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Agility is all the rage in strategy circles these days. According to conventional wisdom, organizations should rapidly react to technological advances, new market dynamics, and shifting consumer preferences. But in practice this is nearly impossible to pull off, because the environment is evolving much faster than firms can respond to. The consequences of trying to keep up with every change are stark: the erosion of competitive advantages, a myopic focus on the short term, and organizational chaos. In their research the authors have repeatedly seen that in volatile environments, firms anchoring their strategies in a few enduring factors, rather than many transient ones, are more likely to achieve sustainable growth. This approach is called strategic constancy. It involves recognizing the fundamental aspects of the company's business model—its core values, customer relationships, brand identity, and key competencies—and remaining dedicated to them despite external pressures. It emphasizes depth over breadth—deepening the company's competitive advantage in its core areas rather than spreading efforts thinly over many. [ABSTRACT FROM AUTHOR]

Many experts are urging established companies to radically innovate—and disrupt themselves before someone else does. The trouble is, large firms aren't designed for moon shots. Their owners don't like the risks and won't kill the goose that lays the golden egg. As a result, all too often they end up defaulting to incremental innovation. But there is a solution: Incumbents can partner with entrepreneurial start-ups or with intrapreneurs that have ideas for breakthrough products. By doing that, they can leverage their significant resources while increasing the odds that those ideas will take off. This approach does require careful management, however. Drawing on the experiences of more than a dozen large multinationals, including Atlas Copco, Enel, and Epiroc, this article outlines a three-stage innovation process for incumbents to follow: First, set up numerous projects with multiple partners, nurturing them until their chances of success become clear. Next, once a venture has a breakthrough, gradually increase your commitment and help it remove roadblocks. Finally, when its business model is viable and it has a critical mass of customers, rapidly mobilize the resources it needs to scale up quickly. [ABSTRACT FROM AUTHOR]

Generative artificial intelligence (gen AI) has the potential to radically alter how business is conducted, and there's no doubt that it will create a lot of value. Companies have used it to identify entirely new product opportunities and business models; to automate routine decisions, freeing humans to focus on decisions that involve ethical trade-offs, empathy, or imagination; to deliver customized professional services formerly available only to the wealthy; and to develop and communicate product and other recommendations to customers faster, more cheaply, and more informatively than was possible with human-driven processes. But, the authors ask, will companies be able to leverage gen AI to build a competitive advantage? The answer, they argue in this article, is no—unless you already have a competitive advantage that rivals cannot replicate using AI. Then the technology may serve to amplify the value you derive from that advantage. [ABSTRACT FROM AUTHOR]

By making it vastly easier and cheaper to improve or create products and services that previously required significant human labor and creativity, generative AI has the potential to disrupt or even commoditize many businesses. Some companies will be able to gain an edge by leveraging publicly available generative AI tools better or faster than their competitors. But that advantage will be only temporary, and using the tools will soon become table stakes. This means established companies will have to rethink their business strategies and find new ways to add value to their offerings. In this article, the authors consider which types of businesses have the greatest potential to gain competitive advantage from generative AI and which are most likely to be disrupted. They also offer guidance for implementing AI across three levels of sophistication that correspond to an increasingly powerful advantage. [ABSTRACT FROM AUTHOR]

AI has the power to gather, analyze, and utilize enormous volumes of individual customer data to achieve precision and scale in personalization. The experiences of Mercury Financial, CVS Health, and Starbucks debunk the prevailing notion that extracting value from AI solutions is a technology-building exercise. That thinking holds companies back from capturing the power of AI. They needn’t build it; they just have to properly integrate it into a particular business context. But AI is probably only about 10% of the secret sauce. The other 90% lies in the combination of data, experimentation, and talent that constantly activates and informs the intelligence behind personalization. Personalization is the goal; it’s what constitutes a company’s strategic brawn. The technology is merely the tool for reaching it. The authors describe what it means to integrate AI tools and what it takes to continually experiment, constantly generate learning, and import fresh data to improve and refine customer journeys [ABSTRACT FROM AUTHOR]

Many companies realize the value of diversity, equity, and inclusion. But most focus on gender and ethnicity, paying less attention to people with disabilities. Employing people with disabilities is usually seen as a social cause—one best suited to non-profits or the public sector. That is a mistake—and more important, a missed opportunity. In many industries innovative companies are demonstrating that including people with disabilities can lead to real competitive advantage, in four ways: (1) Disabilities often confer unique talents that make people better at particular jobs. (2) The presence of employees with disabilities elevates the culture of the entire organization, making it more collaborative and boosting productivity. (3) A reputation for inclusiveness enhances a firm’s value proposition with customers, who become more willing to build long-term relationships with the company. And (4) being recognized as socially responsible gives a firm an edge in the competition for capital and talent. There is nothing wrong with wanting to do good in the world, but there is also nothing wrong with wanting to do well, and the latter is enough reason to employ people with disabilities. [ABSTRACT FROM AUTHOR]

