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In the past, companies kept most of their research and development activities in their home country because they thought it important to have R&D close to where strategic decisions were being made. But today many companies choose to establish R&D networks in foreign countries in order to tap the knowledge there or to commercialize products for those markets at a competitive speed. Adopting a global approach entails new, complex managerial challenges. It means linking R&D strategy to a company's overall business strategy. The best individual for managing R&D abroad combines the qualities of good scientist and good manager, knows how to integrate the new site with existing sites, understands technology trends, and is good at gaining access to foreign scientific communities. As more pockets of knowledge emerge around the globe and competition in foreign markets mounts, only those companies that embrace an informed approach to global R&D will be able to meet the new challenges.

U.S. foundations and nonprofits work diligently on behalf of society's most needy and yet report that progress is slow and social problems persist. How can they learn to be more effective with their limited resources? Foundations should consider expanding their mission from investing only in program innovation to investing in the organizational needs of nonprofit organizations as well. Their overemphasis on program design has meant deteriorating organizational capacity at many nonprofits. If foundations are to help nonprofits be assured of making payroll, paying the rent, or buying a much-needed computer, they must develop hands-on partnering skills. Venture capital firms offer a helpful benchmark. In addition to putting up capital, they closely monitor the companies in which they have invested, provide management support, and stay involved long enough to see the company become strong.

Conventional wisdom has it that the best way to do business in China is through an equity joint venture (EJV) with a well-connected Chinese partner. But pioneering companies are starting a trend toward a new way to enter that market: as a wholly foreign-owned enterprise, or WFOE. Increasingly, says the author, joint ventures do not offer foreign companies what they need to succeed in China. By contrast, the author asserts, WFOEs are faster to set up and easier to manage; and they allow managers to expand operations more rapidly. That makes them the perfect solution, right? The answer is a qualified yes. First, foreign companies will still need sources of guanxi, or social and political connections. Second, managers must take steps to avoid trampling on China's cultural or economic sovereignty. Third and perhaps most important, foreign companies must be prepared to bring something of value to China--usually in the form of jobs or new technology that can help the country develop. Companies willing to make the effort, says the author, can reap the rewards of China's burgeoning marketplace.

The cash flow statement provides a potential wealth of information about how a company uses its assets. Unfortunately, too many readers of financial reports gloss over this part of the document and head to the long-familiar income statement and balance sheet. They probably do this because of the comparative recency of the cash flow statement and because their business schooling did not expose them to it. Contrary to most readers' assumption, though, the cash flow statement does not require sophisticated analysis of ratios in order to appreciate its value. This article provides a straightforward sequence of steps for tapping into the trove of information that a cash flow statement offers: 1) scanning the big picture; 2) checking the power of the cash flow engine; 3) pinpointing the good news and the bad news; and 4) putting the puzzle together. A self-test is provided so that readers can assess their ability to follow these steps and thus use the cash flow statement to generate powerful information about a firm's financial operations.

In many mass markets, companies are facing a predicament: customers are demanding not only ever faster order fulfillment but also highly customized products and services. The authors show how the Hewlett-Packard Co. and others have proved that one indeed can deliver customized products quickly and at a low cost. The key to mass-customizing effectively is postponing the task of differentiating a product for a specific customer until the latest possible point in the supply network. Instead of taking a piecemeal approach, companies must rethink and integrate the designs of their products, the processes used to make and deliver those products, and the configuration of their entire supply network. By adopting such a comprehensive approach, they can operate at maximum efficiency and quickly meet customers' orders with minimum amount of inventory.

Virtually all executives today recognize the need to provide outstanding service to customers. Focusing on the customer, however, is both an imperative and a potential curse. Companies around the world have embraced mass customization in an attempt to avoid pitfalls. But many managers have discovered that mass customization itself can produce unnecessary cost and complexity. They are realizing that they did not examine thoroughly enough what kind of customization their customers would value before they plunged ahead. In this article, the authors provide a framework to help managers determine the type of customization they should pursue.

