In her new book, The Company of the Future, Frances Cairncross, management editor for The Economist, predicts that corporate leadership is going to have a tough time keeping up with the progress of information technology.

Net Enthusiasm

Dotcoms may be dead, but the Internet is still alive and well, and sure to profoundly change companies and challenge their managers in the years to come. That's the message Frances Cairncross delivers in The Company of the Future. Cairncross writes in brisk, crystal-clear prose, a hallmark of The Economist, where she is management editor. The author marshals numerous examples from companies including Dell, Eli Lilly and Procter & Gamble to show how the Internet is changing the way companies interact with their customers (who get segmented by profitability so that companies can develop deeper relationships with the best of the lot), their employees (the most talented of whom will be lured like Hollywood celebrities to take on starring roles) and their suppliers (who become more strategic as the trend toward outsourcing continues).

Cairncross's talent lies in synthesis and historical perspective. Unlike many chroniclers of the new economy, she peers back and finds parallels to preindustrial economy days as she explains how some companies of the future may look more like the East India Co. of the 17th century (set up to manage a specific project) than like the typical large public company of today.

Sari Kalin

Ten Rules for Survival

Nothing beats running a company for sheer complexity. New information flashes constantly on to the radar; new competitors appear from nowhere; myriad different stakeholders, from regulators to media to human-rights campaigners, clamor for attention. How should managers steer through this period of disruption, grabbing the potential of the new without sacrificing what mattered in the old? Plenty of familiar practices of good management remain, but some rules become even more important. Here are the top ten:

1. MANAGE KNOWLEDGE. A company is the sum of what its people understand and know how to do well. Value lies increasingly in creative ideas and knowledge. But ideas have value only if people share and develop them in ways that benefit the bottom line; knowledge is useful only if people can find what they need to know. Getting intelligent people to share what is in their heads is vital, and takes more than mere money or clever software. Ideas must flow sideways through a company and from the bottom up—not merely top down. And knowledge is worth storing only if senior staff set careful rules to filter and structure it. What goes into a database determines the value of what comes out. So setting central rules and standards is key to good knowledge management.
2. MAKE DECISIONS. Good judgement will remain a key skill. Managers constantly blitzed with new information require strong nerves if they are to build in the data that matters and set aside the rest. Because production cycles are shorter, companies will often need to do things in parallel that they would once have done sequentially: This will be one of the many factors speeding up the decision flow. Managers must accept that it is sometimes better to be roughly right than exactly wrong. Big-bang decisions are generally best avoided—or implemented in small incremental moves that leave room for flexibility and for altering course, if circumstances change. Accountability grows more widespread and deeper—a decision must be right not just financially, but ethically defensible too. Shareholders and other stakeholders have new ways to monitor corporate behavior and to urge change.
3. FOCUS ON CUSTOMERS. Customers matter—but some matter more than others. Acquiring new customers often costs more than making extra sales to existing ones. So companies must build loyalty and trust with reliability and good service. Given the welter of product information reaching customers, memorable brands will grow more important. Companies will not just widen their reach by finding new markets, but will also seek to deepen existing relationships. They will have more information than ever before about their customers, and must use this to offer their most profitable customers special deals and to make them feel part of an elite club. Some companies will even seek to “fire” unprofitable customers by charging them higher rates than others and restricting the services they can access.
4. MANAGE TALENT. Like its customers, some of a company’s people matter more than others. That does not apply only to people at the top: Managing talent is also about capturing innovative ideas from middle managers and those further down the line. At every level, managers must identify where most value lies. In some cases, a few stars will encapsulate much of a company’s value; in others, teams of employees will matter more. Some companies will want to rent the talents of "free agents"; others, to employ directly their best brains. Each case will need a different human-resources approach; each will require new ways to measure performance and imaginative ways to reward it, not all of them financial. Managers must strike a delicate balance between paying enough to attract and retain talent, and offering such lavish rewards that too little value goes to the owners of the business and its other employees.
5. MANAGE COLLABORATION. Teams will have new opportunities to work together; companies too will collaborate more, in alliances that allow them to outsource production or to spread risk or to enter new markets. Both will require lateral links, not hierarchies, and a new managerial style. Teams may be separated by time zone or by geographic distance and increasingly will work for different employers. Effective collaboration between teams and between companies call for similar qualities: trust and shared understanding, rather than the top-down, command-and-control approach of hierarchical structures. Successful collaboration will also require excellent communication, and incentive that reward sharing information and working for common goals.
6. BUILD THE RIGHT STRUCTURE. As costs of handling information in a company decline, so new opportunities open for redefining corporate shape. In general, companies will be less hierarchical, more modular (like Lego), with more ways to arrange and rearrange structure. Managers must think through from scratch which activities should be kept in-house and which outsourced. A general rule: A company should keep those activities it does not merely as well as, but better than, it competitors. Such decisions now depend far more on business logic than cost. So do decisions about what to run from the center, what locally. True, the center can control what happens locally more easily than ever before. But "can" is not always "should": Business logic will vary from one service and company to another.
7. MANAGE COMMUNICATIONS. Given the pace of change, bosses need more than ever to be able to communicate persuasively through many channels, with their staff and the outside world. They must also listen: The most valuable communications will frequently be bottom-up, and the folk nearest to the customer and the product now have new tools for explaining what they see. They will use these only if they feel the message gets through. More communicating will also travel sideways, peer-to-peer, as teams share ideas in more depth than ever before and joint ventures cleave more closely.
8. SET STANDARDS. Ironically, Internet technologies, tools of freedom and decentralization, call for discipline, protocols, and standard processes. Only by setting standards and insisting that everyone abide by them will companies reap their potential savings. Companies need to insist on common practices in areas such as purchasing and information technology in order to harvest real productivity gains. As a result, some aspects of centralization will increase: A key task of top managers will be to provide structures and standards, and to insist that they are observed.
9. FOSTER OPENNESS. Once standards have been set, then openness and freedom should reign. Discipline and openness are two sides of the same coin: Centralization of standards makes possible decentralization of decision-making. In addition, Internet technologies increase the need for a culture of openness, to foster the sharing of knowledge and effective collaboration. Companies will allow their suppliers and customers "inside the machine," as it were, by giving them extraordinary access to their databases and inner workings in order to integrate their operations and to make collaboration effective.
10. DEVELOP LEADERSHIP. Without the right organizational structure, culture, and staff, a company will not fully benefit from even the most sophisticated technology. So the key to success likes much less in technical know-how than in excellent leadership to push through and build upon organizational change. At some points in a company’s life, it will need a hero-leader who can rally staff to push through the trauma of disruptive change. At other times, the right style will be the manager-as-coach, a selfless talent scout who specializes in assembling and motivating great teams. Always, the people at the top will set the tone in a firm. Their skills will determine whether it is a good company to work in and do business with. These are the main tests of successful leadership.

Armed with these ten essentials, managers in the company of the future should see the challenges ahead for what it is: the most revolutionary period this generation has ever experienced in corporate life. For many managers, painfully learning to make the best use of the Internet technologies, it will be frightening and exhausting, but it will also be enormously exciting. For some, who instinctively understand how to lead through difficult times, it may even be fun.

Book available from Harvard Business School Press

http://www.hbsp.harvard.edu/products/hbr/