Managing global accounts

Global account management--which treats a multinational customer's operations as one integrated account, with coherent terms for pricing, product specifications, and service--has proliferated over the past decade. Yet according to the authors' research, only about a third of the suppliers that have offered GAM are pleased with the results. The unhappy majority may be suffering from confusion about when, how, and to whom to provide it. Yip, the director of research and innovation at Capgemini, and Bink, the head of marketing communications at Uxbridge College, have found that GAM can improve customer satisfaction by 20% or more and can raise both profits and revenues by at least 15% within just a few years of its introduction. They provide guidelines to help companies achieve similar results. The first steps are determining whether your products or services are appropriate for GAM, whether your customers want such a program, whether those customers are crucial to your strategy, and how GAM might affect your competitive advantage. If moving forward makes sense, the authors' exhibit, "A Scorecard for Selecting Global Accounts," can help you target the right customers. The final step is deciding which of three basic forms to offer: coordination GAM (in which national operations remain relatively strong), control GAM (in which the global operation and the national operations are fairly balanced), and separate GAM (in which a new business unit has total responsibility for global accounts). Given the difficulty and expense of providing multiple varieties, the vast majority of companies should initially customize just one---and they should be careful not to start with a choice that is too ambitious for either themselves or their customers to handle.     

Finding your next core business

How do you know when your core needs to change? And how do you determine what should replace it? From an in-depth study of 25 companies, the author, a strategy consultant, has discovered that it's possible to measure the vitality of a business's core. If it needs reinvention, he says, the best course is to mine hidden assets. Some of the 25 companies were in deep crisis when they began the process of redefining themselves. But, says Zook, management teams can learn to recognize early signs of erosion. He offers five diagnostic questions with which to evaluate the customers, key sources of differentiation, profit pools, capabilities, and organizational culture of your core business. The next step is strategic regeneration. In four-fifths of the companies Zook examined, a hidden asset was the centerpiece of the new strategy. He provides a map for identifying the hidden assets in your midst, which tend to fall into three categories: undervalued business platforms, untapped insights into customers, and underexploited capabilities. The Swedish company Dometic, for example, was manufacturing small absorption refrigerators for boats and RVs when it discovered a hidden asset: its understanding of, and access to, customers in the RV market. The company took advantage of a boom in that market to refocus on complete systems for live-in vehicles. The Danish company Novozymes, which produced relatively low-tech commodity enzymes such as those used in detergents, realized that its underutilized biochemical capability in genetic and protein engineering was a hidden asset and successfully refocused on creating bioengineered specialty enzymes. Your next core business is not likely to announce itself with fanfare. Use the author's tools to conduct an internal audit of possibilities and pinpoint your new focus.     

Issues in Marketing Online Insurance Products: An Exploratory Look at Agents' Use, Attitudes, and Views of the Impact of the Internet

This article uses a survey of insurance agents in Florida to examine the manner in which insurance agents use and view the Internet as a method of marketing insurance products. The results of the survey suggest that the agents’ use of the Web and their attitudes toward the Web do not vary by demographic characteristics (including age, education level, gender, and income). In addition, the agents’ perception of the Internet as a threat (rather than an opportunity) does not vary by age or education level and is not correlated with their attitudes toward the use of the Web. However, while Internet marketing and other means of direct selling are viewed by the agents as equal threats to their sales, the agents believe that such marketing by other companies is a greater threat than that done by the companies they represent.     

Arm yourself for the coming battle over Social Security

The U.S. Social Security system is in deep trouble--and that's not just bad news for your friends and family. It's also bad news for your company. Unless the Social Security system is changed, by 2017 the cash flowing out of it will exceed the cash coming in, and by 2041 the system will be utterly insolvent. But the trouble will start sooner than that: In the next decade, the very prospect of the rising deficit will mean serious pressure on recent tax cuts, higher long-term interest rates, increased pension-funding costs, and other punishing conditions for U.S. businesses. Clearly, there's a lot at stake for companies, which is why executives need to participate in the growing debate about Social Security reform, says Robert Pozen, a visiting professor at Harvard Law School who served on the President's Commission to Strengthen Social Security. In this article, he urges business leaders to take a stance on how the system should be reformed, suggesting they work with interest groups to make their voices heard. After taking a comprehensive look at the debates surrounding Social Security reform, Pozen outlines the three main alternatives executives might choose to support: increasing contributions to Social Security, decreasing the growth of benefits for more-affluent workers, and increasing investment returns on Social Security assets. What's needed to fix the current system, he contends, is a careful balance of all three.     

