perception of the Toyota brand across Europe as a main obstacle to growth. The new president of Toyota Europe had to decide whether there was a need to reposition the brand. If yes, should he recommend a unified brand image within Europe. How could this be achieved? Provides data on the European market for automobiles, customer segments, and positioning of Toyota vs. the competition. Also outlines the intricacies of growing a business by making bold changes to the positioning of products and brands.
Although women have made enormous gains in the business world--they hold seats on corporate boards and run major companies--they still comprise only 10% of senior managers in Fortune 500 companies. What will it take to shatter the glass ceiling? According to Debra Meyerson and Joyce Fletcher, it's not a revolution but a strategy of small wins--a series of incremental changes aimed at the subtle discriminatory forces that still reside in organizations. It used to be easy to spot gender discrimination in the corporate world, but today overt displays are rare. Instead, discrimination against women lingers in common work practices and cultural norms that appear unbiased. Consider how managers have tried to rout gender discrimination in the past. Some tried to assimilate women into the workplace by teaching them to act like men. Others accommodated women through special policies and benefits. Still others celebrated women's differences by giving them tasks for which they are "well suited." But each of those approaches proffers solutions for the symptoms, not the sources, of gender inequity. Gender bias, the authors say, will be undone only by a persistent campaign of incremental changes that discover and destroy the deeply embedded roots of discrimination. Because each organization is unique, its expressions of gender inequity are, too. Drawing on examples from companies that have used the small-wins approach, the authors advise readers on how they can make small wins at their own organizations. They explain why small wins will be driven by men and women together, because both will ultimately benefit from a world where gender is irrelevant to the way work is designed and distributed.
Major business trends such as deregulation, globalization, technological convergence, and the rapid evolution of the Internet have transformed the roles that companies play in their dealings with other companies. Business practitioners and scholars talk about alliances, networks, and collaboration among companies. But managers and researchers have largely ignored the agent that is most dramatically transforming the industrial system as we know it: the consumer. In a market in which technology-enabled consumers can now engage themselves in an active dialogue with manufacturers--a dialogue that customers can control--companies have to recognize that the customer is becoming a partner in creating value. In this article, authors C.K. Prahalad and Venkatram Ramaswamy demonstrate how the shifting role of the consumer affects the notion of a company's core competencies. Where previously, businesses learned to draw on the competencies and resources of their business partners and suppliers to compete effectively, they must now include consumers as part of the extended enterprise, the authors say. Harnessing those customer competencies won't be easy. At a minimum, managers must come to grips with four fundamental realities in co-opting customer competence: they have to engage their customers in an active, explicit, and ongoing dialogue; mobilize communities of customers; manage customer diversity; and engage customers in cocreating personalized experiences. Companies will also need to revise some of the traditional mechanisms of the marketplace--pricing and billing systems, for instance--to account for their customers' new role.
Intellectual property? Five years ago, that phrase wasn't even in the vocabularies of many CEOs, let alone a part of their business strategies. Indeed, many chief executives still regard patents, trademarks, copyrights, and other forms of intellectual property as legal matters best left to the corporate attorneys. But the burgeoning knowledge economy has given rise to a new type of CEO and a new type of business competition--one in which intellectual assets, not physical ones, have become the principal sources of shareholder wealth and competitive advantage. And therein lies one of the next great corporate challenges: figuring out how to unlock the hidden power of patents. In this article, authors Kevin Rivette and David Kline describe how the strategic management and use of patents can enhance a company's commercial success in three broad ways: by establishing a proprietary market advantage, by improving financial performance, and by enhancing overall competitiveness. They present real-world examples of effective and ineffective patent management strategies--for example, comparing Dell's aggressive patenting of its direct-sales business model with Wal-Mart's looser protection of its unique business systems. They describe common but effective patenting techniques such as clustering and bracketing, both designed to block out or hamper competitors in the market. For both traditional and new-economy businesses, such as Amazon.com and Priceline.com, leveraging patents properly can produce benefits such as reduced corporate risk, the ability to anticipate and react to market shifts, and, ultimately, increased shareholder value and profits.
A new organizational form is emerging in companies that run on knowledge: the community of practice. And for this expanding universe of companies, communities of practice promise to radically galvanize knowledge sharing, learning, and change. A community of practice is a group of people informally bound together by shared expertise and passion for a joint enterprise. People in companies form them for a variety of reasons--to maintain connections with peers when the company reorganizes; to respond to external changes such as the rise of e-commerce; or to meet new challenges when the company changes strategy. Regardless of the circumstances that give rise to communities of practice, their members inevitably share knowledge in free-flowing, creative ways that foster new approaches to problems. Over the past five years, the authors have seen communities of practice improve performance at companies as diverse as an international bank, a major car manufacturer, and a U.S. government agency. Communities of practice can drive strategy, generate new lines of business, solve problems, promote the spread of best practices, develop people's skills, and help companies recruit and retain talent. The paradox of such communities is that although they are self-organizing and thus resistant to supervision and interference, they do require specific managerial efforts to develop them and integrate them into an organization. Only then can they be fully leveraged. The authors explain the steps managers need to take in order to get communities going--and to sustain them so they can become a central part of their companies' success.
