Japanese managers are acutely aware that their headquarters are overstaffed, that employees focus more on work effort than on impact or outcome, and that Japanese companies have hobbled efficiency by limiting outsourcing and off shoring to a handful of IT related functions.
July 29, 2011
One of Japan's longtime strength is electronics, for example, but its share of the world's export value of electronics goods has fallen from 30 percent in 1990 to less than 15 percent today, according to the Japanese Ministry of Economy, Trade, and Industry. Many Japanese Companies have no alternative to globalization if they hope to continue growing.
Why are General Motors and Volkswagen more successful in China than Honda and Toyota ? Why are LG and Samsung bigger in India than Panasonic and Sony? Why is IBM larger in Japan than Fujitsu is in the United States?
These questions are more than academic. Survival for many Japanese Companies may depend on their ability to greatly increases overseas revenues and profits, given demographic and economic trends that suggest slower or stagnant growth in the home market.
July 26, 2011
In China, if you want something done, you talk to a bureaucrat and political - it gets done.
In India, if you talk to a bureaucrat or a politician, there are going to be 600 other people with their own points of view.
The Chinese roll out the red carpet; Indians roll out the red tape.
What on earth did the Banga brothers' mother feed them for breakfast? Whatever it was, it worked: Vindi Banga grew up to become a top executive at the food and personal-care giant Unilever, then a partner at the private-equity firm Clayton, Dubilier & Rice. His younger brother Ajay, after heading Citigroup's Asian operations, was last year named CEO of MasterCard — all without a degree from a Western business school and without abandoning his Sikh turban. When Ajay took over at the credit-card company's suburban — New York City headquarters, the Times of India crowed that he was the first "entirely India-minted executive" at a multinational's helm.
The brothers laugh when asked for their mother's breakfast menu, deflecting suggestions that they were raised by a Bengal-tiger mom. Instead, they cite an itinerant childhood as a key ingredient in their success. The sons of a lieutenant general in the Indian army, they moved to a new posting every couple of years — perfect training, it turns out, for global executives facing new markets and uncertain conditions. "You had to adapt to new friends, new places," recalls Vindi. "You had to create your ecosystem wherever you went."
The Banga brothers are two of a growing roster of global Indian business leaders, a roster that includes CEOs such as Citigroup's Vikram Pandit and PepsiCo's Indra Nooyi as well as the deans of both Harvard Business School and INSEAD. Yes, ArcelorMittal's Lakshmi Mittal had the advantage of growing up in the family business, but now the family business has grown into a global powerhouse under his leadership.
What factors account for the rise and rise of India-trained business minds? "Our colleagues in our Asian offices are asking the same question," laughs Jill Ader, head of CEO succession at the executive-search firm Egon Zehnder International. "Their clients in China and Southeast Asia are saying, 'How come it's the Indians getting all the top jobs?'" It could be because today's generation of Indian managers grew up in a country that provided them with the experience so critical for today's global boss. Multiculturalism? Check. Complex competitive environment? Check. Resource-constrained developing economy? You got that right. And they grew up speaking English, the global business language.
It's risky to generalize about India, a subcontinent of 1.2 billion people, just as it's simplistic to stereotype the Western executive or the Chinese business leader. Motorola's Sanjay Jha or Berkshire Hathaway's Ajit Jain, one of those tipped as Warren Buffett's successor, succeed due to talent and drive, not because they're Indian. And bosses like Nooyi spend most of their formative career years outside the country. Is it that they may just happen to be Indian? As Ajay Banga notes, "You are who you are because of what you do, not the color of your skin."
The data suggest Indians are scaling corporate heights. In a study of S&P 500 companies, Egon Zehnder found more Indian CEOs than any other nationality except American. Indians lead seven companies; Canadians, four. Among the C-suite executives in the 2009 FORTUNE 500 were two mainland Chinese, two North American Chinese and 13 Indians, according to a study by two professors from Wharton and China Europe International Business School.
For multinationals, it makes good sense to have leaders experienced in working with expanding Asian markets. And India is already the location of many of their operations. "If you look at companies like Pepsi or Hewlett-Packard or IBM, a huge chunk of their global workforce is sitting out in India," says Anshuman Das, a co-founder of CareerNet, a Bangalore executive-search company. "India and China are also the countries of future profits for the multinationals, so they may want their global leaders to come out of them."
Competitive and complex, India has evolved from a poorly run, centrally controlled economy into the perfect petri dish in which to grow a 21st century CEO. "The Indians are the friendly and familiar faces of Asia," says Ader. "They think in English, they're used to multinationals in their country, they're very adaptive, and they're supremely confident." The subcontinent has been global for centuries, having endured, and absorbed, waves of foreign colonizers, from the Mughals to the British. Practiced traders and migrants, Indians have impressive transnational networks. "The earth is full of Indians," wrote Salman Rushdie. "We get everywhere." Unlike, say, a Swede or a German, an Indian executive is raised in a multiethnic, multifaith, multilingual society, one nearly as diverse as the modern global marketplace.
Unlike Americans, they're well versed in negotiating India's byzantine bureaucracy, a key skill to have in emerging markets. And unlike the Chinese, they can handle the messiness of a litigious democracy. "In China, you want something done, you talk to a bureaucrat and a politician — it gets done," observes Ajay. "In India, if you talk to a bureaucrat or a politician, there are going to be 600 other people with their own points of view." There's an old saw about Asian business cultures: "The Chinese roll out the red carpet; Indians roll out the red tape."
Maybe that's why Indian managers are good at managing it. They have cut their teeth in a country ranked 134th by the World Bank for ease of doing business. To be fair, it's also the reason some of them left home. They're practiced in the exasperating culture of local, state and national permits. "To build a factory in China, a CEO will have to get two or three different permissions from various departments," observes Signe Spencer, a co-author of The Indian CEO, a 2007 study from the HayGroup consultancy. "An Indian CEO may have to get 80 different permissions from 80 different places." No wonder Indian executives spend much of their time networking and lobbying — tasks Western CEOs leave to their corporate public-affairs departments.
