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There's a difference between being an international company--selling globally, having global brands, or having operations in different countries--and being a global enterprise. Few companies leverage their capabilities around the world to create powerful, cohesive organizations. CEO David Whitwam's vision is for Whirlpool to become an integrated, global enterprise. But a CEO can't change a company's mission and mind-set by edict alone. He or she must be able to convince employees throughout the organization that such change is not only possible, but also the best course of action. Employees must want to change their beliefs and behavior. The CEO must then create crossborder processes that force that change to occur.

The authors have seen North American and European companies make improvements by implementing lean production techniques. The authors now argue that linking these individual breakthroughs up and down the value chain, creating a lean enterprise, is the next step in achieving superior performance. The lean enterprise is a group of individuals, functions, and legally separate but operationally synchronized companies that creates, sells, and services a family of products. Few companies have created a lean enterprise. Individuals, functions, and companies have needs that conflict with each other and with those of the lean enterprise. The strengths and weaknesses of the German, U.S., and Japanese industrial traditions suggest that trade-offs between these three entities are inevitable.

Today's managers feel that a once clear separation between public and private sectors has broken down. Specifically, managers are spending heavily on education and training and wondering if this is their responsibility. In answering this question, the author looks back to Adam Smith's "The Wealth of Nations" and industrial capitalism's first social compact. As work became increasingly simplified under what Smith called the division of labor, the level of education that management required of its workforce declined. According to Smith, business managers were only responsible for providing the most rudimentary elements of education. Avishai goes on to examine business's social contract in a competitive environment that has superseded the division of labor. In the foreseeable future, virtually every business will focus on continuous learning and will therefore have both an obligation to support teaching and an opportunity to profit from it.

A senior executive's instinctive capacity to empathize with and gain insights from customers is the single most important skill he or she can use to direct a company's strategic posture. Yet most top managers at industrial companies consider customer contact the bailiwick of sales and marketing staff. And even if they do believe market focus is a priority, most retain only limited contact with consumers as their organizations grow, relying instead on subordinates' reports to define and sense the market for them. Such approaches are dangerous. First, most industrials define "customer" as the next entity in the distribution channel and requisition reports accordingly. But to get a true sense of the market, senior executives should consider the wants and needs of every step in the distribution chain. Another danger is that senior executives at industrial concerns often confuse information with knowledge. Managers faced with too much general market data tend to average results, blur boundaries, and miss distinct, segmented market opportunities. Finally, unless senior executives make market focus a strategic priority, they will not be motivated to initiate organizational change.

Virtually all manufacturers aspire to "world-class" status. But even those who attain it will only be as good as their toughest competitors. This explains why so many companies that have adopted improvement programs like just-in-time, lean production, and total quality management lament that they never seem to get ahead. The problem is that managers tend to view such programs as solutions to specific problems, like high inventories or products that are difficult to manufacture. As such, they are not manufacturing strategies. In the turbulent 1990s, the goal of competitive strategy should be strategic flexibility. A company must be able to switch gears relatively quickly and with minimal resources. A true manufacturing strategy is a plan for developing the skills and capabilities that will enable a company to do certain things better than competitors over the long haul.

The continued vitality of the most successful U.S. and European pharmaceutical companies in the face of accelerating scientific and technological change holds valuable lessons for managers in all industries trying to respond to turbulent times. The pharmaceutical industry faces some serious challenges in the future, most notably, the proposed reform of the U.S. health care system. Yet its success in the crucial area of research can serve as a benchmark for companies seeking to become more innovative in the overloaded environment of the information age. New research conducted by Rebecca Henderson of MIT and Iain Cockburn of the University of British Columbia suggests that the longevity of pharmaceutical companies attests to a unique managerial competency: an ability to foster a high level of specialized knowledge within an organization, while preventing that information from fixing the company in the past, unable to respond to an ever-changing environment.

Risk, complexity, and uncertainty currently define the business environment of the 1990s. In this interview, Merck CFO Judy Lewent talks about her scientific approach to finance, one that is both long term in nature and eminently tied to Merck's overall strategy. At 44 years of age, Lewent ranks among the most powerful women in corporate America and is the only woman to hold the title of CFO at a major corporation.

