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The rise of 'shareholder value maximization' as the primary mission of corporations has created a context that exacerbates extreme reactions to monetary compensation. As a result, argues the author, depending heavily on monetary incentives to motivate people is nothing short of dangerous, especially for a firm whose mission is truly to maximize shareholder value. When it comes to incentives, balancing them and dulling their 'sharp edges' with a supportive firm context is far preferable - for employees, the firm and for society - to unleashing them on their own.

As traditional television advertisements continue to lose their effectiveness, brand managers are being more pressured to think creatively by going undercover to reach consumers surreptitiously. To capture the attention of jaded, fickle consumers, they are urged to devise below-the-radar approaches that are harder to detect. Examines six stealth marketing techniques and shows how stealth marketing is a viable alternative to obtrusive conventional advertising. Some stealth efforts are so subtle that consumers do not know they are being pitched to. There are emerging ethical and legal issues raised by critics of these techniques. Although some stealth marketing campaigns are setting off alarms with consumer watchdog groups, these techniques will inevitably grow more common. They have a powerful role to play when they are tastefully implemented and respect consumers' intelligence. Brand managers are gambling that the benefits of stealth marketing will outweigh the complaints of its critics.

Sales promotions targeted at consumers (e.g., coupons, sweepstakes, free offers) are becoming a large and growing part of marketing budgets worldwide. Presents a framework that examines the effect of managerially controllable actions--specifically, designing and communicating a sales promotion--on increasing the incentive for different segments of consumers to purchase a product. Sales promotions have three distinct aspects: an economic aspect that provides both incentives and disincentives to purchase a brand; an informational aspect that consumers use to make purchase decisions; and an affective aspect that influences how consumers feel about their shopping transaction, both positively and negatively. How a promotional offer is designed and communicated determines both its information value and its affective appeal, which then enhances or diminishes the attractiveness of the offer beyond the economic incentive it provides. Companies' promotion strategies should attempt to maximize the positive informative and affective aspects, as these can lessen the need for a large economic incentive and thereby increase the promotions' profitability.

Given the rapid increase of Web-based sales, e-services (both pure online and hybrid "clicks and mortar" market plays) face a difficult challenge: What value-added features should they offer to gain market share and profits effectively while realistically considering operational and financial constraints embedded in a perfect market paradigm? Explores similarities and differences in customer values and switching inertia between different customer segments for e-financial services in the United States. Through a national, online, customer-choice experiment involving 2,200 online customers, the authors found that customer values differ widely across segments and online features (such as availability of traditional data-quoting and buy/sell decision support services price, access to a brick-and-mortar retail outlet, and various formats of online accessibility). The results of this study have both managerial and research implications for design and operations strategy development for e-services in other industries as well.

Information systems projects that experience substantial cost and time overruns are common in organizations today. Given their pervasiveness and significant consequences, it's important to understand how to manage runaway projects effectively. To identify specific actions that should be employed as part of a recovery strategy, this article reports on a survey of seasoned information systems consultants. According to these experts, developing a recovery plan, refining the scope of the troubled project, and re-evaluating the leadership of the project team are the most important actions that must be pursued in a comprehensive recovery effort. These and other recommendations by the experts are framed within a crisis management perspective to highlight their potential relevance and impact.

There are still some who consider the phrase "socially responsible business" a contradiction in terms and who feel that the notion of corporate social responsibility is merely a trend and intrinsically suspect. Others believe that this emerging doctrine of deeper and broader accountability for business is deeply pernicious, because it distracts profit-making organizations from what they do best: make profits for their shareholders. Takes the perspective that what matters most is harnessing the power of business to make the world a better place. (Based on a presentation by Jeffrey Hollender at the sixth annual Peterson Lecture on Business Ethics, sponsored by the Center for Responsible Business at the Haas School of Business, University of California, Berkeley.)

After reporting a restatement, firms are motivated to improve their market credibility and enhance their information environment. One potential management strategy is to reach for "lightning rods," receiving substantial media attention: accounting changes associated with increased conservatism and transparency. Such an opportunity is provided in today's market in the form of stock options and variable-interest entities--kin to special-purpose entities, which evoked attention as a consequence of their role in the Enron debacle. Firms sending these high-profile accounting signals are rewarded. An "event-study" approach quantifies the boost in market-adjusted return experienced by the portfolio of firms when they send their signal. This evidence that signaling adds value for stockholders has implications for both policy setters and market participants. Considers from a corroborative and motivation perspective the quality of earnings monitoring analyses and governance "worst boards" listings.

