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Fonterra was a cooperatively owned dairy company--New Zealand's largest company and the world's largest exporter of dairy products. To maintain its leadership, Fonterra had to respond to increased competition, new consumer tastes, consolidation of its customers, and increasing subsidies on milk by developing countries. This futuristic case identifies trends that the cooperative has to take into account for its future success. It can be examined as a model for other cooperatives in other commodity systems.

Commerce Bank has become one of the fastest growing banks in the country, despite having defied conventional wisdom about how to grow deposits. Banks historically have grown either by competing on deposit rates or through acquisitions that expand their deposit base. Commerce has the lowest deposit rates in each of the local markets it serves and has acquired no other banks, yet its growth rate is unparalleled. Its secret? Commerce differentiates itself on service. Explores the highly refined service model that guides the design of its operations and service features and considers the trade-offs involved in competing on service.

In their guarded use of language, CEOs reveal more about themselves and their companies than they realize, says Stanford linguist and NPR commentator Geoffrey Nunberg.

Everyone knows that industries start out fragmented and then consolidate. But new research suggests that most industries do so in a predictable way. They go through four stages, each one requiring companies to employ a different competitive strategy.

Managing corporate projects as though they were a portfolio of financial options appears to be an exact science. But it's not. That's because decisions to drop projects are never made as objectively as decisions to sell shares.

A small software company has remarkable success repairing its dysfunctional organizational dynamics through a form of improvisational theater. The key is an exercise in which actions truly speak louder than words.

Surfing on cross of multiple consumer trends, Résonances was launched in 2000 as a life-styled retail chain selling authentic/traditional household items. Early 2002, the six stores are still unprofitable. A new owner-manager takes over and gives himself 18 months to turn the company around and instill more "magics" in the stores.

Zaplet faces internal challenges following the dramatic change in the economy and the resulting market demand for its product.

This is an MIT Sloan Management Review article. The quality initiative Six Sigma is sweeping the United States. Is it good for whatever ails your company? Consultant Michael Hammer thinks not. He warns that in their quest for operations performance improvement, many business leaders fail to distinguish its strengths from its weaknesses. Hammer presents a strategic, holistic approach--business process management--in which Six Sigma is only one of many useful initiatives. If a business process, such as billing customers, is fundamentally defective, why use Six Sigma to improve the performance of it? Companies that Hammer calls process enterprises (Caterpillar, Johnson & Johnson, Merck, Progressive Casualty Insurance, Bombardier, and IBM) have found more success redesigning whole processes. Certainly, Six Sigma's ability to unearth root causes of problems is outstanding for narrow cost-saving improvements. But it deploys statistical analytic tools to uncover flaws in the execution of an existing process without asking whether the process itself is flawed. Six Sigma assumes that the existing design is fundamentally sound--a dangerous assumption. For peak performance, companies should position Six Sigma in the context of process management and assign process owners. Process owners ensure that all performance initiatives (Six Sigma, enterprise resource planning, balanced scorecard, customer relationship management and so on) are integrated to support strategic goals. Fitting Six Sigma into the process-management framework allows organizations to enjoy Six Sigma's benefits while keeping it away from areas where it doesn't belong. Process enterprises already are reaping cost savings, accelerated new-product introduction, improvements in customer satisfaction, and increases in profitability.

This is an MIT Sloan Management Review article. Forget capital; it's relatively easy to obtain nowadays. Today's scarce, sought-after strategic resource is expertise, which comes in the form of employees. Although organizations have changed mightily from the days of hierarchical, top-down management, they still have a long way to go. In addition to issues of company structure and who should be involved in strategic decision making, there are questions of how the value that companies create should be distributed, now that employees, as well as shareholders, control a scarce resource. And then there are the intangible yet crucial changes that must occur in senior managers' ways of thinking--and in the atmosphere and culture of the company. Reorienting old-school senior managers away from capital and toward knowledgeable employees will be difficult, but Christopher Bartlett of Harvard Business School and Sumantra Ghoshal of London Business School have several recommendations for human resources professionals, who, Bartlett and Ghoshal maintain, will be key players in the design, development, and delivery of strategy. Their task is threefold: build up the company by acquiring and retaining highly skilled employees; find a way to embed individual-based knowledge in the company, making it accessible and useful not just to one unit or one function, but to the entire organization--that is the linking task; and create an engaging, motivating, and bonding culture to attract and keep talented employees--the bonding task.

