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Major shifts in the business environment can make whole investment strategies obsolete. To anticipate such shifts, the Royal Dutch/Shell Group of Companies uses scenario analysis, a method it pioneered three decades ago. Given that most investments are irreversible, scenario planning can be combined with real options analysis to help identify options in the future; help time the decision to exercise a real option; and provide an important input in the process of evaluating real options.

Marketing tends to view technology as a means to meeting customer needs and desires. This view has led some marketers to focus perhaps too exclusively on the customer to the detriment of a deep understanding of technology and its interaction with society. Drawing on the ideas of the philosophers Heidegger and Popper, this article contends that technology is more than a means to the end of satisfying consumer needs and wants--it is an active force that frequently escapes the control of the marketer. Explores the ways in which technologies, firms, customers, and society interact and suggests how firms might adopt different strategies toward technology to take advantage of these emergent interactions.

While many researchers have made contributions to the now extensive literature on service quality, there is much less research on what constitutes delight in service quality and how organizations can delight customers. Examines the differences between customer satisfaction and customer delight, notably the benefits of delighting rather than merely satisfying customers. Describes how to delight customers and outlines how to implement a successful customer delight program as well as how to measure customer delight. Also discusses the potential pitfalls of doing so.

Discusses the role of foreign direct investment in China as a major driver for the high growth observed in the country since 1978.

Presents the corporate social responsibility initiatives of Pantaleon, a leading sugar company from Guatemala, and their relation to its competitive strategy. Since 1990, Pantaleon's management invested in projects aimed at the communities surrounding the mill, featuring educational, health-related, and environmental programs. These activities reinforced corporate strategy, which included infrastructure and agricultural practices updates, vertical integration, and internal and regional expansion of productive capacity and markets. In the second half of 2004, becoming a worldwide leading sugar mill entailed significant strategic challenges for Pantaleon's top executives. In turn, these challenges posed two problems: defining the company's position on social projects undertaken by Pantaleon Foundation and Fundazucar and analyzing the internal consistency of its competitive strategy.

John Dooley, BioSol's vice-president of strategic research, has been making a name for himself at the biotechnology company's offices in Ireland. He's been doing so well, in fact, that the firm has offered him a promotion to director of strategy at headquarters--in California. He's lived abroad before. In the 1980s, making a living in Ireland was tough: Jobs were scarce and unemployment was high. So John and his wife, Fiona, moved to Massachusetts, where John attended MIT. They were not alone; many of their friends and family members also moved out of Ireland then. John and Fiona enjoyed their time in Boston; they became active in a large expatriate community and established reputations in their professional fields. By 1999, however, the Celtic Tiger was running at full speed. The Irish economy was booming and the whole country seemed to be bursting with possibility. When John was offered a job at BioSol's Dublin subsidiary, he and Fiona moved home and never looked back--until now. The new promotion would give his career a huge boost, but accepting it would mean uprooting his family and becoming an expat again. Ireland's economy is going strong now, but what if it doesn't last? Should John cast his lot with his country or his company? Commenting on this fictional case study in R0511A and R0511Z are Raj Kondur, the CEO of Nirvana Business Solutions in Bangalore, India; James Citrin, a senior director at Spencer Stuart in Stamford, Connecticut; Maurice Treacy, the director of biotechnology at Science Foundation Ireland in Dublin; Arno Haslberger, who teaches HR management at Webster University Vienna in Austria; and Sharman Esarey, also in Vienna, editor of the annual report of the Organization for Security and Co-Operation in Europe.

Stress is an essential response in highly competitive environments. Before a race, before an exam, before an important meeting, your heart rate and blood pressure rise, your focus tightens, you become more alert and more efficient. But beyond a certain level, stress overloads your system, compromising your performance and, eventually, your health. So the question is: When does stress help and when does it hurt? To find out, HBR talked with Harvard Medical School professor Herbert Benson, M.D., founder of the Mind/Body Medical Institute. Having spent more than 35 years conducting worldwide research in the fields of neuroscience and stress, Benson is best known for his 1975 best seller The Relaxation Response, in which he describes how the mind can influence stress levels through such tools as meditation. His most recent research centers on what he calls "the breakout principle," a method by which stress is not simply reduced but carefully controlled so that you reap its benefits while avoiding its dangers. He describes a four-step process in which you first push yourself to the most productive stress level by grappling intently with a problem. Next, just as you feel yourself flagging, you disengage entirely by doing something utterly unrelated--going for a walk, petting a dog, taking a shower. In the third step, as the brain quiets down, activity paradoxically increases in areas associated with attention, space-time concepts, and decision making, leading to a sudden, creative insight--the breakout. Step four is achievement of a "new-normal state," in which you find that the improved performance is sustained, sometimes indefinitely. As counterintuitive as this research may seem, managers can doubtless recall times when they've had an "aha" moment at the gym, on the golf course, or in the shower. What Benson describes here is a way to tap into this invaluable biological tool whenever we want.

