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One of the most common business phenomena is also one of the most perplexing: when successful companies face big changes, they often fail to respond effectively. Many assume that the problem is paralysis, but the real problem, according to Donald Sull, is active inertia--an organization's tendency to persist in established patterns of behavior. Most leading businesses owe their prosperity to a fresh competitive formula--a distinctive combination of strategies, relationships, processes, and values that sets them apart from the crowd. But when changes occur in a company's markets, the formula that brought success instead brings failure. Stuck in the modes of thinking and working that have been successful in the past, market leaders simply accelerate all their tried-and-true activities. In attempting to dig themselves out of a hole, they just deepen it. In particular, four things happen: strategic frames become blinders; processes harden into routines; relationships become shackles; and values turn into dogmas. To illustrate his point, the author draws on examples of pairs of industry leaders, like Goodyear and Firestone, whose fates diverged when they were forced to respond to dramatic changes in the tire industry. In addition to diagnosing the problem, Sull offers practical advice for avoiding active inertia. Rather than rushing to ask, "What should we do?" managers should pause to ask, "What hinders us?" That question focuses attention on the proper things: the strategic frames, processes, relationships, and values that can subvert action by channeling it in the wrong direction.

What makes for success in high-tech markets? Many managers believe it's offering products with the best performance at the lowest price. Yet most would also acknowledge that price and performance are just the ante to get into the game, that they don't make the difference between a successful high-tech venture and an unsuccessful one. One factor that can make the difference, the authors argue, is brand management. The problem is, most high-tech managers think of branding only as an advertising campaign or a slogan. Developing and maintaining a strong brand in the fullest sense requires much more--it's conceiving of a promise of value for customers and then ensuring that the promise is kept. The Gateway Computer brand, for example, is a promise of friendly service that's backed by efficient help lines and effective order and service fulfillment. Building a powerful brand requires fives steps. The first two steps involve determining the tangible characteristics of the offerings that carry the brand name and the benefits the customers accrue from those benefits. In the remaining steps, high-tech managers consider the psychological or emotional benefits of the products; what "value" means to a typical loyal customer; and what, ultimately, is the essential nature and character of the brand over time. Like the Apple brand--which has been consistently synonymous with easy-to-use, reliable computers--and the IBM brand--which promises value built on its long tradition of superior service and support--a successful brand commands enduring premium profits that can help a high-tech company get off the price-performance roller coaster.

What does cyberspace mean for physical retail space? Has on-line shopping changed the fundamentals of retailing? And how should managers evaluate new in-store technologies? In this article, the heads of Marks and Spencer, Neiman Marcus, and Karstadt join two distinguished academics to look at what's in store for the bricks-and-mortar store. There's no doubt that new technologies have made retailing more complicated and more competitive. Using the Web, for example, consumers can conceivably sidestep their corner store and patronize shops across the country or around the world. Eventually, they might forsake retailers altogether, shopping directly from manufacturers. By the same token, though, managers can use technology to magnify the benefits of their location--using Web sites to show, for example, the retail topography of a local town and to highlight when stores that sell particular products will be open. And new in-store technologies promise managers--and customers--increased efficiency and more knowledgeable service. It's too early to predict how these new technologies will play out. But the contributors suggest that the fundamentals of retailing really haven't changed. Whether they know it or not, consumers still weigh the same factors when determining where to shop: scope of product assortment, price, convenience, service, and ambiance. The Internet has just added another layer of urgency to an already established agenda--forcing managers to examine their priorities in newly creative ways.

Most executives have a big, hairy, audacious goal. They write vision statements, formalize procedures, and develop complicated incentive programs--all in pursuit of that goal. In other words, with the best of intentions, they install layers of stultifying bureaucracy. But it doesn't have to be that way. In this article, Jim Collins introduces the catalytic mechanism, a simple yet powerful managerial tool that helps translate lofty aspirations into concrete reality. Catalytic mechanisms are the crucial link between objectives and performance; they are a galvanizing, nonbureaucractic means to turn one into the other. What's the difference between catalytic mechanisms and most traditional managerial controls? Catalytic mechanisms share five characteristics. First, they produce desired results in unpredictable ways. Second, they distribute power for the benefit of the overall system, often to the discomfort of those who traditionally hold power. Third, catalytic mechanisms have teeth. Fourth, they eject "viruses"--those people who don't share the company's core values. Finally, they produce an ongoing effect. Catalytic mechanisms are just as effective for reaching individual goals as they are for corporate ones. To illustrate how catalytic mechanisms work, the author draws on examples of individuals and organizations that have relied on such mechanisms to achieve their goals. The same catalytic mechanism that works in one organization, however, will not necessarily work in another. Catalytic mechanisms must be tailored to specific goals and situations. To help readers get started, the author offers some general principles that support the process of building catalytic mechanisms effectively.

