A leading cement producer in southern India, Madras Cement is having trouble controlling costs due to its disorganized reporting processes. This case documents the company's two attempts to resolve these issues with the implementation of an Enterprise Resource Planning (ERP) system. The company's first attempt fails. After a company leader takes the bold step of admitting he made mistakes during this effort, Madras is ready to dig in and make the necessary changes to make the second attempt a success. The case initially seems to be about software implementation, but it is really a story about change management, transformation through transparency, business centric approaches, and the creation of a new social architecture. The company uses innovation to develop new processes that can ultimately be applied to other organizations, allowing the merger and acquisition process to begin.

How do you convince American parents living in the Midwest to hire tutors from India? How do you convince them to hire a tutor that they and their children will never meet in person? Can you build a personal connection between students and tutors when they are separated by thousands of miles and come from vastly different cultures? These are questions that faced Krishnan Ganesh as he began thinking about remote tutoring. A year later he founded TutorVista, an internet-based remote tutoring services company. So far, the remote tutoring firm seems to have the right answers to all of the questions above.

This case study on India's wireless giant Bharti Airtel (Airtel) is the second of two cases on the company that show how the firm exemplifies many of the tenets set forth in the book The New Age of Innovation by CK Prahalad and MS Krishnan. Case B presents the students with the varied strategies that Airtel has pursued to become one of the most profitable wireless telecommunications companies in the world, despite the fact that it operates in one of the poorest countries on Earth. Airtel changed the industry by moving away from such standard metrics as Average Revenue Per User (ARPU) and has employed alternative measurements for success. It has also relied heavily on outsourcing non-core functions and designed unique Value-Added Services (VAS) for its varied customer base. The case asks students how Airtel can maintain its culture of innovation while growing quickly. How will it be able to remain agile, entrepreneurial, and flexible in the face of the necessary standardization that accompanies global expansion?

India's wireless giant Bharti Airtel (Airtel) exemplifies many of the tenets set forth in the book The New Age of Innovation by CK Prahalad and MS Krishnan. Divided into two segments, Case (A) asks students to analyze the Indian environment and Airtel's capabilities in order to determine strategies for growth. Case (B) reviews the strategies Airtel pursued and the subsequent results.

Affordability and sustainability, not premium pricing and abundance, are the new tenets of effective innovation. Westerners are struggling with the shift in mind-set, but a few emerging-market pioneers are showing the way: They're designing inexpensive products and manufacturing them with so little capital and on a scale so vast that their prices-1 cent for a one-minute telephone call, $2,000 for a car-are the lowest in the world. Nowhere is this approach, which the authors call "Gandhian innovation," more evident than in India. Smart companies have used it to penetrate the country's burgeoning mass market. This article provides a framework to help executives understand three types of Gandhian innovation that have brought corporations success: disrupting business models, as Bharti Airtel did when it shifted its focus from average revenue per user to gross profit and expanded its market reach; modifying existing business capabilities, as Computational Research Laboratories did when it came up with a whole new supercomputer design that used standard components; and creating or sourcing new capabilities, as Lupin did when it reversed the usual drug development process to create an affordable treatment for psoriasis.

Successful enterprises create and adhere to distinct business ideologies-such as the Toyota Way and the Xerox Way-over time. These doctrines contain specific ideas about how to compete, performance measures, organization structures, and whom to reward. Every employee knows: That's the way we do things here. The problem is that those success factors turn into entrenched orthodoxies over time, and no one challenges them. That's why during a corporate transformation, the forgetting curve is sometimes more important than the learning curve.

Benchmarking best practices allows enterprises to catch up with the competition, but it won't turn them into market leaders. Organizations become winners by spotting big opportunities and inventing next practices. Executives can unearth opportunities by identifying big problems that their companies will benefit by tackling. They must ask six questions: (1) Is the problem widely recognized? (2) Does it affect other industries? (3) Are radical innovations needed to tackle the problem? (4) Can tackling it change the industry's economics? (5) Will addressing the issue create a fresh source of competitive advantage? (6) Would tackling this problem prove to be a big opportunity for us?

