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Tom Nies, charismatic CEO of Cincom Systems, is considering a public offering of his software enterprise, but the 1987 stock market crash checks his plans. Nies reflects that capital for expansion will keep Cincom at the frontier of technological development in a changing industry. He also realizes that an IPO might negate his firm's efforts to deliver high levels of customer satisfaction and change Cincom's unique corporate culture.

In 2002 Weber Shandwick, a leading global public relations agency, instituted a Client Relationship Leader (CRL) Program for its top 32 global accounts. The purpose of the program is to ensure that all of the firm's resources across geographies, practice areas, and specialty areas are coordinated and effectively delivered to Weber Shandwick's most important clients. Each of these clients is assigned a "Client Relationship Leader" and the case discusses the skills and abilities that are needed to be successful in this role in a very complex multidimensional organizational structure. There are two basic types of CRLs: hunters whose job is growing accounts with a lot of potential and farmers whose job is to maintain strong and broad-based relationships. CRLs must walk a fine line between being close to the client, even considered part of their team, and not being too close by "going native" and ignoring their responsibilities as Weber Shandwick employees. Unlike office managers, who are measured based on the bottom line, CRLs are measured on top-line growth. Another objective of the CRL program is to enable Weber Shandwick to differentiate itself in a highly competitive environment where it is very difficult for PR firms and their holding company media conglomerate parents to do so. The public relations industry in the broadest sense has undergone a tremendous amount of consolidation through acquisitions over the past 20 years. It is also being challenged to adapt to new technologies like blogging and social networking, which both change and enhance existing service offerings. Another way that Weber Shandwick is adapting to new technologies is through an Internet-based platform called WeberWorks (3.0) that fosters communication and collaboration between the firm and the client and within the client team.

When Quanta Computer, Inc., the world's largest manufacturer of laptop computers, first joined the One Laptop Per Child (OLPC) initiative, it faced a challenge trying to balance the cost objectives of a laptop computer targeted at children of the developing world with the escalating content demands from the marketplace and the non-profit OLPC Foundation. It also had to fit the project into its company business model which served global lead PC brands like Apple as a high volume, low cost ODM provider. The case is a vehicle for discussing new market disruption and the impact of modularity and the evolution of the value network in the global PC supply chain.

The emergence of the MP3 file-based music format not only disrupted the market for portable audio players, it also had a huge impact on the business models of major record labels. Modularity, and the commoditization spill-over enabled by modularity in the personal computer industry, was a major force in the development of the market. While Apple's iPod today holds the dominant market position, new forces of commoditization continue to drive shifts in the value chain. The case examines the commoditization cycle and contrasts integrated solutions such as the iPod-iTunes software-iTunes Music Store with emerging competition from other MP3 players and the Amazon.com Music Store.

Spreadsheet supplement to case 908A01.

In the fall of 2006, the president of Conroy's Acura was examining reports of the company's quarterly sales. He was concerned that despite a healthy economy, sales at his dealership were stagnant. The vice-president of sales of Conroy's Acura was constantly coming up with new marketing schemes to boost sales. But the president had difficulty determining how successful past marketing efforts had been in increasing profitability. He needed a way to put the numbers into context.

This note gives a broad overview of the energy sector, highlighting trends and market dynamics in 2008. It is intended to be used as a basic primer for entrepreneurs and investors interested in the energy sector, not an exhaustive or definitive textbook for scientists and engineers. It discusses the importance of incumbent energy sources, including fossil fuels, as well as renewable power.

This article explores the licensing strategies pursued by firms whose business model is based on developing and licensing out their intellectual property. These "intellectual property (IP) vendors" are not traditional suppliers, since they do not engage in production or commercialization, but specialize solely in the generation of IP. Considerable anecdotal evidence exists about these creative and enterprising firms. However, there has been no systematic investigation of how they use licensing to capture value from their IP. Our research indicates that their licensing strategies can be differentiated along two main dimensions. The first concerns the nature of the contractual relationship: whether the license stands alone or whether it is part of a larger package including other R&D collaborative agreements. The second concerns whether the technologies concerned are of high or low cumulativeness. These dimensions yield a typology outlining four different strategies IP vendors can use.

The 2004 amendments to the Federal Sentencing Guidelines state that organizations should "create a culture that encourages ethical conduct and a commitment to comply with the law." This article presents data that show that procedural fairness-which concerns the objectivity and consistency of organizational procedures-is an essential component of such a culture. The data show that employees tend to believe that procedurally just organizations are legitimate. This belief in legitimacy, in turn, encourages them to act ethically and to comply with rules. This is a "market" approach to compliance because employees "buy in" to the organization, its values, and rules. Command-and-control approaches based on reward-and-punishment programs are significantly less effective, suggesting that rigid, rules-based approaches such as Sarbanes-Oxley are counter-productive. Procedural justice encourages employees to go beyond their job descriptions to create organizational value. This value creation aspect of procedural justice suggests a new role for ethics officers. Finally, this article includes an instrument organizations can use to measure their own level of procedural justice as well as a set of national benchmarks.

