Capitalizing on capabilities

By making the most of organizational capabilities--employees' collective skills and fields of expertise--you can dramatically improve your company's market value. Although there is no magic list of proficiencies that every organization needs in order to succeed, the authors identify 11 intangible assets that well-managed companies tend to have: talent, speed, shared mind-set and coherent brand identity, accountability, collaboration, learning, leadership, customer connectivity, strategic unity, innovation, and efficiency. Such companies typically excel in only three of these capabilities while maintaining industry parity in the other areas. Organizations that fall below the norm in any of the 11 are likely candidates for dysfunction and competitive disadvantage. So you can determine how your company fares in these categories (or others, if the generic list doesn't suit your needs), the authors explain how to conduct a "capabilities audit," describing in particular the experiences and findings of two companies that recently performed such audits. In addition to highlighting which intangible assets are most important given the organization's history and strategy, this exercise will gauge how well your company delivers on its capabilities and will guide you in developing an action plan for improvement. A capabilities audit can work for an entire organization, a business unit, or a region--indeed, for any part of a company that has a strategy to generate financial or customer-related results. It enables executives to assess overall company strengths and weaknesses, senior leaders to define strategy, midlevel managers to execute strategy, and frontline leaders to achieve tactical results. In short, it helps turn intangible assets into concrete strengths.     

Competing on capabilities: the new rules of corporate strategy

In the 1980s, companies discovered time as a new source of competitive advantage. In the 1990s, they will discover that time is only one piece of a more far-reaching transformation in the logic of competition. Using examples from Wal-Mart and other highly successful companies, Stalk, Evans, and Shulman of the Boston Consulting Group provide managers with a guide to the new world of "capabilities-based competition." In today's dynamic business environment, strategy too must become dynamic. Competition is a "war of movement" in which success depends on anticipation of market trends and quick response to changing customer needs. In such an environment, the essence of strategy is not the structure of a company's products and markets but the dynamics of its behavior. To succeed, a company must weave its key business processes into hard-to-imitate strategic capabilities that distinguish it from its competitors in the eyes of customers. A capability is a set of business processes strategically understood--for example, Wal-Mart's expertise in inventory replenishment, Honda's skill at dealer management, or Banc One's ability to "out-local the national banks and out-national the local banks." Such capabilities are collective and cross-functional--a small part of many people's jobs, not a large part of a few. Finally, competing on capabilities requires strategic investments in support systems that span traditional SBUs and functions and go far beyond what traditional cost-benefit metrics can justify. A CEO's success in building and managing a company's capabilities will be the chief test of management skill in the 1990s. The prize: companies that combine scale and flexibility to outperform the competition.     

How we went digital without a strategy

Once you say what business you're in, you put your employees into a mental straitjacket and hand them a ready-made excuse for ignoring new opportunities. So rather than dictate his company's identity, Ricardo Semler--the majority owner of Semco in S?o Paulo, Brazil--lets his employees shape it through their individual efforts and interests. "I don't know what Semco is," he writes in this first-person account of his company's expansion from manufacturing to Internet services. "Nor do I want to know." Ten years ago, Semco employees who were selling cooling towers to owners of large commercial buildings heard customers complain about the high cost of maintaining the towers. The salespeople proposed a new business in cooling-tower maintenance, and the venture is now a $30 million property-management business. That initiative led to the creation, with Semco's support, of an on-line exchange to facilitate the management of commercial construction projects. The exchange is revolutionizing the construction process in Brazil and has become a springboard for further Web initiatives such as virtual trade shows. The author shares some of the lessons he has learned along the way: Forget about the top line. Never stop being a start-up. Don't be a nanny (treat your employees like adults). Let talent find its place. Make decisions quickly and openly when it comes to reviewing proposals for new businesses. And partner promiscuously: "Our partners," Semler says, "are as much a part of our company as our employees."     