For the past 33 years, Prahalad, a professor of strategy at the University of Michigan's Ross School of Business, has ended all his MBA and executive education courses with an exhortation: Managers must remember that they are the custodians of society's most powerful institutions, and as such they must hold themselves to a higher standard. They must strive to achieve success with responsibility. He offers 11 specific pieces of advice intended to spur his listeners to reexamine their values before plunging into everyday routines. Among them are 1) Display a commitment to learning and developing yourself. 2) Put personal performance in perspective. 3) Realize the importance of loyalty to organization, profession, community, society, and, above all, family.

When companies pursue sustainability, it's usually to demonstrate that they are socially responsible. They expect that the endeavor will add to their costs, deliver no immediate financial benefits, and quite possibly erode their competitiveness. Meanwhile, policy makers and activists argue that it will take tougher regulations and educated, organized consumers to force businesses to adopt sustainable practices. But, say the authors, the quest for sustainability can unearth a mother lode of organizational and technological innovations that yield both top-line and bottom-line returns. That quest has already begun to transform the competitive landscape, as companies redesign products, technologies, processes, and business models. By equating sustainability with innovation today, enterprises can lay the groundwork that will put them in the lead when the recession ends. Nidumolu, Prahalad, and Rangaswami have found that companies on the journey to sustainability go through five distinct stages of change: (1) viewing compliance as opportunity; (2) making value chains sustainable; (3) designing sustainable products and services; (4) developing new business models; and (5) creating next-practice platforms. The authors outline the challenges that each stage entails and the capabilities needed to tackle them.

Moving beyond decades of mutual distrust and animosity, corporations and nongovernmental organizations (NGOs) are learning to cooperate with each other. Realizing that their interests are converging, the two sides are working together to create innovative business models that are helping to grow new markets and accelerate the eradication of poverty. The path to convergence has proceeded in three stages. In the initial be- responsible stage, companies and NGOs, realizing that they had to coexist, started to look for ways to influence each other through joint social responsibility projects. This experience paved the way for the get-into-business stage, in which NGOs and companies sought to serve the poor by setting up successful businesses. In the process, NGOs learned business discipline from the private sector, while corporations gained an appreciation for the local knowledge, low-cost business models, and community-based marketing techniques that the NGOs have mastered. Increased success on both sides has laid the foundation for the cocreate-business stage, in which companies and NGOs become key parts of each other's capacity to deliver value. When BP sought to market a duel-fuel portable stove in India, it set up one such cocreation system with three Indian NGOs. The system allowed BP to bring the innovative stove to a geographically dispersed market through myriad local distributors without incurring distribution costs so high that the product would become unaffordable. The company sold its stoves profitably, the NGOs gained access to a lucrative revenue stream that could fund other projects, and consumers got more than the ability to sit down to a hot meal--they got the opportunity to earn incomes as the local distributors and thus to gain economic and social influence.

In the early 1970s, when Canon took its first halting steps in reprographics, the idea of a fledgling Japanese company challenging Xerox seemed impossible. Fifteen years later, it matched the U.S. giant in global unit market share. The basis for Canon's success? A different approach to strategy, one that emphasized an organization's resourcefulness above the resources it controlled. In this McKinsey Award-winning article, first published in May 1989, Gary Hamel and C.K. Prahalad explain that Western companies have wasted too much time and energy replicating the cost and quality advantages their global competitors already experience. Familiar concepts like strategic fit and competitive advantage can foster a static approach to competition, while familiar techniques like portfolio planning and competitor analysis lead to strategies that rivals can easily decode. The sum total is a pathology of surrender that leads many managers to abandon businesses instead of build them. Canon and other world-class competitors have taken a different approach to strategy: one of strategic intent. They begin with a goal that exceeds the company's present grasp and existing resources: "Beat Xerox"; "encircle Caterpillar." Then they rally the organization to close the gap by setting challenges that focus employees' efforts in the near to medium term: "Build a personal copier to sell for $1,000"; "cut product development time by 75%." Year after year, they emphasize competitive innovation--building a portfolio of competitive advantages; searching markets for "loose bricks" that rivals have left underdefended; changing the terms of competitive engagement to avoid playing by the leader's rules. The result is a global leadership position and an approach to competition that has reduced larger, stronger Western rivals to playing an endless game of catch-up.