Most consumers who comprise "the bottom of the pyramid" reside in hundreds of thousands of villages located beyond most multinationals' distribution networks. Their access to essential goods is limited not just by high prices, but also by inadequate rural distribution, which also restricts the ability of poor producers to distribute their products. The term "socially responsible distribution" describes initiatives that provide poor producers and consumers with market access for goods and services that they can benefit from by either buying or selling, thus neutralizing the disadvantages they suffer due to inadequate physical links to markets, information asymmetries, and weak bargaining power. This article identifies how socially responsible distribution can be achieved by strategies that reduce costs, reinvent the distribution channel, or incorporate a long-term approach to investment. It offers guidelines for setting up distribution channels that integrate the rural bottom of the pyramid and identifies the payoffs from adopting them.

Since 1963, Bernard Watch Company has been manufacturing watches for widely known brands, such as Dolce & Gabbana and Roamer. The company is headquartered in Denmark and has a branch office in Hong Kong and an assembly plant in Shenzhen, China. Anson Leung, chief financial officer, has conducted a series of audits on the various cost aspects of running the assembly plant. This is to ensure efficient management of the plant's human capital, which is a vital resource for the company due to the need for stable production quality with just-in-time delivery at competitive prices-a common goal for the watch-making industry. Leung is alarmed by findings that reveal a high voluntary turnover rate of 39.3% among assembly line workers during 2006, costing Bernard as much as Rmb 718,188.9. She is concerned that this may jeopardise the company's long-standing market position in watch-making. This case examines the different types of costs that may incur from voluntary turnover, including both direct and intangible costs such as those that are related to separation of leaving employees, recruitment of new staff and loss in productivity. It can be used to teach the concept of human resources accounting and to introduce how human resources management practices may help reduce voluntary turnover costs.

Our annual survey of ideas and trends that will make an impact on business: Stan Stalnaker heralds a peer-to-peer economy in which consumers become consumer-producers. Tamara J. Erickson dissects the expectations of Gen Y workers. Dr. Jerome Groopman writes a prescription for avoiding misdiagnoses in decision making. Michael Sheehan warns not to resort to the tools of competition when it's really opposition that threatens your company. John J. Medina conceives of a brain-friendly workplace that applies modern science to daily performance. Dan Ariely studies the minds of "honest" people when they cheat. Paul Root Wolpe and Daniel D. Langleben share truths about technologically sophisticated lie detection. Scott Berinato shines a light on the cybercrime service economy. Mark Kuznicki, Eli Singer, and Jay Goldman showcase Toronto, where a technology-driven event led to real social change. John Seely Brown and Douglas Thomas argue that online games are preparing the twenty-first-century workforce. Jane McGonigal calls alternate reality games the promising new operating systems for real-world business. Miklos Sarvary mines the history of broadcasting for wisdom about competing in the metaverses of the internet. Judith Donath asks how true to yourself you'll be in the virtual world. Jan Chipchase surveys the soon-to-be-charted territory of metadata trails. Lew McCreary points a finger at people who blame technology for their bad behavior. Jaime Lerner sees the city of the future in a turtle's shell. David Vogel catalogs the advantages of socially responsible lobbying. George Pohle lets the numbers prove the mass-market promise of China's second-tier cities. Aamir A. Rehman and S. Nazim Ali discuss the boom in sharia-compliant finance. Michael J. Mauboussin identifies the shrinking domain in which experts are the best problem solvers. Garrett Gruener reveals his list of sustainable and unsustainable trends.

Each of Lilypad's boutique hotels has its own sense of place and definition of customer experience. Though loyal to their favorites, guests don't visit other luxury properties in the collection or even realize they're affiliated. To boost the lifetime value of existing customers and reach new ones, CEO Andre Cleary is thinking about positioning the hotels more directly under the corporate umbrella. The company could gain scale efficiencies and possibly increase visits - but does one brand really fit all? Four experts comment on this fictional case study in R0802B and R0802Z. Horst Schulze, the CEO and president of the West Paces Hotel Group, says that Lilypad must build up its corporate brand to create long-term value. This would also help the company become more efficient at cross-promoting properties, offering services, and buying supplies in bulk. Jill Granoff, the executive vice president of direct brands at Liz Claiborne, says that the financial risks of putting the Lilypad name front and center may outweigh the potential rewards. The company should instead market its hotels more aggressively to travel agents and selectively acquire new properties to propel further growth. Kevin Lane Keller of Dartmouth argues that Lilypad must clarify what its brand represents before giving it any more emphasis. Rather than making significant changes in the rooms themselves, which could weaken the individual brands, management should coordinate behind the scenes to improve cross-sell numbers. Jez Frampton, the global CEO of the consultancy Interbrand, thinks Andre should systematically examine the brand in terms of Lilypad's customers and culture. That means conducting market research and moving away from the current "warlord" approach of managing each property as a separate fiefdom.

