MIT Sloan Management Review

Includes bibliographical references (p. 15-18).

Corporate executives typically have strategic explanations for their acquisitions: that buying the company in question makes sense geographically or that the products are synergistic. However, if you inquire two years later how the company has benefited, managers tend to focus on the "softer" factors with comments like, "They made us rethink our decision-making processes," or "They introduced us to a new approach to product development," or simply "They shook up our culture." To understand this apparent contradiction, the author analyzes the acquisitions and performance of a number of large, successful companies. Several of the companies included in the research suffered from rigidity. However, the author found that companies were able to use acquisitions to restore a sense of vitality to their businesses and unleash a subsequent surge in performance. The acquired companies often stimulated the acquiring companies to develop new perspectives and different ways of doing things at critical times. Acquisitions kept their organizations fresh and vital. Even if the enterprises did not pursue acquisitions for this reason, the process of buying businesses and deciding how to integrate them into their corporate structures enabled acquirers to renew themselves before their products and operating methods became outdated.

A company's installed business processes are typically designed to execute routine activities. As such, they can have great difficulty handling novel initiatives, particularly when important work needs to be coordinated across different business units. Such cases are often better handled by a new framework that views the organization as a nexus of personal promises that employees make to each other. As defined by the authors, a "commitment" is a promise made by a performer to satisfy the concerns of a customer within the organization. "Customer" and "performer" refer simply to roles: An individual acts as a customer when making a request, and a performer when fulfilling a request. In committing to a customer, a performer promises to fulfill the customer's "conditions of satisfaction," that is, the specific terms (such as cost, timing and quality) required to meet the customer's needs. In general, the most powerful commitments are public, active, voluntary, explicit and motivated. Moreover, effective commitments tend to arise out of ongoing discussions between the customer and performer that proceed through four basic steps -preparation, negotiation, execution and acknowledgment.

Companies have, and new ideas still largely in the proposal stage may lead to further progress. Looking ahead, greater concern for multiple stakeholders may some day have a major impact on board practices and structure. The article shows that boards must have three key ingredients in order to be effective: knowledgeable members, up-to-date, company information and the power to counterbalance the CEO

For many years, multinational corporations could compete successfully by exploiting scale and scope economies or by taking advantage of imperfections in the world's goods, labor and capital markets. But these ways of competing are no longer as profitable as they once were. In most industries, multinationals no longer compete primarily with companies whose boundaries are confined to a single nation. Rather, they go head-to-head with a handful of other giants. Against such global competitors, it is hard to sustain an advantage based on traditional economies of scale and scope. MNCs must seek new sources of competitive advantage. While multinationals in the past realized economies of scope principally by utilizing physical assets and exploiting a companywide brand, the new economies of scope are based on the ability of business units, subsidiaries and functional departments within the company to collaborate successfully by sharing knowledge and jointly developing new products and services. Collaboration can be an MNC's source of competitive advantage because it does not occur automatically - far from it. Indeed, several barriers impede collaboration within complex multiunit organizations. And in order to overcome those barriers, companies will have to develop distinct organizing capabilities that cannot be easily imitated. The authors develop a framework that links managerial action, barriers to interunit collaboration and value creation in MNCs to help managers understand how collaborative advantage can work. The framework conceptualizes collaboration as a set of management levers that reduce four specific barriers to collaboration, leading in turn to several types of value creation. They draw on BP's experience to illustrate the effectiveness of a collaborative approach.

Traditional teams are not faring well in today's rapidly changing business environment. Even when they establish clear roles and responsibilities, build trust among members and define goals according to the book, their projects often fail or get axed. Three MIT Sloan School researchers think they have found the reason: Traditional teams are too inwardly focused and lack flexibility. Traditional team-building activities are still important, they contend, but only when combined with a greater awareness of external stakeholders and information sources. Fortunately, a new, externally focused team has arisen: the X-team. The authors detail the high levels of performance that X-teams are seeing. And they explain how managers in a wide variety of industries and functions can establish the organizational structures that support such teams. The researchers outline the five components of X-teams they have studied: external activity, extensive ties both inside the larger organization and outside the company, expandable tiers or kinds of responsibility, flexible membership (switching roles, moving in and out of the team as needed) and execution mechanisms that facilitate getting the job done. The results are impressive. One observed X-team greatly improved the dispersal of innovation throughout its organization. X-teams in sales were seen to bring in more revenue. Drug-development teams were more adept at drawing in external technology. Product-development teams were more innovative than traditional teams ¿ and more often on time and on budget. Managers that recognize their own company in the new, flatter organizational structures, the increasing interdependence of tasks and teams, the constant updating of information and the overall complexity of work should consider creating an environment for successful X-teams.

