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Few CEOs successfully manage the evolution of their companies from OEM outsourcer to branded manufacturer to expert consumer marketer as well as Tony Lo, CEO of Giant Manufacturing Co. Ltd., now the largest bicycle manufacturer in the world. In the mid-1980s, Giant produced over a million bikes per year with the Giant brand on fewer than 15% of them; by 2008, Giant was producing 6.4 million bicycles with 70% carrying the Giant brand. And in 2010, the transition was still in-process as CEO Lo experimented with a new business model for women cyclists in Taiwan and globally--leveraging some of Giant's lessons learned and challenging others. The case explores Giant's historical evolution from OEM outsourcer to branded manufacturer, which relied heavily on Giant's forward integration into the construction of a world-class, global retail organization. Giant's ability to understand the customer and move him/her up-market has driven both sales growth and profitability (e.g., average sales prices in 2006, 2007, and 2008 were $325, $345, and $360 respectively). That sets the stage for Lo's latest challenge: a realization that his products were not meeting the needs of women customers (including particularly his wife). As a result, Lo commissioned his CFO Bonnie Tu to open the first all-women's bicycle store in Taipei (owned by corporate, not the traditional retail organization), and charged her not only with figuring out the needs of women customers, but also mandating that she turn a profit. "Because your only customers are women, if you don't know how to sell to them, you're out of business -period. So you experiment for survival," explained Lo. The case concludes by examining the company's continuing integration into retail stores, looking closely at the Liv/giant pilot and the surprising business model that it developed.

This case presents the predicament of a company trying to do right by its customers and its employees as the economic crisis of 2008 hits home. Fifteen years earlier, this Spanish supermarket chain had adopted its own version of total quality management, called the Total Quality Model, switching from the industry's traditional high-low pricing to "always low prices" and continuous improvement. These changes called for a well-trained, empowered, and enthusiastically engaged workforce dedicated to providing the best products and service to their customers, who were always and seriously referred to as "the Bosses." The Total Quality Model had been a success in terms of company growth and profitability, sustained by the success of Mercadona's unusually high investment in employee training and satisfaction. Nevertheless, when sales growth slowed down in 2008, CEO Juan Roig concluded that Mercadona had let its customers down by not keeping prices low enough for such hard times. Mercadona set about lowering its prices, reducing product variety, and lowering its financial targets for 2009. Of the 9,200 SKUs in an average store, the company decided to eliminate 1,000. But Roig still had to decide what to do about employee bonuses. Since Mercadona did not meet its 2008 targets, the company policy was that no one-not even top management-would get a bonus. But Roig knew that his employees worked hard and well in 2008 and could not be held totally responsible for the downturn or for management's failure to react quickly enough.

This is an MIT Sloan Management Review article. Companies are surprisingly obtuse, the authors say, when it comes to the formation of new alliances. What often happens is that a business unit will form a partnership that serves its own parochial interests. All too often, however, the value that such alliances add at the business-unit level is negated by the resulting harm to the company due to the incompatibility of the new alliance with existing ones. Forming a partnership with a company that is an arch rival of an existing partner, for instance, can create such ill will that it leads to the overall destruction of value in the company. The solution, the authors argue, lies in both structure and process: Companies should create a central "alliance function"-an individual or a department at the corporate level that is charged with overseeing and coordinating the formation of new alliances. And the decision of whether to enter into a proposed alliance should be subject to a rigorous set of analytical steps in which the company examines the costs and benefits of the proposed alliance, not only for the business unit that is directly involved but also for the company as a whole.

