High-performance marketing: an interview with Nike's Phil Knight. Interview by Geraldine E. Willigan

Nike's advertising slogans--"Bo Knows," "Just Do It," and "There Is No Finish Line"--have moved beyond advertising into popular expression. Its athletic footwear and clothing have become a piece of Americana. Its brand name is as well known around the world as IBM and Coke. Behind the slogans and the flashy TV commercials is the vision of its founder, chairman, and CEO, Phil Knight. Since forming the company in 1962, Knight has taken Nike from a small-time distributor of Japanese track shoes to the top of the athletic shoe and apparel market. But not without a stumble. Along the way, Knight discovered that technological innovation alone could not continue to drive growth. When sales stagnated in the mid-1980s, Knight and Nike learned several hard lessons on how to build brands and understand consumers, and they transformed their technology company into a marketing company whose product is its most important marketing tool. "Ultimately," says Knight, "we wanted Nike to be the world's best sports and fitness company. Once you say that, you have a focus. You don't end up making wing tips or sponsoring the next Rolling Stones world tour." To keep the company growing, Nike began splitting its brands into sub-brands. In tennis, Nike divided its shoes into Challenge Court--for younger, more active players--and Supreme Court--for older, more mature players. That approach brought the company to a broader range of consumers while preserving the customer base. And to create an emotional tie with the consumer, Nike started advertising on TV. "Sports is at the heart of American culture," Knight says. "You can't explain much in 60 seconds, but when you show Michael Jordan, you don't have to. It's that simple."     

The value-adding CFO: an interview with Disney's Gary Wilson. Interview by Geraldine E. Willigan

Financing a company is more complex than ever-and more important to its economic success. The demands on a CFO are tremendous. Optimizing capital costs requires an unprecedented level of technical sophistication. Yet the best CFOs today are not mere technicians. They are also strategists and innovators. Gary Wilson exemplifies the new CFO. In his 5 years as executive vice president and CFO of the Walt Disney Company and his 12 years at Marriott Corporation, he has shown how the finance function can add value-not just account for it. How does a CFO create value for shareholders? "Just like all the great marketing and operating executives," Wilson says, "by being creative." To Wilson, being creative means rethinking assumptions and finding clever ways to achieve financial and strategic goals. Some of Wilson's innovative deal making-like the off-balance-sheet financing he used at Marriott-is well known. At Marriott, he discovered the power of separating the ownership of an asset from its control. Marriott's strength was in operations, yet the company had a great deal of money tied up in real estate. Growth would require even more investment in real estate. Wilson's solution was to sell the hotels-in effect, removing them and the debt used to finance them from the balance sheet-and contract to operate them. In this interview, Wilson gives his view of the role of finance in today's corporation and explains the thinking behind some of the successful deals he has engineered-including Disney's Silver Screen movie-making partnerships and Euro Disneyland.     

Profits with a purpose: an interview with Tom Chapman. Interview by Nancy A. Nichols

Greater Southeast Community Hospital is located in the center of one of Washington, D.C.'s most troubled and isolated neighborhoods. Like so many inner-city hospitals, it serves a population struggling with high rates of poverty, crime, and illiteracy. As a result, the area suffers from the highest rates of infant mortality, cancer, and coronary disease in the D.C. area. When Tom Chapman joined the hospital in 1984, it was giving away roughly 11% of its care-or about $11.5 million worth of medical services to indigent residents. If things continued at that rate, the hospital would soon go out of business. His challenge: to keep Greater Southeast solvent while shoring up the community that surrounds it. Chapman, who grew up in a housing project himself, understands the problems of inner cities innately. Working in tandem with community residents, Greater Southeast has developed a broad range of preventive and supportive programs, such as housing, day care for children and the elderly, nursing home services, and literacy training. Last year, Chapman was promoted to CEO of Greater Southeast Health Care, a broad network comprising two hospitals, three nursing homes, a physician care network, and over 50 community programs. He remains true to his original mission: "I want to create a network of participants, stringing together various organizations and players, each of whom have something special to contribute to urban problems.... What we are really doing is creating a community."     