New research from MIT's Center for Information Systems Research and others reveals that successful companies are revolutionizing the way IT investments get decided. Investments are no longer justified merely on the basis of making a functional silo more profitable. Today, the strategic needs of the whole company come first. In the last 15 years, write professors Jeanne Ross of MIT's Sloan School of Management and Cynthia Beath of the University of Texas, a tidal wave of IT-enabled initiatives has elevated the importance of investing strategically. The Internet alone has created numerous opportunities: to reengineer processes, introduce online products and services, approach new customer segments, and redo business models. The opportunities seem limitless, but the resources required--capital, IT expertise, management focus, and capacity for change--are not. How to choose? Traditionally, companies justified a given project by presenting a strong business case. But with IT's growing strategic importance, companies must now weigh individual ROIs against demands for organizationwide capabilities--and must assess opportunities to leverage and improve existing systems and infrastructures, create new capabilities, and test new business models. The authors recommend a new investment approach based on a framework they developed after studying the e-business initiatives and supporting IT investments of 30 enterprises. The framework encourages simultaneous investment in four kinds of IT initiative. Transformation investments are necessary if a company's core infrastructure limits its ability to develop applications critical to long-term success. Renewal investments maintain the infrastructure's functionality and cost effectiveness. Process improvements allow business applications to leverage infrastructure by delivering short-term profitability. Experiments enable learning about opportunities and testing the capabilities of new technologies.

This is an MIT Sloan Management Review article. The word of the hour is "uncertainty"; it permeates all of modern life and business. Uncertainty so strongly affects companies' project management, for example, that three project management experts decided to study companies that successfully embrace it. The authors acknowledge the challenges of increased complexity, the shrinking of development cycles, and the inadequacy of traditional risk management in shifting markets. But they observe that, counterintuitively, projects conducted in such environments often have high returns. The secret is a willingness to redefine everything in midcourse on the basis of the predominant type of uncertainty. Arnoud De Meyer, Christoph H. Loch, and Michael T. Pich, professors of technology management at INSEAD Singapore, observed 16 major projects in a variety of industries. Using interviews and research on project documentation, they identify four major uncertainty categories. In variation, the project plan is detailed and stable, but project schedules and budgets drift from their projected values. Foreseen uncertainty is characterized by identifiable and understandable influences that the team cannot be sure will occur. Unforeseen uncertainty and chaos are the hardest categories to address because they require a balance between planning and learning. Projects featuring unforeseen uncertainty or chaos are common when the technology is in upheaval or when research, not development, is the main goal. At such times, a project may have successful results that are completely unexpected. Companies must learn to ascertain what kind of uncertainty is likely to dominate a project. For those that do, the authors reveal the best mix of tools and techniques to select when managing each type.

This is an MIT Sloan Management Review article. Regardless of the industry, all companies are operating on ever faster evolutionary tracks and at ever greater risk. A company's real core capability--perhaps its only sustainable one, say authors Charles Fine, Roger Vardan, Robert Pethick, and Jamal El-Hout--is its ability to redesign its value chain continually, reshuffling structural, technological, financial, and human assets to find maximum, albeit temporary, competitive advantage. The ultimate goal of strategic value chain analysis, say the authors, is building an organizational capability for fast response to rapidly evolving industry dynamics. To execute such an analysis, the authors developed a value chain strategy framework during a year-long strategic assessment at the General Motors Powertrain organization. The framework seeks to answer four key questions: Where is value being created and what activities are not adding to overall enterprise value? What areas of the business should remain in-house vs. be outsourced? Where should investments be made and how should they be leveraged? How can the value chain be organized to optimize existing and emerging alliances? To answer those questions, the authors employ not only traditional economic value-added analysis, but also their own strategic value assessment, which considers factors such as customer preferences, the rate of change of underlying technology, competitive position in the marketplace, depth of the supply base, and the integral or modular nature of the asset. The wide applicability of the framework is illustrated in the authors' discussion of IBM's decision to outsource its first PC microprocessor to Intel, a consumer products company's decision to outsource the manufacture of a branded product, and the Recording Industry Association of America's decision to quell rather than acquire Napster's file-sharing capability.

Sheldon Bloomfield, senior vice-president of character properties for Multi-Media Worldwide, has a hit with Baby Ruby. Originally a children's book character, Ruby has become the fastest growing kids' show on television. In fact, Bloomfield's starting to wonder whether Baby Ruby is his evergreen property--the one that will generate licensing income for years to come. Bloomfield has many offers on the table, including one from the nation's leading fast-food franchiser to make Baby Ruby its next kids' meal tie-in. But the fact is, no one wants to risk making a big financial commitment to a relatively new property, and most of the companies are demanding exclusives--which would eat away at Bloomfield's profits even more. The pressure is on. If Bloomfield doesn't make these deals, he may not get another chance. But if he does make the deals, and Baby Ruby ends up on everything from T-shirts to collectible spoons, the public may lose all interest in her. In R0212A and R0212Z, commentators Grant McCracken, a visiting scholar at McGill University and the author of Culture and Consumption; Jack Soden, CEO of Elvis Presley Enterprises; Timothy Rothwell, a senior vice-president of Universal Studios Consumer Products Group; and Bill Griffith, creator of the comic strip Zippy the Pinhead, offer their advice in this fictional case study.

