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The head of Infosys Technologies talks about the power of a well-placed word of encouragement and what it taught him about the CEO's toughest challenge--motivating people.

The case highlights the difficulties faced by a social organization that has been able to expand activities throughout Latin America by developing a highly successful organizational model that responds adequately to different local realities and characteristics, but faces serious limitations as it projects itself internationally. The case is set in September 2005, when the time horizon for the Global Development and Institutional Strengthening Plan is coming to an end; Fe y Alegria (FyA) must now determine how to position itself internationally in 2009, and what it must do to achieve its goal. FyA defines itself as "an international movement for integral popular education and social development" in which both laypersons and members of diverse religious orders participate. Towards the end of 2004, FyA operated in 15 Latin American countries, serving more than one million students in formal education programs (preschool, primary, and secondary), together with other educational activities (work skills, adult education, broadcast education, and other). In each country FyA operates as a nonprofit public service organization, with its own legal entity. Internationally, it operates as a Federation of national agencies. FyA schools had captured the attention of organizations and individuals concerned with improving the quality of education, especially that provided to the poorest segments of society.

Marty Echt, the new head of marketing at Hunsk Engines, is determined to bring the motorcycle maker back to its roots. He says it's not enough to project authenticity to customers--employees must personally subscribe to the brand's values. Should the company's CEO support Marty's "real deal" vision? Five experts comment on this fictional case study in R0803A and R0803Z. Bruce Weindruch, the founder and CEO of the History Factory, says that an authenticity-based campaign can be effective--but only if it's truly drawn from history. Marketers like Marty often remember their organization's past in a golden haze. Weindruch recommends exploring old engineering drawings, ads, and product photos in order to understand what customers and employees really valued back in the day. Gillian Arnold, a consultant to luxury fashion and fine jewelry brands, thinks Marty's approach is right: People in key marketing posts must be passionate about their products and know them inside and out. She argues that the CEO needs to commit more fully to the new campaign and address the significant gap between the staff and the brand. James H. Gilmore and B. Joseph Pine II, the cofounders of Strategic Horizons, point out that Hunsk needs to manage customers' perceptions rather than trying to be a "real company" or forming a management team whose personal interests match the brand. People purchase a product if it conforms to their self-image; that alone determines the brand's authenticity. Glenn Brackett of Sweetgrass Rods, a maker of bamboo fly-fishing rods, says Marty seems to be one of the few people who understand Hunsk motorcycles. If employees bring blood, sweat, heart, and soul to a product, it will manifest that spirit, and customers will line up for it.

The historian David McCullough, a two-time Pulitzer Prize winner and well-known public television host, has spent his career thinking about the qualities that make a leader great. His books, including Truman, John Adams, and 1776, illustrate his conviction that even in America's darkest moments the old-fashioned virtues of optimism, hard work, and strength of character endure. In this edited conversation with HBR senior editor Bronwyn Fryer, McCullough analyzes the strengths of American leaders past and present. Of Harry Truman he says, "He wasn't afraid to have people around him who were more accomplished than he, and that's one reason why he had the best cabinet of any president since George Washington....He knew who he was." George Washington--"a natural born leader and a man of absolute integrity"--was unusually skilled at spotting talent. Washington Roebling, who built the Brooklyn Bridge, led by example: He never asked his people to do anything he wouldn't do himself, no matter how dangerous. Franklin Roosevelt had the power of persuasion in abundance. If McCullough were teaching a business school leadership course, he says, he would emphasize the importance of listening--of asking good questions but also noticing what people don't say; he would warn against "the insidious disease of greed"; he would encourage an ambition to excel; and he would urge young MBAs to have a sense that their work matters and to make their good conduct a standard for others.

