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The 1990s have been a great time to be in business--unless, that is, you happen to be a manufacturer. As business value has flowed steadily downstream, from producing goods to servicing them, most manufacturers have struggled, unable to boost their profits or stock prices. A few manufacturers, though, are thriving. They've gone beyond the factory gates and have begun competing in downstream markets--where the money is. The authors describe four business models for successful downstream moves. The embedded-services model involves using new technologies to build services into products; Honeywell, for instance, offers a product that ties airplane subsystems together through the use of microprocessors. The comprehensive-services model involves providing a set of services that spans the entire product life cycle, as GE is doing for railroads. The integrated-solutions model is a matter of combining products and services into a single offering, as Nokia has done by helping its cellular-carrier customers deploy their networks. The fourth model, distribution control, involves taking control of lucrative distribution activities; Coke's control of 70% of its U.S. bottling and distribution is a prime example. Moving downstream requires manufacturers to shift their strategic focus from achieving operational excellence to gaining customer allegiance. It also calls for new skills and performance measures. But the rewards can be substantial. Downstream markets often generate 10 to 30 times more revenues than the underlying product sales--and they tend to have higher margins and require fewer assets as well.

When most people think about business innovation, they think of product development. But consultants at the Doblin Group take a broader view. They've created a way to map innovativeness across ten categories, from business models to processes to brands.

Paul Binder, founder and artistic director of the Big Apple Circus, offers advice on assembling diverse teams and managing creative people.

A lot of companies have launched marketing campaigns tied to charitable causes. But according to Jerry Welsh, one of the pioneers of cause-related marketing, most of the programs fail to create real benefits for either the companies or the charities.

A team of MIT researchers has created an electronic "process repository" that enables managers to easily explore different options for performing common tasks.

The essence of effective persuasion and negotiation comes down to the ability to craft "frames." A frame orients a reader or listener. It provides the perspective we want the other party to adopt, a rationale for the evidence we present, and the sequential pattern for presenting that evidence. Building a frame consists of four basic steps: 1) Determine your specific objective; 2) Conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis of the other party's current status; 3) Determine the other party's core values; and 4) Write a simple, vivid, evaluative statement linking the three sides. The frame must orient a decision-maker to assess information from the specific perspective that casts the most favorable light on your proposal.

In companies in which a brand is the key source of competitive advantage, it is essential to collect and evaluate data as a part of brand management. To do this, managers need information from a variety of functional areas throughout the firm. One of the ways accountants can provide useful information for marketers is by conducting periodic brand valuations, assigning financial value to the equity created by the name or image of a brand such a NIKE or Intel. Doing this aids management decisions regarding short-term expenditures and long-term benefits. We describe here how brands can be valued and how this information can be used for decision-making. Methods of brand valuation include cost-based approaches, market-based approaches, income-based approaches, and formulary approaches (which use multiple criteria in arriving at brand value, as practiced by the consulting firm Interbrand and Financial World magazine). Advantages and disadvantages of these approaches are noted. The measure of brand value may include subjective elements, but the lack of a financial measure means that the importance of intangible assets might be overlooked. Brand valuation, as a bridge among different functions and disciplines, appears to be the most promising technique capable of illustrating the importance of the brand to managers.

Most executives have a big, hairy, audacious goal. They write vision statements, formalize procedures, and develop complicated incentive programs--all in pursuit of that goal. In other words, with the best of intentions, they install layers of stultifying bureaucracy. But it doesn't have to be that way. In this article, Jim Collins introduces the catalytic mechanism, a simple yet powerful managerial tool that helps translate lofty aspirations into concrete reality. Catalytic mechanisms are the crucial link between objectives and performance; they are a galvanizing, nonbureaucractic means to turn one into the other. What's the difference between catalytic mechanisms and most traditional managerial controls? Catalytic mechanisms share five characteristics. First, they produce desired results in unpredictable ways. Second, they distribute power for the benefit of the overall system, often to the discomfort of those who traditionally hold power. Third, catalytic mechanisms have teeth. Fourth, they eject "viruses"--those people who don't share the company's core values. Finally, they produce an ongoing effect. Catalytic mechanisms are just as effective for reaching individual goals as they are for corporate ones. To illustrate how catalytic mechanisms work, the author draws on examples of individuals and organizations that have relied on such mechanisms to achieve their goals. The same catalytic mechanism that works in one organization, however, will not necessarily work in another. Catalytic mechanisms must be tailored to specific goals and situations. To help readers get started, the author offers some general principles that support the process of building catalytic mechanisms effectively.

