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This is an MIT Sloan Management Review article. MIT Sloan Management Review's Business of Sustainability survey and thought leaders interview project identified numerous management challenges presented by the new competitive landscape that sustainability pressures is creating. Perhaps the biggest challenge, though, is how to build the "business case" for investing in a sustainability-related project -even when you believe that the project addresses a significant opportunity. What do executives need to know about sustainability as a business proposition? Interviewee Amory Lovins, co-founder of Rocky Mountain Institute, co-author of Natural Capitalism -Creating the Next Industrial Revolution and recipient of a MacArthur Foundation "genius grant," argues that executives labor under several pernicious misunderstandings about how sustainability affects business -the worst being that sustainability efforts have to cost a company, when in fact, says Lovins, they nearly always increase profits. How does one begin to build a persuasive business case for undertaking sustainability-related initiatives? Map your flows and costs of materials and energy, says Lovins; you will find fiscal "leaks" that can be fixed, with direct bottom-line benefits. He also points out numerous side benefits of sustainability-related efforts: gains in innovation, labor productivity and appeal as a collaboration partner. Those benefits, he argues, will exceed the direct ones.

This is an MIT Sloan Management Review article.

This is an MIT Sloan Management Review article. In 1994, when Interface Inc.'s founder and CEO Ray Anderson began to think about his legacy, it made him uneasy. Deep down, Anderson realized that the business model of the commercial carpet manufacturing company he had founded 20 years before was based on "digging up the earth and turning petroleum and other materials into polluting products that ended up in landfills"-not something he wanted his grandchildren and great-grandchildren to remember him by. So at age 60 Anderson broke with the old model and began anew. Standing up to naysayers (whose ranks included associates, suppliers and Wall Street analysts), he set out to transform Interface from a traditional business built on consumption and waste to one whose focus -that is, beyond profitable growth -would be zero waste and restoring the earth. Since the start of the journey, Anderson and his associates have confronted technical barriers that no one could have anticipated. But inch by inch, kilowatt-hour by kilowatt-hour, recycled pound of carpet by recycled pound of carpet, Anderson's vision has moved closer to reality. In addition to becoming increasingly efficient in its energy and materials usage -for example, 89% of Interface's global electricity and 28% of its total energy come from renewable sources -Interface prides itself on its ability to turn an increasingly large percentage of its carpet into new product. It is also proud of the influence its sustainability efforts are having on other companies. This article presents a timeline showing how Anderson's "mental model" changed and how he and his company moved along the road to sustainability.

This is an MIT Sloan Management Review article. Successful innovation -the kind that leads to customer engagement and profits -is rare and hard to achieve, or so one might conclude from observing the results of many companies'innovation efforts. Some have tried investing intensively in research and development. But the author recently studied public companies representing almost 60% of global R&D expenditures and found that above a certain minimal level, there is generally no correlation between R&D spending and financial metrics such as sales or profit growth. For many companies, developing new products is hit-or-miss. But according to the author's research, successful innovation is not magical. It comes from careful attention to a small number of important criteria. The key question isn't how much to spend, but how to spend. The author introduces a "return on innovation investment," or ROI2, methodology that correlates directly with organic growth and links innovation spending with financial performance in ways that can lead decision makers to generate higher, more reliable returns on innovation and R&D. The ROI2 approach is based on a series of innovation studies conducted during the past seven years with companies in the consumer products, health care and chemical industries. To become more effective, a company needs to diagnose its innovation practices and capabilities. The diagnosis can be quite different from one company to the next, and that is why adopting industry benchmarks doesn't work. The individual innovation profile represents the value and quality of a company's innovation portfolio and can be clearly expressed as an "innovation effectiveness curve." This curve lets companies plot annual spending on innovation projects against the financial returns from those projects -and "solve for growth."

