Implications

As we embark on a new century, it is clear that the criteria that defined business in the past century are less relevant. The present generation of managers has wit­nessed changes in how firms are managed and how they are defined. Terms like economic value added (EVA), brand equity, and lifetime value of a customer have changed the metric by which firms are evaluated. Exhibit 1.1 compares the mar­ket values of Bethlehem Steel and Nucor. You can infer from this exhibit that Wall Street's perception of the value inherent in integrated steel mills has decreased over time. In the early 1900s, vertical integration was a sign of market strength and dominance. Even today, some firms struggle to let go and rely on others to complete the value chain. Wal-Mart, a nonmanufacturing firm, has become the largest firm of the Fortune 500. Enron, a company that has fallen from grace, became one of the world s largest energy providers not because of the size or efficiency of its generation capacity but because of its knowledge of energy futures.

EXHIBIT 1.1 Comparison of Bethlehem Steel and Nucor.

Source: Reprinted with permission of Harvard Business School Press. From GDI Value Growth Database, cited in Slywotzky, Value Migration (Boston: HBS Pres, 1996), p. 9. Copyright © 1996 by the Harvard Business School Publishing Corporation; all rights reserved.

It was not the traditional electric utility concerned with balanc­ing loads, ensuring that its distribution lines survived storms or that its customers had electricity 24/7. Instead, Enron developed its models and honed its trading acumen. Then the company began to unravel, showing its off-balance-sheet debt to be too great to sustain its growth. Enron, once a model of transformation, crashed amidst greed, questionable business practices, and ineffective gover­nance and oversight. The list of fallen companies has multiplied as the public's confidence in business hits new lows.

The role of business has changed dramatically, and the transformations that point to fundamental changes in the basic structure of society alluded to at the beginning of this chapter are likely to occur more frequently. Andy Grove, CEO of Intel, confirms this view and speaks of inflection points that cut to the heart of the business, threatening its existence. Inflection points reflect those moments at which changes in the nature of competition, technology, or the mar­ketplace present profound opportunities and/or threats for a firm s future sur­vival. The role of senior management will be to set the vision that ultimately transforms the business. However, it is often the middle manager who needs to anticipate this change, who appreciates its potential impact, and who is charged with implementing a response. Success often hinges on execution - achieve­ment of goals is truly in the details! The chapters that follow move with facility between questions of strategy and problems of implementation. All the chapters combine to prepare the reader for the challenges that face managers in the twenty-first century. Our journey takes a number of turns and twists. Some chap­ters focus on the traditional functional business disciplines such as marketing and operations. Others address the details of accounting, quantitative analysis, net present value, and option pricing models.

Still other chapters soar into the stratosphere of the corporate environment by dealing with the business policy level as we address issues germane to entrepreneurship and the creation of wealth and value, to strategy and the manage­ment of alliances. These issues stand side by side with a discussion of the effects of empowerment, the stresses associated with the changing social contract, the need to incorporate business ethics as an essential part of management s think­ing, and the challenges inherent in leading from the middle.