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When Rich Teerlink, now retired chairman and CEO of Harley-Davidson, became president and COO of its motorcycle division in 1987, the hard work of saving the company was already done. The company had just survived seven arduous years of crisis and was on a steady path toward growth. Realizing how much circumstances had changed, Teerlink immediately saw the need for a new kind of leadership--one far removed from the command-and-control model that had carried it through its turnaround. In this First Person account, Teerlink tells the story of how difficult it was to make that shift. In a plan to improve operations, for example, Teerlink came up with an idea for a program he hoped would motivate every employee, customer, and stakeholder. The program, called gain sharing, would allow every employee to share in the company's financial success. The problem? The program was yet another initiative created and imposed from the top. Throughout his tenure, Rich Teerlink launched several programs designed to elicit ideas, enthusiasm, concerns, and vision from employees. These initiatives--as well as other efforts toward inclusiveness--have helped transform Harley's culture and made it the success story it is today.

No one can say for certain how many millionaires have been created by Wall Street's long boom. But this new breed of employee certainly creates a whole new set of challenges for managers today. Working millionaires make motivation and retention--two hard games to play in the first place--harder than ever. And they push already steep compensation levels upward. What, then, can be done to manage millionaires in a way that makes them worth the effort, not to mention the cost? To answer this question, Suzy Wetlaufer, senior executive editor of HBR, interviewed more than two dozen CEOs, HR executives, and headhunters from Wall Street and Silicon Valley, as well as a half-dozen working millionaires themselves. Their thoughts--and the managerial imperatives they imply--have culminated in the first HBR at Large, a new department designed to explore multifaceted business ideas confronting people creating, leading, and transforming business today. Wetlaufer discovered, somewhat unexpectedly, that many executives see an upside to the rise of the working millionaire. Millionaires force companies to be far more creative--indeed, entrepreneurial--about their products and services. They push companies to keep beating their targets in the marketplace. And they compel their bosses to build a productive, healthy culture. Admittedly, some millionaires can only be kept happy with corporate jets, original art lining big offices, and world-class executive lunchroom cuisine. Indeed, millionaires are driving managerial practices that, in another time, might have been dismissed but that today are merely admission to the game. But the irony is that such practices should perhaps have been there for everyone all along.

This is an MIT Sloan Management Review article. Executives are often baffled when they can't implement perfectly sound strategies. The root causes, according to a Harvard Business School professor and a senior organizational fellow at McKinsey & Co., are six deep-seated barriers to strategy implementation and organizational learning. The first barrier is a top-down or laissez-faire senior management style. Without transforming that barrier into a capability, none of the other barriers can be turned into capabilities either. The five others are: unclear strategy and conflicting priorities; an ineffective senior team; poor vertical communication; poor coordination across functions, businesses, or borders; and inadequate down-the-line leadership skills and development. According to the authors, the first three barriers together undermine an organization's quality of direction; a lack of vertical communication interacts with the other barriers to block quality of learning; and the last two barriers cause poor quality of implementation. The authors' own process, Organizational Fitness Profiling, has helped managers overcome the root causes of blocked strategy implementation and has led to individual and organizational learning. Not all organizations are up to the challenge, however.

This is an MIT Sloan Management Review article. Excellence at investing in and deploying IT isn't sufficient to achieve superior business performance: companies must also excel at collecting, organizing, and maintaining information and at getting their people to embrace the right behaviors and values for working with information. The authors present the results of a two-and-a-half-year international research project led by the Institute for Management Development. They show that senior managers view strong IT practices, competent management of information, and good information behaviors as components of one higher level idea--Information Orientation" or IO--which measures a company's capabilities to manage and use information effectively. IO is also a predictor of business performance. Among the guidelines: Focus your best IT resources on what makes you distinctive; actively manage all phases of the information life cycle; develop an explicit, focused view of the information necessary to run the business; and do not compromise on information integrity.

