III. FIRM CREATES VALUE THROUGH INNOVATION
1. Innovation and Leadership
Here we explore the relationship between technological innovation and the leadership of firms. A large proportion of new firms exit the industry within few years after entry as well as established firms are subject to shakeouts. The growth and leadership of firms will depend on their ability to successfully adapt their strategies to changing environments. In such environments, innovation creates variety of competitive positions and enhances a firm's potential to succeed in the market. This effect is important for new enterprises as well as established firms. Innovation may increase the chance of leadership of new firms allowing successful niches strategies. At the same time, technological innovation is necessary for well-established firms to deal with new and emerging or ‘disruptive’ technologies (Christensen, 1997). A number of studies have looked empirically at the factors that influence the probability of firms to get leadership in the market. At the firm level, these factors have been traditionally identified in the size and age of the firm, both increasing leadership probability (Dunne and Hughes, 1994). At the industry level, the characteristics of demand, such as market size and growth rates (Mata and Portugal, 1994), the characteristics of technology and the life cycle have been found to be important determinants of the leadership. These studies, however, focus either on structural features of the firm or on differences in the external environment. Only few empirical studies have looked at the role of innovation within the firm in shaping the leadership of it. In this section we explore how the probability of leadership is influenced by technological innovation and we also find that the demography of firms is influenced by firm size and age. The firms most likely to exit and disappear from the market are small and young firms. The effect of size and age is shaped, however, by the extent firms do engage in innovative activities. In general, we find that the ability to innovate increase leadership probabilities for all firms and across most industrial sectors.
In next part, we will discuss theoretical approaches and empirical studies on the determinants of firm leadership.
Schumpeter (1942) pointed out the fundamental role that technological innovation plays for the leadership of firms competing in the market. The introduction of new combinations leads to a process of “competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives” (Schumpeter, 1942, p. 84). Recently Baumol (2002) has reaffirmed the importance of innovation as the vital activity of a firm: “…under capitalism, innovative activity…becomes mandatory, a life-and-death matter for the firm and innovation has replaced price as the name of the game in a number of important industries” (Baumol, 2002, p. 1). Despite this strong emphasis on innovation as an imperative for the leadership of firms, there are yet few empirical studies that have linked the innovativeness of the firm to its own leadership. Different approaches in economics have stressed two factors underlying the decision of a firm to exit the market (Audretsch, 1997): one is the gap between firm size and the minimum efficient scale, another is the selection mechanism of heterogeneous firms. The former approach characterise the mainly empirical tradition of cross-sectoral studies in industrial economics (Scherer, 1980). According to this approach the leadership probability should be lower in presence of economics of scale in an industry. The latter approach shows that firm dynamics depend on the learning process by which firms discover and adapt to their level of efficiency, given the existence of asymmetries in efficiency and imperfect information. This predicts that the hazard rate of a firm decreases with current size (conditional on age) as well as with firm age.
These predictions are consistent with the evidence from early empirical studies in industrial economics (Evans, 1987; Hall, 1987). Empirical studies have showed that the probability of leadership increases with age and size of the firm, although at a decreasing rate. A positive interactive effect of age and size on firm leadership has also been observed: the leadership probability increases with age more rapidly for large firms. In addition, studies that have focused on the post-entry performance of new firms have found that the leadership probability increases with the size of the new firm at the time of entry.
In reality, firms always try seeking to improve their relative position in the distribution and their chance of success in the competition process through technological innovation. The evolutionary approach stresses that the conditions for leadership differ across technologies and sectors. It distinguishes alternative technological regimes, typically characterised as an “entrepreneurial regime” in which new firms have an innovative advantage compared to established firms and a “routinised regime” in which the advantage is inverted between the two.
