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Ask senior managers to pare costs by 10%, and they know just what to do. Ask them to boost growth by 10%, and they're stymied, assuming that growth is not really something they can influence. But managers can control their company's growth if they have better information about where their revenues are coming from. Rather than sort sales by geographic market, business unit, or product line, they should break them out in a way that reveals which part of their strategy is responsible for what part of their revenue. This article presents a tool--the sources of revenue statement (SRS)--that does just that. Through straightforward calculations using data taken from a company's balance sheet, along with estimations of customer churn and industry growth rates, the SRS enables managers to classify their revenue according to five sources of growth: continuing sales to established customers (base retention); sales won from the competition (share gain); sales that fell into their laps because the market was expanding (market position); sales from moves into adjacent markets; and sales from entirely new lines of business. Once sorted in this way, revenue can be viewed as the outgrowth of manageable circumstances. Comparing the sources of revenue across divisions can uncover profound insights, which can suggest smart ways to change strategy or set stretch goals.

This is an MIT Sloan Management Review article. Today's managers acknowledge the importance of customer focus. Yet the costly customer efforts they usually implement rarely bring the promised gains. The reason? A superficial understanding of what customer focus really means. True customer focus involves comprehensive organizational change. As Baxter Healthcare, LexisNexis, IBM, and BP are learning, the kind of customer focus that creates an advantage competitors have great difficulty copying calls for companywide transformation. The author's in-depth research over many years shows how 10 breakthroughs in thinking, remarkably consistent across industries, improve growth and profitability more effectively than customer relationship management software, loyalty programs, or satisfaction surveys. She describes how, for example, the manager of Baxter Healthcare Corp. Germany got employees thinking of themselves as doing postoperative "home-recovery enhancement" instead of merely providing postoperative nutritional products to hospitals--and how that ultimately led to Baxter becoming indispensable to customers. When deep customer focus gets rooted in employee behavior, people at all levels become innovators.

This is an MIT Sloan Management Review article. By one informed estimate from the late 1990s, three-quarters of the Fortune 100's total market capitalization was represented by intangible assets, such as patents, copyrights, and trademarks. In this environment, cautions the author, intellectual property management cannot be left to technology managers or corporate legal staff alone--it must be a matter of concern for functional and business-unit leaders as well as a corporation's most senior officers. To realize the full value of their companies' intellectual property, top executives must seek answers to the following questions: How can the company use intellectual property rights to gain and sustain competitive advantage? How do intellectual property rights affect the industry's structure? What options do intellectual property rights offer vis-a-vis competitors? How can intellectual property rights grant incumbency advantage and establish barriers to entry? How can intellectual property rights help the company gain vertical power along the value chain? What organizational design accommodates an intellectual property strategy most effectively? The author explores each question, drawing on such company examples as Nokia, Motorola, Novo Nordisk, and Leo Pharma, in the process helping lead intellectual property rights out of their shadowy existence in patent and legal departments.

This is an MIT Sloan Management Review article. The reason most organizations struggle to demonstrate business gains from information technology investments is due to inadequate IT portfolio management (ITPM). Research at 130 companies, including Harrah's Entertainment, Waste Management, and Blue Cross Blue Shield, shows that only 17% are at the advanced, or synchronized, stage of ITPM. Scrutiny of that 17% reveals best practices for successfully aligning IT with strategic goals. The key to bridging the business-technology divide and improving results is early communication. Not only must senior business managers understand more about how IT affects both strategy and the bottom line, CIOs need to learn to communicate the vision, strategies, and goals of the IT organization in terms that non-IT executives can understand. The most effective partnerships studied were those in which the CIO took the initiative in discussing ITPM with business leaders and eventually transferred accountability to them. The most successful practitioners obtained cost savings of up to 40% of pre-ITPM budgets, better alignment between IT spending and business objectives, and greater central coordination of IT investments across the organization. By following certain specific steps to establish or upgrade ITPM and by benchmarking against synchronized companies, large organizations can make IT an integral part of their competitive advantage.

This is an MIT Sloan Management Review article. In recent years, leaders at such high-profile companies as Xerox, Procter & Gamble, Lucent, Coca-Cola, and Mattel have flamed out early in their tenures. Why did such promising and previously successful individuals fail so quickly in the CEO role? And why is such failure happening today with relatively high frequency? The individuals in charge bear some of the responsibility, of course. But the authors' research also uncovers other major forces at play. First is the impact of the predecessor CEO's actions on his or her successor's performance. Although outgoing CEOs do not intend to contribute to the failure of their successors, their personal needs and actions can lay the groundwork for derailment. A second force is often the succession process itself. The outgoing CEO may be responsible, having failed to prepare a successor adequately; and the board is also often guilty of lack of oversight. Third, new CEOs often have narrow expertise and are unable to set a proper context as leaders. The authors explore these issues and offer advice to outgoing CEOs, directors, and incoming leaders that may help them avoid the troubles that some companies have faced in making a leadership transition.

