January 31, 2008
Chess Lessons for Business and Government
John Kay uses Fischer vs. Spassky and the Cold War to illustrate the futility of master planning, whether in business or politics:
. . . People who hold to a single idea, or a fixed design, generally lose in chess, as they lose in battle, in business and in economics. Great chess players apply a variety of principles, they sense patterns, they hold a formidable range of models and analyses in their mind without being a slave to any of them.
As in chess, so it is in business and finance. We cope with an uncertain world through incremental and mostly unsuccessful innovation, not through extensive visions of the future. That is both why computer chess is not very interesting and why market systems outperformed planned economies. And why people who seek to remodel politics or business with grand designs are as mad as Bobby Fischer and far more dangerous.
Read Kay's entire essay here, and remember it as you listen to presidential candidates' plans on how they will "manage the economy" and make our lives better.
Posted by John at 5:49 AM | Comments (0) | TrackBackSeptember 10, 2007
Change, Change, Change for U.S. Business
A rapidly changing job market is the result of rapid change among employers. Chris Zook, director of global strategy at consulting firm Bain & Co., gives some signposts in an interview with Universia-Knowledge@Wharton:
Bain conducted an extensive analysis of change in the Fortune 500 over the past two decades. We found that 153 of the top 500 companies in 1994 either ended up in bankruptcy or were acquired and integrated into another company. An additional 130 had made fundamental changes in their core strategy. Only one in three survived intact.
Posted by John at 4:32 AM | Comments (0) | TrackBackOverall, the facts are quite sobering:
--Only 1 in 10 companies achieve sustainable growth over a 10-year period.
--Business life spans have plummeted to an average of 14 years.
--CEOs are leaving their jobs twice as often as in previous decades, with today’s average tenure only four years.
--The average period an investor holds a share of common stock has decreased from about eight years to eight months.
--Market leaders are more quickly losing their lead positions.
--Product lifecycles in many industries have shrunk by 70% or more.
In the next decade, we expect the survival rate to approach only one-in-four, as major global forces accelerate the pace of change. . .
. . . Three decades ago, only about 20% of industries could be described as turbulent. Today we estimate it to be 62% . . .
July 10, 2007
What You Can't Outsource
Posted by John at 7:12 AM | Comments (0) | TrackBack. . .reducing the cost of an interaction with a consumer isn't usually the point. The real win is when a service person does the difficult work of solving problems and the essential work of connecting with people as individuals. You can't outsource this easily.
May 19, 2007
A "Critical Shortage" of U.S. Middle Managers
From Management-Issues:
A survey of 750 business and 55 senior HR executives by talent management consultancy Bersin & Associates has found more than half admitting to a critical shortage of line managers and a similar percentage saying they struggle to identify, hire and develop mid-level managers.
Just under half identified critical shortages in engineering and other technical professionals, such as nurses, and nearly two out of five reported similar shortages among mid-level management sales professionals.
The research suggested U.S. businesses were suffering from talent shortages across all industries, but the problem was particularly urgent in healthcare, government, utilities, oil and gas and telecommunications. . .
[Thanks to TP! Wire Service for the pointer.]
Posted by John at 4:59 AM | Comments (0) | TrackBackMay 6, 2007
The Challenge for U.S. and Chinese Companies: Thinking Locally
The difference between success and failure for U.S. companies in China, and Chinese companies poised to enter the United States, is thinking locally, according to panelists speaking at the annual conference of the Hua Yuan Science and Technology Association (HYSTA). The Standard reports:
Posted by John at 6:07 AM | Comments (0) | TrackBackWhile corporate giants IBM, Volkswagen, Starbucks and McDonald's are succeeding in China, powerhouses such as Microsoft and Google are not, said Focus Media president Tan Zhi.
The difference between failure and success depends on a company's ability to adapt to the Chinese palette, he said.
"McDonald's and Starbucks have created flavors to meet local needs, so they are successful," Tan said. "I worked at Microsoft and know how hard it was to convince my boss in [Redmond, Washington] to change a little bit.
"Microsoft, eBay and Google don't know yet how to do business in China." . . .
Executives at the HYSTA gathering believe Chinese firms will outgrow their borders and launch international operations, facing their own challenges regarding adapting to cultures abroad.
"Globalization is easy to talk, hard to do," said panelist Zhang Weiying, dean of Peking University's Guanghua School of Management.
"It is difficult for people who live around here to deal with Chinese entrepreneurs. Also, it is difficult for Chinese entrepreneurs who go abroad to deal with other people."
April 8, 2007
Profit and Purpose
Chris Nel on the proper relationship between purpose and profit:
As the father of a three-year-old boy, I dread the day he announces that he wants to invest his talent, time, and energy into—a large corporation. I believe that "large" is doomed to mediocrity not due to size, but because of the inherent inability of "large" to generate a strong sense of common purpose in the organisation beyond making money for its stakeholders.
I believe that we as humans search for a meaningful purpose in everything we do. We are at our very best when we find it. My simple business hypothesis is based on the fact that when humans are at their best (i.e., are purposeful) they run/work in extraordinarily successful businesses. So it turns out that the leader's primary job is not to be a clever strategist or a brilliant technician (let alone control freak) but to help people find a clear sense of purpose (not revenue targets!) in the work that they do. Profit will follow from this, not lead it. . . .
Read Nel's thought-provoking commentary in full here, courtesy of Tom Peters.
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March 19, 2007
General Motors Learns to Draw on Global Creative Talent
Fast Company offers a fascinating look at how global design teams collaborating can strengthen a company’s ability to create . In this case, the company is General Motors, and the story is how the company’s Chinese and North American design teams are working in concert on the Buick LaCrosse. Read the entire article, but a tidbit follows:
. . . when [Ed] Welburn[, GM design chief] decided to pit the China team against the North American team to design the new LaCrosse, it was as if he'd asked a Chinese high-school basketball team to take on the Detroit Pistons. Leading a car's design isn't just about thinking up great lines to be stamped into raw steel. It requires creating hundreds, perhaps thousands, of three-dimensional computer models, building perfect clay replicas and knowing enough to specify which materials will be used. It means working with suppliers around the world and spending years looking after the smallest of details.
But Welburn had seen something in [GM China designer Joe] Qiu's design of the Chinese LaCrosse, as well as in the team's work on a Buick minivan and a stretched version of the Cadillac STS. . . ."Chinese consumers are so demanding--and that team had met their needs so well that even though the studio was small at the time, I knew that China was changing faster and growing up faster than most people realized," Welburn says.
