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Like organization structures inside the company, the board's structures should be designed to fit its mission. This chapter considers board structure-its size and leadership model, and what committees are needed and how they should be led and organized.
This chapter considers the critical question of selecting board members and enhancing their abilities-who should be on the board, how should they get there, and how can they be developed or removed?
This chapter addresses a key problem for every board-designing a set of processes and practices so directors can learn and stay better informed about their company and reach informed decisions.
This chapter focuses on the behaviors that lead to effective boards and how boards can monitor and deal with dysfunctional behavior.
This chapter discusses what individual board members need to do to implement real change and make tomorrow's boards more effective than today's.
This chapter answers several of the most common questions about Time-Driven Activity-Based Costing.
This chapter lays out an agenda for competitiveness by suggesting that HR holds the keys to success in overcoming eight major challenges facing executives. Fundamentally, the new competitive reality will require new ways of thinking about HR practices, functions, and professionals.
To maximize internal growth and profitability, organizations must transform people's work in order to leverage the value of previous learning and take full advantage of future learning. This chapter examines how organizations can leverage knowledge to achieve competitive advantage.
Truthfully evaluating the quality of people's performance-and their potential-allows organizations to make critically important talent management decisions. Unlike conventional performance appraisal, forced ranking is a management process that requires managers to assess how well people performed compared with how well other people performed. It both demands and guarantees differentiation.
The root cause of the problems that most boards have is inadequate attention to the way each board is designed to handle its responsibilities. There is ample room, however, for each board, within established regulations, and with due consideration to current best practices, to design itself to be most effective in governing its company.
Simply sensing and anticipating emerging opportunities and threats is not enough. This chapter shows how companies can move beyond insight to action by deploying the SAPE (sense-anticipate-prioritize-execute) cycle-a system that is particularly well suited to competition in rapidly changing environments.
Conduct Reconnaissance into the Future: How Chinese Entrepreneurs Anticipate the Future of Their Businessby Donald N. Sull
Managers can improve their odds of succeeding in unpredictable markets by conducting reconnaissance into the future rather than relying on a preconceived plan. This chapter outlines the steps that successful Chinese entrepreneurs have taken to anticipate possible threats and opportunities.
Acknowledge the Fog of the Future: How Chinese Entrepreneurs Confront Limited Visibility in Unpredictable Marketsby Donald N. Sull
Managers must rethink their view of time in order to compete effectively in unpredictable markets like China. They should adopt an unfolding view of time, called the "fog of the future," in which a steady stream of unanticipated threats and opportunities emerge.
As this chapter illustrates, firms in unpredictable markets such as China need fully engaged leaders who monitor the competitive context for emerging opportunities and threats, set corporate priorities, build and maintain flexible hierarchies, and pursue golden opportunities while responding to threats.
This chapter discusses how entrepreneurs and managers can think more systematically about the challenges of scaling their organization in unpredictable markets.
Unpredictable environments periodically provide golden opportunities that allow firms to create significant value in a short period. This chapter introduces a framework to help managers and entrepreneurs systematically evaluate opportunities.
Partnerships are necessary in order to share risk and obtain resources for succeeding in an unpredictable environment. This chapter identifies concrete actions companies can take to manage the dynamics of important relationships over time.
This chapter describes how a flexible hierarchy functions and the steps necessary to develop it.
Most Westerners know very little about the entrepreneurs who are reshaping the second-largest and arguably most dynamic economy in the world: China. This chapter provides a brief overview of recent Chinese history and an introduction to several successful Chinese companies and the lessons they offer on managing in an unpredictable context.
In this article, Bob Zider, president of the Beta Group, a California-based firm that invests in commercializing new technologies, presents an analysis of present-day venture capitalists and shows why its practitioners have a lot more in common with investment bankers than you might think. The popular mythology surrounding the U.S. venture-capital industry derives from a previous era. Venture capitalists who nurtured the computer industry in its infancy were legendary both for their risk taking and for their hands-on operating experience. But today things are different, and separating the myths from the realities is crucial to understanding this important piece of the U.S. economy. Today's venture capitalists are more like conservative bankers than the risk takers of days past. They have carved out a specialized niche in the capital markets, filling a void that other institutions cannot serve. They are the linchpins in an efficient system for meeting the needs of institutional investors looking for high returns, of entrepreneurs seeking funding, and of investment bankers looking for companies to sell. Venture capitalists must earn a consistently superior return on investments in inherently risky businesses. The myth is that they do so by investing in good ideas and good plans. In reality, they invest in good industries--that is, industries that are more competitively forgiving than the market as a whole. And they structure their deals in a way that minimizes their risk and maximizes their returns. Although many entrepreneurs expect venture capitalists to provide them with sage guidance as well as capital, that expectation is unrealistic. Given a typical portfolio of 10 companies and a 2,000-hour work year, a venture capital partner spends on average less than 2 hours per week on any given company. In addition to analyzing the current venture-capital system, the author offers practical advice to entrepreneurs thinking about venture funding.
