Research & Insights



Rethinking Valuation So You Don’t Miss a Good Deal

by Alexander B. van Putten, Mehrdad Baghai, and Ian C. MacMillan, December 2, 2010

The odds of a successful acquisition are long — something research has proven time and again — yet executives show no signs of losing interest in M&A. Even Dell, famous for eschewing acquisitions in favor of organic growth, has thrown in the towel with its $5 billion acquisition of Perot Systems.

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Failing By Design

by Rita Gunther McGrath, April 2011

The Idea in Brief:If you’re launching a new business, creating a new product, or developing a new technology, the principles of intelligent failure provide both logic and a safety net.Decide what you’re trying to do and what success would look like.Be explicit about the assumptions you’re making and have a plan for testing them throughout the project.Design the initiative in small chunks so that you learn fast, without spending too much money. Don’t try to learn more than one significant thing at a time.Create a culture that shares, forgives, and sometimes even celebrates failure.

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When Your Business Model is in Trouble

An Interview with Rita Gunther McGrath by Sarah Cliffe, January–February 2011

Columbia Business School professor Rita Gunther McGrath studies strategy in highly uncertain, volatile environments. She spoke recently with HBR executive editor Sarah Cliffe about how to recognize an oncoming crisis—and seize opportunities to get ahead of competitors.

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Create Three Distinct Career Paths for Innovators

by Gina Colarelli O’Connor, Andrew Corbett, and Ron Pierantozzi, December 2009

Big companies are much better at incremental innovation than they are at radical innovation. That’s as true now as it was 20 years ago, despite countless programs aimed at strengthening innovation capabilities. To understand why, researchers at Rensselaer Polytechnic Institute studied 21 large companies’ efforts to build a capability for breakthrough innovations over several years. They found that even though companies pay lip service to innovation, most fail to provide the formal structure and support that programs need to succeed, such as an autonomous organization, processes tailored for highly uncertain work, and well-designed metrics…

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Making Social Ventures Work

by James D. Thompson and Ian C. MacMillan, September 2010

In recent years, we’ve all experienced considerable volatility—financial breakdowns, natural disasters, wars, and other disruptions. It’s clear we need new approaches to the world’s toughest economic challenges and social problems. Entrepreneurs can play a central role in finding the solutions, driving economic growth (building infrastructure, developing local talent, infusing struggling regions with investment capital) and helping hundreds of millions of people worldwide. If successful, socially minded entrepreneurial efforts create a virtuous cycle: The greater the profits these ventures make, the greater the incentives for them to grow their businesses. And the more societal problems they help alleviate, the more people who can join the mainstream of global consumers….

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How Vulnerable Is Your Business to Consumer Debt

by William Jarvis and Ian C. MacMillan, October 2009

Struggling buyers are increasingly tapping—and tapping out—their credit. Calculate your company’s exposure.

This past summer a certain amount of optimism began to reemerge, with talk of “green shoots” and even a potential recovery as the stock market rebounded by 30% from its low in March. That optimism may be misplaced, however. Look at the graph below, which tracks the ratio of U.S. consumers’ debt to their disposable income. While a little off its high point, the number now stands at around 130%. In other words, it will take American consumers nearly 16 months ( 1.3 years), on average, to pay off their debt, assuming that they spend absolutely nothing on housing, clothes, or food. American consumers have maxed out their credit, and with household wealth down as a result of the property collapse and employment prospects uncertain, they’re not about to take on more. Instead, they’ll be looking to cut back on it. Many will default. Both the defaults and the waning consumer appetite for credit bode ill for businesses….

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How to Get Unstock

by Rita Gunther McGrath and Ian C. MacMillan, May 2009

A lot of businesspeople seem to be frozen in the headlights, paralyzed by uncertainty, fear of failure, and lack of trust. In this economy, inaction is understandable but shortsighted. Those who face their fear and get unstuck can outrun hesitant competitors and seize advantage. In studying how leaders prevail in uncertain times, we’ve observed four practices you can use to get yourself, your people, and your firm moving again…

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Implementing a Learning Plan to Counter Project Uncertainty

by Mark P. Rice, Gina Colarelli O’Connor and Ronald Pierantozzi, January 2008

For any breakthrough innovation project, specific objectives are often unclear or highly malleable, and the paths to them are murky. Rather than feign a certainty that doesn’t exist, project managers need a systematic, disciplined framework for turning uncertainty into useful learning that keeps the project tacking on a successful course.