The China team didn't disappoint, jumping into the competition with a vengeance. "There's no doubt, we wanted to beat the North American guys," says [James] Shyr[, head of GM China’s design team], who admits pressing his young team to outdo their more experienced colleagues. For months, over several rounds, design files flew back and forth between Shanghai and Detroit. The two teams occasionally saw each other's work--both feeding the sense of urgency and giving each other ideas.
One team would send a sketch that had closed the gaps on sheet metal by a few millimeters. A new sharper edge or angle would show up from America--and be incorporated in the next Chinese design. "It was a competition, but there also was this bond," says Stapleton. The process pushed the design "to the highest common denominator instead of the lowest. We had our ideas about what this car should be, and they had theirs. But we also had this web of ideas running between us."
Finally, Welburn chose a winner. Or rather, he didn't. He told the two teams, which had been competing so fiercely, that they would have to work together. China would create the LaCrosse's interior and take responsibility for the overall flow. North America would design the exterior--with input from Shanghai, since by the time the new LaCrosse appears, China is expected to be Buick's biggest single market.
"The design is going to be much stronger than if one team worked on it," Welburn explains now. "We're all going to benefit from this collaboration." Shyr describes it differently. "It was more like a war where two platoons are working against each other, and then the reality is that we are all fighting the same war. We had to realize that we had more tricks in our bag working together than just the ones we had here." . . .
Read the entire article; it’s a compelling preview of how companies will pull together their creative and innovation assets on a global basis. As for General Motors specifically, it’s a glimmer of hope for a company long dominated by headquarters command and control thinking.
Posted by John at 7:40 AM | Comments (0) | TrackBackMarch 14, 2007
Toyota: One of America's Most Admired Companies
About four decades after opening its first U.S. plant, Toyota's presence in this country is now so pervasive and accepted that the company has been named, for the second year in a row, one of "America's Most Admired Companies" by Fortune. This year the company placed behind only General Electric and Starbucks in the rankings.
The company's ascent was anything but assured and met more than the usual competitive obstacles:
. . . nothing was inevitable about Toyota's success. It has managed to survive discriminatory taxes, import restraints, and the occasional xenophobic hissy fit - U.S. workers taking sledgehammers to imported cars - to become something of a model citizen.
There's no question that coming in fresh, Toyota had some advantages over Detroit: It was unburdened by retiree obligations, union contracts that had been bid up over decades, and brands like Oldsmobile that refused to make money (or die). And yes, it was lucky to have small cars ready to sell when the first oil shocks hit in the 1970s.
But the most important reason that Toyota became America's most prestigious automaker is that this quintessentially Japanese company has been better than Detroit at reading the American car psyche. [emphasis mine] Toyota has never been a style leader. It has never created a car as iconic as, say, the Ford Mustang. But it discerned correctly that many car buyers don't need the next hot thing. They just want a trouble-free product that looks fine - and they will pay a premium for it.
[See the full Fortune article here.]
If any of the "Detroit Three" had consistently delivered a trouble-free product and earned their own reputation for quality, they, too, might be able to garner a premium price, one which would help pay for those legacy employee obligations.
Posted by John at 4:00 AM | Comments (0) | TrackBackFebruary 19, 2007
Toyota's Long View
The New York Times Magazine has an extended profile of Toyota which is worth a close reading; the excerpt below is only one selection you could pull from the article to illustrate the difference between how Toyota and the Detroit-based auto companies have operated:
. . . the most obvious example of Toyota’s long view is the Prius hybrid. [Toyota Motor North America President Jim] Press said he believes that every automobile in the U.S. will eventually be a hybrid. I asked how soon. Not in five years, he replied, “but I think at some point in the not-too-distant future.” I asked whether Toyota developed and marketed the technology years ahead of the other major automakers because it possessed better technical skills. Press instead framed the issue as a matter of philosophy. Ten years ago, he said, at about the same time the Prius made its debut, Ford rolled out the huge S.U.V. franchise. “Both of us had the same tea leaves, the same research,” he said. “One of us bet on hybrid, one of us bet on big S.U.V.’s.” In his view, the wisdom of making big S.U.V.’s — Press left unacknowledged that Toyota eventually brought out its own line of S.U.V.’s — seemed dubious: “First of all, long term, is fuel going to get cheaper or more expensive? Is oil going to become more plentiful or less plentiful? Is the air going to become cleaner or more polluted? And so, do you do something proactive and innovative, to be in tune with where society is going? Or do you hold on to where it has been, and then don’t let go, to the bitter end?” It was never a matter of altruism, he seemed to be saying, but an example of how corporations survive in society. “What’s the right thing to do to sustain the ability to sell more cars and trucks?” he asked. The Prius was not about a fast return on investment. It was about a slow and long-lasting one.
By the way, the article also points out some of Toyota’s failures, including its effort over the years to introduce a full-size pickup which captures the fancy of America’s hardcore truck buyers.
Posted by John at 8:52 PM | Comments (0) | TrackBackFebruary 3, 2007
Social Concern + Motivated Consumers = Good Business
Coca-Cola Company Chairman and CEO Neville Isdell in a Wall Street Journal editorial:
Because we are a local business on a global scale, it is inevitable that advocates for a wide range of interests -- from environmental protection to social justice to economic development -- will scrutinize us. This is logical: Businesses usually respond to market forces faster than governments. Furthermore, businesses are often better positioned than governments to realize globalization's benefits locally. However, a small minority of activists will always prefer confrontation, with its attendant publicity, to the search for mutually beneficial common ground. With such groups there is little room for dialogue. In these situations, a company has no choice but to vigorously confront parties who seek to use its brand to push their own agenda.
On the other hand, I believe we can -- and should -- deal with those responsible stakeholders who recognize that we cannot abandon or undermine our fundamental economic purpose. The business advantage that comes from such engagement is not merely to reduce criticism. Effective engagement can be a catalyst for programs that improve local living standards. This, in turn, will lead to new or more satisfied consumers, who prefer companies not only on the basis of brands and products, but because of the values they hold and how they conduct business. . . .
