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Augustin Rey, the president of Emilia, a century-old clothing retailer in Spain, is determined to revamp the company's merchandising strategy and redesign some of its dowdiest stores. He also wants to do away with discounts, circulars, and special sales, and win customers over with a strategy he calls hablar claro--"straight talk." That means the same low prices every day. At first, Emilia's financial results were outstanding. But they've since started to slip: Customer traffic is down significantly, and same-store revenue has dropped. Rey's board of directors is pressuring him to go back to the old ways. This case is based on real events at J.C. Penney and includes commentaries from Shari Rudolph, of Gabriel Brothers, and Yashodhara Shroff, of the Indian retail chain ffolio.

In the early 1970s BRAC was a startup nongovernmental organization (NGO) working in Bangladesh. By 2014, it was the world's largest NGO. It had a strong presence in Bangladesh and had begun to deliver social development programs in nine other countries. Its founder and chairperson Fazle Hasan Abed was knighted in 2010 by the British Crown for his service in reducing poverty. The organization took a holistic approach to alleviating poverty, which depended on providing the poor with a portfolio of services including education, agriculture development, healthcare, community empowerment, and microfinance. Around 70% of the funding to deliver BRAc's development programs and services came from its own for-profit social enterprises. The case study allows students to examine the organization's evolution and its business model.

Tin Mining, Inc. was a company located in a developing country called Boldavia mainly dedicated to tin exploitation and production. During its initial thirty-three years of operation (1971-2004), it developed three organizational capabilities (technical, productive, and trust building). The case illustrates three typical characteristics of capabilities: effective solution to complex problems, regular and successful practice, and reliability and development over time. Additionally, it also illustrates the organizational capabilities paradox which emerges during the 2004-2008 period and three of its causes: path dependency (lock in), structural inertia, and the absence of a capability dynamization function. In 2009, Tin Mining, Inc. faced the need to reshape its organizational capabilities, and the arrival of a new president to the company was a propitious moment to analyze this option.

Psychologist Carol Dweck's work on "mindset" has been hugely influential in fields such as education and sports training, and her 2006 book Mindset was a bestseller. Some people, Dweck has argued, view talent as a quality they either possess or lack, and thus have a "fixed mindset"; others, with a "growth mindset," consistently see potential to develop new skills. Now she is extending her work on mindset to organizations. This article describes her new research with Fortune 1000 companies and details several implications for managers. This reprint includes three additional Idea Watch articles: "Is Extra Legroom Worth Fighting For?" provides a visual analysis showing that on economy class flights, higher ticket prices don't necessarily mean greater comfort. "In China the Right Political Ties Count" describes a study of the TV manufacturing industry in China from 1993 to 2003 revealing that ties to local officials were associated with higher rates of company success, but ties to national officials had no such effects. "The Real Cost of 'Patent Trolls'" focuses on three new studies that show how damaging patent-troll lawsuits are to the economy. They suppress venture investing and R&D spending by substantial amounts.

Information technology is revolutionizing products, from appliances to cars to mining equipment. Products once composed solely of mechanical and electrical parts have become complex systems combining hardware, sensors, electronics, and software that connect through the internet in myriad ways. These "smart, connected products" offer exponentially expanding opportunities for new functionality, far greater reliability, and capabilities that cut across and transcend traditional product boundaries. The changing nature of products is disrupting value chains, argue Michael Porter and PTC CEO James Heppelmann, and forcing companies to rethink nearly everything they do, from how they conceive, design, and source their products; to how they manufacture, operate, and service them; to how they build and secure the necessary IT infrastructure. Smart, connected products raise a broad set of new strategic choices for companies about how value is created and captured, how to work with traditional partners and what new partnerships will be required, and how to secure competitive advantage as the new capabilities reshape industry boundaries. For many firms, smart, connected products will force the fundamental question: "What business am I in?" This article provides a framework for developing strategy and achieving competitive advantage in a smart, connected world.

Commercial success with a new technology usually depends on the exclusive ownership of a critical asset or capability. But to create the technology, an innovator draws on knowledge from many different sources. Inventors who mismanage that tension often fail to successfully commercialize their innovations. To understand how to manage the tension, the authors carried out a comprehensive analysis of more than 1,000 inventions from the University of Wisconsin's Technology Transfer Office. They interviewed the TTO's senior leadership, IP managers, licensing and contract managers, legal counsel, and other staff to get firsthand knowledge of how inventions were evaluated for commercial potential. From this research they identified seven IP traps that unwary inventors (individuals and companies alike) fall into when developing scientific discoveries and inventions for the commercial market. The traps include publicly disclosing information prematurely, neglecting to enforce patent infringements, failing to demonstrate sufficient originality, overrelying on known science, failing to stake out the best territory for applications of the technology, mismanaging attribution of contributors, and ceding too much control over IP to funders. Drawing on examples encountered in their research, the authors describe these traps and offer advice on how to avoid them.

