MIT Sloan Management Review Summer 2016

The spring of 2016 brought another round of reports on the pale state of the U.S. boardroom. It remains a whiter shade of pale, predominantly male. In its annual review of corporate board appointments, the executive search firm Heidrick & Struggles International Inc. labels the latest crop of Fortune 500 directors “the usual suspects,” noting “stalled progress for women appointees” and “generally flat numbers for directors of Hispanic, African, and Asian descent.” The problem of a lack of diversity in corporate leadership is not just an American one, either. In 2015, the percentage of new female CEOs at the world’s top 2,500 companies was at its lowest since 2011 — a measly 2.8%, notes PwC’s Strategy& in its latest CEO Success Study. There is no doubt that the forces of sexism and…

Exploring new business models is a recognized way for mature companies to renew their competitive advantage. Companies explore new value propositions, deploy value propositions in new segments, change the value chain, or experiment with alternative revenue models — all in a search for a different logic for value creation and capture. Sometimes this exploration goes far beyond the existing business model and requires the creation of a new business unit. A sometimes unexpected consequence is the difficulty of fitting this new business unit into the existing organizational structure. While business model experimentation may be the raison d’être of many startup ventures, established companies typically face strong organizational rigidities that lead to tensions. Predicting these tensions and being open to experimentation with organizational structure can be the keys to a smoother…

Eastman Kodak Co. is often cited as an iconic example of a company that failed to grasp the significance of a technological transition that threatened its business. After decades of being an undisputed world leader in film photography, Kodak built the first digital camera back in 1975. But then, the story goes, the company couldn’t see the fundamental shift (in its particular case, from analog to digital technology) that was happening right under its nose. The big problem with this version of events is that it’s wrong. Moreover, it obscures some important lessons that other companies can learn from. To begin with, senior leaders at Kodak were acutely aware of the approaching storm. I know because I arrived at Kodak from Silicon Valley in mid-1997, just as digital photography was taking…

When David Goldberg, CEO of Surveymonkey Com LLC, an online-survey company based in Palo Alto, California, died unexpectedly in May 2015, the company did not announce a new CEO until July. It considered 75 candidates, both internal and external, before appointing former Hewlett-Packard Co. and Microsoft Corp. executive Bill Veghte to the position. However, Veghte remained in the CEO role less than six months; in January 2016, he was replaced by Zander Lurie, who had been SurveyMonkey’s chairman. Compare that with the case of Sigma-Aldrich Corp., a St. Louis-based life science and technology company. In November 2010, Jai P. Nagarkatti, its then-chairman, president, and CEO, died unexpectedly. The next day, the board of directors simultaneously announced his death and the promotion to president and CEO of Rakesh Sachdev — previously Sigma-Aldrich’s…

Technology companies increasingly face situations in which developing new products involves navigating around dozens or even hundreds of different patents owned by several companies. As a result, innovation is frequently prone to litigation. In addition to making innovation more costly, the looming threat of lawsuits increases strategic complexity and market uncertainty. The mobile and Internet sectors offer useful examples of how companies can contain the threat of patent litigation. By joining technology consortia, companies such as Apple, Cisco Systems, Ericsson, Google, and Qualcomm pool their patent portfolios to develop markets for technology together. In doing so, they not only become more effective innovators but also augment their chances to capture the value these new markets offer. There are specific challenges associated with participating in technology consortia. For example, managers must identify which…

In recent years, more and more companies have begun using nonfinancial measures as leading indicators of future financial performance. Inspired by strategic management performance tools including Robert S. Kaplan and David P. Norton’s popular balanced scorecard, corporate boards have extended executive compensation schemes to embrace measures for, among other things, customer satisfaction, employee engagement, and openness to innovation. Inclusion of such measures is thought to encourage behaviors that some say have the power to increase the company’s long-term value rather than simply maximizing short-term financial performance. Although the notion of using nonfinancial metrics such as customer satisfaction to shape executive behavior is attractive to managers, the extent to which including these measures in compensation schemes actually improves company value and financial performance is a matter of debate. Research, including a study…