The classic brand manager dealt with simple brand structures in part because he or she was faced with a relatively simple environment and simple business strategies. Today the situation is far different. Brand managers now face market fragmentation, channel dynamics, global realities, and business environments that have drastically changed their task. In addition, there is pressure to leverage brand assets because of the prohibitive cost of creating new brands. This set of challenges has created a new discipline called "brand architecture." A coherent brand architecture can lead to impact, clarity, synergy, and leverage rather than market weakness, confusion, waste, and missed opportunities. Brand architecture is an organizing structure of the brand portfolio that specifies brand roles and the nature of relationships between brands. This article introduces a powerful brand architecture tool, the "brand relationship spectrum." It is intended to help brand architecture strategists employ insight and subtlety to subbrands, endorsed brands, and their alternatives. Subbrands and endorsed brands can play a key role in creating a coherent and effective brand architecture.

A new model for managing distributed innovation, the community of creation is a governance mechanism for managing innovation that lies between the hierarchy-based (closed) mechanism and the market-based (open) mechanism for innovation management. The community-centric model shifts the focus of innovation beyond the boundaries of the firm, to a community of individuals and firms that collaborate to create joint intellectual property. A community of creation requires an identified sponsor, a set of ground rules for participation, and a system for managing intellectual property rights. The community of creation model allows innovation to proceed in a complex environment by striking a balance between order and chaos. This article presents detailed case studies from the computer industry to highlight the differences among the different approaches to innovation management. It also discusses the opportunities and the unresolved issues of the community of creation model for practitioners as well as for academics.

The success of Internet-based businesses in the business-to-customer segment in recent years has been impressive. It is widely projected that the business-to-business segment is poised for a spectacular growth as well. However, a consistent definition and a framework for a business model for Internet-based business is still non-existent. This article proposes a three-dimensional framework for defining a business model and applies it to the emerging market structure. It also identifies certain factors that can guide organizations in their choice of an appropriate business model.

Most large companies are not radical innovators. They are good at making close-in changes to existing products or technologies, but they cannot seem to commercialize breakthrough ideas. This is the case because of their "genetic" makeup: values embodied in their leadership practices, their cultures and structures, their reliance on internal R&D, and their inability to attract and motivate the kind of aggressive and agile entrepreneurs who are the source of most radical innovations. Large companies in traditional industries that want to increase their access to radical innovation have a variety of approaches available to them. These range from ones that draw on existing organizational resources but are unlikely to stimulate radical innovation to ideas that involve a rethinking of external relationships with entrepreneurs and venture capitalists. As the focus of innovation moves from what is inside to what is outside the organization, the keys to success move from mechanisms of owning and controlling the radical innovation to mechanisms that promote learning about its commercial potential.

Executives should not take a reputation for ethical leadership for granted. Based on interviews with senior executives and corporate ethics officers, this article reveals that a reputation for executive ethical leadership rests on two essential pillars: the executive's visibility as a moral person (based upon perceived traits, behaviors, and decision-making processes) and visibility as a moral manager (based upon role modeling, use of the reward system, and communication). Developing a reputation for ethical leadership pays dividends in reduced legal problems and increased employee commitment, satisfaction, and employee ethical conduct. The alternatives are the unethical leader, the hypocritical leader (who talks the talk, but doesn't walk the walk), and the ethically neutral leader (who may be an ethical person, but employees don't know it because the leader has not made ethics and values an explicit part of the leadership agenda). The article also offers guidelines for cultivating a reputation for ethical leadership.

