The Washington Times recently featured  Aaron Chatterji and Christopher Gergen’s views on ways in which successful social enterprises can scale up to serve larger populations.  Read their column here.

The Raleigh News & Observer recently featured Professor (and physician) Marco Huesch’s thoughts on health care reform, highlighting ways in which physicians can lead innovation.  Read his thoughts here.

The number of U.S. companies with an offshoring strategy has more than doubled from 2005 to 2008 and very few plan to relocate activities back to the United States, according to Duke Offshoring Research Network’s fifth annual report on offshoring trends, published in collaboration with The Conference Board.

Last year, more than 50 percent of companies had a corporate offshoring strategy in place, up from 22 percent in 2005. Sixty percent of companies currently offshoring say they have aggressive plans to expand existing activities.

The report also confirms the globalization of innovation — the major finding of last year’s report — is continuing at an increased rate in all areas of industry. Speed to market and the domestic shortage of science and engineering talent are two key drivers for offshoring projects.
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Entrepreneurs in high-technology industries often have significant prior industry experience. A new Duke University study published in the Strategic Management Journal reveals that this experience is critical to entrepreneurs’ success. Surprisingly, however, it is mainly the non-technical knowledge that founders gain from their experiences with prior firms that affects increased achievement at their new firms,rather than direct technical spillovers from the former parent to a new venture.

Aaron K. Chatterji, assistant professor of strategy at Duke’s Fuqua School of Business used financial and patenting data sources to assess the impact of industry experience on entrepreneurial performance and innovation in medical device start-ups.
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American companies plan to continue to implement their current strategies for sourcing some functions offshore despite the current worldwide economic slump and the financial downturn may even accelerate such plans

American companies plan to continue to implement their current strategies for sourcing some functions offshore despite the current worldwide economic slump and the financial downturn may even accelerate such plans. These are among the findings of a study into the effects of offshoring trends on American competitiveness, as part of ongoing research by the Center for International Business Education and Research’s Offshoring Research Network (ORN) at The Fuqua School of Business at Duke University and PricewaterhouseCoopers.

The survey, designed to capture business managers’ sentiments in the midst of the current global slump in financial markets and the presidential election, was conducted during the first two weeks of November and queried nearly 100 firms from the United States and Europe about their plans to source some job functions and business processes offshore.

The current survey on offshoring trends suggests that while cutting labour costs is the most significant factor driving offshoring decisions since the worldwide financial crisis gained momentum this quarter, many survey participants noted an increased urgency to improve efficiencies. Read the rest of this entry »

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This is the second entry in a new series from Duke Strategy Professor Will Mitchell.

PART 2 – SOLUTIONS

Yesterday, we discussed competitive disadvantages that established US businesses face compared to younger firms and foreign competitors as a result of the US approach to employment-based health insurance. Today, let’s consider solutions to the competitive disadvantages.

Let’s start with a couple of solutions that will not work.

Non-starter 1: Convince other countries to change? One approach is to ask the US government to try to force other countries to reduce their health insurance coverage, which would at least address the disadvantages relative to foreign competitors in developed markets. I know this sounds silly (at least I hope it does), but I recall serious suggestions to this effect about Japan during the 1980s, when the Japanese economy was booming and US firms were struggling to compete. It is not hard to imagine how badly it would be received if one of Hillary Clinton’s first actions as Secretary of State was to try to convince Canada, Japan, Germany, France, and the UK to roll back their national health insurance systems.

Non-starter 2: Ratchet down expectations? A second approach would be to try to convince US employees that extensive health care coverage is a luxury that they cannot afford, rather than a necessity and right. Again, I hope this sounds silly. But I recall a conversation with a senior executive from an established business that faced serious competitive disadvantages because of health care costs, in which this came up as a serious (I think it was serious – it was late, and maybe it was just fatigue and frustration that produced the point) suggestion. I think it is unlikely that Tom Daschle would make such a proposal the cornerstone of his policies as Secretary of Health and Human Services.

Now that we’ve disposed of the silliness, let me suggest a starting point for a solution that would work.

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This is the first entry in a new series from Duke Strategy Professor Will Mitchell.

Most criticism of the US health care system focuses on its high costs, variable quality, and limited access. These criticisms are often apt, but they miss an increasingly important issue – which is that the US healthcare system creates disadvantages for established US businesses compared to younger firms and to foreign competitors. This two part series outlines the problem and suggests a starting point for solutions.