India's economic liberalization, which began in 1991, was another blessing for this generation of executives. It gave them exposure to a young and fast-growing consumer market. "Liberalization unleashed a level of competition that makes you stand on your toes," recalls Vindi. "We had to learn to compete with international players but also with very good, extremely fast local ones." In 1987, when Vindi was CEO of Hindustan Unilever, the company's leading detergent, Surf, faced off against Nirma, a locally produced brand. "It didn't cost 5% less, or 10% less," says Vindi, shaking his head. "It cost a third of our product. We had to make a product that was better, for the same price." Within 12 months, they had.
July 20, 2011
The frail, forlorn face of Rupert Murdoch in the news exposes the vulnerability at the heart of his News Corporation media empire: his reputation for ruthlessness. Murdoch is on the line for the phone-hacking scandal in the U.K. and faces potential bribery charges that reach to the U.S. under the Foreign Corrupt Practices Act. He might be sued by the Bancroft family, who sold him the Wall Street Journal and other Dow Jones assets, under an integrity clause included in the deal: that News Corp must preserve the integrity of DJ and all of the company's publications and newsgathering services.
Emperors, including media emperors, don't expect to be caught with their pants down. They expect to remain arms-length, letting underlings take the fall. And they certainly don't expect to be trapped by integrity clauses that require honorable behavior.
Murdoch is the latest in a series of CEOs who become the story when their companies are caught in scandals, because their rise has been accompanied by shoving, bullying, and disdain for the concerns of others. Each act of indignity lengthens the line of offended parties who are eager to join the vigilante squad seeking punishment for the moguls. LOL, other news outlets.
Remember the classic admonishment: Be careful whom you injure on the way up, because you might need their help on the way down.
Ruthlessness in pursuit of success might work for a while. But when there is the merest hint of a problem, a history of callous, cold-blooded, critical behavior means that there is no one left to lend support. The emperor, dictator, or CEO finds himself increasingly isolated and abandoned to the wolves. This happens despite success, and sometimes because of how success was achieved. It happens to results-producing CEOs pushed out of companies; for example, Mark Hurd of H-P, who fudged expense reports but whose real sin perhaps was making enemies within the company by ruthless cost-cutting rather than investment.
Speaking of investment, the best investment anyone can make at any career stage is to behave honorably and make friends. Graciousness, even in victory, goes a long way to make people want to help rather than trash when problems emerge. Integrity in all dealings means taking the interests of other parties taken into account, operating with a long-term perspective rather than short-term greed or sensationalism. Anything for a deal or anything for an advantage is just as bad as anything for a story, even if it violates moral, ethical, and legal standards.
A well-regarded financier I know routinely beats out others for deals while remaining a very gracious winner who doesn't swagger and always has a little something to share. His competitors or opponents up end up becoming his good friends, leaving open the possibility for alliances later. "Co-optition," an awkward term for knowing how to cooperate with competitors, is the operating mode in rapidly changing industries. This requires a dash of humility as well as honor and integrity.
Graciousness has benefits for survival, too. A new study of baboons reported in the New York Times shows that the number two, the beta male who is theoretically the "nice guy" rather than the alpha male bully-ruler, has lower levels of disease-causing stress hormones — and also lower than those below. Ivan Seidenberg's willingness to go from number 1 to number 2 twice — first when NYNEX, where he was CEO, merged with Bell Atlantic, and then when the successor company, Verizon, bought GTE — was associated with a leadership style responsible for the emergence of Verizon at the top of the industry and Seidenberg's long tenure as CEO. He could go from the alpha role to beta mode and back. He put the integrity of the institution above his own CEO ego.
Executives are not baboons. But sometimes they act like 800-pound gorillas, throwing their weight around. And sometimes they stumble and get crushed under their own bulk, showing that they are vulnerable like the rest of the pack. For empire-builders like Rupert Murdoch, defenders appear to be non-existent, but gorilla-hunters are everywhere. The lesson for the rest of us is to make a few more friends, avoid injuring others, and remain on an honorable course.
Contributed by Rosabeth Moss Kanter, Professor at Harvard Business School
July 19, 2011
Sixteen Years ago, A magnitude 7.2 earthquake struck the Japanese city of Kobe. Operations at its damaged port came to a standstill. Despite the best efforts of the government, it took more than six months before repairs were completed.
In the interim, some of the cargo ships that had previously called at Kobe were diverted to Kaohsiung in Taiwan or Busan in Korea. Today, the port of Kobe is open for business, but freight volume remains at half the pre-crisis level.
I approached to Yasuhiro Sato, President and CEO of Mizuho Corporation Bank and Mizuho Financial Group, the corporate banking arm and holding company of the whole group, respectively. He told me "When the supply chain is cut, you have to restore it as fast as possible. Otherwise Global companies will seek out alternative suppliers of parts, regardless of quality or price."
That explains why Sato's current focus is persuading Japan's Central and local governments - as well as the many blue chip Japanese Companies with which Mizuho Corporate Bank has relationships - not only to pour resources into the region devastated by the March 11 earthquake and tsunami, but also to do it quickly. Speed is the determining factor in retaining a place in the global supply chain.
July 18, 2011
Car Guys vs. Bean Counters:
The Battle for the Soul of American Business
By Bob Lutz
Portfolio; 256 pp; $26.95
The Battle for the Soul of American Business
By Bob Lutz
Portfolio; 256 pp; $26.95
It’s been said that Bob Lutz—Detroit shaman, veteran of General Motors’ (GM) Mad Men era, and inveterate ham—often attracted as much attention as his cars. The former fighter pilot wore expensive English suits, gnawed on cigars, and once dismissed global warming as “a total crock of s–t.” While president of Chrysler, he unveiled the first Jeep Grand Cherokee, in 1992, by driving it through a plate glass window. Five years later he modestly shared the secrets of his success in Guts: 8 Laws of Business from One of the Most Innovative Business Leaders of Our Time.