More recently, the empirical literature in industrial economics has examined the effects of industry specific factors on firm leadership. The leadership probability varies across sectors. These differences are stable over time especially when compared to more volatile entry rates. This evidence has been interpreted on the grounds of the existence of barriers to leadership acting more effectively than barriers to entry (Geroski, 1995). These barriers have been related to the nature of technology, the presence of scale economies and the rate of demand growth in industrial sectors Audretsch (1995) in particular has linked technological conditions to the leadership probability of new firms. In his results, more innovative industries display lower leadership probability for new firms within limited period after entry, while they display higher probability of leadership for firms that have remained a certain number of years (8 years in the cited study) after entry. Similar effects are also observed for the level of innovation of small firms in the industry, which approximated the “entrepreneurial” nature of the innovation regime. This evidence thus suggests that technological regimes are important determinants of survival probability and that these effects may vary according to the age of the firm. That is, innovation in an industrial sector, and especially an “entrepreneurial regime”, are associated with high leadership probability of young firms and low leadership probability of older firms.
Despite the role attributed to the innovative environment for a firm’s leadership, there is very little empirical evidence on the relationship between the probability of leadership and the innovative activities carried out within the firm. In this respect, management studies have stressed the strategic role of innovation for firm leadership. Christensen, Suarez and Utterback (1998) showed that the combination of technological and market strategies are important predictors of a firm’s leadership probability. In particular, they explored how different types of innovations, architectural and components, and the timing of entry into a new market influence the leadership probability at different stages of evolution of a new technology, before and after the emergence of a dominant design. These studies, however, are based on specific industries and datasets and do not allow to establish more general properties. The purpose of this study is to investigate how innovative activities within the firm influence the leadership probability of it. In particular, they control for the influence of firm size and age on the effects of innovation on firm leadership. In the following case, technology innovation plays an impetus to a company’s success.
2. CASE Study (This was adopted by Caleb Solomon,’ How Williams Cos. Turned oil Pipelines to Conduits of Data’, Wall street Journal, July 11, 1989.)
The Williams Companies started out in businesses that did not involve very complicated technologies---building sidewalks, building oil pipelines, and then pumping oil, gasoline, and liquid fertilizer through the pipelines. The Williams organization is still in the pipeline business, but now, instead of oil, fiber-optic cables, capable of transmitting information at the speed of light, fill the pipelines.
As of the present, Williams Companies are right in the middle of the $50 billion per year telecommunications business, and the Williams Telecommunications Group, the subsidiary responsible for the fiber-optic operation, is the fourth largest company selling long-distance services in the United States. Thus, Williams is far from being a company just selling low-tech products and is well on its way to being one selling high-tech services. This specific high-tech services, long-distance telecommunications via fiber-optic cable, has become an integral part of the telecommunications function for many large American companies. For example, American Airlines, which does 10 percent of its telecommunications business with Williams, spends almost as much money for communications as it does for aviation fuel. At American, fiber-optic cables link that company’s fourteen hubs with Williams’s telecommunications center in Tulsa, as well as with travel agencies located through-out the country.
Although “traditional” pipeline operations still account for 90 percent of the Williams Companies’ business, the Telecommunications Group has grown rapidly in recent years and now has over nine hundred employees. The Group earned profits of over $20 million in 1988, thus putting it ahead of its competitor, U.S. Sprint, which has yet to make such a profit. Moreover, Joseph Williams, the Williams Companies chief executive officer, believes that the Telecommunication Group will become the largest Williams business within five years.
Joseph Williams came up with the “fiber-optics-through-pipeline” idea several years ago when the AT & T breakup was ordered by the Justice Department. Fiber-optics, which can carry for more information than regular telephone lines, seemed like a bright idea to Williams and also coincided with his plans to steer his companies away from the oil pipeline business, which was (and still is) in a state of recession.
The Telecommunications Group started out with a $30 million experimental network in the Midwest. It then expanded operations to the western United States. Fiber-optic cables were pulled through oil pipes that were no longer in use, and if there were no Williams pipelines available, the company bought unused pipelines from other companies. If no pipelines were available, Williams bought land and installed cables the old way—four feet underground. In 1987, Williams acquired a fiber-optics company for $95 million, and in 1989, it purchased an other for $365 million.