An abrupt and lasting drop in revenue growth is a crisis that can strike even the most exemplary organization. The authors' comprehensive analysis of growth in Fortune 100-size companies over the past half century revealed, in fact, that 87% of them had stalled out at least once. The record shows that if management cannot turn a company around within a few years, the odds are that it will never again see healthy top-line growth. Fortunately, the authors (of the Corporate Executive Board) have uncovered and categorized the most common causes of growth stalls. The majority of these standstills are preventable because, according to the authors, they arise from management choices about strategy or organizational design; external factors (e.g., regulatory actions) account for only 13%. Four categories predominate: Premium-position captivity. When a firm's world-class offering has won the most demanding customers in the market, it often fails to respond effectively to new, low-cost competitive challenges or shifts in customer valuation of product features. Innovation management breakdown. Because most large corporations generate sequential product innovations, any systemic inefficiency or dysfunction in the innovation chain can cause extremely serious problems that last for years. Premature core abandonment. Managers may conclude too quickly that a core market is saturated. Or they may incorrectly interpret operational impediments in the core business as evidence that it's time to move into new competitive terrain. Talent bench shortfall. Insufficient capabilities will stop growth dead in its tracks. They also identified a common culprit in detailed case studies of 50 stalled companies--failure to adapt company strategy to changes in the external environment. Two tools can help managers avoid growth stalls: a self-test to diagnose impending stalls and a choice of practices to explicitly identify strategic assumptions and test them for ongoing relevance.

A decade ago, the Thomson Corporation, like most B2B companies, had a much better understanding of the people who purchased its newspapers, journals, and textbooks for their organizations than of the people who actually used them in their daily jobs. Facing an internet shakeup of its market, Thomson realized it needed to bridge that critical knowledge gap. The company began systematically scrutinizing its end users--in much the same way that Procter & Gamble tackles consumer research--as part of a new front-end customer strategy that would become the cornerstone of the firm's transformation. In this article, Harrington, Thomson's CEO, and Tjan, a consultant who advised him, describe how the company adopted a user-centric mind-set--initially in the Thomson Financial division and then throughout the organization. First came a redefinition of the division's market, which was mapped not by type of purchaser but by eight end-user segments. That gave Thomson a clear view of the division's real, addressable market and of corresponding opportunities. After conducting surveys and "day in the life" observations of users, Thomson charted their entire work flow, beginning with what they were doing three minutes before and after using a product, and saw where the organization could add value. Then, through cluster and conjoint analysis, the company determined how pain points and product preferences varied among the users. With that information, Thomson was able to identify three clusters of customers in one segment and develop three categories of offerings. Since beginning to implement this approach, Thomson has changed radically. Its revenue now comes mostly from digital, not print, products, and it generates twice the operating profit and four times the free cash flow it did 10 years ago. In a market that changes by the day, Thomson's revenue is unusually predictable and profitable.

Most firms have no formal programs for anticipating and fulfilling talent needs, relying on an increasingly expensive pool of outside candidates that has been shrinking since it was created from the white-collar layoffs of the 1980s. But the advice these companies are getting to solve the problem--institute large-scale internal development programs--is equally ineffective. Internal development was the norm back in the 1950s, and every management-development practice that seems novel today was routine in those years--from executive coaching to 360-degree feedback to job rotation to high-potential programs. However, the stable business environment and captive talent pipelines in which such practices were born no longer exist. It's time for a fundamentally new approach to talent management. Fortunately, companies already have such a model, one that has been well honed over decades to anticipate and meet demand in uncertain environments: supply chain management. Cappelli, a professor at the Wharton School, focuses on four practices in particular. First, companies should balance make-versus-buy decisions by using internal development programs to produce most--but not all--of the needed talent, filling in with outside hiring. Second, firms can reduce the risks in forecasting the demand for talent by sending smaller batches of candidates through more modularized training systems in much the same way manufacturers now employ components in just-in-time production lines. Third, companies can improve their returns on investment in development efforts by adopting novel cost-sharing programs. Fourth, they should seek to protect their investments by generating internal opportunities to encourage newly trained managers to stick with the firm. Taken together, these principles form the foundation for a new paradigm in talent management: a talent-on-demand system.