Expanding into foreign markets can be challenging for companies due to their outsider status. They often face unfamiliarity with the local business environment and cultural differences, credibility issues in attracting customers and suppliers, and fewer resources compared to local firms. However, research has shown that embracing foreignness can lead to significant growth and success in foreign markets. Approaches such as leveraging outsider exception, building influential associations, and forging strategic alliances have proven effective in gaining a competitive advantage. By acknowledging and leveraging their foreignness, companies can thrive in unfamiliar territories. [Extracted from the article]

Identifying the next big thing is often treated as an exercise in analyzing trends. But that’s misleading. By the time a trend is established, any opportunities it presents have probably been captured by competitors. And although a company may need to reflect trends in its business plans, that may mean catching up with rivals rather than gaining a competitive edge. To take advantage of emerging trends, companies must identify them when they are embryonic—not purely speculative, but not yet named or widely known. At that stage the signs will be merely anomalies: weak signals that are in some way surprising but not entirely clear in scope or import. Most anomalies don’t become meaningful trends, of course. But some do—and the businesses that identify and interpret them early will steal a march on the competition. The authors present a process for spotting anomalies that have the potential to drive a business, but the process isn’t mechanical: Anomaly-driven strategy requires being open to unexpected ideas that may overturn long-held assumptions. Only if you are willing to look at your business from the outside in, question your existing models, and embrace ambiguity will you be able to identify the diamonds hiding in the data. [ABSTRACT FROM AUTHOR]

Today it’s not unusual for corporations that have dominated their markets for decades to be blind-sided by upstarts with radical new business models. A lot of young ventures, on the other hand, raise vast sums of money and attract tens of millions of customers, only to collapse when they can’t figure out how to fend off imitators. In these situations and many others, the underlying cause is often a failure to take a holistic approach to strategy. Strategy today demands more than classic competitive positioning. It requires making carefully coordinated choices about the opportunities to pursue; the business model with the highest potential to create value; how to capture as much of that value as possible; and the implementation processes that help a firm adapt activities and build capabilities that allow it to realize long-term value. Neglecting any of those imperatives can derail a strategy, but CEOs frequently zero in on just one. Entrepreneurs tend to focus on identifying a golden opportunity and don’t think enough about how to monetize it; leaders of incumbents, on capturing value but not new ways to create it. By tackling all the elements of strategy and integrating them well, however, firms will greatly increase their odds of success. [ABSTRACT FROM AUTHOR]

Many executives assume that customer data can give you an unbeatable edge. The more customers you have, the more data you can gather, and that data, when analyzed, allows you to offer a better product that attracts more customers. You can then collect even more data, repeating the cycle until you eventually marginalize your competitors. But this thinking is usually wrong. Though the virtuous cycles of data-enabled learning may look similar to those of network effects—wherein an offering increases in value to users as more people adopt it and ultimately garners a critical mass of users that shuts out competitors—they are not as powerful or as enduring. Nevertheless, under the right conditions, customer data can help build competitive defenses. It all depends on whether the data offers high and lasting value, is proprietary, leads to improvements that can’t be easily imitated, or generates insights that can be quickly incorporated. Those characteristics do give firms an advantage. And when learning from one customer rapidly improves an offering for others (think Google Maps), people will care about how many other people are adopting it, and it will enjoy those sought-after network effects. [ABSTRACT FROM AUTHOR]

This article, titled "10 Reasons Why Inclusion Is a Competitive Advantage," discusses the positive effects of inclusion on firm performance. The authors argue that inclusion, defined as creating conditions that allow people to thrive because of their differences, has several benefits. These include helping to recruit and retain good employees, increasing engagement and resilience, growing the marketplace, fostering innovation, improving decision-making, managing risk, boosting stock prices, and ultimately making more money. The authors emphasize the importance of inclusion in organizations and its potential advantages. [Extracted from the article]

Many people with neurological conditions such as autism spectrum disorder and dyslexia have extraordinary skills, including in pattern recognition, memory, and mathematics. Yet they often struggle to fit the profiles sought by employers. A growing number of companies, including SAP, Hewlett Packard Enterprise, and Microsoft, have reformed their HR processes in order to access neurodiverse talent—and are seeing productivity gains, quality improvement, boosts in innovative capabilities, and increased employee engagement as a result. The programs vary but have seven major elements in common. Companies should: • Team with governments or nonprofits experienced in working with people with disabilities • Use noninterview assessment processes • Train other workers and managers in what to expect • Set up a support system • Tailor methods for managing careers • Scale the program • Mainstream the program The work for managers will be harder, but the payoff to companies will be considerable: access to more of their employees’ talents, along with diverse perspectives that will help them compete. [ABSTRACT FROM AUTHOR]

Rita Gunther McGrath takes issue with some of this thinking. In “Old Habits Die Hard, but They Do Die,” she argues that although the theory of cumulative advantage makes sense in industries that are predictable, that condition no longer applies for many companies. Habits, like other elements of the environment, can shift. Consider how Dollar Shave Club’s subscription model snatched market share from Gillette. Executives, McGrath says, must balance the power of cumulative advantage with the need to refresh their approach. One tactic is to leverage an organization’s core skills or capabilities, but in a new format—as Dayton Hudson did when it became Target. The better executives become at understanding the motivations behind unconscious choices, the more likely they are to succeed at building habitual behavior among their customers—and, just as important, the more likely they are to see how those habits might change. INSET: IT WORKS UNTIL IT DOESN'T. [ABSTRACT FROM AUTHOR]

