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SparkPlace is a two-year-old business with a hot new product: software that manages and measures the effectiveness of permission-based marketing campaigns for social media. The company is in the process of deciding on which of two customer segments to focus its strategy. Each segment has demonstrable advantages, but developing the product for and marketing to both segments simultaneously could pose big challenges. Is the argument against being "all things to all people" a valid one? If so, which customer segment should SparkPlace target? Or is there a single strategy that can capture the potential value of both types of customers without draining the company's resources? These questions are at the heart of this fictionalized case by Jill Avery, of the Simmons School of Management, and Thomas Steenburgh, of the University of Virginia's Darden School of Business. Expert commentary comes from regular HBR contributor Roger Martin, of the University of Toronto, and from Mike Volpe, chief marketing officer at HubSpot, the company on which SparkPlace is based.

While uncertainty is rampant in today's economy, the authors argue that one thing is clear: public policy to increase innovation is generally not working, and this is due largely to confusion between the terms 'invention' and 'innovation'. While the terms are often used interchangeably, there are important differences in definition, intent and process. They describe these differences and argue that the focus must switch to a particular type of innovation: user-driven innovation. This type of innovation enables users to do something that they could not have done before and can also lower costs for users. They explain how to 'refresh' innovation policy to embrace user driven innovation, putting an end to inventors creating inventions that nobody really wants.

Many managers feel doomed to trade off the futile rigor of ordinary strategic planning for the hit-or-miss creativity of the alternatives. In fact, the two can be reconciled to produce novel but realistic strategies. The key is to recognize that conventional strategic planning, for all its analysis, is not actually scientific--it lacks the careful generation and testing of hypotheses that are at the heart of the scientific method. The authors outline a strategy-making process that combines rigor and creativity. A team begins by formulating options, or possibilities, and asks what must be true for each to succeed. Once it has listed all the conditions, it assesses their likelihood and thereby identifies the barriers to each choice. The team then tests the key barrier conditions to see which hold true. From here, choosing a strategy is simple: The group need only review the test results and choose the possibility with the fewest serious barriers. This is the path P&G took in the late 1990s, when it was looking to become a major global player in skin care. After testing the barrier conditions for several possibilities, it opted for a bold strategy that might never have surfaced in the traditional process: reinventing Olay as a prestigelike product also sold to mass consumers. The new Olay succeeded beyond expectations--showing what can happen when teams shift from asking "What is the right answer" and focus instead on figuring out "What are the right questions?"

Business is the engine of the developed economies that devour a disproportionate share of the world's nonrenewable resources and produce a disproportionate share of its emissions. We see it, therefore, as both a cause of and a solution to environmental degradation. But how, exactly, can business contribute? To answer this question, the authors explore two schools of thought. According to one, consumers and companies should do more with the resources they consume, become savvier about recycling and processing their waste, and dampen their appetite for consumption in general. This worldview achieved perhaps its clearest expression in the works of the 19th-century economist Thomas Malthus. Although the Malthusian view exercises a powerful influence, it is by no means uncontested. An alternative philosophy, which flows from the work of the 20th-century economist and Nobel Prize winner Robert Solow, appeals to our natural optimism by arguing that environmental and other problems can always be resolved through the exercise of human ingenuity. It's not hard to see that these two philosophies make uneasy bedfellows. The Malthusian view encourages a tendency toward regulation and restraint, while the Solovian view underlies much of the advocacy for deregulation and the promotion of growth. But if we are to make real progress in solving the world's environmental problems, the authors write, we will have to apply both philosophies.

Integrative thinkers will not accept 'either/or' solutions. In general terms, Integrative Thinking means 'constructively using the tension between opposing models to generate a creative resolution in the form of a new model which contains elements of the existing models, but is superior to each'. However, it is not a one-size-fits-all operation. In this article, which includes examples from Walmart and the U.S. Food and Drug Administration, the pioneers of Integrative Thinking describe three types of 'integrations' that can lead to creative resolutions to problems.

For business leaders, the 'new normal' is -- to borrow a phrase from the U.S. military -- a 'VUCA' environment: it is volatile, uncertain, complex and ambiguous. The author shows how organizations can leverage the benefits of complexity and interconnectedness to their advantage by presenting examples from Procter & Gamble that he believes "illustrate the future of strategy." Going forward, strategic choices will extend far beyond an organization's own walls, he argues, and increasingly, the frontier of business will be populated by organizations that embrace this notion. The firms with the greatest capacity to win will be those whose relationships and strategic choices extend out to networked stakeholders, business partners, suppliers - and even to competitors, in the right circumstances.