A substantial number of local companies in emerging markets have managed to hold their own--or better--in the face of competition from global Goliaths. Bhattacharya and Michael of the Boston Consulting Group show how these domestic Davids have achieved that impressive feat. The secret is to adopt most, if not all, elements of a six-part strategy. One, the homegrown winners customize products and services to meet local needs and initially go after economies of scope. Two, they develop business models to overcome market-specific obstacles and gain competitive advantage in the process. Three, they create or buy the latest technologies and use them effectively. Four, they find ways to benefit from low-cost labor and train workers in-house to overcome shortages of skilled employees. Five, they scale quickly by going national before regional rivals can challenge them. Six, they invest in top management talent in order to sustain rapid growth. No element on its own is groundbreaking, but in the aggregate the strategy is a potent one, as the authors illustrate with the story of Ctrip, China's largest online travel agent. Successful as homegrown champions have been--and this article identifies 50 of them--a few multinationals, such as Yum Brands, Nokia, and Hyundai, have managed to beat the locals at their own game by using the six-part strategy. Global companies would do well to study these models of achievement and, armed with acquired wisdom, rethink their own strategies before local rivals shut them out of lucrative emerging markets.

Companies often treat new-product development as a monolithic process, but it can be more rationally divided into two parts: an early stage that focuses on evaluating prospects and eliminating bad bets, and a late stage that maximizes the remaining candidates' market potential. Recognizing the value of this approach, Eli Lilly designed and piloted Chorus, an autonomous unit dedicated solely to the early stage. This article demonstrates how segmenting development in this way can speed it up and make it more cost-effective. Two classes of decision-making errors can impede NPD, the authors say. First, managers often ignore evidence challenging their assumptions that projects will succeed. As a result, many projects go forward despite multiple red flags; some even reach the market, only to fail dramatically after their introduction. Second, companies sometimes terminate projects prematurely because people fail to conduct the right experiments to reveal products' potential. Most companies promote both kinds of errors by focusing disproportionately on late-stage development; they lack the early, truth-seeking functions that would head such errors off. In segmented NPD, however, the early-stage organization maintains loyalty to the experiment rather than the product, whereas the late-stage organization pursues commercial success. Chorus has significantly improved NPD efficiency and productivity at Lilly. Although the unit absorbs just one-tenth of Lilly's investment in early-stage development, it delivers a substantially greater fraction of the molecules slated for late Phase II trials--at almost twice the speed and less than a third of the cost of the standard process, sometimes shaving as much as two years off the usual development time.

An organization with a strong learning culture faces the unpredictable deftly. However, a concrete method for understanding precisely how an institution learns and for identifying specific steps to help it learn better has remained elusive. A new survey instrument from professors Garvin and Edmondson of Harvard Business School and assistant professor Gino of Carnegie Mellon University allows you to ground your efforts in becoming a learning organization. The tool's conceptual foundation is what the authors call the three building blocks of a learning organization. The first, a supportive learning environment, comprises psychological safety, appreciation of differences, openness to new ideas, and time for reflection. The second, concrete learning processes and practices, includes experimentation, information collection and analysis, and education and training. These two complementary elements are fortified by the final building block: leadership that reinforces learning. The survey instrument enables a granular examination of all these particulars, scores each of them, and provides a framework for detailed, comparative analysis. You can make comparisons within and among your institution's functional areas, between your organization and others, and against benchmarks that the authors have derived from their surveys of hundreds of executives in many industries. After discussing how to use their tool, the authors share the insights they acquired as they developed it. Above all, they emphasize the importance of dialogue and diagnosis as you nurture your company and its processes with the aim of becoming a learning organization. The authors' goal--and the purpose of their tool--is to help you paint an honest picture of your firm's learning culture and of the leaders who set its tone.

Many managers think that developing and rolling out a major IT system is like putting up a warehouse: You build it and you're done. But that does not work for IT anymore. Taking that approach results in rigid, costly systems that are outdated from the day they are turned on. What's needed for today's businesses is IT that serves not only as a platform for existing operations but also as a launchpad for new functions and businesses. In this article, the authors present a path-based approach that addresses the primary challenges of IT: the difficulty and expense of mapping out all requirements before a project starts because people often cannot specify everything that they need beforehand; the other unanticipated needs that almost always arise once a system is in operation; and the tricky task of persuading people to use and "own" it. Japan's Shinsei Bank emerged during the authors' research as a standout among the companies applying the path-based method. The firm designed, built, and rolled out its system by forging together, not just aligning, business and IT strategies; employing the simplest possible technology; making the system truly modular; letting it sell itself to users; and ensuring that users influence future improvements. Some of the principles are variations on old themes, while others turn the conventional wisdom on its head.

