Strategy P. 14

Many manufacturers already have established product development activities in different countries around the world. As a rule, the current approach includes colocation of cross-functional teams to foster close collaboration among engineering, marketing, manufacturing and supply-chain functions. The results to date -- better product designs, faster time to market and lower-cost production -- have been satisfactory. However, growth and innovation can now be much more effective if manufacturers tie their decentralized development organizations into a cohesive, unified global product development operation. In this article, the authors introduce new empirical frameworks to guide managers toward such practices. Citing exemplars such as Hewlett-Packard, Eastman Kodak, Hyundai Motors, Haier, Alcatel and Cummins, the authors explain why GPD has come of age and demonstrate a three-stage approach that puts product development in the context of a company's relationships with outside partners. The article draws from extensive interviews with engineering managers at more than 100 companies in 15 countries in North America, Europe and Asia. Additional data are from a recently completed study on GPD that PTC has conducted with BusinessWeek Research Services, interviewing and surveying more than 1,100 engineering managers worldwide.

For both manufacturing companies and service firms, the basis of competition is shifting fast. Manufacturers are finding they must compete by selling services; service firms now have to provide products as well as services. The emerging battleground is known as "integrated solutions," and it is where leading companies such as IBM, General Electric, Rolls-Royce and EDS already compete aggressively. Rolls-Royce provides airlines with "power by the hour," selling engines along with the services to maintain and upgrade them over many years. Services provider EDS now manages and integrates different suppliers' technologies and products as part of its business outsourcing solutions. However, the integrated solutions approach is not simply a matter of blending products and services. Customers are buying guaranteed solutions for trouble-free operations. So the key is to develop and deploy the right capabilities -- and to structure the organization so these capabilities match customers' needs. This article offers a blueprint for implementing integrated solutions, drawing on extensive research with such companies as Alstom Transport, Cable & Wireless, Thales, Ericsson and Atkins. The article highlights the importance of four prerequisite capabilities and shows the organization structures necessary for success -- structures that are no longer bounded by product, service or geographic lines. The article then lays out three levels of organizational capability to chart the journey that integrated-solutions providers must take.

AåÊframework called the "innovation radar" can help companiesåÊidentify opportunities for innovation.

Multinationals are finding it increasingly important to match the strengths of their subsidiaries' host economics to their strategic needs.

China's institutional private equity and venture capital market has similarities to that of the United States and Europe, but there are important differences. Many practices that are taken for granted in areas such as Silicon Valley have yet to become routine in China. To begin with, there is a lack of readily available information about opportunities, entrepreneurs and companies. In addition, Chinese entrepreneurs know little about finance, corporate structures and governance, thereby requiring investors to spend considerable amounts of time educating them and filling the gaps. The authors identify seven disciplines critical to successful investment in China: knowledge and appreciation of the importance of social capital networks, or guanxi; understanding of corporate governance and shareholder rights; the ability to manage intellectual property; the ability to adapt business models to local conditions; the ability to add managerial and technical value to young enterprises; knowledge of legal structure; and an ability to navigate complex regulatory environments.

Global sourcing is an advanced but complex approach to sourcing and supply management. The authors use survey research to gauge the extent to which companies are currently practicing global sourcing, which involves integrating and coordinating common items, materials, processes, technologies, designs and suppliers across worldwide buying, design and operating locations. In a sample consisting of supply executives primarily from large North American-based multinationals -- particularly manufacturers, the majority of survey respondents said their companies practice some form of international purchasing, a less integrated and coordinated approach than global sourcing. However, more than 70% of managers surveyed said that their companies plan to use global sourcing in the future. The authors identify a set of features common among companies that excel at global sourcing. The features cluster into seven broad characteristics: executive commitment to global sourcing; rigorous and well-defined global sourcing processes; availability of resources needed for the global sourcing initiative, including access to qualified personnel and budgets; information technology systems that support data analysis on a worldwide level; organizational design features that support the initiative, such as an executive committee that oversees global sourcing; structured approaches to communication, such as regular strategy review sessions; and methodologies for measuring savings from global sourcing.

By analyzing 50 cases of successful sustainable enterprise in developing countries, the authors developed a conceptual framework they call the Sustainable Local Enterprise Network model. Analysis of the 50 cases revealed that examples of successful sustainable enterprise in developing countries often involve informal networks that include businesses, not-for-profit organizations, local communities and other actors. These networks can lead to virtuous cycles of reinvestment in an area's financial, social, human and ecological capital. Successful SLENs, the authors found, require at least one business enterprise to ensure the network's financial sustainability and serve as its anchor; however, that anchor role may be played by a cooperative or a profitable social enterprise launched by a non-governmental organization. While multinational corporations were sometimes part of the SLENs studied, entrepreneurs, nonprofits and sustainable local businesses were more common. Using a number of examples from their research, the authors describe how SLENs operate. Examples include networks involving Honey Care Africa Ltd., a honey company based in Nairobi, Kenya, which aims to promote rural development through beekeeping, and Grameen Shakti, which sells solar energy systems for homes in Bangladesh. The authors conclude with recommendations for fostering the development of SLENs, such as setting up training programs in sustainable entrepreneurship in developing countries.

In a recent survey, 72% of board directors indicated that their performance ought to be evaluated. Yet only 21% of the boards of public companies actually conduct such assessments. Part of the problem is that organizations often don't know how best to implement a board self-evaluation procedure, so many simply avoid the practice. Others have implemented the process only to become frustrated because it took so much time and produced so few results. To investigate the different self-evaluation practices used, the authors studied eight boards that have engaged in the process for at least two annual cycles. They found two high-level variables in the protocol for self-evaluations: the structure of the data-collection methodology (low versus high) and the confidentiality of data (unimportant versus important). These dimensions define quadrants of four different approaches to self-evaluation: informal, legalistic, trusting and systematic. Each approach has important implications for a company's board rating, directors and officers insurance and various other issues.

In this article, the authors review various streams of research suggesting that although companies are increasingly under pressure to manage conflicting or difficult-to-reconcile stakeholder demands, managers are still largely behind the curve in recognizing, justifying and developing the capabilities to do so. In contrast to primary stakeholders such as customers, suppliers and shareholders, secondary stakeholders are often difficult to identify beforehand, or they may not be willing or able to engage, negotiate, compromise or clearly articulate their positions -- a phenomenon the authors refer to as stakeholder ambiguity. Citing examples involving companies such as Monsanto, Conoco-Philips, Texaco and the French oil company Perenco, the authors present research indicating that managers are often ill-prepared to deal with the idiosyncratic and context-specific nature of stakeholder ambiguity and typically revert to formulaic decision-making frameworks, such as discounted cash flow and cost-benefit analysis, which misrepresent the challenges. Some research indicates that stakeholder ambiguity may actually erode the competitive advantage of large multinationals. Although such companies possess significant competencies, technological capabilities and economies of scale, they may be at a disadvantage when trying to determine and align the interests of secondary stakeholders.