Issue 4, 1997

Viewpoint On Transformation

Lucio A. Noto

On June 30 of this year, Arthur D. Little was honored to welcome Mobil Corporation Chairman and Chief Executive Officer Lou Noto to address some 300 senior members of the Arthur D. Little staff at our corporate leadership conference in Charleston, South Carolina. The theme of the meeting was ^Transformation" – a topic on which Mr. Noto has few peers. Since becoming CEO of Mobil in 1994, Mr. Noto has personally overseen the transformation of Mobil. Three years ago he expressed the belief that, to become a great company and to respond to the dramatic rate of change in the market, Mobil needed to significantly increase the pace of divesting non–core assets, reducing overhead costs, and focusing on developing growth opportunities. Toward that end, he set highly ambitious five–year stretch targets – which Mobil has achieved two years ahead of schedule. [...]

Issue 4, 1997

The Art of Conversation: Dialogue Marketing and the Business-to-Business Relationship

Allan Steinmetz

Think of the last time you needed to buy a new car or an expensive major appliance. If you relied on previous experience or suggestions from others, your task was easy. But if you weren't planning the purchase and needed a little convincing, or if you had no idea what you wanted to buy or from whom to buy it, the process was considerably more daunting. You probably made a mental list of the brand names you knew, looked at advertisements, perhaps did some research on the Internet. After narrowing the field, you may have studied brochures and Consumer Reports to determine which products had the features and quality you were seeking. After again narrowing your choices, you may have visited a store or talked to a salesperson, looked for a good deal, and decided on product options. Finally, you negotiated a price and made a purchase. You may have spent months in the process, and it probably didn't end with the sale. A conscientious retailer may have followed up with information on new product features, reminders for service, and inquiries on your level of satisfaction. Marketers like to call this the "buying process." It's complex and can demand a great deal of effort on the part of the consumer. [...]

Issue 4, 1997

Sustainable Development: A Path for Getting Closer to Customers

Jonathan Shopley and Richard Dodd

Long–term, profitable growth is becoming increasingly difficult to create. Products that once occupied secure niches are becoming commoditized. Brands in areas as disparate as automobiles and electronics are losing their power to retain customers. Manufacturers are losing control over suppliers and customers to retailers and distributors. Markets, from appliances to fast food, are becoming saturated. Prices are dropping and margins are shrinking, while customers demand "more, better, cheaper, and faster." In the automobile industry, for example, return on assets over the last 10 years has dropped from 25 to 10 percent in the United States, and from 10 to 5 percent in Europe. [...]

Issue 4, 1997

Technology's Proliferating Role in Creating Customer Loyalty

John Collins

One of the toughest challenges companies face is identifying and successfully commercialising valuable new products and services for existing and target customers. Many leading companies are addressing this challenge by deploying technologies across – and beyond – their organisations that allow their customers to participate directly in the creation and development process. Although this trend is not new, the ways in which companies are deploying technology are proliferating rapidly, as are the opportunities for customer involvement. Essentially, companies are using technology as a "bridge" that allows teams, departments, functions, and customers to carry an idea forward into a new product or service. By building these bridges with a select group of key customers, they are able to forge strong relationships with these customers and then exert substantial leverage across a wider customer base. [...]

Issue 4, 1997

How Product Companies Are Competing Through Services

Koen Bouckaert, Daniel Deneffe, and Herman Vantrappen

Pick a few leading industrial companies. Now close your eyes and try to visualize their operations. What images come to mind? Very likely you envisioned gleaming R&D laboratories and bustling factories fed by smoothly running supply chains – in short, well–oiled industrial machines geared to delivering high–tech products of impeccable quality at competitive prices to ever–more–demanding customers. Chances are that you visualized the operations of companies such as ABB, GEC Alsthom, General Electric, Otis, Renault, Siemens, or Xerox, to name but a few. [...]

Issue 4, 1997

Creating Customer-Oriented Companies

Marc Rubin

If you had invested in an index mutual fund pegged to the Standard & Poors 500 at the beginning of 1990, you'd have done very well. But if you had invested in a fund consisting of companies that excel at customer management, your investment would have outperformed the Standard & Poors 500 by 300 percent! The lesson is clear: companies that actively manage and nurture their customer relationships are creating greater value for their shareholders. [...]

