Will architecture win the technology wars?

Success today flows to the company that establishes proprietary architectural control over a broad, fast-moving, competitive space, Charles R. Morris and Charles H. Ferguson claim in "How Architecture Wins Technology Wars" (March-April 1993). No single vendor can keep pace with the outpouring of cheap, powerful, mass-produced components, so customers have been stitching together their own local systems solutions. Architectures impose order on the system and make interconnections possible. An architectural controller has power over the standard by which the entire information package is assembled. Because of the popularity of Microsoft's Windows, for example, companies like Lotus must conform their software to its parameters to be able to compete for market share. Proprietary architectural control has broader implications for organizational structure too: architectural competition is giving rise to a new form of business organization.     

Managing in an age of modularity

Modularity is a familiar principle in the computer industry. Different companies can independently design and produce components, suck as disk drives or operating software, and those modules will fit together into a complex and smoothly functioning product because the module makers obey a given set of design rules. Modularity in manufacturing is already common in many companies. But now a number of them are beginning to extend the approach into the design of their products and services. Modularity in design should tremendously boost the rate of innovation in many industries as it did in the computer industry. As businesses as diverse as auto manufacturing and financial services move toward modular designs, the authors say, competitive dynamics will change enormously. No longer will assemblers control the final product: suppliers of key modules will gain leverage and even take on responsibility for design rules. Companies will compete either by specifying the dominant design rules (as Microsoft does) or by producing excellent modules (as disk drive maker Quantum does). Leaders in a modular industry will control less, so they will have to watch the competitive environment closely for opportunities to link up with other module makers. They will also need to know more: engineering details that seemed trivial at the corporate level may now play a large part in strategic decisions. Leaders will also become knowledge managers internally because they will need to coordinate the efforts of development groups in order to keep them focused on the modular strategies the company is pursuing.     

The Apple business model: Crowdsourcing mobile applications

Much to Apple's chagrin, the ‘suicide express’ at the Foxconn manufacturing complex in China has been widely reported. While outsourcing the manufacture of technology components is neither new nor unique, the external sourcing of digital content is integral to the success of Apple's business model. In 2008, Apple opened up their platform to third-party IT developers, leveraging their expertise for the supply of applications. Apple's rapid dominance of the mobile market led to the emergence of a business model that weaves together Internet-enabled mobile devices with digital content, brought together within a closed proprietary platform or ecosystem. Applying a Global Production Network analysis, this paper reports on fieldwork among Apple mobile application developers in Sweden, the UK, and the US. The analysis shows that although some developers experience success, financial returns remain elusive and many encounter intense pressure to generate and market new products in a competitive and saturated market. Crowdsourcing allows Apple to effectively source development to a global base of software developers, capitalizing on the mass production of digital products while simultaneously managing to sidestep the incurred costs and responsibilities associated with directly employing a high-tech workforce.     

Strategic sourcing: from periphery to the core

As globalization changes the basis of competition, sourcing is moving from the periphery of corporate functions to the core. Always important in terms of costs, sourcing is becoming a strategic opportunity. But few companies are ready for this shift. Outsourcing has grown so sophisticated that even critical functions like engineering, R&D, manufacturing, and marketing can-and often should-be moved outside. And that, in turn, is changing the way companies think about their organizations, their value chains, and their competitive positions. Already, a handful of vanguard companies are transforming what used to be purely internal corporate functions into entirely new industries. Companies like UPS, Solectron, and Hewitt have created new business models by concentrating scale and skill within a single function. As these and other function-based companies grow, so does the potential value of outsourcing to all companies. Migrating from a vertically integrated company to a specialized provider of a single function is not a winning strategy for everyone. But all companies need to rigorously reassess each of their functions as possible outsourcing candidates. Presented in this article is a simple three-step process to identify which functions your company needs to own and protect, which can be best performed by what kinds of partners, and which could be turned into new business opportunities. The result of such an analysis will be a comprehensive capabilities-sourcing strategy. As a detailed examination of 7-Eleven's experience shows, the success of the strategy often hinges on the creativity with which partnerships are organized and managed. But only by first taking a broad, strategic view of capabilities sourcing can your company gain the greatest benefit from all of its sourcing choices.     

