Issue 4, 1998

Viewpoint Creating Change Through Strategic Storytelling

Michael Shanahan and Arm N. Maira

"We had came off a great year – earning big enough bonuses to pay the kids' college fees – when the industry did its usual nosedive. There we were, staring at each other, going through the motions of re–forecasting, but in our hearts we were all thinking, ''What the heck – until prices come up, there's nothing much we can do to turn this thing around. 'Joe had hired a team of consultants, mainly to get the Board off his back, and after a few months of frenzied activity they came hack to us with some targets and a whole list of issues. But we weren 't really engaged. Little did the consultants know, the truth of the matter was that none of us wanted to face what lay below those issues. We just weren't going to change. [...]

Issue 4, 1998

Industry Outlook Report Different Oil Industries for Different Futures

Christopher E. H. Ross

Many oil and gas companies are highly focused on the next five years. They see challenges in another period of relatively low commodity prices and opportunities in the opening of previously closed countries and in the worldwide restructuring of the regulated natural gas and electricity businesses. However, some companies recognize that they are now making investments in businesses that will still be operating 30 years from now. After all, the initial discoveries of the North Sea and Alaska North Slope were made in the late 1960s and early 1970s, when Middle East oil prices were around $1.25 per barrel. At that time, several companies invested in residual fuel oil desulfurization to meet growing power generation needs, and Shell and Gulf Oil had an emerging business in nuclear energy. Soon thereafter, many oil companies diversified into the coal and metals industries. Few people at that time envisaged the imminence of nationalization, the massive reduction of residual fuel oil markets, the difficulty in managing a diversified portfolio, or the travails of the nuclear business. Nor did they fully anticipate the huge potential of the North Sea and the North Slope. [...]

Issue 4, 1998

The Role of Metrics in Sustainable Development: A Progress Report

Virginia Morris, Jonathan Shopley, and Eric Turner

Companies that have embarked on sustainable development initiatives recognize that measuring progress is critical to success. Companies such as British Petroleum, IKEA, Interface, and Royal Dutch/Shell are exploring not only why and how to reach sustainable development goals, but also how to calibrate how well they are doing. The challenge is that, for many facets of sustainable development, there is no agreed–upon context or consensus for measurement. When a company sets its sights on increasing profits 28 percent in the coming year, everyone involved knows what that metric means and why it's important. But how does a company measure its progress in supporting the well–being of a local community in a developing country? What environmental, economic, and social metrics should a company draw on to develop a state–of–the–art manufacturing plant in a new region, or to change how it transports goods both internally and externally? Will old measures suffice? Can a few simple measures capture the three dimensions of sustainable development – economic success, environmental quality, and social equity – and provide management with valuable decision–making tools? [...]

Issue 4, 1998

Sustainable Development: The Technology Management Implications and Opportunities

Robert Shelton

To the Chief Technology Officer (CTO) and the technology management group in your company, sustainable development may appear to be someone else's challenge. But appearances can be deceiving. Leading companies are finding that dealing effectively with sustainable development requires significant innovation in technology visioning and execution – because sustainable development is fundamentally new territory. For your company and many others, traditional planning may not pick up the sustainable development issues on the horizon – issues that could significantly affect your business's basic technologies and competitive framework. [...]

Issue 4, 1998

Sustainable Innovation and Change: The Learning-Based Path to Growth

Bryan Smith and Joel Yanowitz

For companies that want to make sustainable development a reality, building organizational learning capabilities can be invaluable. Organizational learning – now embraced as a core competitive strength in successful global companies such as British Petroleum (BP), Coca–Cola, and Royal Dutch/Shell – has proven very effective in bringing about lasting change and fundamental innovation. In fact, every company interested in capturing growth through innovation and change has needed to develop critical organizational learning capabilities to meet its goals. [...]

Issue 4, 1998

A Conversation Profits with Principles - The Transformation of Royal Dutch/Shell

Mark Moody-Stuart, J. Ladd Greeno, and Jonathan B. Shopley

With more than 100,000 employees and assets valued at $80 billion, the Royal Dutch/Shell Group is a global giant in the energy industry, involved in the whole production process of fossil fuels – – from initial prospecting and recovery to final sale – as well as other businesses, such as chemicals. Recently, the Group, which was established early in this century, has moved into the renewable energy business. Since the start of 1996, Shell has been effecting a radical transformation of its company structure. The goal of this transformation is twofold: to create a more flexible and cost-effective framework to meet the business challenges of the next century and to pursue a business focus driven by the interests – financial, social, and environmental – of Shell's customers and others. Arthur D. Little is helping Shell adapt its management framework to enable the company to put its sustainable development goals into practice. [...]

