Looking for a creative option to promote 3M products to medical professionals, a 3M Chile sales manager developed the idea of a first-aid kit or botiquin that could be used as a promotional gift. Managers at the company's world headquarters had not previously focused on branded first-aid kits. It was the same all over the world, a plain white box with the red cross in front. You just can't brand a first-aid kit! they replied. At the same time, the Chilean managers lacked the resources necessary for adequate market research. Should they go ahead with the botiquin concept anyway? If they did, questions such as channels, packaging, promotion, and pricing, would still have to be addressed. (A sequel to this case is available, titled 3M Chile - Health Care Products (B), case 9A99A005.)
A family-owned brick manufacturer has built an export business to Japan and other Asia markets from zero to ten per cent of its volume in seven years. The case examines the company's export strategy and organization in light of the recent Asian economic crisis and the reasons for their competitive success both in Australia and Asia. The managing director is raising the question of whether it is time to change their regional export strategy and organizational structure.
Describes the opportunities that confront the African Communications Group, an entrepreneurial organization that plans to introduce a wireless pay-phone system in Tanzania. Provides a foundation for the analysis of value creation and of value capture. The possibility of entry by other companies, the presence of a large supplier, and uncertainties about demand all create important tradeoffs for the new venture.
Given the changes wrought by the new economy, it makes sense for companies to pursue ever-greater levels of flexibility. But does it make sense for human beings? Do we really want to be free agents, hopping from job to job and from city to city, virtual employees of virtual companies? Richard Sennett doesn't think so. In The Corrosion of Character: The Personal Consequences of Work in the New Capitalism, Sennett, a sociologist and well-known social critic, lays out a dark vision of what the new economy means for working people at all levels of society. He draws on poignant stories to show how the flexibility demanded by the new economy causes us to lose the attachments--to people, places, or companies--that form our character. Without such attachments, we lose the ability to focus on the long term: if everything's going to change overnight, why worry about tomorrow? In the aggregate, the demands of flexibility erode society's foundations. But as Nicholas Carr points out, this isn't a complete picture of what flexibility means for people today. For example, the spread of cheap computers is expanding opportunities to launch, market, and manage microbusinesses. And the networked economy--by making workdays more flexible and location less important--will give many of us more control over where we live and how we parcel out our time. Despite Sennett's blindness to the benefits offered by the new economy, his book provides a thoughtful counterbalance to the empty-headed boosterism that characterizes much of the current writing on the subject.
Private-label products are anathema to many consumer goods manufacturers--cheap imitations that undermine margins and weaken product categories. But the growing power and sophistication of retailers has changed that competitive dynamic. Private labels now offer a range of opportunities for savvy manufacturers. Perhaps most notable, retailers are working with manufacturers to bring out store brands whose quality matches or even exceeds that of brand-name goods. These premium labels offer better margins than traditional private labels and can serve as a low-risk way for manufacturers to try new product categories. Like "fighter brands," private labels can help a manufacturer preserve market share in a category when it decides to raise the price of its brand-name product. Or a manufacturer in the number-two slot might design its private label to imitate--and take sales from--the market leader in a category. The authors say the risks of producing private labels are often exaggerated. Retailer switching isn't as easy as is often believed, particularly for manufacturers who work closely with retail partners. And manufacturers who set clear priorities can make sure their private-label sales don't distract them from promoting the main brand. The authors warn that different manufacturers will want to go with different private-label strategies. Private labels are likely to make most sense when entry barriers are low, when substantial economies of scale exist, or when the label is a premium line for a category with low price sensitivity. For manufacturers who seek closer ties with retailers, private labels may represent a neglected opportunity.
In turbulent markets, businesses and opportunities are constantly falling out of alignment. New technologies and emerging markets create fresh opportunities. Converging markets produce more. And of course, some markets fade. In this landscape of continuous flux, it's more important to build corporate-level strategic processes that enable dynamic repositioning than it is to build any particular defensible position. That's why smart corporate strategists use patching, a process of mapping and remapping business units to create a shifting mix of highly focused, tightly aligned businesses that can respond to changing market opportunities. Patching is not just another name for reorganizing; patchers have a distinctive mind-set. Traditional managers see structure as stable; patching managers believe structure is inherently temporary. Traditional managers set corporate strategy first, but patching managers keep the organization focused on the right set of business opportunities and let strategy emerge from individual businesses. Although the focus of patching is flexibility, the process itself follows a pattern. Patching changes are usually small in scale and made frequently. Patching should be done quickly; the emphasis is on getting the patch about right and fixing problems later. Patches should have a test drive before they're formalized but then be tightly scripted after they've been announced. And patching won't work without the right infrastructure: modular business units, fine-grained and complete unit-level metrics, and companywide compensation parity. The authors illustrate how patching works and point out some common stumbling blocks.