What's the number of product or service offerings that would optimize both your revenues and your profits? For most firms, it's considerably lower than the number they offer today. The fact is, companies have strong incentives to be overly innovative in new product development. But continual launches of new products and line extensions add complexity throughout a company's operations, and as the costs of managing that complexity multiply, margins shrink. To maximize profit potential, a company needs to identify its innovation fulcrum--the point at which an additional offering destroys more value than it creates. The usual antidotes to complexity miss their mark because they treat the problem on the factory floor rather than at its source: in the product line. Mark Gottfredson and Keith Aspinall of Bain & Co. present an approach that goes beyond the typical Six Sigma or lean-operations program to root out complexity hidden in the value chain. The first step is to ask, What would our company look like if it made and sold only a single product or service? For Starbucks, it might be a medium-size cup of coffee; for a bank, a simple checking account. Then determine the cost of producing that baseline offering. Next, add variety back into the business system, product by product, and carefully forecast the resulting impact on sales as well as the cost implications across the value chain. When the analysis shows the costs beginning to overwhelm the added revenues, you've found your innovation fulcrum. By deconstructing their companies to a zero-complexity baseline, managers can break through organizational resistance and deeply entrenched ways of thinking to find the right balance between innovation and complexity.

Senior executives typically delegate responsibility for managing a firm's derivatives portfolio to in-house financial experts and the company's financial advisers. That's a strategic blunder, argues this Nobel laureate, because the inventiveness of modern financial markets makes it possible for companies to double or even triple their capacity to invest in their strategic assets and competencies. Risks fall into two categories: either a company adds value by assuming them on behalf of its shareholders or it does not. By hedging or insuring against non-value-adding risks with derivative securities and contracts, thereby removing them from what the author calls the risk balance sheet, managers can release equity capital for assuming more value-adding risk. This is not just a theoretical possibility. One innovation--the interest rate swap, introduced about 20 years ago--has already enabled the banking industry to increase dramatically its capacity for adding value to each dollar of invested equity capital. With the range of derivative instruments growing, there is no reason why other companies could not similarly remove strategic risks, potentially creating billions of dollars in shareholder value. The possibilities are especially important for private companies that have no access to public equity markets and, therefore, cannot easily increase their equity capital by issuing more shares. The author describes how derivative contracts of various kinds are already being employed strategically to mitigate or eliminate various risks. He also shows how companies can use the risk balance sheet to identify risks they should not bear directly and to determine how much equity capacity they can release for assuming more value-adding risk.

Yes, it's nice when a leader is charismatic and confident. And a great resume can tell you a lot about a person's knowledge and experience. But such assets are no substitute for sheer business intelligence, and they reveal very little about a leader's ability to reach the "right" answer consistently. How can hiring managers flag individuals with such smarts? Historically, the only reliable measure of brainpower has been the standard IQ test, which is rarely used in business settings because of the specific subjects it tests for--math, reading, and spatial reasoning--and because of its multiple-choice format. Despite its shortcomings, the standard IQ test is still a better predictor of managerial success than any other assessment tool companies currently use, Justin Menkes argues. It's true that there isn't a version of IQ testing that applies to the corporate world, but in rejecting IQ tests altogether, hiring managers have thwarted their own attempts to identify true business stars. The author defines the specific subjects that make up "executive intelligence"--namely, accomplishing tasks, working with people, and judging oneself. He describes how to formulate questions to test job candidates for their mastery of these subjects, offering several examples based on real situations. Knowledge questions, such as those used in standard behavioral interviews, require people to recite what they have learned or experienced; intelligence questions call for individuals to demonstrate their abilities. Therefore, the questions in an executive intelligence test shouldn't require specific industry expertise or experience; any knowledge they call for must be rudimentary and common to all executives. And the questions should not be designed to ask whether the candidate has a particular skill; they should be configured so that the candidate will have to demonstrate that skill in the course of answering them.

