In June 2016, Benjamin (Bibi) Netanyahu, Prime Minister of Israel, wrestled with how to sustain Israel's strong innovation track record and the country's reputation as the 'startup nation.' Despite the economic miracle the country had wrought since its founding, he knew he could not be complacent. On the one hand, in 2015 Israeli start-ups raised record-breaking amounts of venture capital, and exits for the year totaled over $8 Billion. On the other hand, government expenditure on R&D had decreased and Israel's position in the Global Innovation Index had fallen. Several other indicators, such as achievement tests among elementary school students in math and science, painted a grim picture. Furthermore, in spite of the wealth created by many high-tech Israeli firms, socioeconomic gaps in the country had widened. A two-tier economy had formed. The long-term sustainability of the "innovation economy" was in doubt, as the sector faced increased competition from foreign innovation hubs, was being reshaped by the growth of Multinational Corporations (MNCs) locating R&D centers in Israel, and had to contend with a vexing shortage of human capital and low labor force participation among some groups. Netanyahu had to assess whether it was time to sound the alarm, and whether drastic and immediate measures were needed to right the innovation economy ship. Bibi mulled over which policies or interventions would best curb the erosion of Israel's competitive position as an innovation powerhouse and how best to promote social equality. He pondered whether public policy could make a difference or whether the market and societal currents, responsible for these trends, were too strong for him and his government to try to contend with.
This module reading pulls together key concepts and techniques from the Strategy Execution series into an integrated model - the levers of control. The four levers are: (1) belief systems, (2) boundary systems, (3) diagnostic control systems, and (4) interactive control systems. The module discusses how top managers use the levers of control to inspire commitment to the organization's purpose; stake out the territory for experimentation and competition; coordinate and monitor the execution of today's strategies; and stimulate and guide the search for strategies of the future. The power of this integrated approach to strategy implementation is illustrated in two contexts: the introduction of performance measurement and control systems over the life cycle of a growing business and the use of the levers by managers taking charge of a new business. While this module is designed to be used alone, it is part of the Strategy Execution series. Taken together, the series forms a complete course that teaches the latest techniques for using performance measurement and control systems to implement strategy. Modules 1 - 4 set out the foundations for strategy implementation. Modules 5 - 10 teach quantitative tools for performance measurement and control. Modules 11 - 15 illustrate the use of these techniques by managers to achieve profit goals and strategies. View the full Strategy Execution series at: hbsp.harvard.edu/strategy-execution.
In late 2012, the owner of the Ratnagiri Alphonso Orchard considered whether or not to purchase information from a climatology firm regarding the probability of unseasonable rains that could damage some or all of his family’s mango harvest. The owner needed to decide whether or not he should lease the orchard to a fruit merchant or keep the orchard for his family to harvest, despite the possibility of rain. Would the climatology firm provide helpful information, or should he make an independent decision? Regardless of whether he purchased information from the climatology firm, what was the best informed decision he could make?
In 2015, Britannia Industries — India’s most recognized biscuit brand — had overtaken Parle as the market leader in the biscuit (cookie) category and faced stiff competition from Parle, ITC’s Sunfeast, and many regional competitors. Britannia had to devise a strategy that would allow it to further consolidate its leadership position without losing market share; increasing the price alone was not an option in this highly competitive market. What could Britannia do to remain India’s number-one biscuit maker? How could it stay ahead of its rivals in the area of product innovation? In a market swamped with near-identical product packaging, it had to devise a strategy that would help it avoid an identity crisis and make it the consumer’s first choice. The company’s senior management needed to chart a clear roadmap for the future.
By 2014, the Walton Group, an electrical goods manufacturer based in Bangladesh, sold its products in over 20 different countries. A decision to utilize the advantages of low labour costs in the company’s home country was made in the early 2000s, which led to an increase in value and permitted rapid international expansion. To achieve Walton’s mission of “Walton at every home,” the company established various specialized support units both inside and outside of Bangladesh. Government tax incentives in Bangladesh had boosted Walton’s cost competitiveness, but how else could Walton compete with other international brands to achieve is goals and become a household name worldwide?
The Royal Harbour Resort & Spa was a large hotel and spa with over 300 employees. In December 2010, the human resources manager was advised by the general manager that headquarters had ordered an immediate restructuring due to a decline in the hospitality industry, especially in the luxury hotel sector. The human resources manager was advised that she had to terminate the employment of their banquet manager — an employee of over 17 years. The human resources manager was instructed to prepare the severance letter by the following day and meet with the banquet manager on Monday to finalize the termination.