Most managers today understand the strategic implictions of the information based, knowledge driven, service intensive economy. So that they are recognizing that skilled and motivated people are central to the operations of any company that wishes to flourish in the new age

Many executives lack an effective framework for accurately classifying - let alone developing strategies for - their work relationships, leading to bad misjudgments and costly mistakes. The authors contend that professional relationships should be defined along one of two continuums: unconditional and conditional. Many career-ending mistakes can be traced back to a fundamental misunderstanding of the difference. Relationships that are independent of situation and context are called unconditional. At one end of this spectrum are friends; at the other end are enemies. A friend inspires unconditional trust, whereas an enemy is someone who continually works against another person's interests regardless of the circumstances. Although the most intense (and often the most time-consuming) connections are those with friends and enemies, the vast majority of business relationships are conditional, with allies and adversaries on opposite ends of the spectrum. Allies will promote another's interests as long as doing so also serves their own self-interest. In contrast, adversaries will work against someone because their self-interest conflicts with the other person's interests. The most important thing about such relationships is their transitory nature: An ally can easily turn into an adversary (and vice versa) given a change in circumstances.

The article reports on experimental studies indicating that the research method known as conjoint analysis could be a valuable market research tool to help companies predict which of several alternative affinity marketing or social-cause marketing affiliations would provide the best return on investment. Case histories suggest that companies have been able to use societal marketing to help differentiate their brands from competitors in consumers' minds. Careful experimental research using conjoint analysis is recommended to refine and test ideas for affinity marketing initiatives against one another and against other kinds of marketing initiatives.

A flexible and coordinated response by the Toyota Group's supplier network enabled the manufacturer to rapidly restore production after a disastrous fire; the self-organized cooperation was enabled by deliberately designed practices that created dense social networks of trust and reciprocity that extended beyond Toyota's boundaries and into the companies of its network of suppliers.

This article presents information about the importance to companies of thoroughly analyzing and managing alliances with other businesses in order to maintain good relationships. The article cites the case of French food company Groupe Danone and its relationship with Hangzhou Wahaha Group Co. Ltd., the leading Chinese bottled water and nonalcoholic beverage company. This profitable relationship ended because Hangzhou accused Danone of having alliances with rival companies. Managers should develop business frameworks that provide proper analysis of such alliances.

For a firm to succeed over the long term it needs to master both adaptability and alignment - an attribute sometimes referred to as ambidexterity. The concept is alluring, but the evidence suggests that most companies have struggled to apply it. The standard approach has been to create separate structures for different types of activities. But separation can also lead to isolation, and many R&D and business development groups have failed because of their lack of linkages to the core businesses. In an attempt to shed new light on the discussion, the authors develop and explore their concept of contextual ambidexterity, which calls for individual employees to make choices between alignment-oriented and adaptation-oriented activities in the context of their day-to-day work. The authors introduce this as a complementary concept to traditional structural ambidexterity. By means of their survey- and interview-based research - which took place over a three-year period and involved 4,195 respondents across 41 business units in 10 multinational firms - the authors identify the four behaviors displayed by ambidextrous individuals, each of which involves taking independent, adaptive action in the service of overall company goals. They then present a framework for describing and analyzing which organizational contexts encourage or discourage such behaviors. They link organizational context to ambidexterity and, in turn, ambidexterity to high performance. Finally, the authors describe how companies such as Nokia, Ericsson, Oracle and Renault have been able to create such high performance contexts, and they offer managers guidance on how to create them in their own companies.

