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Change or perish is a corporate truism, but so is its unhappy corollary: many companies change and perish. The process of change can tear an organization apart. Drawing on his research over ten years, the author suggests that companies alternate major change initiatives with carefully paced periods of smaller, organic change, using processes he calls tinkering and kludging (kludging is tinkering on a large scale). The result is dynamic stability, which allows change without fatal pain. Citing examples from General Electric to Barnesandnoble.com, the author describes dynamic stability as a process of continual but relatively small reconfigurations of existing practices and business models rather than the creation of new ones. As they tinker and kludge, successful companies would be wise to follow these four guidelines: reward shameless borrowing; appoint a chief memory officer who can help the company avoid making the same old mistakes; tinker and kludge internally before searching for solutions externally; and hire generalists, because generalists tend to be more adept at tinkering and kludging. As a paradigm of successful pacing, the author cites the efforts of Lou Gerstner at IBM, American Express Travel Related Services, and RJR Nabisco.

Fire fighting is an old, familiar way of doing business, especially when developing new products and ramping up manufacturing. But fire fighting consumes an organization's resources and damages productivity. What factors underlie this destructive pattern? Fire fighting derives from what seems like a reasonable set of rules--investigate all problems, for example, or assign the most difficult problems to your best troubleshooter. Ultimately, however, fire-fighting organizations fail to solve problems adequately and forgo so many opportunities that overall performance plummets. Some companies never fight fires, even though they have just as much work and just as many resource constraints as other companies do. They have strong problem-solving cultures. They don't tackle a problem unless they're committed to understanding its root cause and finding a valid solution. And they don't reward fire-fighting behavior. Transforming a fire-fighting organization into a problem-solving one is not easy. But there are tactical, strategic, and cultural methods for pulling your company out of fire-fighting mode.

The current high level of venture capital investment is driving enormous innovation in business. About 40% of the growth in the U.S. GDP is coming out of the tech sector, and most of that can be traced to the vibrancy of entrepreneurial initiatives, according to accomplished entrepreneur and venture capitalist Vinod Khosla. But in a wide-ranging interview, Khosla says greed is at a high level, too, and he's concerned about its effect on entrepreneurs and their infant businesses. Today, an entrepreneur with a plan for a new business can get funded within a week. But the entrepreneur doesn't get an honest, painstaking critique. The weaknesses of the plan are often ignored. The result is that great ideas don't reach their full potential. Khosla touches on the qualities required of today's entrepreneurs and the difficulties that established companies face in adapting to the Internet. He also offers some of his secrets for finding and exploiting the biggest new technologies.

Despite all the data that retailers and e-tailers can now gather about point-of-purchase information, buying patterns, and customer tastes, they still haven't figured out how to offer the right product, in the right place, at the right time, for the right price. But some retailers are moving profitably toward what the authors call "rocket science retailing"--a blend of traditional forecasting systems, which are largely based on the gut feel of employees, with the prowess of information technology. The authors recently finished surveying 32 retail companies in which they tracked practices and progress in four areas critical to rocket science retailing: demand forecasting, supply-chain speed, inventory planning, and data gathering and organization. In this article, the authors look at some companies that have excelled in those four areas and offer some valuable advice for other businesses seeking retailing perfection. In particular, the authors emphasize the need to monitor crucial metrics such as forecast accuracy, early sales data, and stockouts--information that will help retailers determine when to tweak their supply-chain processes to get the right products to stores at just the right time.

The almost universal belief among executives today is that bigger is better: companies are entering into huge, pricey cross-border mergers at an unprecedented rate. Common wisdom is that industries will become more concentrated as they become more global. In this article, the authors debunk the myth of increased concentration; the perceived links between the globalization of an industry and the concentration of that industry are weak. Empirical research shows that global--or globalizing--industries have actually been marked by steady decreases in concentration since World War II. The authors present the biases that managers often have about consolidation and offer alternative strategies to pursuing the big M&A deal. There are better, more profitable ways of dealing with globalization than relentless expansion, they say. Those strategies include buying up cast-off assets from merging rivals; focusing more on domestic or regional growth rather than on global expansion; taking advantage of merging rivals' weakened market position during integration and launching an aggressive marketing campaign; and building alliances with other companies rather than buying them up.

In the early 1990s, IBM was a has-been. Fujitsu, Digital Equipment, and Compaq were hammering down its hardware margins. EDS and Andersen Consulting were stealing the hearts of CIOs. Intel and Microsoft were running away with PC profits. Today, Big Blue is back on top, a leader in e-business services. This is the story of how the company, which had lagged behind every computer trend since the mainframe, caught the Internet wave. Much of the credit for the turnaround goes to a small band of activists who built a bonfire under IBM's rather broad behind. Together, building simultaneously from the top and the bottom of the organization through an ever-widening grassroots coalition of technicians and executives, they put IBM on the Web and morphed it into an e-business powerhouse. People who want to foment similarly successful insurrections can learn a lot from their example.