Successful collaboration is built on finding the common ground where a company's self-interest and the needs of communities converge. This is hard work, but work worth doing. The integration of the global economy, advanced with respect and concern for local interests and cultures through broad stakeholder engagement, remains the most effective means to lift people out of poverty and advance prosperity. That creates motivated consumers -- and that is good business.
Posted by John at 7:29 AM | Comments (0) | TrackBack
October 25, 2006
Business Lessons to Be Learned This Political Season
Steven Pearlstein, business columnist for the Washington Post, offers an engaging commentary on business lessons to be learned in the battle for control of Congress this year:
There are lots of reasons why businesses run into trouble, but a few pop up with remarkable regularity.
Misreading or ignoring market signals.
Focusing more on competitors than customers.
Confusing management with leadership, tactics with strategy.
Promoting leaders who misunderstand their jobs and surround themselves with blind loyalists.
It should be no surprise that these business missteps are also common in politics.
They are the key mistakes that led Republicans to overplay their hand and perhaps throw away the chance to renew their political lease on Congress and the White House.
Though the election is still two weeks away, there are signs the Democrats, if they win, are determined to make the same mistakes.
Let's start with the "Six for '06" plan that Democrats promise to ram through the House in the first 100 hours, or 100 days -- I'm a bit confused as to which. The very premise of the document represents a fundamental misreading of the political marketplace.
First, there is no mandate for a Democratic agenda because until last week, there wasn't one. Like most political turning points, including the one in 1994, this election is fundamentally a referendum on the party in power rather than on the promises of the opposition. The voters are angry at Republicans, dissatisfied with their programs and disenchanted with their governance. It's less that Democrats will have won this election than Republicans will have lost it. . . .
. . . reading through the "Six for '06" document, it's pretty clear Democrats have followed Republicans into the trap of thinking more about competition (winning elections) than consumers (voters). Instead of offering a credible strategy for extricating us from the horrible mess in Iraq, confronting difficult fiscal trade-offs and reversing the powerful market forces that are leading us toward economic insecurity and inequality, they offer nothing more than political tactics. . . .
I encourage you to read Pearlstein's insightful column in full by following this link.
Posted by John at 7:40 AM | Comments (0) | TrackBackOctober 6, 2006
BMW's Success Attributable to Managers Who Listen
A terrific BusinessWeek profile on BMW's success secrets:
Posted by John at 3:54 AM | Comments (0) | TrackBackMuch of BMW's success stems from an entrepreneurial culture that's rare in corporate Germany, where management is usually top-down and the gulf between workers and managers is vast. BMW's 106,000 employees have become a nimble network of true believers with few hierarchical barriers to hinder innovation. From the moment they set foot inside the company, workers are inculcated with a sense of place, history, and mission. Individuals from all strata of the corporation work elbow to elbow, creating informal networks where they can hatch even the most unorthodox ideas for making better Bimmers or boosting profits. The average BMW buyer may not know it, but when he slides behind the wheel, he is driving a machine born of thousands of impromptu brainstorming sessions. BMW, in fact, might just be the chattiest auto company ever. "The difference at BMW is that [managers] don't think we have all the right answers," says Claussen, manager of the company's new Leipzig factory, a 21st century cathedral of light and air designed by avant garde architect Zaha M. Hadid. "Our job is to ask the right questions."
October 4, 2006
Delivering Pleasure, Not a Product, to Customers
New York City restauranteur Danny Meyer, in an interview with the Wall Street Journal, on why his businesses are so successful in an industry littered with failures:
Our chefs and managers cook and run restaurants as if the word of mouth spread by each and every guest today will determine how full -- or empty -- our restaurants will be tomorrow. We work hard to hire people whose emotional skills -- even more than how well they can cook or serve wine -- make them predisposed to deriving pleasure from the act of delivering pleasure. Long after our guests have forgotten how much they did or didn't like the turbot or the lamb shank, they'll remember how we made them feel.
Meyer is successful because he understands that his primary product is the experience, not the food. Understanding what your product or service really is, whether it's the customer experience, trust, or feeling, is critical to any company's success.
Meyer's eleven restaurants in Union Square Hospitality Group generate an estimated $50 million a year.
Posted by John at 8:43 PM | Comments (0) | TrackBackJuly 11, 2006
A Lesson for Business From This Year's World Cup
John Kay writes on the business lesson from this year's World Cup:
The story of the 2006 World Cup is that outstanding teams defeated groups of outstanding players. All players in top sides are very good. The reason the countries in the final four were not the ones pundits expected was that their predictions were based on the quality of individual players. But the trophy goes not to the best players, but to the best team.
Posted by John at 10:22 PM | Comments (0) | TrackBack. . . business success is not simply a matter of acquiring the best people, technology or resources. Businesses create value by establishing a difference between the cost of their input and the effectiveness of their output. The Italian team was more than the sum of its parts, the Brazilian team was not.
The difference between output and value added is relevant to every type of business, but especially important for the professional services company – whether it is a football team or an investment. Goldman Sachs and McKinsey do not simply attract exceptional people – so did Manchester United and Brazil. Like Liverpool and Italy, these businesses achieve more than would be predicted from the quality of the people alone.
June 15, 2006
"Show-and-Tell" Meetings at Ford
Interminable meetings are the bane of most large corporations, but Ford Motor Co. Chairman and CEO Bill Ford Jr. says enough is enough.
In a memorandum sent to all corporate officers and senior executives last Friday, Bill Ford said he is moving to limit the number of high-level meetings held each month in Dearborn and restricting participation to those managers whose presence is absolutely necessary.
"We must evaluate our schedules to make certain we and our teams are focused on our most essential business objectives while letting go the tasks that have no bearing on our company's success," Bill Ford said in the memo, a copy of which was provided to The Detroit News. "Likewise, you and your teams should look at how your time is spent. Meetings that are held for the infamous 'management entertainment,' attended out of fear of not being seen, or scheduled simply because 'that's the way we've always done it' need to go. Meetings worth our time are those that help us move quicker, break through bureaucracy and drive decision-making to the appropriate levels throughout the organization.."
Each month, Ford sets aside a week for meetings aimed at addressing issues of global concern. Over time, these meetings have snowballed, both in terms of frequency and participation. In an effort to speed up decision making and drive down accountability to lower levels of the corporation, Bill Ford is eliminating several regularly scheduled meetings. He is also limiting participation.
Professor John Tropman, an expert on management organization at the University of Michigan and the author of Making Meetings Work, said Bill Ford's decision seems like a step in the right direction.