After a relatively quiet period following the end of the Cold War, geopolitics is back. With the United States displaying a reduced appetite for violent confrontation, there are now no world policemen, few effective “neighborhood watch” schemes, and a growing number of vigilante groups and countries eager to challenge the existing rules of the game. Companies cannot assume, in any region of the world, that the strategic status quo will be sustained by neat balances of power or unbreakable promises of foreign-policy assistance from superpower states. In this new reality, the most successful multinational companies will be those that make expertise in international affairs central to their operations, adopting what John Chipman, the chief executive of the International Institute for Strategic Studies, calls a corporate foreign policy. A corporate foreign policy has two components. Geopolitical due diligence involves the assessment of local, regional, and transnational risks facing a company. Corporate diplomacy aims to enhance a company’s ability to operate internationally and to ensure its success in each particular country with which it is engaged. Chipman lays out the principles of geopolitical due diligence and corporate diplomacy and argues that their successful execution can be a new source of competitive advantage for multinational businesses in a time of increased geopolitical volatility. [ABSTRACT FROM AUTHOR]

High-end professional services firms, unlike product companies, traditionally experience only linear revenue growth. That’s because selling more services means adding more professionals, which limits profit margins. However, savvy providers of consulting, legal, accounting, and other services are using technology to their benefit. They are automating certain routine aspects of their work to essentially “productize” those tasks. By combining those products with human attention to matters requiring more knowledge or judgment, they can give clients better service at a lower cost. This article provides a guide to product development for professional services firms. The author describes the three key stages of the process: (1) To discover potential products, identify opportunities for automation by looking for patterns in your services and zeroing in on the tasks that are performed frequently and require little knowledge. (2) To develop products, use algorithms and artificial intelligence to create “smart” tools to handle high-volume, low-sophistication tasks. (3) To monetize your products, stop charging for time and materials, and shift first to transaction-based pricing and then to an outcome-based model. In conjunction with this process, it’s important to create a cross-functional team that focuses on product development. And take the long view—you’ll have to invest time and money before you reap the benefits of embedding products in services. [ABSTRACT FROM AUTHOR]

The most successful companies don’t just have good products and strong distribution systems—they have a deep understanding of customers. That naturally requires lots of marketing data, but the authors say it also takes an “insights engine”—a set of structures, people, and processes that can translate data into actionable strategy. How do high-performing organizations achieve this kind of customer centricity? Extensive research by the lead author’s firm indicates that seven operational characteristics are critical for a superior insights and analytics group: It must be adept at synthesizing data, independent from other functions, integrally involved in business planning, collaborative, willing to experiment with new technologies and programs, future oriented, and active in strategic decision making. In addition, the people who are part of the insights engine share three key traits: They have a whole-brain mindset (they think creatively as well as analytically), they focus on business growth, and they are effective at getting their messages across with engaging storytelling rather than dry recitations of data. The authors discuss each characteristic in turn, using the consumer goods giant Unilever as a case study. Unilever’s Consumer Markets and Insights group, the epitome of a powerful insights engine, has helped the company generate impressive revenue and sales growth. INSET: ABOUT THE INSIGHTS2020 RESEARCH. [ABSTRACT FROM AUTHOR]

CEO Indra Nooyi believes that each PepsiCo product must engage customers so directly and personally that they fall in love with it. So in 2012 she hired renowned designer Mauro Porcini as PepsiCo’s first chief design officer. Nooyi says that design thinking now informs nearly everything the company does, from product creation, to the look on the shelf, to how consumers interact with a product after they buy it. Design thinking is apparent, for instance, in Pepsi Spire, the company’s touchscreen fountain machine that gives consumers the visual experience of watching flavors get added to a beverage before the finished product is dispensed. And design thinking is an integral part of what Nooyi says makes women embrace Mountain Dew Kickstart—with its slim can, higher juice content, and lower calorie burden—as a product they can “walk around with.” But design is not all about the way a product looks, according to Nooyi. She says that PepsiCo has delivered “great shareholder value” on her watch because the company also offers consumers true choices, as evident in its “good for you” and “fun for you” categories of products—and because she has led her workforce to adapt strategically to consumers’ constantly evolving aspirations. INSET: How Design Can Thrive.. [ABSTRACT FROM AUTHOR]

With the help of technology, companies today sweep up huge amounts of customer data. But they tend to be opaque about the information they collect and often resell, which leaves their customers feeling uneasy. Though that practice may give firms an edge in the short term, in the long run it undermines consumers’ trust, which in turn hurts competitiveness, say authors Morey, Forbath, and Schoop. In this article, the three share the results of a survey of 900 people across five countries, which looked at attitudes about data privacy and security. It examined what people knew about the information trails they leave online, which organizations they did—and did not—trust with their data, and which data they valued the most. The results show that the value consumers place on different data depends a lot on what it is and how it is used. In general, the perceived value rises as the data’s breadth and sensitivity increases from basic, voluntarily shared information to detailed, predictive profiles that firms create through analytics, and as its uses shift from benefiting the consumer to benefiting the company. If data is used to improve a product, consumers generally feel the enhancement itself is a fair trade, but they expect more in return for data used to target marketing, and the most in return for data sold to third parties. To build trust, companies must be transparent about the data they gather and offer consumers appropriate value in exchange for it. Simple legal disclosures aren’t enough, however; companies must actively educate their customers and incorporate fairness into their products and models from the start. Companies that get this will win consumers’ goodwill and business and continued access to their data. Companies that don’t will find themselves at a serious disadvantage, and maybe even shut out. [ABSTRACT FROM AUTHOR]