PART 1 – PROBLEMS

US health care – high costs, variable quality, limited access: The US health care system regularly faces attacks for having high costs and variable quality, while offering only limited access when compared to health care systems in most other developed countries. The usual criticisms focus on the large number of people in the country who have little or no health care insurance, while common measures of health quality, such as mortality rates, lag many countries in Europe, Asia, and elsewhere, despite the fact that the costs of health care have grown to more than 15% of Gross National Product (the OECD reports that the US spent about $6,700 per capita on health care in 2006, more than 1.5 times the next highest country, Norway). Analysts regularly question whether even the current cost level is sustainable, an issue that has come to the fore again during the current recession.

Brief aside: In anticipation of criticisms from my colleagues in outstanding US hospitals and other health care providers – I am deeply aware of the incredible strengths in innovation and care that are available in many parts of the US health system. And a large part of the population enjoys access to outstanding care, even if the costs are high. There are powerful parts of the system that we need to cherish and preserve. But there are fundamental flaws in cost, quality, and access that we need to address, or they will pull down the towers of strength.

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This is the third in a series of posts by Duke Strategy Professors Arie Lewin and Marco Huesch.

We temper our advice by noting that while the future business landscape is unlikely to resemble that of the past, your firm must of course still be able to get there from here. To do so, you will still need many of those processes that make you successful today. In fact, you may still be able to leverage those processes to make you a leader tomorrow. Clearly, your experimentation with innovation should not come at the expense of failing to whittle down, refine, sharpen and polish your current execution strengths.

With the fine print out of the way, our closing thoughts are that what is good for firms who successfully follow these maxims is also good for America. We echo the words of GE boss Jeff Immelt, who recently advised that the “companies and countries that really play offence vis-à-vis technology and innovation are going to come out ahead,” We share the enthusiasm of national colleagues – Amar Bhidé, Glen Hubbard, and Ned Phelps among others – who see such innovative changes as ‘non-destructive creation’. Given the option between Schumpeterian ‘creative destruction’ and the above alternative, the choice should be clear for our business leaders.

This is the second in a series of posts by Duke Strategy Professors Arie Lewin and Marco Huesch.

Let’s consider a suggestive example of deliberate business model experimentation. In our association with leading U.S. consultancies, we have seen these ideas put to good use. Recall one of the last international financial crises, triggered by East Asian currency collapses? In the late 1990’s, banks in this region faced dollar denominated borrowings, and local currency denominated credit assets. Technical insolvency of many players led to dramatic government interventions, ownership stakes sold to international banks, and depressed wholesale financial performance.

Surviving independent local players saw global banks like Citibank poach swathes of high-value personal and commercial clients. Portfolio monitoring, credit risk assessment and dynamic external monitoring were missing at most local players. Reliable financial market and commerce statistics and credit bureau did not exist to inform lending practices.

Not the best time for experimentation? Steady as she goes? Not so. Booz and Co. worked with one of the leading Thai commercial banks to transform the business model in a risky but successful series of business model experimentations. As part of that team, one of us helped to tailor overseas practices (in risk and recovery, in portfolio management in credit cards, in internal IT support and many other areas) to local organizational, cultural and resource constraints. Within a short time, our client had outperformed the local banking market in stock price and continued to adapt its business model pro-actively to the changed competitive landscape. Loyal customers and staff continue to reward the still-independent bank years later for not cutting and running.

The lessons for domestic firms are clearly that counter-cyclical investment in business model innovation can pay big. Cisco’s CEO alluded to this recently by explaining that the firm made more aggressive investments during bad times than during good times. His counterpart at IBM goes further: the Economist highlighted his belief that new leaders would “win not by surviving the storm, but by changing the game.”

Closing thoughts will follow tomorrow…

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Duke Strategy Professors Arie Lewin and Marco Huesch urge managers to invoke ancient wisdom when responding to the current economic crisis.

In these tumultuous economic times, even the most modern business strategists may benefit from the (literally) stoic calm of an ancient leader like Marcus Aurelius. “Never let the future disturb you,” he advised, “You will meet it, if you have to, with the same weapons of reason which today arm you against the present.”

Let’s take those weapons of reason out and sharpen them for a moment.

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