This case is about the takeover bid of Zandu Pharmaceutical Works, a small Indian traditional medicine manufacturer based at Jamnagar, (Gujarat, India). It encapsulates the protracted multi-level negotiations among its two promoter families - the Parikhs and the Vaidyas - with Kolkata, India based Emami group that intended to take over the firm in 2008. The two families had established Zandu Pharma in 1910. The Vaidyas came from a lineage of Ayurveda practitioners and brought technical know-how to the business. The Parikhs belonged to a traditional trading community and brought their business acumen to the firm. Complimenting each other, the two families managed the business for about hundred years. However, with passage of time, the later generations of the Parikhs gained technical knowledge and became firmly entrenched within the firm's operations. On the other hand, the Vaidyas failed to effectively pass on the technical expertise to their later generations. Thus their importance in the eyes of the Parikhs went down and Vaidya descendants were viewed as incompetent. The Vaidyas felt ignored and marginalized; the Parikhs repeatedly denied their demand for a director's position on the company's board. Pushed into a corner, the Vaidyas sold their stake in Zandu to Kolkata based beautycare and healthcare company - Emami. The Parikhs viewed this as a hostile move and tried to thwart Emami's bid for Zandu's control. The decision dilemma that Parikhs face in the case is - whether to sell their stake to Emami or to fight the takeover battle. The case narrates the circumstances and the actions taken by parties involved. The case deals with various managerial issues like leadership, communication, acquisition strategy and emotional issues faced by promoter families. The case serves as an effective tool for students to learn and apply leadership, communication, strategic and negotiation skills in complex acquisition scenarios, like those in family controlled businesses.

Supplement case to ISB045.

In 2014 The Alta Gracia clothing factory in the Dominican Republic was doing something quite unusual in the industry; it was paying its employees a living wage, which was 350 percent higher than the country's minimum wage. Knights Apparel, which owned the four-year old factory, also provided benefits, health care, and allowed the workers to unionize. Most apparel factories paid employees a minimum wage, which in some places was not enough to pay for workers' basic needs and the needs of their families. Knights Apparel founder and CEO Joe Bozich, the driving force behind Alta Gracia, came to this decision from both business and personal motivations. Knights Apparel was the number one provider of licensed collegiate logo apparel, and Bozich saw the opportunity presented by the growing number of college students unhappy with the working conditions of the people making their schools' branded apparel. Personally, Bozich said he wanted to provide "hope and a pathway out of poverty for generations to come." However, Alta Gracia's production costs were 20-30 percent higher than at Knights' other factories, and Alta Gracia was losing over half a million dollars a year. Knights was able to keep Alta Gracia open only by subsidizing it with funds from its profitable business units. Knights was a private company, but Bozich was still accountable to his board and the company's large multi-billion-dollar institutional investors. Over time, Bozich had convinced many of them to back Alta Gracia, but he needed to pull the factory into profitability soon in order to prove it was a viable business model. If Alta Gracia was successful, Knights would have to decide if it should be expanded. There was also the question of whether Knights would be able to replicate Alta Gracia, and if it could, should it? Other companies had tried and failed to offer a living wage and become profitable. Would Knights be different?

In 2013, Progressive was the fourth largest player in the auto insurance market, having lost the third position to GEICO in 2008. As the industry shifted from agency to online sales, GEICO's direct selling model positioned it strongly for growth. Progressive's direct sales mix had increased from 36% of total sales in 2006 to 42% in 2012, well ahead of the industry average of around 25%. As a result, both Progressive and GEICO continued to gain ground on industry leaders, State Farm and Allstate, who sold less than 5% of their policies direct. In 2013, Progressive hoped to revolutionize the purchasing of auto insurance and to build its competitive position with Snapshot, a new usage-based pricing product. First introduced in 2011, Snapshot had low rates of adoption through 2012, but Progressive was redoubling its efforts in 2013 to educate consumers about the product's benefits, which included potential savings of as much as 30% for some drivers. Progressive was also intent on building share with customers who purchased multiple insurance policies since they tended to be more loyal and profitable. Whether these moves would be sufficient to catch up with GECIO was unclear, but they seemed to be working well against State Farm and Allstate.