Companies in developing countries are often so focused on chasing growth that they fail to invest in improving their innovation, operations, and brand management. So despite enormous reach and revenues in the billions, they're unprepared when demand growth slows and competition from increasingly savvy developed-world multinationals intensifies. The once high-flying Chinese automakers BYD and Chery have landed hard. In contrast, another automaker, Great Wall, and the appliance maker Haier have won early competitive advantage. In their efforts to compete, emerging-market companies should consider four stages: (1) Seize the moment and invest in the basics, such as payroll, finance, factory operations, and employee management. (2) Build strength by learning (through licensing or contract manufacturing, for example) from established companies. (3) Scale and consolidate, keeping product lines and markets relatively narrow. (4) Move up and out, with a strong portfolio of brands, innovation capabilities, advanced technology, marketing, and sales. INSETS: How One Chinese Car Company Came Up Short;Great Wall: First Stronger, Then Bigger. [ABSTRACT FROM AUTHOR]

For decades, businesses have sought competitive advantage in "upstream" activities related to making new products--building bigger factories, finding cheaper raw materials, improving efficiency, and so on. But those easily copied sources of advantage are being irreversibly eroded, and advantage increasingly lies "downstream"--in the marketplace. Today the strategic question that drives business is not "What else can we make?" but "What else can we do for our customers?" This new center of gravity demands a rethink of long-standing strategy principles: First, the sources and locus of competitive advantage now lie outside the firm, and advantage is accumulative-rather than eroding over time as competitors catch up, it grows with experience and knowledge. Second, it's no longer about having the better product but about how you position yourself in the market and which companies you choose to compete against. Third, the pace of change in markets is now driven by shifts in customers' purchase criteria rather than by improvements in products or technology. INSET: How Cialis Beat Viagra. [ABSTRACT FROM AUTHOR]

For decades, the business world has been fixated on achieving sustainable competitive advantage, a position within an industry that allows a company to best its rivals over the long term. Though we can all point to organizations that have succeeded with this approach--think GE and Unilever--in today's world, the edge of most companies doesn't last long. The forces at work here are familiar: the digital revolution, disappearing barriers to entry, globalization. In a turbulent environment, businesses can't afford to spend months crafting a single long-term strategy. They need a portfolio of multiple transient advantages that can be built quickly and abandoned just as rapidly. Transient advantages call for a whole new playbook, says Columbia Business School's McGrath. It involves a view of strategy that is less industry-bound and more customer-centric. Executives who grasp this shift don't rely solely on analysis to develop strategy; they use tools like advanced pattern recognition and observation to set broad strategic themes and then let people experiment within them. They also adopt decision metrics that support entrepreneurship, replacing the net present value rule, for instance, with the logic of real options. And, knowing that product features can be copied instantly, they focus on providing experiences and solutions to problems to customers, and turn relationships into competitive barriers. INSET: Idea in Brief. [ABSTRACT FROM AUTHOR]

Emerging economies are often thought of as environmental laggards; they're perceived to be focused more on addressing poverty than on protecting the planet. But when the Boston Consulting Group and the World Economic Forum went looking for the best sustainable business practices in the developing world, their researchers uncovered many visionary enterprises that defied that stereotype. These organizations show that in markets where resource depletion is most keenly felt, conservation efforts can be a wellspring of innovation--and a source of competitive advantage. Some of these enterprises pursue sustainability out of pragmatism; some out of idealism. But all have consistently generated above- average (and in some cases, astounding) growth rates and profit margins. They've achieved them by following one or more of three general approaches: (i) taking a long view and investing in initially more-expensive sustainable operating methods that eventually lead to dramatically lower costs and higher yields; (2) bootstrapping--making small adjustments that generate big savings, which then fund purchases of advanced technologies; and (3) extending their sustainability efforts to the operations of their customers and suppliers (and in the process, devising new business models). Collectively, these companies demonstrate that there need be no trade-off between sustainability and financial performance. Rather, the pursuit of sustainability can be a powerful path to reinvention for all. [ABSTRACT FROM AUTHOR]