This is an MIT Sloan Management Review article. Many companies keep their suppliers and partners at arm's length, zealously guarding internal knowledge. Toyota Motor Corp., however, embraces its suppliers and encourages knowledge sharing through established networks. Toyota has developed interorganizational processes that facilitate the transfer of both explicit and tacit knowledge. The three key processes revolve around supplier associations (for general sharing of information), consulting groups (for workshops, seminars, and on-site assistance from Toyota), and learning teams (for on-site sharing of know-how within small groups). With Toyota's help, suppliers have fine-tuned their operations until, compared with their work for Toyota's rivals, they have 14% higher output per worker, 25% lower inventories, and 50% fewer defects. Quality improvements enable Toyota to charge price premiums for its products. Toyota's experience suggests that competitive advantages can be created and sustained through superior knowledge-sharing processes within a supplier network. The authors believe those principles have applicability in other types of alliances, too, including joint ventures. In fact, they contend that establishing effective interorganizational knowledge-sharing processes with suppliers and partners can be crucial for any company. The authors claim that knowledge sharing with suppliers is the reason for Toyota's dynamic learning capability and might be the company's one truly sustainable competitive advantage.

This is an MIT Sloan Management Review article. Companies deploying dishonest tactics toward customers, suppliers, distributors, and others typically do so to increase short-term profits, and in that regard they might succeed. But the misconduct is likely to fuel social psychological processes within the organization that have the potential for ruinous fiscal outcomes, outweighing short-term gains. There are three types of consequences to organizational dishonesty: reputation degradation, (mis)matches between values of employees and the organization, and increased surveillance. These outcomes can lead to decreases in repeat business and job satisfaction--and increases in worker turnover, employee theft, and other hidden costs. These consequences will, like tumors, spread and eat progressively at the organization's health and vigor. They will also be difficult to identify through typical accounting methods and might lead to corrective efforts that overshoot the true causes of poor productivity and profitability. Without a thorough understanding of the three types of consequences, an organization could try to control one financial hemorrhage (for example, losses from employee theft) by creating another (namely, investments in increasingly expensive security systems).

This is an MIT Sloan Management Review article. Consumer-centered product design is an emerging best practice in many industries, particularly those characterized by practical products that hold no emotional appeal; in which competition is based on increasingly less profitable attempts to cut cost or improve performance; in which once distinctive products are becoming commoditized; or in which there is little room left for product innovation. Among the best practitioners, design is understood to be a core activity, conferring competitive advantage by bringing to light the emotional meaning products and services have, or could have, for consumers and extracting the high value of such emotional connections. The authors discuss how companies such as Master Lock, Procter & Gamble, BMW, and Cambridge SoundWorks have employed design research--including the use of multidisciplinary teams and a variety of ethnographic and psychophysiological techniques--to build organizationwide identification with the customers' needs and aspirations, keeping everyone's eyes on the same prize.

This is an MIT Sloan Management Review article. One of the most thoroughly studied questions in business is how, at budgeting time, large corporations should choose among investment opportunities. Why, then, are so many senior executives frustrated with the process and convinced that their companies' capital is not being invested as well as it could be? One reason is that even the best-designed systems can be trumped by the power of personality. It has become commonplace, in fact, for talented and charismatic managers to spin, manipulate, and otherwise cajole senior management into funding their business ideas--often in the face of numbers that would, on their own, dictate a negative decision. Having guided dozens of major corporations through the budgeting process and watched hundreds of presentations by line managers asking for capital, the authors have profiled five archetypes of bad behavior commonly used by managers to subvert decision-making standards and win resources. They also explain how senior managers can counteract such behavior and instill values that lead to better use of investment capital.

This is an MIT Sloan Management Review article. For the past couple of decades, companies have focused on creating strong leaders of business units and influential heads of functions--men and women responsible for achieving results in one corner of an organization. But they have not paid as much attention to a more important challenge: developing leaders who see the enterprise as a whole and act for its greater good. And that perspective has become increasingly necessary as companies seek to provide not just products but broad-based customer solutions. The author explores the three key questions that companies must answer to link strategy to leadership development: What are the key elements of the enterprise leader's job? Why is learning to lead at the enterprise level such a difficult challenge? And what can companies do to identify and develop enterprise leaders? He illustrates his points with examples from PricewaterhouseCoopers, Canada's RBC Financial Group, IBM, and others.

Different organizational stakeholders, such as investors, customers, employees, and suppliers, actually have many shared needs and interests. Among other things, they all want companies to give them accurate information, show respect for their time, and be honest and forthright. Cultivating a stakeholder-friendly culture that is responsive to these common needs can be a source of competitive advantage for a firm. Examples of both friendly and unfriendly actions suggest a checklist that managers can use to improve their interactions with their important stakeholders.