Brand equity is one of a firm's most important assets. Unfortunately, such intangible assets have received little attention from the financial and accounting communities. This view may now be changing. The focus of the research is on valuating the effect of advertising on brand equity, not only for external reporting but also for internal management and control. Pros and cons of various brand valuation models are examined. Brand asset measurements should address the success of the firm in creating a product, providing marketing support, retaining customers, building brand value, and reducing return volatility. The authors use a calculation called "advertising turnover" to describe the relationship between advertising expenditures and brand value. It indicates how efficiently the firm converts advertising dollars into brand value, and is similar to methods used in financial analysis for determining the productivity of capital assets or receivables. Plotting this calculation over time can distinguish between high-efficiency brand enhancers, low-efficiency brand enhancers, unknown brand future, and brand deterioration. Brand ROI can be broken down into "brand turnover" and "return on sales." Kellogg's brand performance is used as an example of applying the model to evaluate the ability of advertising and market share to enhance brand value.

As products become more complex and global in scope, product development managers rely increasingly on suppliers for help. Limited resources necessitate developing close, long-term relationships with a few of the most important suppliers. But partners often struggle in these relationships because of conflicting needs and objectives. The OEM's wish list consists of providers with scarce resources and capabilities, including turnkey solutions, a shared strategy, and contributions to new product development; support of global product strategies (market knowledge or access and local presence); and minimized risks (assurance of good design, confidentiality, and demonstrated ability). The supplier's wish list consists of rewards for up-front involvement, protected business interests, and a share in the payoffs. OEM and supplier needs can be balanced by honoring the Ten Commandments for their relationships: three for OEMs (don't manage all suppliers equally, realize that good suppliers are hard to find, demand more of suppliers but learn to be a good customer as well); three for suppliers (recognize that competition is getting tougher and broader based, explore new business sourcing arrangements, use speed to alleviate the need to maintain propriety in NPD); and four for both parties (don't let distance hamper performance, keep score, be creative in using capabilities of global partners, and develop and encourage trust).

Must firms compete on all dimensions of value simultaneously? Or can managers pick and choose among market segments and deploy a variety of strategies to meet customer needs? Operational systems cannot simultaneously excel on all dimensions of value--cost, lead time, quality, and flexibility. The authors examine three companies similar in product, geographic location, shop floor equipment, employee skills, and customers; all three firms have survived for at least 20 years and are among the top 25 companies in their industry group. Comparing the three in terms of key strategic advantages, disadvantages, fixed costs, lead time, and employee commitment strongly supports the need to make trade-offs in competing dimensions of value in operations (although all three realize they must satisfy certain industry norms, such as quality and on-time delivery). Thus, not only do trade-offs exist, but they have significant competitive implications--trade-offs are strategic in nature. Eventually a firm hits the "productivity frontier," beyond which it cannot continue to improve all dimensions of performance simultaneously.

Today's fast-paced economy demands that businesses change or die. But few companies manage corporate transformations as well as they would like. The brutal fact is that about 70% of all change initiatives fail. In this article, authors Michael Beer and Nitin Nohria describe two archetypes--or theories--of corporate transformation that may help executives crack the code of change. Theory E is change based on economic value: shareholder value is the only legitimate measure of success, and change often involves heavy use of economic incentives, layoffs, downsizing, and restructuring. Theory O is change based on organizational capability: the goal is to build and strengthen corporate culture. Most companies focus purely on one theory or the other, or haphazardly use a mix of both, the authors say. Combining E and O is directionally correct, they contend, but it requires a careful, conscious integration plan. Beer and Nohria present the examples of two companies, Scott Paper and Champion International, that used a purely E or purely O strategy to create change--and met with limited levels of success. They contrast those corporate transformations with that of UK-based retailer ASDA, which has successfully embraced the paradox between the opposing theories of change and integrated E and O. The lesson from ASDA? To thrive and adapt in the new economy, companies must make sure the E and O theories of business change are in sync at their own organizations.