This is an MIT Sloan Management Review article. "Dysfunctional momentum" occurs when people continue to work toward an original goal without pausing to recalibrate or reexamine their processes, even in the face of cues that suggest they should change course. In the authors' study of firefighting teams as a metaphor for business organizations, where dysfunctional momentum arises daily, they found that it has at least five possible causes: (1) an overemphasis on action and decisiveness, which often precludes meaningful assessment along the way; (2) evaluating people, processes and outcomes against plans rather than reevaluating the plans themselves; (3) the cumulative effects of small changes that can ripple and grow throughout the organization; (4) the tendency to ignore or co-opt disconfirming evidence; and (5) deference to authority even when leaders are not especially in the know. To overcome dysfunctional momentum, the authors conclude, we have to create interruptions -points at which we can ask: What's the story now? Is it the same story as before? If not, how has it changed? And how, if at all, should we adjust our actions? The people in charge need to stop and reassess what is happening around them. Two interconnected factors tend to be instrumental, say the authors. First, individuals have to recognize their own inability to understand fully and predict the unfolding situation by themselves -they have to develop "situated humility."Second, they must actively create or seek out disruptive information -they have to accept interruptions so that people may reevaluate the story they are maintaining in their minds.

This is an MIT Sloan Management Review article. Should coworkers have sex with each other? Should employers try to stop them? The answer to the first question is that the question isn't worth answering -because office romance is inevitable anyway. The answer to the second is more interesting. And due to recent shifts in the legal climate, for companies, it's also more scary. There is a misunderstanding at the epicenter of the office romance debate, even as it attracts increasing scrutiny due to famous examples such as the recent episode involving CBS's "Late Show With David Letterman" host. Contrary to some commonly misread signals, managers are not interested in stamping out employee dating. However, sexual relationships and romances change office dynamics in potentially problematic ways, presenting legal challenges such as allegations about sexual harassment and a hostile work environment, and those challenges need to be managed skillfully This article explores the changing legal and managerial landscape regarding office romance, and explains what practices companies should take to avoid trouble.

This is an MIT Sloan Management Review article. Many companies see customers' product returns as a major inconvenience and an eroder of profits. But recent studies have begun illuminating the potential benefits of allowing customers to return products with impunity. This research finds that when a company has a lenient product-return policy, which allows customers to return almost any product at any time, customers are more willing to make other purchases, thereby raising the company's revenues from sales. The authors' own research extended these studies by exploring the trade-offs between the costs of product returns -particularly when customers deem such experiences satisfactory -and their long-term benefits to the company. Analyzing six years of purchase, product-return and marketing-communications data from "Company 1"-a large national catalog retailer that sells apparel and accessories -they confirmed that ignoring product return behavior, or even trying to discourage it directly by not marketing to customers who return products (such as by not sending them catalogs), would be a mistake. In fact, managers should embrace customers' product-return behavior and offer them a satisfactory experience. In a field experiment with a second catalog retailer, "Company 2,"which sells footwear, apparel and other accessories through the Internet and mail-order catalogs, the authors found that under a lenient product-return policy, customers' purchases, induced profits and referrals were greater than under a strict policy (which discourages and limits product returns). These measures could be raised even further through a catalog-mailing strategy that takes into account the expected future profits from each customer and the relationship between purchases and product-return behavior -i.e., through an optimal allocation strategy.

Dassault Systemes, a leader in product lifecycle management software, has enjoyed a very profitable business model in 3D engineering design. In the past, it has successfully managed market disruptions and opportunities through acquisition and organic innovations. Its latest brands, 3DVIA, offers 3D models and life-like experiences to a new non-professional client category, the consumer. In November 2009, President and CEO Bernard Charles has to decide how to best address this new market segment, characterized by rapidly expanding open communities and new pricing models. What is the right business model for the new brand, and how will it affect the future of Dassault Systemes?

This article is an interview conducted with Pamela J. Pure, former President of McKesson Technology Solutions. In the interview, Ms. Pure is asked about the role information technology plays in healthcare, and the role it will serve moving forward with healthcare in the United States and worldwide.

For most Americans, a trip to the doctor's office or a hospital stay necessitates that medical personnel search through paper charts and records as care is administered. This remains the status quo, despite the increasingly large role that electronic communication plays in other aspects of our business and personal lives. The elevated use of information technology (IT) in healthcare settings-primarily via utilization of electronic health records (EHRs), which allow information to be readily communicated and shared among healthcare providers-has been advocated as a means of improving quality of care and helping to control healthcare costs over the long term. Yet, hastened implementation of healthcare IT will require considerable cost incursion in the near term, and will present various other challenges that must be addressed. Herein, we examine the merits and benefits of healthcare IT, as well as the costs and other challenges that may serve as obstacles to its wider implementation and use. We conclude with a set of recommendations designed to increase the likelihood that extensive expansion in the use of healthcare IT will yield the desired benefits.

