In 1998, most officials in El Salvador recognize that the water infrastructure and the institutions responsible for managing that infrastructure are in disrepair. Without reforms, the country would be unable to provide water and sewerage services to a majority of its people. The Inter-American Bank had made it clear that financial aid to El Salvador was contingent upon the country's willingness to restructure its water system. Admittedly, there were major differences among the parties as to how the system should be reformed, but not whether it should be. HKS Case Number 1483.0
When Ukraine becomes independent following the collapse and dissolution of the Soviet Union, the nation which is suddenly Europe's third most populous finds itself almost immediately caught up in high-stakes international diplomacy and negotiations. A significant part of the Soviet Union's former nuclear arsenal, including intercontinental ballistic missiles targeted at the United States, are housed within Ukraine. This case tells the story of the formation and evolution of a newly-independent nation's foreign policy, focusing on Kiev's dawning understanding of the dynamics of diplomatic negotiation, the power of nuclear weapons as bargaining chips, and its emerging sense of the nature of its national interest. HKS Case Number 1425.0
When a Republican state representative in the Midwest decides not to seek re-election, he is approached by a politically active, successful farmer about running for the seat. He thinks the farmer would represent the moderate wing of the party effectively and decides to support his candidacy. In a conversation several months later, the candidate reveals that he is gay although conservative on gay issues, and asks the representative's advice on whether to reveal his sexual orientation to his campaign manager and supporters. The representative realizes that the advice he gives the candidate may shape the outcome of the election. He says that such an admission would make the campaign far more difficult, and that he thinks it is a personal issue that the candidate isn't obligated to reveal. The only other candidate in the primary is a previously unknown conservative openly opposed to what he calls the homosexual agenda. The moderate candidate runs a campaign focused on the issues, but three weeks before the primary his campaign manager resigns, having learned of the candidate's homosexuality and feeling betrayed at not being told. The candidate loses the primary by a small margin. HKS Case Number 1454.0
When Ukraine becomes independent following the collapse and dissolution of the Soviet Union, the nation which is suddenly Europe's third most populous finds itself almost immediately caught up in high-stakes international diplomacy and negotiations. A significant part of the Soviet Union's former nuclear arsenal, including intercontinental ballistic missiles targeted at the United States, are housed within Ukraine. This case tells the story of the formation and evolution of a newly-independent nation's foreign policy, focusing on Kiev's dawning understanding of the dynamics of diplomatic negotiation, the power of nuclear weapons as bargaining chips, and its emerging sense of the nature of its national interest. HKS Case Number 1425.0
Based on 22 years of breakthrough research, this article by Teresa Amabile, MBA Class of 1954 Professor of Business Administration at the Harvard Business School, provides insightful guidelines for any executive who wants to nurture and stimulate one of the most powerful competitive weapons in the realm of business today: creativity. In today's knowledge economy, creativity is more important than ever. But many companies unwittingly employ managerial practices that kill it. How? By crushing their employees' intrinsic motivation--the strong internal desire to do something based on interests and passions. Managers don't kill creativity on purpose. Yet in the pursuit of productivity, efficiency, and control--all worthy business imperatives--they undermine creativity. It doesn't have to be that way. Business imperatives can comfortably coexist with creativity. But managers will have to change their thinking first. Specifically, managers will need to understand that creativity has three parts: expertise, the ability to think flexibly and imaginatively, and motivation. Managers can influence the first two, but doing so is costly and slow. It would be far more effective to increase employees' intrinsic motivation. Take challenge as an example: Intrinsic motivation is high when employees feel challenged but not overwhelmed by their work. The task for managers, therefore, becomes matching people to the right assignments. Managers can make a difference when it comes to employee creativity. The result can be truly innovative companies in which creativity doesn't just survive but actually thrives.
In a comparative study, authors M. Bensaou from INSEAD and Michael Earl from the London Business School found fundamental differences in how Japanese and Western managers think about technology. Too many managers in the West are intimidated by the task of managing technology. They tiptoe around it, supposing that it needs special tools, special strategies, and a special mind-set. Well, it doesn't, the authors say. Technology should be managed--controlled, even--like any other competitive weapon in a manager's arsenal. The authors came to this conclusion in a surprising way. Having set out to compare Western and Japanese IT-management practices, they were startled to discover that Japanese companies rarely experience the IT problems so common in the United States and Europe. In fact, their senior executives didn't even recognize the problems that the authors described. When they dug deeper into 20 leading companies that the Japanese themselves consider exemplary IT users, they found that the Japanese see IT as just one competitive lever among many. Its purpose, very simply, is to help the organization achieve its operational goals. The authors found five principles of IT management in Japan that, they believe, are not only powerful but also universal. They contrast these principles against the practices commonly found in Western companies. While acknowledging that Japan has its own weaknesses with technology, particularly in white-collar office settings, they nevertheless urge senior managers in the West to consider the solid foundation on which Japanese IT management rests.