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Change with Your Customers – and Win Big

by Ian C. MacMillan and Larry Selden, December 2008

Companies should exploit an economic downturn by identifying and meeting emerging customer needs that competitors can’t—or don’t even see. For consumers, the world is changing: Fuel prices are volatile, jobs and compensation are in jeopardy, loans are harder to get, and debts are more difficult to pay off. For B2B customers, volumes and margins are shrinking, credit is tightening, and suppliers are getting tougher. Under these pressures, customers need new types of offerings. It’s an ideal time to go on the strategic offensive and innovate…

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The Incumbent’s Advantage

by Ian C. MacMillan and Larry Selden, October 2008

CEOs of large companies often complain to us about how hard it is to grow profits organically. They worry that it’s just a matter of time before they fall prey to invaders—and therefore assume that to grow robustly they will need to seek out new markets, territories, or acquisitions…

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Growing Your Business: Strategies that Work for Small and Midsize Companies

by Karen Dillon, Clifford Baden, Amar V. Bhide, Adrian J. Slywotzky, Richard Wise, Rita Gunther McGrath, Ian C. MacMillan, Thomas J. Waite, Chris Zook, James Allen, Paul Hemp, W. Chan Kim, Michael C. Mankins, Richard Steele, Nitin Nohria, William Joyce, Bruce Roberson, Renee A. Mauborgne, Publication date: Aug 15, 2006

For many small and midsize organizations, growth can be a wild ride. Mind-boggling expansion during the start-up years can turn to incremental progress as a company reaches maturity. Too few small and midsize companies have time–or make time–to stop and ask hard questions about their long-term growth strategy before it becomes a matter of survival. Consider this Harvard Business Review OnPoint Executive Edition a jumping-off point for strategic conversations within your organization…

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Manage Customer-Centric Innovation – Systematically

by Larry Selden and Ian C. MacMillan

It takes more than good intentions to innovate in a customer-centric way. A disciplined process of customer R&D at the front lines will turn wishes into an enduring competitive edge—and a growing market cap….

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MarketBusting: Strategies for Exceptional Business Growth

by Rita Gunther McGrath and Ian C. MacMillan, March 2005

You can’t outperform rivals if you compete the same way they do. To be king of the jungle, not copycat, you must spur substantial new growth—quickly, profitably, and safely.

How? With deceptively simple moves. Redefine your unit of business—what you bill customers for—to reflect what customers value. Then boost your performance on key metrics. Mexican cement company Cemex shifted its unit of business from cubic yards of cement to delivery window: the right amount of concrete delivered when needed. Then it reoriented its information systems, logistics, and delivery infrastructure to improve truck utilization—a key metric for delivery businesses. For instance, it developed digital systems enabling real-time adjustments to trucks’ destinations…

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MarketBusting: Strategies for Exeptional Business Growth (Enhanced)

by Rita Gunther McGrath, Ian C. MacMillan, Mar 01, 2005

If company leaders were granted a single wish, it would surely be for a reliable way to create new growth businesses. Business practitioners’ overwhelming interest in this subject prompted the authors to conduct a three-year study of organizational growth–specifically, to find out which growth strategies were most successful. They discovered, somewhat to their surprise, that even companies in mature industries found rich new sources of growth when they reconfigured their unit of business…

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Making Real Options Really Work

by Alexander B. van Putten and Ian C. MacMillan, December 2004

Real options are a complement to, not a substitute for, discounted cash flow analysis. To pick the best growth projects, managers need to use the two methods in tandem.
For all their theoretical attractiveness as a way to value growth projects, real options have had a difficult time catching on with managers. CFOs tell us that real options overestimate the value of uncertain projects, encouraging companies to overinvest in them. In the worst case, they grant excessively ambitious managers a license to gamble with shareholders’ money…

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Global Gamesmanship

by Ian C. MacMillan, Alexander B. van Putten, and Rita Gunther McGrath, May 2003

When the whole world (or even a good-size city) is your playing field, you might find that a move your company makes in one market provokes a counterattack from a completely different direction. Smart managers can learn how to anticipate those reactions and manipulate them to their own advantage…

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Discovering New Points of Differentiation

by Ian C. MacMillan and Rita Gunther McGrath, July–August 1997

Most profitable strategies are built on differentiation: offering customers something they value that competitors don’t have. But most companies, in seeking to differentiate themselves, focus their energy only on their products or services. In fact, a company has the opportunity to differentiate itself at every point where it comes in contact with its customers—from the moment customers realize that they need a product or service to the time when they no longer want it and decide to dispose of it. We believe that if companies open up their creative thinking to their customers’ entire experience with a product or service—what we call the consumption chain—they can uncover opportunities to position their offerings in ways that they, and their competitors, would never have thought possible.

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Discover Your Product’s Hidden Potential

by Ian C. MacMillan and Rita Gunther McGrath, May–June 1996

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Discovery-Driven Planning

by Rita Gunther McGrath and Ian C. MacMillan, July–August 1995

Business lore is full of stories about smart companies that incur huge losses when they enter unknown territory—new alliances, new markets, new products, new technologies. The Walt Disney Company’s 1992 foray into Europe with its theme park had accumulated losses of more than $1 billion by 1994. Zap-mail, a fax product, cost Federal Express Corporation $600 million before it was dropped. Polaroid lost $200 million when it ventured into instant movies. Why do such efforts often defeat even experienced, smart companies? One obvious answer is that strategic ventures are inherently risky: The probability of failure simply comes with the territory. But many failures could be prevented or their cost contained if senior managers approached innovative ventures with the right planning and control tools.

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