Every company today exists in a complex web of relationships formed, one at a time, through negotiation. Purchasing and outsourcing contracts are negotiated with vendors. Marketing arrangements are negotiated with distributors. Product development agreements are negotiated with joint-venture partners. Taken together, the thousands of negotiations a typical company engages in have an enormous effect on both its strategy and its bottom line. But few companies think systematically about their negotiating activities as a whole. Instead they take a situational view, perceiving each negotiation to be a separate event with its own goals, tactics, and measures of success. Coordinating them all seems an overwhelming and impracticable job. In reality, the author argues, it is neither. A number of companies are successfully building coordinated negotiation capabilities by applying four broad changes in practice and perspective. First, they've established a companywide negotiation infrastructure to apply the knowledge gained from forging past agreements to improve future ones. Second, they've broadened the measures they use to evaluate negotiators' performance beyond matters of cost and price. Third, they draw a clear distinction between the elements of an individual deal and the nature of the ongoing relationship between the parties. Fourth, they make their negotiators feel comfortable walking away from a deal when it's not in the company's best interests. These changes aren't radical steps. But taken together, they will let companies establish closer, more creative relationships with suppliers, customers, and other partners.
Less than half an hour after Donald Hastings became chairman and CEO of the Lincoln Electric Company in July 1992, he got the shocking news: losses from the company's European operations were so steep that Lincoln was at risk of defaulting on its loans and being unable to pay its employees their year-end bonus. Since the bonus was the foundation of the company's unusually successful manufacturing operations, Hastings knew that failure to pay it could lead to the company's unraveling. How had Lincoln gotten into this predicament? By a program of rapid foreign expansion. Lincoln was primarily a U.S. company until the mid-1980s, but recession at home and competition from abroad led executives to dream that the company could become a global power. Between 1986 and 1991, Lincoln took on unprecedented debt in order to finance foreign acquisitions, mostly in Europe. A number of factors doomed the venture: recession in Europe, unfamiliarity with Europe's labor culture, lack of international expertise at the top. But the root cause, Hastings admits, was overconfidence on the part of Lincoln's leaders in the company's manufacturing abilities and systems. Hastings, now chairman emeritus, recounts how the company suffered through the early 1990s and then returned to prosperity. It wrote off most of its European operations, ramped up domestic production and sales, and hired top managers and board members with international experience. As a result of strenuous efforts at all levels of the company, it managed to keep paying the bonus and to largely regain the trust of its people.
Corporations are continually looking for new sources of innovation. Today several leading companies are beginning to find inspiration in an unexpected place: the social sector. That includes public schools, welfare-to-work programs, and the inner city. Indeed, a new paradigm for innovation is emerging: a partnership between private enterprise and public interest that produces profitable and sustainable change for both sides. In this article, the author shows how some companies are moving beyond corporate social responsibility to corporate social innovation. Traditionally, companies viewed the social sector as a dumping ground for their spare cash, obsolete equipment, and tired executives. But that mind-set hardly created lasting change. Now companies are viewing community needs as opportunities to develop ideas and demonstrate business technologies; find and serve new markets; and solve long-standing business problems. They focus on inventing sophisticated solutions through a hands-on approach. This is not charity; it is R&D, a strategic business investment. The author concedes that it isn't easy to make the new paradigm work. But she has found that successful private-public partnerships share six characteristics: a clear business agenda, strong partners committed to change, investment by both parties, rootedness in the user community, links to other organizations, and a commitment to sustain and replicate the results. Drawing on examples of successful companies such as IBM and Bell Atlantic, the author illustrates how this paradigm has produced innovations that have both business and community payoffs.
For many organizations, achieving competitive advantage means eliciting superior performance from employees on the front line--the burger flippers, hotel room cleaners, and baggage handlers whose work has an enormous effect on customers. That's no easy task. Frontline workers are paid low wages, have scant hope of advancement, and--not surprisingly--often care little about the company's performance. But then how do some companies succeed in engaging the emotional energy of rank-and-file workers? A team of researchers at McKinsey & Company and the Conference Board recently explored that question and discovered that one highly effective route is demonstrated by the U.S. Marine Corps. The Marines' approach to motivation follows the "mission, values, and pride" path, which researchers say is practical and relevant for the business world. More specifically, the authors say the Marines follow five practices: they overinvest in cultivating core value; prepare every person to lead, including frontline supervisors; learn when to create teams and when to create single-leader work groups; attend to all employees, not just the top half; and encourage self-discipline as a way of building pride. The authors admit there are critical differences between the Marines and most businesses. But using vivid examples from companies such as KFC and Marriott International, the authors illustrate how the Marines' approach can be translated for corporate use. Sometimes, the authors maintain, minor changes in a company's standard operating procedure can have a powerful effect on frontline pride and can result in substantial payoffs in company performance.
The selection of a CEO is one of the most important--and risky--events in the life of any company. Yet the way CEOs are chosen remains little discussed and little understood. The succession process has traditionally unfolded behind closed doors--some observers have even likened it to the election of a pope. To shed light on what works and what doesn't in CEO succession, the authors lead a roundtable discussion with five distinguished corporate directors: Philip Caldwell, George D. Kennedy, G.G. Michelson, Henry Wendt, and Alfred M. Zeien. Collectively, the five directors have participated in dozens of successions, either as board members or as CEOs. In a lively and frank exchange of views and experiences, the roundtable participants explore a broad range of questions: What can a company do to ensure a successful succession? How should management-development and succession processes be managed? How should the board work with the sitting chief executive during the process? What makes for a strong CEO candidate? When should outside candidates be considered? How much competition should be encouraged among potential CEO candidates? What role should executive search firms play? What role should former CEOs play after they are succeeded? Their conversation illuminates a corporate challenge that is as difficult as it is important.