As they search for growth, multinational corporations will have no choice but to compete in the big emerging markets of China, India, Indonesia, and Brazil. Although it is still common to question how such corporations will change life in those markets, Western executives would be smart to turn the question around and ask how multinationals themselves will be transformed by these markets. To be successful, MNCs will have to rethink every element of their business models, the authors assert in this seminal HBR article from 1998. During the first wave of market entry in the 1980s, multinationals operated with what might be termed an imperialist mind-set, assuming that the emerging markets would merely be new markets for their old products. But this mind-set limited their success: What is truly big and emerging in countries like China and India is a new consumer base comprising hundreds of millions of people. To tap into this huge opportunity, MNCs need to ask themselves five basic questions: Who is in the emerging middle class in these countries? How do the distribution networks operate? What mix of local and global leadership do you need to foster business opportunities? Should you adopt a consistent strategy for all of your business units within one country? Should you take on local partners? The transformation that multinational corporations must undergo is not cosmetic--simply developing greater sensitivity to local cultures will not do the trick, the authors say. To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be.

This is an MIT Sloan Management Review article. As competition intensifies and profit margins shrink, managers are under overwhelming pressure to create value. Traditional prescriptions such as cost reduction, reengineering, and outsourcing, although critically important, cannot solve the problem. The need to innovate is greater than ever, but the focus of innovation must change, say the authors. By synthesizing societal trends and early experimentation in companies such as General Motors, LEGO, and Medtronic, the authors paint a picture of the "next practices" of innovation in which the locus of value creation will inevitably shift from products and services to "experience environments." The intent of experience innovation is not to improve a product or service, per se, but to enable the co-creation of an environment in which personalized, evolvable experiences are the goal, and products and services are a means to that end. Profitable company growth results from individual consumers co-creating their own unique value, supported by a network of companies and consumer communities. From that perspective, say the authors, managers must learn to view existing and emerging technologies not as enhancers of products, features, and functions, but as facilitators of experiences. They offer examples of how technological capabilities such as miniaturization, networked communication, and adaptive learning are fostering experience innovation at companies such as Sony, Apple, Microsoft, and TiVo, illustrating their contention that technology will be the key facilitator of the nascent trend toward experience innovation.

By stimulating commerce and development at the bottom of the economic pyramid, multinationals could radically improve the lives of billions of people and help create a more stable, less dangerous world. Achieving this goal does not require MNCs to spearhead global social-development initiatives for charitable purposes. They need only act in their own self-interest. How? The authors lay out the business case for entering the world's poorest markets. Fully, 65% of the world's population earns less than $2,000 per year--that's 4 billion people. But despite the vastness of this market, it remains largely untapped. The reluctance to invest is easy to understand, but it is, by and large, based on outdated assumptions of the developing world. Although individual incomes may be low, the aggregate buying power of poor communities is actually quite large, representing a substantial market in many countries for what some might consider luxury goods like satellite television and phone services. Because these markets are in the earliest stages of economic development, revenue growth for multinationals entering them can be extremely rapid. Business leaders must confront their own preconceptions--particularly about the value of high-volume, low-margin businesses--for companies to master the challenges or reap the rewards of these developing markets.

This is an MIT Sloan Management Review article. In an often overemphasized focus on efficiency, many companies turn to packaged information technology systems to manage business processes. University of Michigan Business School professors C.K. Prahalad and M.S. Krisnhan suggest they should be more concerned with strategy--and getting line managers and IT managers to use information systems in ways that facilitate strategic change. A new applications-portfolio scorecard helps managers assess information infrastructure before making investments. Six key considerations are: each IT application's role in strategy, whether the knowledge embodied in the application (say, salaries in a payroll application) is stable or evolving, how much change will be needed, where the application will be sourced, whether the data are proprietary or public, and the application's freedom from conformance defects. Those parameters differ for different functions. Only those companies that deeply analyze what they need from each IT application will acquire the right portfolio. The authors' work with 500 executives reveals that few managers believe their information infrastructure can handle the pressures from deregulation, globalization, ubiquitous connectivity, and the convergence of industries and technologies. Though fully aware their organizations lack rapid-response capability or flexibility, the managers rarely knew how to fix the disconnection between the quality of IT infrastructures and the need for strategic change. Considering that information-infrastructure expenditures are generally 2% to 8% of companies' revenues, new measures to address the disconnection are essential. A corresponding change in the mind-sets and skill sets of smart line managers and IT managers also helps improve overall competitiveness.