Once upon a time, the Walt Disney Company was famous for a quaint little mouse, a collection of vintage animated films for children, and two enjoyable--but aging--theme parks. It was, in other words, a great American company in eclipse. Today, Disney may be going through some tough times, but it's tough times for a vast $23 billion empire. Along with animation blockbusters like The Lion King and Beauty and the Beast, Disney now owns three motion picture studios, as well as the ABC and ESPN television networks. The company is now poised to build new theme parks in Japan and China to go along with its EuroDisney attractions. Two Disney cruise ships sail the Bahamas. A Disney symphony to mark the millennium opened at the New York Philharmonic last fall. And an integrated network of Web sites--Disney.com, ABC.com, ABCNews.com, Go.com, and Family.com--stretches out over the Internet. The driving force behind all that growth was undoubtedly Michael Eisner, who became chairman and CEO in 1984. In this interview with senior editor Suzy Wetlaufer, Eisner vividly and colorfully describes the challenges he confronted as he built Disney. In a series of revealing anecdotes, he illustrates the workings of a culture that fosters creativity--an environment fraught with both carefully institutionalized conflict and good old-fashioned common sense. Eisner describes in detail the four pillars of his particular brand of leadership, which he maintains are the same in good times and bad: being an example; being there; being a nudge; and being, as he puts it, "an idea generator--all the time, all day, all night."
As we enter the twenty-first century, the business world is consumed by questions about e-commerce. In this article, four close observers of e-commerce speculate about the future of commerce. Adrian Slywotzky believes the Internet will overturn the inefficient push model of supplier-customer interaction. He predicts that in all sorts of markets, customers will use choiceboards--interactive, on-line systems that let people design their own products by choosing from a menu of attributes, prices, and delivery options. And he explores how the shifting role of the customer--from passive recipient to active designer--will change the way companies compete. Clayton Christensen and Richard Tedlow agree that e-commerce, on a broad level, will change the basis of competitive advantage in retailing. The essential mission of retailers--getting the right product in the right place at the right price at the right time--is a constant. But over the years retailers have fulfilled that mission differently thanks to a series of disruptive technologies. The authors identify patterns in the way that previous retailing transformations have unfolded to shed light on how retailing may evolve in the Internet era. Nicholas Carr takes issue with the widespread notion that the Internet will usher in an era of "disintermediation," in which producers of goods and services bypass wholesalers and retailers to connect directly with their customers. Business is undergoing precisely the opposite phenomenon--what he calls hypermediation. Transactions over the Web routinely involve all sorts of intermediaries. It is these middlemen that are positioned to capture most of the profits.
AllerGen, a young biotechnology firm, is heading for trouble, possibly even bankruptcy. The company's one product--a vaccine for people allergic to cats--may never make it to market. And turnover is on the rise, not only because of the vaccine's uncertain future but also because employees are increasingly unhappy working for founder and Chief Scientific Officer Harry Huston. Although Harry is an excellent scientist, he has no business background. Several years ago he recruited a president and COO to bring some much-needed business savvy to the organization, but that executive left after a year because Harry simply wouldn't let him do his job. It hasn't helped matters that AllerGen's board consists mainly of Harry's friends and family, who go along with whatever he wants. Recently some scientists at AllerGen had the phenomenal good luck to develop, almost by accident, an alternative potentially lucrative product. But Harry won't give the go-ahead to develop a business plan for it. "There has to be someone who stays the course and works for the sheer joy of finding the cure," he says. "There are people out there who need this vaccine. Some very badly. That's why we're here. Not for the money." It's up to two senior scientists to make Harry see that he is holding AllerGen back. How can they convince Harry that changing course is critical? In R00106 and R00114, commentators Matt Benasutti, Mark Lipton, George N. Hatsopoulos, Dorothy Beckert, and Warren D. Miller offer advice on this fictional case study.