Despite 30 years of evidence demonstrating that most acquisitions don't create value for the acquiring company, executives continue to make more deals, and bigger deals, every year. There are plenty of reasons why value isn't created, but many times it's simply because the acquiring company paid too much. It's not, however, that acquirers pay too high a price in an absolute sense. Rather, they pay more than the acquisition is worth to them. What is that optimum price? The authors present a systematic way to arrive at it, involving several distinct concepts of value. In today's market, the purchase price of an acquisition will nearly always be higher than the intrinsic value of the company--the price of its stock before any acquisition intentions are announced. The key is to determine how much of that difference is "synergy value"--the value that will result from improvements made when the companies are combined. This value will accrue to the acquirer's shareholders rather than to the target's shareholders. The more synergy value a particular acquisition can generate, the higher the maximum price an acquirer is justified in paying. Just as important as correctly calculating the synergy value is having the discipline to walk away from a deal when the numbers don't add up. If returns to shareholders from acquisitions are no better in the next ten years than they've been in the past 30, the authors warn, it will be because companies have failed to create systematic corporate governance processes that put their simple lessons into practice.

Hiring executives has always been a daunting task--and today's economy makes it tougher than ever. The global scope and breakneck pace of business, the shrinking supply of job candidates, and the constant shift of organizational structures have increased the stakes exponentially; one wrong hire can quickly derail a company. Yet recent studies indicate that between 30% and 50% of executive-level hires end in firings or resignations. What makes hiring go wrong so often? And how can executives substantially improve the outcome of the process? This article provides some surprising answers to those questions. Fernandez-Araoz presents ten common hiring traps and many real-world examples of how those traps have scuttled business plans in a variety of industries worldwide. A large consumer goods company, for instance, slipped into the delegation gaffe trap when it handed over the screening and interviewing process to a mismatched team of managers that had an agenda different from the CEO's. And the ignoring emotional intelligence trap tripped up a U.S. telecommunications company that hired a CEO with a great track record--only to fire him less than a year later when his lack of cross-cultural social skills was discovered. Hiring well is a strategy--perhaps an organization's most important one, the author says. To sidestep the hiring traps, he suggests ways to systematically assess the company's needs and to determine how those needs mesh with the open job description--before candidates walk through the door. Fernandez-Araoz's search strategy incites managers with hiring responsibilities to be creative, determined, and courageous when embarking on a candidate search.

In all economies, financial systems perform a basic set of functions, which include the need to pool resources, to save and borrow, to make payments, and to collect information. And yet, in rich and poor communities, the ways in which those needs are met differ greatly. In part, this is because traditional financial service firms have found it too expensive to serve poor neighborhoods. But it is possible to work with less traditional institutions to meet those needs. According to the authors, inner cities face two core impediments to financial services: lack of economies of scale and lack of good information. An inner-city investor with $500, for instance, does not warrant much attention from financial service firms. But twenty thousand parishioners investing $500 apiece can collectively wield $10 million. By partnering with strong social organizations such as churches, financial institutions can benefit both themselves and investors. A lack of good information concerning credit histories--a common problem in poor communities--also makes low-income customers much less appealing to financial institutions. Churches can help close such information gaps by vouching for parishioners' reliability. There are certainly problems that come with mixing business and religion, as the authors concede. Ethical issues, trust issues, and issues of experience all come to mind. But understanding that functions need to dictate the structure of the financial service sector may be the first step toward achieving inner-city prosperity.