Creating corporate advantage

What differentiates truly great corporate strategies from the merely adequate? How can executives at the corporate level create tangible advantage for their businesses that makes the whole more than the sum of the parts? This article presents a comprehensive framework for value creation in the multibusiness company. It addresses the most fundamental questions of corporate strategy: What businesses should a company be in? How should it coordinate activities across businesses? What role should the corporate office play? How should the corporation measure and control performance? Through detailed case studies of Tyco International, Sharp, the Newell Company, and Saatchi and Saatchi, the authors demonstrate that the answers to all those questions are driven largely by the nature of a company's special resources--its assets, skills, and capabilities. These range along a continuum from the highly specialized at one end to the very general at the other. A corporation's location on the continuum constrains the set of businesses it should compete in and limits its choices about the design of its organization. Applying the framework, the authors point out the common mistakes that result from misaligned corporate strategies. Companies mistakenly enter businesses based on similarities in products rather than the resources that contribute to competitive advantage in each business. Instead of tailoring organizational structures and systems to the needs of a particular strategy, they create plain-vanilla corporate offices and infrastructures. The company examples demonstrate that one size does not fit all. One can find great corporate strategies all along the continuum.     

动态能力构建与保险公司竞争优势——基于中国保险市场的多案例研究

当前,中国保险市场发展十分迅猛,同时也面临多变和不确定的内外部环境,为研究动态能力提供了理想情境。根据国内外最近研究进展,识别保险公司动态能力的构建维度,探索动态能力和保险公司竞争优势之间的关系。通过对三个案例的研究,发现保险公司的动态能力是个多维度聚合构念,包括感知机会和威胁的能力、对新知识的吸收能力、重构资源基础的能力、产品和服务的创新能力。研究的主要贡献是对保险公司动态能力构念的定义和操作化,以及企业动态能力和保险公司竞争优势之间的关系,对我国保险业的持续健康发展有一定的实践参考价值。     

Fast, global, and entrepreneurial: supply chain management, Hong Kong style. An interview with Victor Fung. Interview by Joan Magretta

Li & Fung, Hong Kong's largest export trading company, has been an innovator in supply chain management--a topic of increasing importance to many senior executives. In this interview, chairman Victor Fung explains both the philosophy behind supply chain management and the specific practices that Li & Fung has developed to reduce costs and lead times, allowing its customers to buy "closer to the market." Li & Fung has been a pioneer in "dispersed manufacturing." It performs the higher-value-added tasks such as design and quality control in Hong Kong, and outsources the lower-value-added tasks to the best possible locations around the world. The result is something new: a truly global product. To produce a garment, for example, the company might purchase yarn from Korea that will be woven and dyed in Taiwan, then shipped to Thailand for final assembly, where it will be matched with zippers from a Japanese company. For every order, the goal is to customize the value chain to meet the customer's specific needs. To be run effectively, Victor Fung maintains, trading companies have to be small and entrepreneurial. He describes the organizational approaches that keep the company that way despite its growing size and geographic scope: its organization around small, customer-focused units; its incentives and compensation structure; and its use of venture capital as a vehicle for business development. As Asia's economic crisis continues, chairman Fung sees a new model of companies emerging--companies that are, like Li & Fung, narrowly focused and professionally managed.     

How CEOs manage growth agendas

When does it make sense for companies to grow from within? When is it better to gain new capabilities or access to markets by merging with or acquiring other companies? When should you sacrifice the bottom line in order to nurture the top line? In a thought-provoking series of essays, five executives--Kenneth Freeman of Quest Diagnostics, George Nolen of Siemens USA, John Tyson of Tyson Foods, Kenneth Lewis of Bank of America, and Robert Creifeld of Nasdaq--describe how they have approached top-line growth in various leadership roles throughout their careers. They write candidly about their struggles and successes along the way, relaying growth strategies as diverse as the companies and industries they represent. The leaders' different tactics have almost everything to do with their companies' particular strengths, weaknesses, and needs. Freeman, for instance, emphasizes the importance of knowing when to put on the brakes. When he first became CEO of Quest, he froze acquisitions for a few years so the company could focus on internal processes and "earn the right to grow." But for Greifeld, it's all about innovation, which "shakes up competitive stasis and propels even mature businesses forward." The executives agree, though, that companies can grow (and can do so profitably) by distinguishing their offerings from those of other organizations. As Ranjay Gulati of Northwestern's Kellogg School of Management points out in his introduction to the essays, no matter what strategies are in play,"it's important to remember that growth comes in many forms and takes patience.... The key is to be ready to act on whatever types of opportunities arise."     