Building networks is widely encouraged as a means to improving productivity and profits. But does having an extensive list of contacts really result in better performance for an organization? When looking at the data-rich world of the National Basketball Association (NBA), the answer is no. The author’s research examined every NBA player transaction from 1977 to 2010 and worked out which managers used their contacts to sign players and which managers didn’t. Teams that used their manager’s contacts to sign players performed five per cent worse than those that didn’t, and that was after factoring in the quality of the team, club budgets, and a host of other influences. Indeed, while relying on contacts saves time and money in the short term, it can be seriously harmful on and off the basketball court. When entering a business transaction, managers must objectively seek the best people for the job, keeping the long-term interests of the firm in mind. That means being able to weigh their contacts against outside candidates in every situation. Building in time for a proper tendering process often saves on costs in the long run by producing better outcomes for the company. If a firm finds its managers relying on contacts to save on search costs, it must assess this situation. Monitoring how managers use their contacts may cost time and money, but it can also mean the difference between being a market champion or just an also-ran.
The founder of a digital media firm had to decide whether to list or to sell his company, PacificLink iMedia (PacificLink) in 2015. The founder had fielded more than 20 offers from various companies to acquire PacificLink since 2007-2008. He rejected all these past offers, because he was working to position the company to list on the main board of the Hong Kong Stock Exchange. However, in 2015, the founder received an offer from Accenture that appealed to him because PacificLink was finally in a position to satisfy all listing requirements for the Hong Kong Stock Exchange. He knew that he must consider many criteria in making his critical decision to sell or list PacificLink. See also the first and second cases in the three-part series.
In this exercise, the manager of The Virginian, a small restaurant and bar in Charlottesville, has asked for help in reducing the average queue size at its bar. The Virginian prides itself on its fast and consistent service. (View the video at http://thevirginiancville.com/.) Students are offered four scenarios to guide their analyses. Students conduct analyses by preparing a simulated model on their own or using a simulation created with AnyLogic software. This exercise is supported by "A Late Night at The Virginian Restaurant: Model Documentation and Guide." After learning the steps to run the model, students are asked to run it for four hours of simulated time under the four scenario conditions.
In October 2016, Apple Inc. announced the financial results for its fiscal year 2016. CEO Tim Cook commented on a very successful fiscal year 2016 and focused on all the positive financial results. However, Apple's 2016 annual report was also telling another story. Apple's total revenue had decreased 9% and iPhone revenue decreased 13% compared to the fourth quarter of fiscal year 2015. Apple also faced some criticism from consumers regarding the iPhone 6 and IPhone 6 Plus Upgrade Program. A September 2016 survey reported that an increasing number of customers decided to subscribe to the iPhone Upgrade Program. In spite of this, the company was very supply constrained on the iPhone 7 and 7 Plus and financial analysts were still eager to receive more information on the impact of the iPhone Upgrade Program on Apple's financials.
On 2012, Gary Taubes lunched the Nutrition Science initiative (NuSI), a not for profit organization aiming to question the mainstream scientific paradigm regarding obesity and dietary recommendations. This case provides a brief scientific background on obesity and its causes, comorbidities and the economic cost of this epidemic. It then discusses the two main hypotheses of diet, and the formation of NuSI. Finally, it describes the unique challenges and hurdles NuSI has faced both with funding and with impacting the mainstream scientific community. Could this NGO model of funding the "right" clinical trials be successful? Could it be duplicated across other scientific areas? What can be learned from NuSI's experience? And what is the roadmap for NuSI going forward?
Louise Dejan was a successful real estate developer operating throughout northeast England. The city council of her hometown of Newcastle faced a problem common to many areas: how to encourage private investment into less attractive areas. In August 2012, Newcastle's East Pilgrim Street neighborhood remained an eyesore, despite its great location between the city's Central Station and city hall. It was a natural place for Dejan to build a typical urban office building over street-level retail building. On a particularly attractive site sat an asbestos-contaminated building, which was a former home to the Bank of England. The costs of remediation had kept developers like Dejan away for many years. To encourage redevelopment, the Newcastle City Council had recently designated the East Pilgrim Street neighborhood an Accelerated Development Zone (ADZ). This gave Dejan access to Tax Increment Financing (TIF), a method by which public funds could be spent to encourage private sector redevelopment of designated parcels of land. After studying the details of TIF and the financial projections of a potential new development, Dejan had to decide whether she should be the first to redevelop property in this well-located but seemingly forgotten neighborhood.
The Prysmian Group is a leading global cable manufacturer based in Milan, Italy. Although dominant in Europe and other areas, it has been struggling to improve its market share in the Asia Pacific region. Its competitors are small family-owned businesses that operate within their individual countries in the region. Unable to execute its strategy practised in other regions-of acquiring companies and streamlining their operations-in Asia, Prysmian management decides on a business strategy of improving cooperation within business units and becoming more customer-centric. The three regional leaders in APAC, Luigi Migliorini, CEO of Prysmian China, Frederic Grosse, CEO of Prysmian ASEAN and Frederick Persson, CEO of Prysmian Australia & New Zealand had just completed a strategy meeting in the Singapore office and all understand that the key to implementing the business strategy is its human capital. This case is targeted for participants who are interested in understanding the human capital challenges associated with implementing a business strategy for a multinational corporation. After the session, the students will be able to describe the challenges associated with change in a multi-national corporation, and determine how human capital can impact the implementation of strategy.
