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Reengineering efforts are sweeping the country as companies shift from purely functional organizations to those that better accommodate horizontal work flows. Broad, crosscutting processes such as product development and order fulfillment have become the new organizational building blocks, Managers, in turn, have begun to develop new ways of working. But much remains to be learned about how these new organizations are crafted and led. The critical questions involve strategy and management practice. In this roundtable, Xerox's Allaire, USAA's Herres, SmithKline Beecham's Leschly, and Pepsi's Weatherup, four senior executives who have helped pioneer the shift to process-based organizations, discuss their experiences. They represent diverse industries and a wide range of competitive challenges, but their observations about processes and process management are strikingly similar.

Achieving the full profit potential of each customer relationship should be the fundamental goal of every business. The logic is as simple as it is compelling: Profits from customer relationships are the lifeblood of all businesses. And, at the most basic level, these profits can be increased in only three ways: by acquiring new customers, by enhancing the profitability of existing customers, and by extending the duration of customer relationships. Yet the business models that drive decisions in most large companies were forged before it was possible to focus directly on these key drivers of business profitability. Today companies can use information and technology tools to link their investments in customer relationships to the returns that customers generate. In other words, companies can now optimize what the authors call the value exchange: the relationship between a company's financial investment in customer relationships and the return that customers generate in responding to that investment.

Information technology now permeates every aspect of a business, requiring CEOs today to involve themselves in IT planning and decision making. Which IT investment responsibilities should the CEO delegate and to whom? When senior executives consider IT investment options, what should they look for? How do they learn what they need to know to ask the right questions? What role should other managers play in the decision? Six experts--Bob L. Martin, Gene Batchelder, Jonathan Newcomb, John F. Rockart, Wayne P. Yetter, and Jerome H. Grossman--share their views.

Few managers of high-technology companies view manufacturing as a primary souce of competitive advantage. Indeed, companies in high-tech industries increasingly outsource manufacturing completely. In so doing, they hope to avoid the risks of investing in expensive manufacturing plants and losing sight of what they see as their true source of advantage: product research and development. The authors' research in the health care industry over the past decade suggests that such thinking is often costly and potentially dangerous to the competitive health of high-tech companies. In fact, it is not only possible but also necessary to excel at developing new products and new manufacturing processes simultaneously. In many high-tech markets in which product technology is rapidly evolving, manufacturing process innovation is becoming an increasingly critical capability for product innovation.

The lingering belief that environmental regulations erode competitiveness has resulted in a stalemate. One side pushes for tougher standards, the other tries to roll standards back. The authors' research shows that tougher environmental standards actually can enhance competitiveness by pushing companies to use resources more productively. Managers must start to recognize environmental improvement as an economic and competitive opportunity, not as an annoying cost or an inevitable threat. Environmental progress demands that companies innovate to raise resource productivity--precisely the new challenge of global competition. It is time to build on the underlying economic logic that links the environment, resource productivity, innovation, and competitiveness.

Can an organization with a four-decade track record of growth avoid becoming the victim of its own success? Since the Nature Conservancy was founded in 1951, it has worked to save threatened habitats and species by buying and setting aside land. Year by year, the number of acres under its protection has increased, membership has risen, and donations have grown. The leader of any nonprofit company might justifiably envy the Conservancy's performance, but its president and CEO, John Sawhill, isn't satisfied. Since taking the job in 1990, Sawhill has led a major shift in strategy with far-reaching implications for the day-to-day activities of the organization's 2,000 employees. He believes that the Conservancy must change now to achieve its mission over the long term. In this interview, he discusses the challenges inherent in refocusing a large, successful, mission-driven organization.

Most managerial work happens through talk--discussions, meetings, presentations, negotiations. And it is through talk that managers evaluate others and are themselves judged. Using research carried out in a variety of workplace settings, linguist Deborah Tannen demonstrates how conversational style often overrides what we say, affecting who gets heard, who gets credit, and what gets done. Tannen's linguistic perspective provides managers with insight into why there is so much poor communication. Gender plays an important role. Tannen traces the ways in which women's styles can undermine them in the workplace, making them seem less competent, confident, and self-assured than they are. She analyzes the underlying social dynamic created through talk in common workplace interactions. She argues that a better understanding of linguistic style will make managers better listeners and more effective communicators, allowing them to develop more flexible approaches to a full range of managerial activities.

