Engines of Innovation
-edited by Richard S. Rosenbloom and William J. Spencer
(HBS Press)
In past decades, industrial laboratories such as AT&T;'s Bell Labs and the Xerox Palo Alto Research Center were wellsprings of powerful new technologies critical to America's global competitiveness. In the 1980s and 1990s, however, competitive pressures have forced managers to reassess industrial research as a business priority.
In Engines of Innovation: U.S. Industrial Research at the End of an Era, editors Richard Rosenbloom, the School's David Sarnoff Professor of Business Administra-tion, and William Spencer, president and CEO of Sematech, bring together top technical managers from Alcoa, IBM, Intel, and Xerox and leading scholars of the history and economics of technological change. The result is an important discussion of the consequences of declining investment in research for industry and the economy as a whole. The authors, who include HBS professor Dorothy Leonard-Barton and Rosenbloom, explore new ideas for linking research with commercial markets and identify the policy choices for industry, government, and universities as together they shape the future of industrial research.
Broken Promises
-by D. Quinn Mills and G. Bruce Friesen
(HBS Press)
What happened to IBM? That is the question posed by authors Quinn Mills, the School's Albert J. Weatherhead, Jr., Professor of Business Administration, and Bruce Friesen (MBA '85), knowledge manager in the Enterprise Transformation Initiative at Arthur Andersen, in their new book, Broken Promises: An Unconventional View of What Went Wrong at IBM. Based on interviews with IBM executives, company records, and surveys of the company's customers, Broken Promises is a cautionary tale of strategic miscalculation, managerial error, and loss of confidence that demonstrates the risks of neglecting customer and employee relationships in the face of large-scale change.
Once the world's most admired corpo-ration, IBM stumbled badly in the early 1990s. The company, now making a comeback, suffered at the depth of this crisis its first-ever operating loss and eliminated nearly 200,000 jobs. According to Mills and Friesen, the cause of IBM's difficulties, as is widely believed, was not that it had fallen behind in technology, but rather that the company had disregarded its customers and misled its employees. Broken Promises points to several key mistakes IBM made and suggests challenges that lie ahead for the com-pany's current executives.
Co-opetition
-by Adam M. Brandenburger and Barry J. Nalebuff
(Doubleday)
"Co-opetition" is a new business concept that goes beyond the old rules of competition and cooperation to combine advantages of both. In their new book, HBS associate professor Adam Brandenburger and Professor Barry Nalebuff of the Yale School of Management develop a five-part business strategy based on this concept. Drawing from the science of game theory, the authors show managers how they can profit and prosper by changing the way they think about customers, competition, cooperation, and the market.
Examples from companies such as Nintendo, American Express, Club Med, and General Motors provide ample evidence that long-term profitability does not require others to fail. Rather, these stories demonstrate that dozens of companies have been using the strategies of co-opetition not only to create "wins" for themselves, but to make it possible for their industry as a whole to grow.
Wise Choices
-edited by Richard J. Zeckhauser, Ralph L. Keeney, and James K.
Sebenius
(HBS Press)
To live is to make decisions, whether in organizations or as individuals. In Wise Choices: Decisions, Games, and Negotiations, edited by HBS professor James Sebenius; Professor Richard Zeckhauser of Harvard's John F. Kennedy School of Government; and Ralph Keeney, professor of systems management at the University of Southern California, leading scholars in economics, psychology, statistics, and decision theory grapple with strategic uncertainty and the question of how to make wise choices.
The 23 papers in this collection -which include those of HBS authors David Bell, Adam Brandenburger, Richard Meyer, John Pratt, and James Sebenius -address topics such as individual decision-making under uncertainty, games of strategy in which one player's actions directly influence an-other's welfare, and the process of forging negotiated agreements. The contributors also analyze decisions regarding personal medical problems, business investments, public policy, and international diplomacy.
The following article is the fifth in a series on the activities and research taking place in each academic unit at HBS.
"With the time-honored marketing maxim "the customer
is king" now reverberating throughout all parts of the firm, the
traditional corporate marketing function is at risk of becoming the
victim of its own success, according to the leaders of the
Marketing unit at
HBS. "Advances in technology and fundamental changes in how
products and services are delivered are enabling other disciplines -
such as manufacturing, sales, even accounting and control - to
incorporate into their own activities many functions that were
formerly the province of marketing," says Professor Alvin J. Silk,
unit cochair.