In 1994, Continental Airlines was headed for a crash landing--it was quickly running out of customers and cash. Today, the airline is one of the great turnaround stories of the decade. What explains its reversal of fortune? A simple strategy, executed fast, right away, and all at once, says Greg Brenneman, president and COO of the company. There's no time to think too much during a turnaround, he notes in this outspoken first-person account, and that happens to be a very good thing. More specifically, he describes the five lessons he learned during this dramatic turnaround. At the beginning, there was so much wrong with Continental that he felt as if any one misstep could bring the whole effort down. But in a time of crisis, when time is tight and money is tighter, you can't afford to mull over complex strategy. With Gordon Bethune, Continental's chairman and CEO, Brenneman devised the Go Forward Plan, a straightforward strategy focused on four key elements: understanding the market, increasing revenues, improving the product, and transforming the corporate culture. He admits that the plan wasn't complicated--it was pure common sense. The tough part was getting it done. "Do it now!" became the rallying cry of the movement, and the power of momentum has carried Continental to success.
Managers can separate the real opportunities for synergy from the mirages, say Michael Goold and Andrew Campbell of the Ashridge Strategic Management Centre, by taking a more disciplined approach to synergy. Corporate executives have strong biases in favor of synergy, and those biases can lead them into ill-advised attempts to force business units to cooperate--even when the ultimate benefits are unclear. These biases take four forms: 1) the synergy bias, which leads executives to overestimate the benefits and underestimate the costs of synergy; 2) the parenting bias, a belief that synergy will be captured only by cajoling or compelling business units to cooperate; 3) the skills bias--the assumption that whatever know-how is required to achieve synergy will be available within the organization; and 4) the upside bias, which causes executives to concentrate so hard on the potential benefits of synergy that they overlook the possible downside risks. In combination, these four biases make synergy seem more attractive and more easily achievable than it truly is. As a result, corporate executives often launch initiatives that ultimately waste time and money and sometimes even severely damage their businesses. To avoid such failures, executives need to subject all synergy opportunities to a clear-eyed analysis that clarifies the benefits to be gained, examines the potential for corporate involvement, and takes into account the possible downsides. Such a disciplined approach will inevitably mean that fewer initiatives will be launched. But those that are pursued will be far more likely to deliver.
In this article, Timothy A. Luehrman explores how option pricing can be used to improve decision making about the sequence and timing of a portfolio of strategic investments. In financial terms, a business strategy is much more like a series of options than like a single projected cash flow. Executing a strategy almost always involves making a sequence of major decisions. Some actions are taken immediately while others are deliberately deferred so that managers can optimize their choices as circumstances evolve. While executives readily grasp the analogy between strategy and real options, until recently the mechanics of option pricing were so complex that few companies found this method practical to use when formulating strategy. But advances in both computing power and our understanding of option pricing over the last 20 years now make it feasible to apply real-options thinking to strategic decision making. To analyze a strategy as a portfolio of related real options, this article exploits a framework presented by the author in "Investment Opportunities as Real Options: Getting Started on the Numbers" (HBR July/August 1998). That article explained how to get from discounted-cash-flow value to option value for a typical project; in other words, it was about reaching a number. This article extends that framework, exploring how, once you've worked out the numbers, you can use option pricing to improve decision making about the sequence and timing of a portfolio of strategic investments. The author shows executives how to plot their strategies in two-dimensional "option space," giving them a way to "draw" a strategy in terms that are neither wholly strategic nor wholly financial, but some of both. Such pictures inject financial discipline and new insight into how a company's future opportunities can be actively cultivated and harvested.
In this interview, Li & Fung Chairman Victor Fung explains both the philosophy behind supply-chain management and the specific practices that Li & Fung has developed to reduce costs and lead times, allowing its customers to buy "closer to the market." Li & Fung, Hong Kong's largest export trading company, has been an innovator in supply-chain management--a topic of increasing importance to many senior executives. Li & Fung has also been a pioneer in "dispersed manufacturing." It performs the higher-value-added tasks such as design and quality control in Hong Kong, and outsources the lower-value-added tasks to the best possible locations around the world. The result is something new: a truly global product. To produce a garment, for example, the company might purchase yarn from Korea that will be woven and dyed in Taiwan, then shipped to Thailand for final assembly, where it will be matched with zippers from a Japanese company. For every order, the goal is to customize the value chain to meet the customer's specific needs. To be run effectively, Victor Fung maintains, trading companies have to be small and entrepreneurial. He describes the organizational approaches that keep the company that way despite its growing size and geographic scope: its organization around small, customer-focused units; its incentives and compensation structure; and its use of venture capital as a vehicle for business development. As Asia's economic crisis continues, chairman Fung sees a new model of companies emerging--companies that are, like Li & Fung, narrowly focused and professionally managed.