"My research shows that most organizations meet about twice as often as necessary," Tropman said. "Ford is notorious for show-and-tell meetings. It's basically preening and presenting." . . .
Something tells me that Toyota has very few "management entertainment" meetings.
Posted by John at 11:22 AM | Comments (0) | TrackBackJune 14, 2006
Morgan's Jamie Dimon: He's a Leader, Not a Rock Star
JPMorgan Chase CEO Jamie Dimon was in Lexington, Kentucky recently, and gave an interview to the Lexington Herald-Leader during his visit.
"This is not a rock star business and I am not a rock star," he told the reporter. In an seemingly unrelated question and answer, he went on to prove, without necessarily meaning to, that he isn't a "rock star":
Q: I read that as part of your cost-cutting, you discontinued the office gyms at some Chase locations. Why would a guy who likes to exercise do that?
A: There were 16 gyms accessible to -- I forget the numbers now -- 15 percent of the people? So here you have this perk that's pretty expensive and that's accessible to 15 percent of the people and only used by 3 percent of the people. The perk itself cost, if you did it per person, like $5,000 per person.
So here you have this perk that was benefiting very few people. No one liked canceling it, but when I started telling them only 3 percent were using it, they realized it was unfair. Worse than that, in most of those locations, there was a gym across the street where you could join for $600. So what kind of thing is that for a company to do?
In the old days, there weren't gyms everywhere. There are gyms everywhere now. I'm going to tell you that the 3 percent who used it, a lot of them had home gyms. They just liked the convenience of exercising, if they felt like it, in the office at lunchtime.
We've got to grow up. That's not what we are in business for. [emphasis mine]
Rock stars--and many CEOs--need gyms and other perks. Jamie Dimon isn't a rock star. Jamie Dimon is a leader.
That's why the future of JP MorganChase seems very bright.
Posted by John at 6:30 AM | Comments (0) | TrackBackMay 27, 2006
A Model of Business Grit: Keefe, Bruyette & Woods Prepares to Go Public
Keefe, Bruyette & Woods announced the firm will pursue an initial public offering. Founded over 40 years ago, the employee-owned bank and financial services firm will be publicly-owned for the first time.
KBW is a corporate model for preseverance and determination. A weak bank stock market and the indictment of the firm's president prevented an IPO in the late 1990s. In 2001, the company was in advanced discussions to be sold. Then, on September 11, 2001, the firm lost almost one-third of its employees and its World Trade Center headquarters in the 9/11 attacks.
There are no manuals or management courses in business school on how to rebuild a firm so devasted. Nothing can prepare anyone for what to do when, in a flash, your firm is ravaged and you are caught up in the grief of burying colleagues you've worked beside for years.
We often throw around terms like "admirable" with abandon, but the character and grit with which KBW's survivors rebuilt the firm is nothing if not admirable. How can you know ahead of time you have what it takes to rebuild after such a tragedy? Whatever it was, deep inside, this collection of individuals had what they needed to come back.
According to the Wall Street Journal, the firm grew from $150 million in revenue in 2001 to $300 million in revenue and $18 million in profit for 2005. In 2002, KBW was 26th in the "league tables" for investment banks; by last year the firm had risen to 16th.
The story is told in detail in the book Triumph Over Tragedy, by John Duffy. Duffy was the firm's co-Chief Executive Officer at the time of the tragedy, and became the firm's Chairman and CEO when his partner Joe Berry was one of the losses in the attacks. Duffy also lost his son, who also worked at the firm.
An IPO is a milestone for most companies, particularly for one which has been private and employee-owned for many years. In KBW's case, however, it's also a special tribute to those who contributed so much to the firm's growth and reputation, yet are senselessly and tragically unable to be here to witness this achievement.
Posted by John at 12:01 PM | Comments (0) | TrackBackMay 3, 2006
When Your Best Customers Say Goodbye, The Party Really is Over
Consultant, business author, and frequent traveler Alf Nucifora writes it's time to say goodbye to Delta Airlines:
When I look back over the relationship and relive the years, I'm left with few serious complaints. Delta took care of me and I reciprocated, spending hundreds of thousands of dollars in the process. My Platinum Medallion status and looming Three Million Miler achievement guaranteed a more than satisfactory level of service and performance for most of the time. I know many of Delta's fine staff and respect them for the dedicated and committed professionals they are. A number of the airline's problems and calamities are industry-driven, the result of an environment that will destroy any and all but the most adept and agile players. And to the extent that Delta's problems are self-inflicted, the blame can be spread around liberally. No one ogre stands head and shoulders above the rest.
It's time, however, to say goodbye. The old relationship has been rent asunder. To tell the truth, the frisson is gone. Sure I'll miss the familiarity and reassurance that I felt upon boarding a Delta flight. I new I was traveling with family. It's the same feeling I experience at U.S. Immigration when the officer stamps the passport and says "Welcome home!" But I just don't care anymore. I don't have the energy. The rewards no longer seem important. The return on the emotional investment is no longer worth the effort to sustain the relationship. I don't care about missing the comfortable seating and once-prized service because I know they'll never return. The economics of the operating model won't permit it. I don't care about the Platinum Medallion status. First Class is nothing more than a wider seat and a free drink, both of which I can live without in order to save a buck. And the free upgrades? They've gone the way of the fifties service station attendant who used to clean the windshield and check the tires for free. In the commodity environment which the airline industry has become, emotional brand bonding is out. Just get me there on time and at the right price. One Boeing plane is as good as another…ditto with the airlines that fly them.
My sense is that Alf is representative of a lot of Delta's best customers here in Atlanta.
When your best customers say goodbye, the party really is over.
Posted by John at 4:24 AM
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April 29, 2006
Country Music Singers, Entrepreneurs, Failure, and Success
Jeff Cornwall, whose blog The Entrepreneurial Mind we've pointed you toward before, penned a beautiful post on the "highway to success" which is invariably littered with failure:
Posted by John at 5:44 AM | Comments (0) | TrackBackI wanna thank everyone who ever told me no, Pack it up and get back home, It kept me going knowin' I would prove them wrong. Yea I knew it all along, Without 'm I might have given up a long time ago, and so, I wanna thank everyone who ever told me no. [Buddy Jewell]
Because we live in Nashville, I am often reminded of how much failure goes into creating success. From the outside, it seems that music stars just suddenly appear on the scene. The truth is that for most of them it took years of hard work and many, many failures to finally find success.