Beyond offshoring: assess your company's global potential

In the past few years, companies have become aware that they can slash costs by offshoring: moving jobs to lower-wage locations. But this practice is just the tip of the iceberg in terms of how globalization can transform industries, according to research by the McKinsey Global Institute (MGI). The institute's yearlong study suggests that by streamlining their production processes and supply chains globally, rather than just nationally or regionally, companies can lower their costs-as we've seen in the consumer-electronics and PC industries. Companies can save as much as 70% of their total costs through globalization--50% from offshoring, 5% from training and business-task redesign, and 15% from process improvements. But they don't have to stop there. The cost reductions make it possible to lower prices and expand into new markets, attracting whole new classes of customers. To date, however, few businesses have recognized the full scope of performance improvements that globalization makes possible, much less developed sound strategies for capturing those opportunities. In this article, Diana Farrell, director of MGI, offers a step-by-step approach to doing both things. Among her suggestions: Assess where your industry falls along the globalization spectrum, because not all sectors of the economy face the same challenges and opportunities at the same time. Also, pay attention to production, regulatory, and organizational barriers to globalization. If any of these can be changed, size up the cost-saving (and revenue-generating) opportunities that will emerge for your company as a result of those changes. Farrell also defines the five stages of globalization-market entry, product specialization, value chain disaggregation, value chain reengineering, and the creation of new markets-and notes the different levers for cutting costs and creating value that companies can use in each phase.     

Predictable surprises: the disasters you should have seen coming

Think hard about the problems in your organization or about potential upheavals in the markets in which you operate. Could some of those problems--ones no one is attending to--turn into disasters? If you're like most executives, you'll sheepishly answer yes. As Harvard Business School professors Michael Watkins and Max Bazerman illustrate in this timely article, most of the "unexpected" events that buffet companies should have been anticipated--they're "predictable surprises." Such disasters take many forms, from financial scandals to disruptions in operations, from organizational upheavals to product failures. Some result in short-term losses or distractions, while others cause damage that takes years to repair. Some are truly catastrophic--the events of September 11, 2001, are a tragic example of a predictable surprise. The bad news is that all companies, including your own, are vulnerable to predictable surprises. The good news is that recent research helps explain why that's so and what companies can do to minimize their risk. The authors contend that organizations' inability to prepare for predictable surprises can be traced to three sets of vulnerabilities: psychological, organizational, and political. To address these vulnerabilities, the authors recommend the RPM approach. More than just the usual environmental scanning and contingency planning, RPM requires a chain of actions--recognizing, prioritizing, and mobilizing--that companies must meticulously adhere to. Failure to apply any one of these steps, the authors say, can leave an organization vulnerable. Given the extraordinarily high stakes involved, it should be every business leader's core responsibility to apply the RPM approach, the authors conclude.     

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.     

Behave yourself. Interview by Gardiner Morse

Executive consultant Marshall Goldsmith tells his CEO clients that he's not the real coach; the people around them are. To change your behavior, he says, quit whining about the past and start asking your colleagues how you can do better. You're not done until they think you are.     

Developing products on Internet time

The rise of the World Wide Web has provided one of the most challenging environments for product development in recent history. The market needs that a product is meant to satisfy and the technologies required to satisfy them can change radically--even as the product is under development. In response to such factors, companies have had to modify the traditional product-development process, in which design implementation begins only once a product's concept has been determined in its entirety. In place of that traditional approach, they have pioneered a flexible product-development process that allows designers to continue to define and shape products even after implementation has begun. This innovation enables Internet companies to incorporate rapidly evolving customer requirements and changing technologies into their designs until the last possible moment before a product is introduced to the market. Flexible product development has been most fully realized in the Internet environment because of the turbulence found there, but the foundations for it exist in a wide range of industries where the need for responsiveness is paramount. When technology, product features, and competitive conditions are predictable or evolve slowly, a traditional development process works well. But when new competitors and technologies appear overnight, when standards and regulations are in flux, and when a company's entire customer base can easily switch to other suppliers, businesses don't need a development process that resists change--they need one that embraces it.     