In this eye-opening article, Thomas W. Malone and Robert J. Laubacher of the Massachusetts Institute of Technology look at how a new kind of organization could form the basis of a new kind of economy--an e-lance economy--where all the old rules of business are overturned and big companies are rendered obsolete. Drawing on their research at MIT's Initiative on Inventing the Organizations of the 21st Century, the authors postulate a world in which business is not controlled through a stable chain of management in a large, permanent company. Rather, it is carried out autonomously by independent contractors connected through personal computers and electronic networks. These electronically connected freelancers--e-lancers--would join together into fluid and temporary networks to produce and sell goods and services. When the job is done--after a day, a month, a year--the network would dissolve and its members would again become independent agents. Far from being a wild hypothesis, the e-lance economy is, in many ways, already upon us. We see it in the rise of outsourcing and telecommuting, in the increasing importance within corporations of ad-hoc project teams, and in the evolution of the Internet. Most of the necessary building blocks of this type of business organization--efficient networks, data interchange standards, groupware, electronic currency, venture capital micromarkets--are either in place or under development. What is lagging behind is our imagination. But, the authors contend, it is important to consider sooner rather than later the profound implications of how such an e-lance economy might work. They examine the opportunities, and the problems, that may arise and anticipate how the role of managers may change fundamentally--or possibly even disappear altogether.
Signs of prosperity abound in the United States, fueling optimism that the economy has finally risen out of a long productivity slump. But Stephen Roach, chief economist at Morgan Stanley Dean Witter, takes a skeptical look at current conditions in reviewing two books in the optimist's camp. In Prosperity, Wall Street Journal reporters Bob Davis and David Wessel argue that information technology is sparking a productivity breakthrough that will sustain prolonged prosperity. The authors foresee a powerful collaboration between industry and community colleges, working together to produce skilled workers. In The Productive Edge, MIT Professor Richard Lester pins his hopes on recent turnarounds in the U.S. industry in response to innovation, globalization, and deregulation--and concludes that these forces can drive an economywide productivity revival. Roach agrees that the books provide impressive anecdotes, but he points out that industry-based gains may stem from cost-shifting and rampant outsourcing. Long-lasting improvements in productivity, by contrast, would depend on boosting capital and educational endowments--and here the news is sobering. Despite the enormous corporate gamble on IT, the net stock of capital per worker has stayed constant because of frequent upgrading. "Human capital," as reflected in aptitude tests, also remains at low levels. Accordingly, Roach finds no hint in national data that productivity is emerging from its subpar trend. In fact, hours worked--a key factor in productivity calculations--may actually be rising. White-collar work, which depends more on mental acuity and creativity than on computers, just may not be capable of the sort of productivity advances seen on farms and in factories.
Harry Denton, the CEO in this fictional case study, has been caught off guard. As the head of Delarks, a venerable department-store chain in the Midwest, he has engineered a remarkable turnaround in only a year. Sales have rebounded, and Wall Street is applauding. But when Delarks's head of merchandising defects to a competitor, Denton is shocked to realize that many of the layoff survivors, in fact, have had it with him and with the company. The last straw was the recent closing of the Madison store, which Denton announced without warning to anyone--not even the company's head of HR, Thomas Wazinsky, a supposedly trusted adviser. The rumor mill says that many employees are considering leaving before Denton can inflict the next blow. And senior managers are not immune to the fear and anger. Even Wazinsky, one of the few links to Delarks's proud past, confesses to Denton, "I'll bet you're thinking of firing me." Denton has to act--and fast. He calls a "town meeting" for the 600 employees of the St. Paul store. The plan: rally the troops. Instead, Denton is routed. Angry questions are hurled at the CEO, and he is forced to beat a hasty retreat through the back door. In 98510A and 98510Z, Bob Peixotto, Jim Emshoff, Richard Manning, Gun Denhart, and Saul Gellerman offer advice on how to revive morale at the successful but troubled company.