The same is true for entrepreneurs. Most highly successful entrepreneurs will tell you that along the road to success in their businesses they were often on the brink of failure. But they persevered. They found a way to make payroll. They found a way to make that critical sale. They found a way to keep the wolves away from the door just long enough to make it through the tough times. They found a way to pick themselves up from a business that did not succeed and move on to the next one that might. As Thomas Edison once said, "Many of life's failures are people who did not realize how close they were to success when they gave up." . . .
April 18, 2006
Nissan’s Carlos Ghosn: Opting for Stretching Instead of Self-Satisfaction
Here’s some more Carlos Ghosn for you, courtesy of the New York Times:
Consumers, he said, are in danger of being more in love with their Blackberrys, TiVo devices and high- definition television sets than they are with their cars. "The auto industry is in competition for the attention and affection in the minds of consumers," he said.
To fix that, Mr. Ghosn said, it was critical that car companies reinstill passion in developing new cars and trucks, which in turn will lead troubled automakers back to profitability.
He said Nissan adopted that strategy in its turnaround, which helped the company rebound from a $3 billion loss in 1999 to an expected profit of $4.5 billion for the 2005 fiscal year, which ended March 31.
Nissan is now in the planning stages of its next strategy, which it expects to unveil one year from now, he said.
Mr. Ghosn said the plan would require the company to stretch even more than it has since it nearly went bankrupt in 1999. Mr. Ghosn, however, said he did not need a crisis to motivate Nissan's troops.
"Obviously, you need to systematically stretch your organization and stretch your people in order to be able to accomplish more," he said. "But frankly, I would prefer to be in this situation, which is a solid financial base, a solid product plan, a solid management experience for the past six years, a solid recovery story which gives you confidence."
A critical part of Nissan's next phase will be an overhaul of its lineup, which was completely restyled during the first years of its turnaround efforts, lifting its worldwide sales. [emphasis mine]
Wouldn’t it be easy for Ghosn to crow about a $7.5 billion turnaround from loss to profit over six years? Any fool can do that, and Ghosn knows better. The only way not just to prosperity, but to continued survival, is stretching and not being smugly self-satisfied.
Posted by John at 9:40 PM | Comments (0) | TrackBackMarch 19, 2006
When You Decide to Use the Crop, You'd Better Hold On
This afternoon I was riding with my wife in our riding arena. My horse, Miss Glo, was hardly paying attention to me. While I wanted a canter, Miss Glo decided that all I was going to get was a trot.
My wife got me a riding crop and said, "Ask again, and when she ignores you, smack her once with this. When you do, though, hold on and be ready for anything."
The "hold on" advice was prescient; I got quite a ride. Moreover, she decided to test my balance and swerve on me, not once but several times.
From a management point of view, it’s very similar to eating the jalapeños. When you decide to get tough and use the crop, you’d better hold on and be ready for anything. Anything may be exactly what happens.
Posted by John at 10:58 PM | Comments (0) | TrackBackMarch 8, 2006
Spaghetti, General Motors Style
The Wall Street Journal featured a terrific story on today’s front page about how General Motors' bureaucracy has inhibited the company's performance. Reading the entire article, if you have any management responsibilities at all, is so painful your teeth ache by the time you finish. Here’s just a tidbit to save yourself the throbbing:
GM employs 325,000 people, almost as many as the population of Miami itself. At various times there have been as many as six layers of management between top executives in Detroit and those in the field. GM's general manager for the Southeast has 38 teams reporting to him, overseeing relations with the region's 1,400 dealers, among other things.
In addition to these geographic units, the company is divided along functional lines, with global groups overseeing areas such as marketing, product development and human resources. GM calls this "the Matrix." To explain how the two chains of command interact, GM has produced a chart that shows them overlapping in a pattern that resembles a basket weave. . . .
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The article continues:
It's a system that's confusing even to insiders, especially midlevel employees who often feel as if they have two bosses. Marketing ideas often get lost as they bounce between departments.
The design of GM's corporate headquarters, located in Detroit's Renaissance Center, reflects this bureaucratic inertia. Its four towers resemble massive, steel grain silos. To find colleagues in different departments, employees must sometimes take elevators to the ground floor and walk around an illuminated walkway to get to the other towers. New employees and contract workers get lost frequently.
"We are a large company and we are all working independently to make things happen," says Sonia Green, a GM marketing executive charged with helping revive the company's business in Miami. "Unfortunately, we all work in little silos."
Size is not necessarily the issue; silos and layers are. Home Depot, according to their website, actually has more associates than GM.
Look whose recent performance has been impressive enough to merit a BusinessWeek cover story.
Posted by John at 10:44 PM | Comments (0) | TrackBackMarch 5, 2006
The Only Sustainable Competitive Advantage: Determination
I’m a David Maister fan. If you’re in the professional services business and don’t know of Maister and his work, it’s your loss.
Maister has been a pioneer in the study of professional services firms. Such enterprises, like investment, accounting, and law firms, need individuals like Maister, because in some cases they’re the worst managed (or unmanaged) businesses around.
He’s written a number of books over the years, but he’s also now entered the world of blogs and podcasts, both of which I regularly enjoy.
Masiter recently penned "It's Not How Good You Are, It's How Much You Want It," an article, which addresses both individuals and firms, on bouncing back from failure and its role in success.
He calls determination "the only sustainable competitive advantage." Pause for a moment and think about how that principle applies to yourself or your firm, and to successful individuals and companies you know.
You must read the entire article, but here’s a tidbit:
Posted by John at 8:30 AM | Comments (0) | TrackBackThere are no guarantees in life, and determination is only an essential ingredient, not a sufficient one. People try and some of them fail. But a lot more never try, and they cannot win.
The key lesson is that, for me and for others, lifelong drive and determination, the burning passion to get somewhere next, are the key ingredients in career success.
Did Richard Branson or Bill Gates (or anyone else) succeed mostly because they had higher IQ’s than anyone else? They are certainly very smart people. But what made them special and successful was clearly something else: discipline, ambition, passion, entrepreneurship, energy, enthusiasm, engagement, and a whole host of closely allied characteristics.
The point is worth stressing. In a free- market economy, what is rewarded is not inherent value, but scarcity (the relative supply and demand).) If many other people have what you have, then you cannot earn a premium or distinguish yourself just because you have it.