MarketBusting: strategies for exceptional business growth

If company leaders were granted a single wish, it would surely be for a reliable way to create new growth businesses. Business practitioners'overwhelming interest in this subject prompted the authors to conduct a three-year study of organizational growth--specifically, to find out which growth strategies were most successful. They discovered, somewhat to their surprise, that even companies in mature industries found rich new sources of growth when they reconfigured their unit of business (what they bill customers for) or their key metrics (how they measure success). In this article, the authors outline these and other moves companies can make to redefine their profit drivers and realize low-risk growth. They offer plenty of real-world examples. For instance: CHANGING YOUR UNIT OF BUSINESS: Once a conventional printing house, Madden Communications not only prints promotional materials for customers but also manages the distribution and installation of those materials on-site. Its revenues grew from dollars 1o million in 1990 to dollars 133 million in 2004, in an industry that many had come to regard as hopelessly mature. IMPROVING YOUR KEY METRICS-PARTICULARLY PRODUCTIVITY: Lamons Gasket, with dollars 80 million in revenues, built a Web site that radically improved its customers' ability to find, order, and pay for goods. The firm's market share rose along with its customer retention rate. The authors also suggest ways to identify your unit of business and associated key metrics and recognize the obstacles to changing them; review the key customer segments you serve; assess the need for new capabilities and the potential for internal resistance to change; and communicate to internal and external constituencies the changes you wish to make in your unit of business or key metrics.     

The half-truth of first-mover advantage

Many executives take for granted that the first company in a new product category gets an unbeatable head start and reaps long-lasting benefits. But that doesn't always happen. The authors of this article discovered that much depends on the pace at which the category's technology is changing and the speed at which the market is evolving. By analyzing these two factors, companies can improve their odds of succeeding as first movers with the resources they possess. Gradual evolution in both the technology and the market provides a first mover with the best conditions for creating a dominant position that is long lasting (Hoover in the vacuum cleaner industry is a good example). In such calm waters, a company can defend its advantages even without exceptional skills or extensive financial resources. When the market is changing rapidly and the product isn't, a first entrant with extensive resources can obtain a long-lasting advantage (as Sony did with its Walkman personal stereo); a company with only limited resources probably must settle for a short-term benefit. When the market is static but the product is changing constantly, first-mover advantages of either kind--durable or short-lived--are unlikely. Only companies with very deep pockets can survive (think of Sony and the digital cameras it pioneered). Rapid churn in both the technology and the market creates the worst conditions. But if companies have an acute sense of when to exit-as Netscape demonstrated when it agreed to be acquired by AOL-a worthwhile short-term gain is possible. Before venturing into a newly forming market, you need to analyze the environment, assess your resources, then determine which type offirst-mover advantage is most achievable. Once you've gone into the water, you have no choice but to swim.     

Getting past yes: negotiating as if implementation mattered

Many deals that look good on paper never materialize into value-creating endeavors. Often, the problem begins at the negotiating table. In fact, the very person everyone thinks is pivotal to a deal's success--the negotiator--is often the one who undermines it. That's because most negotiators have a deal maker mind-set: They see the signed contract as the final destination rather than the start of a cooperative venture. What's worse, most companies reward negotiators on the basis of the number and size of the deals they're signing, giving them no incentive to change. The author asserts that organizations and negotiators must transition from a deal maker mentality--which involves squeezing your counterpart for everything you can get--to an implementation mind-set--which sets the stage for a healthy working relationship long after the ink has dried. Achieving an implementation mind-set demands five new approaches. First, start with the end in mind: Negotiation teams should carry out a "benefit of hindsight" exercise to imagine what sorts of problems they'll have encountered 12 months down the road. Second, help your counterpart prepare. Surprise confers advantage only because the other side has no time to think through all the implications of a proposal. If they agree to something they can't deliver, it will affect you both. Third, treat alignment as a shared responsibility. After all, if the other side's interests aren't aligned, it's your problem, too. Fourth, send one unified message. Negotiators should brief implementation teams on both sides together so everyone has the same information. And fifth, manage the negotiation like a business exercise: Combine disciplined negotiation preparation with post-negotiation reviews. Above all, companies must remember that the best deals don't end at the negotiating table--they begin there.     