Everyone knows a story about a talented businessperson who has lost his passion for work or a person who ditched a 20-year career to pursue something completely different and is the happier for it. "Am I doing what is right for me, or should I change direction?" is one of the most pressing questions for today's midcareer professional. A true change of direction is hard to swing. Many academics and career counselors contend that the problem lies in basic human behavior: We fear change and don't want to make sacrifices. But author Herminia Ibarra suggests another explanation. People most often fail, she says, because they take the wrong approach to finding new careers. Indeed, the conventional wisdom on how to change careers is a prescription for how to stay put. Most of us have heard that the key to a successful career change is figuring out what we want to do next, then acting on that knowledge. But change actually happens the other way around. Doing comes first, knowing second, because changing careers means redefining our working identity--our sense of self in our professional roles, what we convey about ourselves to others and, ultimately, how we live our working lives. Who we are and what we do are tightly connected, the result of years of action. And to change that connection, we must first resort to action.

In the wake of the recent corporate scandals, it's time to reconsider the assumptions underlying American-style stock-market capitalism. That heady doctrine--in which the market is king, success is measured in terms of shareholder value, and profits are an end in themselves--enraptured America for a generation, spread to Britain during the 1980s, and recently began to gain acceptance in Continental Europe. But now, many wonder whether the American model is corrupt. The American scandals are not just a matter of dubious personal ethics or of rogue companies fudging the odd billion. And the cure for the problems will not come solely from tougher regulations. We must also ask more fundamental questions: Whom and what is a business for? And are traditional ownership and governance structures suited to the knowledge economy? According to corporate law, a company's financiers are its owners, and employees are treated as property and recorded as costs. But whereas that might have been true in the early days of industry, it does not reflect today's reality. Now a company's assets are increasingly found in the employees who contribute their time and talents rather than in the stockholders who temporarily contribute their money. The language and measures of business must be reversed. In a knowledge economy, a good business is a community with a purpose, not a piece of property.

When it comes to philanthropy, executives increasingly see themselves as caught between critics demanding ever higher levels of "corporate social responsibility" and investors applying pressure to maximize short-term profits. Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company's image through high-profile sponsorships. But there is a more truly strategic way to think about philanthropy. Corporations can use their charitable efforts to improve their competitive context--the quality of the business environment in the locations where they operate. Using philanthropy to enhance competitive context aligns social and economic goals and improves a company's long-term business prospects. Addressing context enables a company not only to give money but also leverage its capabilities and relationships in support of charitable causes. Taking this new direction requires fundamental changes in the way companies approach their contribution programs. Adopting a context-focused approach requires a far more disciplined approach than is prevalent today. But it can make a company's philanthropic activities far more effective.

For better or worse, investors now view chief executives as the primary determinant of corporate performance. But the reality is that most companies perform no better after they dismiss their CEOs than they did in the years leading up to the dismissals. Worse, the organizational disruption created by a rushed firing can leave a company with deep and lasting scars. The blame for such poor results, the author argues, lies squarely with boards of directors. Boards often lack the strategic understanding of the business necessary to give due diligence to choosing a replacement CEO. Concern over restoring investor confidence quickly--rather than doing what's right for the company--drives the selection process. And all too often, companies continue to be dogged by the same old problems after the new CEOs come on board. But a good board can make a CEO replacement pay off if its members first develop a better understanding of the business context, worry less about pleasing the investment community and more about a replacement's strategic fit, and take an active role in overseeing the new CEO and the performance and direction of the company. In the long run, such approaches are likely to foster stability at the helm--making it less likely that a company will have to fire its CEO in the first place.

It's natural to promote your best and brightest, especially when you think they may leave for greener pastures if you don't continually offer them new challenges and rewards. But promoting smart, ambitious young managers too quickly often robs them of the chance to develop the emotional competencies that come with time and experience--the ability to negotiate with peers, regulate emotions in times of crisis, and win support for change. Indeed, at some point in a manager's career--usually at the vice-president level--raw talent and ambition become less important than the ability to influence and persuade, and that's the point at which the emotionally immature manager will lose his effectiveness. This article argues that delaying a promotion can sometimes be the best thing a senior executive can do for a junior manager. The authors recommend that senior executives employ these strategies to help boost their proteges' people skills: sharpen the 360-degree feedback process, give managers cross-functional assignments to improve their negotiation skills, make the development of emotional competencies mandatory, make emotional competencies a performance measure, and encourage managers to develop informal learning partnerships with peers and mentors.

The use of stock options for executive compensation has become a lightning rod for public anger, and it's easy to see why. Many top executives grew hugely rich on the back of the gains they made on their options--profits they've been able to keep even as the value they were supposed to create disappeared. The supposed scam works like this: Current accounting regulations let companies ignore the cost of option grants on their income statements, so they can award valuable option packages without affecting reported earnings. Not charging the cost of the grants supposedly leads to overstated earnings, which purportedly translate into unrealistically high share prices, permitting top executives to realize big gains when they exercise their options. If an accounting anomaly is the problem, then the solution seems obvious: Write off executive share options against the current year's revenues. The trouble is, Sahlman writes, expensing option grants won't give us a more accurate view of earnings, won't add any information not already included in the financial statements, and won't even lead to equal treatment of different forms of executive pay. Far worse, expensing evades the real issue, which is whether compensation (options and otherwise) does what it's supposed to do--namely, help a company recruit, retain, and provide the right people with appropriate performance incentives. Only ethical management, sensible governance, adequate internal control systems, and comprehensive disclosure will save the investor from disaster.