Now comes an encore in the Lutz on Lutz genre—Car Guys vs. Bean Counters: The Battle for the Soul of American Business. It’s a topic on which he has undeniable expertise. Frequently described by industry insiders as the “ultimate car guy”—a man for whom no vehicle could ever be too big, too fast, or too thirsty for gasoline—Lutz spent 47 years in the business, with stints at each of the Big Three. Last year, at age 78, he retired as vice-chairman of GM.
Now it’s legacy-burnishing time. In Car Guys, Lutz argues that Detroit’s steady decline can be blamed on the fact that there aren’t enough Bob Lutzes anymore. After legendary designer and car-guy’s-car-guy Bill Mitchell retired as GM’s design chief in 1977, Lutz writes, the balance of power—at the company, in particular, and in Detroit, in general—began shifting from the car guys to the number crunchers. As a consequence, product planners determined which customers to target with a new sedan or wagon; engineers fretted over inexpensive assembly; and managers fretted about cheap mass production. Only at the end were designers summoned to wrap a steel body around a nearly completed vehicle.
The results, Lutz laments, were the not-so-fondly remembered Cadillac Cimarron, GMC Envoy XUV, Pontiac Aztek, and others. Yet Lutz believes a post-bailout renaissance is possible, and he has the solution. “It’s time to stop the dominance of the number crunchers, living in their perfect, predictable, financially projected world (who fail, time and again),” he writes, “and give the reins to the ‘product guys.’”
There are, of course, a couple of problems with this argument. A company like GM can make a great car, but if it lavishes unaffordable benefits on its unions in return for labor peace—as GM did—it will have difficulty making much money. Whether or not being a “car guy” is actually a valid qualification to run an international conglomerate, as Lutz suggests, most car buyers aren’t even car guys. Instead, they’re interested in more boring matters, like fuel efficiency. Not everyone thinks global warming is a crock.
Notably absent from Car Guys is any meaningful acknowledgment that the automobile business is no longer a U.S. monopoly—partly because old strategies no longer apply. As gas prices rose steeply in the late 1970s, the Big Three were painfully slow to abandon their belief that small cars were mere gateway products. “Small cars are like vodka,” the hard-drinking car-guy’s-car-guy Mitchell once noted. “People will try them out, but they won’t stay with them.” These days, people pay hundreds of dollars for bottles of colorless, flavorless, odorless liquor—and small cars are now at the core of GM’s strategy.
Yet when Lutz triumphantly returned to GM, in 2001, he followed the Mitchell Plan, championing the Hummer and rehabilitating Chevrolet brands such as the Camaro and the Malibu. And while he is given credit for pushing then-CEO Rick Wagoner to manufacture the much heralded hybrid Chevy Volt, the anti-global-warming-guy wasn’t exactly going green. By his own admission, Lutz was just miffed about the great press Toyota (TM) was getting for its Prius.
In the end, there was only so much Lutz could do for GM after decades of soaring union costs, high gas prices, and, yes, lousy design. In 2009, the year it declared bankruptcy, General Motors’ market share fell below 20 percent—down from its peak of 51 percent in 1962. While the company’s $50 billion federal bailout didn’t enhance its popularity, Lutz still sees a silver lining in its emergence from bankruptcy. Its 2010 initial public offering, the most successful in history, is deemed a fitting capstone to a glorious career.
Lutz the writer, like Lutz the executive, remains a master salesman, and what he sells best in Car Guys is nostalgia for a bygone Detroit. In 1965, he notes, French national TV produced a fawning one-hour special on GM—which, Lutz writes, then had sales revenue that “exceeded the budget of the French Republic.” Still, design mavens and penny-pinchers alike should recall that Ford—Detroit’s real success story—somehow rode out the recession by listening to the bean counters, mortgaging its assets, and using the cash to avoid a bankruptcy filing and bailout. Ford CEO Alan Mulally is no car guy, but the former Boeing (BA) executive figured out how to run a car company. Maybe someday he, too, will write a book about it.
July 11, 2011
Thomas Stewart was one of the business writers who launched the first stage of knowledge management with the release of his book Intellectual Capital in 1997. In this new book, he collects and organises the wealth of learning about KM that has occurred in the last five years into a cogent argument and a blueprint for a knowledge-enabled company.
Part one establishes ‘The theory of a knowledge business’ and the case for knowledge management, examining evidence that the knowledge economy is squarely upon us and that companies no longer exist outside of how they manage and leverage knowledge.
The practical core of the book is part two, ‘The disciplines of a knowledge business’, in which Stewart articulates and then expands on a four-step model for an intellectual capital strategy:
- Identify and evaluate the role of knowledge;
- Identify knowledge assets;
- Develop a strategy for investing in and exploiting intellectual assets;
- Improve the efficiency of knowledge work and knowledge workers.
This is a simple, useful model that Stewart uses throughout this section to emphasise the importance of KM practices. Stewart provides success stories of the application of KM disciplines (communities of practice, information infrastructure, leveraging internal knowledge as a knowledge product) that support each of these steps.
“Measurement... is a worldview, not just a scorecard,” he writes. Models for valuing and tracking intellectual capital and knowledge assets have been around for a while, but most companies have yet to adopt them. Stewart, though, believes the time for this is near: “Calls to revamp accounting, lonely cries in the forest just a few years ago, have become full-voiced howls within sight of the campfire.”
The third and final part of the book, ‘The performance of a knowledge business’, suggests very specific financial accounting models for each of the four aspects of the knowledge business strategy.