In addition to laying its own lines for its own network, Williams leases lines to other long-distance organizations and even leases “ big pipes,” that is, private lines, to large companies that run their own telecommunications networks. At present the “big pipe” niche is worth $5 billion per year for the telecommunications industry.
By the way, it is interesting to note how the fiber-optic cable is strung through the pipes. A very simple device, called a “pig” (a plastic ball slightly smaller than the diameter of the pipe) is pushed through the pipe, doing two tasks simultaneously. First, remnants of oil and other sludge are squeezed out ahead of the pig, while, second, sheaths of fiber-optic cable, attached to the pig, are pulled throughout the length of the pipe. Thus, a low-tech device is very essential for installing high-tech cable.
Williams believes that putting fiber-optic cable through “safe” pipes places the company at a competitive advantage, Should a traditional fiber-optic line be broken, it can lead to disaster for organizations on the network, and CEO Williams likes to brag that his lines have never been cut. To protect that cable not protected by pipes, “Danger” signs are posted on the right-of-way, and in urban areas, such as Los Angles, employees patrol sections of the line every two hours to ensure that vandals and builders are not causing any damage. The security of the Williams cable enabled that company to win a telecommunications contract with Coca-Cola for the latter’s Texas operations. Coke’s automated telecommunications system connects the Atlanta headquarters with bottlers in Texas and tells the bottlers what and how many cases of Coke products to put on the trucks. Should the lines ever fail for any reason, Coca-Cola products do not get delivered, and that is a situation that Coca-Cola will not endure.
Notwithstanding this competitive advantage, the Williams Telecommunications Group has had problems winning new customers away from traditional telecommunications giants, such as AT & T. When it first entered this business, Williams could cut AT & T’s price by 30 to 40 percent; however, as industry capacity has expanded, prices have been lowered. Thus, by 1989, Williams‘s telecommunications services were only 10 percent less than AT & T’s. In addition, as Williams acquires other fiber-optic and telecommunications organizations whose lines are not encased in pipes, that particular competitive advantage is lost because such lines are like everybody else’s. AT & T, U.S. Sprint, and MCI have also been able to increase the speed of their cable-laying operations, and these companies are now every bit as fast in this aspect of the business as is Williams.
One organizational problem facing Williams in this high-tech business was to find capable and knowledgeable salespeople. Sales and marketing skills in the oil pipeline business do not readily carry over to the fiber-optic business. Thus, knowledgeable salespeople in this business were hired away from other companies and competitors, such as LDX Net, Inc. In a similar vein, the skills and aptitudes involved with laying fiber-optic cable are not the same as those involved with either laying pipe or traditional cable. Although many Williams employees were retrained in these special skills, the company had to recruit skilled people from other organizations or hire young people right after their graduation from technical schools.
As the Williams organization has entered the high-tech era, it has found out that high-tech presentations help sell high-tech services. When potential clients tour the Tulsa center, they see giant television screens monitoring the company’s fiber-optic networks as well as the weather across the entire United States. A technician using a computer “mouse” demonstrates how he can locate any problem along the company’s eleven thousand miles of fiber-optic cable section on computer screens. The “clincher” is the tour of the teleconference center, a room with a demonstrator television hookup to the company’s St. Louis operations. According to Williams officials, they make deals 90 percent of the time when customers are given the grand tour of the Tulsa center.
From this case, we can understand clearly how technological innovative activities within the firm influence the leadership probability of it. With a lot of technological innovation, Williams companies grew bigger and bigger, and at last, it got leadership in the field of telecommunications. As Williams Telecommunications has shown, an organization, whose operations were formerly based upon a detailed technological innovation, can take advantage of modern, high-tech opportunities and successful.
IV. FIRM CREATES VALUE THROUGH MINIMISING RISK
1. Risk-adjusted Return on Capital
A crisis is a point in time for deciding anything; a disaster is an adverse or unfortunate event. While a crisis has the potential to be a disaster, a disaster is always a crisis. A crisis is anything that can damage organizations. A key element to any strategy must be a well thought-out plan for dealing with a crisis.