Dozens of markets of all types are in the early stages of a revolution as the Internet and related technologies vastly expand the variety of products that can be produced, promoted and purchased. Although this revolution is based on a simple set of economic and technological drivers, the authors argue that its implications are far-reaching for managers, consumers and the economy as a whole. This article looks at what has been dubbed the "Long Tail" phenomenon, examining how customers derive value from an important characteristic of Internet markets: the ability of online merchants to help consumers locate, evaluate and purchase a far wider range of products than they can typically buy via the traditional brick-and-mortar channels. The article examines the Long Tail from both the supply side and the demand side and identifies several key drivers. On the supply side, the authors point out how e-tailers' expanded, centralized warehousing allows for more offerings, thus making it possible for them to cater to more varied tastes. On the demand side, tools such as search engines, recommender software and sampling tools are allowing customers to find products outside of their geographic area. The authors also look toward the future to discuss second order amplified effects of Long Tail, including the growth of markets serving smaller niches.

Strategy is increasingly a moving target. And despite strategists' and technologists' recognition that developing a productive relationship is critical, it's been hard to build a technology platform to support visions based on capabilities that may or may not exist. Fortunately, say researchers from the University of Oxford and the Warwick University Business School in England, a few enterprises are showing how to successfully bridge the great divide. Chris Sauer and Leslie Willcocks surveyed CEOs and CIOs at 97 companies that had moved or were moving to e-business. As the companies shrank their development and planning cycles, the gap between strategists and technologists grew. But in a few enterprises, the authors spotted inspired players they call "organizational architects." These leaders were generally technology-smart CEOs or business-savvy CIOs who developed mechanisms to force communication between strategists and technologists. The success stories point to the value of companywide transformation, with organizational architects guiding the translation of strategy to a flexible, integrated platform. Dialogue between strategists and technologists makes it possible to define and design structures, processes, capabilities and technologies that have a greater chance of being responsive to organizational goals. In true synergy, the platform is shaped by the vision, and the vision is reshaped by the characteristics of the platform that enable the vision. How do organizational architects keep business and technology concerns united? They view technology and organization as equal influences; they standardize and centralize; they manage change intelligently; and they match capability and ambition. Companies such as Oracle, IBM, the utility Citipower and the investment bank Macquarie (the latter two in Australia) have already strengthened their business-technology alignment by applying one or more of these principles.

Companies make big moves when they change direction with a large commitment of resources. These moves typically involve a different set of products or services, a new customer base or new ways of operating. For many companies, incremental growth is not sufficient, because the changing business landscape is forcing corporate leaders to learn how to reposition their businesses more fundamentally

As far back as 1959, Peter Drucker insisted on the need to pay more attention to knowledge work and the people doing such work. More than 40 years later, the subject still lacks its Frederick Taylor or Henry Ford; at best, it has been explored by approximations of William Morris and the Italian Futurists -artists who expressed an understanding of industrial developments in the late 19th and early 20th centuries. In the spirit of the artists concerned with industrialism a century ago, but with an eye toward more scientific advances, the authors spent more than a year investigating the mysteries of knowledge-worker performance. In the process, they realized that organizations can't begin to increase their understanding of what makes knowledge workers effective until they recognize the importance of such workers as a whole and how to differentiate among them as individuals. In this article, the authors explore five key issues that companies are struggling with and then develop a framework to help organizations think more clearly about how to improve the performance of their knowledge workers. Copyright © Massachusetts Institute of Technology, 2002. All rights reserved.