In order to resolve severe water management problems in Metro Manila, the Government of Philippines began rolling out a privatisation scheme in 1995 with the objective to provide piped water to everyone in the city with regular 24-hour access. The scheme aimed to auction off service provision of Metropolitan Waterworks and Sewage System (MWSS), a government agency that handled all water and sewage services, through two 25-year concession agreements that divided Metro Manila into East and West. On August 1, 1997, Manila Water won the East Concession. By 2013, after 16 years of management and operations, Manila Water had more than doubled their customer base and achieved 24-hour access to safe and affordable piped water to 99 percent of its distribution network in the East Concession, whereas before just two-thirds had any access at all and only 26 percent had regular 24-hour access. Moreover, system leakage and pilferage were improved from 63 percent to 12 percent water loss. To come so far, Manila Water had to overcome both internal and external challenges. Internally, the company had to transform its highly centralised organisational structure and bureaucratic culture into a de-centralised one where actions could be undertaken through bottom-to-top directives. Human capital and leadership development, as well as putting in place the right incentives, were key to accomplishing this objective. Externally, Manila Water had to address environmental, socio-economic and political challenges. In this regard, tri-sector engagement between government, business and civil society was essential. Moreover, the company had to seek out new business and a means to sustainable growth if it were to stay relevant in the future.

Mobileye was an Israeli company, officially headquartered in The Netherlands, which was a Tier 2 supplier to the global automobile industry. After 15 years of building a leading technology for autonomous driving systems, Mobileye emerged in 2014 as one of the most exciting companies in the race for the driverless car. After going public in August 2014, which made its founders-Amnon Shashua and Ziv Aviram-billionaires, the company looked set to become the de facto standard for vision-based autonomous and ultimately self-driving cars. This case explores the company's competitive position, the challenges of sustaining its advantages in a highly competitive industry, and how it should work with Google, the publicly perceived leader in the self-driving revolution.

This case is used in Darden's first-year strategy course and is appropriate for MBA, Executive MBA, GEMBA, and executive education programs. The head of strategy for a well-known fashion retailer, Saks Fifth Avenue, and her general management colleagues face critical decisions required to address evolving buying patterns as online retailing becomes an important part of consumer behavior. How should a successful firm organize itself when market shifts require existing and emerging processes to coexist in one organizational structure?

On July 30, 2015, Procter & Gamble (P&G) announced headline double digit earnings per share growth for the year ended June 30. A closer look at the numbers suggested a less healthy picture. Sales, volumes, and operating profits were down. Investors were not impressed; shareholders were becoming increasingly impatient with the results of Chairman and CEO A.G. Lafley's attempted turnaround. Five-year shareholder returns were well below those of the S&P 500 and the S&P 500 Consumer Staples index. After returning to the company in 2013 in the face of stalling growth, Lafley had announced that P&G would focus on 10 high-growth categories and divest 100 smaller brands in the portfolio. As of September 2015, Lafley had negotiated the sale of 93 brands. Shareholders were left wondering whether this would be enough.<br/> Two days before the results were published, P&G announced that 35-year P&G veteran David Taylor would become CEO on November 1, 2015. Lafley would remain Chairman. At the time, Taylor respectfully declined to be interviewed by the press. He had a lot to think about.

In June 2011, American Express announced the formation of a new group, Enterprise Growth (EG). EG was designed to challenge existing credit and charge business models and extend American Express's leadership into the world of digital and mobile forms of payment through the use of software platforms and mobile apps. Alpesh Chokshi, president of EG, and Wesley Wright, product development leader, were well aware of the magnitude of the potential market that was currently underserved by traditional banking services. They saw an opportunity to do something bigger-to move American Express into debit and checking spending. EG called the initiative Bank 2.0, indicating the application of technology to usher in a "next iteration" of banking.

One of the great challenges for organizations in the current economy is making strategy under the uncertainties posed by turbulent environments, intensified competition, emerging technologies, shifting customer tastes and regulatory change. Executives often know they must break with the status quo, but there are few signposts indicating the best way forward. Executives have long been exhorted to conduct analyses of internal and external environments and construct scenarios of the future. However, seeing strategy in this way has some serious weaknesses. It assumes that accuracy can be achieved through rigorous analysis and conscientious efforts to overcome individual biases in perception. It also assumes that the process will be relatively frictionless and primarily analytical. But research has found that most forecasting efforts fail to attain the desired precision. To study how managers make strategy in conditions of considerable uncertainty, the authors took an in-depth look at five technology strategy projects inside the Advanced Technology Strategy Group at a communications technology company that was experiencing a period of high industry turbulence. The authors observed managers'struggles to forecast the future and discovered that managers could not imagine new futures for the company without rethinking the past and reconsidering present concerns. A new future could not shape strategic choices unless it was connected in a narrative that showed how it relates to the past and the present. When managers settled on a particular narrative, they could make choices. Strategy making amid volatility thus involves constructing and reconstructing strategic narratives that reimagine the past and present in ways that allow the organization to explore multiple possible futures. In comparing strategy projects, the authors found that the more work managers do to create novel strategic narratives, the more likely they are to explore alternatives that break with the status quo.