Incoming CEOs and general managers don't have much time to show what they can do to improve a business's performance. (In 2006, for instance, about 40% of CEOs who left their jobs had lasted an average of just 1.8 years - and many of them were ushered out the door.) Within a few months at most, leaders must find ways to boost profitability, increase market share, overtake a competitor - whatever the key tasks may be. But they can't map out specific objectives and initiatives until they have accurately assessed their companies' distinctive strengths and weaknesses and the particular threats and opportunities they face. In this article, Bain consultants Gottfredson, Schaubert, and Saenz provide a diagnostic template to help organizations figure all that out so they can decide which goals are reasonable and where to focus performance-improvement efforts. The template is built on four widely accepted principles. First, costs and prices almost always decline; second, your competitive position determines your options; third, customers and profit pools don't stand still; and fourth, simplicity gets results. Along with each principle, the authors offer diagnostic questions and analytic tools. Of course, each manager will emphasize certain elements of the template and de-emphasize others, based on his or her business situation. This process will show incoming CEOs and general managers where they are starting from (their point of departure) and help them establish their performance objectives (their point of arrival) as well as the change initiatives that will take them where they want to go.

In May 2004, with the war for talent in high gear, Groysberg and colleagues from Harvard Business School wrote in these pages about the risks of hiring star performers away from competitors. After studying the fortunes of more than 1,000 star stock analysts, they found that when a star switched companies, not only did his performance plunge, so did the effectiveness of the group he joined and the market value of his new company. But further analysis of the data reveals that it's not that simple. In fact, one group of analysts reliably maintained star rankings even after changing employers: women. Unlike their male counterparts, female stars who switched firms performed just as well, in the aggregate, as those who stayed put. The 189 star women in the sample (18% of the star analysts studied) achieved a higher rank after switching firms than the men did. Why the discrepancy? First, says the author, the best female analysts appear to have built their franchises on portable, external relationships with clients and the companies they covered, rather than on relationships rooted within their firms. By contrast, male analysts built up greater firm- and team-specific human capital by investing more in the internal networks and unique capabilities and resources of their own companies. Second, women took greater care when assessing a prospective new employer. In this article, Groysberg explores the reasons behind the star women's portable performance.

As life expectancy in the West increases and companies can no longer promise lifelong security, many businesspeople will need to make major changes during middle age, embarking on a second life and a second career. They must start by getting beyond two pervasive and opposing myths. The first is that midlife marks the onset of decline. Problems do arise during middle age - concerns about health and finances, for instance - but one's life force does not expire at 65, nor do possibilities vanish. In fact, by middle age, most executives have gained a freedom that only self-knowledge can impart, and they relish unprecedented opportunities for personal growth. Midlife transitions, however, must be rooted in realism, not driven by the second myth, which paints middle age as a time of magical transformation. Contrary to what self-help books and inspirational speakers proclaim, such transformations do not happen. A 50-year-old with little musical training, for instance, will not suddenly become a concert pianist. People who buy into this myth find that their inevitable disappointment can be debilitating. Paradoxically, the doctrine that aims to encourage change actually stifles it. To make successful transitions, executives must stay open to the possibilities their experience qualifies them for but remain realistic about what they can achieve. For companies, employees' midlife transitions represent both a challenge (senior managers seemingly on track to become CEO may instead leave) and an opportunity (other midlife executives, with different perspectives and experiences, may knock on the door). Organizations must help middle-aged executives through this difficult period, not just by offering a workshop or two but by providing ongoing coaching and opportunities for personal and professional development.

When companies put seasoned managers in charge of important projects, they don't expect missed deadlines, budget overruns, and rampant defects. However, that's what researchers found when they tested hundreds of experienced project managers with computer games that simulated software development projects. The study, conducted by two professors from Insead and one from Naval Postgraduate School, strongly suggests that veterans in complex environments suffer a breakdown in the learning process. The research reveals three reasons for the breakdowns: Time lags between causes and effects make it difficult to see how they're connected; fallible estimates color the chain of decisions that determine a project's outcome; and a bias toward the initial goals prevents managers from setting revised, more appropriate, targets when project circumstances change. Sticking to an initial low budget goal after a project grew in scope, for instance, led subjects to ignore quality assurance, which led to soaring defect rates - and costs. Companies can take practical steps to fix the learning cycle. They can provide feedback that shows the relationships between important variables in the environment. Such feedback might reveal, say, the 20-day ramp-up that a new quality assurance team needs before becoming fully effective. Tools that apply formal models to calculate such things as the effect of turnover on team productivity also help. Setting goals for behavior, instead of targets for performance, is critical as well. Finally, firms can create project "flight simulators" that mimic actual learning environments but don't let complexity overwhelm trainees. Managers can continue learning only if they get decision support tailored to the challenges they face. Firms would do well to focus more on training people higher up in the organization and stop leaving them to fend for themselves.