Intelligence, IQ, brains, and smarts are all important, but they are also more common than drive and determination. The latter will be more highly rewarded and also more determinative of future success.
And here’s the key: you can’t sustain lifelong drive and determination unless you are passionate about accomplishing something. Discipline for discipline’s sake won’t work. . . .
It’s the willingness to keep trying, always committing yourself to getting better, whenever you have just stumbled – which is hard. What may be more critical, successful people keep stretching when they are already doing well – which is even harder! . . .
If moods, emotional states, and such characteristics as determination and enthusiasm are the keys to individual success, what does all this mean for companies and firms?
The most important lesson is that managers, if they are to serve their role, must, above all else, be net creators of energy, passion, drive, and enthusiasm in other people.
Even Jack Welch, the recently retired chairman and CEO of General Electric, who had a reputation for being a hard-driving boss, wrote (in his book Winning): "The job of any leader is to build self-confidence in the people around him. Make those people feel twelve feet tall. Clap for every achievement, no matter how small, with everybody around you. That’s a hell of a lot more important than some finite strategy."
Unfortunately, in too many cases, managers, rather than being creators of excitement, end up being net destroyers of it. Managers have been encouraged and trained to focus on tasks, activities, outcomes, and accomplishments, but they are rarely trained to understand and influence people’s emotions, either as individuals or in groups. . . .
Too few organizations, and too few individuals, have implemented the basic insight of this article: He or she wins who gets more done, and he or she gets more done who passionately wants to get to the next level of accomplishment. Creating and sustaining that ambition is management’s primary task. It’s obvious, but it’s still scarce. . . .
March 2, 2006
When You Eat the Jalapeños, You’d Better Be Ready For Anything
Yesterday I heard one of the funniest, yet insightful management statements I’ve ever heard, and it came from one of our portfolio company entrepreneurs.
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Last year during a trip to Sichuan Province, known all over China for its very spicy food, I was at a dinner where a beautiful "three peppers" dish was served. One of my hosts, not knowing how much I love spicy food, picked out one of the peppers with his chopsticks, turned to me with a smile, and in an exaggerated motion popped the pepper in his mouth. Slowly chewing with a smirk, he arched an eyebrow at me as if to say, "bet you can’t handle that."
Little did he know, it was game on.
I quickly responded by grabbing a pepper myself, and we went back and forth all during the dinner, each playfully trying to one up the other. We had a great time and lots of laughs.
I didn't get much sleep later that night. In fact, I wore the carpet out between the bed and the bathroom. It took me several days to fully recover.
My entrepreneur is so right. The peppers can taste great on the way down, and even give a spicy rush.
The aftermath, however, can simply be a lot more than you bargained for.
In management, when you decide to eat the jalapeños, you’d better be ready for anything. Anything, as opposed to what you're expecting, is exactly what's likely to happen.
Posted by John at 8:57 AM | Comments (2) | TrackBackFebruary 23, 2006
Toyota’s Victory: Harnassing the Value of Line Employees
Gary Hamel, writing in the Harvard Business Review, offers a cautionary tale what’s behind Toyota’s dismantling of Detroit over the last three decades. The bottom line? Toyota listens to and values its line workers; Detroit values its staff:
Posted by John at 10:18 PM | Comments (0) | TrackBackWhy has it taken America’s automobile manufacturers so long to narrow their efficiency gap with Toyota? In large part, because it took Detroit more than 20 years to ferret out the radical management principle at the heart of Toyota’s capacity for relentless improvement. Unlike its Western rivals, Toyota has long believed that first-line employees can be more than cogs in a soulless manufacturing machine; they can be problem solvers, innovators, and change agents. While American companies relied on staff experts to come up with process improvements, Toyota gave every employee the skills, the tools, and the permission to solve problems as they arose and to head off new problems before they occurred. The result: Year after year, Toyota has been able to get more out of its people than its competitors have been able to get out of theirs. Such is the power of management orthodoxy that it was only after American carmakers had exhausted every other explanation for Toyota’s success – an undervalued yen, a docile workforce, Japanese culture, superior automation – that they were finally able to admit that Toyota’s real advantage was its ability to harness the intellect of “ordinary” employees. As this example illustrates, management orthodoxies are often so deeply ingrained in executive thinking that they are practically unassailable. The more unconventional the principle underlying a management innovation, the longer it will take the competitors to respond. In some cases, the head-scratching can go on for decades.
February 22, 2006
A Great Leadership Quote on Responsibility
"By leadership I mean taking complete responsibility for an organization's well-being and growth and changing it for the better. Real leadership is not about prestige, power, or status. It is about responsibility."
(Robert L. Joss, dean, Stanford Graduate School of Business)
(Thanks to the Fast Company blog for the pointer.)
Posted by John at 9:31 PM | Comments (0) | TrackBackA Thoughtful Comment from One of the Quiet Ones
A rather quiet lady who works at one of our portfolio companies, whose youth might also cause one to ignore her, gave me a wonderful pearl of wisdom earlier this week:
"Our future is hiding in our daily routine."
I don’t know where she got this quote, or came up with it herself, but it has caused me to do a lot of thinking this week, about my company and those we have invested our money and time in.
As one who climbs under the hood of companies daily, I can tell you that sometimes they strike me as nothing but a bowl of spaghetti-like details. More often than not, it’s how those details are managed which determines success or failure. The big-picture strategy which sounds good in presentations to the outside world isn’t the real driver.
By the way, isn’t it usually the case that true wisdom comes from the unobtrusive and the unrecognized members of an organization? The problem is listening to them over the din caused by those with runoff of the mouth. It’s an associated lesson for me this week.
Posted by John at 8:24 PM | Comments (0) | TrackBackFebruary 11, 2006
Jack Welch on Why Meddlers Don’t Make Good CEOs
The Wall Street Journal’s Holman Jenkins, Jr. interviewed Jack Welch; I was particularly struck by Jenkins’ close:
Posted by John at 9:45 AM | Comments (0) | TrackBackHe was 13 years into his own career at GE before he learned what he now preaches as the key lesson of leadership -- it's no longer about your success, but about the success of others. He discovered this only when he gave up running GE Plastics to run a whole group of GE businesses. "I realized I couldn't run those businesses myself. I didn't know anything about them. It was up to me to get great people. When I was running my own business, I was way too much of a meddler. I didn't get it," he says.