经营性资产:概念界定与质量评价

经营性资产通常是企业资产的重要组成部分,其质量好坏在很大程度上决定了企业的竞争优势和发展潜力,尤其对于制造业企业的经营成败更是至关重要。本文从经营性资产概念和质量特征的界定入手,结合新企业会计准则引起的有关经营性资产信息披露方面的变化,从周转性、增值性以及获现性等三方面构建经营性资产质量评价指标体系。     

Judo strategy. The competitive dynamics of Internet time.

Competition on the Internet is creating fierce battles between industry giants and small-scale start-ups. Smart start-ups can avoid those conflicts by moving quickly to uncontested ground and, when that's no longer possible, turning dominant players' strengths against them. The authors call this competitive approach judo strategy. They use the Netscape-Microsoft battles to illustrate the three main principles of judo strategy: rapid movement, flexibility, and leverage. In the early part of the browser wars, for instance, Netscape applied the principle of rapid movement by being the first company to offer a free stand-alone browser. This allowed Netscape to build market share fast and to set the market standard. Flexibility became a critical factor later in the browser wars. In December 1995, when Microsoft announced that it would "embrace and extend" competitors' Internet successes, Netscape failed to give way in the face of superior strength. Instead it squared off against Microsoft and even turned down numerous opportunities to craft deep partnerships with other companies. The result was that Netscape lost deal after deal when competing with Microsoft for common distribution channels. Netscape applied the principle of leverage by using Microsoft's strengths against it. Taking advantage of Microsoft's determination to convert the world to Windows or Windows NT, Netscape made its software compatible with existing UNIX systems. While it is true that these principles can't replace basic execution, say the authors, without speed, flexibility, and leverage, very few companies can compete successfully on Internet time.     

Redacted Disclosure

In this paper we investigate a firm's decision to redact proprietary information from its material contract filings. Information redaction results when the Security and Exchange Commission (SEC) grants a firm's request to withhold information from investors in its material contract filings, presumably because the information is proprietary. We hypothesize that when firms redact information, measures of adverse selection deteriorate. That is, the redaction of proprietary information from material contracts should be associated with: a larger adverse selection component of the bid‐ask spread, reductions in market depth, and lower market turnover. In addition, we conjecture that the decision to redact depends on whether the firm plans on raising capital, the competitiveness of the firm's industry, and the performance of the firm. Overall the results of our analysis generally support our predictions. We find that when firms redact information, contemporaneous measures of the adverse selection component of the bid‐ask spread rise, and market depth and share turnover deteriorate; this suggests an increase in adverse selection. We also find firms are less likely to redact when they issue long‐term debt and are more likely to redact when they are in a competitive industry or experience losses.     

Benjamin Greygoose & Sons: survival in the death industry

This case study concerns a company, operating within a highly sensitive industry, which needs to adopt new planning and control procedures along with performance measures in order to ensure its long term survival. The case explores the characteristics of the UK funeral industry, and the impact of the incursion of large overseas companies on the operation of small family businesses. Porter's (1980) Competitive Strategy framework provides a vehicle for the analysis of generic strategies to secure competitive advantage when cost leadership is not a practical possibility. Product diversification and niche marketing are explored in a Teaching Note to a rewarding case, but one which may raise the emotional sensitivity of subjects.     

国外券商自营业务风险控制及对我国券商的启示

风险控制是证券自营业务风险管理的核心环节,是证券公司自营业务风险管理的关键所在。国外券商在自营业务风险控制方面各具特色且个性鲜明。在对国外著名券商自营业务风险控制分析的基础上,比较了国内券商与国外券商自营业务风险控制的差距。国外券商已经逐步形成一整套比较成热、完善的自营业务风险控制系统,对于我国证券公司自营业务风险控制改进有借鉴意义。     

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.     

Chief executives define their own data needs.

