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Describes a senior management team's strategic decision-making process. The division president faces three options for redesigning the process to address several key concerns. The president has extensive quantitative and qualitative data about the process to guide him as he and the senior team attempt to make improvements.

The Gaylord Division of Americhem, a large chemical company, is in the midst of the first use of a new zero-base budgeting system. The general manager of the division leading the process is experiencing disagreement and conflict among the members of the senior management team. This case describes a difficult meeting. A rewritten version of an earlier case.

Supplements the (A) case, 314011. A rewritten version of an earlier supplement.

The economic policies advocated by Prime Minister Shinzo Abe of Japan, dubbed Abenomics, have weakened the yen and given new life to Japan's stock market. There are three components of Abenomics: monetary easing, fiscal spending, and growth strategies. The economy-boosting effects of Abenomics and the Bank of Japan's (BOJ's) bold monetary easing policy are stirring up considerable global interest in Japan. Of the three components of Abenomics, monetary easing and fiscal spending are unlikely to inflict much pain on the public, apart from the fact that younger generations will be forced to pay back the debt the government is rapidly incurring. But the third component, growth strategies, can only be effective when addressing regulatory issues that have long been left untouched. What Japan needs most is regulatory and structural reform. These painful, drastic reforms will shuffle the deck for protected businesses. While structural reforms almost always inflict pain on vested interests protected by regulatory walls, creative initiatives by newcomers benefit consumers and help to revitalize the economy.

The chairman of Stag International faced a number of challenges. As the number one table tennis brand in India and one of the top five companies globally, Stag could go after market share, diversify into domestic distribution, do both or just sit tight. The chairman also needed to set the business up for the fourth generation to step in and drive the family-owned business forward. The dilemmas he faced were defining the strategic intent, strategic choices and resourcing for the business as it entered its 90th year of existence as a leading manufacturer and exporter of sports goods in India.

The owner of The Jade Seafood Restaurant in Richmond, BC, is ambushed by an impromptu media interview with animal rights activists regarding his restaurant’s serving of shark’s fin soup. This soup has been an upper-class staple delicacy in China for over 400 years; with the increased consumer power that has resulted from the growth of the Chinese economy since 1970, it has become the signature dish for families celebrating important occasions and for sealing business and political deals. However, research has shown that sharks have become a highly endangered species, in part because of the practice of harvesting only the fins and throwing away the rest of the carcass and because of the small birth rate and slow growth development of the fish. The consumption of shark’s fin soup in Chinese culture has become an easy target for animal rights activists because it is so localized. How should the owner react to this media ambush? If he removes this culturally important item from his menu, how will this affect his business in the highly competitive Asian restaurant environment in Richmond? Should a cultural norm trump real concerns about the consumption of an endangered species?

An analysis of more than 25,000 earnings calls made by publicly held U.S. companies reveals that the tone of calls is markedly different depending on the time of day--and stock returns over the next quarter reflect that tone, with negative calls associated with abnormal negative returns. Managers should consider these findings when scheduling calls and be aware that, for example, a 3 PM call is likely to have a far more negative tone than an 8 AM call.

The personal traits your top people possess matter much less than what they actually do every day. Kevin Sharer, former chief executive at Amgen, argues that your greatest job as a CEO is to define the behavior you want the leaders of your organization to exhibit--not by dictating the behavior from on high but by involving the leaders themselves in the process of defining it.

How Walmart listened to its critics and demonstrated that taking on large social issues, such as providing help in the aftermath of Hurricane Katrina, recycling, and hiring war veterans, can be compatible with building a strong business.

The author grew up on a dairy farm in Turkey, where his mother made yogurt from scratch. When he moved to the United States, in 1994, he found the yogurt to be "disgusting--too sugary and watery." So he made his own at home. By 2005 he was running a cheese factory in upstate New York when he saw an ad for a run-down but fully equipped yogurt factory that Kraft was divesting. It had a price tag below $1 million. Against the advice of his attorney and business adviser, he bought the factory with a bank loan backed by the Small Business Administration and immediately hired a master yogurt maker from Turkey. They spent two years perfecting their recipe, and Ulukaya worked hard to get the packaging just right. Three crucial decisions allowed him to finance growth after the business took off: He insisted that Chobani be sold in mainstream grocery stores and be stocked in the dairy aisle alongside existing yogurt brands. He negotiated with retailers over their slotting fees. And he spent a lot of time determining the right unit selling price. Within a few weeks of launch, very large orders started coming in; by 2009 the company was selling 200,000 cases of yogurt a week. It needed to make a big investment to increase capacity--but Ulukaya ruled out private equity investors. Here he tells why.