When Panasonic started selling home appliances in the Chinese market a few decades ago, its only attempt at localization was to off er less expensive versions of developed-market offerings. But as the Chinese middle class began to emerge, Panasonic’s leaders discovered that local competitors such as Haier were quickly outpacing the Japanese company. While the home appliance market in China grew at 20% to 30% annually, Panasonic’s growth in China stayed flat. Panasonic’s leaders realized that they needed to engage more deeply with that market and learn to bridge two strategies that are often seen as mutually exclusive: finding competitive advantage through integrated, worldwide operations and focusing locally to meet consumers’ particular needs. As a result of efforts such as the creation of a China Lifestyle Research Center, ideas began flowing freely between China and the home office in Japan. The company soon embarked on initiatives to understand consumers all over the world, and Panasonic’s leaders began rethinking the company as a global, rather than a Japanese, powerhouse. [ABSTRACT FROM AUTHOR]

In this article Wessel and Christensen, both of Harvard Business School, introduce a way to work out how dangerous a disruption may be to your business. With a deep understanding of the jobs your company really does for customers and a clear take on both the advantages the disrupters have and the barriers they face, you can predict whether, to what extent, and how quickly an approaching disruption might displace your business model. Then you can take steps to maximize your core’s strengths in response. The authors offer as an example the disruption of retail grocery stores. Although only about 1% of all groceries in the U.S. are currently bought online, the theory of disruption suggests that e-grocers will speed their delivery times, increase their product selection, and add features we can hardly imagine today in pursuit of new customers and higher profit margins. Nevertheless, of the three main jobs for which customers use retail grocers— stock up on nonperishables, shop for tonight’s dinner, and grab an emergency item—only the first is vulnerable right now to the disrupters’ extendable core: its ability to maintain radically lower prices as it creeps upmarket in search of more customers. That means traditional grocers need to focus on developing innovations to strengthen their hold on the other two. [ABSTRACT FROM AUTHOR]

Many executives rely on a process for devising strategy suited to stable, predictable environments even when they know conditions are highly volatile and mutable. Why? Because, the authors contend, they lack a systematic way to match their strategy-making style to the particular circumstances of their industry, business function, or geographic market. These three BCG consultants offer a framework to do just that. It identifies four "strategic styles": classical, adaptive, shaping, and visionary. Which of these is best suited to your situation depends on how far and accurately you can confidently forecast demand, corporate performance, competitive dynamics, and market expectations (predictability) and to what extent you or your competitors can influence those factors (malleability). A classical style, familiar to most managers and business school graduates, is well suited to an industry whose environment is predictable but hard for your company to change. Oil is a good example of this. An adaptive style suits an unpredictable industry, such as fashion, that players can't alter. A shaping style is best when the industry is unpredictable but your company or another has the power to transform it. And a visionary style fits a predictable industry that is nevertheless amenable to change. Too often strategists focus only on how predictable their environment is and not on the opportunities they-or others-may have to change it. INSETS: When the Cold Winds Blow;The Ultimate in Strategic Flexibility. [ABSTRACT FROM AUTHOR]

Contrary to conventional wisdom, banking can be both fair and profitable-in fact, fairness can be a source of competitive advantage. The evidence for this claim comes from a segment of the financial services industry seldom associated with fairness: consumer credit. The reputation of this business-which encompasses credit cards, personal loans, payday advances, and so on- is so questionable that any claims of "fairness" are viewed by customers with extreme skepticism. But TeamBank, a subsidiary of the German Volksbanken Raiffeisenbanken banking group, has successfully developed a brand that transforms the fuzzy concept of fairness into a visible and credible set of product characteristics and operating processes. Overhauling its central offering, easyCredit, involved significant organizational change and the strength of mind to reject profitable products and features inconsistent with the company's core value: "We are an honorable merchant." Product developments included offering a 30-day customer retraction period, making repayment insurance optional rather than mandatory, eliminating the penalty on partial repayments, and even offering a "protection package" that would consider changes in a customer's circumstances, such as illness or loss of a job. TeamBank addressed concerns about the new strategy by providing extensive training to employees and partners and adopted an unusual catalytic device for values-driven innovation-a scale model town symbolizing the brand. [ABSTRACT FROM AUTHOR]

Trying to operate two business models at once often causes strategic failure. Yet LAN Airlines, a Chilean carrier, runs three models successfully. Casadesus-Masanell, of Harvard Business School, and Tarziján, of the Pontificia Universidad Católica de Chile, explore how LAN has integrated a full-service international passenger model with a premium air-cargo business model while separately operating a no-frills passenger model for domestic flights. LAN's multimodel success comes from recognizing the complementarity of its two high-end services and the distinct, or substitute, nature of its no-frills offering. LAN came to that insight by analyzing the major assets that the models share and the compatibility of the models' operational resources and capabilities. It recognized that the more the models have in common, the more likely they are to generate greater value together than apart; the less they share, the more likely they are to be best executed separately. Nevertheless, managing multiple models is a tall order. LAN has had to face greater complexity, broaden its organizational skills, increase the flexibility of its workforce, and make other investments. But by mastering three models, the company has built formidable advantages that are difficult for competitors to overcome. Its example has shown how, properly applied, the implementation of multiple business models is not a risk but rather a new tool for strategists. [ABSTRACT FROM AUTHOR]

