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To ensure that acquisitions generate value, what should the priorities of the new management team be? If it starts with rationalization (closing duplicate facilities, reducing the head count), it will make rapid progress on the cost side, but risk a demotivated work force. If it emphasizes acculturation (building relationships, fostering a common culture), it will have happy employees, but little cost savings. Doing both at the same time is no answer, either. Intensive analysis of three case studies suggests a model for the acquiring firm in deciding whether to pursue the "high road" by first emphasizing human integration before concentrating on operational synergies, or the "low road" of attending to cost savings initially and subsequently focusing on relationships. Evidence supports the case for a "high road" approach when the acquired firm's key assets are R&D and knowledge-intensive. A three-phase model--initial actions, follow-up, and second wave--is offered to help top management avoid the perils on either side of an optimal integration path. Specific examples are drawn from the experiences documented in the three case studies.

Husky, a Canadian maker of injection molding systems, has established an enviable position in the market for plastics processing equipment. The company builds the highest performance systems in the business and charges a hefty premium for them. Husky is enjoying robust growth and record profits in 1996 when competitors attack its core markets. As financial results deteriorate rapidly, founder and CEO Robert Schad must decide how to defend Husky's traditional markets and whether to expand beyond those markets.

Supplements the case.

Confounding predictions that the Internet would "disintermediate" commerce, making "middle man" companies all but obsolete, Marshall Industries, a leading electronics distributor, used the Internet and digital technologies to reinvent itself. Marshall continued to sell electronics components, but the company abandoned the traditional sales-driven strategy for a more customer-focused, service-driven strategy. At the heart of its transformation was a complete restructuring of the compensation and incentive system and heavy investments in information technologies. Several years into its first foray into the digital realm, Marshall faced growing pressures: shrinking margins, increasingly demanding customers, restrictive supplier practices, and competitors rapidly introducing me-too Internet and virtual services. Marshall continued to look for ways to use its innovative spirit and digital expertise to differentiate itself and to create and deliver a whole new set of virtual supply chain services.

Despite revenues in excess of $93 million in 1998, world-renowned Dana-Farber Cancer Institute constantly faces an operating shortfall and looks to its highly successful development office to help cover the deficit. The development office raises money annually (with a $42 million goal for 1999) through its two major fund-raising arms: the Development Fund and the Jimmy Fund. In addition, it conducts a major capital campaign about every five years. A new chief development officer, Susan Paresky, needs to establish the development strategy going forward. The case reviews the major fund-raising programs in the development office and presents additional growth options. Students examine the existing programs, assess the value of the new options, and devise a development strategy consistent with the mission and philosophy of the institute.

Executive Health Group provides in-depth physical exams. Facing stagnant revenues, CEO William Flatley has to reposition his firm, strengthen the brand franchise, and grow share in an increasingly competitive health care environment.

Accounting and law firms around the globe are following with great interest the progress through British courts of a lawsuit. Those familiar with the suit, filed by Prince Jefri of Brunei against the professional service firm KPMG Peat Marwick, remark that its judgment will be "a landmark ruling with profound implications." At stake is nothing less than how professional service firms conduct their business. The case highlights: (1) the emerging tension between how accounting firms and law firms view their responsibility to clients and (2) the use and limitations of "Chinese walls" in managing potential conflicts within firms.

Supplements the (A) case.

Supplements the (A) case.

Supplements the (A) case.

A family-owned brick manufacturer has built an export business to Japan and other Asia markets from zero to ten per cent of its volume in seven years. The case examines the company's export strategy and organization in light of the recent Asian economic crisis and the reasons for their competitive success both in Australia and Asia. The managing director is raising the question of whether it is time to change their regional export strategy and organizational structure.

Describes the opportunities that confront the African Communications Group, an entrepreneurial organization that plans to introduce a wireless pay-phone system in Tanzania. Provides a foundation for the analysis of value creation and of value capture. The possibility of entry by other companies, the presence of a large supplier, and uncertainties about demand all create important tradeoffs for the new venture.