Issue 3, 1997

Strategic Management of Technology: Thirteen Common Pitfalls

Martin Trewhella and Pat Clarke

In recent years, Arthur D. Little has been applying its Third Generation R&D principles to a wide variety of technology management assignments. Many of our clients are process and/or production companies (e.g., major oil companies, chemical manufacturers, and pulp and paper producers) that continue to face difficult technology management decisions. In an era of dramatically reduced R&D spending in these mature industries, managers are nevertheless coming to see technology management as a key strategic driver for operational improvement and sustained market performance. Although among our client firms we see a wide range of technological sophistication, we've noticed that many companies – even the most sophisticated – make similar mistakes. In this article we highlight 13 technology management "pitfalls" we often see in the process industries, but which are common in a range of other industries as well. [...]

Issue 3, 1997

Industry Outlook Report The Future of Telecommunications

Werner A. Knetsch, Phil O?Donovan, and Martyn F. Roetter

The telecommunications industry has a special role in economic globalization: it is an enabler as well as a beneficiary of this phenomenon. The integration of telecommunications markets worldwide, together with new applications and technologies, is enabling multinational companies in other industries to operate globally and become more efficient and effective. At the same time, telecommunications benefits from globalization because communications revenue increases as a result of increased activity in world markets. Telecommunications is therefore in a "win–win" situation. [...]

Issue 3, 1997

A Conversation From Paternalism to Performance: Leading Enterprise-Wide Change

The Lord Simon of Highbury and Douglas A. Ready

An industry giant in the U.K., British Petroleum (BP) is the world's fourth largest oil company. BP extracts oil from around the world and sells its products in over 100 countries. In addition, it operates a large chemicals business and manages one of the largest solar opera–dons in the world. In the mid 1980s, due to declining oil prices and several failed exploration activities, BP came under intense pressure to cut its operating expenses. In 1992, after the first quarterly loss in the company's history, BP fired its Chairman and elevated Sir David Simon to that position. Widely regarded as a brilliant strategist, he led BP from its nadir to stellar operating performance in just four years. The challenge, at least in part, was leading the transformation from a highly paternalistic, inward–looking culture to a fiercely competitive, market–focused company. In May of this year, Sir David Simon was appointed Minister of Trade and Competitiveness for Europe and a member of the House of Lords, becoming The Lord Simon of Highbury. This conversation took place in September 1996, when he was still leading BP. [...]

Issue 3, 1997

Planning for Growth in Mature Industries

David Barker and Richard Eno

Consider the following business landscape:

  • With an enormous range of options, investors increasingly seek exceptional performance at the expense of security, and shift their portfolios toward high–growth industries and companies.
  • Despite poor industry fundamentals, leading competitors deliver superior returns and continuously "raise the bar" on performance by publicly establishing stretch goals.
  • Performance–based remuneration for corporate executives and many employees has become the norm, with returns to shareholders relative to competition the most heavily weighted determinant of compensation.
  • Share performance is increasingly influenced by perceptions of management's ability to sustain growth in earnings and cash flow.
  • The prevailing industry sentiment is that the "easy" route to enhanced earnings – through cost cutting and reengineering – has run its course.
  • The most talented workers seek careers in growth businesses and readily jump ship when their employers falter.
Welcome to 1997 and the realities faced by companies operating in mature industries. Over the past five years, the top performers in these industries have significantly reduced costs, grown earnings, and in some cases produced shareholder returns that have handily outpaced broad market indices. In many instances, executives of these firms have reaped large bonuses and exercised options at eye–popping values. [...]

Issue 3, 1997

Scenario Thinking: Planning for the Futures You Want (and the Futures You Just Might Get)

Christopher E.H. Ross, J. Ladd Greeno, and Albert Sherman

For major multinational corporations that are heavily invested in the way things are now, there is no simple recipe for thinking about futures in which their businesses, and the factors that drive those businesses, will radically change. Even though everyone knows that we are living in a world of rapid, accelerating change, too many companies are planning for a future of "more of the same, more or less." They are anticipating linear, if galloping, change along current paths, when they might be better off preparing for the unexpected: major discontinuities. [...]

