A corporation's success today lies more in its intellectual and systems capabilities than in its physical assets. Managing human intellect--and converting it into useful products and services--is fast becoming the critical executive skill of the age. It is therefore surprising that so little attention has been given to that endeavor. Few managers have systematic answers to even these basic questions: What is professional intellect? How can we develop it? How can we leverage it? According to James Brian Quinn and his coauthors, an organization's professional intellect operates on four levels: cognitive knowledge, advanced skills, systems understanding, and self-motivated creativity. They argue that organizations that nurture self-motivated creativity are more likely to thrive in the face of today's rapid changes.

This is an MIT Sloan Management Review article. By strategically outsourcing and emphasizing a company's core competencies, managers can leverage their firms' skills and resources for increased competitiveness. The authors suggest ways to determine what those core competencies are and which activities are better performed externally. They assess the relative costs and risks of "making" or "buying" and present methods for containing risks while enjoying the benefits of their dual approach.

Services technologies are changing the way companies compete. Vertical integration, physical facilities, even a seemingly superior product no longer assure a competitive edge. Sustainable advantage is more likely to come from developing superior capabilities in a few core service skills. Technology is increasing the leverage of service activities. These changes have far-reaching implications for the way managers structure their organizations and define strategic focus.

The service sector, now nearly three quarters of the U.S. gross national product, may be headed toward the same global noncompetitiveness as manufacturing. Deregulation of U.S. communications and financial markets has helped drive U.S. industries into global competitive leadership, but success may be producing a familiar complacency that repeats in services the same insularity that has damaged manufacturing. This report on a multiphase study shows that warning signs have already begun to appear. U.S. companies are paying insufficient attention to customers and quality and overemphasizing scale economies.

A study of U.S., Japanese, and European companies shows that, contrary to the claims of some corporate critics, large companies can be as technologically innovative as small companies. The effective management of innovation is surprisingly similar in both. Founders of small companies pursue their technological goals over many years, keeping costs low, tolerating uncertainty and setbacks, and readily adapting their products to meet market needs. By contrast, many managers of large organizations emphasize orderly and predictable operations. Innovative large companies accept the tumultuous realities of the innovative process and behave much like their smaller counterparts. McKinsey Award Winner.