This is an MIT Sloan Management Review article. During the last decade, virtual work -professionals working remotely from home, from client locations or simply from the road -has become increasingly prevalent. Some Fortune 500 companies, including Procter & Gamble, IBM, Accenture and AT&T, have already partially or fully eliminated traditional offices. As much as 10% of today's work force telecommutes from home -more than triple the level of 2000. This trend will accelerate in the coming decades in response to the ongoing globalization of work, ever-increasing customer demands and the cost and time of commuting. However, remote employees as well as managers are becoming increasingly aware of the challenges associated with virtual work as they relate to internal communication, social interaction and employee satisfaction and commitment. The article focuses on four critical challenges involving remote work that require management attention: (1) finding the right work-life balance, (2) overcoming workplace isolation, (3) compensating for the lack of face-to-face communication and (4) compensating for the lack of visibility. For each issue, the authors offer a set of management coping strategies drawn from interviews with managers and remote workers. Successful companies will find ways to adjust to the differences and provide specialized training, mentoring and broad opportunities for social and business interactions with both traditional and remote employees.

This is an MIT Sloan Management Review article. While the protection of intellectual property, or IP, seems to be at odds with a company's pursuit of open innovation, or OI -the selective use of research carried out elsewhere -businesses in the know can align these two approaches. An appropriate IP strategy can actually be an enabler of OI activities. In fact, an increasing number of companies, such as International Business Machines Corp., are involved in interconnected "ecosystems"-critically dependent on cooperating with other parties to generate innovations and profits. The authors'research has found that the enabling function of IP depends on the specific circumstances under which companies engage in OI. Two variables in particular have emerged as critical determinants: the technological environment in which the business is active, and the knowledge distribution among potential collaborators. Each variable is presented as having two possible values. The technological environment, for instance, is either calm or turbulent. Concerning the nature of innovative knowledge distribution, external knowledge can be thought of as residing either with the few (in puddles) or with the many (in oceans). By combining these two dimension sets, and thus creating four possible scenarios, we provide a better sense of a firm's most appropriate IP/IO strategy. Depending on the category into which the company falls, IP plays a different role as an enabler of OI.

This is an MIT Sloan Management Review article. The recent economic downturn has left many organizations in a quandary. Just several years ago, the major issue was winning the so-called "war for talent": how to attract, motivate and retain the best and the brightest. But then the current recession turned that thinking upside down. Now, many organizations are scrambling to figure out how best to restructure and cut costs without jeopardizing the valuable human capital that they built during the prior period of growth. To help such companies, the authors have developed a framework that integrates the seemingly paradoxical practices of talent management and downsizing. The framework looks at two important dimensions. The first is the type of downsizing, either reactive or proactive. The second dimension of the framework is the approach to managing employees, either control-oriented or commitment-oriented. Those two dimensions -type of downsizing and approach to talent management -can be combined to form a two-by-two matrix consisting of four quadrants. Each quadrant represents a different strategy, with a distinct philosophy, focus and key HR and downsizing best practices. The authors contend that there is no "one size fits all" approach to downsizing and that managers need to devise the approach that makes the best sense for their particular company, depending on its position in the matrix's quadrants.

In 2007, Wyeth Pharmaceuticals' manufacturing organization faced a number of challenges, requiring that it revolutionize the way its 17,000 people operated. The case describes alternative methods of systemic change considered by Wyeth, the approach they implemented, and how they rolled out the changes across more than 25 sites worldwide. The transformation of one plant is described in some detail. The case also describes setting of objectives and expectations, engagement of leaders and staff, and the use of outside advisors.

Research shows that even a few minutes of sleep can improve memory and problem-solving skills. In light of the potential benefits to productivity and performance, you may want to encourage your employees to catch a few winks during the day.

Sunnylake Hospital is being held up by online extortionists who have blocked access to its electronic medical records and are demanding $100,000 to restore it. Paul Layman, Sunnylake's CEO, didn't take their first e-mail seriously, and now the hospital has ground to a halt. Paul's golden-boy IT director can't seem to outwit the hackers. Sunnylake's legal counsel tells Paul, "Literally every second is a liability." The chief of staff is in a mutinous fury. What should Paul do? Three experts comment on this fictional case study in R0910B and R0910Z. He should pay the extortionists, advises Per Gullestrup, the CEO of Clipper Projects, who in late 2008 was closely involved in negotiations with Somali pirates who had seized a Clipper Group ship. But first Paul should hire a negotiator to prevent the extortionists from doing further mischief. He should absolutely not acquiesce, says Richard L. Nolan, a professor at the University of Washington's Michael G. Foster School of Business, because the hackers may have embedded further corruption in the system. And Paul must communicate fully with the staff, his board, patients, and the public. Peter R. Stephenson, chairman of the department of computing at Norwich University, recommends shutting down the servers, running a malware scan on every workstation in the hospital, and watching what happens for 24 hours, in case the extortionists are insiders.