The application of information technology to healthcare promises significant benefits, particularly with regard to innovations in improving both clinical and administrative processes. However, to date, few studies have been devoted to understanding the process of implementing a hospital's clinical and business systems and the drivers of success. In this article, we describe a major HIT implementation undertaken by The Christ Hospital (TCH). Specifically, we report on TCH's efforts to separate from a well-established, multi-facility healthcare delivery network and move toward providing world-class patient care on its own. Here, we examine how different stakeholder perspectives, rather than causing conflict, were capitalized on via a collaboration-intensive process. These stakeholders included administrators, physicians, nurses, and other hospital staff, as well as external vendors and TCH's consulting partner. This project is unique due to the speed and spirit of collaboration with which it was accomplished. Our findings have a number of generalizable lessons for practice and implications for research.

Many serious medical errors result from violations of recognized standards of practice. Over time, even egregious violations of standards of practice may become "normalized" in healthcare delivery systems. This article describes what leads to this normalization and explains why flagrant practice deviations can persist for years, despite the importance of the standards at issue. This article also provides recommendations to aid healthcare organizations in identifying and managing unsafe practice deviations before they become normalized and pose genuine risks to patient safety, quality care, and employee morale.

Two significant concerns in healthcare are spiraling costs and medical errors. These two concerns are correlated: eliminating medical errors leads to significant cost reductions. We provide an example, ThedaCare Inc., where both problems are improved by providing mechanisms that stop healthcare processes. While businesses often view having their processes stopped as a negative, increasing the stoppages, or creating process failures, is often a precursor to improved performance. A good rule of thumb is: if in doubt, stop. This concept of creating or engineering stoppages in the processes is linked to two "lean" concepts that come from the Toyota Production System: jidoka and poka-yoke. A spectrum of methods for stopping processes is discussed, ranging from warnings in the work environment to mechanical devices designed to stop processes and empower humans to stop the process. The preliminary results achieved at ThedaCare demonstrate the financial and medical improvements that may be obtainable from utilizing these methods.

Critics of the American healthcare system recite a long list of problems, including rising out-of-pocket costs, inconvenient access, overuse of emergency departments, uncoordinated medical records, and declining numbers of primary care doctors. To address these issues, some new venues have evolved, such as retail and urgent care clinics; however, the emergency department has become the only service provider available to all patients on a 24/7 basis. It is time to reinvent the system. The concept of patient-centered medical homes offers a structure for integrating innovations that can transform the delivery of healthcare. In this model, each patient develops an ongoing relationship with a primary care physician supported by a team of caregivers. An integral feature is the electronic medical record, which facilitates coordinated communication and decisions. Access expands beyond the traditional physician office visit to satellite services tailored to individual needs. Services center on whole-person care, including wellness and preventive counseling, as well as acute and chronic care. Adoption of the patient-centered medical home transforms healthcare delivery into a system that benefits everyone.

Consumer-directed healthcare promises to reduce costs and increase quality by expanding provider choice for prospective patients. High-deductible insurance, employer- or government-subsidized health savings accounts, transparent pricing, and accurate information on clinical performance help generate millions of patients shopping for healthcare. As in any other well-behaved market, when patients shop, there is a link between financial reward and value for the individual patient. Absence of price competition, agency problems, and high barriers to entry in local markets are market failures that currently break this link in U.S. healthcare. Consumer-directed health plans are already popular among many employers and have established a momentum that indirectly shapes discussion of reform by the Obama administration. Complexity of reporting clinical results, dependence of treatment success on at-home patient behavior, and scientific ignorance among consumers threaten delivery of results promised by theory. Successful implementation requires regulator attention to sophisticated data reporting that adjusts for clinical risk, avoidance of patient-focused marketing that leads to over-consumption, and adequate subsidy of health savings accounts. In the end, implementation shifts the locus of healthcare system control from cost-shifting negotiations between employers, providers, and payers to new-found purchasing power of prospective patients.

