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As dramatic changes in technology and customer tastes roil the music industry, the top executives of BMG Entertainment, one of the world's largest record companies, must decide how to organize for digital distribution of music. This case includes a brief history of the music industry, a description of the industry's current structure and economics, and a description of digital downloading efforts.

Hewlett-Packard's Greeley Hard Copy Division is the market leader in the production of desktop flatbed scanners for personal computers. The division has been working to develop a portable scanner product for the past five years with mixed results. The new general manager, Phil Faraci, faces mounting pressures in the flatbed scanner markets, but is also presented with a new technology that has the potential to be a breakthrough for portable scanners. Faraci must decide whether or not to pursue the new portable technology, and if so, how to structure the organization to make product development successful where it has failed in the past.

Supplements the (A) case.

Supplements the (A) case.

Spreadsheet supplement for case 701-003.

This case provides a unique illustration of how a high-tech European new venture starts-up, grows, burns cash, stumbles, adapts, captures value, disappoints, survives on the verge of bankruptcy to eventually achieve in the fall of 1995 among the most successful IPOs on NASDAQ. On 27 November 1995, L&H received an IPO pricing proposal of H and Q at the low end of the pricing range, after L and H had rejected proposals by Robertson Stephens. The proposal valued the company at US $152 million, when its accumulated deficit was $(72) million and its shareholder equity $(37). The case explains the company and its technologies. It then describes the sequence of financing and strategic events that eventually lead to the IPO: early company development, international alliances, several private equity placements, financing on main street and pre-IPO private placement. It provides a lively and timely learning opportunity for an intermediate MBA corporate finance or for a private equity course in three areas: guerrilla financing, the why, what and how of an IPO, IPO valuation.

The classic brand manager dealt with simple brand structures in part because he or she was faced with a relatively simple environment and simple business strategies. Today the situation is far different. Brand managers now face market fragmentation, channel dynamics, global realities, and business environments that have drastically changed their task. In addition, there is pressure to leverage brand assets because of the prohibitive cost of creating new brands. This set of challenges has created a new discipline called "brand architecture." A coherent brand architecture can lead to impact, clarity, synergy, and leverage rather than market weakness, confusion, waste, and missed opportunities. Brand architecture is an organizing structure of the brand portfolio that specifies brand roles and the nature of relationships between brands. This article introduces a powerful brand architecture tool, the "brand relationship spectrum." It is intended to help brand architecture strategists employ insight and subtlety to subbrands, endorsed brands, and their alternatives. Subbrands and endorsed brands can play a key role in creating a coherent and effective brand architecture.

A new model for managing distributed innovation, the community of creation is a governance mechanism for managing innovation that lies between the hierarchy-based (closed) mechanism and the market-based (open) mechanism for innovation management. The community-centric model shifts the focus of innovation beyond the boundaries of the firm, to a community of individuals and firms that collaborate to create joint intellectual property. A community of creation requires an identified sponsor, a set of ground rules for participation, and a system for managing intellectual property rights. The community of creation model allows innovation to proceed in a complex environment by striking a balance between order and chaos. This article presents detailed case studies from the computer industry to highlight the differences among the different approaches to innovation management. It also discusses the opportunities and the unresolved issues of the community of creation model for practitioners as well as for academics.

The success of Internet-based businesses in the business-to-customer segment in recent years has been impressive. It is widely projected that the business-to-business segment is poised for a spectacular growth as well. However, a consistent definition and a framework for a business model for Internet-based business is still non-existent. This article proposes a three-dimensional framework for defining a business model and applies it to the emerging market structure. It also identifies certain factors that can guide organizations in their choice of an appropriate business model.