Making strategy: learning by doing

Companies find it difficult to change strategy for many reasons, but one stands out: strategic thinking is not a core managerial competence at most companies. Executives hone their capabilities by tackling problems over and over again. Changing strategy, however, is not usually a task that they face repeatedly. Once companies have found a strategy that works, they want to use it, not change it. Consequently, most managers do not develop a competence in strategic thinking. This Manager's Tool Kit presents a three-stage method executives can use to conceive and implement a creative and coherent strategy themselves. The first stage is to identify and map the driving forces that the company needs to address. The process of mapping provides strategy-making teams with visual representations of team members' assumptions, those pictures, in turn, enable managers to achieve consensus in determining the driving forces. Once a senior management team has formulated a new strategy, it must align the strategy with the company's resource-allocation process to make implementation possible. Senior management teams can translate their strategy into action by using aggregate project planning. And management teams that link strategy and innovation through that planning process will develop a competence in implementing strategic change. The author guides the reader through the three stages of strategy making by examining the case of a manufacturing company that was losing ground to competitors. After mapping the driving forces, the company's senior managers were able to devise a new strategy that allowed the business to maintain a competitive advantage in its industry.     

Creating the most frightening company on earth. An interview with Andy Law of St. Luke's. Interview by Diane L. Coutu

Though only five years old, employee-owned St. Luke's Communications has become one of the most talked about advertising agencies in the United Kingdom, winning numerous awards--though it doesn't enter contests--and increasing its profits eightfold. Chairman and cofounder Andy Law attributes the firm's success to its determination to continuously reinvent itself in a world populated by dot-coms and mega-ad agencies. St Luke's intends to revolutionize the way business is done and provide a credible alternative to the capitalism of both the old economy and the new. To that end, it pushes its people to take enormous risks. As Law says in this candid interview, "We're fundamentally convinced that there is a connection between co-ownership, creativity, collaboration, and competitive advantage." In this interview, Law comments on topics ranging from dot-coms--he calls them old-fashioned--to the hazards of St. Luke's environment. "When I see ... paranoia," he says, "it's a sign there's been too much change." Along the way, he provides concrete examples of how St. Luke's fosters its brand of "confrontative, angry creativity" and manages an organization that is run "like a radical democracy." Safety and fear play key roles. No one has ever been fired for poor performance, so employees can feel secure about their jobs, but the firm requires people "to peel away all the levels of their personalities.... That's truly frightening." Self-knowledge, Law says, "is the DNA of a creative company in the creative age."     

Information technology and the board of directors

Ever since the Y2K scare, boards have grown increasingly nervous about corporate dependence on information technology. Since then, computer crashes, denial of service attacks, competitive pressures, and the need to automate compliance with government regulations have heightened board sensitivity to IT risk. Unfortunately, most boards remain largely in the dark when it comes to IT spending and strategy, despite the fact that corporate information assets can account for more than 50% of capital spending. A lack of board oversight for IT activities is dangerous, the authors say. It puts firms at risk in the same way that failing to audit their books would. Companies that have established board-level IT governance committees are better able to control IT project costs and carve out competitive advantage. But there is no one-size-fits-all model for board supervision of a company's IT operations. The correct approach depends on what strategic "mode" a company is in whether its operations are extremely dependent on IT or not, and whether or not it relies heavily on keeping up with the latest technologies. This article spells out the conditions under which boards need to change their level of involvement in IT decisions, explaining how members can recognize their firms' IT risks and decide whether they should pursue more aggressive IT governance. The authors delineate what an IT governance committee should look like in terms of charter, membership, duties, and overall agenda. They also offer recommendations for developing IT policies that take into account an organization's operational and strategic needs and suggest what to do when those needs change. Given the dizzying pace of change in the world of IT, boards can't afford to ignore the state of their IT systems and capabilities. Appropriate board governance can go a long way toward helping a company avoid unnecessary risk and improve its competitive position.     