Harry Denton, the CEO in this fictional case study, has been caught off guard. As the head of Delarks, a venerable department-store chain in the Midwest, he has engineered a remarkable turnaround in only a year. Sales have rebounded, and Wall Street is applauding. But when Delarks' head of merchandising defects to a competitor, Denton is shocked to realize that many of the layoff survivors, in fact, have had it with him and with the company. The last straw was the recent closing of the Madison store, which Denton announced without warning to anyone--not even the company's head of HR, Thomas Wazinsky, a supposedly trusted adviser. The rumor mill says that many employees are considering leaving before Denton can inflict the next blow. And senior managers are not immune to the fear and anger. Even Wazinsky, one of the few links to Delarks' proud past, confesses to Denton, "I'll bet you're thinking of firing me." Denton has to act--and fast. He calls a "town meeting" for the 600 employees of the St. Paul store. The plan: rally the troops. Instead, Denton is routed. Angry questions are hurled at the CEO, and he is forced to beat a hasty retreat through the back door. In 98510A and 98510Z, Bob Peixotto, Jim Emshoff, Richard Manning, Gun Denhart, and Saul Gellerman offer advice on how to revive morale at the successful but troubled company.
Harry Denton, the CEO in this fictional case study, has been caught off guard. As the head of Delarks, a venerable department-store chain in the Midwest, he has engineered a remarkable turnaround in only a year. Sales have rebounded, and Wall Street is applauding. But when Delarks' head of merchandising defects to a competitor, Denton is shocked to realize that many of the layoff survivors, in fact, have had it with him and with the company. The last straw was the recent closing of the Madison store, which Denton announced without warning to anyone--not even the company's head of HR, Thomas Wazinsky, a supposedly trusted adviser. The rumor mill says that many employees are considering leaving before Denton can inflict the next blow. And senior managers are not immune to the fear and anger. Even Wazinsky, one of the few links to Delarks' proud past, confesses to Denton, "I'll bet you're thinking of firing me." Denton has to act--and fast. He calls a "town meeting" for the 600 employees of the St. Paul store. The plan: rally the troops. Instead, Denton is routed. Angry questions are hurled at the CEO, and he is forced to beat a hasty retreat through the back door. In 98510 and 98510Z, Bob Peixotto, Jim Emshoff, Richard Manning, Gun Denhart, and Saul Gellerman offer advice on how to revive morale at the successful but troubled company.
According to author Rick Yan, a vice president in the Beijing office of Bain & Company, making money in the China market in the short run is the best indicator we have that a company's current strategy and practices are well suited to success in the longer term. Despite concerns about the continuation of China's economic boom and the country's political future, multinationals are flocking to China. Why? Because China may soon be one of the world's most important economies. Companies that don't consider exploring this vast market may be overlooking a tremendous growth opportunity. Investing in China now to build sustainable long-term positions is a credible strategy. Some companies, however, have taken the long-term argument too far. They tolerate poor short-term results in the mistaken belief that such results are a trade-off for future profitability. But underperformance in the short term is a good indicator that a company's strategy or practices may not measure up over the long run. Drawing on the examples of multinationals already competing in China, the author finds that success is more a factor of managerial capability, critical mass scale, and product portfolio than it is length of stay. Although some early movers are market leaders, being number one requires more than longevity. Take Coca-Cola, for instance. To see it as a passive player that "waited it out" is to misunderstand the company's aggressive strategy: Coca-Cola planned carefully for success and executed a series of smart short-term moves to make it happen. In the final analysis, players that want to be around over the long run had better make the right moves today. One mistake won't seal a company's fate, but organizations need to learn from their mistakes quickly and use their new knowledge to build winning strategies. Companies that fail to adapt to the fast-paced market will never enjoy long-term success in China.
This note presents an overview of the process of collecting or sampling data from the appropriate population, presenting statistical measures to describe the data and to allow inferences to be drawn from the data, and then clearly presenting the results obtained.
Describes how the Balanced Scorecard built by the Online Financial Services (OFS) group is used to select the highest-priority initiatives for the organization. Currently, initiatives arise continually throughout the organization, and management spends considerable time reviewing, approving, and, often , canceling initiatives. OFS develops a ranking procedure, based on the Balanced Scorecard, to align initiatives with the group's strategy. Currently 11 proposals have made it through the first two screening processes. Students evaluate these proposals according to the strategic themes described in the Balanced Scorecard plus supplementary criteria developed by senior managers.
Describes how 3M Corp. introduces and learns a new and innovative methodology called Lead User research to understand future customer and market needs. A team from 3M's Medical-Surgical Markets Division applies the Lead User methodology to the field of surgical infection control and discovers not only new product concepts but also a very promising new business strategy. Focuses on: (1) 3M's approach to the management of innovation and understanding market needs, (2) an in-depth description of the Lead User method and its potential as applied to the medical business, and (3) the managerial challenges of introducing novel methods into a successful organization.