Private investment in infrastructure is again the rage among foreign investors and governments in the developing countries of Asia, Latin America, and Africa. Managers should not get carried away, however: A look at a few recent experiences shows that the pitfalls of the past are still present today. The authors review ill-fated foreign investment projects and conclude that foreign investment in infrastructure is dangerous because the hosting nations view it as an obsolescing bargain. In the face of this discouraging evaluation, the authors have some suggestions for minimizing risks. These range from the general, such as taking care to choose the right businesses to invest in, to more specific advice on setting rates and buying insurance. Nevertheless, investors should not expect security in infrastructure investment. Indeed, the paradox of infrastructure projects may be that higher returns cause higher risk, rather than the converse.

Too often when managers think about pricing, the first question they ask is, What should the price be? In fact, what they should be asking is, Have we addressed all the considerations that will determine the correct price? Robert J. Dolan describes two broad qualities of an effective pricing process and provides eight steps to enable managers to develop and use such a process. The pricing scorecard included at the end of the article will allow managers to evaluate how well their pricing practices meet these guidelines.

The essence of business success lies in making sure you're playing the right game. How do you know if it's the right game? What can you do if it's the wrong game? To help managers answer those questions, the authors have developed a framework that draws on the insights of game theory. The primary insight of game theory is the importance of focusing on others. In other words, companies should consider both cooperative and competitive ways to change the game. Who are the participants in the game of business? The authors introduce a schematic map that represents all the players and all the interdependencies among them.

With institutional investors, regulatory authorities, the financial press, and the fear of lawsuits all pressuring boards of public corporations to be more active, many directors are seeking practical ways to conduct strategic oversight. Gordon Donaldson's strategic audit provides an orderly way for boards to review strategy without invading management's territory. Usually, there are three triggers that motivate boards to get involved in strategy: the retirement of a CEO, a precipitous decline in profitability, or an unsolicited takeover attempt. These triggers force a board into a reactive mode and are not conducive to effective oversight. Managers are expected to turn strategic vision into operational reality, but directors represent shareholders and must evaluate strategy based on how the company's returns compare with those of other investment opportunities. Donaldson suggests that a low-key, behind-the-scenes audit of strategy, designed to lend credibility to management's leadership and not undermine it, is an important board tool.

Rigid, old corporate styles, like the inflexible steel and stone headquarters that symbolized them, are fast becoming quaint vestiges of things past. Many of today's managers are beginning to understand that encouraging some behaviors at the edge of accepted organizational propriety can actually help their companies achieve success in this new competitive environment. And hot groups are helping organizations do just that. Based on years of observing and participating in hot groups, the authors describe the conditions under which such groups flourish, the behaviors they exhibit, the type of leadership they require, and the benefits they bring. For those executives who believe that more hot groups might help stir the hearts and minds of their people, there remains the question of how to make them happen. The authors offer suggestions that managers can follow to create an environment fertile enough to allow hot groups to grow.

Smart companies may incur huge losses when they enter unknown territory--new alliances, markets, products, technologies. Failures could be prevented or their cost contained if managers approached innovative ventures with the right planning and control tools. Discovery-driven planning is a practical tool that acknowledges the difference between planning for a new venture and for a more conventional business. Using Kao Corp.'s entry into floppy disks, the authors present a step-by-step approach to help companies think differently about planning. Managers should begin with the bottom line and work their way up the income statement, first determining a new venture's profit potential.

It's no secret that managing a brand in today's chaotic marketplace is a daunting task. Consumers are bombarded with messages from broadcast and narrow-cast television, radio, on-line computer networks, the Internet, faxes, telemarketing, and niche magazines. But by harnessing new and emerging technologies, companies can start real-time dialogues with their customers and provide interactive services with valuable side effects. Netherlands-based Philips NV, for example, used a research team to brainstorm with children and adults to develop a new product; in the end, its enthusiastic young product developers became potential loyal customers. Marketing managers must take responsibility for systems that link companies with customers, suppliers, and distributors. They must give consumers access and learn to think of feedback as part of product development. They need to provide customers with support and information. Finally, they need to become personally competent in information technology and to expand the role of marketing within the organization.