A time for growth: an interview with Amgen CEO Kevin Sharer. Interview by Paul Hemp

Fast growth is a nice problem to have--but a hard one to manage well. In this interview, Kevin Sharer, the CEO of biotech giant Amgen, talks about the special challenges leaders face when their companies are on a roll. Sharer, who was also head of marketing at pre-WorldCom MCI and a division head and a staff assistant to Jack Welch at GE, offers insights drawn from his own experience--and from his own self-proclaimed blunders: "I learned the hard way that you need to become credible and enlist support inside the company before you start trying to be a change agent. If you think you're going to make change happen simply by force of personality or position or intellect, you'd better think again." And change there was: Under Sharer's leadership, Amgen overhauled its management team, altered its culture, and launched a couple of blockbuster products. How do chief executives survive in that kind of dizzying environment? "A CEO must always be switching between different altitudes--tasks of different levels of abstraction and specificity," Sharer says. "You might need to spend time working on a redesign of your organizational structure and then quickly switch to drafting a memo to all employees aimed at reinforcing one of the company's values." Having a supportive and capable top team is also key: "A top management team is the most revealing window into a CEO's style, values, and aspirations.... If you don't have the right top team, you won't have the right tiers below them. [The] A players won't work for B players. Maybe with a company like GE, the reputation of the company is so strong that it can attract top people to work for weaker managers. In a new company like Amgen, that won't happen."     

The case of the machinists' mutiny

"You can't be serious!" Mike Trail, the president and fourth-generation owner of Trail Manufacturing, stared at five older men standing in his office. "I'm afraid we are, Mike." Sandy, the most senior of the five, was polite but firm. "We won't switch over to the new equipment." Trail Manufacturing was a small Midwestern company trying to define itself in a new world of competition. Working with engineering chief Marco Duncan, Mike Trail, its young CEO, developed a program to revolutionize the company's manufacturing capability by installing six computerized machining centers. The $4 million automation program was proceeding smoothly, or at least it seemed to be, until the sixth of eight production teams, whose members included the company's most respected machinist, refused to continue participating. Mike canvased his colleagues for suggestions. "We can't let any screw machines remain in operation," Marco insisted. "The problem wasn't just old machines. The problem was--and is--the whole company. We need a clean break with the past." Shop manager Darrell Montgomery didn't necessarily disagree, but he worried about alienating Sandy. "You know what Sandy means to this place," he said. "If it wasn't for him, we never would have survived the startup." Bob Block, the company's CFO, went a step further. He questioned Marco's all-or-nothing vision and counseled compromise. "With half the new cells up, the screw machines are running a lot fewer jobs," he noted. "But they still account for over half our sales and even more of our profits. Maybe these guys are right." Four experts on change examine the crisis at Trail Manufacturing and debate Mike Trail's next step.     

The five competitive forces that shape strategy

In 1979, a young associate professor at Harvard Business School published his first article for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. In exploring the implications of the five forces framework, Porter explains why a fast-growing industry is not always a profitable one, how eliminating today's competitors through mergers and acquisitions can reduce an industry's profit potential, how government policies play a role by changing the relative strength of the forces, and how to use the forces to understand complements. He then shows how a company can influence the key forces in its industry to create a more favorable structure for itself or to expand the pie altogether. The five forces reveal why industry profitability is what it is. Only by understanding them can a company incorporate industry conditions into strategy.     