Now he got it. Seven years later, he was tapped to become CEO.
January 20, 2006
Learning from the Rhino
Historian Paul Johnson writes a column for Forbes which I enjoy regularly; his latest effort is particularly edifying.
Behold the rhinoceros, says Johnson:
. . . the rhino is not a particularly subtle or clever animal. It's the last of the antediluvian quadrupeds to carry a great weight of body armor. And by all the rules of progressive design and the process of natural selection the rhino ought to have been eliminated. But it hasn't been. Why not? Because the rhino is single-minded. When it perceives an object, it makes a decision--to charge. And it puts everything it's got into that charge. When the charge is over, the object is either flattened or has gone a long way into cover, whereupon the rhino instantly resumes browsing.
History is full of rhinos, notes Johnson. Moses, in leading the Israelites out of Egypt, was a rhino. So was Alexander the Great, Julius Caesar, the American Revolutionaries, Abraham Lincoln, and Winston Churchill.
Rhinos aren’t just found among military and political leaders. Johnson notes, quite rightly, that rhino principles apply particularly to entrepreneurs. Successful businesspeople come with varying characteristics, but one of the indispensable characteristics all of them have is a single-minded aggressive focus.
Sam Walton’s vision of a retailer with low prices and operational excellence was the "charge" which created Wal-Mart. The Home Depot Company resulted from a single-minded drive, on the part of Bernie Marcus and Arthur Blank, to bring a wide range of home improvement products at attractive prices under one roof. Fred Smith, a student of history himself, envisioned a business which could make money by flawlessly delivering packages overnight around the country. The result is the FedEx Corporation.
Thousands of entrepreneurs whose stories have received much less publicity have achieved success by a focused determination embodied in the rhino. They’ve understood that it’s physically impossible to charge three or four ways at one time. The rhino can’t do it. Neither could any of these entrepreneurs. Survival itself, much less success, is predicated on aggressively pursuing one focused vision.
Johnson’s moral is worth remembering:
Posted by John at 10:36 AM | Comments (0) | TrackBackWe can choose to lead quiet lives and get through them without achieving much. But if we want to do the big thing, if we hope to leave a record that will be admired and remembered, we must learn to distinguish between the peripheral and the essential. Then, having clearly established our central objective, we must charge at it again and again until the goal is achieved.
That is what the rhinoceros does. It may not be a model animal in most ways. But it does one thing very well. And that one thing we can learn: Charge!
January 16, 2006
Company Culture: 'Don’t Ask Me, Talk to People You Know'
I related the long holiday conversation I had with Jimmy Tallent, CEO of United Community Banks, and his perspectives on the coming year.
Naturally, during our extended conversation, we alternately talked, laughed, and shook our heads about a variety of topics.
Jimmy talked in depth and proudly about his company’s culture. That’s the part of United Community’s development which he says he’s most proud of.
And so he should be. Without the cultural environment which he and his management team have so vigilantly cultivated, UCBI wouldn’t have been able to pull off such coups as they did in Gainesville during 2005, for example.
As Jimmy noted, "one of the things I’ve learned is that when you get the good bankers, the business will follow. You’ve got to create a good environment to get good bankers."
I was struck by one particular comment he made regarding culture. When he’s recruiting and talking about the company’s internal working environment, he tells prospective employees: "Don’t take my word for it—-call people you know and ask them for their opinion."
I’m amazed by company CEOs who think they can keep the actual state of their company’s culture hidden from their investors, vendors, and customers. These very same company heads mouth fealty to "the importance of culture," but just a cursory dip below the shiny veneer they portray to the world sometimes reveals a tempestuous mess.
It’s amazing, as an investor in both public and private companies, what you can learn about the actual working environment at a company. All you have to do is ask. Employees will tell you. They’re telling you their side of the story, but nuggets of truth can be picked out.
The truth about culture always comes out.
Always.
Posted by John at 7:01 PM | Comments (0) | TrackBackJanuary 9, 2006
Two Lessons to Bracket the Day
At breakfast this morning I was with a individual from one of our portfolio companies who I was complimenting. His even keel, even in the face of some of the big ego, high maintenance individuals he deals with daily, is instructive to watch. (Particularly for me.)
When I asked him his secret, he said: "When I hear a declaration from somebody which offends me or make me mad, I just reply with the opposite of what I’m thinking. For example, my first thought might be 'you must be crazy,' but instead I’ll say 'that’s an interesting thought, let’s consider that.' That gives me more time, along with the person I’m dealing with, to come to a better ending to our conversation."
Tonight at dinner I heard this piece of colloquial wisdom: "The grass is always greener on the other side of the fence, and when you get over there you find out it’s indoor/outdoor carpet."
Posted by John at 10:17 PM | Comments (0) | TrackBackJanuary 6, 2006
A Lesson in Leadership from a Delta Pilot
Ever been on a plane that’s a couple of hours late? Ever had the pilot of that plane walk back through the cabin, talking to passengers and explaining the problem?
It actually happened to Chuck Salter on a Delta flight, who recounts it on the Fast Company blog. He explains why the incident is a great lesson in leadership for all of us.
Delta needs to put that pilot in senior management.
Posted by John at 5:13 AM | Comments (0) | TrackBackDecember 16, 2005
A Guardian Attitude
As I prepared the earlier post on the paranoia of Nissan’s Carlos Ghosn, I reread the preface of Andy Grove’s terrific book, Only The Paranoid Survive. Despite having been written almost a decade ago, the equivalent of a few centuries in Silicon Valley time, the central message of Grove’s book is as timely today as ever:
 | I'm often credited with the motto, "Only the paranoid survive." I have no idea when I first said this, but the fact remains that, when it comes to business, I believe in the value of paranoia. Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people's attacks and to inculcate this guardian attitude in the people under his or her management. |
A guardian attitude. It’s not casual, nor optional For the good of any company, it has be the central obligation of its leadership.