Despite 30 years of evidence demonstrating that most acquisitions don't create value for the acquiring company, executives continue to make more deals, and bigger deals, every year. There are plenty of reasons why value isn't created, but many times it's simply because the acquiring company paid too much. It's not, however, that acquirers pay too high a price in an absolute sense. Rather, they pay more than the acquisition is worth to them. What is that optimum price? The authors present a systematic way to arrive at it, involving several distinct concepts of value. In today's market, the purchase price of an acquisition will nearly always be higher than the intrinsic value of the company--the price of its stock before any acquisition intentions are announced. The key is to determine how much of that difference is "synergy value"--the value that will result from improvements made when the companies are combined. This value will accrue to the acquirer's shareholders rather than to the target's shareholders. The more synergy value a particular acquisition can generate, the higher the maximum price an acquirer is justified in paying. Just as important as correctly calculating the synergy value is having the discipline to walk away from a deal when the numbers don't add up. If returns to shareholders from acquisitions are no better in the next ten years than they've been in the past 30, the authors warn, it will be because companies have failed to create systematic corporate governance processes that put their simple lessons into practice.

Hiring executives has always been a daunting task--and today's economy makes it tougher than ever. The global scope and breakneck pace of business, the shrinking supply of job candidates, and the constant shift of organizational structures have increased the stakes exponentially; one wrong hire can quickly derail a company. Yet recent studies indicate that between 30% and 50% of executive-level hires end in firings or resignations. What makes hiring go wrong so often? And how can executives substantially improve the outcome of the process? This article provides some surprising answers to those questions. Fernandez-Araoz presents ten common hiring traps and many real-world examples of how those traps have scuttled business plans in a variety of industries worldwide. A large consumer goods company, for instance, slipped into the delegation gaffe trap when it handed over the screening and interviewing process to a mismatched team of managers that had an agenda different from the CEO's. And the ignoring emotional intelligence trap tripped up a U.S. telecommunications company that hired a CEO with a great track record--only to fire him less than a year later when his lack of cross-cultural social skills was discovered. Hiring well is a strategy--perhaps an organization's most important one, the author says. To sidestep the hiring traps, he suggests ways to systematically assess the company's needs and to determine how those needs mesh with the open job description--before candidates walk through the door. Fernandez-Araoz's search strategy incites managers with hiring responsibilities to be creative, determined, and courageous when embarking on a candidate search.

In all economies, financial systems perform a basic set of functions, which include the need to pool resources, to save and borrow, to make payments, and to collect information. And yet, in rich and poor communities, the ways in which those needs are met differ greatly. In part, this is because traditional financial service firms have found it too expensive to serve poor neighborhoods. But it is possible to work with less traditional institutions to meet those needs. According to the authors, inner cities face two core impediments to financial services: lack of economies of scale and lack of good information. An inner-city investor with $500, for instance, does not warrant much attention from financial service firms. But twenty thousand parishioners investing $500 apiece can collectively wield $10 million. By partnering with strong social organizations such as churches, financial institutions can benefit both themselves and investors. A lack of good information concerning credit histories--a common problem in poor communities--also makes low-income customers much less appealing to financial institutions. Churches can help close such information gaps by vouching for parishioners' reliability. There are certainly problems that come with mixing business and religion, as the authors concede. Ethical issues, trust issues, and issues of experience all come to mind. But understanding that functions need to dictate the structure of the financial service sector may be the first step toward achieving inner-city prosperity.