徐曙光 董事长专业户的成功法则

他曾连续成功创业,并跨越不同的国家、涉足不同的领域。他正是董事长专业户徐曙光。     

Why bad projects are so hard to kill

Even at the prototype stage, experts were saying the technology was obsolete. Yet, in the face of tepid consumer response, the company stubbornly kept increasing production capacity and developing new models. By the time it was finally killed, the initiative had cost the company an astounding $580 million and had tied up resources for 14 years. The product was RCA's SelectaVision videodisc recorder, and its story is hardly unique. Companies make similar mistakes--if on a somewhat smaller scale--all the time. But why? No one comes to work saying, "I'm going to pursue a project that will waste my company millions of dollars." Quite the opposite. They come to work full of excitement about a project they believe in. And that, surprisingly, can be the root of all the trouble--a fervent belief in the inevitability of a project's ultimate success. Starting, naturally enough, with a project's champion, this faith can spread throughout the organization, leading everyone to believe collectively in the product's viability and to view any signs of impending doom merely as temporary setbacks. This phenomenon is documented here in two chillingly detailed case studied, one involving Essilor, the world's largest maker of corrective lenses for eyeglasses, and the other involving Lafarge, the largest producer of building materials. By counterexample, they point the way toward avoiding such morasses: assembling project teams not entirely composed of like-minded people and putting in place--and sticking to--well-defined review processes. Both cases also show that if it takes a project champion to get a project up and running, it may take a new kind of organizational player--an "exit champion"--to push an irrationally exuberant organization to admit when enough is enough.     

The risky business of hiring stars

With the battle for the best and brightest people heating up again, you're most likely out there looking for first-rate talent in the ranks of your competitors. Chances are, you're sold on the idea of recruiting from outside your organization, since developing people within the firm takes time and money. But the authors, who have tracked the careers of high-flying CEOs, researchers, software developers, and leading professionals, argue that top performers quickly fade after leaving one company for another. To study this phenomenon in greater detail, the authors analyzed the ups and downs of more than 1,000 star stock analysts, a well-defined group for which there are abundant data. The results were striking. After a star moves, not only does her performance plunge, but so does the effectiveness of the group she joins--and the market value of her new company. Moreover, transplanted stars don't stay with their new organizations for long, despite the astronomical salaries firms pay to lure them from rivals. Most companies that hire stars overlook the fact that an executive's performance is not entirely transferable because his personal competencies inevitably include company-specific skills. When the star leaves the old company for the new, he cannot take with him many of the resources that contributed to his achievements. As a result, he is unable to repeat his performance in another company--at least not until he learns to work the new system, which could take years. The authors conclude that companies cannot gain a competitive advantage or successfully grow by hiring stars from outside. Instead, they should focus on cultivating talent from within and do everything possible to retain the stars they create. Firms shouldn't fight the star wars, because winning could be the worst thing that happens to them.     

Opening the books

For years, small companies have experimented with forms of open-book management. Open-book systems have smoothed change efforts by giving workers the why instead of just the how of initiatives; they have enabled employees to think like owners. Now divisions of large organizations such as R.R. Donnelley & Sons and Amoco Canada are finding opening the books can work for them, too. It isn't easy, and companies must adapt the principles to their own situations. AES Corporation, for example, found that it had to declare all its employees "insiders" when it went public. One of the reasons for large companies' interest in open-book management is the success of a role-model company, Missouri-based Springfield ReManufacturing. Leaders of divisions of large companies have been able to visit and ask questions. Other early adopters are also showing competitive advantages. Among them are Wabash National, now the nation's leading truck and tractor manufacturer, and Physician Sales & Service, a distributor of supplies to doctors' office. Open-book principles are the same whether a company is large or small: every employee must receive all relevant financial information and be taught to understand it; managers must hold employees accountable for making their unit's goals; and the compensation system must reward everyone for the overall success of the business. Hexacomb Corporation is one large organization that has done well. Workers at the company's seven plants are inspired by a system of splitting profits over budget fifty-fifty: half goes to the company and half to the bonus pool. Such companies are learning the benefits of having everyone work to push the numbers in the right direction.     