In this article, University of California at Berkeley professors Carl Shapiro and Hal Varian explain how a "versioning" strategy can enable a company to distinguish its products from the competition and protect its prices from collapse. This insightful article will be essential reading for any executive competing in the information economy. Many producers of information goods assume that their products are exempt from the economic laws that govern more tangible goods. But that's just not so. Information goods are subject to the same market and competitive forces that govern the fate of any product. And their success, too, hinges on traditional product-management skills: gaining a clear understanding of customer needs, achieving genuine differentiation, and developing and executing an astute positioning and pricing strategy. What makes information goods tricky is their "dangerous economics." Producing the first copy of an information product is often very expensive, but producing subsequent copies is very cheap. In other words, the fixed costs are high and the marginal costs are low. Because competition tends to drive prices to the level of marginal costs, information goods can easily turn into low-priced commodities, making it impossible for companies to recoup their up-front investments and eventually bringing about their demise. The best way to escape that fate, the authors say, is to create different versions of the same core of information by tailoring it to the needs of different customers. The authors draw on a wide range of examples to illustrate how companies use different versioning strategies to appeal to customers with different needs. The power of versioning is that it enables managers to apply tried-and-true product-management techniques in a way that takes into account both the unusual economics of information production and the endless malleability of digital data.
In this article, Michael Porter, the C. Christensen Professor of Business Administration at the Harvard Business School, explains how clusters foster high levels of productivity and innovation and lays out the implications for competitive strategy and economic policy. Economic geography in an era of global competition poses a paradox. In theory, location should no longer be a source of competitive advantage. Open global markets, rapid transportation, and high-speed communications should allow any company to source any thing from any place at any time. But in practice, location remains central to competition. Today's economic map of the world is characterized by what Porter calls clusters: critical masses in one place of linked industries and institutions--from suppliers to universities to government agencies--that enjoy unusual competitive success in a particular field. The most famous examples are found in Silicon Valley and Hollywood, but clusters dot the world's landscape. Porter explains how clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation; and third, by stimulating the formation of new businesses within the cluster. Geographic, cultural, and institutional proximity provides companies with special access, closer relationships, better information, powerful incentives, and other advantages that are difficult to tap from a distance. The more complex, knowledge-based, and dynamic the world economy becomes, the more this is true. Competitive advantage lies increasingly in local things--knowledge, relationships, and motivation--that distant rivals cannot replicate.
This fictitious case written by Andy Blackburn, a Boston Consulting Group vice president based in San Francisco, explores the question of how PC companies can make money in the increasingly price-competitive consumer market. The senior staff of Praxim, a multibillion-dollar maker of desktop computers, face some tough questions: Is it possible to make money selling personal computers to consumers? And if so, how? What resources need to be mustered? Where should they be directed? After years of strong profits, Praxim is being dragged down by increasing competition in the consumer segment of the PC market. In response, CEO Jack Thompson has hired a new manager for the consumer division, Linda Marcus, luring her away from a leading packaged-goods company. Linda wants to make Praxim into a trusted brand by putting Praxim's people into retail stores at peak selling times, setting up an 800 number to answer consumers' technical questions in plain English, and bundling extensively. But the other members of the senior staff are skeptical. The vice president of the commercial division argues that PCs are a commodity and urges Linda to concentrate on cutting costs. The chief technology officer wants Praxim to concentrate on developing the next killer app so that it can charge consumers a premium for new technology. The CFO thinks Praxim should cut its losses and mostly give up on the consumer segment. Mindful that continued losses in the consumer segment will pull down Praxim's share price and put his top executives' stock options at risk, Jack is at a loss. Should he try to make money selling PCs to consumers? Can he keep the doubters on his staff from defecting if he goes ahead with Linda's plan? In 98603 and 98603Z, Geoff Moore, Donna Dubinsky, Larry Keeley, George Quesnelle, Scott Ward, and Philip Pifer give Jack their advice.
In this article, authors James Anderson, professor at the Kellogg Graduate School, Northwestern University, and James Narus, associate professor at the Babcock Graduate School, Wake Forest University, illustrate several ways in which suppliers can figure out exactly what their offerings are worth by creating and using what they call customer value models. Field value assessments--the most commonly used method for building customer value models--call for suppliers to gather data about their customers firsthand whenever possible. Through these assessments, a supplier can build a value model for an individual customer or for a market segment, drawing on data gathered from several customers in that segment. Suppliers can use customer value models to create competitive advantage in several ways. First, they can capitalize on the inevitable variation in customers' requirements by providing flexible market offerings. Second, they can use value models to demonstrate how a new product or service they are offering will provide greater value. Third, they can use their knowledge of how their market offerings specifically deliver value to craft persuasive value propositions. And fourth, they can use value models to provide evidence to customers of their accomplishments. Doing business based on value delivered gives companies the means to get an equitable return for their efforts. Once suppliers truly understand value, they will be able to realize the benefits of measuring and monitoring it for their customers.
Harry Denton, the CEO in this fictional case study, has been caught off guard. As the head of Delarks, a venerable department-store chain in the Midwest, he has engineered a remarkable turnaround in only a year. Sales have rebounded, and Wall Street is applauding. But when Delarks's head of merchandising defects to a competitor, Denton is shocked to realize that many of the layoff survivors, in fact, have had it with him and with the company. The last straw was the recent closing of the Madison store, which Denton announced without warning to anyone--not even the company's head of HR, Thomas Wazinsky, a supposedly trusted adviser. The rumor mill says that many employees are considering leaving before Denton can inflict the next blow. And senior managers are not immune to the fear and anger. Even Wazinsky, one of the few links to Delarks's proud past, confesses to Denton, "I'll bet you're thinking of firing me." Denton has to act--and fast. He calls a "town meeting" for the 600 employees of the St. Paul store. The plan: rally the troops. Instead, Denton is routed. Angry questions are hurled at the CEO, and he is forced to beat a hasty retreat through the back door. In 98510A and 98510Z, Bob Peixotto, Jim Emshoff, Richard Manning, Gun Denhart, and Saul Gellerman offer advice on how to revive morale at the successful but troubled company.