Issue 4, 1998

Sustainable Development: The Next Generation of Business Opportunity

Gilbert Hedstrom, Stephen Poltorzycki, and Peter Stroh

Industry is showing unprecedented interest in the business potential of sustainable development, an approach to developing long–term prosperity by integrating strategies for economic success, environmental quality, and social equity. In a recent Arthur D. Little survey on business and sustainable development/ for example, 95 percent of companies responding viewed sustainable development as genuinely important, and 83 percent saw business value in implementing sustainable initiatives. At the same time, when we look beyond a few leaders in key industries, most companies seem uncertain about how to capitalize on the business value of sustainable development, particularly in the short term. [...]

Issue 3, 1998

Viewpoint From Einstein to Elephants: Unlocking the Innovative Mindset

Geoffrey Marlow

Innovation, which can be defined as "creating value in new ways," isn't limited to radical changes in technologies, products, and manufacturing processes. It can also help frame and position brands – or even whole organizations – and provide new access routes to markets. Fortune magazine described Coca–Cola as the world's most innovative company because of the creative ways it has found to add value to a product that has not essentially changed in 95 years. Innovation can also take the form of new ways of working, new business processes and infrastructures, and better staff management and career development. [...]

Issue 3, 1998

Preparing for Strategy in Times of Change

Annie Galliano and Kathie Neal

In our work with clients in a wide range of industries, we have become aware of the need for a tool or experience set that can prepare people to create effective, timely strategies. To meet this need, we have developed a new approach called "Wishes, Weapons, War Zones" (WWW). WWW is an easy–to–use navigational tool that helps companies prepare for strategy formation by guiding the search for insight and facilitating effective dialogue among the many parties whose input is necessary for successful strategy. The WWW process can yield a snapshot of the reality of a given situation, providing a powerful kick–start to the process of new strategic thinking. [...]

Issue 3, 1998

Value-Based Decision-Making: A Technique for Accelerated Product Development

Mildred Hastbacka and Christine Jantz

"Getting close to the customer" has long been recognized by developers, manufacturers, and marketers of commercial products as an essential ingredient for success. Customer requirements – integrated with business objectives, product delivery requirements, and applicable regulatory requirements – define the product and provide direction to its development. There are, however, several issues involved in incorporating the voice of the customer into product development: it takes time – where time is in fact money – and it often happens too late in the cycle to permit extensive reengineering. hi addition, the way most research is conducted, you don't get true customer requirements, because customers often can't articulate needs or wants for things they haven't yet experienced. Even once the needs are known, there may be a large number of ways to fulfill that need, i.e., in terms of engineering approaches. How do you choose one? [...]

Issue 3, 1998

Innovation in the Fast Lane

Philip D. Metz

In our innovation work, clients frequently approach us with requests or aspirations that seem impossible. "Our products are three years behind our competitors," one of our electronics clients lamented. "We need to catch up now – and, by the way, we don't have the time or money to duplicate our competitor's R&D operation." A major telecommunications services provider came to us saying, "We need to develop a diverse service portfolio for dozens of niche markets. Although we're good at developing and supporting major new services, it takes us forever to roll them out. We also lack the resources and management 'bandwidth' needed to quickly develop these niche products. How can we get additional resources at little cost and with no additional management attention?" [...]

Issue 3, 1998

Toward Sustainable Innovation: A Progress Report

Ron Jonash, Tom Sommerlatte, and Arun N. Maira

In conducting research for our new book on the next–generation enterprise, we have found that a critical differentiator for the next generation of corporate leaders will be the ability to effectively harness and drive innovation. In so doing, these leaders will have found ways to leverage innovation to compete successfully along all three key competitive dimensions: product and technology leadership, operational efficiency and excellence, and customer intimacy and loyalty.1 They will have found ways to sustain innovation cross–functionally and cross–culturally across their extended enterprises of lead customers, lead suppliers, institutional partners, and individual inventors – as if each organization were truly a single integrated enterprise with well–aligned strategic objectives and win–win propositions, hi this article, we will outline the preliminary results from our most recent research into the critical pathways to high–performance technology and innovation management in the next–generation enterprise. [...]

