Lean production, which has succeeded in both improving quality and lowering costs, has become the competitive standard for automakers worldwide. But a debate continues over how that system treats workers--a debate that concerns not only economics and engineering but also values and ideology. In this article, Michael Maccoby, a consultant based in Washington D.C. who specializes in organizational culture and leadership, reviews two books on General Motors' factories: Farewell to the Factory: Autoworkers in the Late Twentieth Century, by Ruth Milkman; and Just Another Car Factory? Lean Production and Its Discontents, By James Rinehart, Christopher Huxley, and David Robertson. Maccoby argues that companies can raise worker morale and productivity by showing workers true respect and by educating them in business perspective. General Motors may have failed to accomplish this at its Linden, New Jersey and Ingersoll, Ontario plants, but lean production has succeeded at Saturn and NUMMI. As more industries switch to lean production, workers will come under more pressure but companies will also have new opportunities to win their commitment to business goals. Car factories perform much better when workers understand the business and join in the effort to improve it.
One of the most challenging decisions a company can confront is whether to diversify. The rewards and risks are extraordinary. Success stories such as General Electric, Disney, and 3M abound, but so do stories of failure--consider Quaker Oats' entry into the fruit juice business with Snapple. There has been much talk about the importance of strategic focus for companies in recent years, so much so that diversification as a corporate strategy has gone out of vogue. In this article, London Business School Professor Costas Markides argues that companies may be overlooking significant growth opportunities by abandoning diversification moves. In order for diversification to work, though, he proposes that companies consider a number of essential questions before they leap into new business: What business am I in? Do I have all of the critical success factors? Can I break up my core competencies? The answers to these and other questions may make the difference between success and failure in the new business. Much has been written about "focusing on core competencies," while diversification has been largely ignored. And yet, diversification can be a powerful way to grow a business.
Companies achieve real agility only when every function and process--when every person--is able and eager to rise to every challenge. This type and degree of fundamental change, commonly called revitalization or transformation, is what many companies seek but rarely achieve because they have never before identified the factors that produce sustained transformational change. The authors identify three interventions that will restore companies to vital agility and then keep them in good health: incorporating employees fully into the principal business challenges facing the company; leading the organization in a different way in order to sharpen and maintain incorporation and constructive stress; and instilling mental disciplines that will make people behave differently and then help them sustain their new behavior. The authors discovered these basic sources of revitalization by tracking the change efforts of Sears, Roebuck and Co., Royal Dutch Shell, and the United States Army. This article is one of the first practical revitalization guides to appear anywhere, and it is based not on theory but on actual experience.
The continued success of technology-based companies depends on their proficiency in creating next-generation products and their derivatives. So getting such products out the door on schedule must be routine for such companies, right? Not quite. Behnam Tabrizi, a Consulting Professor of Engineering Management in the Department of Industrial Engineering & Engineering Management at Stanford University, and Rick Walleigh, a partner at Ernst & Young LLP, recently engaged in a detailed study--in which they had access to sensitive internal information and to candid interviews with people at every level--of 28 next-generation product-development projects in 14 leading high-tech companies. They found that most of the companies were unable to complete such projects on schedule. And the companies also had difficulty developing the derivative products needed to fill the gaps in the market that their next-generation products would create. The problem in every case, the authors discovered, was rooted in the product definition phase. And not coincidentally, the successful companies in the study had all learned how to handle the technical and marketplace uncertainties in their product definition processes. The authors have discerned from the actions of those companies a set of best practices that can measurably improve the definition phase of any company's product-development process.
In this HBR Classic, originally published in January-February 1989, Abraham Zaleznik, a psychoanalyst and the Konosuke Matsushita Professor of Leadership, Emeritus at the Harvard Business School, observes that many senior executives are substituting the rituals of "psychopolitics"--the balancing of social expectations in the workplace--for the real work of thinking about and acting on ideas relating to products, markets, and customers. In his retrospective commentary, Zaleznik writes that senior executives seem to have established a healthier balance in the 1990s between their real work and psychopolitics. Executives are now leading their companies to deal with external, competitive conditions that require them to cut costs, create products, please customers, and develop markets. What worries Zaleznik today, however, is that under the guise of employee empowerment, senior executives are beginning again to indulge in ritualized actions. For instance, they establish task forces to seek answers to questions they themselves should be addressing. The real work of the executive, says Zaleznik, should always include the thinking that informs and directs action. Zaleznik consults to business and government, and his most recent book, Learning Leadership, was published in 1993. In addition to "Real Work," he has authored five previous HBR articles.
