R&D
Replicating
Toyota's Success
If
You're #1, Watch Out
R&D
Roundup
Terrorism,
Insurance, and Uncle Sam
When
a Rainy Day Comes: The Economics of Happiness
Top
Ten Cases: Research from Around the World
Books
Telling
the Electronic Century's Unfinished Story: Alfred D. Chandler,
Jr.
As
the Future Catches You
Leading
Quietly
Driven
Church
on Sunday, Work on Monday
HBS
Press Books in Brief
Replicating Toyota's Success
The
idea of human cloning is controversial, but cloning a successful
business concept remains as desirable as ever. For HBS assistant
professor Steven
J. Spear, this pursuit led him to Toyota, whose perennial
leadership in quality manufacturing attracts many would-be emulators.
After about four years of on-site research at Toyota and its affiliates,
in 1999 Spear and HBS professor H. Kent Bowen published a Harvard
Business Review article titled “Decoding
the DNA of the Toyota Production System.” Understanding
Toyota’s production system, though, was just the first step.
After all, Spear notes, the company has welcomed countless observers,
even competitors, through its factory doors, but no one has yet
approached Toyota’s success. “The research we’ve
done since 1999 is not so much about decoding the DNA as it is
about replicating it,” says Spear.
In looking for keys to that replication, Spear focused on the
company’s approach to solving problems and noticed the conscious
way Toyota’s managers involve employees in this process,
even to the point of leaving a production line at suboptimal performance
so that workers could develop improvements on their own.
The development process itself is also unique. Rather than adopting
the first good idea, workers create iterative, structured experiments
to test hypotheses and foster continuous learning. The result
is a workforce that can explore problems independently, an asset
that, in the long run, is more valuable than ingenuity. “It’s
likely a company is not going to get a design perfect on the first
try,” notes Spear. “It needs to have the people within
its system capable of making improvements.”
Spear has now helped apply Toyota’s principles to much of
Alcoa’s worldwide manufacturing operations and to the more
unusual terrain of U.S. hospitals. From smelting plants to accounting
offices to hospital pharmacies, he’s seen the technique pay
off. “If companies learn to treat every problem as an idiosyncrasy
and approach solving it as an experiment,” says Spear, “they
can always make progress.”
— Laura Singleton (MBA ’88)
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If You're #1, Watch Out
You’re
the top performer in your market. Your products are of such a
high quality that they exceed the requirements of all but the
most demanding customers, and you’re the only one able to
serve them. Clear sailing ahead, right? Wrong, according to HBS
professor Clayton
M. Christensen in “Skate
to Where the Money Will Be,” an article published in
the November 2001 Harvard Business Review.
“In markets where product performance is outstripping customer
need, the market leader is vulnerable,” write Christensen
and coauthors Michael Raynor (DBA ’00) and Matt Verlinden.
“Newer entrants can compete based upon cost, customization,
or convenience, and they can start winning business at the lower
end.”
Profit is maximized, the authors suggest, in situations where
product quality is not yet meeting customer requirements. Here,
products with tightly interdependent, proprietary architectures
are required to achieve better and better results. When the product
the customers use isn’t good enough, its architecture is
proprietary and its manufacturers make money. When it’s more
than good enough, its architecture becomes modular, built around
industry standards, and attractive profits are hard to earn. Typically
when this happens, the components and subsystems are the things
that become not good enough — and that’s where attractive
profits get made. An example is the computer industry, where profit
shifted from manufacturers down to operating system providers,
to the manufacturers of heads and disks, and then to producers
of chip-manufacturing technology, as each area in turn became
the focus for innovation to improve performance.
Old-school wisdom suggested that market leaders should “stick
to their knitting” and outsource components of modular systems.
However, being an assembler of such parts presents only marginal
profit opportunity. Staying in the innovative segment of an industry
may mean, in fact, manufacturing a key subsystem and even becoming
a provider to competitors. The willingness to make such shifts
and the resources to execute them efficiently can help keep large
firms in front of the profit curve despite a high level of integration,
Christensen, Raynor, and Verlinden assert.
“To the extent a company like IBM maintains the flexibility
to couple and decouple operations rather than irrevocably sell
them off, it has an even greater potential to thrive than a nonintegrated
company,” the authors say.