AllerGen, a young biotechnology firm, is heading for trouble, possibly even bankruptcy. The company's one product--a vaccine for people allergic to cats--may never make it to market. And turnover is on the rise, not only because of the vaccine's uncertain future but also because employees are increasingly unhappy working for founder and Chief Scientific Officer Harry Huston. Although Harry is an excellent scientist, he has no business background. Several years ago he recruited a president and COO to bring some much-needed business savvy to the organization, but that executive left after a year because Harry simply wouldn't let him do his job. It hasn't helped matters that AllerGen's board consists mainly of Harry's friends and family, who go along with whatever he wants. Recently some scientists at AllerGen had the phenomenal good luck to develop, almost by accident, an alternative potentially lucrative product. But Harry won't give the go-ahead to develop a business plan for it. "There has to be someone who stays the course and works for the sheer joy of finding the cure," he says. "There are people out there who need this vaccine. Some very badly. That's why we're here. Not for the money." It's up to two senior scientists to make Harry see that he is holding AllerGen back. How can they convince Harry that changing course is critical? In R00106 and R00114, commentators Matt Benasutti, Mark Lipton, George N. Hatsopoulos, Dorothy Beckert, and Warren D. Miller offer advice on this fictional case study.
Open competition for other companies' people, once a rarity in business, is now an accepted fact. Fast-moving markets require fast-moving organizations that are continually refreshed with new talent. But no one likes to see talent leave; when a good employee walks, the business takes a hit. It's futile to hope that by tinkering with compensation, career paths, and training efforts, you can wall off your company from today's labor market. But there is an alternative: a market-driven approach to retention based on the assumption that long-term, across-the-board loyalty is neither possible nor desirable. By taking a hard look at which employees you need to retain and for how long, you can use highly targeted programs to keep the required talent in place. Most companies today rely on compensation to build loyalty, but compensation is only one of many useful retention mechanisms. You can redesign jobs to reduce turnover: UPS kept many more drivers by shifting the tedious job of loading trucks to other employees. You can promote loyalty to particular projects or to work teams. You can hire people who aren't in high demand and place valuable employees in locations where they won't be constantly tempted by job offers. You can team up with other companies to offer cross-company career paths. And when there's no effective way to prevent attrition, you can learn to live with it: outsource, strengthen recruitment, standardize jobs, cross-train employees, and organize work around short-term projects. If managing retention in the past was akin to tending a dam, today it is more like managing a river. The object is not to stop water from flowing but to control its direction and speed.
Entrepreneur Charles H. Ferguson created FrontPage with the notion of establishing a proprietary software standard for the Internet. His company, Vermeer, did beat competitors to market with an authoring tool for Web pages; soon after, Ferguson sold the company and the technology to Microsoft for $130 million. In his book, High Stakes, No Prisoners: A Winner's Tale of Greed and Glory in the Internet Wars (Times Books, 1999), Ferguson, an industry analyst and government policy analyst, offers a detailed and extraordinarily honest account of his experiences in the world of high-tech start-ups. Reviewers J. Bradford DeLong and A. Michael Froomkin note that other books may present a more thorough account of the high-tech industry, but few contain the streetwise business philosophy Ferguson pumps into this book. His multiplicity of vision gives the book its depth--though his awareness of his own shortcomings does not give him humility in assessing others' actions. The reviewers take issue with Ferguson's narrative only when he argues that Microsoft's strategy of gaining proprietary control over software standards is the only game in town. Another approach is also worth considering: nonproprietary, "open source" software. Microsoft's principal competitive restraint--in the operating system business, at least--isn't Sun or Apple. It's open-source software, particularly the Linux freeware operating system. Ferguson concludes that Linux is unlikely to have more than a small niche in the market. But the reviewers suggest that some emerging aspects of the open-source movement mean that freeware still poses a threat to Microsoft.
The promise of synergy is the prime rationale for the existence of the multibusiness corporation. Yet for most corporations, the "1-plus-1-equals-3" arithmetic of cross-business synergies doesn't add up. Companies that do achieve synergistic success use a corporate strategic process called coevolving; they routinely change the web of collaborative links among businesses to exploit fresh opportunities for synergies and drop deteriorating ones. The term coevolution originated in biology. It refers to the way two or more ecologically interdependent species become intertwined over time. As these species adapt to their environment, they also adapt to one another. Today's multibusiness companies need to take their cue from biology to survive: They should assume that links among businesses are temporary and that the number of connections--not just their content--matters. Rather than plan collaborative strategy from the top, as traditional companies do, corporate executives in coevolving companies should simply set the context and then let collaboration (and competition) emerge from business units. Incentives, too, are different than they are in traditional companies. Coevolving companies reward business units for individual performance, not for collaboration. So collaboration occurs only when two business-unit managers both believe that a link makes sense for their respective businesses, not because collaboration per se is useful. Managers in coevolving companies also need to recognize the importance of business systems that support the process: frequent data-focused meetings among business-unit leaders, external metrics to gauge individual business performance, and incentives that favor self-interest.