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In the past 15 years, IBM has undergone a remarkable transformation from a struggling seller of hardware to a successful broad range solutions provider. Underlying this change is a story of foresighted strategy and disciplined execution--of connecting knowing to doing. In strategic terms, the IBM transformation illustrates the ideas behind dynamic capabilities, showing how the company has been able to sense changes in the marketplace and to seize these opportunities by reconfiguring existing assets and competencies. We review the literature on dynamic capabilities and, using IBM as an example, show how their strategy process permits them both to explore new markets and technologies (e.g., life sciences, pervasive computing) as well as to exploit mature products and markets (e.g., mainframe computers, middleware).

When the Danish mobile phone service provider Telmore entered the market in October 2000, few people took notice. Its business model was not perceived as particularly aggressive or threatening to the industry. Less than three years later, Telmore's creative adaptation of the well-known, no-frills model of the airline industry had taken the Danish market by storm. With a combination of rock-bottom prices, simplicity, and a focus on customer satisfaction backed by a unique low-cost infrastructure, Telmore's business model, with its powerful virtuous cycles, proved to be the most successful innovation the industry had seen in many years.

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Firms that aspire to develop two-sided platforms face a formidable challenge. Prospective users on each side will not invest in the platform until they are confident there will be enough users on the other side. Traditional strategies for dealing with this dilemma--subsidizing users or securing their exclusive affiliation--are costly and risky. Describes less costly staged strategies for building two-sided platforms. With the "vendor to two-sided platform" strategy, a firm starts as a vendor selling products or services to customers on just one side of a potential--but not yet existing--two-sided network. Once the first side is firmly established, it proves easier to attract users to the network's other side during stage two. With the "merchant to two-sided platform" strategy, a firm starts as a merchant buying goods from many different suppliers and reselling them, in the process absorbing all the risk of platform failure. In stage two, the firm shifts risk and control back to some or all of its suppliers, giving them more responsibility for managing inventory, pricing, and merchandising their wares. Presents examples and offers guidelines for when to use each strategy.

In 2006, Rio Tinto Iron Ore (RTIO) faced a number of challenges. The iron ore business had traditionally been dominated by a few large suppliers, who sold to a relatively few large steel producers. The business environment was changing, however, with the rapid development of China. Demand was growing faster than supply, causing increased prices, particularly on the spot market. Most of RTIO's production was committed to fulfilling long-term contracts, so it could not fully benefit from the high spot market prices. New entrants, however, were not committed to long-term contracts and were attracted by these high prices. In addition, many new Chinese iron and steel mills were small operations, geographically disbursed, and did not secure their iron ore supplies before building their plants. An important part of the iron ore supply chain was transportation. Traditionally, customers were responsible for shipping, but this did not meet the needs of small, remotely located Chinese mills. In addition to these changes in the marketplace, RTIO had developed new steelmaking technology that enabled the use of lower quality iron ore and also generated substantially fewer greenhouse gas emissions than conventional technology. There were a number of possible approaches to commercializing this technology, ranging from vertical integration to licensing.

When getting a company ready to sell in the short term, it turns out, PE firms employ many of the best strategy practices--use debt aggressively, focus on cash flow, reduce costs, concentrate on the dominant part of the business and sell the rest--that make for success in the long term. They just do it in months, not years.

When your company is doing well, and money is pouring in, how do you know if it could be doing better? How can you tell which management practices are making the difference--and which are merely not doing obvious harm? To find out, Professor Stadler and a team at Innsbruck University's business school conducted a massive benchmarking study comparing nine pairs of European companies over 50 years. Each pair was from the same industry (and, preferably, the same country) and included one exceptional performer and one less impressive, but solid performer. The project yielded four main findings, which Stadler calls the four principles of enduring success: Exploit before you explore: Great companies don't innovate their way to growth--they grow by efficiently exploiting the fullest potential of existing innovations. Diversify your business portfolio: Good companies, conscious of the dangers of irrational conglomeration, tend to stick to their knitting. But the great companies know when to diversify, and they remain resilient by maintaining a wide range of suppliers and a broad base of customers. Remember your mistakes: Good companies tell stories of success, but great companies also tell stories of past failures to avoid repeating them. Be conservative about change: Great companies very seldom make radical changes--and take great care in their planning and implementation. How much difference do these principles make? An investment of $1 in 1953 in the group of companies in the study that consistently applied them--insurers Allianz, Legal & General, and Munich Re; financial services firm HSBC; building materials maker Lafarge; high-tech firms Nokia and Siemens; oil giant Shell; and pharmaceutical firm GlaxoSmithKline--would be worth $4,077 today. A $1 investment in the comparison companies--Aachener und Munchener, Prudential Limited, and Cologne Re; Standard Chartered; Ciments Francais; Ericsson and AEG; BP; and Wellcome--would have yielded $713.