— Laura Singleton (MBA ’88)
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R&D Roundup
Terrorism,
Insurance, and Uncle Sam
In
the wake of the September 11 attacks, business in general and
the insurance industry in particular are examining ways to manage
the high cost of insurance against acts of terrorism. Appearing
before the Senate Committee on Commerce, Science, and Transportation
last October, Associate Professor David
Moss was asked to consider “what role the federal
government should play, if any, in indemnifying terrorism-related
risks.”
Moss, whose new book, When All Else Fails: Government as the
Ultimate Risk Manager, traces the history of federal and state
efforts in this area, told senators that “contrary to popular
wisdom, government involvement with private-sector risks is nothing
new.” Moss noted that public-risk management goes back to
the earliest days of the Republic and cited policies such as limited
liability, federal deposit insurance, bankruptcy, and product
liability law. Policymakers have long understood that private
markets for risk don’t always function adequately on their
own, Moss said, adding that “involving the federal government
in the management of terror-related risks would in no way constitute
a radical departure from the path of American policymaking.”
Moss observed that historically, federal disaster policy has not
produced effective risk monitoring sufficient to curtail the kind
of risky behaviors (such as reckless building) that compound losses
when natural disasters strike. With that in mind, he proposed
a program of federal reinsurance for terrorism-related risks that
would draw on “the government’s unique strengths as
a risk manager without short-circuiting either the essential capabilities
or the relentless discipline of the private market.”
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When a Rainy Day Comes: The Economics of Happiness
A study by HBS assistant professor Rafael
Di Tella (with Andrew Oswald of the University of Warwick
in Coventry, England, and Robert MacCulloch of the London School
of Economics) finds that when a country is in a recession, the
number of people describing themselves as “very happy”
declines by about 10 percent. The general happiness of the population
suffers, too, even among people who do not personally experience
job loss or reduction in income.
For
behavioral economists and politicians, among others, these findings
raise the question of whether governments should become more proactive
in attempting to mitigate or stave off recessions. In addition
to enjoying a more satisfying life, which presumably is every
government’s goal for its people, a “happy” population
is likely to be more productive than a disgruntled one —
also an advantage for government.
The study is based on poll results involving some 300,000 individuals
in Europe and the United States over the last 25 years. Participants
were asked to describe their state of mind by selecting one of
three answers: “very happy,” “fairly happy,”
and “not too happy.” The authors found that the populations
that were happiest (or least unhappy) during recessions were in
countries that paid the highest unemployment benefits.
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Top Ten Cases: Research from Around The World
Computers and e-commerce, cars and corporate titans — these themes are at the core of Harvard Business School Publishing’s latest compilation of best-selling cases. Written wholly or in part by current or former members of the HBS faculty, each case below (with title, author[s], order number, and publication date) sold between twenty and thirty thousand copies in fiscal year 2001.
- “Leadership
Online: Barnes & Noble vs. Amazon.com (A),” by
P. Ghemawat and B. Baird (9-798-063), 2000
- “Dell
Online,” by V.K. Rangan and M. Bell (9-598-116), 1999
- “Wal-Mart
Stores, Inc.,” by S.P. Bradley, P. Ghemawat, and S.
Foley (9-794-024), 1996
- “FreeMarkets
OnLine,” by V.K. Rangan (9-598-109), 1999
- “Toyota
Motor Manufacturing, U.S.A., Inc.,” by K. Mishina (9-693-019),
1995
- “GE’s
Two-Decade Transformation: Jack Welch’s Leadership,”
by C. Bartlett and M. Wozny (9-399-150), 2001
- “Apple
Computer — 1999,” by D. Yoffie and M. Kwak (9-799-108),
1999
- “Yahoo!:
Business on Internet Time,” by J. Rivkin and J. Girotto
(9-700-013), 2000
- “Ford
Motor Co.: Supply Chain Strategy,” by R. Austin (9-699-198),
1999
- “Calyx & Corolla,” by W. Salmon and D. Wylie (9-592-035), 1995To order cases, call 800-545-7685 or 617-783-7500
Books
Telling the Electronic Century's Unfinished Story
Inventing
the Electronic Century: The Epic Story of the Consumer Electronics
and Computer Industries (The
Free Press) is the fourth major book by Alfred
D. Chandler, Jr., the School’s Isidor Straus Professor
of Business History, Emeritus. It is the heretofore untold story
of the people, companies, countries, and economic forces that
shaped the infrastructure for an unprecedented new era of technology.