Major business trends such as deregulation, globalization, technological convergence, and the rapid evolution of the Internet have transformed the roles that companies play in their dealings with other companies. Business practitioners and scholars talk about alliances, networks, and collaboration among companies. But managers and researchers have largely ignored the agent that is most dramatically transforming the industrial system as we know it: the consumer. In a market in which technology-enabled consumers can now engage themselves in an active dialogue with manufacturers--a dialogue that customers can control--companies have to recognize that the customer is becoming a partner in creating value. In this article, authors C.K. Prahalad and Venkatram Ramaswamy demonstrate how the shifting role of the consumer affects the notion of a company's core competencies. Where previously, businesses learned to draw on the competencies and resources of their business partners and suppliers to compete effectively, they must now include consumers as part of the extended enterprise, the authors say. Harnessing those customer competencies won't be easy. At a minimum, managers must come to grips with four fundamental realities in co-opting customer competence: they have to engage their customers in an active, explicit, and ongoing dialogue; mobilize communities of customers; manage customer diversity; and engage customers in cocreating personalized experiences. Companies will also need to revise some of the traditional mechanisms of the marketplace--pricing and billing systems, for instance--to account for their customers' new role.

Software applications are now a mission-critical source of competitive advantage for most companies. They are also a source of great risk, as the Y2K bug has made clear. Yet many line managers still haven't confronted software issues--partly because they aren't sure how best to define the quality of the applications in their IT infrastructures. Some companies such as Wal-Mart and the Gap have successfully integrated the software in their networks, but most have accumulated an unwieldy number of incompatible applications--all designed to perform the same tasks. The authors provide a framework for measuring the performance of software in a company's IT portfolio. Quality traditionally has been measured according to a product's ability to meet certain specifications; other views of quality have emerged that measure a product's adaptability to customers' needs and a product's ability to encourage innovation. To judge software quality properly, argue the authors, managers must measure applications against all three approaches. Understanding the domain of a software application is an important part of that process. The domain is the body of knowledge about a user's needs and expectations for a product. Software domains change frequently based on how a consumer chooses to use, for example, Microsoft Word or a spreadsheet application. The domain can also be influenced by general changes in technology, such as the development of a new software platform. Thus, applications can't be judged only according to whether they conform to specifications. The authors discuss how to identify domain characteristics and software risks and suggest ways to reduce the variability of software domains.

Is your company a rule maker or a rule follower? Does your company focus on catching up or on getting out in front? Do you spend the bulk of your time as a maintenance engineer preserving the status quo or as an architect designing the future? Difficult questions like these go unanswered not because senior managers are lazy--most are working harder than ever--but because they won't admit that they are less than fully in control of their companies' future. In this adaptation from their upcoming book, Hamel and Prahalad urge senior managers to look toward the future and ponder their ability to shape their companies in the years and decades to come. Creating the future, as Electronic Data Systems has done, for example, requires industry foresight. Since change is inevitable, managers must decide whether it will happen in a crisis atmosphere or in a calm and considered manner. Too often, profound thinking about the future occurs only when present success has been eroded.

For many managers, being strategic means pursuing the opportunities that fit the company's resources. This approach is not wrong, but it obscures an alternative approach in which being strategic means creating a chasm between ambition and resources. Winners find less resource-intensive ways of achieving their ambitious goals. Managers at competitive companies can leverage their resources in five basic ways: by concentrating resources around strategic goals; by accumulating resources more efficiently; by complementing one kind of resource with another; by conserving resources whenever they can; and by recovering resources from the marketplace as quickly as possible.

In the 1990s, competitive success will come from building and dominating fundamentally new markets. Core competencies are one prerequisite for creating these new markets. Corporate imagination and expeditionary marketing are the keys that unlock the markets. Corporate imagination is unleashed when companies escape the tyranny of their served markets, think about needs and functionalities instead of marketing's more conventional customer-product grid, overturn tradition price-performance assumptions, and lead customers rather than follow them.