Companies collect information about customers to target valuable prospects more effectively, tailor their offerings to individual needs, improve customer satisfaction, and identify opportunities for new products or services. But managers' efforts to capture such information may soon be thwarted. The authors believe that consumers are going to take ownership of information about themselves and start demanding value in exchange for it. As a result, negotiating with customers for information will become costly and complex. Consumers will be unlikely to bargain with vendors on their own, however. The authors anticipate that companies they call infomediaries will broker information to businesses on consumers' behalf. In essence, infomediaries will be the catalyst for people to start demanding value in exchange for information about themselves. And most other companies will need to rethink how they obtain information and what they do with it if they want to find new customers and serve them better.

Three decades into the environmental revolution, many companies in the industrialized nations have recognized that they can reduce pollution and increase profits at the same time. But beyond corporate "greening" lies the enormous challenge--and opportunity--to develop a sustainable global economy, one that the planet is capable of supporting indefinitely. Stuart Hart, director of the Corporate Environmental Management Program at the University of Michigan School of Business, explains the imperative of sustainable development and provides a framework for identifying the business opportunities behind sustainability. Hart identifies three stages of environmental strategy: pollution prevention, product stewardship, and the development of clean technology. But companies will not benefit from such efforts unless they draw a road map that can show them how new products and services must evolve and what new competencies they will need.

Costs, market fragmentation, and new media channels that let customers bypass advertisements seem to be in league against the old ways of marketing. Relying on mass media campaigns to build strong brands may be a thing of the past. Several companies in Europe, making a virtue of necessity, have come up with alternative brand-building approaches and are blazing a trail in the post-mass-media age. In England, Nestle's Buitoni brand grew through programs that taught the English how to cook Italian food. The Body Shop garnered loyalty with its support of environmental and social causes. Cadbury funded a theme park tied to its history in the chocolate business. Haagen-Dazs opened posh ice-cream parlors and got itself featured by name on the menus of fine restaurants. Hugo Boss and Swatch backed athletic or cultural events that became associated with their brands.

If you're in the business of service delivery, investment in the training and development of your staff is one of the keys to your company's success. But what's the best way to design and implement your investment? In 1994, Fidelity Institutional Services Co. (FIRSCo) needed to ensure that its rapidly expanding staff maintained the company's high levels of customer satisfaction. The solution, according to Ellyn McColgan, formerly an executive vice president of FIRSCo and now the president of Fidelity Investments Tax-Exempt Services Co., was to reach out to its service associates with a powerful new model for training and development called Service Delivery University. McColgan explains how FIRSCo overcame resistance to this sweeping change in employee education. (Time was one obstacle: each associate receives 80 hours of training per year.) In addition, the author discusses the fine art of measuring the success of a program like SDU. She finds that the company's investment has paid dividends to the staff, to the organization as a whole, and to FIRSCo's customers.

How do we face the prospect that creating a profitable, growing company might require intolerable abuse of the natural world? Monsanto--with its history in the chemicals industry--is an unlikely candidate to be creating cutting-edge environmental solutions, but that is precisely what it is doing. The need for sustainability is transforming the company's thinking about growth. Changes in global environmental conditions will soon create an unprecedented economic discontinuity. To invent new businesses around the concept of environmental sustainability, Robert Shapiro begins with a simple law of physics: A closed system like the earth's cannot support an unlimited increase of material things. It can, however, withstand exponential growth in information. So Monsanto is exploring ways to substitute information for "stuff" and services for products. For example, the company is genetically coding plants to repel or destroy harmful insects. Putting the right information in the plant makes pesticides unnecessary. Information replaces stuff; productivity increases and waste is reduced.

Innovation and the management of intellectual capital are playing an increasingly important role in competition in high-technology industries. To operate in markets where innovation is cumulative, such as in electronics and semiconductors, firms frequently need to engage in extensive licensing and cross-licensing. This need is amplified by recent increases in the strength of patent protection and by the more active licensing stance of intellectual property owners. A high-quality patent portfolio not only reflects the firm's inventive capacity, but may significantly increase its cross-licensing bargaining ability and reduce royalty payments. In addition, it may directly contribute to its product and process innovation.