Beginning with the vacuum tube in the 1920s and progressing through
the inventions of the transistor, the integrated circuit, and
the microprocessor, Chandler’s dramatic tale holds lessons
for managers in any industry, as the Pulitzer Prize–winning
historian revealed in a recent conversation with the Bulletin.
How did you approach this enormous project?
For Inventing the Electronic Century, my basic purpose
was to bring the historian’s broad perspective to bear on
an untold story. I wanted to record where, when, how, and by whom
technical knowledge was commercialized into the new products that
laid the foundation for this era. I realized that I ran the risk
of telling a story that isn’t yet finished, but for the privilege
of recounting its progress to date, I was willing to take that
chance.
What are some of that story’s highlights?
One striking aspect is that by the mid-1980s, the United States
had almost entirely lost both the computer and the consumer electronics
industries before it recovered in computers with the coming of
the PC. By 2000, Europe’s withdrawal from consumer electronics
and computers (except for software) was nearly complete.
A century before, the early architects of the consumer electronics
path had been three competing industrial forces: the United States,
Europe, and Japan. Today, in consumer electronics, only three
companies — Sony, Matsushita, and Sharp — remain on
that path, and they are all in Japan. In computers, the Japanese
have been and remain major challengers to the U.S. industry, with
growing market share in large systems, servers, and software.
These have been extraordinary developments. The national industries
that invented the infrastructure for the Industrial Century did
not compete, conquer, or die in the manner of the national industries
that created the infrastructure for the Electronic Century. I
wanted to find out why.
Amid
these complex shifts of dominance, one key theme you cite has
to do with “paths of learning” in organizations. Can
you offer an example?
Sony’s role in Japan’s path to global conquest is
probably the best example. In the wake of the devastation following
World War II, Sony acquired from Bell Laboratories one of the
first licenses issued to a foreign company to produce the transistor.
Focusing on miniaturization, Sony became the first mass marketer
of small transistor radios and followed with the development of
the first transistor-based microtelevision set. Then came the
Walkman, the basic VCR, the CD, the CD-ROM, the DVD, and the PlayStation,
all capitalizing on Sony’s technical capabilities and learning
in areas such as marketing, production, and distribution.
This is what I call a “virtuous strategy,” which basically
means that the learning and profits from an early innovation are
then applied to the next one. As a manager, if you understand
that, you’ll succeed; if you lose sight of it, you’ll
fail. In contrast to Sony’s approach, RCA, having achieved
world dominance in its industry in the 1960s, fell off the “virtuous”
path by diversifying into areas in which its managers had no learning
base — businesses such as mainframe computers, car rentals,
frozen foods, and savings and loans. I compare this disaster to
a Greek epic, in which RCA is lured away from its core capabilities
by “Sirens” consisting of the business press, the academy,
and Wall Street, for whom conglomerates were then the business
model of choice.
Extending this analogy, the Fates — in the form
of government officials intent on monopoly-busting — also
intervene.
That’s correct. In the late 1950s, just as the Electronic
Century was being formed, the U.S. Justice Department settled
antitrust suits with IBM and RCA, paving the way for learning
in these firms to be sold or leased to any applicant. Gene Amdahl,
who had been the chief designer of IBM’s 704 and System 360
and 370 that dominated world markets, left IBM, hoping to start
his own company. Unable to raise $40 million to fund his venture,
however, he took his learning to Fujitsu, thus permitting the
Japanese to capture global markets in large systems outside the
United States. Never has a single deal so formidably shaped a
major national industry.
What themes will you explore in your next book?
Originally I had conceived of writing a single volume devoted
to the consumer electronics and computer industries and
the chemical and pharmaceutical industries. But the differences
between those pairs of sectors were just too great. So the second
book will examine this question: Why were the Japanese chemical
and pharmaceutical industries unable to enter the U.S. and European
markets, at the very same time their compatriots in consumer electronics
and computers did so successfully?
It sounds like an intriguing study.
It fascinates
me, and it keeps me healthy!
— Nancy O. Perry
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As the Future Catches You
by Juan Enriquez
(Crown
Business )
“I
would like you and me to have a conversation,” HBS senior
research fellow Juan Enriquez tells his readers in the prologue
of his new book, As the Future Catches You: How Genomics &
Other Forces Are Changing Your Life, Work, Health & Wealth.