Marketers planning promotional campaigns ask questions to boost the odds that the messages will be accepted: Who should receive each message? What should be its content? How should we deliver it? The one question they rarely ask is: When should we deliver it? That's too bad, because in marketing, timing is arguably the most important variable of all. Indeed, there are moments in a customer's relationship with a business when she wants to communicate with that business because something has changed. If the company contacts her with the right message in the right format at the right time, there's a good chance of a warm reception. The question of when can be answered by a new computer-based model called "dialogue marketing," which is, to date, the highest rung on an evolutionary ladder that ascends from database marketing to relationship marketing to one-to-one marketing. Its principal advantages over older approaches are that it is completely interactive, exploits many communication channels, and is "relationship aware," that is, it continuously tracks every nuance of the customer's interaction with the business. Thus, dialogue marketing responds to each transition in that relationship at the moment the customer requires attention. Turning a traditional marketing strategy into a dialogue marketing program is a straightforward matter. Begin by identifying the batch communications you make with customers, then ask yourself what events could trigger those communications to make them more timely. Add a question or call to action to each message and prepare a different treatment or response for each possible answer. Finally, create a series of increasingly urgent calls to action that kick in if the question or call to action goes unanswered by the customer. As dialogue marketing proliferates, it may provide the solid new footing that Madison Avenue seeks.

Companies often face new rivals, technologies, regulations, and other environmental changes that seem to come out of left field. How can they see these changes sooner and capitalize on them? Such changes often begin as weak signals on what the authors call the periphery, or the blurry zone at the edge of an organization's vision. As with human peripheral vision, these signals are difficult to see and interpret but can be vital to success or survival. Unfortunately, most companies lack a systematic method for determining where on the periphery they should be looking, how to interpret the weak signals they see, and how to allocate limited scanning resources. This article provides such a method--a question-based framework for helping companies scan the periphery more efficiently and effectively. The framework divides questions into three categories: learning from the past (What have been our past blind spots? What instructive analogies do other industries offer? Who in the industry is skilled at picking up weak signals and acting on them?); evaluating the present (What important signals are we rationalizing away? What are our mavericks, outliers, complainers, and defectors telling us? What are our peripheral customers and competitors really thinking?); and envisioning the future (What future surprises could really hurt or help us? What emerging technologies could change the game? Is there an unthinkable scenario that might disrupt our business?). Answering these questions is a good first step toward anticipating problems or opportunities that may appear on the business horizon. The article concludes with a self-test that companies can use to assess their need and capability for peripheral vision.

There has been a lot of research on marketing as an offensive tactic--how it can help companies successfully launch new products, enter new markets, or gain share with existing products in their current markets. But for nearly every new product launch, market entrant, or industry upstart grabbing market share, there is an incumbent that must defend its position. And there has been little research on how these defenders can use marketing to respond to new or anticipated threats preemptively. John H. Roberts outlines four basic types of defensive marketing strategies: positive, inertial, parity, and retarding. With the first two, you establish and communicate your points of superiority relative to the new entrant; with the second two, you establish and communicate strategic points of comparability with your rival. Before choosing a strategy, you need to assess the weapons you have available to protect your market position--your brand identity, the products and services that support that identity, and your means of communicating it. Then assess your customers' value to you and their vulnerability to being poached by rivals. The author explains how Australian telecommunications company Telstra, facing deregulation, used a combination of the four strategies (plus the author's customer response model) to fend off market newcomer Optus. Telstra was prepared, for instance, to reach deep into its pockets and engage in a price war. But the customer response model indicated that a parity strategy--in which Telstra would offer lower rates on some routes and at certain times of day, even though its prices, on average, were higher than its rival's--was more likely to prevent consumers from switching. Ultimately, Telstra was able to retain several points of market share it otherwise would have lost. The strategies described here, though specific to Telstra's situation, offer lessons for any company facing new and potentially damaging competition.

John Dooley, BioSol's vice-president of strategic research, has been making a name for himself at the biotechnology company's offices in Ireland. He's been doing so well, in fact, that the firm has offered him a promotion to director of strategy at headquarters--in California. He's lived abroad before. In the 1980s, making a living in Ireland was tough: Jobs were scarce and unemployment was high. So John and his wife, Fiona, moved to Massachusetts, where John attended MIT. They were not alone; many of their friends and family members also moved out of Ireland then. John and Fiona enjoyed their time in Boston; they became active in a large expatriate community and established reputations in their professional fields. By 1999, however, the Celtic Tiger was running at full speed. The Irish economy was booming and the whole country seemed to be bursting with possibility. When John was offered a job at BioSol's Dublin subsidiary, he and Fiona moved home and never looked back--until now. The new promotion would give his career a huge boost, but accepting it would mean uprooting his family and becoming an expat again. Ireland's economy is going strong now, but what if it doesn't last? Should John cast his lot with his country or his company? Commenting on this fictional case study in R0511A and R0511Z are Raj Kondur, the CEO of Nirvana Business Solutions in Bangalore, India; James Citrin, a senior director at Spencer Stuart in Stamford, Connecticut; Maurice Treacy, the director of biotechnology at Science Foundation Ireland in Dublin; Arno Haslberger, who teaches HR management at Webster University Vienna in Austria; and Sharman Esarey, also in Vienna, editor of the annual report of the Organization for Security and Co-Operation in Europe.