Tyrannical leadership can lead to extraordinary performance and intolerable human effects. When performance matters, its currency soars. Contrary to modern prescriptions for CEO approaches, the phenomenon of managerial tyranny endures in the business world, where performance matters on a quarterly basis. Several celebrated CEOs and leaders who were tyrannical in their methods and yet delivered spectacular results can serve as examples of the paradox. Rather than make moral judgments on a leadership style unpalatable to many, this study presents a typology of managerial tyrants based on their individual traits, objectives, and roles and offers several strategies for coping with them.

The 1990s saw the world's industrial companies turn away in droves from the strategy of product diversification. The causes for such change include recognition of the poor performance of highly diversified firms, a trend toward decision frameworks based on market allocation of resources among disparate activities, and the rise of institutional shareholders that demand performance and clarity. These developments will continue to raise the intensity of global industrial competition, requiring managers to cope by thinking more about multinational than multiproduct expansion. Will the few remaining conglomerates and highly diversified corporate holdouts remain strategically viable? And what will happen to firms that persist in diversifying outside their core industries in spite of all the evidence?

This is an MIT Sloan Management Review article. Many companies have supply chains that are global. They start with the sourcing of components and raw materials from around the world, then move their basic manufacturing to low-cost locations overseas. But few organizations have innovation processes that are equally global. That is, rarely do businesses have innovation activities that integrate distinctive knowledge from around the world as effectively as global supply chains integrate far-flung sources of raw materials, labor, component, and services. But some companies--Nokia, Airbus, SAP, and Starbucks, among them--have managed to assemble an integrated "innovation chain" that is truly global. They have been able to implement a process for innovating that transcends local clusters and national boundaries, becoming what the authors call "metanational innovators." This process requires three steps: prospecting (finding relevant pockets of knowledge from around the world), assessing (deciding on the optimal "footprint" for a particular innovation), and mobilizing (using cost-effective mechanisms to move distant knowledge without degrading it). When done properly, metanational innovation can provide companies with a powerful new source of competitive advantage: more and higher value innovation at a lower cost.

This is an MIT Sloan Management Review article. Traditional models for developing and managing corporate portfolios are based on financial frameworks, business synergies, or leveraging core competencies into related businesses. In this article, the author goes beyond those traditional approaches and offers an alternative--the corporate sphere of influence. Like nations, says the author, companies build spheres of influence that protect their cores, project their power outward to weaken rivals, and prepare the way for future moves. By recognizing the strategic purpose of each part of the portfolio, the sphere of influence model focuses attention on the company's overall strategy, including how it wants to structure the division of product and geographic markets in an industry, which threats it will address or ignore, and how the company's portfolio enhances or detracts from its competitive or alliance strategy. Thinking in terms of building a sphere of influence forces managers to draw together corporate- and business-level strategic analyses that are often treated as separate. The corporate-level concern about where to fight and the business-level concern about with whom and how to fight are brought together into a coherent view. In this article, the author defines the components of a sphere of influence and explains how senior executives can use his framework to assess their company's current sphere and map their desired one. He offers examples of how companies have managed their spheres, drawing from a wide range of industries and companies, including Microsoft, Procter & Gamble, Johnson & Johnson, Anheuser-Busch, Nokia, Harley-Davidson, and Mexican cement company CEMEX.

This is an MIT Sloan Management Review article. For a firm to succeed over the long term, it needs to master both adaptability and alignment--an attribute sometimes referred to as ambidexterity. The concept is alluring, but the evidence suggests that most companies have struggled to apply it. The standard approach has been to create separate structures for different types of activities. But separation can also lead to isolation, and many R&D and business development groups have failed because of their lack of linkages to the core businesses. In an attempt to shed new light on the discussion, the authors develop and explore their concept of contextual ambidexterity, which calls for individual employees to make choices between alignment-oriented and adaptation-oriented activities in the context of their day-to-day work. The authors introduce this as a complementary concept to traditional structural ambidexterity. By means of their survey- and interview-based research--which took place over a three-year period and involved 4,195 respondents across 41 business units in 10 multinational firms--the authors identify the four behaviors displayed by ambidextrous individuals, each of which involves taking independent, adaptive action in the service of overall company goals. They then present a framework for describing and analyzing which organizational contexts encourage or discourage such behaviors. They link organizational context to ambidexterity and, in turn, ambidexterity to high performance. Finally, the authors describe how companies such as Nokia, Ericsson, Oracle, and Renault have been able to create such high-performance contexts, and they offer managers guidance on how to create them in their own companies.