He points out that he has left space on each page for note-taking,
and after expressing his hope that the book will be a “fun
read,” he concludes by providing his e-mail address and urging
readers to contact him. It’s an unusual beginning, but fitting
for this unusual book, a work that is informal in tone, presentation,
and typography despite its serious subject matter. Alternately
teasing and solemn — but unfailingly provocative — it
is intended to push the boundaries of intellectual engagement
in order to provide a deeper understanding of what the future
will mean to all citizens of the planet.
Enriquez, the founding director of the new Life Science Project
at HBS, believes that the future will be defined by the genomic
revolution and that world history today is at a fundamental turning
point. Combined with advances and developments in other fields,
the human experience, he argues, will soon be transformed. Indeed,
change — in medicine, technology, international relations,
economics, and human behavior, and as a phenomenon that stimulates
itself — is at the core of the book.
In the realm of science, Enriquez emphasizes the impact of the
following facts: Genomics will enable humans to control evolution
of all life forms; the genetics revolution is occurring 50 percent
faster than the computer revolution; private companies, from IBM
to DuPont to L’Oréal, will have the ability to rewrite
the source code of life; and nanotechnology will soon produce
“biorobots” the size of a virus. In human affairs, Enriquez
points out, the wealth disparity between the richest and the poorest
nations will soon be 1,000:1. In an age of super-technologies,
knowledge will be key and will enable tiny, well-educated nations
to prosper while the economies of much larger, less-educated countries
languish.
As the Future Catches You presents page after page of thought-provoking
facts, anecdotes, and ideas; it is an accessible and instructive
guide to the new age that lies just over the horizon, an era for
which the overworked adjective “revolutionary” will
truly apply.
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Leading Quietly
by Joseph L. Badaracco, Jr.
(Harvard
Business School Press)
In
Leading Quietly: An Unorthodox Guide to Doing the Right Thing,
HBS professor Joseph Badaracco takes an unconventional look at
leaders and leadership. Rather than focusing on those men and
women whose bold acts of courage and insight have led to widespread
public acknowledgment and praise, he examines what he calls “quiet
leadership.” “I have observed that the most effective
leaders are rarely public heroes,” says Badaracco, who has
written extensively about leadership and ethics. “They do
what is right — for their organizations, for the people around
them, and for themselves — inconspicuously and without casualties.”
Badaracco believes that what drives society are millions of small
yet consequential decisions that individuals make on a daily basis.
He presents a series of situations describing quiet leaders at
work and derives practical lessons from their efforts. Each of
the book’s eight chapters — whose titles include “Craft
a Compromise,” “Don’t Kid Yourself,” “Buy
a Little Time,” and “Bend the Rules” — is
gleaned from the quiet leaders Badaracco studied. The book is
full of practical advice, but Badaracco cautions that “although
the guidelines can be stated simply, using them well is tricky.”
Accordingly, he provides short case studies to illustrate some
of the many thorny issues a quiet leader might face — how
a new CEO deals with a sexual harassment case, the personnel issues
facing a bank president, and an Army captain’s ethical dilemma
regarding an inspection, for instance.
“Preparation, caution, care, and attention to detail are
usually the best approach to everyday challenges,” writes
Badaracco. “What usually matters are careful, thoughtful,
small, practical efforts by people working far from the limelight.
In short,” he concludes, “quiet leadership is what moves
and changes the world.”
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Driven
by Paul R. Lawrence and Nitin Nohria
(Jossey-Bass)
In
Driven: How Human Nature Shapes Our Choices, HBS professor
emeritus Paul Lawrence and professor Nitin Nohria explore one
of the most basic questions of human behavior: What motivates
us to act the way we do? Drawing on theories of evolutionary biology
and social science, Driven establishes an innovative framework
for understanding the human experience and offers intriguing insights
into individual and organizational behavior with practical applications
for government, business, and community leaders.
Noted experts on organizational behavior, Lawrence and Nohria
argue that human behavior is the result of conscious choices that
are influenced by four fundamental drives: the drive to acquire
objects and experiences that improve our status relative to others;
the drive to bond with others in long-term relationships of mutual
care and commitment; the drive to learn and make sense of the
world and of ourselves; and the drive to defend ourselves, our
loved ones, our beliefs, and our resources from harm. The authors’
findings are based on their collective seventy years of research
on human behavior in the workplace and their synthesis of scholarly
work in numerous academic fields, ranging from neuroscience to
political science and paleontology to economics.
