Companies increasingly face the need for transformation in today's rapidly changing business environment, characterized by major shifts in technology, regulation, and customer behavior. A lack of strategic risk insight and foresight leaves many incumbents insufficiently prepared in the face of such deep uncertainty. We argue that traditional risk management falls short because it predominantly focuses on strategy execution while leaving strategy formulation largely untouched. Moreover, an administrative-heavy risk management process can create strategic inertia and a misleading sense of control. In today's dynamic business context, companies must not only increase the speed and impact of their strategy execution but also continuously explore the development of new strategies in response to disruptive events or emerging opportunities. Our research shows how leading companies develop a strategic risk management (SRM) capability to increase their resilience and agility in response to deep uncertainty. SRM takes a strategic, forward-looking perspective and focuses on strengthening processes, people, and practices for purposefully integrating risk into the strategy formulation process. This article offers a framework with three proven configurations of content and timing integration, risk management roles, and leading practices that enable effective SRM.

The case puts the students in the role of a member of a management team trying to create a strategy map and balanced scorecard, in an attempt to ensure alignment of strategic objectives and how to reach them.

Case (A) describes how a major player in the agricultural chemicals industry struggles to transform a fragmented group of newly acquired businesses into an integrated supply chain. The case highlights the firm's operational and organizational problems from the perspective of the European supply chain manager, whose primary objective is to streamline operations and cut costs.

In a maturing market, HPÂ’s attention moved from Return on Sales to Return on Net Assets. Mismatches between demand and supply, aggrevated by a long supply chain, were a burden on profit. HP realized that conventional logistics costs (warehousing, inventories, transport) were only the tip of the iceberg. Hidden underneath were large costs due to price protection, material devaluation, returns and obsoletes (Inventory Driven Costs). Uncovering all true demand/supply mismatch costs allowed HP to redress the situation and restore competitiveness.

In the 1990s, Hewlett-Packard's PC business was struggling to turn a dollar, despite the company's success in winning market share. By 1997, margins on its PCs were thin, and some product lines had not turned a profit since 1993. The problem had to do with the PC industry's notoriously short product cycles and brutal product and component price deflation. A common rule of thumb was that the value of a fully assembled PC decreased 1% a week. In such an environment, inventory costs become critical. But the standard "holding cost of inventory" accounted for only about 10% of HP's inventory costs. The greater risks, it turned out, resided in four other, essentially hidden costs, which all stemmed from mismatches between demand and supply leading to excess inventory: component devaluation costs for components still held in production; price protection costs incurred when product prices drop on goods distributors still have on their shelves; product return costs that have to be absorbed when distributors return and receive refunds on overstock items; and obsolescence costs for products still unsold when new models are introduced. By developing metrics to track those costs in a consistent way throughout the PC division, HP has found it can manage its supply chains with much more sophistication. Now, each product group chooses the supply chain configuration that best suits its needs.

This is an MIT Sloan Management Review article. Companies tend to assume that little can be done to reduce product costs once a design is set. This belief has shaped many cost management programs across diverse products' life cycles. Because of it, firms often focus on cost reduction during the design phase and cost containment during manufacturing. But are much of a product's costs truly locked in during design? Recent research suggests otherwise. In an extensive field study at the consumer products division of Olympus Optical Co. Ltd., the authors found that the company is able to obtain significant cost reductions in manufacturing. Indeed, the research demonstrated that costs can be aggressively managed throughout the product life cycle. Furthermore, the authors found that Olympus Optical applies various cost management techniques in an integrated manner, with the outputs of some techniques acting as inputs to others, thereby increasing the program's overall effectiveness. The observations suggest that companies competing aggressively on cost might consider adopting some form of an integrated cost management program that spans the entire product life cycle.

In a maturing market, HPs attention moved from Return on Sales to Return on Net Assets. Mismatches between demand and supply, aggrevated by a long supply chain, were a burden on profit. HP realized that conventional logistics costs (warehousing, inventories, transport) were only the tip of the iceberg. Hidden underneath were large costs due to price protection, material devaluation, returns and obsoletes (Inventory Driven Costs). Uncovering all true demand/supply mismatch costs allowed HP to redress the situation and restore competitiveness.

The (A) case describes the situation of Cadbury Schweppes (CS) and its sugar confectionery business, in a state of 'satisfactory underperformance' in which past strategies and practices make it hard for new management to initiate change in this widely respected company. The (B) case shows how from 1997 to 1999 John Sunderland, the new CEO and a new divisional manager used value based management (VBM) as a vehicle for transforming respectively the company and the sugar confectionery division with strong emphasis on people and leadership practices. The (C) case describes how CS' performance management system was redesigned in line with the Managing for Value (MfV) philosophy. It illustrates the new management performance process in action in the beverages business in Spain, where the country manager is faced with major competitive challenges.

Case (A) describes how a major player in the agricultural chemicals industry struggles to transform a fragmented group of newly acquired businesses into an integrated supply chain. The case highlights the firm's operational and organizational problems from the perspective of the European supply chain manager, whose primary objective is to streamline operations and cut costs.

The case briefly outlines the European strategy for a major player in the agricultural chemicals industry. This description provides the basis for developing a Balanced Scorecard program to help align the firm's European supply chain operations with the company's strategic goals.