Given the changes wrought by the new economy, it makes sense for companies to pursue ever-greater levels of flexibility. But does it make sense for human beings? Do we really want to be free agents, hopping from job to job and from city to city, virtual employees of virtual companies? Richard Sennett doesn't think so. In The Corrosion of Character: The Personal Consequences of Work in the New Capitalism, Sennett, a sociologist and well-known social critic, lays out a dark vision of what the new economy means for working people at all levels of society. He draws on poignant stories to show how the flexibility demanded by the new economy causes us to lose the attachments--to people, places, or companies--that form our character. Without such attachments, we lose the ability to focus on the long term: if everything's going to change overnight, why worry about tomorrow? In the aggregate, the demands of flexibility erode society's foundations. But as Nicholas Carr points out, this isn't a complete picture of what flexibility means for people today. For example, the spread of cheap computers is expanding opportunities to launch, market, and manage microbusinesses. And the networked economy--by making workdays more flexible and location less important--will give many of us more control over where we live and how we parcel out our time. Despite Sennett's blindness to the benefits offered by the new economy, his book provides a thoughtful counterbalance to the empty-headed boosterism that characterizes much of the current writing on the subject.

Private-label products are anathema to many consumer goods manufacturers--cheap imitations that undermine margins and weaken product categories. But the growing power and sophistication of retailers has changed that competitive dynamic. Private labels now offer a range of opportunities for savvy manufacturers. Perhaps most notable, retailers are working with manufacturers to bring out store brands whose quality matches or even exceeds that of brand-name goods. These premium labels offer better margins than traditional private labels and can serve as a low-risk way for manufacturers to try new product categories. Like "fighter brands," private labels can help a manufacturer preserve market share in a category when it decides to raise the price of its brand-name product. Or a manufacturer in the number-two slot might design its private label to imitate--and take sales from--the market leader in a category. The authors say the risks of producing private labels are often exaggerated. Retailer switching isn't as easy as is often believed, particularly for manufacturers who work closely with retail partners. And manufacturers who set clear priorities can make sure their private-label sales don't distract them from promoting the main brand. The authors warn that different manufacturers will want to go with different private-label strategies. Private labels are likely to make most sense when entry barriers are low, when substantial economies of scale exist, or when the label is a premium line for a category with low price sensitivity. For manufacturers who seek closer ties with retailers, private labels may represent a neglected opportunity.

In turbulent markets, businesses and opportunities are constantly falling out of alignment. New technologies and emerging markets create fresh opportunities. Converging markets produce more. And of course, some markets fade. In this landscape of continuous flux, it's more important to build corporate-level strategic processes that enable dynamic repositioning than it is to build any particular defensible position. That's why smart corporate strategists use patching, a process of mapping and remapping business units to create a shifting mix of highly focused, tightly aligned businesses that can respond to changing market opportunities. Patching is not just another name for reorganizing; patchers have a distinctive mind-set. Traditional managers see structure as stable; patching managers believe structure is inherently temporary. Traditional managers set corporate strategy first, but patching managers keep the organization focused on the right set of business opportunities and let strategy emerge from individual businesses. Although the focus of patching is flexibility, the process itself follows a pattern. Patching changes are usually small in scale and made frequently. Patching should be done quickly; the emphasis is on getting the patch about right and fixing problems later. Patches should have a test drive before they're formalized but then be tightly scripted after they've been announced. And patching won't work without the right infrastructure: modular business units, fine-grained and complete unit-level metrics, and companywide compensation parity. The authors illustrate how patching works and point out some common stumbling blocks.

Every company today exists in a complex web of relationships formed, one at a time, through negotiation. Purchasing and outsourcing contracts are negotiated with vendors. Marketing arrangements are negotiated with distributors. Product development agreements are negotiated with joint-venture partners. Taken together, the thousands of negotiations a typical company engages in have an enormous effect on both its strategy and its bottom line. But few companies think systematically about their negotiating activities as a whole. Instead they take a situational view, perceiving each negotiation to be a separate event with its own goals, tactics, and measures of success. Coordinating them all seems an overwhelming and impracticable job. In reality, the author argues, it is neither. A number of companies are successfully building coordinated negotiation capabilities by applying four broad changes in practice and perspective. First, they've established a companywide negotiation infrastructure to apply the knowledge gained from forging past agreements to improve future ones. Second, they've broadened the measures they use to evaluate negotiators' performance beyond matters of cost and price. Third, they draw a clear distinction between the elements of an individual deal and the nature of the ongoing relationship between the parties. Fourth, they make their negotiators feel comfortable walking away from a deal when it's not in the company's best interests. These changes aren't radical steps. But taken together, they will let companies establish closer, more creative relationships with suppliers, customers, and other partners.