This is an MIT Sloan Management Review article. Many companies organize employees into self-managing teams that are basically left to run themselves with some guidance from an external leader. In fact, comprehensive surveys report that 79% of companies in the Fortune 1,000 currently deploy such "empowered," "self-directed," or "autonomous" teams. Because of their widespread use, much research has been devoted to understanding how best to set up self-managing teams to maximize their effectiveness. Interestingly, though, relatively little attention has been paid to the leaders who must oversee such working groups. At first, it seems contradictory: Why should a self-managing team require any leadership at all? But the authors' research has shown that self-managing teams require a particular kind of leadership. Specifically, the external leaders who contribute most to their team's success tend to excel at one skill: managing the boundary between the team and the larger organization. That process requires specific behaviors that can be grouped into four basic functions: (1) moving back and forth between the team and the broader organization to build relationships, (2) scouting necessary information, (3) persuading the team and outside constituents to support one another, and (4) empowering team members.

This is an MIT Sloan Management Review article. Every industry leader lives in fear of the low-end competitor--a company offering much lower prices for a seemingly similar product. The vast majority of such low-end companies fall into one of four types: strippers, predators, reformers, or transformers. Each of these is defined by the functionality of product and the convenience of purchase. Strippers, for instance, typically enter a market with a bare-bones offering, reduced in function and usually in convenience. Industry leaders have significant advantages for combating low-end competition, but they often hesitate because they're afraid their actions will adversely affect their current profit margins. The answer, then, is to find the response that is most likely to restore market calm in the least disruptive way. An industry leader could choose to ride out the challenge by ignoring, blocking, or acquiring the low-end competitor. Or it could decide to strengthen its own value proposition by adding new price points, increasing its level of benefits, or dropping its prices. Such tactics can be effective in the short term, but the industry leader also needs to consider strategic retreat, particularly when certain conditions make future low-end challenges inevitable.

This is an MIT Sloan Management Review article. Getting more value from knowledge--especially from a firm's own hard-won knowledge--is one of the central challenges facing companies today. Many organizations have approached this problem in recent years by making big investments in IT systems, but the payoff has often been disappointing. Companies would do better to emulate the innovative giants of the Internet--Google, eBay, and Amazon--whose success has in part derived from their ability to make it easy for customers to find what they are looking for, to browse for products and services, and to evaluate potential purchases. These are exactly the things that are hard to do in most companies. That is, employees find that it is not intuitive to search for information in company repositories; they cannot easily browse within categories of knowledge; and they are not given the context they need to evaluate the quality of the knowledge they do find. The authors assert that if organizations apply the basic, proven approaches of the Internet success stories to capture the attention of their employees, they should be able to improve their ROI on sunk IT costs while increasing knowledge-worker productivity.

This is an MIT Sloan Management Review article. As China prepared to enter the World Trade Organization in 2001, many multinationals planned to invest new billions in operations there. But their ambitious growth plans must be viewed with caution. Experienced multinationals have long been aware of the challenges, summed up by the adage that in China "everything is possible, but nothing is easy." But few predicted the most formidable obstacle to success: the emergence of tough competition from local Chinese players. The authors' research over the past five years reveals that although market dominance by local champions is not universal, it's becoming more frequent. Multinationals must face the fact that the competitive edge that is potentially available to them from superior technologies, products, and systems will be blunted unless they build stronger local competencies. Specifically, multinationals must show a new determination to master the complexities of distribution, sales, and service in China's secondary cities and rural heartland and to learn how to adapt products, processes, and marketing messages more sensitively to the peculiarities of the Chinese market.