"Marketing is indeed experiencing a watershed," adds Silk's colleague and the unit's other cochair, Professor John A. Quelch. He notes that dynamic, technology-driven industries such as telecommunications and financial services are replacing the consumer goods industry as the testing ground of marketing innovation. To keep pace with these dramatic shifts in the business world, says Quelch, "marketing researchers and academics must broaden their perspectives" - precisely what he and Silk have set out to do at HBS.
Marketing's New Mission
Quelch and Silk, leaders of the Marketing unit since 1994, have adopted five imperatives to guide the department in addressing these significant changes. The unit has committed itself to becoming more international, multifunctional, technologically savvy, analytically sophisticated, and expansive in its industry coverage. Within this context, several major initiatives are under way in Marketing.
First on the agenda is faculty staffing and development. With several recent retirements, as well as other changes, the department has lost more than a dozen faculty members in the last five years, spurring an energetic recruitment effort. "It's an enormous challenge but also a great opportunity," says Quelch. "We can restructure the unit in line with the needs for marketing in the 21st century."
Course development is another priority. Under the leadership of Professor V. Kasturi Rangan, the required Marketing course has been revamped to include new initiatives such as a marketing-strategy computer simulation (called "Pharmasim") and a module on new product development, developed and taught jointly with the Technology and Operations Management unit. Professor Robert J. Dolan, whose research focuses on pricing, will oversee the required Marketing course in the 1996-97 academic year.
The elective curriculum has also been restructured, based in part on feedback from student focus groups. New electives include Customer Behavior and Managerial Action, featuring Professor Gerald Zaltman's pioneering marketing research method, ZMET, which uses visual images to tap into consumer feelings; Entrepreneurial Marketing, taught by Thomas J. Kosnik, a visiting lecturer from Stanford University; and International Marketing Management (IMM), which involved a significant course development effort spearheaded by Quelch. The new IMM comprises fifteen new case studies that reflect a variety of industry and country settings. Equally diverse is the course's student enrollment, with more than forty countries represented.
Looking ahead to the 1997-98 academic year, one of several new electives will be the course Distribution Channels, which Professor Rangan is currently developing.
Technology
The School's first paperless CD-ROM case, on an Intel TV marketing strategy for the United Kingdom, as well as videoconferencing, computer lab work, e-mail, and online interactions between instructors and students are some of the latest technological innovations in Marketing classrooms. Associate Professor Raymond P. Burke uses his "virtual shopping" computer software in the elective New Product Decision-Making: An Analytical Approach; both the required Marketing course and IMM use the CD-ROM case; and IMM includes a videoconferencing hookup to executives in Japan that enables students to ask questions of case protagonists in real time.
Technology also spurred "The Future of Interactive Marketing," an international conference sponsored by the Marketing unit and held on campus in May. More than fifty academics and business practitioners participated in the conference, designed to explore how marketing will be carried out in the interactive era. Associate Professor John A. Deighton, who joined the HBS faculty in 1994, organized the event.
Research
Rounding out Marketing's agenda are multifaceted research projects. Professor Walter J. Salmon is looking at the costs and benefits of product variety for retailers and manufacturers as part of a joint project with the Food Marketing Institute. Profes-sor Silk has a study under way of the economics of the advertising industry. Other important work is being done by four new assistant professors, including Narakesari Narayandas's study of long-term relationships between manufacturers and vendors, Susan M. Fournier's work on customers' brand loyalty, John T. Gourville's framing of the price of a product in terms of its daily cost, and Samuel S. Chun's research into the future of trade promotions. Among the goals of all this work is heightened collaboration among the faculty.
"Given the momentous changes going on in marketing today," concludes Silk, "one could say that for the coming century, we not only have to reinvent the unit, we need to reinvent the entire field."
by Mary Jane Higgins
Illustration by Peter Hoey
"When HBS professor Leonard A. Schlesinger and the other architects of the new MBA introductory "Foundations" curriculum decided that a thorough understanding of capitalism's underpinnings was essential, they asked Professor Thomas K. McCraw and other members of the School's Business History Group for help. McCraw, a Pulitzer Prize-winning historian, enlisted his colleagues in the effort, and the group immersed itself in the project. All together, eight different authors contributed cases. Two years, thousands of hours, and hundreds of written pages later, the new course, The Dynamics of Capitalist Revolutions (DCR), was born. Taught initially in January 1996 by McCraw and Assistant Professor Nancy F. Koehn, another business historian, DCR drew an enthusiastic response from the first students to take it.
