When Steve Jobs returned to Apple, in 1997, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. Believing that conventional management had stifled innovation, Jobs laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization. Although such a structure is common for small entrepreneurial firms, Apple-remarkably-retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple's distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.
This case details the transformation of a health care delivery system, UnityPoint Health - Fort Dodge, into a Pioneer Accountable Care Organization (ACO) after the passage of health reform in the United States. The case explores in detail how the hospital CEO and staff designed and implemented new models of care delivery and built relationships across health care delivery settings in an effort to better coordinate patient care and lower health care costs. Using patient stories, care delivery prior to the formation of the ACO is compared to care delivery after the formation of the ACO. Three novel programs that were cornerstones to transformation efforts are highlighted: 1) reducing readmissions; 2) creating advanced medical teams; and 3) creating a palliative care program.
For years, people have bemoaned executives' zealous focus on short-term results, which often leads CEOs to make moves that undermine their firms' long-term prospects and, some say, act irresponsibly. But all the talk won't change anything if the business world doesn't adopt a new way of measuring performance. Three professors from France's Insead believe they have the answer: an innovative scorecard that evaluates CEOs on the basis of the results they delivered over their entire tenures in office. It incorporates three metrics: industry-adjusted shareholder returns, country-adjusted shareholder returns, and increase in market capitalization over that time frame. Using this scorecard, the authors have studied and objectively ranked the performance of thousands of CEOs of major corporations around the world. In this issue, we reveal who made it into the top 100. This is the second installment of the ranking, which we published for the first time three years ago. Since then, the authors have expanded the group of CEOs studied, making it even more global. And, recognizing the growing sentiment that great financial performance is no longer enough, they also looked at social and environmental ratings to see which of the top CEOs also did well on those metrics. Accompanying this year's list is an interview with Jeff Bezos, the CEO of Amazon, whose well-known focus on the long term has served his company extremely well--earning him the #2 spot in the ranking.
Social media and technologies have put connectivity on steroids and made collaboration more integral to business than ever. But without the right leadership, collaboration can go astray. Employees who try to collaborate on everything may wind up stuck in endless meetings, struggling to reach agreement. On the other side of the coin, executives who came of age during the heyday of "command and control" management can have trouble adjusting their style to fit the new realities. In their research on top-performing CEOs, Insead professors Ibarra and Hansen have examined what it takes to be a collaborative leader. They've found that it requires connecting people and ideas outside an organization to those inside it, leveraging diverse talent, modeling collaborative behavior at the top, and showing a strong hand to keep teams from getting mired in debate. In this article, they describe tactics that executives from Akamai, GE, Reckitt Benckiser, and other firms use in those four areas and how they foster high-performance collaborative cultures in their organizations.
A lot of people have blamed short-term thinking for causing our current economic troubles, which has set off a debate about what time window we should use to assess a CEO's performance. Today boards of directors, senior managers, and investors intensely want to know how CEOs handle the ups and downs of running businesses over an extended period. Many executive compensation plans define the "long term" as a three-year horizon, but the real test of a CEO's leadership has to be how the company does over his or her full tenure. This article contains a list of the 50 CEOs of large public companies who performed best over their entire time in office-or, for those still in the job, up until September 30, 2009. To compile the results, the authors collected data on close to 2,000 CEOs worldwide. They asked, Who had led firms that, on the basis of stock returns, outperformed other firms in the same country and industry? The ranking combines three measures: country-adjusted return, industry-adjusted return, and change in market capitalization during tenure. While it may come as no shock that Steve Jobs of Apple tops the list, the ranking does contains a few surprises. You'll see some relatively unknown faces at the top. The inverse is also true: Some obvious candidates based on reputation don't make the top 50. The authors' analysis of the factors that increased the likelihood that an executive would place high in the ranking turned up a few more surprises. Although one might expect context to have a big effect, they found a wide diversity of countries and industries represented in the top performers. The CEO's background did matter, however, as did the situation left behind by his or her predecessor.