In health care, the days of business as usual are over. Around the world, every health care system is struggling with rising costs and uneven quality, despite the hard work of well-intentioned, well-trained clinicians. Health care leaders and policy makers have tried countless incremental fixes--attacking fraud, reducing errors, enforcing practice guidelines, making patients better "consumers," implementing electronic medical records--but none have had much impact. It's time for a fundamentally new strategy. At its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost. We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We must shift the focus from the volume and profitability of services provided--physician visits, hospitalizations, procedures, and tests--to the patient outcomes achieved. And we must replace today's fragmented system, in which every local provider offers a full range of services, with a system in which services for particular medical conditions are concentrated in health-delivery organizations and in the right locations to deliver high-value care. The strategy for moving to a high-value health care delivery system comprises six interdependent components: organizing around patients' medical conditions rather than physicians' medical specialties, measuring costs and outcomes for each patient, developing bundled prices for the full care cycle, integrating care across separate facilities, expanding geographic reach, and building an enabling IT platform. The transformation to value-based health care is well under way. Some organizations, such as the Cleveland Clinic and Germany's Schon Klinik, have undertaken large-scale changes involving multiple components of the value agenda. The result has been striking improvements in outcomes and efficiency, and growth in market share.

The Pentagon's Defense Advanced Research Projects Agency arguably has the longest-standing track record of radical invention in history. Over the past 50-plus years, DARPA has produced an unparalleled number of breakthroughs, including the internet, global positioning satellites, stealth technology, MEMS, and carbon composites. The agency's advances are now used in everything from smartphones to sporting equipment to artificial limbs, and it has played a central role in creating a host of multibillion-dollar industries. What makes these accomplishments even more impressive is DARPA's swiftness (its programs last only three to five years) and relatively tiny organization (about 120 permanent staffers) and modest budget (about $3 billion annually for roughly 200 programs). With its unconventional speed, efficiency, and effectiveness, DARPA has created a "special forces" model of innovation. In this article, two former DARPA leaders who now head an advanced research group at Google decipher the DARPA model and explain how it can be adapted for the private sector. The model has three critical, mutually reinforcing elements: (1) Ambitious goals. Projects are designed to push the boundaries of science to solve urgent real-world problems or create new opportunities. (2) Temporary project teams. DARPA contracts world-class experts from industry and academia to work on projects with relatively short durations. They are led by about 100 technical managers who have been brought in for fixed terms. (3) Independence. By charter, DARPA has autonomy in selecting and executing projects. Its model also challenges assumptions about how personnel are hired, and how contracting and intellectual property are managed. Such independence allows the organization to move fast and take bold risks, and helps it persuade the best and the brightest to join it.

For decades, large companies have been wary of corporate venturing. But as R&D organizations face pressure to rein in costs and produce results, companies are investing in promising start-ups to gain knowledge and agility. The logic of corporate venturing is compelling: A well-run fund can help a firm respond quickly to changes in markets and gain a better view of threats. In some cases, it can stimulate demand for a company's own products. And its investments may earn attractive returns. During their first three years as public companies, firms backed by corporate venture funds show better stock price performance, on average, than companies backed by traditional VCs. Managing corporate venture funds is not easy. Some companies have seen their venture initiatives fail, and even firms with successful funds have struggled to make use of the knowledge gained from start-up investments. Six steps can help companies avoid the pitfalls: (1) Align goals. Corporate venture funds are more successful if the business of the corporate parent and of the portfolio firm overlap. (2) Streamline approvals. A complicated decision process can burden the fund with too many goals and lead to ineffective investing patterns. (3) Provide powerful incentives. Companies that don't offer adequate compensation to their venture capitalists will face a steady stream of defections. (4) Tolerate failure. A zero failure rate may indicate that the fund is playing it too safe. (5) Stick to your commitments. If a company is seen as a fickle investor, professionals will be wary of joining its venture unit, entrepreneurs will be reluctant to accept its funds, and independent VCs will be hesitant to join in. (6) Harvest valuable information. Companies need to invest as much in learning from their start-ups as they do in making and overseeing deals.