Strategic planning has fallen from the pedestal it occupied when it came on the scene in the mid-1960s. Strategic planning failed because it is not the same as strategic thinking. Planning is about analysis--about breaking a goal into steps, formalizing those steps, and articulating the expected consequences. Strategic thinking, in contrast, is about synthesis. It involves intuition and creativity. The outcome of strategic thinking is an integrated perspective, a not-too-precisely articulated vision of direction that must be free to appear at any time and at any place in the organization.

In this fictional case study, Diane Bryant, who is pregnant, is up for a significant promotion at Hunter Peripherals, a director's position overseeing environmental testing and product compliance. But Jim Serra, vice president of engineering at Hunter, is concerned that Diane won't be able to handle the combined challenges of her new job and new baby. Hunter is planning a critical product launch in six months, and Diane is due in four months. Jim isn't sure he can rely on Diane to put in the time necessary to ensure the product's successful entry into the market. Jim must make a recommendation to the executive committee, either supporting Diane's bid for the job or not. Six commentators offer their solutions to Jim's dilemma and discuss related family and work issues.

In the 1980s, U.S. business experienced an explosion of new managerial concepts unparalleled in previous decades. Many American managers felt that the emergence of new managerial ideas signaled a rejuvenation of U.S. business. But their thinking doesn't jibe with the facts. American managers did not take charge in the 1980s. Instead, they abdicated their responsibility to a burgeoning industry of management professionals. If business leaders want to reverse this trend, they must reclaim management responsibility--and pragmatism is the place to start. Pragmatic managers are sensitive to their company's context and open to uncertainty. They focus on outcomes and are willing to make do. Pragmatic managers also avoid three common pitfalls, the "let's do it better this time" syndrome and the "flavor of the month" and "let's go for it all" approaches.

Institutional investors, who now own a majority of the voting stock of publicly traded U.S. companies, have an influence on the way these companies are run. And given their influence, institutions are under increasing pressure to become activist shareholders. But institutional investors are not interested in the day-to-day management of any portfolio company; their goal is to achieve their clients' financial objectives. To decide whether and when to become active, an institutional investor compares the expected costs of a course of action, from a proxy fight to an informal discussion with management, with the expected benefits, which are difficult both to predict and to measure. If corporate executives understood what motivates the decision making of institutional investors, they would realize that institutions are not out to take control of U.S. corporations or to lobby for the German-Japanese model of intense institutional involvement. Given the rigors of the cost-benefit test, activism turns out to be the best strategy in very few cases.

Ricardo Semler is a Brazilian industrialist whose company, Semco, manufactures marine equipment, food-service machinery, and other highly differentiated products. Semco has long practiced unusual but successful management innovations, but when the Brazilian economy took a turn downward in 1990, empowerment, profit sharing, self-set salaries, and other policies were no longer enough to ensure survival. The only solution was to cut permanent staff and contract out more work. But instead of contracting it to strangers, Semler gave the contracts to his own workers, setting them up in business with generous severance settlements and an offer to lease them Semco's equipment, on- or off-site, and to defer lease payments for two years. The transition was painful, but only one satellite has failed, while most ex- and semi-employees do very well with ad hoc compensation systems.

Within its first two years, Saturn created one of the strongest automobile brands. This article explains how and why General Motors (GM) was able to accomplish this unique feat. It involved creating a world-class product, developing a team-oriented organization outside the GM fold, selling the company not the car, creating a new retailing strategy and relationship with the customer, and implementing a consistent communication effort. Ironically, Saturn's success raises difficult strategic issues as to its future management and its role in the future of GM.

Although modern urban recycling programs have successfully created a tremendous supply of recycled newspapers, glass bottles, and office paper, when it comes to consumer and business demand for products made from these materials, the economics of recycling falls apart. The present cost of collecting and processing recyclable materials far outweighs their value as a commodity that can be sold back to industry. Yet precisely because of this market uncertainty, companies can seize the competitive high ground. Rubbermaid, Moore Business Forms, and others have dramatically increased market share with appropriate offerings. In addition, top managers of companies like Bell Atlantic and Coca-Cola have made buying recycled products and investing in green R&D part of their business strategies. Through such efforts, business leaders help to challenge current recycling myths, including the supposed high price and low quality of recycled products.