Issue 3, 1998

A Strategy for Supporting Innovation and Growth in Times of High Uncertainty

Friedrich Bock, Martin Hellweg, Marc-Milo Lube, and Hubertus Mühlhäuser

One good indicator of the accelerating pace of change is the time it takes for the total amount of human knowledge to double. At the end of the first millennium, it doubled in about 200 years; at the beginning of the industrial revolution, in about 30 years; and today, in about five years. Welcome to the information age! [...]

Issue 3, 1998

Organising on the Edge: Meeting the Demand for Innovation and Efficiency

Arun N. Maira and Robert J. Thomas

Lou Noto, Chairman and CEO of Mobil, is one of Arthur D. Little's key clients. After undertaking a substantial reorganisation to make his company more fluid and less hierarchical, he recently described the ensuing organisation as resembling "an irregular electron cloud." He went on to express a need for more focus and structure than are generally provided by electron clouds and for ways to connect the various parts of the organisation more firmly. But he also recognized that large companies cannot achieve this combination of fluidity, focus, and connection by using traditional ways of organising a business. Another client, also the CEO of a Fortune 50 global company, has been leading his organisation through a rapid process of learning. He has to discover how to manage in a new world in which, within the past five years, the company has deployed more than half its assets in strategic joint ventures, some in partnership with its principal competitors! The firm is rapidly becoming a networked organisation, and it must learn to manage the compete-or-collaborate dilemma as it connects across former boundaries. [...]

Issue 2, 1998

Viewpoint Creating a Successful Knowledge Management System

Laurence P. Chait

Effective knowledge management is an area that we at Arthur D. Little see as critical to the ongoing success of our firm. After all, our knowledge and experience is our "product." [...]

Issue 2, 1998

Industry Outlook Report New Paradigms for the Auto Industry Beyond 2000

Holger Karsten, Wolfgang Bernhart, and Martin Mitteldorf

The automotive industry will ride a wave of dramatic change over the next decade as new technologies emerge, markets stagnate in developed countries and grow in emerging countries, buying patterns change, and customers become ever more demanding. The industry will respond to a wide range of political, social, and economic issues: How quickly will Eastern Europe and China develop? Which trade barriers will rise or fall? Will an environmental crisis or a medical discovery prompt citizens to demand "greener" transportation – e.g., smaller cars and more public transportation? Will safety concerns trigger massive defections to safer means of transport – planes, trains, or buses? [...]

Issue 2, 1998

Technology Licensing: A Strategy for Creating Value

Mildred A. Hastbacka and Kathleen McCarthy

Would you like to increase your bottom line – without additional capital or research investment? Would you like to tap into new foreign markets – without investing in property, plants, or equipment? Would you like to develop new technologies – without expanding your existing R&D resources? Would you like a base level of revenues to help smooth out otherwise cyclical earnings? Would you like your technology to become the industry standard? [...]

Issue 2, 1998

Knowledge Management at Daimler-Benz's Passenger-Car Division

Karin Bergmann

Daimler-Benz has long been a leading-edge manufacturer of high-quality luxury passenger cars, with a tradition of exceptional engineering, performance, and safety. The technological edge was the company's critical success factor and a structural barrier to market entry for potential competitors. In recent years, however, changing customer needs and competitor behavioûr have required a different approach to the market. In response, Daimler-Benz has started a radical repositioning process: from manufacturing only luxury cars to becoming a premium full-line manufacturer, offering high-quality vehicles in several market segments. [...]

Issue 2, 1998

Knowledge Management: An Engine for Innovation

Craig A. Chambers and Ashok B. Boghani

One of our colleagues with several decades of experience in managing innovation has proclaimed that his mission in life is to absolve executives from feeling that they must know everything before they can effectively do anything. There is simply too much data, intelligence, information, and even disinformation flowing through all complex, technology–driven organizations for any manager to master it all. [...]

Issue 2, 1998

Practical Knowledge Management: A Model That Works

Gilbert J. B. Probst

The goal of knowledge management is a practical one: to improve organizational capabilities through better use of the organization's individual and collective knowledge resources. These resources include skills, capabilities, experience, routines, and norms, as well as technologies. [...]