A disturbing trend is going on in corporate America--CEO churning. Top executives are rapidly coming and going, keeping their jobs for increasingly shorter periods of time. The reason? Most boards are so unclear about the definition of leadership, they are picking the wrong people. CEO churning needn't be, say leadership experts Warren Bennis and James O'Toole. Boards can reverse the trend by following several guidelines. First, boards must come to a shared, accurate definition of leadership. Simply put, leaders must be able to move human hearts--to challenge people and make them want to scale steep peaks. Second, boards should strengthen the CEO selection process by resolving strategic and political conflicts amongst themselves. An agreed-upon strategic direction will make choosing the CEO with the right vision for the company that much easier and can clarify the job for the new CEO. Third, the board needs to measure every CEO candidate's soft qualities. Economic measures are important, but integrity, the ability to provide meaning, and the talent for creating other leaders are critical. Fourth, boards should beware of candidates who act like CEOs. Charisma and glossy pitches can be enticing, but they're rarely the stuff of true leadership. Fifth, boards should accept that real leaders will more than likely overturn the status quo. Sixth, boards need to know that insider heirs usually aren't apparent, and finally, boards should always avoid making a hasty decision. Hiring the right CEO is a slow process at best. Ultimately, the surest way for boards to pick the right CEO is to cultivate and nurture talent in the making.

Akamai Technologies is attracting investors, employees, partners, and customers like a supercharged magnet. The Cambridge, Massachusetts, company is transforming the way the Internet works, and everybody, it seems, wants to be "Akamaized." But will the attraction last? Will the company meet the challenges of explosive growth? Will it maintain its technological edge? Will it fulfill the giddy expectations of investors? Much of that depends on the performance of George Conrades, Akamai's chairman and CEO. In this interview, Conrades explains how Akamai pushes Web content and services closer to end users through the use of distributed servers and proprietary software. He shares the challenges and thrills of working at Internet speed--forging partnerships with site operators, ISPs, and application providers; setting and achieving short-term business goals while preserving the company's intellectually combative corporate culture; and maintaining a customer focus. Conrades discusses the company's "virtuous circle" business model--better technology attracts more content providers, which begets more ISP participation, which begets better technology--and reveals the strategies and processes Akamai uses to keep that circle spinning. He discusses his own role as an absorber of uncertainty: by taking on the inevitable risks of competing in the networked economy, he frees up the rest of company to act. Conrades, who's been in business long enough to see the industrial era give way to the Internet era, says the new economy is all about "speed and scale." But it's also about risk-taking, innovation, and teamwork. Bureaucratic CEOs need not apply.

New ideas are the precious currency of the new economy, but generating them doesn't have to be a mysterious process. The image of the lone genius inventing from scratch is a romantic fiction. Businesses that constantly innovate have systematized the production and testing of new ideas, and the system can be replicated by practically any organization. The best innovators use old ideas as the raw materials for new ideas, a strategy the authors call knowledge brokering. The system for sustaining innovation is the knowledge brokering cycle, and the authors discuss its four parts. The first is capturing good ideas from a wide variety of sources. The second is keeping those ideas alive by playing with them, discussing them, and using them. Imagining new uses for old ideas is the third part--some knowledge brokers encourage cross-pollination by creating physical layouts that allow, or even force, people to interact with one another. The fourth is turning promising concepts into real services, products, processes, or business models. Companies can use all or part of the cycle. Large companies in particular desperately need to move ideas from one place to another. Some will want to build full-fledged consulting groups dedicated to internal knowledge brokering. Others can hire people who have faced problems similar to the companies' current problems. The most important lesson is that business leaders must change how they think about innovation, and they must change how their company cultures reflect that thinking.

Most retailers on the Web spend more to acquire customers than they will ever get back in revenue from them. Many think that sky-high spending on marketing is necessary to stake out their share of Internet space. But is it really? How do retailers know how much to pay? Consider CDnow, which has developed a multifaceted customer-acquisition strategy that reflects a clear understanding of the economics of an on-line business. At the heart of its strategy is affiliate marketing, a concept the company pioneered. Under its BuyWeb program, anyone can put a link to CDnow on his or her Web site, and if a customer uses that link to arrive at CDnow and make a purchase, the referring site owner gets a percentage of the sale. CDnow pays no money if no sale is made, which makes the marketing program completely efficient. But CDnow didn't stop there. Being a Web store, it had complete data on the number of visitors to its site and what they bought, which it used to work out the lifetime value of an average customer. CDnow used that figure to determine how much to wager on the expensive and risky world of traditional advertising to reach a wider audience that wasn't already on-line. CDnow's experience, still a work in progress, contradicts John Wanamaker's oft-quoted lament: "I know half the money I spend on advertising is wasted, but I can never find out which half." As the CDnow example demonstrates, there is a way to find out which half really works.

