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Strategic alliances continue to be important tools of competitive strategy. However, many alliances do not achieve their partners' collaborative objectives and are terminated prematurely. As a result, alliances are often described as inherently unstable organizational forms that are subject to high rates of failure. In addition to the problems associated with not achieving collaborative objectives, a related issue has received limited attention. Although alliances are prone to failure, there are numerous examples of strategic alliances that continue for years despite failing to accomplish partner objectives. This article examines such strategic alliances. However, it does not focus on why failure occurs, but on the variables that contribute to firms' persistence with failing alliances. It also provides measures that can effectively counter persistence.

This is an MIT Sloan Management Review article. Partnering with outsiders to speed innovation is increasingly the norm among high-tech companies. Then why are so many organizations still struggling to make such efforts work? The answer, say MIT Sloan School professor of management Edward B. Roberts and management consultant Wenyun Kathy Liu, is that all too often companies choose collaborative strategies without first considering what stage in the technology life cycle a given technology has entered--and which type of partnership is suited best to that stage. There are four phases in the life cycle of a technology (the fluid, the transitional, the mature, and the discontinuities), and, depending on where a particular technology is at the moment, only certain external partnerships facilitate speedy development. That reality presents a challenge for managers: Each product a company is juggling may be in a different phase, and because the partnerships developed for one phase of one technology could eventually serve a different purpose in another phase of another technology, all partnerships must be handled with care. Companies are more inclined to form alliances as the technology becomes better defined and as competitive pressure increases. In broadening past research (on the technology life cycle's effect on internal product development) to encompass the externally focused technology life cycle, the authors also have underscored the growing complexity of achieving business success. The implication for management in high-tech industries is that leaders need to excel at multitasking, thinking laterally, thinking creatively, and networking with individuals in various related industries. But all that starts with understanding the technology life cycle and what it means for outsourcing innovation.

Open book management (OBM) means opening a company's financial statements to all employees and providing the education that enables them to understand how the firm makes money and how their actions affect the bottom line. It is a method of managing without concealment that involves all employees in focusing on how to grow the business profitably. The experience of Manco, Inc., a medium-size supplier of branded consumer products for retail and office product channels, illustrates the four essential steps of OBM: 1) Get the information out there; 2) teach the basics of finance and business; 3) empower people to make decisions based on what they know; and 4) make sure everyone shares directly in the company's success, as well as its failure, with targets for net earnings and return on operating assets. With technological changes transforming business and the concurrent rise of intangible and human capital as the sources of wealth creation, OBM has begun to find its place in the business world.

Much has been made about how efficient it is to develop new products from independent, modular components. But 350 billion calculations on U.S. Patent Office data reveal that the true breakthrough products are more likely to come from designs that employ the far messier and more unpredictable interdependent parts.

What's the best way to pay individuals so they'll work well as a team? New research based on battlefield computer simulations points to the advantages of combining two fundamentally different approaches: equality and equity.

Historian Thomas Frank spends a lot more time than you do reading management books. Most of them, he concludes, are more concerned with convincing people that corporations have souls than with improving the practice of management.

If you want to know what your customers really want, don't ask how they'd make your products and services better. Ask what they'd wish for if they could have anything.

"Garbage in, garbage out" may be true for computers, but a co-author of The Cluetrain Manifesto explains why it's exactly the wrong way to think about executive decision making.

Every aspiring entrepreneur can recite the truisms of the business: Feel comfortable with risk, hire the best people, do what you love, and don't do it for the money alone. Nevertheless, the road to success can be a scramble from one slippery rock to another. And no one knows that better than Dan Bricklin, creator of VisiCalc, the first electronic spreadsheet. In this first-person account, Bricklin, now on his fourth start-up, describes his life as an entrepreneur and professional tinkerer. In addition to the usual suspects for creating a business--solid training, talent, and good timing--he suggests that entrepreneurs need a few more tricks in their bags to thrive during the inevitable ups and downs. First, entrepreneurs need to understand what value they bring to their endeavors. They have to know their limits, both in terms of evaluating their penchant for risk and personal sacrifice and recognizing when their ambitions exceed their skills. They may, for instance, need others to step in when their own talents don't match their businesses' current needs. Second, entrepreneurs shouldn't wait to get started. Or, if they do wait, they should understand that as time goes by, they may become less willing to sacrifice their standard of living for their businesses. Third, entrepreneurs need to recognize that they are not their businesses. They must remember that their companies' failures don't make them awful people. Likewise, their companies' successes don't make them geniuses or superhumans. Indeed, training, talent, and good timing are essential, but entrepreneurs must also have a true passion for what they're doing, and they must possess the humility to know when they need help. Many of today's dot-com entrepreneurs, Bricklin says, have paid a price for their arrogance. Others can learn from their mistakes.

