Senior executives have long been frustrated by the disconnection between the plans and strategies they devise and the actual behavior of the managers throughout the company. This article approaches the problem from the ground up, recognizing that every time a manager allocates resources, that decision moves the company either into or out of alignment with its announced strategy. A well-known story--Intel's exit from the memory business--illustrates this point. When discussing what businesses Intel should be in, Andy Grove asked Gordon Moore what they would do if Intel were a company that they had just acquired. When Moore answered, "Get out of memory," they decided to do just that. It turned out, though, that Intel's revenues from memory were by this time only 4% of total sales. Intel's lower-level managers had already exited the business. What Intel hadn't done was to shut down the flow of research funding into memory (which was still eating up one-third of all research expenditures); nor had the company announced its exit to the outside world. Because divisional and operating managers--as well as customers and capital markets--have such a powerful impact on the realized strategy of the firm, senior management might consider focusing less on the company's formal strategy and more on the processes by which the company allocates resources. Top managers must know the track record of the people who are making resource allocation proposals; recognize the strategic issues at stake; reach down to operational managers to work across division lines; frame resource questions to reflect the corporate perspective, especially when large sums of money are involved and conditions are highly uncertain; and create a new context that allows top executives to circumvent the regular resource allocation process when necessary.
How do you go to market with a brand new product in a new industry? How does a business develop an opportunity and then adapt its strategy to ensure success? Who are the early adopters and how does a business work with them? Katherine Hays, chief operating office at Massive Inc., faced several options for guiding the development and launch of the Massive Ad Network. Massive had recognized that young males, ages 18 to 34, were becoming increasingly hard to reach through traditional means of advertising yet, at the same time, video game usage by this highly coveted market segment had skyrocketed and online game advertising provided a valuable revenue opportunity. To capitalize on the situation, Massive had built a product that enabled the dynamic delivery of advertising content into video games. Although the concept was simple, successful adoption of the new advertising medium required the enthusiastic buy-in from three distinct audiences: game publishers and developers, advertisers and their media buyer, and gamers. To be successful, Massive needed to continue to ask questions, experiment, and listen to each of these constituencies.
Tracks Merck's efforts to adapt to changes in the pharmaceutical industry. Key challenges include adapting Merck's internally focused, science-led culture to a more open environment, where marketing performance has become increasingly important. Examines Merck's efforts to adapt to the external changes without compromising its internal values and capability architecture.
This is an MIT Sloan Management Review article. Established businesses usually consider innovation as an attack to be met with defensive measures. And, indeed, disruptive technologies and business models have toppled many established industry leaders and will likely continue to do so. The real story behind disruptive innovation, however, is not one of destruction, but its opposite: In every industry changed by disruption, the net effect has been total market growth. Moreover, disruption can be a powerful avenue for growth through new market discovery for incumbents as well as for upstarts. There are several keys to the successful navigation of this growth path: to recognize that disruption is not an immediate phenomenon--it can take years and even decades before the upstart business encroaches heavily on the established market; to find new customers who are eager to be served by the disruption; and to build an organization that is capable of serving the new customers. The author explains each aspect in detail, drawing on extensive research involving online newspapers, minicomputers, cardiology, and semiconductors.
Captures the efforts of newspaper publisher Knight Ridder to create a digital venture. Knight Ridder proves to be a pioneer in digital publishing, launching the first online newspaper site; builds a network of newspaper sites called Real Cities; and invests in Careerbuilder, the second largest career site after Monster.com. However, the company has cumulatively lost over $100 million in its core Internet operations, is missing important categories of advertising revenue, and is operating in an ad recession at the time of the case. Tracks the evolution of the venture that spans nearly a decade and can be summarized in three distinct periods: 1) initial launch and experimentation, 2) rapid expansion within the newspaper organization vs. operation as a separate venture, and 3) managing the venture after the Internet bubble has burst.
When a company faces a major disruption in its markets, managers' perceptions of the disruption influence how they respond to it. If, for instance, they view the disruption as a threat to their core business, managers tend to overreact, committing too many resources too quickly. But if they see it as an opportunity, they're likely to commit insufficient resources to its development. Clark Gilbert and Joseph Bower explain why thinking in such stark terms--threat or opportunity--is dangerous. It's possible, they argue, to arrive at an organizational framing that makes good use of the adrenaline a threat creates as well as of the creativity an opportunity affords. The authors claim that the most successful companies frame the challenge differently at different times: When resources are being allocated, managers see the disruptive innovation as a threat. But when the hard strategic work of discovering and responding to new markets begins, the disruptive innovation is treated as an opportunity. The ability to reframe the disruptive technology as circumstances evolve is not an easy skill to master, the authors admit. In fact, it might not be possible without adjusting the organizational structure and the processes governing new business funding. Successful companies, the authors have determined, tend to do certain things: They establish a new venture separate from the core business; they fund the venture in stages as markets emerge; they don't rely on employees from the core organization to staff the new business; and they appoint an active integrator to manage the tensions between the two organizations, to name a few. This article will help executives frame innovations in more balanced ways--allowing them to recognize threats but also to seize opportunities.
Pandesic is a joint venture of SAP and Intel designed to develop turnkey information architectures for marketspace companies. The case explores the problems of developing the joint venture from the perspective of its general management. Describes the development of its strategy and organization. At the end of the case, performance is poor and Harold Hughes (Intel) steps in from his position as part-time chairman to run Pandesic.