You've watched them comfort colleagues, defuse tense situations, and take the heat from tough bosses. You've seen them step in to ease the pain during layoffs and change programs. Who are they? The authors call them toxic handlers--managers who voluntarily shoulder the sadness, frustration, bitterness, and anger of others so that high-quality work continues to get done. Toxic handlers are not new. They are probably as old as organizations themselves. But there has never been a systematic study of the role they play in business. In this article, the authors introduce the role of toxic handlers, explaining what they do and why. Managing the pain of others is hard work. Toxic handlers save organizations from self-destructing, but they often pay a high price--emotionally, professionally, and sometimes physically. Some toxic handlers experience burnout; others suffer far worse consequences, such as ulcers and heart attacks. The authors contend that these unsung corporate heroes have strategic importance in today's business environment. Effective pain management can--and does--contribute to the bottom line. No company can afford to let talented employees burn out. Nor can it afford to have a reputation as an unhappy place to work. The authors offer practical advice for managers and organizations about how to support toxic handlers--before a crisis strikes. The role of toxic handler needs to be given the attention it deserves for everyone's benefit, because the health of employees is a key element in the long-term competitiveness of companies and of society.

Financial experts in the West suggest that diversified business groups--or affiliated companies under one parent--in emerging markets should break up. Dismantling these mammoth conglomerates could reduce the debt and inefficiencies that some of them incur; that logic is based on the success that companies in advanced economies had when they unbundled their assets in the 1980s. But the authors argue that breaking up business groups such as the Korean chaebol and India's Tata Group is premature. Emerging economies lack a soft infrastructure--the banks, business schools, corporate governance processes, and so on that are the foundation of economic growth. And building such an infrastructure takes time. Many business groups in emerging markets make up for the absence or weakness of market intermediaries by filling in themselves. For instance, they're venture capitalists when they use funds from one business group affiliate to fund a new one. They're labor market substitutes when business-group headquarters creates management training programs based on the knowledge and experience of managers across several business affiliates. Instead of breaking up the conglomerates now, governments should start the long-term development of market institutions for finance, labor, and goods and services. In the meantime, business groups should strive to improve the way they substitute for those market institutions. The authors suggest several Western business tools and models that business groups can use to boost their role as market intermediaries and to prepare for the eventual development of those institutions.

The debate on business and the environment has typically been framed in simple yes-or-no terms: "Does it pay to be green?" But the environment, like other business issues, requires a more complex approach--one that demands more than such all-or-nothing thinking. Managers need to ask instead, "Under what circumstances do particular kinds of environmental investments deliver returns to shareholders?" This article presents five approaches that managers can take to identify those circumstances and integrate the environment into their business thinking. These approaches will enable companies with the right industry structure, competitive position, and managerial skills to reconcile their responsibility to shareholders with the pressure to be faithful stewards of the earth's resources. Some companies can distance themselves from competitors by differentiating their products and commanding higher prices for them. Others may be able to "manage" their competitors by imposing a set of private regulations or by helping to shape the rules written by government officials. Still others may be able to cut costs and help the environment simultaneously. Almost all can learn to improve their management of risk and thus reduce the outlays associated with accidents, lawsuits, and boycotts. And some companies may even be able to make systemic changes that will redefine competition in their markets. All five approaches can help managers bring the environment down to earth. And that means bringing the environment back into the fold of business problems and determining when it really pays to be green.

At a time when other areas of business are undergoing dramatic improvements in productivity, marketing seems to be getting more expensive and less effective. Marketing has seen no great advances since the advent of brand management and network television after World War II. Reviewer Peter Sealey looks for solutions in three new books. Competing on Value, by Stan Maklan and Simon Knox, advises companies to look beyond specific products and provide value by enlisting the entire organization in satisfying consumer needs. Radical Marketing, by Sam Hill and Glenn Rifkin, tells how niche companies such as Boston Beer won share in competitive markets by carefully studying their customers and bringing their own passions to bear. While these two books offer real improvements to marketing, they don't offer a conceptual breakthrough that enables companies to get beyond the limitations of brand management. Seth Godin's Permission Marketing, by contrast, tells marketers to replace basic brand strategies with full-fledged dialogues with consumers. For Godin, the Internet is tailor-made to host such dialogues; it allows marketers to integrate all their interactions with customers into one medium and permits companies to discover and exploit the individual interests of the target audience. Sealey agrees that the Internet offers the technology for innovation in marketing, but he goes further than Godin, saying that the Internet will lead companies all the way to customer-driven marketing. Customers will actively engage companies and aggressively seek information, allowing marketers to drastically reduce their often wasted efforts to capture consumer attention.