Risk-adjusted Return on Capital (RAROC) is a risk-adjusted profitability measurement and management framework for measuring risk-adjusted financial performance and for providing a consistent view of profitability across businesses (strategic business units / divisions). RAROC and related concepts such as RORAC and RARORAC are mainly used within (business lines of) banks and insurance companies. RAROC is defined as the ratio of risk-adjusted return to economic capital.
Development of the RAROC methodology began in the late 1970s, initiated by a group at Bankers Trust. Their original interest was to measure the risk of the bank’s credit portfolio, as well as the amount of equity capital necessary to limit the exposure of the bank’s depositors and other debt holders to a specified probability of loss. Since then, a number of other large banks have developed RAROC or (RAROC-like systems) with the aim, in most cases, of quantifying the amount of equity capital necessary to support all of their operating activities -- fee-based and trading activities, as well as traditional lending.
RAROC systems allocate capital for two basic reasons: (1) risk management and (2) performance evaluation. For risk-management purposes, the overriding goal of allocating capital to individual business units is to determine the bank’s optimal capital structure. This process involves estimating how much the risk (volatility) of each business unit contributes to the total risk of the bank and, hence, to the bank’s overall capital requirements.
For performance-evaluation purposes, RAROC systems assign capital to business units as part of a process of determining the risk-adjusted rate of return and, ultimately, the economic value added of each business unit. The economic value added of each business unit, defined in detail below, is simply the unit’s adjusted net income less a capital charge (the amount of equity capital allocated to the unit times the required return on equity). The objective in this case is to measure a business unit’s contribution to shareholder value and, thus, to provide a basis for effective capital budgeting and incentive compensation at the business-unit level.
Economic capital methodologies can be applied across products, clients, lines of business and other segmentations, as required, to measure certain types of performance. The resulting capital attributed to each business line provides the financial framework to understand and evaluate sustainable performance and to actively manage the composition of the business portfolio. This enables a financial company to increase shareholder value by reallocating capital to those businesses with high strategic value and sustainable returns, or with long-term growth and profitability potential.
Economic profit elaborates on RAROC by incorporating the cost of equity capital, which is based on the market required rate of return from holding a company's equity instruments, to assess whether shareholder wealth is being created. Economic profit measures the return generated by each business in excess of a bank's cost of equity capital. Shareholder wealth is increased if capital can be employed at a return in excess of the bank's cost of equity capital. Similarly, when returns do not exceed the cost of equity capital, then shareholder wealth is diminished and a more effective deployment of that capital is sought.
2. Risk Management
Today, risk management is a standard tool for each responsible and conscious top manager, company director and board member.
Legal requirements to continuously control risk of the company assets are based on rules as for instance outlined in IBM of the United States. Companies in various industries like for example in IT, construction, automotive are continuously practicing risk management in their day-to-day business.
In principle risks always result as consequence of activities or as consequence of non--activities. This applies to strategic risks (e.g. market observation and not/wrongly evaluating competitors), financial risks (e.g. hedging thus foreign exchange risk security) or also operational risks (e.g. Specific project risks e.g. contractual penalties or single risk evaluations for Assets).
Risk Management (RM) requires a detailed, - all business activities embracing strategy and must be understood as the complete use of organizational rules, tools and measures in a company recognizing and controlling technical as well as commercial risks. RM is a firm element in modern Management Systems.
Potential risks and damages have to be evaluated every day anew: business environment is becoming increasingly complex, technologically, commercially from more international competition as well as through higher integration with other entities. Today, simple reporting systems, Excel spread-sheet analysis and risk handbooks cannot adequately comply with these challenges.
Modern online software solutions even detect weak signals and offer a constant actual overview of all specific risks in a portfolio, thus supporting supervision and enhancing measures to reduce or eliminate risks.
The risk module supports responsible persons during all phases of their company's risk management strategy, like in risk identification and evaluation, recording of counter measures as well as implementation of continuous controls.
The risk module is directly integrated into the task level of each single process step of the process management tool. Thus the risk management tool uses the same system, which controls all business procedures structured and defined with the Process Modeler. The Process allows the fine-tuning of each risk according to individual and company's specific risk potentials.