A few years back, a seminal report came out, warning that India and China were educating thousands more innovators per year than the Western world and urging the U.S. to focus more on Science, Technology, Engineering and Mathematics (STEM) education. While this movement has since gained in strength, the authors show that there is little evidence to support it. They argue that great innovators like Facebook founder Mark Zuckerberg embrace both the Sciences (how things work) and the Arts (how people work), and in addition, they learn to think in ways that enable them to build new models that connect the two spheres. Teaching the model-building skill of Integrative Thinking, they argue, entails going beyond both hysteria about STEM and nostalgia about the Liberal Arts. The central goal of modern education must be the building of an 'integrative capacity', and the country that builds it first and best will enjoy the prosperity benefits.

A few years ago the software development company Intuit realized that it needed a new approach to galvanizing customers. The company's Net Promoter Score was faltering, and customer recommendations of new products were especially disappointing. Intuit decided to hold a two-day offsite for the company's top 300 managers with a focus on the role of design in innovation. One of the days was dedicated to a program called Design for Delight. The centerpiece of the day was a PowerPoint presentation by Scott Cook, who realized midway through that he was no Steve Jobs: The managers listened dutifully, but there was little energy in the room. By contrast, an exercise that followed, in which the participants worked through a design challenge by creating prototypes, getting feedback, iterating, and refining, had them mesmerized. The eventual result was an organized program in which a team of nine design thinking coaches-"innovation catalysts"- from across Intuit were made available to help any work group create prototypes, run experiments, and learn from customers. The process includes a "painstorm" (to determine the customer's greatest pain point), a "sol-jam" (to generate and then winnow possible solutions), and a "code-jam" (to write code "good enough" to take to customers within two weeks). Design for Delight has enabled employees throughout Intuit to move from satisfying customers to delighting them.

'Earnings management' - the drive to meet earnings targets, and the things executives will do to make that happen -- has become a pervasive practice, and according to the author, it is a step down a very dangerous path. Far too many of our leaders are using their talents and corporate resources to 'smooth earnings' rather than to build their companies, he says. This has become a significant feature of the unhealthy community in which our CEOs now live -- a community that causes people to lead inauthentic lives. The good news is, if we can refocus CEOs on communities that are both healthy and meaningful, we can return authenticity to the C-suite. The first step on this road: do away with stock-based incentives. This doesn't mean that executives shouldn't own any shares, but they should be prevented from selling any stock while serving in that capacity, and indeed for several years after leaving their post.

Microsoft Canada CEO Eric Gales talks to Roger Martin, Dean of the Rotman School of Management, University of Toronto, about the need for more companies to take a leap of faith with respect to innovation. The two discuss why Canadian companies lag their peers in innovation; the perils of the status quo for companies in any industry; the role of IT in innovation; how the Canadian capital markets discourage innovation; and the importance of having senior leaders who are willing to 'stick their necks out' for the sake of innovation. Martin ends by explaining why 'Prove it' is the most dangerous phrase in the English language when it comes to innovation.

Roger Martin on a new challenge facing business schools: how to teach managers to look beyond the data and use factors such as empathy and trust when making important decisions.

The authors argue that today's leaders suffer from a common logical fallacy: they tend to see what they want to see and don't ask the harder questions that might lead in other directions. As a result, they fall victim to their own thinking -- to a willingness to 'mash together' competing logics without giving it a second thought. The remedy, they argue, is to dig deeper into the logic of opposing choices, to test your assumptions and explicitly seek to understand the ways in which conditions and consequences are linked. They explain how 'integrative thinkers' explicitly use the tensions between opposing ideas to generate new and better solutions.

In today's complex environment, the most successful thinkers are able to quickly and effectively abstract the best qualities of radically different 'ways of seeing' and apply them to the situation at hand. The authors describe how the minds of these 'integrative thinkers' are dialectical - 'diaminds' for short - in that they can holds at least two contradictory ways of seeing in any critical situation, give each its full due, and instead of fleeing from the resulting tension, embrace it and come up with a third and better way. 'Stretching' the mind to achieve this, they argue, is a cornerstone of the diamind's way of being in the world; they describe how this is accomplished and how we can willfully augment our mind's faculties of real-time thinking to achieve creative solutions.

The realization of a strategy depends on countless employees. So it's no surprise that when a strategy fails, the reason cited is usually poor execution. But this view of strategy and execution relies on a false metaphor in which senior management is a choosing brain while those in the rest of the company are choiceless arms and legs that merely carry out the brain's bidding. The approach does damage to the corporation because it alienates the people working for it. A better metaphor for strategy is a white-water river, in which choices cascade from its source in the mountains (the corporation) to its mouth (the rest of the organization). Executives at the top make the broader choices involving longterm investments while empowering employees toward the bottom to make more concrete, day-to-day decisions that directly influence customer service and satisfaction. For the cascade to flow properly, a choice maker upstream can set the context for those downstream by doing four things: explaining what the choice is and why it's been made, clearly identifying the next downstream choice, offering help with making choices as needed, and committing to revisit and adjust the choice based on feedback. When downstream choices are valued and feedback is encouraged, employees send information upward, improving the knowledge base of decision makers higher up and helping everyone in the organization make better choices.