Trial-by-fire transformation: an interview with Globe Metallurgical's Arden C. Sims. Interview by Bruce Rayner

Globe Metallurgical Inc., a $115 million supplier of specialty metals, is best known as the first small company to win the Baldrige Award in 1988. But there is much more to this gutsy little company than total quality. During the 1980s, Globe transformed itself from a rust-belt has-been on the verge of bankruptcy into a high-technology, high-quality industry leader. Along the way, the company went private in a management-led leveraged buyout, embraced flexible work teams, adopted a high-value-added, niche marketing strategy, and took its business global. Leading the way in Globe's reinvention was Chief Executive Arden C. Sims, the slow-talking son of a West Virginian coal miner. When he joined the company in 1984, Sims had no experience in the new managerial techniques. He was a product of the old school of management: cut costs and trim operations to regain competitiveness. But he soon discovered that old-style management was not enough to battle offshore competitors, an unproductive work force, rising costs, and outdated production technology. He was forced to go looking for new ideas and practices. In a succession of learning experiences, Sims attended a seminar on total quality in 1985, paving the way for the company's quality program; he discovered the power of flexible work teams when management was forced to run the furnaces during a year-long strike; he organized an LBO, allowing him to change the work order even more dramatically; and he took the company global and into highly profitable niche markets by severing a long-standing relationship with Globe's sales and marketing representative. As a result of these and other changes, Globe leads the specialty metals industry in virtually all performance measures.     

The CEO as organizational architect: an interview with Xerox's Paul Allaire. Interview by Robert Howard

As chairman and CEO of the Xerox Corporation, Paul Allaire leads a company that is a microcosm of the changes transforming American business. With the introduction of the first plain-paper copier in 1959, Xerox invented a new industry and launched itself on a decade of spectacular growth. But easy growth led Xerox to neglect the fundamentals of its core business, leaving the company vulnerable to low-cost Japanese competition. Starting in the mid-1980s, Xerox embarked on a long-term effort to regain its dominant position in world copier markets and to create a new platform for future growth. Thanks to the company's Leadership through Quality program, Xerox became the first major U.S. company to win back market share from the Japanese. Allaire describes his efforts to take Xerox's corporate transformation to a new level. Since becoming CEO in 1990, he has repositioned Xerox as "the document company" at the intersection of the worlds of paper-based and electronic information. And he has guided the company through a fundamental redesign of what he calls the "organizational architecture" of Xerox's document processing business. Few CEOs have approached the process of organizational redesign as systematically and methodically as Allaire has. He has created a new corporate structure that balances independent business divisions with integrated R&D and customer operations organizations. He has redefined managerial roles and responsibilities, changed the way managers are selected and compensated, and renewed the company's senior management ranks. And he has articulated the new values and behaviors Xerox managers will need to thrive in a more competitive and fast-changing business environment.     

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."     

Organizing for empowerment: an interview with AES's Roger Sant and Dennis Bakke. Interview by Suzy Wetlaufer.

The topic of empowerment is receiving a lot of attention, but how many employees are truly empowered? At the global electricity giant AES Corporation, the answer is all 40,000 of them. In this interview, chairman Roger Sant and CEO Dennis Bakke reflect on their trials and triumphs in creating an exceptional company and explain how their employee-run company works. When they founded AES in 1981, Sant and Bakke set out to create a company where people could have engaging experiences on a daily basis--a company that embodied the principles of fairness, integrity, social responsibility, and fun. Putting those principles into action has created something unique--an ecosystem of real empowerment. What does that system look like? Rather than having a traditional hierarchical chain of command, AES is organized around small teams that are responsible for operations and maintenance. Moreover, AES has eliminated functional departments; there's no corporate marketing division or human resources department. For the system to work, every person must become a well-rounded generalist--a mini-CEO. That, in turn, redefines the jobs of the people at headquarters. Instead of setting strategy and making the "the big decisions," Sant and Bakke act as advisers, guardians of the principles, accountability officers, and chief encouragers. Can other companies successfully adopt the mechanics of such a system? Not unless they first adopt the shared principles that have guided AES since its inception. "Empowerment without values isn't empowerment," says Sant. "It's just technique," adds Bakke.     