When a mature company fails to endure over the long term, it's often due to the "Horizon 2 vacuum," argues Geoffrey Moore, author of "Crossing the Chasm" and several other books on innovation strategy, and managing director of the consulting firm TCG Advisors. The reference is to the strategic horizons outlined by McKinsey's Mehrdad Baghai and colleagues in "The Alchemy of Growth": Horizon 1 is today's cash-generating business, Horizon 2 is the set of innovations just being commercialized, and Horizon 3 consists of forward-thinking R&D. Most companies understand they must invest in their future, so the funding and management of Horizon 3 is not the problem. The trouble starts when those innovations are brought to market and must compete with the mainstay business for company resources. They disappear from top management's radar screen and suffer a level of neglect few ventures could survive. Cisco Systems is one company that has recognized the problem and tried to address it. To begin with, CEO John Chambers has insulated Horizon 2 projects from many of the pressures of Horizon 1--for example, by re-orchestrating sales coverage so that emerging markets won't be neglected. He has also kick-started some Horizon 2 businesses by augmenting them with acquisitions, increasing their scale, and giving them more management attention. For the same reason, he has challenged his head of product development to think in terms of new businesses, not simply new products--knowing that the latter tend to get lost in salespeople's bags. Most important, Cisco is handicapping its Horizon 2 projects so that they need not compete head-to-head with established businesses. Their success is judged by metrics that are appropriate to new businesses, and they are given the benefit of Cisco's best managerial talent.

The primary goal of forecasting is to identify the full range of possibilities facing a company, society, or the world at large. In this article, Saffo demythologizes the forecasting process to help executives become sophisticated and participative consumers of forecasts, rather than passive absorbers. He illustrates how to use forecasts to at once broaden understanding of possibilities and narrow the decision space within which one must exercise intuition. The events of 9/11, for example, were a much bigger surprise than they should have been. After all, airliners flown into monuments were the stuff of Tom Clancy novels in the 1990s, and everyone knew that terrorists had a very personal antipathy toward the World Trade Center. So why was 9/11 such a surprise? What can executives do to avoid being blindsided by other such wild cards, be they radical shifts in markets or the seemingly sudden emergence of disruptive technologies? In describing what forecasters are trying to achieve, Saffo outlines six simple, commonsense rules that smart managers should observe as they embark on a voyage of discovery with professional forecasters: Map a cone of uncertainty, look for the S curve, embrace the things that don't fit, hold strong opinions weakly, look back twice as far as you look forward, and know when not to make a forecast.

This is an MIT Sloan Management Review article. The place of multinational corporations (MNCs) in China has rapidly changed since the 1970s. No longer expected to bring cash and management expertise to China, argues that MNCs have taken on a new role as teachers and role models. However, recent high-profile mistakes, including a McDonald's Corp. (Oak Brook, Illinois) ad that over 80% of Chinese surveyed found offensive, show that MNCs are not entirely up to this task. Illustrates the consequences of this inability to cope and suggests eight strategies for improving MNC's success in China: think local--act global, don't apply double standards, don't bend the rules, avoid making "symbolic" acquisitions, avoid employing aggressive tactics over intellectual property rights, guard against management insensitivity, don't "strip mine" profits, and don't use China as a lab. Shows how these strategies can be executed to increase MNC's profits and standing in China.

This is an MIT Sloan Management Review article. Many markets are affected by the complex interactions of multiple variables: geopolitics, technical innovation, capital market swings, competitive dynamics, shifting consumer preferences, and so on. These volatile markets throw out a steady stream of opportunities and threats, and managers can neither predict nor control the form, magnitude, or timing of future events with accuracy. In such environments, the traditional linear view of strategy--plan then execute--is woefully inadequate because it hinders people from incorporating new information into action. But instead of thinking of strategy as a linear process, why not consider it as inherently iterative--a loop instead of a line? According to this view, every strategy is a work in progress that is subject to revision in light of ongoing interactions between the organization and its shifting environment. To accommodate those interactions, the strategy loop consists of four major steps: making sense of a situation, making choices on what to do (and what not to do), making those things happen, and making revisions based on new information. Reconceptualizing strategy as an iterative loop is simple enough, but putting that new mindset into practice is not. Here, the crucial thing to remember is that discussions--formal and informal, short and long, one-on-one and in groups--are the key mechanism for coordinating activity inside a company. Thus, to put the strategy loop into practice, managers at every level in the organization must be proficient at leading discussions that reflect the four major steps (making sense, making choices, making things happen, and making revisions). Companies such as Diageo Ireland, All America Latina Logistica, and Onset Venture Services demonstrate that each of the four types of discussions has a different objective that requires a specific tone, supporting information, leadership traits, and accompanying tactics.