If you're an innovation manager struggling to assess your pipeline and assemble a balanced portfolio of growth initiatives, you may find inspiration in Major League Baseball's general managers. They, like you, are constantly shifting their lineups under high degrees of uncertainty while trying to balance stakeholders' demands for immediate results against history's likely judgment of their own choices. Here are some ways to adapt the solutions they've found. Before the sabermetrics revolution in baseball, managers generally dismissed minor league statistics - which turned out to be highly useful predictors of success. Business innovators who likewise learn to analyze information more insightfully can devise better tactics and make investment and personnel decisions more wisely. A ball club's depth chart, illustrating the bench strength for every position, signals strategic priorities. Companies can think the same way about their innovation portfolios to balance offensive and defensive strategies, explore new channels or geographies, and significantly alter platform or marketing approaches. Baseball's farm system allows teams to identify and coach promising players in lower-pressure environments. Innovation executives can similarly organize testmarket research and regional rollouts to expose new offerings to steadily increasing levels of scrutiny from prospective customers. Procter & Gamble has been a leader on this front with its Swash fabric-care products and Tide-branded dry cleaners.

Five experts gathered recently to discuss the future of enterprise risk management: Kaplan, the Baker Foundation Professor at Harvard Business School, who with his colleague David Norton developed the balanced scorecard; Mikes, an assistant professor at HBS who studies the evolution of risk management and the role of the chief risk officer; Simons, the Charles M. Williams Professor of Business Administration at HBS; Tufano, the Sylvan C . Coleman Professor of Financial Management at HBS; and Hofmann, the chief risk officer at Koch Industries. The panel was moderated by HBR senior editor David Champion. Among the questions they addressed were: How predictable was the financial meltdown of 2008-2009? Did new tools for assessing risk give a false sense of security? How do the challenges facing industrial companies differ from those facing the financial sector? Is outsourcing an effective risk-management tool? Have capital structures become a bit too efficient in many companies? What makes a good chief risk officer?

Risk managers should plot their organizations' fraud threats on a heat map. They'll want to look carefully at the upper-left quadrant, where unlikely - but potentially devastating - risks lurk.

Taleb (who wrote the best-selling books Fooled by Randomness and The Black Swan) and his coauthors argue that conventional risk-management textbooks don't prepare us for the real world. For instance, no forecasting model predicted the impact of the current economic crisis. Managers make six common mistakes when confronting risk: They try to anticipate extreme events, they study the past for guidance, they disregard advice about what not to do, they use standard deviations to measure risk, they fail to recognize that mathematical equivalents can be psychologically different, and they believe there's no room for redundancy when it comes to efficiency. Companies that ignore Black Swan (low-probability, high-impact) events will go under. But instead of trying to anticipate them, managers should reduce their companies' overall vulnerability.

Today's sky-high personal debt levels portend a freeze in consumer spending and a rise in defaults. They could threaten your company - even if you don't sell to consumers. Two experts explain how to calculate your firm's risk.

In this edited conversation with HBR senior editor David Champion, Merton, a professor at Harvard Business School, casts light on the role of derivatives in the current financial crisis. Merton was awarded the Nobel Prize in 1997 for his part in developing a new method to value derivatives, and after publication of that development, the markets in derivatives exploded: Today, the estimated notional value of derivative contracts exceeds $500 trillion. Merton posits that derivatives themselves cannot be the cause of a financial crisis. They are simply tools that can be used either functionally (to reduce risk) or dysfunctionally (in ways that increase risk without offsetting benefits). He also offers prescriptions for making the financial markets safer.