John Dooley, BioSol's vice-president of strategic research, has been making a name for himself at the biotechnology company's offices in Ireland. He's been doing so well, in fact, that the firm has offered him a promotion to director of strategy at headquarters--in California. He's lived abroad before. In the 1980s, making a living in Ireland was tough: Jobs were scarce and unemployment was high. So John and his wife, Fiona, moved to Massachusetts, where John attended MIT. They were not alone; many of their friends and family members also moved out of Ireland then. John and Fiona enjoyed their time in Boston; they became active in a large expatriate community and established reputations in their professional fields. By 1999, however, the Celtic Tiger was running at full speed. The Irish economy was booming and the whole country seemed to be bursting with possibility. When John was offered a job at BioSol's Dublin subsidiary, he and Fiona moved home and never looked back--until now. The new promotion would give his career a huge boost, but accepting it would mean uprooting his family and becoming an expat again. Ireland's economy is going strong now, but what if it doesn't last? Should John cast his lot with his country or his company? Commenting on this fictional case study in R0511A and R0511Z are Raj Kondur, the CEO of Nirvana Business Solutions in Bangalore, India; James Citrin, a senior director at Spencer Stuart in Stamford, Connecticut; Maurice Treacy, the director of biotechnology at Science Foundation Ireland in Dublin; Arno Haslberger, who teaches HR management at Webster University Vienna in Austria; and Sharman Esarey, also in Vienna, editor of the annual report of the Organization for Security and Co-Operation in Europe.

All companies value leadership--some of them enough to invest dearly in cultivating it. But few management teams seem to value one engine of leadership development that is right under their noses, churning out the kind of talent they need most. It's the complicated, overburdened but very rich lives of their minority managers. Minority professionals--particularly women of color--are called upon inordinately to lend their skills and guidance to activities outside their jobs. Sylvia Ann Hewlett, who heads the Center for Work-Life Policy, and her co-authors, Carolyn Buck Luce of Ernst & Young and Cornel West of Princeton, present new research on the extent to which minority professionals take on community service and other responsibilities outside the workplace and more than their share of recruiting, mentoring, and committee work within the workplace. These invisible lives, argue the authors, can be a source of competitive strength if companies can learn to recognize and further cultivate the cultural capital they represent. But it's hard to convince minority professionals that their employer respects and values their off-hours responsibilities. A lack of trust keeps many people from revealing much about their personal lives. The authors outline four ways companies can leverage hidden skills: Develop a new level of awareness of minority professionals' invisible lives; appreciate the outsize burdens these professionals carry and try to lighten them; build trust by putting teeth into diversity goals; and, to finish the job of leadership development, help minorities reflect on their off-hours experiences, extract and generalize the lessons, and apply what's been learned in other settings.

Hema Ravichandar, head of human resources, was given a new and aggressive milestone to reach: ensure Infosys is on the Top 10 lists of both Best Performing Companies and Best Employers by 2007. No large organization had ever been able to achieve this distinction because of the tension between the need to control costs for financial performance and the expenditure required for employee satisfaction. Ravichandar was aware of the humbling experiences of the past that made Infosys cognizant of the difficulties ahead as it transitioned from a small to a large company.

Supplements the (A) case.

In October 2003, a confluence in southern California of low humidity, dead vegetation, and Santa Ana winds created the conditions for a firestorm-multiple fires that burned for some two weeks, scorched hundreds of thousands of acres, destroyed thousands of buildings, and took 24 lives. One conflagration, the Cedar Fire in San Diego County, became the largest in state history. While California boasts one of the best firefighting operations in the world, with exhaustive coordination across federal, state and local boundaries, this set of fires sent the system reeling. In the midst of operational chaos, highly placed elected officials in San Diego entered the fray with offers of military aircraft and helicopters to fight the fire-which the firefighters did not want. This case tells the story of what can happen when the operational imperative-to fight fires effectively but safely-collides with the political imperative to override established procedures as necessary to protect the public.

Perelson Weiner LLP, a successful accounting firm in New York City, is re-evaluating its incentive strategy as it makes plans to grow its business.