Less than half an hour after Donald Hastings became chairman and CEO of the Lincoln Electric Company in July 1992, he got the shocking news: losses from the company's European operations were so steep that Lincoln was at risk of defaulting on its loans and being unable to pay its employees their year-end bonus. Since the bonus was the foundation of the company's unusually successful manufacturing operations, Hastings knew that failure to pay it could lead to the company's unraveling. How had Lincoln gotten into this predicament? By a program of rapid foreign expansion. Lincoln was primarily a U.S. company until the mid-1980s, but recession at home and competition from abroad led executives to dream that the company could become a global power. Between 1986 and 1991, Lincoln took on unprecedented debt in order to finance foreign acquisitions, mostly in Europe. A number of factors doomed the venture: recession in Europe, unfamiliarity with Europe's labor culture, lack of international expertise at the top. But the root cause, Hastings admits, was overconfidence on the part of Lincoln's leaders in the company's manufacturing abilities and systems. Hastings, now chairman emeritus, recounts how the company suffered through the early 1990s and then returned to prosperity. It wrote off most of its European operations, ramped up domestic production and sales, and hired top managers and board members with international experience. As a result of strenuous efforts at all levels of the company, it managed to keep paying the bonus and to largely regain the trust of its people.

Corporations are continually looking for new sources of innovation. Today several leading companies are beginning to find inspiration in an unexpected place: the social sector. That includes public schools, welfare-to-work programs, and the inner city. Indeed, a new paradigm for innovation is emerging: a partnership between private enterprise and public interest that produces profitable and sustainable change for both sides. In this article, the author shows how some companies are moving beyond corporate social responsibility to corporate social innovation. Traditionally, companies viewed the social sector as a dumping ground for their spare cash, obsolete equipment, and tired executives. But that mind-set hardly created lasting change. Now companies are viewing community needs as opportunities to develop ideas and demonstrate business technologies; find and serve new markets; and solve long-standing business problems. They focus on inventing sophisticated solutions through a hands-on approach. This is not charity; it is R&D, a strategic business investment. The author concedes that it isn't easy to make the new paradigm work. But she has found that successful private-public partnerships share six characteristics: a clear business agenda, strong partners committed to change, investment by both parties, rootedness in the user community, links to other organizations, and a commitment to sustain and replicate the results. Drawing on examples of successful companies such as IBM and Bell Atlantic, the author illustrates how this paradigm has produced innovations that have both business and community payoffs.

For many organizations, achieving competitive advantage means eliciting superior performance from employees on the front line--the burger flippers, hotel room cleaners, and baggage handlers whose work has an enormous effect on customers. That's no easy task. Frontline workers are paid low wages, have scant hope of advancement, and--not surprisingly--often care little about the company's performance. But then how do some companies succeed in engaging the emotional energy of rank-and-file workers? A team of researchers at McKinsey & Company and the Conference Board recently explored that question and discovered that one highly effective route is demonstrated by the U.S. Marine Corps. The Marines' approach to motivation follows the "mission, values, and pride" path, which researchers say is practical and relevant for the business world. More specifically, the authors say the Marines follow five practices: they overinvest in cultivating core value; prepare every person to lead, including frontline supervisors; learn when to create teams and when to create single-leader work groups; attend to all employees, not just the top half; and encourage self-discipline as a way of building pride. The authors admit there are critical differences between the Marines and most businesses. But using vivid examples from companies such as KFC and Marriott International, the authors illustrate how the Marines' approach can be translated for corporate use. Sometimes, the authors maintain, minor changes in a company's standard operating procedure can have a powerful effect on frontline pride and can result in substantial payoffs in company performance.