Issue 3, 1997

Strategy in a Time of Change

James A. Finnegan, Darcio A.R. Crespi, and Debra Hernandez

Not so long ago – in fact in the memory of the generation of men and women who lead global enterprises today – people known as strategic planners sat in corporate offices and made strategy. These strategists were generally far removed from the day–to–day business of R&D, manufacturing, marketing, and customer service. Their strategies spanned lengthy periods of time and were designed to guide their organizations from success to success – dictating the structure and the allocation of resources to keep their companies profitable and growing. [...]

Issue 2, 1997

A Conversation Driving Culture Change at Samsung Semiconductor

Dr. Ho-Kyoon Chung and Grant Gustafson

Samsung Electronics Co. Ltd., since its foundation in 1969, has developed a broad range of electronics and related items from semiconductors and finished home appliances to telecommunications hardware and multimedia products. A listed company on the Korean Stock Exchange, Samsung Electronics' sales reached US$20 billion in 1996. [...]

Issue 2, 1997

The Environmental Challenge of Going Global

Gilbert S. Hedstrom, Ronald A.N. McLean, and Bernhard H. Metzger

Conventional wisdom holds that as transnational companies expand into new sites and markets, they leave behind North America's and Northern Europe's stringent environmental, health, and safety performance requirements. The reality is quite different. Leading transnational companies have known for some time that sound EHS performance is vital to success wherever they operate. Host countries expect the best from firms with global resources. The financial community is very sensitive to the risks and liabilities of mediocre environmental performance. Advocacy groups don't hesitate to hold companies accountable for lapses in EHS practices wherever they occur. And consumers – especially in Europe – can be motivated to punish companies at the cash register when they perceive them as environmentally irresponsible. [...]

Issue 2, 1997

The Role of the "Human Organisation" in the Success of Japanese and American Affiliates Overseas

Schon Beechler

As competition has intensified and become global in more and more industries, multinational corporations (MNCs) and their overseas affiliates have become more important and visible players in the world economic arena. Moreover, the fortunes of entire nations are increasingly linked to the success or failure of their largest firms. It is therefore not surprising that politicians, businessmen, and scholars alike are all searching for the answer to the question: What is the key to international competitiveness and global business success? [...]

Issue 2, 1997

A Conversation Achieving Concerted Action: The Proposed BT-MCI Merger

Sir Peter Bonfield and Tim Simpson

If approved, the proposed merger between British Telecommunications plc (BT) of the United Kingdom and MCI of the United States (which is awaiting approval by U.S. and European regulators) will create a $42 billion company, the world's fourth–largest telco (after NTT of Japan, AT&T, and Deutsche Telekom). To effect the merger, BT will acquire, for $20 billion, the 80 percent of MCI that it does not already own (BT acquired 20 percent of MCI in 1994), making this the largest takeover ever by a British company. [...]

Issue 2, 1997

Rethinking the Organisation: New Structures for Global Competitiveness

Arun N. Maira

As the next millennium approaches, leading companies are racing to implement fundamental reorganisations of various kinds. Ford is rearranging itself into global "centers of excellence." AT&T is breaking apart. GM is contemplating a new international organisation to coordinate its global resources. Daimler-Benz, Philips, and others are divesting acquisitions they made not too long ago. Meanwhile, corporate mergers are legion – particularly, but not only, in the industries devoted to pharmaceuticals and health care, banking and financial services, telecommunications and utilities, and aerospace and defense. And the unprecedented wave of reengineering and restructuring that began in the United States continues unabated in Europe and elsewhere. [...]

Issue 2, 1997

Leading Enterprise-Wide Change Initiatives

Douglas A. Ready

Consider the following scenario: You are a member of your company's top management team. Performance indicators suggest that your firm's global competitive position is softening. Several long–term customers have left you and are now working with one of your newest competitors, who achieves 20 percent lower costs, higher product quality, and 50 percent faster order fulfillment than you. At the same time, you've realized that your traditional short list of benchmark competitors may no longer be a reliable source of competitive intelligence. At the quarterly gathering of your company's Presidents' Council, the CEO and top team concur that the situation is urgent. To remain successful, your company must take decisive and far–reaching steps. The goal is to become a global leader – and remain one well into the 21st century. The CEO will announce a transformation program, Global Vision 2000, during the annual Leadership Congress next month, when the company's top 500 executives from around the world will listen to motivational speeches from top management gurus and lean about major developments in your industry and your company. During the last decade, this scenario has become familiar. Once–dominant companies all over the world are reeling from relentless changes to the business environment. In their efforts to recapture the magic that once made them great, they have been launching major transformation programs. [...]