It's been four years since Dave Souza, Joe Castle, and Ryan Bahar started Socaba.com--an e-business that sells office supplies and services. Six months ago, acting on the advice of their VC, the young founders hired three seasoned managers to help bring the business to the next level. The new executives appeared to complete the Socaba management team. But even as early as the welcome lunch for the three, a rift between the insiders and outsiders developed. Just minutes after the party, the founders were seen drifting into Dave's office to assess the three newcomers. Such exclusionary meetings have continued on both sides, further aggravating the situation. To complicate matters, one of the company's main competitors wants to partner with Socaba, and there's controversy about whether to enter into the deal. Socaba.com is at a crossroads--the company is in position to grow, but internal conflicts could hold it back. In R00408 and R00414, commentaand Stever Robbins offer advice on this fictional case study.tors Tom Scott, Ted Murguia, Christine Comaford,

Thanks to the development of the Kyoto Protocol--an international plan to limit carbon dioxide and other so-called greenhouse gases in the atmosphere--global warming is beginning to assume a prominent position on the agendas of business executives. Although weather patterns aren't going to change overnight, new regulations designed to curb climate change may themselves disrupt the flow of business. Faced with such a complex problem, however, many executives have wondered where to begin. A sensible way to start is by taking a close look at the risks--and the inevitable opportunities--associated with shifts in the weather, potential regulatory changes, and the battle over public opinion. Forward-looking companies in a range of industries, from energy to insurance to automobiles, are already seeking ways to mitigate the effects of the weather on their operations, shape any regulatory regime that governments may devise, and inform the public about their efforts to reduce the problems associated with climate change. Companies that calculate the risks and opportunities effectively--as they would for any other part of the business--will be able to make wise investments that allow them to survive the coming storms.

In the rush to build Internet businesses, many executives mistakenly concentrate all their attention on attracting customers rather than retaining them. But chief executives at the cutting edge of e-commerce--from eBay's Meg Whitman to Vanguard's Jack Brennan--know that customer loyalty is an economic necessity: acquiring customers on the Internet is very expensive, and unless customers stick around and make lots of repeat purchases, profits will remain elusive. For the past two years, the authors have studied e-loyalty. Contrary to the popular perception that on-line customers are fickle by nature, they found that most of today's on-line consumers exhibit a clear proclivity toward loyalty, and Web technologies, if used correctly, reinforce that inherent loyalty. In this article, the authors explain the enormous advantages of retaining on-line buyers. They also describe what Grainger, Dell, America Online, and other Internet leaders are doing to gain their customers' trust and earn their loyalty. By encouraging repeat purchases among a core of profitable customers, companies can initiate a spiral of economic advantages. This loyalty effect enables them to compensate their employees more generously, provide investors with superior cash flows, and reinvest more aggressively to further enhance the value delivered to customers.

When Rich Teerlink, now retired chairman and CEO of Harley-Davidson, became president and COO of its motorcycle division in 1987, the hard work of saving the company was already done. The company had just survived seven arduous years of crisis and was on a steady path toward growth. Realizing how much circumstances had changed, Teerlink immediately saw the need for a new kind of leadership--one far removed from the command-and-control model that had carried it through its turnaround. In this First Person account, Teerlink tells the story of how difficult it was to make that shift. In a plan to improve operations, for example, Teerlink came up with an idea for a program he hoped would motivate every employee, customer, and stakeholder. The program, called gain sharing, would allow every employee to share in the company's financial success. The problem? The program was yet another initiative created and imposed from the top. Throughout his tenure, Rich Teerlink launched several programs designed to elicit ideas, enthusiasm, concerns, and vision from employees. These initiatives--as well as other efforts toward inclusiveness--have helped transform Harley's culture and made it the success story it is today.

No one can say for certain how many millionaires have been created by Wall Street's long boom. But this new breed of employee certainly creates a whole new set of challenges for managers today. Working millionaires make motivation and retention--two hard games to play in the first place--harder than ever. And they push already steep compensation levels upward. What, then, can be done to manage millionaires in a way that makes them worth the effort, not to mention the cost? To answer this question, Suzy Wetlaufer, senior executive editor of HBR, interviewed more than two dozen CEOs, HR executives, and headhunters from Wall Street and Silicon Valley, as well as a half-dozen working millionaires themselves. Their thoughts--and the managerial imperatives they imply--have culminated in the first HBR at Large, a new department designed to explore multifaceted business ideas confronting people creating, leading, and transforming business today. Wetlaufer discovered, somewhat unexpectedly, that many executives see an upside to the rise of the working millionaire. Millionaires force companies to be far more creative--indeed, entrepreneurial--about their products and services. They push companies to keep beating their targets in the marketplace. And they compel their bosses to build a productive, healthy culture. Admittedly, some millionaires can only be kept happy with corporate jets, original art lining big offices, and world-class executive lunchroom cuisine. Indeed, millionaires are driving managerial practices that, in another time, might have been dismissed but that today are merely admission to the game. But the irony is that such practices should perhaps have been there for everyone all along.