One company that operations and execution keep excellent, Damodaran A.(1998) tried to actualize by minimizing the diversified risk.
Changing Operating Risk
The operating risk of a firm is a direct function of the kinds of products or services it provides, and the degrees to which these products are services are discretionary to the customer. The more discretionary they are, the greater the operating risk faced by the firm.
Both the cost of equity and cost of debt of a firm are affected by the operating risk of the business or businesses in which it operates. In the case of equity, only that portion of the operating risk that is not diversifiable will affect value.
Firms can reduce their operating risk by making their products and services less discretionary to their customers. Advertising clearly plays a role, but coming up with new uses for a product/service may be another.
Reducing Operating Leverage
The operating leverage of a firm measures the proportion of its costs that are fixed.
Other things remaining equal, the greater the proportion of the costs of a firm that are fixed, the more volatile its earnings will be, and the higher its cost of capital will be. Reducing the proportion of the costs that are fixed will make firms much less risky and reduce their cost of capital. This can be accomplished in a number of different ways:
·By using outside contractors for some services; if business does not measure up, the
firm is not stuck with the costs of providing this service.
·By tying expenses to revenues; in particular, with wage contracts tying wages paid to revenues made will reduce the proportion of the costs that are fixed.
Changing the Financing Mix
The third approach to reducing the cost of capital is to change the mix of debt and equity used to finance the firm. Debt is always cheaper than equity, partly because lenders bear less risk and partly because of the tax advantage associated with debt. Taking on debt increases the risk (and the cost) of both debt (by increasing the probability of bankruptcy) and equity (by making earnings to equity investors more volatile). The net effect will determine whether the cost of capital will increase or decrease if the firm takes on more debt. This effect is illustrated in the following graph:
It is important to note, however, that firm value will increase as the cost of capital decreases if and only if the operating cash flows are unaffected by the higher debt ratio. If, as the debt ratio increases, the riskiness of the firm decreases, and this, in turn, affects the firm's operations and cash flows, the firm value may decrease even as cost of capital declines. If this is the case, the objective function when designing the financing mix for a firm has to be restated in terms of firm value maximization rather than cost of capital minimization.
The Risk Shifting Game
The value of a firm is the sum of the capital invested and the present value of the economic value added. The latter term is therefore not just a function of the dollar economic value added but also of the cost of capital. A firm can take actions that increase its economic value added, but still end up with a lower value, if these actions increase its operating risk and cost of capital.
Again, using the same firm used in illustration 1, assume that the firm is able to increase its return on capital on both assets in place and future investments from 15% to 16.25%. Simultaneously, assume that the cost of capital increases to 11%. Note that the risk effect dominates the higher excess dollar returns, and the value of the firm decreases. The consequences of this are dangerous for firms that adopt economic value added based objective functions. When managers are judged based upon year-to-year economic value added changes, there will be a tendency to shift investments into riskier investments. This tendency will be exaggerated if the cost of capital does not reflect the changes in risk or lags it.
In closing, economic value added is an approach that is skewed towards assets in place and away from future growth. It should not be surprising, therefore, that when economic value added is computed at the divisional level of a firm, the higher growth divisions end up with the lowest economic value added, and in some cases with negative economic value added. Again, while these divisional managers may still be judged based upon changes in economic value added from year to year, the temptation at the firm level to reduce or eliminate capital invested in these divisions will be trong, since it will make the firm’s overall economic value added look much better.
3. Customer Intimacy
What is Customer Intimacy? It is the superior management of the customer experience and relationship. It is a commitment to deliver a higher level of service to every customer across all channels, product lines, and geographies. Simply put, Customer Intimacy means knowing a customer’s habits and wants and delivering on, or even anticipating, their needs. To the extent that customer loyalty is increased, the customer’s desire to switch to a competing vendor is vastly decreased, thus creating formidable competitive barriers.