How to restore the fiduciary relationship. An interview with Eliot Spitzer. Interview by Louise O'Brien

Eliot Spitzer's investigations into the mutual fund and investment-banking industries have made the New York State attorney general the de facto flag bearer of corporate reform. His exposure of conflicts of interest between investment bankers and research analyst in Wall Street firms led to the $1.4 billion global settlement between regulators and banking houses in 2003. In this interview, Spitzer describes the challenge of protecting public markets from conflicts of interest, paying particular attention to how such conflicts get institutionalized in an industry. "The cases that have gotten me and my fellow regulators most upset are the ones where we've seen senior management being tolerant of rank abuses," he says. "Because then you know that the entire structure is rotten." He also points the finger squarely at boards, maintaining that board members are drawn from pools of company and industry insiders. He cites "a void in values in a lot of boardrooms," holding up executive compensation as a powerful example. "Board compensation committees ... are self-selected and interwoven--it's a rigged marketplace." He continues, "It would be interesting to see what the world would look like if CEO pay packages had to be submitted to shareholder votes." Spitzer suggests that what's really needed is for all business leaders to reinstill throughout their organizations the critical notion of a fiduciary duty--whether it is to the shareholder or to the customer. Using the mutual fund industry as an example, he also contrasts the value of enforcement with that of regulation and articulates an important--and surprisingly limited--role for government in protecting free markets.     

Mastering the value chain. An interview with Mark Levin of Millennium Pharmaceuticals. Interview by David Champion.

As today's business leaders are all too aware, a new scientific or technological break-through can quickly transform an industry's competitive landscape. The upheaval is often traumatic for the companies involved, forcing them to rethink their strategies and redefine their boundaries. But an industry in flux also creates vast opportunities. To seize them, companies must see how the current upheavals will affect the future distribution of profits--and then reinvent themselves to capitalize on the new sources of value. In this interview with HBR senior editor David Champion, Mark Levin, the founder and CEO of Millennium Pharmaceuticals, describes his vision of the future of the pharmaceutical industry in the wake of the genetics revolution and new technologies that have altered the economics of drug development. No company, he argues, will create serious long-term value by staying in just one or two stages of the value of chain. That's why Millennium, which started out doing basis research into genes and proteins and selling its findings to pharmaceutical giants, has moved downstream - toward the patients who actually use and pay for the drugs. He explains why the research end has become less lucrative than the more mechanical tasks of identifying, testing, and manufacturing molecules. Levin talks about the changes Millennium has undergone since its inception in 1993-from 30 workers to more than 1,000, and from one end of the value chain to the other. He discusses the company's cultural transformations as well as the partnerships and acquisitions that have helped millennium become involved in every stage of the chain-from gene to patient. Levin's vigorous approach to balancing long-term strategy with short-term tactics offers important lessons to any executive facing an industry upheaval.     

Leading through rough times. An interview with Novell's Eric Schmidt. Interview by Bronwyn Fryer

Few large companies have soared as high, sunk as low, and struggled as long as the 18-year-old networking software maker Novell. For years, the company dominated the market for local area networks, but by 1997, it had faltered due to misguided acquisitions, product missteps, and large unsold inventories. That's when Eric Schmidt arrived from Sun Microsystems to take over as Novell's third CEO. He turned the company around with a deft combination of cost reductions, divestitures, and new product rollouts, and by 1998, it was back in the black. Unfortunately, the good times didn't last, and like most technology companies, Novell is once again struggling with a slowdown in demand. But Schmidt is optimistic about returning Novell to good health, and his strategies suggest ways for other organizations to handle themselves during downturns. He counsels against being overly cautious during such times. It may be necessary to eliminate excess inventory, cut costs, and reduce the size of the staff and the management team in order to stabilize a company. Working to retain those employees whom he calls the "smart people" and keeping them motivated will have long-term payoffs. Further, Schmidt says it is necessary to acknowledge and overcome a "culture of fear," the deadening environment of cynicism in which employees suppress thoughts and feelings because they're worried about layoffs. His additional advice: keep new products coming out to sustain the interest of customers and the press, pay attention to your cash position, stay focused on your desired outcomes, and take heart from other industry leaders.     