Hundreds of books on business growth are published each year, but which ones are really worth reading? Harvard Business School professor Pankaj Ghemawat takes a close look at three recent offerings: Chris Zook's Beyond the Core, Ram Charan's Profitable Growth Is Everyone's Business, and Adrian Slywotzky and Richard Wise's How to Grow When Markets Don't. He finds that all three are likely to succeed at prompting readers to take action. Zook defines the various adjacencies along which a business might extend its scope. Charan presents 10 tools that can be put to use immediately. And Slywotzky and Wise advise executives to inventory their companies' "hidden assets" and conduct an analysis of ways to solve customer problems. But Ghemawat wonders if the current crop of books harbors a subtle pro-growth bias. Ghemawat makes a sobering case for the dangers of setting growth targets too high. Ryanair and Coca-Cola, for instance, stumbled badly when they set unreachable growth targets. Even companies that are considered efficient growth machines run into constraints related to their size. Wal-Mart, for example, has had to accept declining growth rates as it has grown ever larger. Yet none of the three books discusses this dynamic. According to Ghemawat, readers interested in growth would be well advised to revisit a classic: Alfred Chandler's The Visible Hand. Chandler's propositions about growth and the managerial enterprise have withstood years of scrutiny, and his central idea--that technological changes, broadly defined, can affect the relative efficiency of different modes of organizing economic activity--still provides a frame for rich debate.

Many companies have posted impressive top-line growth over the past two decades in their respective economic regions--for instance, Wal-Mart in North America, BP in Europe, Toyota in Asia, and News Corp. in the Southern Hemisphere. But which were the best at converting all of that revenue growth into shareholder value? Harvard Business Review asked G. Bennett Stewart III, senior partner of the consulting firm Stern Stewart & Co., and his colleagues to come up with the answer. For the period 1983 to 2003, they assembled a list of the top 20 high-growth value adders (and laggards) in each of the four regions cited above. Their calculations gave equal weight to companies' revenue growth and market-value-added scores, revealing the important effect of region on the performance of companies in the same industry. For instance, whereas automakers are positioned high on the Asian list of high-growth value adders, U.S. carmakers GM and Ford--each of which reported revenue growth in excess of $100 billion between 1983 and 2003--are among the value laggards on the North American list, as are DaimlerChrysler and Volkswagen on the European list. The Japanese win through better efficiency, higher quality, and narrower product mixes, the author says. And although there are four telecom companies represented among the European high-growth value adders, there is none on the North American list. That's probably because the European telecoms enjoyed more protective regulation, made fewer high priced acquisitions, and didn't bet as big on the overblown dot-com economy, the author says.

Fast growth is a nice problem to have--but a hard one to manage well. In this interview, Kevin Sharer, the CEO of biotech giant Amgen, talks about the special challenges leaders face when their companies are on a roll. Sharer, who was also head of marketing at pre-WorldCom MCI and a division head and a staff assistant to Jack Welch at GE, offers insights drawn from his own experience--and from his own self-proclaimed blunders: "I learned the hard way that you need to become credible and enlist support inside the company before you start trying to be a change agent. If you think you're going to make change happen simply by force of personality or position or intellect, you'd better think again." And change there was: Under Sharer's leadership, Amgen overhauled its management team, altered its culture, and launched a couple of blockbuster products. How do chief executives survive in that kind of dizzying environment? "A CEO must always be switching between different altitudes--tasks of different levels of abstraction and specificity," Sharer says. "You might need to spend time working on a redesign of your organizational structure and then quickly switch to drafting a memo to all employees aimed at reinforcing one of the company's values." Having a supportive and capable top team is also key.

Everyone knows that corporate growth--true growth, not just agglomeration--springs from innovation. And the common wisdom is that companies must spend lavishly on R&D if they are to innovate at all. But in these fiscally cautious times, where every line item of every budget in every company is under intense scrutiny, many organizations are doing just the opposite. They tighten their belts, subject nascent product development programs to rigorous screening, and train R&D staffers to think in business terms so the researchers will be better able to decide whether an idea for a product or service is worth pursuing in the first place. Such efficiency measures are commendable, say authors Gary Hamel and Gary Getz. But frugality is not a growth strategy, they point out and, in truth, there is very little correlation between corporate performance and the amount spent on innovation. Companies like Southwest, Cemex, and Shell Chemicals have shown that businesses don't have to spend a fortune on R&D to reap the benefits of innovation. To produce more growth per dollar invested, companies must produce more innovation per dollar invested. Hamel and Getz explain how businesses can dramatically improve their innovation yields. They offer these five imperatives: Increase the number of innovators among existing employees (whatever their job titles) by involving them in innovation processes and events. Focus on developing truly radical ideas--ones that change customer expectations and behaviors and industry economics--not just incremental ideas. Look for innovation sources outside the organization, as well as inside. Increase the learning from small, low-risk experiments. And commit to long-term, consistent development efforts.