The difficult task of achieving worldly success while also storing up spiritual treasure is perennially with us, in good times and in bad. Today, however, as the economy has cooled and companies have demonstrated their mortality, questions about meaning and value appear more relevant, even urgent. HBR associate editor David A. Light recently spoke with the Reverend Peter J. Gomes, one of the nation's best-known preachers and the minister at Harvard University's Memorial Church, about why and how it is both possible and necessary to reconcile a life of success with a life of faith. To do so, says Gomes, you must first "get used to it"--come to terms with the age-old tension between being rich in spirit and rich in worldly goods. Second, you should "get over it"--arrive at an understanding of the value and responsibilities associated with power and wealth. Finally, "get on with it"--figure out how you can live your life spiritually while continuing to lead in the business world. For those wondering how to get on with spiritual development, Gomes cites the growing phenomenon of senior executives gathering with peers--out of shared need, not shared accomplishment--to pray, study sacred texts, and share their religious life together. He counsels that it's never too late to get on with it. Gomes concludes that business will continue to be one of the most significant forces in American culture, but it will always struggle against people's need for a perspective that is beyond this world's.

Middle managers have often been cast as dinosaurs. Has-beens. Mediocre managers and intermediaries who defend the status quo instead of supporting others' attempts to change organizations for the better. An INSEAD professor has examined this interesting breed of manager--in particular, middle managers' roles during periods of radical organizational change. His findings will surprise many. Middle managers, it turns out, make valuable contributions to the realization of radical change at companies--contributions that go largely unrecognized by most senior executives. Quy Nguyen Huy says these contributions occur in four major areas. First, middle managers often have good entrepreneurial ideas that they are able and willing to realize--if only they can get a hearing. Second, they're far better than most senior executives at leveraging the informal networks at companies that make substantive, lasting change. Because they've worked their way up the corporate ladder, middle managers' networks run deep. Third, they stay attuned to employees' emotional needs during organizational change, thereby maintaining the transformation's momentum. And, finally, they manage the tension between continuity and change--they keep the organization from falling into extreme inertia or extreme chaos. The author examines each of these strengths, citing real-world examples culled from his research. Of course, not every middle manager in an organization is a paragon of entrepreneurial vigor and energy, Huy acknowledges. But cavalierly dismissing the roles that middle managers play--and carelessly reducing their ranks--will drastically diminish senior managers' chances of realizing radical change at their companies. Indeed, middle managers may be the most effective allies of corner office executives when it's time to make major changes in businesses.

Most companies do a great job promoting efficiency within their own walls, streamlining internal processes wherever possible. But they have less success coordinating cross-company business interactions. When data pass between companies, inconsistencies, errors, and misunderstandings routinely arise, leading to wasted work--for instance, the same sales, order entry, and customer data may be entered repeatedly into different systems. Typically, scores of employees at each company manage these cumbersome interactions. The costs of such inefficiencies are very real and very large. In this article, Michael Hammer outlines the activities and goals used in streamlining cross-company processes. He breaks down the approach into four stages: scoping--identifying the business process for redesign and selecting a partner; organizing--establishing a joint committee to oversee the redesign and convening a design team to implement it; redesigning--taking apart and reassembling the process, with performance goals in mind; and implementing--rolling out the new process and communicating it across the collaborating companies. The author describes how several companies have streamlined their supply-chain and product development processes. Plastics compounder Geon integrated its forecasting and fulfillment processes with those of its main supplier after watching inventories, working capital, and shipping times creep up. General Mills coordinated the delivery of its yogurt with Land O'Lakes; butter and yogurt travel cost effectively in the same trucks to the same stores. Hammer says this new kind of collaboration promises to change the traditional vocabulary of corporate relationships. What if you and I sell different products to the same customer? We're not competitors, but what are we? In the past, we didn't care. Now, we should, the author says.