Marty Echt, the new head of marketing at Hunsk Engines, is determined to bring the motorcycle maker back to its roots. He says it's not enough to project authenticity to customers--employees must personally subscribe to the brand's values. Should the company's CEO support Marty's "real deal" vision? Five experts comment on this fictional case study in R0803A and R0803Z. Bruce Weindruch, the founder and CEO of the History Factory, says that an authenticity-based campaign can be effective--but only if it's truly drawn from history. Marketers like Marty often remember their organization's past in a golden haze. Weindruch recommends exploring old engineering drawings, ads, and product photos in order to understand what customers and employees really valued back in the day. Gillian Arnold, a consultant to luxury fashion and fine jewelry brands, thinks Marty's approach is right: People in key marketing posts must be passionate about their products and know them inside and out. She argues that the CEO needs to commit more fully to the new campaign and address the significant gap between the staff and the brand. James H. Gilmore and B. Joseph Pine II, the cofounders of Strategic Horizons, point out that Hunsk needs to manage customers' perceptions rather than trying to be a "real company" or forming a management team whose personal interests match the brand. People purchase a product if it conforms to their self-image; that alone determines the brand's authenticity. Glenn Brackett of Sweetgrass Rods, a maker of bamboo fly-fishing rods, says Marty seems to be one of the few people who understand Hunsk motorcycles. If employees bring blood, sweat, heart, and soul to a product, it will manifest that spirit, and customers will line up for it.

Marty Echt, the new head of marketing at Hunsk Engines, is determined to bring the motorcycle maker back to its roots. He says it's not enough to project authenticity to customers--employees must personally subscribe to the brand's values. Should the company's CEO support Marty's "real deal" vision? Five experts comment on this fictional case study in R0803A and R0803Z. Bruce Weindruch, the founder and CEO of the History Factory, says that an authenticity-based campaign can be effective--but only if it's truly drawn from history. Marketers like Marty often remember their organization's past in a golden haze. Weindruch recommends exploring old engineering drawings, ads, and product photos in order to understand what customers and employees really valued back in the day. Gillian Arnold, a consultant to luxury fashion and fine jewelry brands, thinks Marty's approach is right: People in key marketing posts must be passionate about their products and know them inside and out. She argues that the CEO needs to commit more fully to the new campaign and address the significant gap between the staff and the brand. James H. Gilmore and B. Joseph Pine II, the cofounders of Strategic Horizons, point out that Hunsk needs to manage customers' perceptions rather than trying to be a "real company" or forming a management team whose personal interests match the brand. People purchase a product if it conforms to their self-image; that alone determines the brand's authenticity. Glenn Brackett of Sweetgrass Rods, a maker of bamboo fly-fishing rods, says Marty seems to be one of the few people who understand Hunsk motorcycles. If employees bring blood, sweat, heart, and soul to a product, it will manifest that spirit, and customers will line up for it.

In 1999, the 20-year-old AIDS crisis had ravaged many developing countries and, in particular, on the continent of Africa. Of the estimated 33.4 million people living with HIV/AIDS worldwide in 1998, almost two-thirds (22 million) were in sub-Saharan Africa, considered the "global epicenter" of the disease. Already 12 million had died, and life expectancy in the region plummeted from 62 years to 47. Chicago-based Abbott Laboratories had responded at the start of the AIDS outbreak by developing the HIV diagnostic test kit and then, later in the crisis, developed some of the state-of-the-art HIV/AIDS drugs. Abbott executives, led by new CEO Miles White, wanted to address the crisis in sub-Saharan Africa, but in a specific, efficient, and effective way. This case details the evolution of the AIDS crisis, Abbott Laboratories' HIV/AIDS drug production, and the company's efforts-in 1999-to find other ways to battle HIV/AIDS globally.