Why do people start businesses? For the money and the chance to control their own companies, certainly. But new research from Harvard Business School professor Wasserman shows that those goals are largely incompatible. The author's studies indicate that a founder who gives up more equity to attract cofounders, new hires, and investors builds a more valuable company than one who parts with less equity. More often than not, however, those superior returns come from replacing the founder with a professional CEO more experienced with the needs of a growing company. This fundamental tension requires founders to make "rich" versus "king" trade-offs to maximize either their wealth or their control over the company. Founders seeking to remain in control (as John Gabbert of the furniture retailer Room & Board has done) would do well to restrict themselves to businesses where large amounts of capital aren't required and where they already have the skills and contacts they need. They may also want to wait until late in their careers, after they have developed broader management skills, before setting up shop. Entrepreneurs who focus on wealth, such as Jim Triandiflou, who founded Ockham Technologies, can make the leap sooner because they won't mind taking money from investors or depending on executives to manage their ventures. Such founders will often bring in new CEOs themselves and be more likely to work with their boards to develop new, post-succession roles for themselves. Choosing between money and power allows entrepreneurs to come to grips with what success means to them. Founders who want to manage empires will not believe they are successes if they lose control, even if they end up rich. Conversely, founders who understand that their goal is to amass wealth will not view themselves as failures when they step down from the top job.

Sustainability, defined by natural scientists as the capacity of healthy ecosystems to function indefinitely, has become a clarion call for business. Leading companies have taken high-profile steps toward achieving it: Wal-Mart, for example, with its efforts to reduce packaging waste, and Nike, which has removed toxic chemicals from its shoes. But, says Unruh, the director of Thunderbird's Lincoln Center for Ethics in Global Management, sustainability is more than an endless journey of incremental steps. It is a destination, for which the biosphere of planet Earth - refined through billions of years of trial and error - is a perfect model. Unruh distills some lessons from the biosphere into three rules: Use a parsimonious palette. Managers can rethink their sourcing strategies and dramatically simplify the number and types of materials their companies use in production, making recycling cost-effective. After the furniture manufacturer Herman Miller discovered that its leading desk chair had 200 components made from more than 800 chemical compounds, it designed an award-winning successor whose far more limited materials palette is 96% recyclable. Cycle up, virtuously. Manufacturers should design recovery value into their products at the outset. Shaw Industries, for example, recycles the nylon fiber from its worn-out carpet into brand-new carpet tile. Exploit the power of platforms. Platform design in industry tends to occur at the component level - but the materials in those components constitute a more fundamental platform. Patagonia, by recycling Capilene brand performance underwear, has achieved energy costs 76% below those for virgin sourcing. Biosphere rules can teach companies how to build ecologically friendly products that both reduce manufacturing costs and prove highly attractive to consumers. And managers need not wait for a green technological revolution to implement them.

In developed nations, the workforce is aging rapidly. That trend has serious implications. Companies could face severe labor shortages in a few years as workers retire, taking critical knowledge with them. Businesses may also see productivity decline among older employees, especially in physically demanding jobs. The authors, partners at Boston Consulting Group, offer managers a systematic way to assess these dual threats - capacity risk and productivity risk - at their companies. It involves studying the age distribution of their employees to see if large percentages fall within high age brackets and then projecting - by location, unit, and job category - how the distribution will change over the next 15 years. Managers must also factor in both the impact of strategic moves on personnel needs and the future supply of workers in the market. When RWE Power analyzed its trends, the company learned that in 2018 almost 80% of its workers would be over 50. What's more, in certain critical areas its labor surplus was about to become a sizable shortfall. For instance, a shortage of specialized engineers would develop in the company just as their ranks in the job market thinned and competition to hire them intensified. Reversing its downsizing course, RWE Power took steps to increase its supply of workers in those key positions. The authors show how companies that face talent gaps, as RWE Power did, can close them through training, transfers, recruitment, retention, productivity improvements, and outsourcing. They also describe measures that companies can take to keep older workers productive, including workplace accommodations, revised compensation structures, performance incentives, and targeted health care management. The key is to identify and address potential problems early. Firms that do so will gain an edge on rivals that are still relentlessly focused on reducing head count.