Strategy and your stronger hand

There are two kinds of businesses in the world, says the author. Knowing what they are--and which one your company is--will guide you to the right strategic moves. One kind includes businesses that compete on a complex-systems model. These companies have large enterprises as their primary customers. They seek to grow a customer base in the thousands, with no more than a handful of transactions per customer per year (indeed, in some years there may be none), and the average price per transaction ranges from six to seven figures. In this model, 1,000 enterprises each paying dollar 1 million per year would generate dollar 1 billion in annual revenue. The other kind of business competes on a volume-operations model. Here, vendors seek to acquire millions of customers, with tens or even hundreds of transactions per customer per year, at an average price of relatively few dollars per transaction. Under this model, it would take 10 million customers each spending dollar 8 per month to generate nearly dollar 1 billion in revenue. An examination of both models shows that they could not be further apart in their approach to every step along the classic value chain. The problem, though, is that companies in one camp often attempt to create new value by venturing into the other. In doing so, they fail to realize how their managerial habits have been shaped by the model they've grown up with. By analogy, they have a "handedness"--the equivalent of a person's right- or left-hand dominance--that makes them as adroit in one mode as they are awkward in the other. Unless you are in an industry whose structure forces you to attempt ambidexterity (in which case, special efforts are required to manage the inevitable dropped balls), you'll be far more successful making moves that favor your stronger hand.     

Using VoIP to compete

Internet telephony, or VoIP, is rapidly replacing the conventional kind. This year, for the first time, U.S. companies bought more new Internet-phone connections than standard lines. The major driver behind this change is cost. But VoIP isn't just a new technology for making old-fashioned calls cheaper, says consultant Kevin Werbach. It is fundamentally changing how companies use voice communications. What makes VoIP so powerful is that it turns voice into digital data packets that can be stored, copied, combined with other data, and distributed to virtually any device that connects to the Internet. And it makes it simple to provide all the functionality of a corporate phone-call features, directories, security-to anyone anywhere there's broadband access. That fosters new kinds of businesses such as virtual call centers, where widely dispersed agents work at all hours from their homes. The most successful early adopters, says Werbach, will focus more on achieving business objectives than on saving money. They will also consider how to push VoIP capabilities out to the extended organization, making use of everyone as a resource. Deployment may be incremental, but companies should be thinking about where VoIP could take them. Executives should ask what they could do if, on demand, they could bring all their employees, customers, suppliers, and partners together in a virtual room, with shared access to every modern communications and computing channel. They should take a fresh look at their business processes to find points at which richer and more customizable communications could eliminate bottlenecks and enhance quality. The important dividing line won't be between those who deploy Vol P and those who don't, or even between early adopters and laggards. It will be between those who see Vol P as just a new way to do the same old things and those who use itto rethink their entire businesses.     

The determinants of Internet financial reporting

Responding to the widespread adoption of the Internet and the rapidly growing demands for information from stakeholders, corporations around the world are using the Internet for business and financial disclosures. Internet reporting has the benefits of low cost, wider reach, frequency and speed. Despite these benefits Internet reporting varies across companies and across countries. We study Internet financial reporting (IFR), in particular the presentation and content of IFR, of 660 large companies in 22 countries to identify the firm, and environmental determinants of IFR. The study revealed that firm size, listing on US stock exchanges and technology were firm specific determinants of IFR. Given that IFR is not just about the content of disclosure, but also about employing new presentation methods, the environment of disclosure was included in the research. The overarching disclosure environment of a country was found to be an important environmental driver for IFR presentation and less strongly for IFR content. The presentation aspect of IFR was more associated with the identified determinants than the content of IFR, which suggests that Internet presentation technologies were more related to the determinants than the content of the reports on the company Web sites.     

The coming battle for customer information

Companies collect information about customers to target valuable prospects more effectively, tailor their offerings to individual needs, improve customer satisfaction, and identify opportunities for new products or services. But managers' efforts to capture such information may soon be thwarted. The authors believe that consumers are going to take ownership of information about themselves and start demanding value in exchange for it. As a result, negotiating with customers for information will become costly and complex. How will that happen? Consumers are realizing that they get very little in exchange for the information they divulge so freely through their commercial transactions and survey responses. Now new technologies such as smart cards, World Wide Web browsers, and personal financial management software are allowing consumers to view comprehensive profiles of their commercial activities-- and to choose whether or not to release that information to companies. Their decision will hinge, in large part, on what vendors offer them in return for the data. Consumers will be unlikely to bargain with vendors on their own, however. The authors anticipate that companies they call infomediaries will broker information to businesses on consumers' behalf. In essence, infomediaries will be the catalyst for people to start demanding value in exchange for information about themselves. And most other companies will need to rethink how they obtain information and what they do with it if they want to find new customers and serve them better.     