But this limited perspective of the law does not explain how some leading companies, such as Qualcomm and the Walt Disney Co., have managed to deploy their legal departments to shape the legal environment in order to secure long-term competitive advantage. In their research, the authors have developed a framework that can help executives identify the different ways in which legal strategies can be used to achieve various corporate goals, including the identification of value-creating opportunities. The framework consists of five different legal pathways, which the authors describe using examples such as Qualcomm, Microsoft, United Parcel Service and Xerox. In order of least to greatest strategic impact, the five legal pathways are (1) avoidance, (2) compliance, (3) prevention, (4) value and (5) transformation. In the avoidance pathway, managers see the law as an obstacle to their desired business goals. Companies operating in the avoidance pathway will often have lax internal controls or a failure to perform due diligence, and this approach can lead to disaster. Companies in the compliance pathway recognize that the law is an unwelcome but mandatory constraint, and they think of compliance basically as a cost that needs to be minimized. For businesses in the prevention pathway, managers take a more proactive approach, using the law to preempt future business-related risks. The value pathway represents a fundamental shift in mind-set, from risk management to value creation; managers use the law to craft strategies that increase ROI in ways that can be directly tied to a profit-and-loss statement. For companies in the transformation pathway,executives have integrated their legal strategy not only within the organization's various value-chain activities but also with the value chains of important external partners.

This is an MIT Sloan Management Review article. Managers often must make decisions about complex strategic issues, and they are expected to make choices carefully and objectively. A retailer, for example, may need to decide whether to bid more in a highly competitive auction. Or a manufacturer may want to determine how long to hold onto a money-losing plant as the economy sinks into a recession. In boom times, deals are often in demand and expensive (and acquirers tend to know it); but when the economy cools off, acquisitions fall out of favor and prices decline. Conventional capital budgeting methods for valuing acquisitions and investments (such as discounted cash flow) may result in overpricing in "hot"deal markets and underpricing in "cold"deal markets. By setting potential deals in the context of real options theory and behavioral economics, authors Han Smit and Dan Lovallo write, executives can compensate for potential biases. Investor exuberance, the positive sentiments of boards and interest by rivals can cause executives to view acquisition opportunities as more attractive than they actually are in "hot"deal markets. Loss aversion and a narrow perspective that does not consider long-term growth options, meanwhile, can subdue acquisition behavior during "cold"markets. The article is designed to improve the use of valuation methods and help mitigate decision biases. Treating acquisition decisions as simple go/no-go choices based on expected cash flows, the authorswrite, creates an unhealthy dynamic. Because it's difficult for executives to recognize their own biases, the authors suggest using a formalized process to de-bias the decision-making team. First, managers must determine whether they are facing an investment in a "hot"or "cold"deal market (something that can often be revealed by the number of deals), after which the authors propose taking a broader view, supported by checklists.

This is an MIT Sloan Management Review article. In a world where business models are evolving rapidly and new competitors can emerge almost overnight, strategic thinking -especially at the top of the company -is more important than ever to a company's survival. However, the authors argue, boards of directors have no clear model to follow when it comes to developing the strategic role that is best suited to the company they oversee. As with other leadership roles, the one played by the board varies with the company's culture and the norms and legal requirements of its home country, as well as the norms of the industry. More importantly, the board must play a role that matches the strategic needs of the company and the state of its sector. The board of a young company, for example, usually needs to wrestle with different strategic issues than the board of a long-established company. In the authors'view, three dimensions shape the board's contributions to strategy: 1. A Definition of Strategy Companies define strategy in different ways, depending on their place in their industry and the nature of their industry. Often boards go wrong simply because they have not defined the right measures of competition or the right challenges on which to focus. 2. The Role of the Board The board's role in strategy may range from that of advisers who supervise the strategy to full coauthors of the company's game plan. 3. The Context of the Company The board's involvement in strategy also depends on the context or environment in which the company competes. If the company operates in a market that has a fairly simple and stable competitive dynamic, the board may be well advised to remain distant and largely hands-off on strategy questions. In a more chaotic context, however, a board may choose to take a stronger, hands-on approach to strategy development.