With consumers tightening their belts, many premium brands are losing market share to low-price rivals. Their managers face a classic conundrum: Should they tackle the threat head-on by cutting prices and risk damaging their profits and brand equity? Or should they hold the line and lose customers who might never come back? Faced with those two unpalatable alternatives, companies often turn to a third option: launching a fighter brand. A fighter brand is designed to protect a premium offering by combating, and ideally eliminating, its cheaper competitors. The textbook example is Busch beer, which Anheuser-Busch introduced in 1955 at half the wholesale price of Budweiser. Busch fended off the inexpensive regional beers that were eating into Bud's sales and, even better, opened up a brand-new market segment for the company. Unfortunately, such victories are rare. Too many fighter brands inflict little damage on their targets and instead cause significant collateral losses for the companies that initiate them. What trips them up? Cannibalization of the premium product's sales, failure to create an offering that can compete, unprofitability, inattention to consumer needs, and drains on management's time and resources. With detailed accounts of campaigns lost - and occasionally won - Melbourne Business School's Ritson explains how to avoid those major hazards and launch an offering that wins on all fronts.

Evaluating a company's performance often entails wading through a thicket of numbers produced by a few simple metrics, writes the author, and senior executives leave measurement to those whose specialty is spreadsheets. To take ownership of performance assessment, those executives should find qualitative, forward-looking measures that will help them avoid five common traps: Measuring against yourself. Find data from outside the company, and reward relative, rather than absolute, performance. Enterprise Rent-A-Car uses a service quality index to measure customers' repeat purchase intentions. Looking backward. Use measures that lead rather than lag the profits in your business. Humana, a health insurer, found that the sickest 10% of its patients account for 80% of its costs; now it offers customers incentives for early screening. Putting your faith in numbers. The soft drinks company Britvic evaluates its executive coaching program not by trying to assign it an ROI number but by tracking participants' careers for a year. Gaming your metrics. The law firm Clifford Chance replaced its single, easy-to-game metric of billable hours with seven criteria on which to base bonuses. Sticking to your numbers too long. Be precise about what you want to assess and explicit about what metrics are assessing it. Such clarity would have helped investors interpret the AA ratings involved in the financial meltdown. Really good assessment will combine finance managers' relative independence with line managers' expertise.

People in professional services believe a 24/7 work ethic is essential for getting ahead - and so they work 60-plus hours a week and stay tethered to their BlackBerrys. This perpetuates a vicious cycle: Responsiveness breeds the need for more responsiveness. When people are always "on," responsiveness becomes ingrained in the way they work, expected by clients and partners, and even institutionalized in performance metrics. There is no impetus to question whether the work actually requires 24/7 responsiveness; on the contrary, people work harder and longer, without stopping to explore how they could work better. But four years of research conducted by the authors in several North American offices of the Boston Consulting Group suggests that consultants and other professionals can provide the highest standards of service and still have planned, uninterrupted time off. They can do this even in times of recession. In this article, Perlow and Porter outline the lessons from BCG's implementation of predictable time off - namely, impose a strict mechanism for taking days and nights off, encourage lots of talk about what's working and what isn't, promote experimentation with different ways of working, and insist on top-level support.

An international assignment can be among the most exciting and challenging transitions that an aspiring leader can undertake. With the right planning and attitudes, taking on that kind of leadership role can stretch capabilities, challenge assumptions, and steer both people and profits in a positive direction. But an expat assignment can also be a harrowing journey. Indeed, if they've never made an international move before, emerging leaders can fall into common traps that can severely stress their family bonds, negatively affect their performance at work, damage their businesses, and even lead to outright career derailment. In this article, Clouse, the managing director of Kraft Foods Brazil, and Watkins, the author of The First 90 Days: Critical Success Strategies for New Leaders at All Levels, offer three best practices for handling the personal-change challenges that go along with an overseas assignment. Settling the family in, adapting your communication style, and ensuring that you understand the new regulatory environment you're operating in are all critical for a successful transition, they advise.