The business world's preoccupation with predictability and quantitative analysis has not gotten us very far, the author argues. For instance, none of the economic forecasting organizations predicted that the economy would shrink in 2008, let alone that it would crater as disastrously as it did. Our complex world is like a spirited race horse, he says. The harder we tug on the reins to control it, the more it resists to prove a point: it is not a machine that responds the way a user manual suggests it will; rather, our world is an intensely complicated, ambiguous system of systems that defies comprehensive quantification. Such an environment demands a lesser-known form of analysis -- one that pays attention to qualities (i.e. important aspects of a problem that cannot be measured) rather than just quantities. The author argues that if we are to face today's complex challenges, we must build up 'qualitative intelligence'.

Modern capitalism can be broken down into two major eras. The first, managerial capitalism, began in 1932 and was defined by the then radical notion that firms ought to have professional management. The second, shareholder value capitalism, began in 1976. Its governing premise is that the purpose of every corporation should be to maximize shareholders' wealth. If firms pursue this goal, the thinking goes, both shareholders and society will benefit. Though that is the theory, in reality shareholders have not been better off since they became the center of the business universe. From 1933 to the end of 1976, when they were allegedly playing second fiddle to professional managers, shareholders of the S&P 500 earned compound annual real returns of 7.6%. From 1977 to the end of 2008, S&P 500 shareholders did considerably worse - earning real returns of 5.9% a year. Putting shareholders first forces managers into playing a game in which they focus on managing shareholder expectations rather than on managing the business. The main principle behind shareholder value capitalism is inherently flawed, and it's time we abandoned it and made a shift to a new era: customer-driven capitalism. Companies that make customers their top priority, as P&G and J&J do, generate returns that are just as high as, if not higher than, those of shareholder-focused companies, and can sustain them for longer. If companies put the customer first, they will make better decisions, because they can focus on improving operations and products and services, rather than on spinning lines to shareholders.

MBA education has come under heavy criticism in recent years. The author argues that much of the criticism is fair, though superficial, focusing on the extent of ethics training or the lack of real-world experience embedded in MBA programs. The real problem, he says, is that MBA programs fail to prepare graduates to make smart decisions in the face of complexity and ambiguity. At its root, the reason MBA programs fail to produce better thinkers is structural, and it runs across three dimensions: where the curriculum's content should be deep, it is shallow; where it should be broad, it is narrow; and where it should be dynamic, it is static. The author shows how each of the three elements of a '3D' MBA is being developed at the Rotman School of Management at the University of Toronto.

Roger Martin, dean of the Rotman School of Management, talks with renowned autism and genomics researcher Stephen Scherer about how to tackle a big, messy problem.

The Virtue Matrix, first introduced in a 2002 Harvard Business Review article, is a tool developed by the lead author that provides a concrete, actionable framework for creating a corporate citizenship strategy. The goals of CSR have long been poorly defined and unclear, and as a result, many companies are uncertain of the rules or the benefits of doing what is 'right'. The authors argue that as regulations become tighter and solutions more difficult, the capacity of firms to innovate in this arena will become increasingly valuable. The best organizations, they say, will stand out by fully complying with the laws of their industry and jurisdiction; meeting the highest level of current non-regulated norms; having projects underway in the 'strategic frontier' of the Virtue Matrix; and being an active participant in 'structural frontier' projects as well. In addition to describing the four quadrants of the Virtue Matrix in detail, the authors show how companies can protect the best of what currently is - the civil foundation - and contribute to the expansion of what could be, through activities on the frontier.

What does it take to have staying power in today's economy - to not only survive, but to prosper and thrive? It's a question that has grown all the more pressing of late, as we've watched once-mighty companies like Merrill Lynch and AIG falter and crumble. While examining lending provisions, banking regulations and derivatives structures can provide insight into the specifics of the crash, focusing our attention on the intricacies of the sub-prime mortgage market and asset-backed securities obscures the real lesson, says the author. He argues that our own management theories are the prime culprit - a triumvirate of well-intentioned theories that are taught in every business school and entrenched in every significant publicly-traded company. Intended to ensure longevity and profitability, they have instead led to the opposite - transience - and contributed mightily to both the technology crash of 2001-02 and the financial-services crash of 2008. Neither crash would have happened, he argues, if our theories were as robust as those used to govern America's National Football League (NFL).