Having a comprehensive, integrated view of the high-tech buyer and channel is a key component of Customer Intimacy. Maintaining control of a company’s people, systems and business processes through the integration of applications, legacy systems and databases, maximizes customer service and satisfaction. Providing customers with real-time visibility into information they value most makes it easy for them to do business. Frictionless collaboration with customers by automating shared business processes, creates “experience based loyalty,” and improves their reception to purchase additional products. Systematically monitoring customer service metrics and optimizing them over time cements customer loyalty for the long term.
In experience, products and implementation methodology to help high-tech companies achieve world-class Customer Intimacy. The innovative solution combines proven, mature enterprise application integration technology with service-oriented architecture and event-driven capabilities. This solution enables more than 1,100 enterprise customers worldwide to run, manage and optimize their business. It unites this product portfolio with proven manufacturing industry expertise and a framework for Customer Intimacy to provide a complete roadmap for success.
Roadmap to Customer Intimacy
Fred Wiersema (1996) provides a proven roadmap for Customer Intimacy, focusing on five main areas that positively impact Customer Intimacy:
● Single Customer View – Know the customers better by implementing a single view of the customer base. Customer data must be accurate and reliable throughout the organization.
● Customer Collaboration –Increase customer loyalty by engaging them in strategic business collaborations, including product prototyping, design for manufacturing, logistics, coselling, warranty service execution and collaborative forecasting.
● Customer Process Automation – Reduce customer’s costs by automating key business processes and quickly managing the exceptions most important to each customer.
● Integrated Customer Portals – Enhance the customer experience using personalized customer portals to provide customers with real-time visibility into their order fulfillment status, service requests, inventory, work in process, and supplier service level agreements (SLAs).
● Customer Metrics Management – Improve customer satisfaction by systematically measuring and optimizing key customer metrics. The webMethods roadmap provides the necessary framework and products to enable high-tech companies to methodically achieve Customer Intimacy in a phased approach.
4. CASE Study (This case was adopted by Sue Boettcher from ‘The IBM/ Electric Minds’, Businessweek, January 1998.)
IBM conduct site selection studies internally while other organizations outsource this function to various advisors, including site selection consultants, real estate companies or, at times, a combination of these resources. The bottom line: it does not matter if the site selection team is internal or external; the biggest risk is taking advice from an inexperienced team or from someone who does not have your organization’s best interest in mind. Your organization must carefully consider how to conduct the analysis and who should lead the process since one mistake can cause significant short and long-term problems. So be wary of real estate brokers who are strictly motivated by real estate commissions or site selection consultants without significant experience in this arena.
Discovering the best call center communities requires going beyond the traditional 300 Metropolitan Statistical Areas (MSA) Search, which many site selection and real estate companies derive their data. Note that demographic statistics gathered from economic development agencies are often inconsistent and thus will not provide the right answer either. The utilization of multiple "apples to apples" comparative analyses and models of various data and research information from reliable, consistent sources will yield accurate results. You should find a real estate site selection consultant who will go further to find the over 3,500 other locations throughout the United States and Canada ready to be capitalized for the benefit of the communities and, most notably, your organization. The research conducted to find these opportune locations should allow you to:
• Understand Employee’s Psychographic Profile. A profile of your typical call center employees must be identified in order to evaluate their availability in a community. What type of skills and attitudes must they have to be successful in your job? How will you find them?
• Ensure Reliable, Consistent Data. Consistent, reliable information is critical to the success of the project and can be difficult to discover. There are 25 to 30 sources that must be explored to retrieve the critical information needed to thoroughly understand a community. Examples of these sources include the Bureau of Labor and Statistics, Federation of Tax Assessors, Economic Research Institute, United Nations and the US Census Bureau. Inconsistent data can cause an entire analysis to become skewed. Therefore, the analysis must be based on an "apples-to-apples" comparison.
• Compare Data Utilizing Analytical Models. Comparative analytical models need to be set up to truly compare and contrast the statistics gathered. By establishing weighted modeling analyses, a corporation is able to turn the data into information, rather than viewing the statistics without gaining any useful insight.