This microeconomics case examines the pricing issues related to the sale of inexpensive vaccines for use in developing countries. The case describe the historic success of the United Nations' so-called "tiered pricing" policy. This policy had allowed the World Health Organization to purchase large volumes of vaccines at the marginal price of vaccine production-often just a few cents per dose-while developed nations paid the full average cost-often many times more. Changing political circumstances and the cost structure of new vaccines threaten the decades-old arrangement, however. HKS Case Number 1450.0
This microeconomics case examines the pricing issues related to the sale of inexpensive vaccines for use in developing countries. The case describe the historic success of the United Nations' so-called "tiered pricing" policy. This policy had allowed the World Health Organization to purchase large volumes of vaccines at the marginal price of vaccine production-often just a few cents per dose-while developed nations paid the full average cost-often many times more. Changing political circumstances and the cost structure of new vaccines threaten the decades-old arrangement, however. HKS Case Number 1450.0
The Washington Post is now headed up by its fourth family member in three generations. The Graham family has somehow transcended the problems and pitfalls that overtake so many family-owned and operated businesses.
This exercise comprises seven problems that collectively allow students to work through each type of cash flow that is encountered in capital budgeting. The instructor can also address such issues as product cannibalization and real options.
Starting in 1988, the Appalachian Mountain Club (AMC) began a controversial transformation in management and governance. For its first 112 years, the AMC's structure had resembled that of a country club--volunteer leaders directed the club's operations and its small, paid staff. However, with the club slowly sinking in debt and operations spinning increasingly out of control, a group of members persuaded the membership to take the governing, volunteer council out of the direct management of the organization, hire a new executive director as CEO, and institute a "corporate-style" board of directors charged with policy and oversight. During the next six years, the revamped AMC sprang back to life. The board and the executive director instituted new budgeting procedures, initiated marketing programs, and hired more professionally-trained staff that helped erase the debt, double the membership, and triple the endowment. However, challenges remained. At the end of 1996, the reorganized board experienced a generational transition in leadership as the terms of the last of the directors who had been present during earlier transition expired. This transition provided a good milestone from which to assess the board's role within the organization and its relationship with the expanded staff and membership.
This case serves as an introduction to the concept of economic value added (EVA). The student is placed in the position of Valmont's CFO to decide whether EVA can live up to its promise to motivate managers to act like shareholders and ultimately lead them to make value-enhancing decisions that can reverse Valmont's weak earnings and lackluster stock-price performance. The case works best if students are acquainted with the concepts of cost of capital and net present value. The teaching note that is available for registered faculty explains how to incorporate the accompanying six-minute video supplement. To obtain the video, please contact Darden Business Publishing at +1-800-246-3367 or [email protected].
In February 1995, the National Association for the Advancement of Colored People (NAACP), the largest civil rights organization in the United States, was in the midst of a crisis. The executive director had been fired due to financial improprieties amid charges of sexual harassment. Immediately thereafter the board chairman came under fire as well. In a very close vote, Myrlie Evers-Williams, a long-standing board member, was elected the new board chair. She found herself leading an organization with severely diminished credibility and support, precarious finances, and a fractured board of directors. The case raises issues regarding board oversight, governance structure, and crisis leadership in a nonprofit setting.
Big City Courier is a small regional courier company operating in Toronto, Ontario. The business was started two years ago, and has grown rapidly since its inception. The company is making profits, but has a severe cash flow problem. This case may be used to illustrate the statement of cash flows, the impact of rapid growth on a company's cash position, and the financing gap between receivables and payables.
In early 1996, the vice president of the instant drinks department of Nestle (Philippines), had to decide how to respond to a major change in Nestle's environment. Until January 1996, imports of coffee in any form - green beans, roasted, or ground and processed - were prohibited. As of January 1996, however, coffee within a specified quota could be imported over a 30 per cent tariff. Nestle was the only foreign-owned producer of coffee in the Philippines and had over 60 per cent of the market, up from 52 per cent seven years before. Over the same period, total coffee consumption in the Philippines doubled. Nestle produced its coffee from Philippine-grown robusta beans, since Philippine arabica beans were of inferior quality. Outside the Philippines, however, usually a mixture of robusta and arabica beans were used. There were rumors that both Procter and Gamble (Folgers) and Kraft General Goods (Maxwell House) were planning to enter the Philippine market, initially via imports, but possibly in the future with production facilities.
Wascana Energy Inc., an oil and gas producer, had just rejected an unsolicited $1.8 billion takeover offer from Talisman Energy Inc. Rival Canadian Occidental Petroleum Ltd. had gained access to confidential Wascana data in order to determine whether a higher bid than Talisman's was warranted, and if so, how to structure the deal. The acquisition would need to make strategic sense.
L'Oreal's strategy is to "trickle down" technology over time from high-end outlets like department stores to mass-markets, such as drugstores. The mass market brand Plenitude has become the market leader in France, but even eight years after introduction in the United States, the product continues to lose money. The case presents qualitative market research data to enable students to diagnose the problem and develop an action plan. Includes color exhibits.