Stewart is a passionate, articulate and witty proponent of the idea that knowledge is ultimately the only source of competitive advantage left for companies, and he speaks in the language of business. From his influential seat on the board of editors for Fortune magazine, Stewart is a credible advocate for KM and here he draws on the experience of many of the discipline’s leading practitioners to illustrate that the shift towards becoming a knowledge economy has largely already occurred. In so doing, he presents the case for strategic knowledge management, which leverages and applies the core disciplines that have matured over the past five years.
KM practitioners will discover that this book reinforces the value of a broad set of knowledge management capabilities in the practitioner’s toolkit. What’s great about reading this book is that it is like eavesdropping into a conversation in which Stewart is explaining knowledge management strategy to executives, as in the following paragraph: “In particular, knowledge companies must know how to select, design and manage knowledge projects, which increase the value of knowledge or change the way a company uses it. Collecting best practices is a knowledge project: it gathers previously uncodified data, analyses it and turns it into a piece of structural capital.” Brilliant.
This is the knowledge management book you will want to give to a senior business leader in your organisation when you are looking for sponsorship for a KM programme. Leaders will understand what you, as a KM practitioner, care about, what you do and why it is important. They will begin to understand the implications for their own leadership aspirations of operating in the knowledge economy, they will know what knowledge management has accomplished over the past five years and (best of all) they’ll start to learn the language of KM. In fact, it’s a great book for anyone who likes a good KM read. What can you say about a book that throws away lines such as “…like pearls, knowledge assets form around irritants, such as real business needs”?
Read it and pass it on. The key message put forward by this book is that managers, KM practitioners and consultants must make the shift from seeing knowledge management as an IT initiative to regarding it as a business imperative. Stewart documents this shift in a readable mixture of data, history and insight – and gets at the knowledge component in business by tackling the questions of what companies do and why they exist. The answers lie in a company’s ability to understand the knowledge component of its business: “If you’re not managing knowledge, you’re not paying attention to business.” Such messages should renew and revitalise those people who are committed to KM.
July 8, 2011
Take three kids and a flute. Anne says the flute should be given to her because she is the only one who knows how to play it. Bob says the flute should be handed to him as he is so poor he has no toys to play with. Carla says the flute is hers because it is the fruit of her own labour. How do we decide between these three legitimate claims?
There are no institutional arrangements that can help us resolve this dispute in a universally accepted just manner. Conceptions of what constitutes a "just society", argues the Nobel Prize-winning economist and philosopher Amartya Sen in this majestic book, will not help us decide who should have the flute. A one-dimensional notion of reason is not much help either, for it does not provide us with a feasible method of arriving at a choice.
What really enables us to resolve the dispute between the three children is the value we attach to the pursuit of human fulfilment, removal of poverty, and the entitlement to enjoy the products of one's own labour.
Who gets the flute depends on your philosophy of justice. Bob, the poorest, will have the immediate support of the economic egalitarian. The libertarian would opt for Carla. The utilitarian hedonist will bicker a bit but will eventually settle for Anne because she will get the maximum pleasure, as she can actually play the instrument. While all three decisions are based on rational arguments and correct within their own perspective, they lead to totally different resolutions.
Thus justice is not a monolithic ideal but a pluralistic notion with many dimensions. Yet Western philosophers have seen justice largely in singular, utopian terms. Hobbes, Locke and Kant, for example, wove their notions of justice around an imaginary "social contract" between the citizens and the state. A "just society" is produced through perfectly just state institutions and social arrangements and the right behaviour of the citizens.
Sen identifies two serious problems with this "arrangement focussed" approach. First, there is no reasoned agreement on the nature of a "just society". Second, how would we actually recognise a "just society" if we saw one? Without some framework of comparison it is not possible to identify the ideal we need to pursue.
Furthermore, this approach is of no help in resolving basic issues of injustice. How would you reason, for example, that slavery was an intolerable injustice in a framework that concerned itself with right institutions and right behaviour? How would we ensure that well-established and cheaply producible drugs were available to the poor patients of Aids in developing countries? When faced with stark injustice, the contractual approach turns out to be both redundant and unfeasible.
Much of Sen's criticism is directed towards the liberal philosopher John Rawls, whose 1971 book, A Theory of Justice, has acquired the status of a classic. Sen's gentle and polite deconstruction of Rawls shows him to be rather shallow and irrelevant. Rawls's approach, based on specific institutions that firmly anchor society, demand a single, explicit resolution to the principle of justice. Stalin had similar ideas.
Rawls is not just authoritarian but also elitist and Eurocentric. Just as Mill had excluded "the backward nations", women and children from his Essay on Liberty, Rawls openly acknowledges that the world's poor have no place in his theory of justice. Indeed, the very "idea of global justice" is dismissed by Rawls and his cohorts as totally irrelevant. Moreover, the kind of "reasonable person" needed to produce a just society is found only in democratic, Western societies.
Given the limitations of Rawls's theory of justice, why has he been turned into a demi-god? Sen does not tackle this question. But a viable answer is provided by the classical Muslim philosopher al-Razi, who declared that "the acquisition of knowledge and the practice of justice" go hand in hand. Justice acquires meaning and relevance, al-Razi argued, within socially conscious epistemologies. The opposite is equally true.
Theories of justice that exclude, by definition, the poor or issues of global injustices only perpetuate injustice. The main function of Rawls's theory of justice, it seems, is to maintain the status quo, where injustice is not just simply a part of the system, but the system itself. That's exactly why he is force-fed to students of social sciences.
Sen's alternative is a realisation-focused approach to justice which concentrates on the real behaviour of people and its actual outcomes. Taking a cue from "social choice theory", he wants us to focus on removing injustices on which we can all rationally agree. There is nothing we can do about people dying of starvation beyond anyone's control. But we can choose to do something about injustices that emerge from a conscious "design of those wanting to bring about that outcome".
I see two problems with this. The "we" who choose must include those who consciously perpetuate injustice in the first place – ruthless corporations, hedge-fund managers and the like. Moreover, design need not be conscious. It can, for example, be unconsciously intrinsic in the theory itself.