Identification of information needs of top management is discussed in this article by comparing four methods now in use with a new approach, "identification of critical success factors," developed at the Sloan School of Management. The author argues that the CSF method, implemented through a series of two to three interview sessions, helps top management define its own current information needs. Critical success factors are those performance factors which must receive the on-going attention of management if the company is to remain competitive. While not intended for strategic planning purposes, the identification of critical success factors can help top management by: (1) determining where management attention should be directed; (2) developing measures for critical success factors; and (3) determining the amount of information required and thus limiting gathering unnecessary data. The author concludes that the CSF method is both effective and efficient and should be seriously considered by top management as an important tool in assessing data needs.     

我国商业银行公司信贷风险管理的行业思维

中国金融业的全面开放,加剧了中国商业银行的竞争,提高了主要依赖存贷利差收入的银行公司信贷风险。认为商业银行公司信贷业务不应涉足所有行业,要定位自己的几个优势行业,推行公司信贷业务的行业化经营、专业化管理,只有成为行业专家,才能透视行业,根据公司所处的行业政策和行业周期,把握进退时机,更好地控制公司信贷风险,提高经营效益。     

Why the computer industry is restructuring now

For over 30 years the computer industry has been a growth sector. Recently major players have run into trouble and many smaller ones have fallen under the onslaught of two major forces. Firstly, what is being sold, to whom, and with what margins is changing rapidly as computing moves from being an immature, high technology market for major corporations and specialists to a mass market for every size of firm. Secondly, the industry has by tradition depended on a confused jumble of proprietary standards to defend market share. Today the phenomenon of open systems is destroying those old defences. Long-term survival will mean not only adjusting to the effects of open systems on reducing traditional margins but also playing by the new rules of the resultant commodity market. Success will depend on rapid readjustment, with exploitation of the internal influences of open systems on the company value chain, in order to slim down yet achieve a new scale of productivity.     

Strategy as stretch and leverage

Global competition is not just product versus product or company versus company. It is mind-set versus mind-set. Driven to understand the dynamics of competition, we have learned a lot about what makes one company more successful than another. But to find the root of competitiveness--to understand why some companies create new forms of competitive advantage while others watch and follow--we must look at strategic mind-sets. For many managers, "being strategic" means pursuing opportunities that fit the company's resources. This approach is not wrong, Gary Hamel and C.K. Prahalad contend, but it obscures an approach in which "stretch" supplements fit and being strategic means creating a chasm between ambition and resources. Toyota, CNN, British Airways, Sony, and others all displaced competitors with stronger reputations and deeper pockets. Their secret? In each case, the winner had greater ambition than its well-endowed rivals. Winners also find less resource-intensive ways of achieving their ambitious goals. This is where leverage complements the strategic allocation of resources. Managers at competitive companies can get a bigger bang for their buck in five basic ways: by concentrating resources around strategic goals; by accumulating resources more efficiently; by complementing one kind of resource with another; by conserving resources whenever they can; and by recovering resources from the market-place as quickly as possible. As recent competitive battles have demonstrated, abundant resources can't guarantee continued industry leadership.(ABSTRACT TRUNCATED AT 250 WORDS)     

IT doesn't matter

As information technology has grown in power and ubiquity, companies have come to view it as ever more critical to their success; their heavy spending on hardware and software clearly reflects that assumption. Chief executives routinely talk about information technology's strategic value, about how they can use IT to gain a competitive edge. But scarcity, not ubiquity, makes a business resource truly strategic--and allows companies to use it for a sustained competitive advantage. You only gain an edge over rivals by doing something that they can't. IT is the latest in a series of broadly adopted technologies--think of the railroad or the electric generator--that have reshaped industry over the past two centuries. For a brief time, as they were being built into the infrastructure of commerce, these technologies created powerful opportunities for forward-looking companies. But as their availability increased and their costs decreased, they became commodity inputs. From a strategic standpoint, they became invisible; they no longer mattered. that's exactly what's happening to IT, and the implications are profound. In this article, HBR's editor-at-large Nicholas Carr suggests that IT management should, frankly, become boring. It should focus on reducing risks, not increasing opportunities. For example, companies need to pay more attention to ensuring network and data security. Even more important, they need to manage IT costs more aggressively. IT may not help you gain a strategic advantage, but it could easily put you at a cost disadvantage. If, like many executives, you've begun to take a more defensive posture toward IT, spending more frugally and thinking more pragmatically, you're already on the right course. The challenge will be to maintain that discipline when the business cycle strengthens.     