Do your commitments match your convictions?

How many of us keep pace day to day, up-holding our obligations to our bosses, families, and the community, even as our overall satisfaction with work and quality of life decline? And yet, our common response to the situation is: "I'm too busy to do anything about it now." Unfortunately, unless a personal or professional crisis strikes, very few of us step back, take stock of our day-to-day actions, and make a change. In this article, London Business School strategy professors Donald Sull and Dominic Houlder examine the reasons why a gap often exists between the things we value most and the ways we actually spend our time, money, and attention. They also suggest a practical approach to managing the gap. The framework they propose is based on their study of organizational commitments--the investments, promises, and contracts made today that bind companies to a future course of action. Such commitments can prevent organizations from responding effectively to change. A similar logic applies to personal commitments--the day-to-day decisions we make about how we allocate our precious resources. These decisions are individually small and, therefore, easy to lose sight of. When we do, a gap can develop between our commitments and our convictions. Sull and Houlder make no value judgments about the content of personal commitments; they've devised a somewhat dispassionate tool to help you take a thorough inventory of what matters to you most. It involves listing your most important values and assigning to each a percentage of your annual salary, the hours out of your week, and the amount of energy you devote. Using this exercise, you should be able to identify big gaps--stated values that receive little or none of your scarce resources or a single value that sucks a disproportionate share of resources--and change your allocations accordingly.     

Leadership and the psychology of turnarounds

Turnaround champions--those leaders who manage to bring distressed organizations back from the brink of failure--are often acclaimed for their canny financial and strategic decision making. But having studied their work closely, Harvard Business School's Rosabeth Moss Kanter emphasizes another aspect of their achievement. These leaders reverse the cycle of corporate decline through deliberate interventions that increase the level of communication, collaboration, and respect among their managers. Ailing companies descend into what Kanter calls a "death spiral," which typically works this way: After an initial blow to the company's fortunes, people begin pointing fingers and deriding colleagues in other parts of the business. Tensions rise and collaboration declines. Once they are no longer acting in concert, people find themselves less able to effect change. Eventually, many come to believe they are helpless. Passivity sets in. Finally, the ultimate pathology of troubled companies takes hold: denial. Rather than volunteer an opinion that no one else seems to share, people engage in collective pretense to ignore what they individually know. To counter these dynamics, Kanter says, and reverse the company's slide, the CEO needs to apply certain psychological interventions--specifically, replacing secrecy and denial with dialogue, blame and scorn with respect, avoidance and turf protection with collaboration, and passivity and helplessness with initiative. The author offers in-depth accounts of how the CEOs at Gillette, Invensys, and the BBC used these interventions to guide their employees out of corporate free fall and onto a more productive path.     

Price smarter on the Net

Companies generally have set prices on the Internet in two ways. Many start-ups have offered untenably low prices in a rush to capture first-mover advantage. Many incumbents have simply charged the same prices on-line as they do off-line. Either way, companies are missing a big opportunity. The fundamental value of the Internet lies not in lowering prices or making them consistent but in optimizing them. After all, if it's easy for customers to compare prices on the Internet, it's also easy for companies to track customers' behavior and adjust prices accordingly. The Net lets companies optimize prices in three ways. First, it lets them set and announce prices with greater precision. Different prices can be tested easily, and customers' responses can be collected instantly. Companies can set the most profitable prices, and they can tap into previously hidden customer demand. Second, because it's so easy to change prices on the Internet, companies can adjust prices in response to even small fluctuations in market conditions, customer demand, or competitors' behavior. Third, companies can use the clickstream data and purchase histories that it collects through the Internet to segment customers quickly. Then it can offer segment-specific prices or promotions immediately. By taking full advantage of the unique possibilities afforded by the Internet to set prices with precision, adapt to changing circumstances quickly, and segment customers accurately, companies can get their pricing right. It's one of the ultimate drivers of e-business success.