Managers need a new way to think about managing change in today's knowledge organization. Instead of breaking change into small pieces--TQM, process reengineering, employee empowerment--and then managing these pieces, managers need to think in terms of overseeing a dynamic. Managing change is like balancing a mobile. Achieving this critical balance means managing the conversation between the people leading the change effort and those who are expected to implement the new strategies; creating an organizational context in which change can occur; and managing emotional connections, which have traditionally been banned from the workplace but are essential for a successful transformation. One tool that companies can use is the Transition Management Team, a group of company leaders that oversees the corporate change effort and ensures that leaders and followers work together to create their future.

Reinvention is not changing what is, but creating what isn't. When British Airways declared itself the world's favorite airline, it faced the challenge of becoming a different company, not just a better one. When Europcar decided to become the most efficient rental-car company in Europe and Haagen-Dazs chose to make a visit to its European shops an exciting event, they didn't just need to focus on doing things to improve their competitiveness. When a company sets out to reinvent itself, it must uncover and then alter the invisible assumptions and premises on which its decisions and actions are based. This organizational context is the sum of the past and dictates what is possible for the future. When managers reinvent themselves and their companies, they create a new context that leads everyone to embrace a seemingly impossible future. Reinvention includes assembling a critical mass of stakeholders to do an organizational audit, create urgency, harness contention, and engineer breakdowns that reveal weak spots.

In all too many companies, reengineering has been not only a great success but also a great failure. After months, even years, of careful redesign, these companies achieve dramatic improvements in individual processes only to watch overall results decline. By now, paradoxical outcomes of this kind have become almost commonplace. Too many companies are squandering management attention and other resources on projects that look like winners but fail to produce widespread bottom-line results. The authors' research into reengineering projects in over 100 companies reveals how difficult these projects actually are to plan and implement and, more important, how often they fail to achieve real business-unit impact. The study identified two factors--breadth and depth--that are critical in translating short-term, narrow-focus process improvements into long-term profits.

A new organization man has emerged, one who wants to be an involved father with no loss of income, prestige, and corporate support - and no diminished sense of manhood. But since many companies still deem dedication to career the sole marker of professional success, this new man may believe he has to hide his participation at home. Not surprisingly, the compromises made by the new organization man bear a striking resemblance to those of the new organization women. And just as many senior managers now recognize that they'll lose their most ambitious women if they don't develop strategies to accommodate family needs, corporations may also lose their best and brightest men if they don't address the needs of the 1990s man.

Big companies in crisis get there by doing the things that once made them big. The experience of troubled companies is a syndrome with four stages. First the founders articulate their vision. Then the company develops steering mechanisms to operationalize the vision and guide the company through change. Unfortunately, these steering mechanisms tend to become rigid over time, with much stronger ties to the founding vision than to the changing economic environment. So in the third stage, feedback deteriorates. And the useful signals that do get through run into organizational defensive routines--the fourth stage--that prevent information from being put to proper use. The key to getting out of this syndrome is to abandon blame and focus instead on what the company did right to get into the crisis it now faces. To answer that question, managers must examine the differences between the strategy the company espouses and the strategy it enacts.

It is difficult to overstate the extent to which most managers and the people who advise them believe in the redemptive power of rewards, argues Alfie Kohn in "Why Incentive Plans Cannot Work," reprint #93506. The assumption that people will do a better job if they are promised an incentive is pervasive, but a growing collection of evidence supports an opposing view. In fact, research suggests that, by and large, rewards succeed at securing one thing only: temporary compliance. According to Kohn, incentives (or bribes) simply can't work. Kohn's views elicited a lively debate on the role of incentives in the workplace. In this Perspectives column, nine experts consider Kohn's argument. Kohn then offers a general response.