Posted by John at 4:09 AM | Comments (0) | TrackBackParanoid Survival Quote of the Day
"Mr. Ghosn has pointed out that when you're doing well, that's the time to make changes, not when you're in a downturn." (Jim Morton, Senior Vice President, Administration and Finance, of Nissan’s North American operation, quoted in a column by Bloomberg’s Doron Levin.)
 | Nissan chief Carlos Ghosn is executing the Andy Grove mantra ("Only the Paranoid Survive"). In spite of five straight years of solid profitability and rising share in the U.S., Ghosn understands that complacency on costs in a business as cyclical and competitive as the automobile industry can debilitating. He not only understands it, but his people realize it as well, judging by Mr. Morton’s quote. |
It’s an uncommon business leader which truly executes a similar paranoia within the company he’s entrusted with, whether that obsession is about costs, competitive threats, judicious use of capital, or other hazards to the business. Yet the presence of such paranoia (or lack thereof) often determines a firm’s survival, much less its level of prosperity.
Success breeds complacency; it’s human nature. Great managers like Ghosn understand that good times are the best times to press the point: only the paranoid survive.
Posted by John at 3:32 AM | Comments (0) | TrackBackDecember 7, 2005
"It's Always Your Fault"
This past weekend I had to go to my office, which I hardly do anymore, thanks to the joys of Internet access and remote computing. Our system was malfunctioning, however, and I needed to handle some emails and other items which couldn’t wait until Monday.
My bride noted dryly that there were some other domestic priorities.
"Go ahead and get your stuff done," she said, "but come on back as soon as you get done. You know how you are when you get down there; you see about ten things that you think you need to dive into right then."
Sure enough, what did I do? Exactly what my wife told me I would do.
I was finally getting in my car when my cellphone rang. "I was tied up talking to our IT people," I told her. That was true, of course, but it was only number one on the list of ten things she warned me about.
"Well, there’s your first mistake," she said.
What, thought I, talking to IT people who were trying to feed me a bushel basket of horse poop? Sure, on that we both agree—that’s a mistake. But that wasn’t what she was talking about.
"You’re the boss--it’s always your fault."
My wise wife.
If I’d gotten on the stick and fired this IT provider months ago when I should have, I probably wouldn’t have had to go to the office in the first place. Maybe if I had been a little better organizer of my time earlier in the week I would have gotten everything done at the office before Friday afternoon.
If I move "it" to the "it’s not my fault" square, then I can sit back and blame somebody else. It’s convenient. It’s a position of weakness. It’s a bushel basket of horse poop.
If I keep "it"—whatever "it" is—on the "my fault" square as long as it is practical, I can do something about "it." Ironically, it’s actually liberating.
Posted by John at 9:38 AM | Comments (0) | TrackBackDecember 5, 2005
A Remarkable Look at Quantum Physics, Leadership, and Making Sense of it All
I highly recommend The Big Moo, a book probably best summarized by the tag line on it cover: "stop trying to be perfect and start being remarkable."
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Indeed, however, the book is remarkable, in part because it exists in large part to raise funds for three different yet quite worthy charities. Much of the book’s content is quite noteworthy as well, and worth your attention and the contribution to charity it will cost you to buy at the retailer of your choice.
One chapter I enjoyed in particular was "Inside Out, Outside In," an excerpt of which follows:
Posted by John at 11:19 PM | Comments (0) | TrackBackJohn Seely Brown is the former head of Xerox PARC and a renowned thinker and writer on the art of management. He is deservedly famous for a number of statements. The one I like best is, "The job of the leader isn’t just to make decisions, it’s to make sense."
Making sense is actually everyone’s job. The better you are at it, the better you’ll do in the working world.
Can you connect the invisible dots? Can you improve the signal-to-noise ratio in all the data that’s streaming at you? Take all the information that comes at you in the course of just one day. The morning newspaper: How many do you read? Two? Three? There’s the Times and the Journal, plus your hometown paper. What about magazines? Fortune, Forbes, BusinessWeek, Fast Company? How about professional journals and industry-specific publications like Variety, Advertising Age, Adweek, Institutional Investor, CEO, CFO, CIO? Do you try to keep up with weekly newsmagazine like Time, Newsweek, U.S. News & World Report, The Economist? What do you read for fun? Magazines about golf, fishing or hunting, home decoration or design, health and fitness, or just gossip? Do you watch TV? The nightly news? Sports or made-for-TV movies? How about email? Get a few of those each day?
Now, from all that stuff, how good are you at making sense? . . .
The premise is that your job as a leader, a sensor, a future-finder, is to weave these outside threads together faster, smarter, and better than the competition.
That’s the way it has been – at least up until now. Smart businesspeople making sense of the world, gathering and synthesizing external data.
Now we get to the interesting part.
Think of it as quantum mechanics come to business sense making.
Now the sense maker is part of the sense making.
Now the interior landscape is part of the connect-the-dots effort.
In other words, now the job of the business leader isn’t just to gaze out at a dizzying world full of streaming data. It’s to gaze in, at the long-ignored interior landscape. . . .
The way the world works now, the way the rules of engagement operate, you can’t claim to make sense out of the exterior without booking voyages into the interior. Think about it: How can you understand "it" if you haven’t make any effort to understand "you"? Because what you’re really doing is establishing a living, electrical, vital, energetic connection between it and you. You’re creating both of them, simultaneously. A lot like quantum physics. . . .
So what to do?
Do what Jim Collins did when he was a student. Treat yourself like an experiment, like your very own lab rat. Do you dream at night? Start writing them down.
Do you wish you could be a writer? You are! Reserve an hour every day to record you thoughts in a special file on your PC. Build up a journal, an inventory of your inner life. . . .
How many museums or art galleries have you visited in the last six months? How many contemporary artists can you name? If you only know the names of you competitors, and you can’t name a single artist, your outer and inner life are seriously out of balance.
Take time to go in side. Learn to meditate, to do yoga. Take time to exercise – you think you’re toning your body, but your also redirecting your mind. Gradually, over time, you’ll find that you can make more and better sense of what’s outside and what’s inside. And what’s the difference.
December 4, 2005
A Powerfully Worded Warning to the Senior Management of Any Business
From the fabulous Tom Peters, on the danger of very "smart-clever" management too close to the action:
". . . there is also inside insularity that does incredible harm to enterprises. And, perversely in my experience, the higher up they are and the smarter they are (smart = excellent at intellectually stunning rationalizations), the more likely they are to be dangerously out of touch with everyman."
I was recently at an investor conference of banks represented mostly by their CEOs. As I read the bios of the presenting executives, I realized that the best run organization at that conference (in my opinion, anyway) was run by a down to earth "everyman" whose educational achievements were probably the least impressive in the group. He was probably the slowest talker with the simplest pitch for his company.