Indeed, theory does sometimes serve as an instrument of injustice. Think of free-market capitalism, along with its theoretical underpinnings, including the mathematical modelling of sub-prime derivatives, where huge profits for the few are produced from the misery of others. To do something about the injustices perpetuated by the dominant model of economy, we need to tackle the tyranny of the discipline of economics itself.
Reading The Idea of Justice is like attending a master class in practical reasoning. You can't help noticing you are engaging with a great, deeply pluralistic, mind. There were times, however, when I felt a bit unfulfilled. For example, we are temptingly informed that classical Sanskrit has two words for justice: niti, organisational propriety and behavioural correctness; and nyaya, which stands for realised justice. In the Indian context, the role of the institutions, rules and organisations have to be assessed in the broader and more inclusive perspective of the world as it actually emerges. We are also told of Mughal Emperor Akbar's idea that justice should be based on rational endeavour. But this is not elaborated. I also wanted to see some comparatively material on Islamic, Chinese and Latin American ideas on justice.
But these quibbles apart, this is a monumental work. "When people across the world agitate to get more global justice", Sen writes, "they are not clamouring for some kind of 'minimal humanitarianism"'. They are sensible enough to know that a "perfectly just" world is a utopian dream. All they want is "the elimination of some outrageously unjust arrangement to enhance global justice".
Ziauddin Sardar's 'Balti Britain' is out in Granta paperback
From prices to values: Amartya Sen
Born in West Bengal in 1933, Amartya Sen studied at Presidency College, Calcutta and Trinity College, Cambridge. He taught economics in Delhi, then at Oxford, the LSE and Harvard. In 1998 became Master of Trinity, and in 2004 returned to Harvard. His major previous books include 'Collective Choice and Social Welfare' (1970), 'Poverty and Famines' (1981), 'Development as Freedom' (1999) and 'Identity and Violence' (2006). A Nobel laureate, he is also a Companion of Honour and hold India's Bharat Ratna
July 6, 2011
The annual gathering of some of the world’s most powerful individuals at Davos is celebrated and questioned, but what cannot be doubted is the potency of its mix. Davos is a powerful cocktail of ideas, opinions and agendas.
Where else could you hear Morgan Tsvangirai, the Prime Minister of Zimbabwe, displaying his up-to-date knowledge of the theories of Michael Porter and challenging the Harvard guru? Where else could you see the Wal-mart CEO trying to find a seat to listen to the British Prime Minister? And where else could you listen to eminent psychologists exposing the flaws in the parenting style of Amy Chua, the Tiger Mom of North America?
Behind the cocktails, there is, of course, work to do, deals to be done, positions to be taken. Davos is a serious business. "Business today is about partnerships and, for me and London Business School, that is why Davos is such a fruitful event," says London Business School Dean, Sir Andrew Likierman. "It gives you an unparalleled opportunity to talk to existing and potential customers as well as shaping critical debates about the future shape of business."
The London Business School contingent at Davos included Kamalini Ramdas, Professor of Management Science & Operations; Rajesh Chandy, Tony and Maureen Wheeler Chair in Entrepreneurship, Professor of Marketing; Michael Hay, Professor of Management Practice in Entrepreneurship; and Gary Dushnitsky, Associate Professor of Strategic and International Management and Entrepreneurship.
Among the biggest themes of Davos was healthcare, one close to the heart of Kamalini Ramdas. “The key to seeing widespread improvement in the health care world is to get everyone involved – from doctors to those who prepare food in the hospital cafeteria, from nurses to those who work in maintaining the hospital grounds – to become patient-centric,” she says. Of course good nutrition is fundamental to good health.At Davos, she saw Josette Sheeran, executive director of the UN’s World Food Program, compare the problem her organisation is trying to solve to opening a bicycle lock with eight tumblers. The problem can only be solved if all eight tumblers line up. If hunger is to be solved, each of us needs to figure out which piece of the lock we can tackle, and work with it, be it infrastructure, technology, or other elements.
In the Ideas Lab
The London Business School group led an Ideas Lab session -- the first time the school had led such a session. It looked at breakthroughs in business strategy.
"What was exciting about the Ideas Lab session was that it was in an area where people hadn’t previously made connections," says Sir Andrew Likierman who introduced the session. "It linked different management disciplines together and demonstrated that innovation and entrepreneurship need to be on the business agenda."
The Ideas Lab session looked at interconnectedness in a changing landscape and set out to challenge prevailing theories, unquestioned assumptions and established ways of working. Says Michael Hay: “The world is not a modified version of the reality to which we have become accustomed. The New Reality is profoundly different and it is these differences, together with the challenges that arise, which we want to explore and debate”.
Kamalini Ramdas challenged some common preconceptions about innovation and presented a number of examples of groundbreaking innovations happening in unlikely places and environments. She cited an example of a cardiac preventive care clinic in which the doctor sees a group of 12 patients at once in an 1.5 hour slot, rather than seeing one patient at a time for half an hour. Outcomes are up and costs are down.
She also described the innovative work of Amit Mehra, CEO of Reuters Market Light in India. He is spearheading a service where farmers receive information on the price of specific crops at markets of their choice. It is sent by daily text messages. Rather than having to travel somewhere to get information, the farmer gets it right where he is.
Closer to home, hospitals in Scotland and France are using Cisco technology to practice remote telemedicine. A doctor in a major hospital can consult with a patient in a small far away clinic or outpost. “Services that have been around forever are being delivered very differently. And often information technology is the bridge that allows this to happen,” said Professor Ramdas. “This is enabling simultaneous improvements in quality and reduction in cost, resulting in better value. New technologies are taking products and services to the location of the customer.”