For at least the past decade, the holy grail for companies has been innovation. Managers have gone after it with all the zeal their training has instilled in them, using a full complement of tried and true management techniques. The problem is that none of these practices, well suited for cashing in on old, proven products and business models, works very well when it comes to innovation. Instead, managers should take most of what they know about management and stand it on its head. In this article, Robert Sutton outlines several ideas for managing creativity that are clearly odd but clearly effective: Place bets on ideas without much heed to their projected returns. Ignore what has worked before. Goad perfectly happy people into fights among themselves. Good creativity management means hiring the candidate you have a gut feeling against. And as for the people who stick their fingers in their ears and chant, "I'm not listening, I'm not listening" when customers make suggestions--praise and promote them. Using vivid examples from more than a decade of academic research to illustrate his points, the author discusses new approaches to hiring, managing creative people, and dealing with risk and randomness in innovation. His conclusions? The practices in this article succeed because they increase the range of a company's knowledge, allow people to see old problems in new ways, and help companies break from the past.

Most executives think of decision making as a singular event that occurs at a particular point in time. In reality, though, decision making is a process fraught with power plays, politics, personal nuances, and institutional history. Leaders who recognize this make far better decisions than those who persevere in the fantasy that decisions are events they alone control. That said, some decision-making processes are far more effective than others. Most often, participants use an advocacy process, possibly the least productive way to get things done. They view decision making as a contest, arguing passionately for their preferred solutions, presenting information selectively, withholding relevant conflicting data so they can make a convincing case, and standing firm against opposition. Much more powerful is an inquiry process, in which people consider a variety of options and work together to discover the best solution. Moving from advocacy to inquiry requires careful attention to three critical factors: fostering constructive, rather than personal, conflict; making sure everyone knows that their viewpoints are given serious consideration even if they are not ultimately accepted; and knowing when to bring deliberations to a close. The authors discuss in detail strategies for moving from an advocacy to an inquiry process, as well as for fostering productive conflict, true consideration, and timely closure. And they offer a framework for assessing the effectiveness of your process while you're still in the middle of it. Decision making is a job that lies at the very heart of leadership and one that requires a genius for balance: the ability to embrace the divergence that may characterize early discussions and to forge the unity needed for effective implementation.

Everybody loves the stories of heroes like Martin Luther King, Jr., Mother Teresa, and Gandhi. But the heroic model of moral leadership usually doesn't work in the corporate world. Modesty and restraint are largely responsible for the achievements of the most effective moral leaders in business. The author, a specialist in business ethics, says the quiet leaders he has studied follow four basic rules in meeting ethical challenges and making decisions. The rules constitute an important resource for executives who want to encourage the development of such leaders among their middle managers. The first rule is "Put things off till tomorrow." The passage of time allows turbulent waters to calm and lets leaders' moral instincts emerge. "Pick your battles" means that quiet leaders don't waste political capital on fights they can't win; they save it for occasions when they really want to fight. "Bend the rules, don't break them" sounds easier than it is--bending the rules to resolve a complicated situation requires imagination, discipline, restraint, flexibility, and entrepreneurship. The fourth rule, "Find a compromise," reflects the author's finding that quiet leaders try not to see situations as polarized tests of ethical principles. These individuals work hard to craft compromises that are "good enough"--responsible and workable enough--to satisfy themselves, their companies, and their customers. The vast majority of difficult problems are solved through the consistent striving of people working far from the limelight. Their quiet approach to leadership doesn't inspire, thrill, or provide story lines for uplifting TV shows. But the unglamorous efforts of quiet leaders make a tremendous difference every day in the corporate world.

Like many manufacturers, DuPont traditionally has grown by making more and more "stuff." And its business growth has been proportional to the amount of raw materials and energy used--as well as the resulting waste and emissions from operations. Over the years, though, DuPont became aware that cheap supplies of nonrenewable resources wouldn't be endlessly available and that the earth's ecosystems couldn't indefinitely absorb the waste and emissions of production and consumption. Chad Holliday, chairman and CEO of DuPont, believes strongly in the challenge of sustainable growth and makes the business case for it: By using creativity and scientific knowledge effectively, he says, companies can provide strong returns for shareholders and grow their businesses--while also meeting the human needs of societies around the world and reducing the environmental footprint of their operations and products. In fact, a focus on sustainability can help identify new products, markets, partnerships, and intellectual property and lead to substantial business growth. Holliday describes how DuPont developed a three-pronged strategy to translate the concept of sustainability into nuts-and-bolts business practices. Focusing on integrated science, knowledge intensity, and productivity improvement, the strategy was accompanied by a new way to measure progress quantitatively. Sustainable growth should be viewed not as a program for stepped-up environmental performance but as a comprehensive way of doing business, one that delivers tremendous economic value and opens up new opportunities. Ultimately, companies will find that they can generate substantial business value through sustainability while both enhancing the quality of life around the world and protecting the environment.

