Developing Strategy

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The Hard Truth About Business Model Innovation

Attempts at business model innovation have led to both repeated failures as well as seemingly inexplicable successes — and few formulas to help guide business leaders. Yet a study of both failures and successes shows that the journey to successful innovation is predictable, although “travel time” differs by industry and circumstance. The manager’s dilemma is to identify whether the journey is one the company wants — or needs — to take.

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Harnessing the Best of Globalization

Globalization offers significant opportunities, yet most companies approach key decisions haphazardly. Although the complexity of globalization means managers rarely can fully analyze a global business opportunity before they need to act, the basic tensions in global business models are straightforward. A simple analysis of global ventures along these dimensions can help entrepreneurs develop clearer expectations and decision-making processes.

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When Strategy Walks Out the Door

Managers should be skeptical consumers of external strategy advice. External strategy advice can be costly — and wrong. The best sources of insight about strategy tailored for your company can lie dormant within the company itself, in its employees. Ironically, companies often expend significant resources on obtaining flawed external advice while the employees with the best strategy ideas are ignored — and thus may walk out the door.

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Finding a Lower-Risk Path to High-Impact Innovations

Pursuing a high-impact innovation strategy can have terrific payoffs — but it’s also extremely risky, and most companies won’t do it. Yet a comparatively less risky, proactive approach that strings together “lily pads” of capability-building investments, technical and conceptual advances, and market explorations into “enabling innovations” can bring companies closer to their goal and provide a long-lasting competitive edge.

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Are Nonfinancial Metrics Good Leading Indicators of Future Financial Performance?

Although using nonfinancial metrics like customer satisfaction has become increasingly popular in assessing executive performance and determining compensation, the practice has some significant drawbacks. Not all metrics apply equally to all industries. Companies considering such metrics for strategic performance management frameworks should be mindful of the importance of knowing their strength as lead indicators and applying them appropriately.

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The Lost Art of Thinking in Large Organizations

Making the transition from management to leadership requires managers to exercise skills in strategic thinking — skills they don’t often get to practice in the action-oriented environment they know best. Managers moving into senior leadership must learn to embrace ambiguity and uncertainty and learn the importance of taking time to think things through.

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Do You Know What Really Drives Your Business’s Performance?

Although intuitively appealing, strategy maps and models such as the service profit chain have a common pitfall: They encourage managers to embrace general assumptions about the drivers of financial performance that may not stand up to close scrutiny in their own organizations. A more rigorous analytic approach called performance topology mapping may help managers avoid these assumptions, as well as the strategic mistakes they promote.

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How Scenario Planning Influences Strategic Decisions

Anecdotal evidence suggests that considering various scenarios helps strengthen decision making. To test this idea, researchers offered a scenario-based workshop to executives to see how considering scenarios affected decisions. They found that though participants’ confidence in their choices never wavered, the strategic choices they made before the exercise often changed dramatically after viewing the scenarios, with a tendency to become more flexible and focused on long-term value.

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The Real Lessons From Kodak’s Decline

Former photography giant Kodak is often cited as having lacked the vision to recognize the effects digital technology would have on its business. The reality of what happened — and the true lessons of Kodak’s experience with digital disruption — highlight the complex challenges posed by fast-moving technological innovation.

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Managing Tensions Between New and Existing Business Models

Exploring new business models may be a good way to stay competitive, but doing so can create tensions internally, in areas such as organizational structure and competition for resources. Companies exploring business model innovation may not recognize the inevitability of these tensions and thus be poorly prepared to manage them. But understanding these issues may lessen some of the organizational challenges associated with business model innovation.

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Debating Disruptive Innovation

Few MIT Sloan Management Review articles garner as much attention as Andrew A. King and Baljir Baatartogtokh’s “How Useful Is the Theory of Disruptive Innovation?” After surveying 79 industry experts, King and Baatartogtokh concluded that many of the cases cited as examples of disruptive innovation by Harvard Business School professor Clayton M. Christensen and his coauthor Michael E. Raynor did not fit four of the theory’s key elements well. Here, three experts provide responses to continue the conversation.

“How Useful Is the Theory of Disruptive Innovation?” was the question raised by an article in the fall 2015 issue of MIT Sloan Management Review. In this issue, several more experts weigh in on the topic.

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Beyond the Hype: The Hard Work Behind Analytics Success

The 2016 Data & Analytics Report by MIT Sloan Management Review and SAS finds that analytics is now a mainstream idea, but not a mainstream practice. Few companies have a strategic plan for analytics or are executing a strategy for what they hope to achieve with analytics. Organizations achieving the greatest benefits from analytics ensure the right data is being captured, and blend information and experience in making decisions.

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Keep Calm and Manage Disruption

Disruption can be averted, and many businesses manage through it by beating the new competition, joining them, or waiting them out. “To be sure, facing disruption is no picnic,” writes Joshua S. Gans, author of The Disruption Dilemma. “But it also isn’t the existential threat that so many see it as.” Many businesses are finding ways to weaken disruptive events, sometimes by investing aggressively in the new innovation after entrants had brought it to market or by acquiring the entrants and the actual disruption.

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Lessons From Hollywood: A New Approach To Funding R&D

Could science-based industries benefit from a financing model similar to one used to make Hollywood movies? “We propose that a form of governance centered on the project rather than the company may be a more efficient way to organize innovation in science-based industries,” write the authors. Their proposal addresses the fact that traditional venture capital “wasn’t designed to deal with the costs, risks, and slow payout of science-based industries.”

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Leading in the Age of Super-Transparency

Thanks to social media and an increasing flood of data, the capacity to generate causes and controversies almost instantly has become the new norm in today’s “super-transparent society.” Individuals and organizations produce a voluminous, mostly involuntary, “digital exhaust,” which reveals much more about them than they think it does. Most business leaders have not yet come to grips with the new reality — and what it means for their organizations.

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Mastering Strategy

How can executives develop their skills as strategists? One way is to learn from the masters. The book Strategy Rules: Five Timeless Lessons From Bill Gates, Andy Grove, and Steve Jobs (HarperCollins, 2015) explores insights drawn from the careers of these former CEOs of Microsoft, Intel, and Apple. In a Q&A, the book’s authors, David B. Yoffie of Harvard Business School and Michael A. Cusumano of MIT Sloan, explain how strategic thinking is a capability that leaders — even the superstars — develop over time.

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From the Editor: Disruption Everywhere?

The Fall 2015 issue of MIT Sloan Management Review has two big themes: developing tomorrow’s leaders, and disruption. In a special report on leadership, four articles explore how to engage, keep, and train the next generation of managers. “Preparing for Disruptions Through Early Detection” highlights the detection techniques to become more resilient. And “How Useful Is the Theory of Disruptive Innovation?” takes a deep dive into Clayton M. Christensen’s influential theory of disruptive innovation.

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The Leaders’ Choice

The next generation of business executives will face a choice: What kind of companies do they want to lead? Organizations that will treat most employees as costs to be minimized — or ones where both employees and the company prosper together? So-called “high-road” companies begin with different values and assumptions about the workplace. But few MBAs are learning about high-road strategies in their courses, and they don’t learn that they will have distinct choices in how to compete.

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