Companies everywhere compete to find the best talent in knowledge work, and often wind up with thousands of expensive employees who aren't as productive as hoped. So they lay off a huge number of them, and soon after are out recruiting again. This binge-and-purge cycle is highly destructive, writes the author: Aside from the human and social costs involved, it is an extremely inefficient way to manage any resources, let alone knowledge workers. The problem exists, he believes, because most companies misunderstand how knowledge work does and doesn't differ from manual work. They think they should structure the former like the latter--with each worker doing the same job for a full shift. But they also assume that knowledge is necessarily bundled with the workers--and is almost impossible to codify and transfer as one could do with manual work. The trouble is that knowledge work comes primarily in the form of projects, not routine daily tasks, so these employees often have downtime. Of course it's not in their interest to advertise any spare capacity--that could lead to a poor performance review or even a layoff--and this survival imperative gets in the way of knowledge transfer. The solution is to structure knowledge work the way professional services firms do--with capabilities flowing to the projects that need them--and to put key executives in charge of codifying knowledge.

When Alex Ferguson took over as manager of the English football team Manchester United, the club was in dire straits: It hadn't won a league title in nearly 20 years and faced a very real threat of being relegated to a lower division. In 26 seasons under Ferguson, United won 38 domestic and international trophies--giving him nearly twice as many as any other English club manager--and became one of the valuable franchises in sports. In 2012, during Ferguson's final season before retiring, Harvard Business School professor Anita Elberse had the unique opportunity to observe Ferguson's management style in a series of visits and in-depth interviews. In this collaborative explication, she details eight parts of Ferguson's "formula" as she observed them and gives the manager his say. The lessons described range from the necessity of maintaining control over high-performing team members to the importance of observation and the inevitability of change. The approach that brought Ferguson's team such success and staying power is applicable well beyond football--to business and to life.

A rise in collaborative workplaces and dynamic teams over recent years has heightened the demand for "authenticity" and "instant intimacy," and managers are supposed to set an example. But sharing thoughts, feelings, and experiences at work can backfire if it's hastily conceived, poorly timed, or inconsistent with cultural or organizational norms. Getting it right can be challenging for leaders at any stage of their careers. The authors draw on four decades' worth of research in social and organizational psychology to look at common mistakes executives make when they're trying to be authentic and to offer a five-step plan for moving toward more-effective self-disclosure: (1) Set the foundation with self-knowledge. The best approach is to solicit honest feedback from coworkers and follow it up with coaching. (2) Consider relevance to the task. Before sharing personal information, ask yourself if it's germane to the situation. (3) Keep revelations genuine. Making up or exaggerating stories is easily discovered and can damage credibility. (4) Understand the organizational and cultural context. Some societies are more inclined than others to disclose personal information. (5) Delay or avoid very personal disclosures. First take note of how open others are. The authors include a tool to help you assess when and when not to share.

The wildly successful restaurateur Nobu Matsuhisa, whose hospitality group has 22 outlets in 13 countries, overcame a lot of adversity early in his career. In this edited interview he talks about selecting the talent for his kitchens, the pleasure he gets from seeing happy customers, his partnership with the actor Robert De Niro, and more.

The Wits Reproductive Health and HIV Institute (WRHI), a South African non-government organization, played a crucial role in turning the tide in the fight against HIV/AIDS in Africa. The organization significantly influenced the national response to the HIV/AIDS epidemic through its credibility, research output and multiple stakeholder engagement. The collaborative multiparty relationships between WRHI's stakeholders were a key component of the organization's success. However, WRHI's sustainability faced serious challenges in the rapidly changing operating environment, particularly since the organization was totally dependent on funders. What strategic initiatives should WRHI pursue?

This is an MIT Sloan Management Review article. Is it better to reward existing customers for loyalty -or spend your marketing dollars on attracting new ones? Many companies face that management dilemma, and expert opinions on the subject conflict. The authors argue that the answer to that question depends on how fluid customer preferences are in a market and to what degree some of a company's customers are much more valuable than others. In markets where consumer preferences are highly fluid and where the highest-value customers are much more valuable than others, companies should focus on rewarding their best existing customers. Examples of industries in which this is the case include airlines and car rentals. However, if either or both of those two characteristics -customer shopping flexibility and concentrations in customer value -is not in place, then companies should focus on offering their best prices to new customers. When identifying high-value customers, it's important to remember that revenues and profits may not necessarily be correlated. The authors note that it is not only possible that high-volume customers are not as valuable as they seem, but, in some settings, they may be downright unprofitable. For example, at one bank with which one of the authors worked, about 50% of customers contributed negatively to profits. The authors suggest several approaches to addressing the problem of unprofitable customers, including customer education and selectively increasing prices to those customers.

This is an MIT Sloan Management Review article.