EXECUTIVE SUMMAR8ES > March 2001

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Strategy and the Internet

Michael E. Porter Reprint R0103D

Building the Emotional Intelligence of Groups

Vanessa Urch Druskat and Steven B. Wolff Reprint R0103E

Not All M&As Are Alikeand That Matters

Joseph L Bower Reprint R0103F

Many of the pioneers of Intemet business, both dot-coms and established companies, have competed in ways that violate nearly every precept of good strategy. Rather than focus on profits, they have chased customers indiscriminately through discounting, channel incentives, and advertising. Rather than concentrate on delivering value that earns an attractive price from customers, they have pursued indirect revenues such as advertising and click-through fees. Rather than make trade-offs, they have rushed to offer every conceivable product or service. It did not have to be this way-and it does not have to be in the future. When it comes to reinforcing a distinctive strategy, Michael Porter argues, the Intemet provides a better technological platform than previous generations of IT. Gaining competitive advantage does not require a radically new approach to business; it requires building on the proven principles of effective strategy. Porter argues that, contrary to recent thought, the Internet is not disruptive to most existing industries and established companies. It rarely nullifies important sources of competitive advantage in an industry; it often makes them even more valuable. And as aU companies embrace Intemet technology, the Intemet itself will be neutralized as a source of advantage. Robust competitive advantages will arise instead from traditional strengths such as unique products, proprietary content, and distinctive physical activities. Intemet technology may be able to fortify those advantages, but it is unlikely to supplant them. Porter debunks such Intemet myths as first-mover advantage, the power of virtual companies, and the multiplying rewards of network effects. He disentangles the distorted signals from the marketplace, explains why the Intemet complements rather than cannibalizes existing ways of doing business, and outlines strategic imperatives for dot-coms and traditional companies.

The management world knows by now that to be effective in the workplace, an individual needs high emotional intelligence. What isn't so well understood is that teams need it, too. Citing such companies as IDEO, HewlettPackard, and the Hay Group, the authors show that high emotional intelligence is at the heart of effective teams. These teams behave in ways that build relationships both inside and outside the team and that strengthen their ability to face challenges. High group emotional intelligence may seem like a simple matter of putting a group of emotionally intelligent individuals together. It's not. For a team to have high EI, it needs to create norms that establish mutual trust among members, a sense of group identity, and a sense of group efficacy. These three conditions are essential to a team's effectiveness because they are the foundation of true cooperation and collaboration. Group EI isn't a question of dealing with a necessary evil-catching emotions as they bubble up and promptly suppressing them. It's about bringing emotions deliberately to the surface and understanding how they affect the team's work. Group emotional intelligence is about exploring, embracing, and ultimately relying on the emotions that are at the core of teams.

Despite all that's been written about mergers and acquisitions, even the experts know surprisingly little about them. The author recently headed up a year-long study sponsored by Harvard Business School on the subject of M&A activity. In-depth findings will emerge over the next few years, but the research has already revealed some interesting results. Most intriguing is the notion that, although academics, consultants, and businesspeople lump M&As together, they represent very different strategic activities. Acquisitions occur for the following reasons: to deal with overcapacity through consolidation in mature industries; to roll up competitors in geographically fragmented industries; to extend into new products and markets; as a substitute for R&D; and to exploit eroding industry boundaries by inventing an industry. The different strategic intents present distinct integration challenges. For instance, if you acquire a company because your industry has excess capacity, you have to determine which plants to shut down and which people to let go. If, on the other hand, you buy a company because it has developed an important technology, your challenge is to keep the acquisition's best engineers from jumping ship. These scenarios require the acquiring company to engage in nearly of)posite managerial behaviors. The author explores each type of M&Aits strategic intent and the integration challenges created by that intent. He underscores the importance ofthe acquiring company's assessment of the acquired group's culture. Depending on the type of M&A, approaches to the culture in place must vary, as will the level to which culture interferes with integration. He draws from the experiences of such companies as Cisco, Viacom, and BancOne to exemplify the different kinds of M&As.

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HARVARD BUSINESS REVIEW