Without question, internal collaboration can produce benefits for an organization. This doesn't mean, however, that the more your employees collaborate, the better off the company will be. It may, in fact, be worse off. The author, a professor at UC Berkeley and at Insead, offers a simple method for determining when collaborating on a project makes sense. He calls it calculating the collaboration premium - what's left after you subtract opportunity costs and collaboration costs from a project's expected financial return. The opportunity cost is what's lost by devoting resources to the collaboration project rather than to something else - particularly something that doesn't require collaboration. Collaboration costs arise from the challenges - conflict over goals and budgets, competing objectives, logistical roadblocks - involved in working across organizational boundaries. Sometimes those costs are so high that the project results in a collaboration penalty. The Norwegian company Det Norske Veritas (DNV) would have done well to apply Hansen's calculation before it launched a food-safety initiative combining the expertise, resources, and customer bases of two business units: standards certification and risk-management consulting. According to initial projections, from 2004 to 2008 the joint effort would quadruple the growth to be realized if the two units operated separately. Unfortunately, DNV hadn't formally evaluated food safety's potential relative to other promising sectors; the consulting unit might have more profitably pursued IT risk management on its own. Meanwhile, mistrust and quarreling between the two units scotched efforts to cross-sell, while conflicting goals and incentives pulled individual team members in opposing directions. Two years after launching the initiative, DNV abandoned it. The challenge is to cultivate not more collaboration but the right collaboration. Hansen's formula can get you started.
The challenges of coming up with fresh ideas and realizing profits from them are different for every company. One firm may excel at finding good ideas but have weak systems for bringing them to market. Another organization may have a terrific process for funding and rolling out new products and services but a shortage of concepts to develop. In this article, Hansen and Birkinshaw caution executives against using the latest and greatest innovation approaches and tools without understanding the unique deficiencies in their companies' innovation systems. They offer a framework for evaluating innovation performance: the innovation value chain. It comprises the three main phases of innovation (idea generation, conversion, and diffusion) as well as the critical activities performed during those phases (looking for ideas inside your unit; looking for them in other units; looking for them externally; selecting ideas; funding them; and promoting and spreading ideas companywide). Using this framework, managers get an end-to-end view of their innovation efforts. They can pinpoint their weakest links and tailor innovation best practices appropriately to strengthen those links. Companies typically succumb to one of three broad "weakest-link" scenarios. They are idea poor, conversion poor, or diffusion poor. The article looks at the ways smart companies--including Intuit, P&G, Sara Lee, Shell, and Siemens--modify the best innovation practices and apply them to address those organizations' individual needs and flaws. The authors warn that adopting the chain-based view of innovation requires new measures of what can be delivered by each link in the chain. The approach also entails new roles for employees--"external scouts" and "internal evangelists," for example. Indeed, in their search for new hires, companies should seek out those candidates who can help address particular weaknesses in the innovation value chain.
ENVIE and ACTIF are two French social enterprises that aim at creating employment opportunities for long-term unemployed people through refurbishing and selling used goods. Both organizations are regarded as successes in their field, as both their economic and social performances are superior to the averages of other organizations in the field, yet ENVIE scaled much further than ACTIF. The case describes how they were founded as well as how each of them grew from one local site to a national network. Their respective scale-up strategies are illustrated at length, emphasizing how each of them designed a new organizational structure, selected new sites, hired new site entrepreneurs, raised start-up funds, developed partnerships and built systems and capacity.
ENVIE and ACTIF are two French social enterprises that aim at creating employment opportunities for long-term unemployed people through refurbishing and selling used goods. Both organizations are regarded as successes in their field, as both their economic and social performances are superior to the averages of other organizations in the field, yet ENVIE scaled much further than ACTIF. The case describes how they were founded as well as how each of them grew from one local site to a national network. Their respective scale-up strategies are illustrated at length, emphasizing how each of them designed a new organizational structure, selected new sites, hired new site entrepreneurs, raised start-up funds, developed partnerships and built systems and capacity.