In 1999 and 2000, Abbott Laboratories' senior management considered a number of philanthropic options that could make a difference and define the focus for Abbott and the Abbott Fund's charitable programs. Although the cause was humanitarian, it was considered important that the programs align strategically with Abbott's leadership in the HIV/AIDS arena. The Abbott Fund officially launched the Program for Orphans and Vulnerable Children in June 2000. The program assisted orphans and vulnerable children infected and affected by HIV/AIDS as well as the communities that cared for them. They chose Tanzania as host for a pilot program, which involved updating the country's community health care infrastructure. Abbott partnered with Tanzania's Ministry of Health over the next five years to upgrade the facilities at Muhimbili National Hospital in Dar Es Salaam, the Tanzanian capital; build an HIV center comprising an outpatient clinic and counseling/support facilities; create a national HIV teaching center; and introduce pharmacy, health information, and management systems. The dramatic growth of the Abbott Fund HIV/AIDS programs suggested a strategic turning point for the Abbott Fund, transforming it from a domestic philanthropic program to one with a global focus, now aligned with Abbott's international business focus. By 2003, nearly $20 million from the Abbott Fund was being invested in its developing-world AIDS programs.

The partnership between Abbott and the government of Tanzania continued to flourish. As a demonstration of Abbott's long-term commitment to Tanzania, in 2007, the Abbott Fund opened its first office outside Abbott headquarters in Illinois. The new office in Dar es Salaam, led by Divisional Vice President Christy Wistar, oversaw the expanding number of philanthropic projects in Tanzania. In June 2007, Abbott CEO Miles White returned to Tanzania for the third time and announced the Abbott Fund's future plans to modernize the 23 regional laboratories across Tanzania. By the end of 2007, the Abbott Fund had invested more than $50 million in Tanzania alone, strengthening and modernizing the health care infrastructure and systems countrywide. The Abbott Fund planned to continue its support of numerous programs and organizations that were working to prevent mother-to-child transmission of HIV/AIDS and deliver effective care and treatment to HIV-infected patients. The Abbott Fund also supported programs that provided for the basic needs of orphans and vulnerable children in Tanzania and elsewhere in Africa and India.

Bob Kelly, the new CEO of Mellon Financial, is considering the terms of a proposed "merger of equals" with The Bank of New York, just before the final Board meeting to approve the deal. The combination offers a great strategic fit, and the expected synergies are large. However, the proposed exchange ration values Mellon at a discount to its last closing price, even though it is the smaller and non-surviving bank. Kelly must consider the various dimensions of the deal--specifically the value of synergies, the form of consideration, and the deal's impact on the eps of both sides--and determine whether it is in the best interests of Mellon, the city of Pittsburgh, and Mellon's shareholders.

This note provides guidelines to consider and reviews the sources available for compensation research. Having an understanding of the "outside option", that is effectively the average salary being offered for a position in a specific type of firm is an important component of conducting analysis for compensation decisions. The information in this note will help in locating the information necessary for this type of analysis.

In January 2007, three decades after its incorporation, Apple Computer shed the second word in its name and became Apple Inc. With that move, the company signaled a fundamental shift away from its historic status as a vendor of the Macintosh personal computer (PC) line. Mac sales remained vital to Apple's future, but they now accounted for less than half of its total revenue. The company's line of iPod media players, its iTunes online content store and its newly launched iPhone mobile handset business made up increasingly large shares of its operations. In early 2008, on the strength of sky-rocketing sales in those areas and by resurgent sales of Macintosh products, Apple's revenues and its stock price reached record levels. The case explores the sustainability of Apple's current business model, one that positioned the company simultaneously in the PC industry and the consumer electronics industry. While Apple enjoyed a high market share in digital media players and in online music sales, it remained a niche player in the worldwide PC industry. The case examines the history of Apple's strategic moves under the leadership of CEOs Jobs, Sculley, Spindler, Amelio, and (again) Jobs; places those moves in the context of structural features of the evolving PC industry; and covers the iPod and iPhone businesses at considerable length.

Spreadsheet supplement for case 708-480.