One of the most common business phenomena is also one of the most perplexing: when successful companies face big changes, they often fail to respond effectively. Many assume that the problem is paralysis, but the real problem, according to Donald Sull, is active inertia--an organization's tendency to persist in established patterns of behavior. Most leading businesses owe their prosperity to a fresh competitive formula--a distinctive combination of strategies, relationships, processes, and values that sets them apart from the crowd. But when changes occur in a company's markets, the formula that brought success instead brings failure. Stuck in the modes of thinking and working that have been successful in the past, market leaders simply accelerate all their tried-and-true activities. In attempting to dig themselves out of a hole, they just deepen it. In particular, four things happen: strategic frames become blinders; processes harden into routines; relationships become shackles; and values turn into dogmas. To illustrate his point, the author draws on examples of pairs of industry leaders, like Goodyear and Firestone, whose fates diverged when they were forced to respond to dramatic changes in the tire industry. In addition to diagnosing the problem, Sull offers practical advice for avoiding active inertia. Rather than rushing to ask, "What should we do?" managers should pause to ask, "What hinders us?" That question focuses attention on the proper things: the strategic frames, processes, relationships, and values that can subvert action by channeling it in the wrong direction.

What makes for success in high-tech markets? Many managers believe it's offering products with the best performance at the lowest price. Yet most would also acknowledge that price and performance are just the ante to get into the game, that they don't make the difference between a successful high-tech venture and an unsuccessful one. One factor that can make the difference, the authors argue, is brand management. The problem is, most high-tech managers think of branding only as an advertising campaign or a slogan. Developing and maintaining a strong brand in the fullest sense requires much more--it's conceiving of a promise of value for customers and then ensuring that the promise is kept. The Gateway Computer brand, for example, is a promise of friendly service that's backed by efficient help lines and effective order and service fulfillment. Building a powerful brand requires fives steps. The first two steps involve determining the tangible characteristics of the offerings that carry the brand name and the benefits the customers accrue from those benefits. In the remaining steps, high-tech managers consider the psychological or emotional benefits of the products; what "value" means to a typical loyal customer; and what, ultimately, is the essential nature and character of the brand over time. Like the Apple brand--which has been consistently synonymous with easy-to-use, reliable computers--and the IBM brand--which promises value built on its long tradition of superior service and support--a successful brand commands enduring premium profits that can help a high-tech company get off the price-performance roller coaster.

What does cyberspace mean for physical retail space? Has on-line shopping changed the fundamentals of retailing? And how should managers evaluate new in-store technologies? In this article, the heads of Marks and Spencer, Neiman Marcus, and Karstadt join two distinguished academics to look at what's in store for the bricks-and-mortar store. There's no doubt that new technologies have made retailing more complicated and more competitive. Using the Web, for example, consumers can conceivably sidestep their corner store and patronize shops across the country or around the world. Eventually, they might forsake retailers altogether, shopping directly from manufacturers. By the same token, though, managers can use technology to magnify the benefits of their location--using Web sites to show, for example, the retail topography of a local town and to highlight when stores that sell particular products will be open. And new in-store technologies promise managers--and customers--increased efficiency and more knowledgeable service. It's too early to predict how these new technologies will play out. But the contributors suggest that the fundamentals of retailing really haven't changed. Whether they know it or not, consumers still weigh the same factors when determining where to shop: scope of product assortment, price, convenience, service, and ambiance. The Internet has just added another layer of urgency to an already established agenda--forcing managers to examine their priorities in newly creative ways.

Local firms can compete with transnational firms if their actions are firmly based in the local culture, and if they move from local strengths while being equipped with an in-depth understanding of global production and consumption dynamics. Three domains where local firms can offer alternatives to standard global products are products grounded in local culture, information goods, and products for similar local conditions and the poor worldwide. Local firms must develop an innovative perspective, a global and local vision, self-crafted rather than transferred and imitated marketing skills and practices, partnerships and alliances, and a supportive political environment. Such firms can successfully travel on their alternative road within the global arena.