Essentially an overview of hundreds of years of international capitalism, DCR is rooted in the popular MBA elective, The Coming of Managerial Capitalism: The United States, an offering designed in the 1980s by HBS professors Alfred D. Chandler, Jr., and Richard S. Tedlow. To expand this course into the global arena while compressing it into a shorter time frame was a Herculean endeavor, McCraw and Koehn recall with a shared laugh. "We had endless debates with our colleagues inside and outside our unit about how the course should be structured and which countries should be chosen for inclusion," McCraw notes. Indeed, settling on the course's framework - four countries (Great Britain, Germany, the United States, and Japan), three cases per country, and a time span of three industrial revolutions - ultimately became a two-year, all-or-nothing process.
The draft of the first case, a one-hundred-page treatise on German capitalism, McCraw elaborates, was "exceptionally rich but much too dense, and ludicrously unsuccessful." Even rewriting the case and dividing it into two sections, one a broad look at German capitalism and the other an examination of Thyssen Steel, did not make the material much more manageable. "It seemed that every step of the way we realized we had a lot more work to do," adds McCraw, noting that every one of the case drafts was discussed publicly and at length in the Business History Seminar of 1995.
Undaunted, the group decided to examine capitalism in each country in a separate case, complementing these "country" cases with two others on particular companies in each country. To catch students' attention immediately, they chose companies with name recognition, such as Toyota, Wedgwood, Ford, and IBM.
The companies were also selected to include functional areas of interest and to fall within one of the three industrial revolutions under consideration: the first (1760-1840), second (1840-1950), or third (1950-present). The mix presented fundamental business problems involving marketing, finance, operations, and human resource management. Koehn's case on Josiah Wedgwood's pottery business, for example, focuses on how brand equity born in the first industrial revolution in England has survived for two hundred years. Another case, on Southland Corporation and Seven-Eleven Japan, examines retailing in the third industrial revolution in two very different environments, the United States and Japan. A case on IBM examines human resources and the management of technology, while a Deutsche Bank case covers universal banking.
"We wanted to develop a framework for students that would help them understand the rest of their HBS experience," says Koehn, a prize-winning teacher whose own first book, The Power of Commerce: Economy and Governance in the First British Empire, is set in the eighteenth century. She and McCraw were determined to challenge their students. "We wanted to give them materials that were chock-full of relevant issues," Koehn says. For example, after spending two weeks gathering primary source material at Wedgwood's archives in Staffordshire, Koehn had hundreds of pages of information on the company's founder, on mid-eighteenth-century popular British culture, and on customer loyalty. At Wedgwood, she found the first examples of money-back guarantees, an employee time-clock system, and "inertia selling," the term for the shipping of unsolicited goods, a practice not unfamiliar to contemporary record clubs.
"We really set the bar as high as possible," says Koehn. "It was a big gamble, but it worked. The students rose to the occasion magnificently." The two instructors emphasize that in addition to wanting each case to be relevant and to focus on a broad spectrum of concepts, they felt strongly that the course as a whole needed to be greater than the sum of its parts. As they discuss their first experience teaching The Dynamics of Capitalist Revolutions, they both beam with excitement. Student evaluations, notes McCraw, "were an overwhelming collective valentine to the course."
Click here for more information on Business, Government, and the International Economy.
by Susan Young
The Harvard University Press will pubish these cases in 1997 in a book tentatively titled Dynamics of Capitalist Revolutions: A Business History of Great Britain, Germany, the United States, and Japan.
British Capitalism How the first industrializer set a standard for others to match
Josiah Wedgwood and the First Industrial Revolution Two hundred years of brand equity after a dramatic breakthrough in the 1760s
Rolls-Royce and the Rise of High-Technology Industry From luxury cars to aeroengines
German Capitalism How a new country industrialized rapidly using an unorthodox strategy
Thyssen Steel A German family steel business becomes a giant industrial powerhouse
The Deutsche Bank The evolution of a champion universal bank
American Capitalism How the most market-oriented of all major national economies evolved
IBM and the Two Thomas J. Watsons Maintaining competitive advantage while shifting from the second to the third industrial revolution
Henry Ford and Alfred Sloan Corporate strategy and marketing techniques used by pioneers in the American automobile industry
Japanese Capitalism How a late developer caught up fast with the West and in some industries surpassed it
Toyoda Automatic Looms and Toyota Automobiles Looms in the first Japanese economic miracle (1920s); cars in the second (post-World War II)
Convenience Store Retailing in Two Countries: Southland and Seven-Eleven Japan How Japanese managers learned from their American counterparts, then taught the teachers