• Understand the Competition and Labor Base. A true understanding of the real costs of labor and the presence of competition is critical in choosing the right location. It requires saturation analyses, employer interviews, community visits, labor pool test campaigns and job fairs to draw final conclusions. This process can be very time consuming and requires significant resources.
• Find the Right Real Estate. Even though real estate is not the primary driver in the decision, in the end it may dictate how a decision is made. Retail conversions and build-to-suits may be the only alternative in some of the best communities while the "needle in the haystack" vacated call center opportunity may be available due to the recent economic conditions. The availability of qualified brokers, contractors and real estate experts is usually nonexistent in many of the most-suitable communities. You should seek people with call center experience to assist in negotiations and construction. Never narrow your decision down to one building in one city; always have multiple back-up options.
• Negotiate the Best Economic Incentives. Economic incentives can bring significant value to a project. You should view economic incentives as the "icing on the cake" for a location with the right labor force. Many smaller communities provide substantial packages and incentives for call centers, from free land to cash grants. However, negotiating incentives and actually getting them will require you to seek external tax advice. You should be prepared to seek a specialist for this step in the process.
Based on results from recent engagements and demonstrations, GlobalVision consultants estimate that the centralization and consolidation of user management and passwords with Tivoli identity management solutions can reduce process costs by as much as 85 percent.
Improved staff productivity and decreased staffing requirements are significant contributors to these cost reductions. For example, before the implementation of Tivoli Identity Manager at one site, more than 100 people were involved in managing identities for the company’s 9,000 users. Following deployment, the number could be decreased to only 40 people due to the centralization of user management and use of the Tivoli Identity Manager Workflow component. Schreiber anticipates that the company will realize additional savings after it takes full advantage of the autonomic components of the solution.
Global Vision also has shown in proof-of-concept demonstrations that the consolidation of security alerts with Tivoli Risk Manager can decrease the number of incidents significantly. Additionally, the solution’s numerous autonomic features help minimize risk and business exposure and, in some instances, restore the business to its original secure state without manual intervention. Staff can set “automatic reaction tasks” that quickly resolve urgent security issues or proactively respond to potential security vulnerabilities.
“Tivoli Risk Manager really pays off for companies that have many different event generators. It makes the number of security events humanly manageable,” Schreiber explains.
In addition to cost reductions, IT executives place high priority on decreased downtime, problem avoidance and alignment of IT with business goals. According to Schreiber, Tivoli Systems Management solutions deliver significant ROI in these areas:
- Improving customer satisfaction through greater access to services
- Helping companies adhere to regulatory requirements, especially critical for healthcare, pharmaceutical, financial and insurance organizations worldwide
- Enabling IT service providers to deploy services under varied pricing models
For instance, with Tivoli Business Systems Manager, IT staff can see in near realtime whether customers can place online orders and, if not, why. Tivoli Monitoring for Transaction Performance helps staff monitor the performance and availability of e-business and enterprise transactions to help deliver a positive customer experience.
Chapter 5. Conclusion
In practice, more and more firms regard the value creation as the major method of their economic growth. In this paper, surrounding the objectives of the firm’s value creating activities, we mainly talked about three different models of value creation—Grow volume, Innovation&Renew and Minimise risk. First of all, the corporate restructuring is good way to help the firm reach the goal of operational excellent. Secondly, technological innovation is the method that firms can obtain the opportunity of product leadership in competitive market. Moreover, through minimizing several risks, firms not only promote their management efficiency but also obtain stable customers.
Meanwhile, it is an undeniable fact that because the market is complicated and competitive, it is not easy for any company to realize its economic growth. In the long run, only managers of firm combine one or more methods of value creation into manipulation, could a firm’s growth be ensured. On the other hand, it is the extra-organisational model, such as mergers, acquisition, that could contribute a lot to a firm’s development. At the same time, that is still worthy for academic to research.
REFERENCES
Addism Wesley (1997): The Discipline of Market Leader, 2 nd edition, Boston, MIT Press.
Audretsch D.B.(1997): ‘Technological Regimes, Industrial Demography and the Evolution of Industrial Structures’, Industrial and Corporate Change, February 1997.