Luigi Migliorini, CEO of Prysmian China, Frederic Grosse, CEO of Prysmian ASEAN and Frederick Persson, CEO of Prysmian Australia & New Zealand were discussing ways of increasing business in APAC. Prysmian is seeking to make the APAC region a second home market for the group. Previously, the APAC region had been neglected as Prysmian had concentrated on Europe. However, there are several challenges facing the management team. The tried and tested method of acquiring companies and streamlining their processes was difficult to replicate in APAC because competitors tended to be small and privately owned. Internally, the centralised decision-making structure made Prysmian slower than its competitors in providing quotes and rolling out products. Its scattered manufacturing plants worldwide also made intercompany transactions more important. Communications over product specifications and availability had to be made in a timely manner. Additionally, the diverse nature of individual countries and industries in APAC had resulted in niche product opportunities, but made operations more difficult. Still, APAC was a growth region and future infrastructure investments would require various types of cables. The three regional leaders had to devise a strategic approach for Prysmian to grow in APAC. Participants will learn that changing the culture of a multinational corporation is difficult but can be achieved by addressing the company's human capital in terms of talent, leadership, culture, and structure.
Since the flood of child migrants from Central America burst upon the southern United States in the summer of 2014-a vast rise in arrivals dubbed "the Surge"-Kids in Need of Defense (KIND) had been facing overwhelming demand for its legal services. Wendy Young, KIND's president, explained that the organization's primary mission was to ensure that no child appears alone in immigration court, but KIND also wanted to provide leadership, research, and advocacy to protect these "children on the move" from laws and practices that threatened their fundamental human rights. Ms. Young was facing a critical juncture in the organizational life of KIND: where and how should it focus its resources for greatest effectiveness in protecting child migrants? What limits must the organization set on its activities when facing an almost unlimited need for legal, social, health, and educational support of these vulnerable children?
Back when the author was the CEO of Virgin Mobile, he accepted a challenge to live like a homeless person for 24 hours in New York City--with no money or credit card, no cell phone, just the clothes on his back. A few years later, when he was head of a division at American Express, he joined his leadership team in a variation on that experiment: They would spend an entire day trying to pay bills and transfer money the way people without bank accounts or credit cards have to. Those experiences increased his empathy for less-affluent people and his awareness of how difficult it is for them to manage and move money--and energized PayPal's new strategy after Schulman joined the company as CEO, in 2014. That strategy was to be a "customer champion" company and reorganize into just two groups: merchants and consumers. For merchants, PayPal would evolve its technology platform to enable more-intimate relationships with customers using mobile and software. For consumers, it would empower underserved citizens throughout the world to make more-secure, faster, easier, and less-expensive financial transactions. Within those two segments, the company has created or acquired a suite of products that target different markets, including Venmo for Millennials, Xoom for international digital payments, and PayPal Working Capital, which lends money to small businesses.
Global players in search of double-digit growth are running out of opportunities. Emerging-market giants such as Brazil, Russia, and China are experiencing an economic slowdown. They are increasingly expensive as a base for operations, and it's harder to export to and import from these countries than it used to be. As a result, multinationals are paying more attention to low-income, high-risk countries both as new markets for selling goods and services and as platforms from which to export them elsewhere. Even in industries where competition is skewed by government manipulation, foreign players that target the right sectors with the right strategies can prosper. The first step in identifying opportunities in a frontier economy is to assess the competitive environment of its industries along two dimensions: (1) the degree to which profitability is determined by competition between firms and not by government policies and actions and (2) whether the industry is focused primarily on domestic sales or on exports. Industries will fall into one of four categories. Each category is associated with a distinct strategy, ranging from the conventional (leverage existing capabilities, adapt to local tastes) to the unfamiliar (make yourself indispensable to powerful local players). In this article, the authors offer companies a framework to help figure out whether and where to play and how to win in the spaces in which they choose to compete.
When it comes to selecting a new CEO, judgment really matters. The choice may devastate a company or create enormous value. In his work advising companies, Charan has observed that some board members are especially great at succession decisions. In this article he describes how they go about picking the right candidate. Directors who excel at selection zero in on the two or three distinct capabilities that a CEO will need to thrive at the firm in question. (Charan calls this the "pivot" because the succession decision turns on it.) For example, when IBM was conducting a CEO search in 1993, many thought it should hire a technologist, but two directors saw that what the company really needed was an executive with business acumen, a customer orientation, and execution skills. At their urging, the board brought in Lou Gerstner, who quickly turned IBM's $8 billion loss into a $3 billion profit. Astute directors also keep an open mind about where the best candidate will come from; they shed assumptions about insiders and outsiders and may even consider a leader a few levels below the CEO. They go deep to understand which person is the best fit with the pivot, doing their own due diligence. Finally, they allow for the imperfections in the chosen candidate, figuring out which gaps can be filled by other executives or corrected with coaching.