In the first of the book’s four sections, Lawrence and Nohria
consider the evolution of the human mind, including the “Great
Leap” in intellectual development that occurred a hundred
thousand years ago when modern Homo sapiens emerged. Next,
they analyze the origins of the four drives mentioned above and
discuss their role in everyday life. The authors then look at
the drives in terms of their relationship to human culture, emotions,
and skills. Finally, they discuss ways to apply their four-drive
theory within organizations and suggest possibilities for its
application elsewhere.
Lawrence and Nohria admit that “two Harvard Business School
professors might seem like unlikely candidates” to propose
such an expansive model of human behavior. But they maintain that
the School’s multidisciplinary approach to research creates
an opportunity to weave together disparate threads of scholarship.
A fascinating outcome of this broad intellectual overview, Driven
provides a new way to look at the unseen forces that guide the
choices we make every day in our personal and professional lives.
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Church on Sunday, Work on Monday
by Laura L. Nash and Scotty McLennan
(Jossey-Bass)
In
Church on Sunday, Work on Monday: The Challenge of Fusing Christian
Values with Business Life, Laura Nash and Scotty McLennan
explore the gap that exists between Christian ideals and the realities
of business life at a time when many are searching for guidance
in dealing with the impact of the marketplace on people’s
lives. The authors believe there are deep differences of worldview
and language that need to be addressed before church and business
professionals can truly communicate on this problem. “The
church could be one of the strongest resources we have for leading
a balanced and effective business life,” they write in the
book’s preface. “In most cases, it is not.”
In their analysis of this separation between spirituality and
work, Nash, a senior research fellow at HBS, and McLennan, a Unitarian
Universalist minister and former senior lecturer at HBS who is
now dean for religious life at Stanford University, have developed
several new frameworks to help businesspeople and clergy actively
draw on their religious faith to address management problems.
“Our goal is not to convince the church that it should be
the handmaiden of business — in fact, we argue for less,
rather than more, engagement of the institutional church in economics,”
note Nash and McLennan. “But we do argue that the church
should help businesspeople develop a process for personally engaging
their faith in the management arena.”
The book is based on confidential interviews with middle and upper-level
managers and with clergy and laypeople from a variety of Christian
denominations; case studies of relevant programs for businesspeople;
a survey of seminarians; a review of existing literature on executive
spiritual development; and material from
one of Nash’s previous books, Believers in Business,
which focused on the experiences of 85 Christian CEOs.
American business has experienced enormous change in the last
few decades, which has led to what Nash
and McLennan term “a kind of spiritual schizophrenia”
that is threatening the ability of many in the workplace to sustain
a strong connection to their own soul and the ethics of their
faith. Church on Sunday, Work on Monday offers a path for
churches and congregations to follow as they work together to
enhance the spiritual fulfillment
of Christians in the business world.
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HBS Press Books in Brief |
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Information Markets: What Businesses Can Learn from Financial Innovation, by William J. Wilhelm, Jr., and Joseph D. Downing, is the finance professional’s must-have guide to understanding the changing role of information and intermediaries in the financial markets. The authors draw lessons from the experience of financial intermediaries and illustrate these lessons through a variety of fascinating case studies. |
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In Primal Leadership: Realizing the Power of Emotional Intelligence, by Daniel Goleman, Richard Boyatzis, and Annie McKee, the authors unveil scientific evidence that links organizational success or failure to “primal leadership.” They argue that a leader’s emotions are contagious and must resonate energy and enthusiasm if an organization is to thrive. |
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Cultivating Communities of Practice: A Guide to Managing Knowledge, by Etienne Wenger, Richard McDermott, and William M. Snyder, maintains that communities of practice — groups of individuals formed around common interests and expertise — provide the ideal vehicle for driving knowledge-management strategies and building lasting competitive advantage. |
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In The Elephant and the Flea: Reflections of a Reluctant Capitalist, eminent social philosopher and international business guru Charles Handy offers both a poignant personal memoir and a deep reflection on the past and future of world capitalism, with all its possibilities and pitfalls. |
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Based on the real-world experiences of global business leaders, Developing Global Executives: The Lessons of International Experience, by Morgan W. McCall, Jr., and George P. Hollenbeck, gives an in-depth look at what it takes for organizations to groom, and individuals to become, successful international executives. |
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To order HBS Press books, call 800-545-7685 or visit www.hbsp.harvard.edu. Other books by HBS authors are available at the Business School Coop (617-499-3248; 617-547-5003 fax). RETURN TO THE TOP OF THE PAGE |
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