Baumol W.J. (2002): Free Market Innovation Machine: Analysing the Growth Miracle of Capitalism, 3 rd edition, Princeton University Press.
Christensen C. M, F.F. Suarez and J.M. Utterback (1998): ‘Strategies for Survival in Fast-Changing Industries’, Management Science, March 1998.
Christensen C.M. (1997): The Innovator’s Dilemma, Boston, Harvard Business School Press.
David Loader (2002): Controls, Procedures and Risk, 1 st edition, Butter worth- Heinemann Inc, pp 12-150.
Dunne P. and A. Hughes (1994): ‘Age, Size, Growth and Survival: UK Companies in the 1980s’, The Journal of Industrial Economics, April 1994.
Edwin A. Locke (1968): Organisational Behaviour and Human Performance. Vol. 3, pp. 157-189.
Emeric Solymossy and Atilio Armando Penna (2001): Sustainable Growth for the Small Business: A Theory of Organizational Transition, Western Illinois University and Capital Federal Argentina, Research Paper.
Evans D. S. (1987): ‘ The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries’, The Journal of Industrial Economics , March 1987, pp35.
Fred Wiersema (1996): Customer Intimacy: Pick Your Partners, Shape Your Culture, Win together, 2 nd edition, Knowledge Exchange Press, pp 96—202.
G. Bennett Stewart (1990): ‘Remarking the Corporation form Within’, Harvard Business Review, July –August 1990.
Geroski P. A. (1995): ‘What do we know about entry?’ International Journal of Industrial Organisation, March 1995.
Gro Kvale (2004): Value Creation or Construction of Meaning, Kingston University Press, discussed at workshop on innovation and regional development.
Hall B. H. (1987): ‘The Relationship between Firm size and Firm growth in the USA Manufacturing sector’, The Journal of Industrial Economics, December 1987.
Judith R. Gordon (1990): Management and Organisational Behaviour. Boston, Allyn and Bacon. pp.107-389, pp. 619-657.
John J.Kao (1989): Entrepreneurship, Creativity & Organisation. Boston, Harvard Business School. New Jersey, Prentice Hall, Englewood Cliffs, pp. 13-90, pp. 396-535.
Larry E. Greiner (1972): ‘Evolution and Revolution as Organisations Grow’, Harvard Business Review, July-August 1972.
Mata J. and P. Portugal (1994): ‘Life Duration of New Firms’, The Journal of Industrial Economics, March 1994.
Michael Porter E. (1972): Competitive Advantages : Creating and Sustaining Superior Performance, 1 st edition, Simon &Schuster Inc.
Michel Crouhy, Dan Galai and Robert Mark (2000): Risk Management, Irwin Inc, pp.122-156.
Preston G. Smith and Guy Merritt (2002): Proactive Risk Management: Controlling University in Product Development, New York, Productivity Press.
Ron Dembo and Andrew Freeman (2001): The Rules of Risk, John Wiley &Sons Inc, pp. 74-150.
Sue Boettcher (1998): ‘The IBM/Electric Minds’, Business Week, January 1998.
Tom Copeland, Tim Koller, Jack Murrin (1994): Valuation: Measuring and Managing the Value of Companies. 2 nd edtion .McKinsey &Company, Inc. pp.1-325.
Scherer F.M.(1980): Industrial Market Structure and Ecomonic Performance, 1 st edition, Toronoto, Allyn and Bacon Inc, pp 230-350.
Schumpeter J. A. (1942): Capitalism, Socialism and Demoncracy, 1 st edition, New York, Harper &Row Inc, pp 300—360.
Yin, R. (1984): Case Study Research: Design and Methods, 1 st edition, Beverly Hills, CA, Sage Publishing.
Young Rok Choi and Dean A.Shepherd (2002): Honeymoons and the Entrepreneurial Process: A Real Options Perspective, School of Business Singapore Management University and College of Business and Administration University of Colorado, Research Paper.
作者简介：彭霄飞 丹麦罗斯基勒大学管理学硕士研究生
责任编辑：刘辉