The sharper a company's differentiation, the greater its competitive advantage. In studying companies that sustained a high level of performance over many years, the authors, both partners at Bain, have found that more than 80% of those companies had a well-defined and easily understood differentiation at the center of strategy. But differentiation can wear with age: The growth it generates creates complexity, and complex companies tend to forget what they're good at. Often they respond by trying to re-imagine their entire business models quickly and dramatically. That's rarely the answer, the authors write. Really successful companies relentlessly build on their fundamental differentiation, going from strength to strength. They learn to deliver it to the front line, creating an organization that lives and breathes its strategic advantages day in and day out. They learn to sustain it through constant adaptation to changes in the market. And they learn to resist the siren song of today's hot market better than their less-focused competitors do. The result is a simple, repeatable business model that a company can apply to new products and markets over and over again to generate sustained growth. INSET: Making Your Differentiation Easier to Repeat. [ABSTRACT FROM AUTHOR]

A veteran top executive at two giant mutual fund companies, the author has also been an attorney, a government official, a law school professor, and a business school professor-sometimes simultaneously. Over the years, he has devised a number of principles and practices to maximize his personal productivity without sacrificing his health or family life. In this article he presents six of them. Know your comparative advantage. Focus not on what you do best but on what your organization most needs from you-and don't spend too much time on operational details. It's not the time you spend but the results you produce. Most executives put a huge amount of time into their jobs, assuming that more hours equal more value added. That's too simplistic. Think first, read or write second. Figure out your argument in advance; then jot down your four or five key points and write the concluding paragraph. Prepare your plan, but be ready to change it. Arrive early for a speaking engagement in order to grasp the mood of your audience and tailor your speech accordingly. Let others own their space. Instead of assigning detailed tasks, present general priorities and let \your reports decide how to implement them. Keep things short and simple. Routine meals, naps, and travel habits can save time, effort, and health. INSET: Don't Forget to Sleep (And Other Tips for a Healthful Life). [ABSTRACT FROM AUTHOR]

Most executives believe that competing through business models is critical for success, but few have come to grips with how best to do so. One common mistake, the authors' studies show, is enterprises' unwavering focus on creating innovative models and evaluating their efficacy in standalone fashion--just as engineers test new technologies or products. However, the success or failure of a company's business model depends largely on how it interacts with those of the other players in the industry. (Almost any business model will perform brilliantly if a company is lucky enough to be the only one in a market.) Because companies build them without thinking about the competition, companies routinely deploy doomed business models. Moreover, many companies ignore the dynamic elements of business models and fail to realize that they can design business models to generate winner-take-all effects similar to the network externalities that high-tech companies such as Microsoft, eBay, and Facebook often create. A good business model creates virtuous cycles that, over time, result in competitive advantage. Smart companies know how to strengthen their virtuous cycles, undermine those of rivals, and even use them to turn competitors' strengths into weaknesses. INSET: Three Characteristics of a Good Business Model. [ABSTRACT FROM AUTHOR]

How do some entrepreneurs, corporate innovators, and investors turn adverse conditions to competitive advantage? Chakravorti, of McKinsey and Harvard Business School, has identified four areas that the most successful of these people consistently explore. 1. Entrepreneurs reroute resources that become redundant to meet new needs, as Jonathan Bush did at Athena Health . The company is now a leader in internet-based revenue-cycle management tools. 2. They round up unusual suspects and break industry orthodoxy, as Iqbal Quadir did with Grameenphone in Bangladesh. 3. They find small solutions to big problems, as Trey Moore and Cameron Powell did with their Air-Strip OB smartphone app for mobile physicians who needed a major advance in wireless health care. 4. They focus on platform, not just product. That's how Fred Khosravi and Amar Sawhney broadened the field of surgical applications for Incept's hydrogel technology. The entrepreneurs who survive in the "new normal" will be those who find counterintuitive solutions to the bottlenecks, constraints, and other difficulties that adversity engenders. Call them the "new abnormals." INSET: Adversity: A Disruptive Ingredient For Corporate Innovation. [ABSTRACT FROM AUTHOR]

The article refers to green business and three strategies related to the development and marketing of sustainable or green products. The challenges of developing and marketing green products from cultural and operational perspectives are mentioned. The discussion includes an accentuate strategy that is based on emphasizing green attributes in a company's existing products that have been overlooked. Topics include corporate growth, competitive advantage, and product line expansion through the acquisition of a green brand and the so-called architect strategy of building new products.

The article examines the idea of organizational change from the perspective that shifting social dynamics within an organization can lead to corporate restructuring which then disrupts informal networks of collaboration, improves communication, and fosters creativity. Topics include matrix organizations, the effect of organizational power structures on resource allocation, the formation of silos, and routines that can prevent innovation. Examples of successful reorganizations include Cisco Systems Inc. which reorganized its business units by function in 2001 and the reorganization of GE Healthcare by chief executive officers Jeffrey Immelt and Joe Hogan.

The article discusses research on performance management and leadership strategy which resulted in competitive advantages for companies that are based in India. The so-called Indian business model at companies such as Infosys, Reliance Industries, and Aventis Pharma is mentioned. The skills that Indian executives consider most valuable include strategic thinking and communication of an organizational vision. The characteristics of leaders that are considered valuable include being accountable and being an inspirational role model. Organizational transparency, employee empowerment, and investment in training are part of the corporate culture.