Most large companies are not radical innovators. They are good at making close-in changes to existing products or technologies, but they cannot seem to commercialize breakthrough ideas. This is the case because of their "genetic" makeup: values embodied in their leadership practices, their cultures and structures, their reliance on internal R&D, and their inability to attract and motivate the kind of aggressive and agile entrepreneurs who are the source of most radical innovations. Large companies in traditional industries that want to increase their access to radical innovation have a variety of approaches available to them. These range from ones that draw on existing organizational resources but are unlikely to stimulate radical innovation to ideas that involve a rethinking of external relationships with entrepreneurs and venture capitalists. As the focus of innovation moves from what is inside to what is outside the organization, the keys to success move from mechanisms of owning and controlling the radical innovation to mechanisms that promote learning about its commercial potential.

Executives should not take a reputation for ethical leadership for granted. Based on interviews with senior executives and corporate ethics officers, this article reveals that a reputation for executive ethical leadership rests on two essential pillars: the executive's visibility as a moral person (based upon perceived traits, behaviors, and decision-making processes) and visibility as a moral manager (based upon role modeling, use of the reward system, and communication). Developing a reputation for ethical leadership pays dividends in reduced legal problems and increased employee commitment, satisfaction, and employee ethical conduct. The alternatives are the unethical leader, the hypocritical leader (who talks the talk, but doesn't walk the walk), and the ethically neutral leader (who may be an ethical person, but employees don't know it because the leader has not made ethics and values an explicit part of the leadership agenda). The article also offers guidelines for cultivating a reputation for ethical leadership.

In 2000, SAS Institute, the largest privately owned software company in the world, confronted the decision of whether to become a public company. The organization, know for its family-friendly policies and low turnovers, had to consider whether being a public company would adversely affect its ability to maintain its unique culture. The leadership in the organization had to address the question: If the company were to go public, what should they do to ensure its continued success?

In 1991 Peru undertook perhaps the most radical tax administration reform in the developing world as President Fujimori created the National Tax Administration Superintendency (SUNAT): a semi-autonomous revenue authority charged with putting the country's fiscal house in order. The reform met with initial success as it increased revenues and reduced evasion, though SUNAT's strategy came to be questioned by the same government that created it. In particular, the powerful ministry of finance raised doubts about the wisdom of SUNAT's autonomy and advocated taking a second look at the reform model. At the same time, corporate taxpayers, as well as the informal sector, vigorously joined the debate. This public sector reform, hailed as an important achievement in tax administration, raises serious questions about the reform of the state in developing countries by revisiting the old, fine line between politics and administration. HKS Case Number 1596.1

In 1991 Peru undertook perhaps the most radical tax administration reform in the developing world as President Fujimori created the National Tax Administration Superintendency (SUNAT): a semi-autonomous revenue authority charged with putting the country's fiscal house in order. The reform met with initial success as it increased revenues and reduced evasion, though SUNAT's strategy came to be questioned by the same government that created it. In particular, the powerful ministry of finance raised doubts about the wisdom of SUNAT's autonomy and advocated taking a second look at the reform model. At the same time, corporate taxpayers, as well as the informal sector, vigorously joined the debate. This public sector reform, hailed as an important achievement in tax administration, raises serious questions about the reform of the state in developing countries by revisiting the old, fine line between politics and administration. HKS Case Number 1596.0

The head of the U.S. patent office explains the myths and realities of patenting business methods and suggests that these ownership claims actually boost innovation by forcing ideas to go public.

Computer simulations help companies determine how they'll optimize their use of the billions of software agents--shopbots and pricebots--that will increasingly become part of the Internet economy.

Here's a primer on XML, an Internet technology that's helping to shape the future of e-business.

Traditionally, complex business structures in the Chinese market have kept foreign companies out. Now, with Kodak leading the way, corporate structures from the West are gaining acceptance and are providing a way for China to let foreign companies in through the back door.

How would your company fare in the Business Olympics? An INSEAD professor and his students assess the "corporate fitness" of the largest firms in Europe and the United States and map out which companies and industries are likely to take the gold.

Internet entrepreneur Martin Varsavsky applies what he does best--building high-tech companies--to improving education in Argentina.