Many companies have used activity-based costing in onetime profitability studies. But when companies integrate ABC into critical management systems and use it to make day-to-day decisions--when they use it as activity-based management--it becomes a powerful tool for continuously rethinking and improving a business. Most managers do not realize that implementing activity-based management is a major organizational-change effort that involves a tremendous amount of work. The biggest obstacle is resistance from employees. The authors focus on two companies--Chrysler Corp. and Safety-Kleen Corp.--whose success in implementing activity-based management can serve as a model for other companies. The benefits they have reaped have been 10 to 20 times their investments in their programs.

In the mid-twentieth century, global organizations began to promise employees economic security, personal fulfillment, and respect in return for performing clearly delineated activities. Employees were willing to make sacrifices, and employers were willing to invest in training in the mutual expectation of future reward. But now, intense competition and rapid change are destroying predictability. Virtual organizations and many current managerial practices, such as reengineering, continuous improvement, matrix management, and "rightsizing," ignore this human need. As a result, employees keep their resumes up to date and their commitments to a minimum. The best way to approach organizational change is with the realization that dire predictions are better than no predictions at all or positive predictions that no one believes. Managers must make few promises and keep those they do make. The more managers make clear to employees which courses of action will improve their lives, the more employees can focus on creating value.

Manufacturing managers in a broad array of industries agree that achieving low cost and high quality is no longer enough to guarantee success. In the face of fierce, low-cost competition and an army of high-quality suppliers, companies are increasingly concentrating on flexibility as a way to achieve new forms of competitive advantage. Having acknowledged the importance of flexibility, however, managers in industry after industry are finding it frustratingly difficult to improve. In a quest to help manufacturing managers begin to understand why the improvement of flexibility has been so elusive, author David Upton embarked on a study of more than 60 factories in North America that manufacture fine paper. Upton found that, contrary to conventional wisdom, the flexibility of the plants depended much more on the people in the operation than on any technical factor.

In theory, mastery of a single competency provides a distinct niche in the marketplace. In practice, today's global competition is more dynamic and multidimensional than those models suggest. The mature industry paradox is that leadership demands differentiation, yet differences are quickly copied. Single-factor innovations tap one competency, and capable competitors can usually match it. Multiple competencies strengthen several dimensions and in effect redefine the basis of competition. The "shadow strategy task force" is offered as a method to force managers to relinquish the comfort of the firm's accepted view of itself. This approach begins with the objective of identifying the strategies and competencies that, in the hands of competitors, might be used to attack the firm's competitive position successfully. Especially critical on the task force are individuals with insight into how customers, suppliers, and competitors view the firm's products and services. Developing new competencies requires constant experimentation. The innovation-imitation-equilibrium cycle suggests that industry leaders teach customers what to demand by defining the current state of the art in performance, price, service, and other dimensions; customers learn to judge competitive offerings against these standards, and the learning effect is cumulative.

In the postwar years, planning and control systems were the tools that enabled companies to grow and helped managers deal with sprawling enterprises. Yet many of the problems companies experience today are inherent in the strategy-structure-systems doctrine that produced those tools. The systems that allowed managers to control employees also inhibited creativity and initiative. Today the challenge for top-level managers is to engage the knowledge and skills of each person in the organization in order to create what the authors call an individualized corporation. In the individualized corporation, top-level managers don't direct and correct middle and frontline managers; they create an environment in which individuals monitor themselves. The authors have conducted research on 20 high-performing corporations. They have concluded that systems, no matter how sophisticated, can never replace the richness of close personal communication and contact between top-level and frontline managers.

In 1993, BP Exploration Operating Co. Ltd., the $13 billion division of British Petroleum Co. that explores for and produces oil and gas, outsourced all its information technology operations in an effort to cut costs, gain more flexible and higher quality IT resources, and refocus the IT department on activities that directly improve the overall business. BP Exploration took a different path to outsourcing than most companies have taken. The company sought a solution that would allow it both to buy IT services from multiple suppliers and to have the pieces delivered as if they came from a single supplier. To that end, three contractors were hired and required to work together to deliver a single seamless IT service. This arrangement--multiple IT suppliers that act as one--is the cornerstone of the company's outsourcing strategy. The IT department has final accountability for IT services, but it is not mired in the operations. Only by relinquishing operations could IT employees begin to focus on doing business instead of running the business.