Companies routinely overestimate the attractiveness of foreign markets. Dazzled by the sheer size of untapped markets, they lose sight of the difficulties of pioneering new, often very different territories. The problem is rooted in the analytic tools (the most prominent being country portfolio analysis, or CPA) that managers use to judge international investments. By focusing on national wealth, consumer income, and people's propensity to consume, CPA emphasizes potential sales, ignoring the costs and risks of doing business in a new market. Most of these costs and risks result from the barriers created by distance. "Distance," however, does not refer only to geography; its other dimensions can make foreign markets considerably more or less attractive. The CAGE framework of distance presented here considers four attributes: cultural distance (religious beliefs, race, social norms, and language that are different for the target country and the country of the company considering expansion); administrative or political distance (colony-colonizer links, common currency, and trade arrangements); geographic distance (the physical distance between the two countries, the size of the target country, access to waterways and the ocean, internal topography, and transportation and communications infrastructures); and economic distance (disparities in the two countries' wealth or consumer income and variations in the cost and quality of financial and other resources). This framework can help to identify the ways in which potential markets may be distant from existing ones. The article explores how (and by how much) various types of distance can affect different types of industries and shows how dramatically an explicit consideration of distance can change a company's picture of its strategic options.

Conventional pricing is being turned on its head. Deciding what prices to charge represents one of the more visible decision variables confronting managers. Prices send clear messages about customer value and company objectives. Yet, pricing has been one of the least emphasized strategic issues. Historically, managers have taken price for granted, thinking its main function was to cover costs and provide a target rate of return. Now, companies are adopting more sophisticated approaches. A strategic perspective on pricing includes price objectives, price strategy, price structure, price levels, and price promotions. E-commerce opens new opportunities for using differentiated pricing all the time, optimizing pricing by creating customer switching barriers, and differentiating by stage. Challenges to management include the development of technology that facilitates customer price searching and customers making rather than taking prices. An integrative framework for analysis combines the dimensions of strategic pricing with market-based versus cost-based, proactive versus reactive, risk-assumptive versus risk-aversive, and flexible versus standardized dimensions.

This traditional Midwestern company, a manufacturer of industrial signs and other identification products, didn't even allow employees to have coffee at their desks until 1989. But when Katherine Hudson became CEO of Brady Corp. in 1994, she and her executive team determined that injecting some fun into the company's serious culture could create positive effects within the organization and contribute to increased performance and sales. In this article, Hudson distills her approach to overhauling Brady's culture into six principles of serious fun: More people than you might think are comfortable having fun at work; used with an awareness of cultural sensitivities, fun and laughter really are well-understood international languages; humor can help companies get through tough times; fun can be embodied in formal programs; spontaneous efforts at humor can also be effective; and encouraging fun should begin at the top. She richly illustrates each principle with examples. At Brady, getting people to loosen up and enjoy themselves fosters a company esprit de corps and greater team camaraderie. It started conversations that have sparked innovation, helped to memorably convey corporate messages to employees, and increased productivity by reducing stress, among other benefits. Also, the company has doubled its sales and almost tripled its net income and market capitalization over the past seven years.

According to David Baldwin, a former Major League pitcher, blame can be a powerful and constructive force. It can be an effective teaching tool that helps people avoid repeating their mistakes. When used judiciously--and sparingly--blame can also prod people to put forth their best efforts, while maintaining both their confidence and their focus on goals. The way that blame is managed can influence how people make decisions and perform their jobs and ultimately affect the culture and character of an organization. In the course of his research on how Major League Baseball managers make decisions, Baldwin looked at what functions blame serves and how it's best managed. His observations led him to identify five rules of blame, which, he says, apply to any organization, whether it's the LA Dodgers, General Motors, or a small start-up. First, know when to blame--and when not to. Second, blame in private and praise in public. Third, realize that the absence of blame can be far worse than its presence. Fourth, manage misguided blame. And fifth, be aware that confidence is the first casualty of blame. Managers who follow these rules will use blame in the most positive and effective way.