Among the other issues raised by the session was the emergence of micro-entrepreneurs. “If you walk into any market in the developing world, you are surrounded by capitalism on steroids – dozens, even hundreds of micro-entrepreneurs selling almost identical assortments of products and services, making puny profits,” said Rajesh Chandy. “Adam Smith pointed to the self-interest of the butcher, the brewer, and the baker to explain the workings of capitalism. I argue that it is in our own self-interest to understand micro-entrepreneurs, and help improve their lives. They are our customers, they are our distributors, and they are our potential suppliers and taxpayers. The lives of micro-entrepreneurs have been filled with constraints. They have had little access to information, they have had little access to money, little access to basic business skills, and to formal and informal rules. Imagine what might happen if these constraints are removed.”
Gary Dushnitsky looked at the financing of innovation and charted the emergence of exciting new models in the world of innovation. “In a world faced with new realities, it is incumbent upon us to start from square one, to revisit past assumptions, and to bridge east and west.Gary Dushnitsky was also involved in a stimulating group discussion on financing innovation in the 21st century.
“Inventors and investors come in more than just 'plain vanilla' - they are diverse. By that I mean, some inventors are motivated by money while others seek recognition or the desire to solve a puzzle. For example, pharmaceutical companies can have productive interactions with inventors who are passionate in their desire to cure a certain disease. Similarly, some investors are motivated by financial returns while others pursue additional motives such as supporting an agenda, making an impact, and so on. Most importantly, new platforms have emerged that can now effectively match these diverse parties. They constitute an eBay for ideas and inventions!”
The tone for the year
Of course, one of the roles of Davos is to identify the big themes for the next year and to strike a tone. The doom and gloom of the two previous annual meetings was supplanted in 2011 by a different mood.
“Our session went well and provoked a vigorous debate which was echoed in many other sessions,” says Michael Hay. “What was striking, having attended Davos over the years, was the extent to which much of the new and innovative thinking is coming from the so-called fringe; from the social entrepreneurs and many of the creative artists represented this year. There is an abiding sense that the zeitgeist is changing. Though there was a sense of disconnection, there was also far more discussion of the word empathy than I can remember. There is real interest in how corporations and individuals give back, and how new, hybrid business models are emerging across many fields. It is around these hybrid business models that much of the future debate will focus.”
Attending his first Davos was Jules Goddard, an associate of London Business School’s Management Innovation Lab. “For me, Davos was welcoming, fast-paced, enthralling and surprisingly eclectic. The best events were those at the margin -- the artists, the creators, the heretics and the explorers. I listened in awe to Alison Levine’s story of her conquest of Everest; I heard Niall Ferguson identify the six ‘killer apps’ that, over the last six centuries, explain the extraordinary and incomparable rise of Western European civilisation; I marvelled at the digital art being created by Aaron Koblin who has found ingenious ways of involving hundreds of artists in the creation of collaborative masterpieces; I was inspired by the Pecha Kucha presentations on entrepreneurship in the developing world at the London Business School Ideas Lab; I was moved by the ingenuity and humanity of two young architects, Bjarke Ingels and Cameron Sinclair, who are bringing their skills to disaster zones, such as Haiti, or to those living in favelas and shanty towns; I learnt about the extraordinary revolution in higher education; I witnessed Michael Porter laying into the CSR movement and advocating the concept of shared value; and I heard Daniel Goleman extolling the virtues of self-awareness.”
From this heady mix of inspirations, what can you take away? Gary Dushnitsky identifies the key issues he encountered as: “Borders are becoming ambiguous -- not unimportant, rather they are becoming multifaceted. The future will see a world that is not borderless, nor does it comprise of solely of national boundaries -- rather it is a collective of regions with different boundaries for capital, talent, enterprises, culture, and so on. For example when it comes to ideas, the world we live in seems hyper global, yet when we take a political activism perspective, it is often hyper local in nature.”
Michael Hay offers another perspective: “There was a real focus on Africa and how best to unleash its full economic potential. A major barrier to this is represented by poor and limited infrastructure in all areas. This is exacerbated by the fact that all roads metaphorically and literally lead to the sea at the cost of intra-Africa routes. Beyond this one wonders if it makes sense to talk about Africa as an entity. Is there one or many Africas?”
Davos may be a single short event, but it is one which continues to produce many such questions.
Fujitsu is the third biggest player in the global IT services market, with sales of 4.6 trillion yen (US$50 billion) and 172,000 employees in 60 countries. It also has a long and distinguished track record as a technology pioneer. And yet, it remains little known outside of Japan. Stuart Crainer and Des Dearlove gained unique access to examine the art of Fujitsu management.
Dreams and detail
"For me the excitement lies in turning technology into profitable technology," says corporate senior executive vice president and director, Kazuo Ishida. "Along the way we make mistakes. Over my time with the company I have run 28 projects with teams ranging from 50 to 800. Some were a year long. At the end you hand over and move on to another project. But, I was never happy with how things had gone. I always looked back and identified where, when and how it could have been done better."
Fujitsu is a technology company built on engineering expertise. Its senior executives typically started their careers as engineers. An appetite for detail is part of their training. Fujitsu engineers prefer doing to theorising and have an elevated view of the likely impact of innovations on broader society: they see engineering as a route to improving the world. Dreams and detail are in unusually close alignment.
The fashionable business ideas of our time suggest that customers are unreliable guides. Simply, they do not know what the technology is capable of, so how can they tell you what they want or would like? As a result, the emphasis of recent years has been on retaining talented individuals rather than attracting and retaining high spending customers. Fujitsu is old fashioned in its adherence to the edict that customers come first. All Fujitsu executives talked about the vital importance of staying close to customers.
Thirty-six years with the company and now a corporate senior executive vice president and director, Kazuo Ishida told us of his first day working as a systems engineer. "I went to work with a banking client. It felt as though I had become a banker such was the identification we had with the customer. That stuck with me and I still spend half of my time with customers."
Grow with customers
Says Richard Christou, corporate senior executive vice president (the only Westerner in the company’s management team), who heads the company’s global businesses: “You don’t shape the future by simply selling technology. There has to be a dynamic, proactive interchange with customers.”