High tech the old-fashioned way. An interview with Tom Siebel of Siebel Systems. Interview by Bronwyn Fryer

There is a growing awareness among corporations that the quality of the customer experience they provide directly affects their bottom line. Many are turning to high-flying software maker Siebel Systems for help in managing those relationships. The young company holds a leadership position in an explosive market-enterprise application software. But customer satisfaction, not dot-com chic, is foremost on the mind of Siebel Systems' founder, chairman, and CEO, Tom Siebel. The buttoned-down Siebel rejects the freewheeling management style and culture that characterize many Silicon Valley companies. As the former CEO of Gain Technology and a former executive at Oracle, Siebel believes in putting customers ahead of technology, discipline ahead of inspiration. In this interview, conducted at the company's San Mateo, California, headquarters, Siebel describes how this obsessive focus on customer satisfaction has been the driving force behind the company's success. He talks about how the organization remains true to its core values: a deep commitment to providing customer satisfaction; responsible fiscal practices that have created a cash-positive business amid today's cash-negative dot-coms; and general professionalism. "The notion of dressing in jeans and a T-shirt to greet the CEO of a major financial institution who just got off the plane from Munich is not acceptable," he says. Siebel Systems rejects the concept of going to war with rivals; instead, the CEO says, the company has forged an ecosystem of partnerships that allows it to support and integrate its own systems with other companies' software products and ultimately ease the customer's software installations. Indeed, Siebel says, the CEO's most important job is to understand what customers need and deliver that.     

The anxiety of learning. Interview by Diane L. Coutu

Despite all the time, money, and energy that executives pour into corporate change programs, the stark reality is that few companies ever succeed in genuinely reinventing themselves. That's because the people at those companies rarely master the art of transformational learning--that is, eagerly challenging deeply held assumptions about a company's processes and, in response, altering their thoughts and actions. Instead, most people just end up doing the same old things in superficially tweaked ways. Why is transformational learning so hard to achieve? HBR senior editor Diane Coutu explores this question with psychologist and MIT professor Edgar Schein, a world-renowned expert on organizational development. In sharp contrast to the optimistic rhetoric that permeates the debate on corporate learning and change, Schein is cautious about what companies can and cannot accomplish. Corporate culture can change, he says, but this kind of learning takes time, and it isn't fun. Learning is a coercive process, Schein argues, that requires blood, sweat, tears, and a certain level of anxiety to achieve the desired effect. In this article, he describes two basic types of anxiety--learning anxiety and survival anxiety--that drive radical relearning in organizations. Schein's theories spring from his early research on how American prisoners of war in Korea had been brainwashed by their captors. He cites the parallels between the "coercive persuasion" tactics the Chinese communists used to control their prisoners (isolating powerful ones and overseeing all communications) and the corporate boot camps that American companies use to indoctrinate their managers. Indeed, heavy socialization is back in style in U.S. corporations today, Schein says, even if no one is calling it that.     

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."     

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.     

Sense and reliability. A conversation with celebrated psychologist Karl E. Weick. Interview by Diane L. Coutu

Most of us see the organizations we operate in--our schools or companies, for instance--as monolithic and predictable, subjecting us to deadening routines and demanding dehumanizing conformity. But companies are more unpredictable and more alive than we imagine, according to Karl Weick, a psychology professor at the University of Michigan and an expert on organizational behavior. Weick says executives can learn a lot about managing the unexpected from organizations that can't afford surprises in the workplace--nuclear plants, firefighting units, or emergency rooms, for instance. In this conversation with HBR senior editor Diane Coutu, Weick examines the characteristics of these high-reliability organizations (HROs) and suggests ways that other organizations can implement their practices and philosophies. The key difference between high-reliability organizations and other companies is the mindfulness with which people in most HROs react to even very weak signs that some kind of change or danger is approaching. For instance, nuclear-plant workers Weick has studied immediately readjust dials and system commands when an automated system doesn't respond as expected. Weick contrasts this with Ford's inability to pick up on weak signs in the 1970s that there were lethal problems with the design of the Pinto gas tank. HROs are fixated on failure. They eschew plans and blueprints, looking instead for the details that might be missing. And they refuse to simplify reality, Weick says. Indeed, by cultivating broad work experiences and enlarging their repertoires, generalist executives can avoid getting paralyzed by "cosmology episodes"--events that make people feel as though the universe is no longer a rational, orderly system.