In today's business world, there's no shortage of know-how. When companies get into trouble, their executives have vast resources at their disposal: their own experiences, colleagues' ideas, reams of computer-generated data, thousands of publications, and consultants armed with the latest managerial concepts and tools. But all too often, even with all that knowledge floating around, companies are plagued with an inertia that comes from knowing too much and doing too little--a phenomenon the authors call the knowing-doing gap. The gap often can be traced to a basic human propensity: the willingness to let talk substitute for action. When confronted with a problem, people act as though discussing it, formulating decisions, and hashing out plans for action are the same as actually fixing it. And after researching organizations of all shapes and sizes, the authors concluded that a particular kind of talk is an especially insidious inhibitor of action: "smart talk." People who can engage in such talk generally sound confident and articulate; they can spout facts and may even have interesting ideas. But such people often exhibit the less benign aspects of smart talk as well: They focus on the negative, and they favor unnecessarily complex or abstract language. The former lapses into criticism for criticism's sake; the latter confuses people. Both tendencies can stop action in its tracks. How can you shut the smart-talk trap and close the knowing-doing gap? The authors lay out five methods that successful companies employ in order to translate the right kind of talk into intelligent action.
In boom times, it is easy for managers to forget about risk. And not just financial risk, but organizational and operational risk as well. Now there's the risk exposure calculator, a new tool that will help managers determine exactly where and how much internal risk is mounting in their companies. The risk calculator is divided into three parts: The first set of "keys" alerts managers to the pressures that come from growth. Now that the company has taken off, are employees feeling increased pressure to perform? Is the company's infrastructure becoming overloaded? And are more new employees coming on board as the company rushes to fill positions? If the answer is yes to any one of those questions, then risk may be rising to dangerous levels. The second set of keys on the calculator highlights pressures that arise from corporate culture. Are too many rewards being given for entrepreneurial risk taking? Are executives becoming so resistant to bad news that no one feels comfortable alerting them to problems? And is the company's level of internal competition so high that employees see promotion as a zero-sum game? The final set of pressures, the author says, revolves around information management. When calculating these pressures, managers should ask themselves, what was the company's complexity, volume, and velocity of information a year ago? Have they risen? By how much? How much of the time am I doing the work that a computer system should be doing? High pressure on many or all of these points should set off alarm bells for managers. To control risk, managers have four levers of control at their disposal that will show them where they need to make organizational adjustments.
Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.
Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.
Northern Oil is moving offices, and CEO Fritz Schumacher wants to make the most of the move in this fictional case study. He believes that adopting an open-plan work space will reinvent how the company works, not to mention cut costs. Facilities manager Sasha Pasternak also supports the open plan. Her job would be easier, and her budget would stretch further, if Northern had standardized workstations and used partitions, not walls. And she likes the way the new design flattens the organization: everyone has the same amount of space and the same ergonomically sound furniture. The new building would have more conference rooms and just-in-time work spaces for employees who worked mostly off-site. And although she knew that initial meetings between the architects and Northern employees hadn't yielded much support for open space--people were attached to their private offices--she expected that people would warm to the idea. But when the new design was unveiled, employees were less than enthusiastic. They hurled questions like, How will workers concentrate if they can't shut their office doors? How will people have confidential meetings with their boss? And why would people stay at Northern when the competition offers them private offices? There was even talk of circulating a petition refusing to move to the new space. A week later, the architect presented revised plans to the project group. The new options would add costs and reduce the amount of space savings, but offering a choice to employees might make them feel less threatened. What should the project team do? In 99312 and 99312Z, five commentators Nick MacPhee, Donald J. Chiofaro, Paul O'Neill, Vivian Loftness, and David Lathrop offer advice.
When a reform-minded economist joins Romania's Ministry of Agriculture, she expects to help move her nation toward market-based changes that will increase the production of food by reducing subsidies and tariffs. Instead, General Secretary Cristina Esanu, formerly with the World Bank, quickly confronts a dilemma. The terms of the release of a new round of World Bank assistance to Romania make new aid contingent on Romania's "progress" toward lower tariffs, generally considered to be protecting inefficient producers from outside competition. Esanu quickly learns that powerful political interests make further tariff reductions, in particular, very difficult to achieve. When the World Bank makes clear that it will ask that at least a symbolic five percent tariff reduction be implemented in order for Romania to receive new assistance, Esanu is asked by her superior--the Agriculture Minister--to take on a task about which she is deeply ambivalent: writing a memo to convince the World Bank that tariffs should not be reduced. The case raises questions about how a public official can, and whether she should, compromise principles and pragmatic political considerations. HKS Case Number 1507.0