The hard side of change management

Everyone agrees that managing change is tough, but few can agree on how to do it. Most experts are obsessed with "soft" issues, such as culture and motivation, but, say the authors, focusing on these issues alone won't bring about change. Companies also need to consider the hard factors-like the time it takes to complete a change initiative, the number of people required to execute it, and so forth. When the authors studied change initiatives at 225 companies, they found a consistent correlation between the outcomes of change programs (success versus failure) and four hard factors, which they called DICE: project duration, particularly the time between project reviews; integrity of performance, or the capabilities of project teams; the level of commitment of senior executives and staff; and the additional effort required of employees directly affected by the change. The DICE framework is a simple formula for calculating how well a company is implementing, or will be able to implement, its change initiatives. The framework comprises a set of simple questions that help executives score their projects on each of the four factors; the lower the score, the more likely the project will succeed. Companies can use DICE assessments to force conversations a bout projects, to gauge whether projects are on track or in trouble, and to manage project portfolios. The authors have used these four factors to predict the outcomes and guide the execution of more than 1,000 change management programs worldwide. Not only has the correlation held, but no other factors (or combination of factors) have predicted outcomes as successfully.     

Rules to acquire by

When Bruce Nolop was an investment banker, he saw only the glamorous side of acquisitions. Since becoming executive vice president and chief financial officer of Pitney Bowes, however, he's learned how hard it is to pull them off. In this article, he shares the lessons his organization has learned throughout its successful six-year acquisition campaign, which comprised more than 70 deals: Stick to adjacent spaces, take a portfolio approach, have a business sponsor, know how to judge an acquisition, and don't shop when you're hungry. Pitney Bowes's management and board of directors now use these five basic rules to chart the company's growth course. For example, when evaluating a potential acquisition, Pitney Bowes distinguishes between "platform" and "bolt-on" acquisitions to set expectations and guide integration efforts; the company applies different criteria, depending on the type. According to Nolop, any company can improve its acquisition track record if it is able to learn from experience, and he suspects that Pitney Bowes's rules apply just as well to other organizations. Buying a company should be treated like any other business process, he maintains. It should be approached deliberately and reviewed and improved constantly. That means mapping a complex chain of actions; paying attention to what can go right or wrong at different stages; and using standard, constantly honed, approaches and tools.     

Do you have a well-designed organization?

For most companies, organization design is neither a science nor an art; it's an oxymoron. Organizational structures evolve in fits and starts, shaped more by politics than by policies. Although most executives can sense when their organization designs are not working well, few take meaningful action, partly because they lack a practical framework to guide them. The authors of this article provide just such a framework; they present nine tests that can be used to either evaluate an existing organization design or create a new one. Four "fit" tests offer an initial screen: The market advantage test asks whether a design directs sufficient management attention to the company's sources of competitive advantage; the parenting advantage test determines whether the design gives enough attention to the corporate-level activities that provide real value to the company; the people test shows whether the design reflects the employees' strengths; and the feasibility test looks at constraints that may impede implementation. Five "good design" tests can help a company refine its prospective design. The specialist cultures test ensures that there's sufficient insulation for units that need to be different from the prevailing culture; the difficult-links test determines whether a design offers solutions for potentially problematic unit-to-unit links; the redundant-hierarchy test asks whether the design has too many parent levels; the accountability test looks at whether every unit has suitable controls; and the flexibility test ensures that the design lets the company adapt to change. Once a design is altered, the tests should be repeated. Organizational decisions are inevitably complex, and tweaking one part of the design may produce unanticipated consequences elsewhere.