GenCorp, a Connecticut-based paper-goods manufacturer, has long supported employee-organized network groups. Its social support group for African-Americans, in fact, has been a particular success, having provided black employees with opportunities to further enhance their careers and helped the company retain top talent, meet its EEO goals, and gain favorable publicity. So when Alice Lawrence, a top accountant at GenCorp, called general manager Bill Thompson about the Christian network group being organized in one of the company's southern plants, Bill hardly flinched. After all, the Christian group was being organized by Russell Kramer, one of the company's most effective plant managers. What could be the problem there? But a couple of years ago, Alice noted, Russell had sent around a companywide letter that talked about the sinful nature of homosexuality. And that letter has made her and other gay and lesbian employees terribly uneasy. To complicate matters, the issue of "Christian rights" in the workplace was being widely discussed on radio talk shows, and several books on the topic had recently been published. An employee had even called the new region's head of human resources to get clarification on the topic. Up until now, GenCorp hadn't placed a lot of restrictions on network groups. But the emergence of a religious group was raising new questions for GenCorp's managers: Should the company accept religious groups or try to stop them? What policy, if any, should GenCorp adopt toward these network groups? In 99405 and 99405Z, Laura Nash, Maureen A. Scully, Gregory Poole, Jr., Jacquelyn Gates, and Kim I. Millis comment on this fictional case study.

GenCorp, a Connecticut-based paper-goods manufacturer, has long supported employee-organized network groups. Its social support group for African-Americans, in fact, has been a particular success, having provided black employees with opportunities to further enhance their careers and helped the company retain top talent, meet its EEO goals, and gain favorable publicity. So when Alice Lawrence, a top accountant at GenCorp, called general manager Bill Thompson about the Christian network group being organized in one of the company's southern plants, Bill hardly flinched. After all, the Christian group was being organized by Russell Kramer, one of the company's most effective plant managers. What could be the problem there? But a couple of years ago, Alice noted, Russell had sent around a companywide letter that talked about the sinful nature of homosexuality. And that letter has made her and other gay and lesbian employees terribly uneasy. To complicate matters, the issue of "Christian rights" in the workplace was being widely discussed on radio talk shows, and several books on the topic had recently been published. An employee had even called the new region's head of human resources to get clarification on the topic. Up until now, GenCorp hadn't placed a lot of restrictions on network groups. But the emergence of a religious group was raising new questions for GenCorp's managers: Should the company accept religious groups or try to stop them? What policy, if any, should GenCorp adopt toward these network groups? In 99405 and 99405Z, Laura Nash, Maureen A. Scully, Gregory Poole, Jr., Jacquelyn Gates, and Kim I. Millis comment on this fictional case study.

Local firms can compete with transnational firms if their actions are firmly based in the local culture, and if they move from local strengths while being equipped with an in-depth understanding of global production and consumption dynamics. Three domains where local firms can offer alternatives to standard global products are products grounded in local culture, information goods, and products for similar local conditions and the poor worldwide. Local firms must develop an innovative perspective, a global and local vision, self-crafted rather than transferred and imitated marketing skills and practices, partnerships and alliances, and a supportive political environment. Such firms can successfully travel on their alternative road within the global arena.

Buzz Hargrove, national president of the Canadian Auto Workers, needs to find a way to secure an agreement from a negotiated contract with de Havilland, Inc. Local union leaders feel the deal is not good enough, but Hargrove is convinced management will close the plant down otherwise.

Supplements the (A) case.

The Euro-Arab Management School is an academic institution established by the European Union and the Arab League. The school is a "virtual organization": it does not operate bricks and mortar classrooms. Instead, programs are offered in an innovative manner that combines web-based learning with local tutoring. The case deals with the concept of management of a virtual organization, and introduces some of the benefits and challenges of virtual organizations. Also deals with issues of the future of education in the age of the Internet.

Six years after dropping out of college to focus on his own business reselling PCs and preformatting PC hard disks, Michael Dell had grown his company's annual sales to more than $500 million. Dell Computer earned a reputation for selling quality products. Describes Dell's unique "direct" approach to producing, selling, and distributing computer equipment. It contains a side-by-side comparison with Compaq before its acquisition by Hewlett-Packard (HP).

Supplements the (A) case.

Supplements Wal-Mart Stores, Inc.

A small manufacturer of car wash facilities has been unable to develop management systems because of rapid growth. Now size dictates the need for such systems because the current personal management style is proving inadequate.

Strategy definition is not a short, discrete process. Rather, outside influences (market, political, technological, etc.) and the company's own resource allocation process continually reshape an organization's strategy.

CardioThoracic Systems, a company that has developed a new system for performing heart surgery on a beating heart, is facing marketing challenges. Discusses the numerous reasons for the system's low penetration (including existing techniques, surgeon resistance, and a challenging reimbursement environment) and asks for recommendations in developing a new sales and marketing strategy.

Supplements the (A) case.