It's been four years since Dave Souza, Joe Castle, and Ryan Bahar started Socaba.com--an e-business that sells office supplies and services. Six months ago, acting on the advice of their VC, the young founders hired three seasoned managers to help bring the business to the next level. The new executives appeared to complete the Socaba management team. But even as early as the welcome lunch for the three, a rift between the insiders and outsiders developed. Just minutes after the party, the founders were seen drifting into Dave's office to assess the three newcomers. Such exclusionary meetings have continued on both sides, further aggravating the situation. To complicate matters, one of the company's main competitors wants to partner with Socaba, and there's controversy about whether to enter into the deal. Socaba.com is at a crossroads--the company is in position to grow, but internal conflicts could hold it back. In R00408 and R00414, commentators Tom Scott, Ted Murguia, Christine Comaford, and Stever Robbins offer advice on this fictional case study.

It's been four years since Dave Souza, Joe Castle, and Ryan Bahar started Socaba.com--an e-business that sells office supplies and services. Six months ago, acting on the advice of their VC, the young founders hired three seasoned managers to help bring the business to the next level. The new executives appeared to complete the Socaba management team. But even as early as the welcome lunch for the three, a rift between the insiders and outsiders developed. Just minutes after the party, the founders were seen drifting into Dave's office to assess the three newcomers. Such exclusionary meetings have continued on both sides, further aggravating the situation. To complicate matters, one of the company's main competitors wants to partner with Socaba, and there's controversy about whether to enter into the deal. Socaba.com is at a crossroads--the company is in position to grow, but internal conflicts could hold it back. In R00408 and R00414, commentators Tom Scott, Ted Murguia, Christine Comaford, and Stever Robbins offer advice on this fictional case study.

This is an MIT Sloan Management Review article. Executives are often baffled when they can't implement perfectly sound strategies. The root causes, according to a Harvard Business School professor and a senior organizational fellow at McKinsey & Co., are six deep-seated barriers to strategy implementation and organizational learning. The first barrier is a top-down or laissez-faire senior management style. Without transforming that barrier into a capability, none of the other barriers can be turned into capabilities either. The five others are: unclear strategy and conflicting priorities; an ineffective senior team; poor vertical communication; poor coordination across functions, businesses, or borders; and inadequate down-the-line leadership skills and development. According to the authors, the first three barriers together undermine an organization's quality of direction; a lack of vertical communication interacts with the other barriers to block quality of learning; and the last two barriers cause poor quality of implementation. The authors' own process, Organizational Fitness Profiling, has helped managers overcome the root causes of blocked strategy implementation and has led to individual and organizational learning. Not all organizations are up to the challenge, however.

This is an MIT Sloan Management Review article. Excellence at investing in and deploying IT isn't sufficient to achieve superior business performance: companies must also excel at collecting, organizing, and maintaining information and at getting their people to embrace the right behaviors and values for working with information. The authors present the results of a two-and-a-half-year international research project led by the Institute for Management Development. They show that senior managers view strong IT practices, competent management of information, and good information behaviors as components of one higher level idea--Information Orientation" or IO--which measures a company's capabilities to manage and use information effectively. IO is also a predictor of business performance. Among the guidelines: Focus your best IT resources on what makes you distinctive; actively manage all phases of the information life cycle; develop an explicit, focused view of the information necessary to run the business; and do not compromise on information integrity.

Enables a thorough analysis of Amazon.com and the company's value proposition, in terms of its business concept, digital business capabilities, and community and shareholder value. Examines the company's complex set of business models and web of business relationships, as well as Amazon's plan to monetize (generate revenues and earnings through) its assets.

Designed to accompany Amazon.com: Exploiting the Value of a Digital Business Infrastructure.

Describes the challenges facing a Japanese financial services company as it attempts to maintain its ability to attract and retain talented employees. The CEO's ideas of corporate governance and evidence from the competitive labor environment suggest the need for more performance-based compensation. But employees at all levels of the firm understand that any new compensation system must carefully consider the strategic goals of the firm, the cultural context of the Japanese workplace, and the legal framework of the Japanese corporation. Considers how a particular performance measurement system known as ORIX Value Added (OVA) might be used in the firm.

Four Seasons has a love/hate relationship with technology, including the best Web site in the industry. This case examines how a leading service delivers high-tech/high-touch, and looks at its progressive human resource strategy.

The newly hired director of human resources for a large golf and country club near Beijing, China has just presented her human resources plan to the company founder. At issue is whether this plan--in terms of recruiting, training and development, rewards, and benefits--is directionally correct and implementable.