The article discusses changes in information technology and the ability of businesses to exploit investments in complementary assets. A case study of Schneider National Inc. is presented in order to demonstrate how transformations in information technology interact with strategy, structure, and people. Schneider's implementation of satellite communications and tracking systems is reviewed. The impact which the technological advances and transformations had on drivers, customer service representatives, service team leaders, and dispatchers is examined. Schneider Dedicated and Schneider Logistics, two business units of Schneider National, are evaluated. INSETS: About the Research;The Nine Pieces of Schneider National

According to conventional wisdom, companies resemble organisms destined to pass through the stages of start-up, scaling, maturity and decline. In reality, business opportunities - and not firms - pass through these stages, and most organizations consist of multiple opportunities arrayed across the different stages of the life cycle. Executives who understand this crucial distinction can view their organization as a portfolio of opportunities that requires constant re-jiggering to balance the demands of the present with the promise of the future. The authors suggest that, when assessing any opportunity portfolio, executives should remain on the lookout for the following common pathologies: waiting too long to exit a declining business, failing to salvage usable pieces of a business that is shutdown, shunning promising new markets because of an overly conservative fiscal approach, trying to scale too many business opportunities so that none of them receives the necessary resources), applying the same management style to business opportunities at different life cycle stages, and erring on the side of loss aversion. Copyright © Massachusetts Institute of Technology, 2006. All rights reserved.

In industrial sectors such as consulting, advertising, film-making, software, architecture, engineering and construction, most individual businesses are project-based firms in other words, their activities tend to be organized through the delivery of projects aimed at meeting the highly differentiated and customized needs of clients. These firms depend on executing discrete task-oriented packages for clients, often through temporary coalitions with other project-based organizations, and on routinely combining knowledge and skills in new ways. Of course, as with any business, project-based firms need to maintain internal coherence. But they also require flexibility to respond to opportunities, manage workloads and allocate resources to different projects. As a result, this type of organization, which is becoming increasingly common in developed economies, presents special management and leadership challenges.

A brief synopsis of The Performance Effects of Coaching: A Multilevel Analysis Using Hierarchical Linear Modeling (University of Maryland Robert H. Smith School Research Paper No. RHS 06-031, February 2006) by Ritu Agarwal, Corey M. Angst and Massimo Magni

For companies considering offshoring, there are dangers in taking too narrow a geographical view, say the authors. Every country presents a different mix of strengths and weaknesses. One country may, for instance, have very low labor costs but a high degree of political instability and a small domestic market. Another might offer a wealth of engineering talent but quickly rising labor rates. A third may have robust local markets but intrusive regulatory regimes and a weak transport infrastructure. Currency fluctuations may unexpectedly swell the costs of sourcing from one country, for instance, or a natural disaster may wreak havoc on a critical source of supplies. The authors suggest that offshoring is no different from any investment program that involves choices with widely divergent cost and benefit characteristics in that it makes sense to create a portfolio that balances risk and reward over both the short and long terms. Their research, canvassing 138 manufacturing executives in sectors ranging from automotive to consumer products to technology, confirms the wisdom of a portfolio approach. It reveals that while many companies confine their offshoring efforts to China and India, 96% of cost leaders are active in countries beyond those two, and nearly half of the leaders have offshore activities in three or more additional countries. The authors illustrate their argument with a description of the global outsourcing portfolio strategy of U.S.-based conglomerate Emerson Electric. They conclude with a brief discussion of a number of practical steps executives can take to ensure that their portfolios are constructed successfully.

In an article written well before Enron became a euphemism for corporate irresponsibility, the authors make the case that such misdeeds, so prevalent in recent months, are symptoms of a syndrome of selfishness that has taken hold of our business institutions, our societies and our minds. Drawing on history, literature, philosophy and management thinking, they argue that the syndrome is built on a series of half-truths -or fabrications - each of which has driven a debilitating wedge into society. Our narrow view of ourselves as "economic man" has driven a wedge of distrust between our individual wants and our social needs. A distorted view of shareholder value has driven a wedge of disengagement between those who create economic performance and those who harvest it. Our obsession with heroic leadership has created a wedge of disconnection between leaders and everyone else. The glorification of the "lean and mean" organization has driven a wedge of discontinuity between short-term and long-term goals. And the convenient, widely held notion that "a rising tide lifts all boats" has ratified a wedge of disparity between the prime beneficiaries of stock-price increases and the large numbers of people disadvantaged by the corresponding actions. The authors challenge and deconstruct each of these flawed premises and offer an alternative. Real prosperity, they say, combines economic development with social generosity - and that requires a new philosophy of social and managerial engagement. Copyright © Massachusetts Institute of Technology, 2002. All rights reserved.