When executives develop corporate strategy, they nearly always begin by analyzing the industry or environmental conditions in which they operate and the strengths and weaknesses of the players they are up against. They then set out to carve a distinctive strategic position from which they can outperform their rivals by building a competitive advantage. The underlying logic here is that a company's strategic options are bounded by the environment. In this structuralist approach, structure shapes strategy. But as Kim and Mauborgne, the authors of Blue Ocean Strategy, point out, history reveals plenty of situations in which firms' strategies shaped structure -- from Ford's Model T to Nintendo's Wii. For the past 15 years, the authors have been developing this reconstructionist approach into the blue ocean strategy, which reflects the fact that a company's performance is not necessarily determined by an industry's competitive environment. In this article they explain the key differences between the two approaches, identify the circumstances under which each one is appropriate, and discuss cases of blue ocean strategies. The authors conclude by observing that most large and diversified businesses operating in multiple industries will need to learn to apply both approaches, depending on the strategic needs of their various units. INSET: Comic Relief's Alignment of the Three Strategy Propositions. [ABSTRACT FROM AUTHOR]

You are leading a negotiating team for your company. When you sit down with the other party, someone on your side of the table blurts out: "Just tell us -- what do we need to do to get more of your business?" And in that moment, you know you've lost the upper hand. Gaffes like this are more common than most businesspeople would care to admit, management professors Brett, Friedman, and Behfar have found in their research. Even though team members are all technically on the same side, they often have different priorities and imagine different ideal outcomes: Business development just wants to close the deal. Finance is most concerned about costs. Legal is focused on patents and intellectual property. The authors recommend taking four steps, either singly or in tandem, to align those goals: Map out each person's priorities, work out conflicts directly with departments, employ a mediator if that doesn't work, and use data to resolve differences. Once you are all on the same page, you can take steps to make sure everyone is coordinated during the negotiations themselves. Try simulating the negotiation beforehand, assigning roles to team members that take advantage of their strengths, and establishing the signals you will use to communicate with one another during the session. The payoff from working as a cohesive group is clear. With access to greater expertise and the ability to assign members to specialized roles, teams can implement more-complex strategies than a sole negotiator could ever pull off. [ABSTRACT FROM AUTHOR]

The current economic crisis is not just another rough spell. Today's mix of urgency, high stakes, and uncertainty will continue even after the recession ends. The immediate crisis -- which we will get through with policy makers' expert technical adjustments -- sets the stage for a sustained, or even permanent, crisis, a relentless series of challenges no one has encountered before. Instead of hunkering down and relying on their familiar expertise to deal with the sustained crisis, people in positions of authority -- whether they are CEOs or managers heading up a company initiative -- must practice what the authors call adaptive leadership. They must, of course, tackle the underlying causes of the crisis, but they must also simultaneously make the changes that will allow their organizations to thrive in turbulent environments. Adaptive leadership is an improvisational and experimental art, requiring some new practices. Like Julie Gilbert, who overcame internal resistance to reorient Best Buy toward female purchasers, adaptive leaders get things done to meet today's challenges and then modify those things to thrive in tomorrow's world. They also embrace disequilibrium, using turbulence as an opportunity to build crucial new capacities, as Paul Levy did to rescue Beth Israel Deaconess Medical Center from a profound financial crisis. Finally, adaptive leaders, such as Egon Zehnder, the founder of an executive search firm, draw out the leadership skills that reside deep in the organization, recognizing the interdependence of all employees and mobilizing everyone to generate solutions. [ABSTRACT FROM AUTHOR]

In tough economic times, some companies have outmaneuvered rivals to become market leaders through value-for-money strategies. That is, they have enabled recession-hit consumers to economize (do less and spend less), become more efficient (do the same for less), or become more effective (do more but spend no more). To implement such a strategy, argue this British professor and Chinese academic, companies must go beyond refining cost-cutting capabilities to develop expertise in cost innovation. That may not be good news for many U.S., European, and Japanese corporations, because multinationals from emerging markets, which have long experience with value-conscious customers, have already built cost-innovation capabilities that are unlocking mass markets in both developing -- and developed -- countries. Some, like battery maker BYD, have learned to sell high-tech products profitably at mass-market prices through a combination of lower labor costs and manufacturing innovations. Others, like drinks purveyor United Spirits, have dominated industries by blanketing sizable niches in their home markets with a full range of products or customized options. And still others, like appliance manufacturer Haier, have used low-price offerings to turn small, unguarded niches into mass markets in developed countries. In response, the authors argue, Western companies should turn to developing countries for vital lessons in lowering the cost of building brands and developing and manufacturing products. They should enter into alliances with emerging giants to gain cost-innovation capabilities. And they should use their superior financial strength to beat emerging giants at their own game of growing mass markets in developing countries. Multinationals that fail to learn from emerging rivals are unlikely to weather the recession well -- or stay competitive for very long. [ABSTRACT FROM AUTHOR]

