Quick Takes

Strategy & Leadership

ISSN: 1087-8572

Publication date: 1 April 2000

Citation

(2000), "Quick Takes", Strategy & Leadership, Vol. 28 No. 2. https://doi.org/10.1108/sl.2000.26128bae.001

Publisher

:

Emerald Group Publishing Limited

Copyright © 2000, MCB UP Limited


Quick Takes

"Quick Takes" presents the key points and action steps contained in each of the feature articles. Catherine Gorrell prepares these summaries.

Page 4Getting strategic value from constellations of communitiesArian Ward

Communities are becoming a beneficial business construct. Six elements comprise a community: common purpose; common cultural context; co-location; common timeframe; voluntary participation; and multiple, shifting, overlapping memberships and participation.

Strategic communities. In the Internet realm, communities that connect people of common interest offer more traffic to portals and Web sites. In the corporate world, communities of practice are seen as the best way to create learning organizations. Work communities are powerful stakeholders in the future of the enterprise.

Communities can be a company's most valuable source of innovation, knowledge, and learning. Community members are more enthusiastic about interacting with their peers in other business units when they are doing it on their own terms, and they are often more innovative and productive as a result. But communities can also be the biggest obstacle to effective communication and organizational change.

Without formal management, there is no way to ensure that the potential benefits of the community will be tapped and aligned with the strategic needs of the company. One of the primary reasons for including communities in strategic thinking and actions is to be able to shape or cultivate internal communities so that they serve as a strategic advantage and avoid becoming a strategic liability.

Constellations of communities. The best way to gain strategic value from communities is to link them together into "constellations of communities." Four types of constellation relationships can be found, each offering unique benefits:

  • Relationships based on a common group of activities provide an effective way of handling highly complex interactions.

  • Relationships related to developing and "managing" a common resource allow the organization to "do more with less."

  • Relationships based on a boundary object such as a document, a product brand, or an Internet portal build high levels of commitment.

  • Relationships based on a common, broad interest, cause, or point of view contribute to the creation of new knowledge and add to the pool of collective wisdom.

Because they are voluntary and naturally emergent, communities cannot be controlled using traditional management techniques. Rather, like gardens they must be tended and nurtured if they are to thrive and multiply.

Page 10Corporate community: a theory of the firm uniting profitability and responsibilityWilliam E. Halal

Stakeholder collaboration is the key to creating economic wealth because: the central source of business profits has shifted from labor to capital to knowledge; and stakeholder collaboration creates knowledge. Knowledge, unlike capital, cannot be used up; it increases when shared. The more you dispense knowledge, the more you generate knowledge. Collaborations allow joint problem solving, joint development of offerings, and an expanded store of valuable knowledge.

The corporate community model (CCM) of governance focuses on knowledge sharing and, thus, supports both profitability and stakeholder responsibility. Business leaders are awakening to this new form of governance slowly. The prevailing logic proposes that:

  • Business is about profit only.

  • "Doing good" is bad business.

  • Governance is a zero-sum game.

What has been missing is a proven economic rationale explaining the role of corporate stakeholders in creating wealth. The CCM offers a new view of the corporation as a socioeconomic system in which wealth is created through stakeholder collaboration, using new knowledge for competitive advantage. In a knowledge economy, management's strategic role is to facilitate joint problem solving among corporate stakeholders.

Evidence that the CCM can and does work includes:

  • The rising trend in stakeholder partnerships. For example, every day, effective alliances are being formed among businesses to pool technology, markets, employees, investors, suppliers, and other assets.

  • Computer simulations proving that all parties can benefit. Furthermore, the closer the integration into a cohesive community, the greater the wealth that is created.

  • Survey data from 540 managers. These data, representing mainstream management thought, show an increasing deployment of common stakeholder practices.

Fortune magazine's annual rating of America's Most Admired Companies is weighted by how well managers serve their customers, workers, and communities – in addition to profitability. As more enterprises truly comprehend the economic rationale behind the CCM, this award will take on even greater implications. For now, the companies that "get it" are the ones that have figured out how to balance their financial targets with their stakeholder responsibility, the bottom line being a gain in both economic and social wealth.

Page 17Measuring the success of an online communityJoseph P. Cothrel

As the growth of online communities continues to dominate business attention, proper application of ROI analysis is needed. But unlike other segments of a business, a community's ROI must begin with defining and measuring how well it is meeting the business challenges it is intended to address.

There are three types of online communities: business-to-consumer (B2C), business-to-business (B2B), and employee-to-employee (E2E). They share two primary goals that contribute directly to a positive, measurable impact on revenues or profitability:

  1. 1.