This is an MIT Sloan Management Review article. For many years, multinational corporations could compete successfully by exploiting scale and scope economies or by taking advantage of imperfections in the world's goods, labor, and capital markets. But these ways of competing are no longer as profitable as they once were. In most industries, multinationals no longer compete primarily with companies whose boundaries are confined to a single nation. Rather, they go head-to-head with a handful of other giants. Against such global competitors, it is hard to sustain an advantage based on traditional economies of scale and scope. MNCs must seek new sources of competitive advantage. Whereas multinationals in the past realized economies of scope principally by utilizing physical assets and exploiting a companywide brand, the new economies of scope are based on the ability of business units, subsidiaries, and functional departments within the company to collaborate successfully by sharing knowledge and jointly developing new products and services. Collaboration can be an MNC's source of competitive advantage because it does not occur automatically--far from it. Indeed, several barriers impede collaboration within complex multiunit organizations. To overcome those barriers, companies will have to develop distinct organizing capabilities that cannot be easily imitated. The authors develop a framework that links managerial action, barriers to interunit collaboration, and value creation in MNCs to help managers understand how collaborative advantage can work. The framework conceptualizes collaboration as a set of management levers that reduce four specific barriers to collaboration, leading in turn to several types of value creation.
Most companies do a poor job of capitalizing on the wealth of expertise scattered across their organizations. That's because they tend to rely on centralized knowledge-management systems and technologies. But such systems are really only good at distributing explicit knowledge, the kind that can be captured and codified for general use. They're not very good at transferring implicit knowledge, the kind needed to generate new insights and creative ways of tackling business problems or opportunities. The authors suggest another approach, something they call T-shaped management, which requires executives to share knowledge freely across their organization (the horizontal part of the "T"), while remaining fiercely committed to their individual business unit's performance (the vertical part). A few companies are starting to use this approach, and one--BP Amoco--has been especially successful. From BP's experience, the authors have gleaned five ways that T-shaped managers help companies capitalize on their inherent knowledge. They increase efficiency by transferring best practices. They improve the quality of decision making companywide. They grow revenues through shared expertise. They develop new business opportunities through the cross-pollination of ideas. And they make bold strategic moves possible by delivering well-coordinated implementation.
Business incubators such as Hotbank, CMGI, and Idealab! are a booming industry. Offering office space, funding, and basic services to start-ups, these organizations have become the hottest way to nurture and grow fledgling businesses. But are incubators a fleeting phenomenon born of an overheated stock market, or are they an important and lasting way of creating value and wealth in the new economy? The authors argue that one type of incubator, called a networked incubator, represents a fundamentally new and enduring organizational model uniquely suited to growing businesses in the Internet economy. Its key distinguishing feature is its ability to give start-ups preferential access to a network of potential partners. Such incubators institutionalize their networking. That doesn't mean incubatees get preferential treatment; it means only that they have built-in access to partnerships that might not have existed without the incubator. Even with this advantage, however, networked incubators can easily follow the road to ruin. To avoid failure, they must create a portfolio of companies and advisers that their incubatees can leverage.
David Riker, the founder and chairman of eCoverage, an online insurance company, describes the various phases of company development, such as presenting a business plan, gathering a management team, getting the word out, and running the site.
The rise of the computer and the increasing importance of intellectual assets have compelled executives to examine the knowledge underlying their businesses and how it is used. Because knowledge management as a conscious practice is so young, however, executives have lacked models to use as guides. To help fill that gap, the authors recently studied knowledge management practices at management consulting firms, health care providers, and computer manufacturers. They found two very different knowledge management strategies in place. In companies that sell relatively standardized products that fill common needs, knowledge is carefully codified and stored in databases, where it can be accessed and used--over and over again--by anyone in the organization. The authors call this the codification strategy. In companies that provide highly customized solutions to unique problems, knowledge is shared mainly through person-to-person contacts; the chief purpose of computers is to help people communicate. They call this the personalization strategy. A company's choice of knowledge management strategy is not arbitrary--it must be driven by the company's competitive strategy. Emphasizing the wrong approach or trying to pursue both can quickly undermine a business. The authors warn that knowledge management should not be isolated in a functional department like HR or IT. They emphasize that the benefits are greatest--to both the company and its customers--when a CEO and other general managers actively choose one of the approaches as a primary strategy.