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.     

The Case for Secondary Buyouts as Exit Channel

Do private equity firms have a clear pecking order when deciding on exit channels for their portfolio companies? Are secondary buyouts—that is, sales to other PE firms—always an exit of last resort? And are there company‐ or market‐related factors that have a clear and predictable influence on decisions to pursue secondary buyouts? Using a proprietary dataset of over 1,100 leveraged buyouts that exited in North America or Europe between 1995 and 2008, the authors attempt to answer these questions by analyzing the returns associated with public, private, and secondary (or “financial”) exits. Based on their analysis of the realized returns, there is no clear pecking order of exit types. Secondary buyouts deliver rates of return that are the equal of those achieved through public exits. In addition, the authors assess the relationship between the likelihood of choosing a financial exit and certain company‐related as well as market‐related factors. Portfolio companies with greater debt capacity are more likely to be sold in secondary buyouts. Furthermore, increases in both the liquidity of debt markets and the amount of undrawn capital commitments to the private equity industry increase the probability of exit through secondary buyouts.     

Building deals on bedrock

The headlines are filled with the sorry tales of companies like Vivendi and AOL Time Warner that tried to use mergers and acquisitions to grow big fast or transform fundamentally weak business models. But, drawing on extensive data and experience, the authors conclude that major deals make sense in only two circumstances: when they reinforce a company's existing basis of competition or when they help a company make the shift, as the industry's competitive base changes. In most stable industries, the authors contend, only one basis--superior cost position, brand power, consumer loyalty, real-asset advantage, or government protection--leads to industry leadership, and companies should do only those deals that bolster a strategy to capitalize on that competitive base. That's what Kellogg did when it acquired Keebler. Rather than bow to price pressures from lesser players, Kellogg sought to strengthen its existing basis of competition--its brand--through Keebler's innovative distribution system. A company coping with a changing industry should embark on a series of acquisitions (most likely coupled with divestitures) aimed at moving the firm to the new competitive basis. That's what Comcast did when changes in government regulations fundamentally altered the broadcast industry. In such cases, speed is essential, the investments required are huge, and half-measures can be worse than nothing at all. Still, the research shows, successful acquirers are not those that try to swallow a single, large, supposedly transformative deal but those that go to the M&A table often and take small bites. Deals can fuel growth--as long as they're anchored in the fundamental way money is made in your industry. Fail to understand that and no amount of integration planning will keep you and your shareholders from bearing the high cost of your mistakes.     

Why are some modes of acquisition more profitable? A study of the credit card industry

A key challenge in financial services marketing is attracting good customers to the firm. For most financial services firms, including credit card firms, a good customer is also a profitable customer. Managers would like to use marketing tactics that attract the most profitable customers while closely monitoring and perhaps limiting expenditures on marketing tactics that tend to attract relatively less profitable customers. Therefore, managers need to understand the relative effectiveness of different modes of new account acquisition and the impact that the various modes of acquisition may have on overall account profitability. To date, there have been very few studies that have calculated individual level customer profitability and then investigated the relationship between new customer acquisition source and customer profitability. That is, how do modes of acquisition differ in their ability to attract profitable customers? We answer this question using a proprietary and novel data set from the credit card industry. Of the four modes of acquisition used in this industry, we find that Internet and direct mail efforts generate more profitable customers than telemarketing and direct selling. We provide possible explanations for these findings. Our work adds to the growing literature in customer relationship management and our results have important managerial implications for resource allocation among acquisition strategies.     

Sale of monopoly information and behavior of rivaling clients: A theoretical perspective

This paper studies a three-stage Bayesian-Cournot game where rivaling firms sign contracts with an information monopoly to purchase proprietary information. The rivaling firms use the external information to create competitive advantage over one another. Knowing the rivalry among its clients, the information monopoly can exploit them by playing one client against another. The information-selling strategy depends on the clients' in-house information technology, the uncertainty of the economic environment, and the number of potential clients. The existence of an information market makes rivaling producers worse off and consumers better off. It is possible that the service of the information monopoly is a private good but a social bad.