    Stronger relationships – increased loyalty or site "stickiness."

  2. 2.

    New insights – feedback loops or two-way communication with community members.

The keys to measuring an online community's ROI are: establish clearly defined and measurable objectives; and use the correct metrics. The most commonly used metrics are activity measures, which measure the ongoing health of the community and aid in managing it on a day-to-day basis. These measures must be supplemented by economic metrics, which provide information about the ongoing financial value or ROI of the community. And finally, topic measures are needed to assess the insights that the community brings to the business about products or processes.

Three concepts are central to thinking about community ROI:

  1. 1.

    Incremental value – the difference between the value created by the business with an online community versus the estimated value it would create without one.

  2. 2.

    Conversion rate – the rate at which site visitors are motivated to various types of action, e.g. entering personal data, contributing to a discussion, making a purchase.

  3. 3.

    Community membership – the number of people involved in member-to-member transactions.

A core group of members, "hyper-affiliates," contribute business value in four ways:

  1. 1.

    Assisted buy/sell dynamic, providing information related to buying or selling.

  2. 2.

    Referral dynamic, spreading the word about favored products and services.

  3. 3.

    Self-select dynamic, joining and participating in community programs.

  4. 4.

    Repeat visit dynamic, coming back to a site time after time.

Managing online communities is still relatively new. Effective management will depend on new kinds of measurement and reporting – striving to improve communities in addition to keeping score.

Page 22Paying the personal price for performanceJane Linder

Leading corporations acknowledge the imperative of changing their business models in the face of competitive challenges. But saying it and doing it are at opposite ends of the continuum of success. Studies show that 60-80 percent of major change programs fail to meet expectations. So, how can organizations become more agile in adopting change? The answer: promote a fundamentally new perspective about learning. "Engaged learning" goes beyond skill and knowledge development to embed the learning process in everyday management practices, which sets the stage for making real, strategic change.

Engaged learning comes at a cost: executives must share leadership, face harsh truths, and take learning personally.

Sharing leadership. Engaged learning can be used to inspire an entirely new model of leadership by building a community of decision makers. Managers who participate in strategic learning experiences want to follow their insights through to action. When engaged learning is integrated into the strategic planning process, it can institutionalize this new leadership model.

Facing harsh truths. Engaged learning thrives on provocative information. Taking that cold hard look in the mirror can shatter comfortable, but dangerous, assumptions. Although the process pains the participants in the short run, it sets the stage for an organization to deal honestly and openly with important issues.

Taking learning personally. Engaged learning means executives must devote their own time and attention and be willing to change their own behavior. Learning can be an emotional experience – that's what makes it vivid and memorable. Executives must accept the risks of trying out radical new ideas in public.

To get the benefits of learning – a management culture that makes an organization agile amidst shape-changing markets – executives must be willing to face the cost. In this case, the cost is threatening, gut-wrenching, personally invasive change – not just for the rest of the firm, but for the leaders themselves.

Page 26Taking trouble: the key to effective global attentionAllen Morrison and John Beck

At the heart of international business today is a core problem: how to truly think globally! A survey of CEOs has revealed that "thinking globally" is the most important area for improvement of any issue their companies are facing. This is because there is a world of difference between spending time on global issues and spending attention.

"Attention" is the key word. Time spent does not equal attention. True global attention means paying concurrent attention to both external and internal issues, putting them all into perspective, and acting on them, simultaneously if need be, in the best short- and long-run interests of the company. Good global leaders possess the ability to hold the whole world in their heads, to be intensely focused, and then to act decisively without hesitation.

Devoting attention is not a matter of education or experience (though both help); it is a matter of conditioning yourself to focus on all the right things all at once. A few simple suggestions are offered:

  • Dislodge your ethnocentric viewpoint. A single world view cannot encompass the entire world. Going global means taking the trouble to learn which strategies can be transferred abroad and which ones must be adopted. Globalization requires a balance. Universal standardization does not work. Sensitive attention to local needs is critical. Global leadership is not about doing things the same way, but about doing the right things the same way.

  • Condition yourself and your employees to adopt a panoramic vision using the three dimensions of attention. Each of these dyads contains tools that can be customized to the individual and to the situation:

    1. 1.

      – The aversion/attraction continuum uses penalties and rewards to focus attention.– The captive/voluntary dyad combines assigned experiences with commitment that is freely given.– Front-of-mind/back-of-mind tools blend direct communication with subliminal messages.

  • Recognize that not all employees need a global perspective. Global attention is key for the top management team, managers, and staff with worldwide responsibilities. Everyone else must retain a local focus.

There can be no substitute or excuse for "taking trouble." It is the only way to win in the global marketplace.