Customers are not static. Fujitsu regards them as a growth opportunity. But this does not mean trying to screw more sales out of each account. The win-win hope is that as customers grow, Fujitsu will grow alongside them. “We have a track record of working with Japanese companies and there is an opportunity to grow with them – and our other customers – as they globalise. As companies expand they need to use systems which are consistent, which they are familiar with and which can receive high levels of support worldwide,” says corporate senior executive vice president, Kenji Ikegai.
Masahiko Yamada, president of the company’s Technical Computing Solutions Unit, is an engaging Fujitsu veteran. “At one stage, I remember thinking that we need to really focus on costs and technology. I was wrong: relationships with customers are more important” says Yamada. Many companies focus on contracts, Fujitsu emphasises genuine relationships and growing with customers.
Multicultural and global
“If you think about where future market expansion will occur, you can only conclude that our future growth will depend on how successful we are in developing our global business,” says company president Masami Yamamoto.
His thoughts are echoed with even greater emphasis by Richard Christou: “I think we have a two year window to become more global in outlook. We have to move decisively. If we do not become more global, we will shrink.”
The initial ethos of globalising companies was to try to export the same products, services and culture worldwide. This was the largely American multinational model of the 1960s and 1970s. Then, in the 1980s and 1990s, the cry was for globalising companies to be global and local, to combine global strength with local sensitivities – witness McDonald’s offering localised menus throughout the world. Now, a new generation of globalisation is occurring as, in particular, companies from India expand globally. The emphasis of these organisations – and of Fujitsu – is to combine a clear sense of having roots while also having the open mindedness to embrace different business and national cultures. At Fujitsu, emphasis is put on the company being a global organisation with Japanese roots. It is multicultural but clear in its origins; globalisation with an open mind.
Respect and humility are deeply entrenched in Japanese culture. Similarly, they inform Japanese business culture and corporations. Gung-ho competitiveness is uncharacteristic. Rather, collective aspirations are the focus – whether they are for the team, the company or society. The emphasis of Fujitsu’s research is not on creating sexy, must-have technological fripperies. Instead, it regards improvements in technology as integral to improvements in how we live and how societies are organised and behave. This belief runs deep, but quietly.
Co-innovation rather than domination
Technology companies place huge store in innovation. But at Fujitsu the emphasis is on co-innovation with customers.
This is exemplified by the company’s concept of Field Innovation. This is a concrete example of how Fujitsu does things differently. As it deploys the concept, Fujitsu works seamlessly alongside its customers to create value for them by defining and visualising management challenges with customers.
At the same time, Fujitsu has always recognised the importance of being at technology’s cutting edge.Visit its Technology Hall in Kawasaki City on the outskirts of Tokyo and you are struck by the sheer range of its interests – from cloud computing to electronic medical record systems, plasma displays and point of sale displays at supermarkets. The range of products gives it a balanced portfolio and “a radar” for converging technologies and new innovations that can be transferred across products.
The fruits of experience
Fujitsu has a cadre of highly experienced managers. They know the company and its customers inside out. Many of the senior leaders at the company have worked with the company all their working lives. As engineers they have a constant urge for improvement. They are like mechanics tinkering with a car engine in search of a slight but significant performance enhancement. Things can always be improved.
ઐશ્વર્યા રાયી પ્રેગ્નન્સીને લીધે મારો ફિલ્મ પ્રકલ્પ મુશ્કેલીમાં સપડાયો હોવાથી મને મોટો આંચકો લાગ્યો છે. એશે પ્રેગ્નન્સીની વાત મારાથી છુપાવી હતી. આને કારણે મારો હમણાં સુધીનો આ સૌથી મોટો પ્રોજેકટ ઘોંચમાં પડતાં મને ઘોર નિરાશામાં ધકેલાઈ જવાનો વારો આવ્યો છે, એમ દિગ્દર્શક મધુર ભંડારકરે મંગળવારે જણાવ્યું હતું.
મારી ફિલ્મમાંથી પ્લગ કાઢી નાખવામાં આવ્યો છે. આને કારણે હવે હું કચેરીમાં એકલો જ બેસી રહું છું. હું કયારેય પરિણામની ચિંતા કર્યા વિના મારી ફિલ્મ પ્રત્યે પ્રામાણિક રહું છું. ગત દોઢ વર્ષથી આ પ્રોજેકટમાટે પસીનો કાઢતો હતો, એમ ભંડારકરે બ્લોગમાં લખ્યું છે. સાચી માહિતી છુપાવવાને લીધે મને આંચકો લાગ્યો છે. ઐશ્વર્યાની પ્રેગ્નન્સી બાબત અગાઉથી ખબર હોત તો હીરોઈન પ્રકલ્પ તે રીતે હાથ ધર્યોહતો, પરંતુ મારી સામે અચાનક આ વાત આવતાં પ્રકલ્પ ટલ્લે ચઢી ગયો છે, એમ તેણે જણાવ્યું હતું.ભંડારકરે ૬૪મા કાન્સ ઈન્ટરનેશનલ ફિલ્મ ફેસ્ટિવલમાં હીરોઈન ફિલ્મની જાહેરાત કરી હતી. ઐશ્વર્યા રાય ચાર મહિનાની ગર્ભવતી હોઈ નવેમ્બર મહિનામાં તેની ડિલિવરી થવાની સંભાવના છે એ માહિતી મને ન્યૂઝ ચેનલ થકી ખબર પડી છે એમ પણ ભંડારકરે જણાવ્યું હતું. આ મામલે ભંડારકરની પૂર્વ પ્રેમિકા તબ્બુએ ગઈકાલે તેને મળી સાંત્વના આપી હતી.