Life sciences and healthcare enterprises represent the largest industry in the U.S. economy. Given the importance of this sector, there is increasing demand for financial valuation of both publicly and privately held companies. At the same time, accurate valuation is particularly difficult in light of shifting business models, the current economy, intellectual property rights issues, continuous innovation in the sector, changing population demographics, quality issues, and government involvement in healthcare debate, discussion, and regulation. Herein, we examine the changing and increasingly problematic valuation of life sciences and healthcare enterprises that have obvious importance from a social welfare perspective.

There are an estimated 46 million Americans without health insurance and an even larger number for whom health insurance does not cover all needed medical services. These individuals and families have to rely more and more on government programs and physicians' willingness to provide uncompensated services, most often described by providers as charity care. Previous studies have shown a downward trend in the percent of physicians willing or able to provide charity care. We extend this research by examining the results of the Medical Group Management Association's Cost Survey of Medical Group Practices for 2005, 2006, and 2007. It is important to examine the uncompensated care reported by medical groups because groups have policies that may govern how much, if any, charity care their physicians provide. This survey data shows that, overall, the number of medical practices providing charity care continues to decline. The results and analysis of the survey data indicate that uncompensated (charity) care is being offered by less than half of medical practices, and at less than 2% of total gross charges. We examined the results by potential explanatory variables: population density, practice size, physician practice specialty, practice ownership structure, payer mix, and practice financial performance. Results were consistent across all categories; charity care is declining. These results have major policy implications for both the federal government and all state governments, especially in light of the current recession and proposed healthcare reform legislation.

Using the terminology of lean management practices, this note addresses muda, or waste, by defining its subtypes and providing a framework for their identification in production and service processes. A form useful for conducting a muda audit is provided.

Though CO2 reduction remains crucial in the fight against climate change, businesses and social entrepreneurs should also set their sights on the number-two contributor to global warming: black carbon. Scrubbing soot from your operations is often easier than reducing CO2 and can provide a quicker payback for the environment and the firm.

In June 2007, Nikolaus Bauer, the head of BMW's 2,500-employee power train plant in Dingolfing, Lower Bavaria, asked two of his production line managers, "How are we going to maintain our productivity as the workforce gets older and older?" BMW is not the only company with this concern. Corporate leaders, politicians, and labor economists in most developed nations are worried about the consequences of demographic change in their labor markets, which increasingly consist of older workers. Instead of turning to traditional approaches-firing older workers, forcing them into early retirement, or moving them to less physically demanding jobs-managers at the BMW plant let the workers themselves find a solution. The company staffed a production line with people who were, on average, 47 years old-reflecting the plant's projected demographic makeup in 2017. The workers on this pilot line, supported by senior management and technical experts, then developed and implemented 70 productivity-enhancing changes, such as managing health care and making small changes to the workplace environment. The total cost of the changes was just around 40,000 euros, but the result was a productivity increase of 7% in one year. BMW is now testing this worker-led approach in other types of plants in the United States, Germany, and Austria in order to develop standards for incorporation across the company's manufacturing organization. As global companies come to grips with the strategic challenges in the years ahead, they may find that the brainpower of their workforce is the most important differentiating factor.

This case presents the Myelin Repair Foundation's accelerated research collaboration model for drug discovery. It highlights the challenges of building a multi-disciplinary and multi-institutional research collaboration that is attempting to create a treatment for multiple sclerosis based on a novel scientific approach. The case provides details on how norms of academic research and intellectual property had to be updated to enable collaboration. The current dilemma facing the CEO and COO of the foundation relates to setting strategic priorities for research so that a treatment for MS can be ready in the next ten years. The strategic choices need to account for the complexities of drug discovery, the uncertainty of commercial partners' interest in the therapeutic approach and the constrained donor-based fundraising environment.