Issue 2, 1998

The Intelligent Organisation

Friedrich Bock

Last night you had a delightful dream. Your best sales manager won a huge contract with an important new client she had been Flawing for years. Throughout those years, this client had continued to use your competitor's product – not because it was a better product, hit because it had a better user interface. Your competitor's R&D people must have done some heavy-duty customer testing and product marketing. Just to catch up, you had done the same. It took you quite some time to bring your R&D and marketing departments together to support common product and quality goals. And then you'd had those intensive discussions with suppliers, bringing in your production people to design a process for optimal parts supply. And you'd informed the distribution channels well in advance to prepare for special packaging. So it was no wonder that your sales manager won the account. Not only was your product greatly improved, but she had all the product information she needed to explain its real advantages to the client. And just as important, she could make a commitment – on-line with the production schedule – on the delivery week. And she could negotiate a favorable leasing rate, using financial models to ensure an adequate return. [...]

Issue 1, 1998

Viewpoint Flocking

Arie de Geus

Arie de Geus is widely recognized as the originator of the concept of the learning organisation. During one phase of his long and distinguished career at the Royal Dutch/Shell Group, when he was serving as the firm's coordinator of planning, he and his colleagues undertook a broad investigation into a provocative question: why do some companies survive over several centuries, while so many more last only a few decades? And what lessons can we learn from the experience of those that achieve long and prosperous lives? He has captured the learning from this exploration, and from a lifetime of astute observation and reflection, in a wise and wonderful new book, The Living Organisation. We are delighted to be able to offer our Prism readers the following excerpt. [...]

Issue 1, 1998

Partnering for Effective Product Development: Lessons for Small Manufacturers

Richard F. Topping and Alien Wilkens

When David slays Goliath in business today, it doesn't necessarily make the headlines. Small manufacturing companies such as Nucor, in steel, or Gateway 2000, in personal computers, now regularly compete and win against the giants. Yet unlike the biblical David, who met his antagonist in single combat, such companies often collaborate with external partners. One small manufacturer that has used this stratagem to compete successfully with the likes of General Electric and Whirlpool is Sub–Zero Freezer Company. [...]

Issue 1, 1998

Collaborating with Competitors on Technology Development

Chris Floyd

Until quite recently, corporate enthusiasm for joint ventures, alliances, and outsourcing partnerships of all kinds stopped short at technology development. Why collaborate with competitors if you could gain a unique advantage by developing technology yourself? Today, however, with technology complexity increasing and lead times shrinking, CEOs are having to rethink how they manage technology. As we discuss in our new book, Managing Technology for Corporate Success, they need new approaches for integrating technology and strategy. In particular, they need to make full use of the best technology available – whether it resides inside or outside the company. [...]

Issue 1, 1998

Successful Post-Merger Integration: Realising the Synergies

Nils Bohlin, Eliot Daley, and Sue Thomson

Merger and acquisition activity has grown sharply in the last five years. Since 1992, annual expenditure on such activity has leaped from under $400 billion to over $1,200 billion, and there are no signs of a slowdown. The size of the deals has also grown, culminating in WorldCom's recent, record-breaking offer of $3 7 billion for MCI. [...]

Issue 1, 1998

Connecting Across Boundaries: The Fluid-Network Organisation

Arun N. Maira

The principal strategic challenge for global companies, as recently reported in a survey of some 2,700 senior executives and managers, is the reconciliation of seemingly conflicting goals: thinking long-term while delivering short-term results, developing global scale while being locally responsive, and investing in innovation while increasing operational efficiency. In each aspect of this challenge – long-term vs. short-term results, global vs local focus, and innovation vs efficiency – there is a tension between two necessary but apparently opposing goals, which needs resolution. [...]

Issue 1, 1998

Strategic Alliances: Finding the Hidden Leverage for Success

Jennifer M. Kemeny and Joel Yanowitz

Mergers... joint ventures... strategic alliances... businesses are increasingly relying on these activities for strategic advantage. All too frequently, however, the potential benefits fail to materialise. While much attention is focused on the financial and contractual aspects of an alliance, we believe that the key to organisational partnerships lies in a different arena. Increasingly we are convinced that the success of such alliances depends on the "human factors" – the ways that people think and interact. And we have gained practical insight into both the hurdles that impede cross–organisational alliances and the processes necessary for their success. But first, let's step back and take a "big picture" look at how alliances work. [...]

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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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