Issue 1, 1997

Viewpoint Practice Fields: Powerful Tools for Enhancing Performance

Marilyn Paul, Jennifer M. Kemeny, Richard H. Gregg, Jimmy Carter, and Cliff Bolster

For individuals and teams who want to master complex skills, practice is essential. Practice enables athletes to excel at sports, musicians to master music, and actors to enchant audiences. Practice works by allowing people to use skills in multiple low–risk experiences in special settings known as "practice fields". Here demands for superb performance, credibility, and confidence are temporarily suspended, exploratory inquiry is allowed, and "not knowing" is permitted. [...]

Issue 1, 1997

Environmental, Health, and Safety Auditing: Meeting New Expectations for Delivering Value

Maryanne DiBerto and Jane E. Obbagy

Companies first began to audit their activities for environmental, health, and safety issues in the 1970s. The goal was to provide assurance to their boards of directors that their operations complied fully with government regulations and company guidelines for environmental, health, and safety matters. Today, leading audit programs are mastering a new role: assessing the efficacy and value of environmental, health, and safety management systems. At the same time, these programs are adapting to a business climate in which every corporate function is under continuous pressure to deliver added value. Without slackening efforts to verify compliance, they must make the most of staff and other resources and better understand and serve the needs of audit programme customers across the organisation. [...]

Issue 1, 1997

A Competitive Framework for Environmental, Health, and Safety Management

Stephen Poltorzycki and John S. Willson

Business pressures are rapidly reshaping how environmental, health, and safety (EHS) managers and their organisations serve companies. For several years, EHS managers at leading companies have sought to integrate EHS issues and activities with business processes and help their organisations look beyond compliance to the broader business benefits of effective EHS management. Now, as corporations push to stay competitive by improving processes and reducing costs, many EHS managers are juggling business integration with a new and equally challenging imperative: reengineering. [...]

Issue 1, 1997

Enterprise Systems: A Report from the Field

Robert M. Curtice, Robert F. Donohue, J. Chris Weiss

A growing number of companies are replacing unique, customized, inflexible, and expensive home–grown information technology systems with more tailorable, integrated, and global enterprise software packages (sometimes known as enterprise resource planning or ERP systems). In some industries, notably the oil and chemicals sectors, these systems are now so pervasive that a company without one raises eyebrows. The widespread acceptance of German–based SAP, first in Europe and later in the United States, opened a wider market for traditional software suppliers such as SSA (BPCS) and J.D. Edwards, as well as newer entrants such as BAAN, Oracle, and PeopleSoft. [...]

Issue 1, 1997

Innovation: The Key Process for Business Growth

Frank Morris, Jean-Philippe Deschamps, Chris Floyd, Geoffrey Marlow

After years of cost–cutting and downsizing, business leaders are once again looking for ways to generate growth. While innovation should be a primary engine for this growth, many senior managers are wary of investing in a process that entails such high costs and offers so little certainty of return. They also doubt their companies' ability to change course abruptly from retrenchment to full–steam–ahead investment. And even where senior management is willing to forge ahead with innovation programs, members of R&D, Marketing, and Manufacturing departments – which have been so long confined to incremental improvements designed to produce low–risk, short–term returns – now need help relearning innovation processes, skills, and mindsets. In short, companies seeking breakthrough products that will change the rules of competition and generate real wealth are facing a number of hurdles. [...]

Issue 1, 1997

Leadership and Transformation: Learning from the Best of the Best

W. Tom Sommerlatte, Friedrich Bock, and Nils Bohlin

Accelerating change in markets and technologies has made the ability to change successfully the determining factor in sustaining company performance. Yet, achieving transformational change in companies is a highly complex and difficult process, requiring explicit and expert management by the company's leaders. And companies that have been most successful often have the hardest time changing. [...]

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About Prism

Twice a year, Arthur D. Little covers the latest cutting-edge thinking on strategy, technology and innovation in its corporate magazine Prism. For over 20 years Prism has continually set the standards in innovative thinking and groundbreaking concepts in the world of business and management.

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