Electronic hubs--Internet-based intermediaries that host electronic marketplaces and mediate transactions among businesses--are generating a lot of interest. Companies like Ariba, Chemdex, and Commerce One have already attained breathtaking stock market capitalizations. Venture capitalists are pouring money into more business-to-business start-ups. Even industrial stalwarts like GM and Ford are making plans to set up their own Web markets. As new entrants with new business models pour into the business-to-business space, it's increasingly difficult to make sense of the landscape. This article provides a blueprint of the e-hub arena. The authors start by looking at the two dimensions of purchasing: what businesses buy--manufacturing inputs or operating inputs --and how they buy--through systematic sourcing or spot sourcing. They classify B2B e-hubs into four categories: MRO hubs, yield managers, exchanges, and catalog hubs, and they discuss each type in detail. Drilling deeper into this B2B matrix, the authors look at how e-hubs create value--through aggregation and matching--and explain when each mechanism works best. They also examine the biases of e-hubs. Although many e-hubs are neutral--they're operated by independent third parties--some favor the buyers or sellers. The authors explain the differences and discuss the pros and cons of each position. The B2B marketplace is changing rapidly. This framework helps buyers, sellers, and market makers navigate the landscape by explaining what the different hubs do and how they add the most value.

Adesemi, an American start-up in Africa, had been trying for six years to blanket the developing world with desperately needed wireless communications services. It had raised more than $15 million in venture capital and launched the world's first fully integrated "virtual" phone system--which incorporated voice mail, pagers, and hundreds of pay phones--in one of its poorest countries, Tanzania. Then Adesemi crashed to earth, leaving its founder, Monique Maddy, with a company that was a shadow of the powerhouse she had envisioned. The company's demise was personally and financially devastating to Maddy, a Liberian-born entrepreneur who grew up wanting to work for the United Nations and who ultimately trained at Harvard Business School. But in this detailed first-person account, she says the failure taught her four important lessons about starting a business in an emerging-market country. The first is that entrepreneurs should avoid do-good investors and concentrate on do-well backers who are looking to make money and who understand risk. The second is that a start-up with a heterogeneous staff should appoint a seasoned HR guru to improve cross-cultural tolerance and understanding. The third is that entrepreneurs should conduct serious due diligence on potential partners, and partners should be required to invest their own money in a venture. And the fourth is that a start-up in the third world should find a visionary, deep-pocketed investor who is willing to ride out the inevitable bumps.

Everyone knows that the way things are formally organized in most companies (their processes) is not the same as the way things are actually done (their practices). The difference between the two creates tension that can be very difficult for managers to handle. Lean too much toward practice and new ideas may bubble up and evaporate for lack of a structure to harness them. Lean too much toward process and you may get no new ideas at all. The goal, then, is to tap into the creativity at work in every layer of an organization with a combination of process and practice. Take, for example, the community of people who fix Xerox machines. Large machines, it turns out, are not as predictable as Xerox's documentation would suggest. So when following the service manual is not enough, the reps come together--over breakfast, at breaks, at the end of the day--and talk about their own best practices. So far so good. But Xerox goes a step further. It has set up a process similar to an academic peer-review system to gather, vet, and share those best practices across the company. The reps get much-welcome recognition for their creativity, and local best practices are deployed companywide. Dot-com companies are a hotbed of innovative practices. But as they mature, they, like Xerox, may find that they need seasoned managers who can harness those practices through the judicious application of constructive processes.