This is an MIT Sloan Management Review article. Business schools and others interested in management education and development have vigorously debated how best to teach strategy to future leaders. Some experts have questioned whether the topic should be taught at all--or at least whether it should be taught to managers. Often missing from the debate, however, has been any in-depth discussion of how individuals learn to think strategically in the first place. What specific experiences are important and how do they contribute? Moreover, what are the different ways in which people absorb those experiences to develop the ability to think strategically? To answer these and other questions, conducts a study that identified executives who were considered the top strategic thinkers in their industries. The study then investigated the totality of experiences (educational, job related, or other) that contributed to the high ability of those individuals. In addition, the research investigated the different ways in which the executives acquired their expertise in strategic thinking--a process that typically took more than a decade. The data showed that strategic thinking arises from 10 specific types of experiences--for instance, spearheading a major growth initiative or dealing with a threat to organizational survival. Moreover, executives appear to gain their expertise in strategic thinking through one of three developmental patterns. These findings help demystify the process by which strategic thinking is learned, offering important implications for management development and the practice of strategy.

This is an MIT Sloan Management Review article. When consumers resist adopting an innovation because it requires them to alter established habits, the innovation is called a resistant innovation. Uses a study involving the diffusion of screwcap wine closures in three countries--Australia, New Zealand, and the United States--to analyze strategies for marketing a resistant innovation. For winemakers, screwcap closures represent a solution to "cork taint," a quality problem that can be caused by poor-quality corks and that can affect wine flavor. But consumers have shown resistance to screwcap closures, associating them with cheap wines or preferring the tradition associated with cork. However, among wine consumers in Australia and New Zealand, screwcaps have now achieved widespread acceptance. But 2005 wine industry statistics showed that less than 5% of U.S. wineries used screwcaps on fine wines. What is the reason for this difference? Earlier research in 2004 had found few differences between U.S. wine consumers and those in Australia and New Zealand--except in their attitudes toward screwcaps. Interviews decision makers at more than two dozen wineries in the three countries, and concludes that winemakers in Australia and New Zealand had generally taken a different approach to marketing screwcap wine closures than United States wineries did. Concludes that under certain circumstances coopetition strategies, which involve some cooperation among competitive firms, can be an effective strategy for marketing a resistant innovation. Suggests that managers should analyze the marketing problem the new innovation faces and the resources available to address it; consider the kind of specific resources and knowledge that might be exchanged during coopetition; and evaluate the industry climate, including the role of trade associations and industry experts.

Examines the evolution of the PC hardware industry over the span of two and a half decades. The open architecture design of the IBM Personal Computer followed by the rapid appearance of clones drove a high level of standardization and modularity in the industry, and value was distributed along the value chain depending on levels of competition and ability to substitute components at each level. On the hardware side two component segments, the microprocessor and the graphics processor unit (GPU), ultimately became the most valuable parts of the chain. The GPU business had settled into a duopoly with Nvidia, Inc. and ATI Technologies (ATI). Intel had dominated the microprocessor segment, but Advanced Micro Devices (AMD) was consistently a thorn in Intel's side. Addresses the prospects of the graphics function becoming integrated with the microprocessor on a single piece of silicon. AMD had just announced the acquisition of ATI and Paul Otellini, Intel's CEO, is faced with the question of what he should do. Should he buy Nvidia, should he continue with his own internal graphics efforts, or should he listen to some of his customers and leave things separate?

Incorporated in 1978 as a joint venture between Biocon Biochemicals Ltd, Ireland and a company led by Ms. Kiran Mazumdar-Shaw, a young Indian entrepreneur, Biocon had long depended on revenues from the production of enzymes and generic drugs. However, competitive pressure from within the country as well as from other developing economies like China was quickly eroding price levels in these lines of business. Moreover, the 2005 adoption of WTO TRIPS in India meant that the generics-based strategy that many of India's pharma and biotech companies had followed might not be viable anymore. To continue on its current growth path, Biocon needed to consider moving from being a producer of biogenerics to becoming a global biopharmaceutical innovator. Concerned with strategy in an emerging industry, sheds light on the effects of clusters on strategy, as well as the effects of national and supranational factors on strategy. Leadership issues and low-cost strategies for diversification are also addressed.

AARP Foundation--a leading non-profit corporation--must create a new "Dashboard" performance measurement tool to track the effectiveness of its new strategic plan.

Supplements the (A) case.

Deals with CEO Bill Foote's decision of how to deal with USG's exposure to asbestos liability. USG was the largest building materials company in the United States, with 14,000 employees and gross revenues of $3.8 billion. Although USG used asbestos in a small subset of its products (and never in its SHEETROCK), as more companies that were heavy users of asbestos went bankrupt, USG was faced with shouldering the burden of the entire building materials industry. USG was otherwise a solvent, growing company. Bankruptcy was an option, but a successful reorganization was by no means assured. How would USG keep its highly motivated (and nonunionized) workforce and continue to attract top managerial talent? Would there be any value left for the shareholders? In the Johns Manville bankruptcy, shareholder equity was wiped out entirely.

Supplements the (A) case.