Sony's first household robot, AIBO, couldn't do much of anything useful. By reframing AIBO as a pet, the company found a way to capitalize on the product's imperfections and attract an unusually diverse group of new customers.

Managers pay lip service to employees as "valuable assets." But when numbers are down, staffers are often seen merely as costs to be cut. Treating employees like the assets they are can do more for your company than build morale.

E. Lawrence Kersten thinks corporate America could use a good dose of demotivation. Carrying products that promise to "unleash the power of mediocrity," Kersten's company, Despair Inc., has just the ticket.

For years, managers assumed that the best way to take advantage of opportunities abroad was to ally with local companies. But a fundamental shift in the cost/benefit equation has led businesses to forgo partnerships in favor of owning foreign affiliates outright.

Wise allocation of assets across both stocks and bonds can help companies reap higher returns from an asset mix that includes equities without assuming unacceptable risk.

Ask most managers what gets in the way of their success, and you'll hear the familiar litany of complaints: Not enough time. Limited resources. No clear sense of how their work fits into the grand corporate scheme. These are, for the most part, excuses. What really gets in the way of managers' success is fear of making their own decisions and acting accordingly. Managers must overcome the psychological desire to be indispensable. In this article, the authors demonstrate how managers can become more productive by learning to manage demands, generate resources, and recognize and exploit alternatives. To win the support they want, managers must develop a long-term strategy and pursue their goals slowly, steadily, and strategically. To expand the range of opportunities, for their companies and themselves, managers must scan the environment for possible obstacles and search for ways around them. Fully 90% of the executives the authors have studied over the past few years wasted their time and frittered away their productivity, despite having well-defined projects, goals, and the necessary knowledge to get their jobs done. Such managers remain trapped in inefficiency because they assume they do not have enough personal discretion or control. They forget how to take initiative-the most essential quality of any truly successful manager. Effective managers, by contrast, are purposeful corporate entrepreneurs who take charge of their jobs by developing trust in their own judgment and adopting long-term, big-picture views to fulfill personal goals that match those of the organization.

Companies have focused so much on downsizing to contain costs that they've largely neglected a looming threat to their competitiveness: a severe shortage of talented workers. The general population is aging and with it, the labor pool. People are living longer, healthier lives, and the birthrate is at a historical low. During the next 15 years, 80% of the native-born workforce growth in North America--and even more in much of western Europe--is going to be in the over-50 age cohort. When these mature workers begin to retire, there won't be nearly enough young people entering the workforce to compensate. The Bureau of Labor Statistics projects a shortfall of 10 million workers in the United States in 2010, and in countries where the birthrate is well below the population replacement level (particularly in western Europe), the shortage will hit sooner, be more severe, and remain chronic. The problem won't just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires. This problem is going to become much more acute in the next decade or so, when baby boomers--more than one-quarter of all Americans, amounting to 76 million people--start hitting their mid-60s. Based on the results of their year-long research project, the authors of this article offer recommendations for gaining the loyalty of older workers and creating a more flexible approach to retirement that allows people to continue contributing well into their 60s and 70s.

It's tough to get consumers to adopt innovations--and it's getting tougher all the time. That's because more and more markets are taking on the characteristics of networks. The interconnections among today's companies are so plentiful that often a new product's adoption by one player depends on its systematic adoption by other players. The traditional levers executives use to launch products--such as targeting unique customer segments or developing compelling value propositions--don't work as well in this new environment. Instead, innovators must orchestrate a change of behaviors across the market so that a large number of players adopts their offerings and believes they are better off for having done so. In this article, Monitor Group's Bhaskar Chakravorti outlines a four-part framework for doing just that: Reason back from a target endgame, implementing only those strategies that maximize the chances of getting to goal; complement power players, positioning the innovation as an enhancement to products or services; offer coordinated switching incentives to three core groups: the players that add to the innovation's benefits, the players that act as channels to adopters, and the adopters themselves; and preserve flexibility in case the initial strategy fails.

Microsoft's and Wal-Mart's preeminence in modern business has been attributed to any number of factors--from the vision and drive of their founders to the companies' aggressive competitive practices. But the authors maintain that a bigger factor of their success is the success of the networks of companies with which Microsoft and Wal-Mart do business. Most companies today inhabit ecosystems--loose networks of suppliers, distributors, and outsourcers; makers of related products or services; providers of relevant technology; and other organizations. The analogy between business networks and biological ecosystems vividly highlights certain pivotal concepts. The moves that a company makes will, to varying degrees, affect the health of its business network, which in turn will ultimately affect the organization's performance. Because a company, like an individual species in a biological ecosystem, ultimately shares its fate with the network as a whole, smart firms pursue strategies that will benefit everyone. So how can you promote the health and stability of your own ecosystem, determine your place in it, and develop a strategy to match your role? Knowing what to do requires understanding the ecosystem and your organization's role in it. Is your company a niche player, a keystone, or a dominator?