Managers regularly implement new ideas without evidence to back them up. They act on hunches and often learn very little along the way. That doesn't have to be the case. With the help of broadly available software and some basic investments in building capabilities, managers don't need a PhD in statistics to base consequential decisions on scientifically sound experiments. Some companies with rich consumer-transaction data--Toronto-Dominion, CKE Restaurants, eBay, and others--are routinely testing innovations well outside the realm of product R&D. As randomized testing becomes standard procedure in certain settings (website analysis, for instance), firms learn to apply it in other areas as well. Entire organizations that adopt a "test and learn" culture stand to realize the greatest benefits. That said, firms need to determine when formal testing makes sense. Generally, it's much more applicable to tactical decisions (such as choosing a new store format) than to strategic ones (such as figuring out whether to acquire a business). Tests are useful only if managers define and measure desired outcomes and formulate logical hypotheses about how proposed interventions will play out. To begin incorporating more scientific management into your business, acquaint managers at all levels with your organization's testing process. A shared understanding of what constitutes a valid test--and how it jibes with other processes--helps executives to set expectations and innovators to deliver on them. The process always begins with creating a testable hypothesis. Then the details of the test are designed, which means identifying sites or units to be tested, selecting control groups, and defining test and control situations. After the test is carried out for a specified period, managers analyze the data to determine results and appropriate actions. Results ideally go into a "learning library," so others can benefit from them. [ABSTRACT FROM AUTHOR]

Downturns offer a rare opportunity to outmaneuver rivals. But to do so, you must first systematically assess your organization's ability to weather the storm and take corrective action. David Rhodes and Daniel Stelter, of the Boston Consulting Group, offer a comprehensive approach to tackling this simultaneously defensive and offensive challenge. For some companies, the outcome of this process will be a program of immediate actions that represent a turbocharged version of business as usual. For others, it will be a painful realization that nothing short of an urgent corporate turnaround will suffice. To stabilize the business, companies must (1) protect their financial fundamentals by, for example, monitoring and maximizing cash flow, managing customer credit risk, reducing working capital, and optimizing their financial structure and financing options; (2) protect their existing business operations by reducing costs, increasing organizational efficiency, aggressively managing the top line, rethinking their product portfolio and pricing, reining in investment plans, and divesting noncore businesses; and (3) work to maximize their valuation relative to rivals by being proactive in their investor relations and favoring dividends over share buybacks. To seize advantage, companies must make farsighted investments, identify opportunistic and potentially transformative mergers, and consider possible redefinitions of their business models. This recession handbook will help companies not only to survive the recession but also to thrive in its aftermath. [ABSTRACT FROM AUTHOR]

For over a century, start-ups began by focusing on their home markets. More and more, however, are now being born global -- chasing opportunities created by distance, learning to manage faraway operations, and hunting for the planet's best manufacturing locations, brightest talent, most willing investors, and most profitable customers wherever they may be -- from day one. That's not easy. In his research, Harvard professor Isenberg has found that global start-ups face three challenges. First are the logistical problems and psychic barriers created by distance and by differences in culture, language, education systems, religion, and economic development levels. Even something so basic as accommodating the world's various workweek schedules can put a strain on a small start-up's staff. Second is managing the challenges (and opportunities) of context -- that is, the different nations' political, regulatory, judicial, tax, and labor environments. Third, like all new ventures, global start-ups must find a way to compete with bigger incumbents while using far fewer resources. To succeed, Isenberg has found, global entrepreneurs must cultivate four competencies: They must clearly articulate their reasons for going global, learn to build alliances with more powerful partners, excel at international supply chain management, and create a multinational culture within their organization. Entrepreneurs shouldn't fear the fact that the world isn't flat. Being global may not be a pursuit for the fainthearted, but even start-ups can thrive by using distance to gain competitive advantage. INSETS: How Diaspora Networks Help Start-Ups Go Global;How Social Entrepreneurs Think Global. [ABSTRACT FROM AUTHOR]

Free customers who are subsidized by paying customers are essential to a vast array of businesses, such as media companies, employment services, and even IT providers. But because they generate revenue only indirectly, figuring out the true value of those customers -- and how much attention to devote to them -- has always been a challenge. Traditional customer-valuation models don't help; they focus exclusively on paying customers and largely ignore network effects, or how customers help draw other customers to a business. Now a new model, devised by professors Gupta, of Harvard Business School, and Mela, of Fuqua School of Business, takes into account not only direct network effects (where buyers attract more buyers or sellers more sellers) but also indirect network effects (where buyers attract more sellers or vice versa). The model calculates the precise long-term impact of each additional free customer on a company's profits, factoring in the degree to which he or she brings in other customers -- whether free or paying -- and the ripple effect of those customers. The model helped an online auction house make several critical decisions. The business made its money on fees charged to sellers but recognized that its free customers -- its buyers -- were valuable, too. As competition heated up, the company worried that it wasn't wooing enough buyers. Using the model, the business discovered that the network effects of buyers were indeed large and that those customers were worth over $1,000 each -- much more than had been assumed. Armed with that information, the firm increased its research on buyers, invested more in targeting them with ads, and improved their experience. The model also helped the company identify the effects of various pricing strategies on sellers, showing that they became less price-sensitive over time. As a result, the company raised the fees it charged them as well. INSET: Inadequate Remedies. [ABSTRACT FROM AUTHOR]