The conventional wisdom is that companies should never outsource core functions. This study of 34 large companies that outsourced for at least two years demonstrates that outsourcing can be successful even when information systems are viewed as core functions. However, outsourcing negotiations must reflect the role of the company performing the outsourced functions and the nature of the outsourced work. A critical key to success in outsourcing arrangements lies in having tight contracts, even when the outsourcing vendor is viewed as a strategic partner or the IS function is considered to be core. This article offers prescriptions for writing contracts and creating balanced arrangements to enhance outsourcing success.

The Challenger disaster cannot be accounted for by reductionist explanations that direct attention only toward individual actors, nor by theories that focus solely on communication failure or the social psychological dynamics of the infamous eve-of-launch teleconference. The cause of the tragedy was rooted in historic organizational and environmental contingencies that preceded the launch decision. By tracing the connection between top policy decisions and decisions by engineers and managers assigned to do risky work, this analysis contradicts conventional understandings about what happened at NASA. As a consequence, this case contains new lessons for both managers and students of organizations.

An integrated strategy captures the synergies between competitive strategies that seek superior performance in the marketplace and nonmarket strategies that shape the competitive environment. This article extends the conceptual and analytical foundations of integrated strategy to a competitive environment structured by international trade policy. The framework is illustrated by the international trade dispute between the Eastman Kodak Co. and Fuji Photo Film Co. regarding access to the Japanese market for consumer film and photographic paper. The analysis focuses on the synergies between market and nonmarket strategies in which governments act as agents of their companies. The framework incorporates competition between the two companies in their market environment, competition in the nonmarket environment to influence their government's bargaining position, and bargaining between the governments.

This is an MIT Sloan Management Review article. Executives today face many difficult, potentially explosive situations in which they must make decisions that can help or harm their firms, themselves, and others. How can they improve the ethical quality of their decisions? How can they ensure that their decisions will not backfire? The authors discuss three types of theories--theories about the world, theories about other people, and theories about ourselves--that help executives understand how they make the judgments on which they base their decisions. By understanding those theories, they can learn how to make better, more ethical decisions.

This is an MIT Sloan Management Review article. Managers and entrepreneurs frequently adhere to the motto of being first to market. But the authors have discovered that many pioneers fail, while most current leaders are not pioneers. Using a historical method, the authors try to determine why pioneers fail and early leaders succeed. They have found that market leaders embody five factors critical to success: vision, persistence, commitment, innovation, and asset leverage.

Here's a familiar story: A nonprofit organization joins forces with a corporation in a cause-related marketing campaign. It seems like a win-win deal, but the nonprofit--and the media--find out several weeks into the campaign that the corporation's business practices are antithetical to the nonprofit's mission. The nonprofit's credibility is severely damaged. Is the moral of the story that nonprofits should steer clear of alliances with for-profit organizations? Not at all, Alan Andreasen says. Nonprofit managers can help their organizations avoid many of the risks and reap the rewards of cause-related marketing alliances by thinking of themselves not as charities but as partners in the marketing effort.

Diversify your product line. Stick to your knitting. Hire a professional manager. Watch fixed costs. Those are some of the suggestions that entrepreneurs sort through as they try to get their ventures off the ground. Why all the conflicting advice? Because in a young company, all decisions are up for grabs. Based on his observations of several hundred start-up ventures over eight years, Amar Bhide has developed a three-step sequence of questions that all entrepreneurs must ask themselves in order to establish priorities among the vast array of opportunities and problems they face: What are my goals? Do I have the right strategy? Can I execute the strategy?

Although today Intel is a titan, the company's history has been a roller-coaster ride. And no one is more qualified to reflect on Intel's close calls and spectacular successes than its CEO, Andrew Grove. Adam Brandenburger and Barry Nalebuff say that Grove's book, Only the Paranoid Survive, offers advice to managers in every business on how to bridge the narrow line between catastrophe and opportunity, and seize the opportunities. Grove's leadership of Intel has led him to conclude that some fear is healthy, especially in organizations with a track record of success. His prescription for ending complacency is a dose of paranoia--a suspicion that the world is changing against you. How can managers catch this mental condition? By stepping outside their organization and adopting the perspective of someone without a vested interest in the status quo.