ભારતના પ્રથમ રાષ્ટ્રપતિ ડા". રાજેન્દ્ર પ્રસાદને પુસ્તકો પ્રત્યે ખૂબ પ્રેમ હતો. તેમના ઘરમાં દરેક પ્રકારનાં પુસ્તકો હતાં. રાત્રે સૂતાં પહેલાં રાજેન્દ્રબાબુ પુસ્તકો અવશ્ય વાંચતા. એક વાર તેઓ કામ માટે બહાર ગયા હતા અને ઘણા દિવસો બાદ ઘરે પાછા ફયાô ત્યારે જોયું તો તેમનાં પુસ્તકો વેર-વિખેર પડેલાં હતાં. ઘણાં પુસ્તકોનાં પાનાં પણ ફાટી ગયાં હતાં. આ જોઈને તેમને ખૂબ દુ:ખ થયું. તેઓ સમજી ગયા કે, આ કામ ઘરનાં બાળકોનું જ છે. તેમણે બધાં બાળકોને બોલાવીને પૂછ્યું કે, પુસ્તકોની આ હાલત કોણે કરી છે? બાળકોએ ઠપકો મળવાની બીકથી કાું કે, તેઓ તો પુસ્તકોને સ્પશ્યાô પણ નથી અને વેર-વિખેર કોણે કયાô તેની પણ ખબર નથી. રાજેન્દ્રબાબુ બુદ્ધિશાળી હતા. સત્ય શોધવા માટે બાળકોને તેમણે પ્રેમથી કાું કે તમે મને સાચું કહો. જેમણે પણ પુસ્તકોને નુકસાન પહોંચાડયું હશે તેને હું ચોકલેટ આપીશ. આમ કહેતાં જ બધાં બાળકોએ આગળ આવીને જોરશોરથી પોતાનું પરાક્રમ જણાવ્યું. રાજેન્દ્રબાબુએ તેમને ચોકલેટ આપતાં સમજાવ્યાં કે, પુસ્તકો ફાડવાં તે સારું નથી કારણ કે તેના દ્વારા આપણને જ્ઞાન મળ છે. તે આપણા ગુરુ છે. પુસ્તકોને નુકસાન પહોંચાડવું તે ગુરુને નુકસાન પહોંચાડવા બરાબર છે. મને વિશ્વાસ છે કે તમે ભવિષ્યમાં આવું નહીં કરો. બધાં બાળકોએ માફી માગીને હવેથી આમ ન કરવાના સોગંદ લીધા. આ પુસ્તકપ્રેમી રાષ્ટ્રપતિએ આમ કરીને એવો બોધપાઠ આપ્યો કે, બાળકો સાથે પ્રેમપૂર્વકનો વ્યવહાર તેનામાં વિશ્વાસ પેદા કરે છે અને વિશ્વાસથી સત્ય બોલવાની હિંમત પેદા થાય છે.
રાજુ માને એક ઉત્તમ મેનેજર હતા. પોતાના દરેક કમ્યુનિકેશનમાં તે સ્પષ્ટતા કરતા કે, કોઈ નિર્ણય શા માટે લેવાયો કે પછી બિઝનેસ કઈ દિશામાં લઈ જવાનો છે અને શા માટે ? રાજુ પોતાના કર્મચારીઓને તેમની કામની રીતભાત વિશે સવાલો કરતા અને તેમને તે જ કામ થોડા સુધારા સાથે કરવા માટે પ્રોત્સાહિત કરતા, જે મેનેજમેન્ટના લક્ષ્યના હિસાબે યોગ્ય હોય. રાજુથી પણ કોઈ ભૂલ થાય તો તેઓ જાહેેર રીતે ખેદ વ્યકત કરતાં ખચકાતા નહોતા. આ જ કારણે એચઆર વિભાગ દ્વારા લીડરની ખૂબીઓને જજ કરવા માટે આયોજિત ઇન્ટરવ્યૂમાં તેના સાથી કર્મચારીઓએ વારંવાર તેમની આ ખૂબીની પ્રશંસા કરી હતી.એક વખત રાજુએ ખોટી જાણકારીના આધારે કોઈ કર્મચારીને કાઢી મૂકયો. બાદમાં જયારે તેમને હકીકતની ખબર પડી ત્યાં સુધીમાં તે કર્મચારી અન્ય કંપનીમાં જોડાઈ ચૂકયો હતો. રાજુ તેને અને તેની નિયુકતા કંપનીને મળ્યા અને વિનંતી કરી કે, તેઓ તે કર્મચારીને કાર્યમુકત કરી દે. ત્યાર બાદ રાજુએ તેને પોતાની કંપનીમાં પરત લઈ લીધો. વર્જિન ગ્રૂપના સીઈઓ રિચર્ડ બ્રોન્સને પોતાના એક પુસ્તકમાં લખ્યું છે કે, શ્રેષ્ઠ મેનેજર ભાગ્યે જ પોતાના ટીમ મેમ્બર્સની ટીકા કરે છે. તેમણે કાું છે કે,
ફંડા એ છે કે, ઉરચ સ્તર તરફથી મળેલી પ્રશંસા અને પ્રોત્સાહન કર્મચારીઓ માટે ટોનિકનું કામ કરે છે. જો માલીક સારા કામ બદલ મેનેજરની પ્રશંસા નહીં કરે તો આગળ જઈને નીચલા સ્તરે તેના પરિવર્તનની શકયતા પણ ઘટી જાય છે.
ફંડા એ છે કે, ઉરચ સ્તર તરફથી મળેલી પ્રશંસા અને પ્રોત્સાહન કર્મચારીઓ માટે ટોનિકનું કામ કરે છે. જો માલીક સારા કામ બદલ મેનેજરની પ્રશંસા નહીં કરે તો આગળ જઈને નીચલા સ્તરે તેના પરિવર્તનની શકયતા પણ ઘટી જાય છે.
July 5, 2011
In this contemporary world, an ecological issue such as global warming interests both the marketing practitioners as well as the consumers. The term “green marketing” simply denotes all the activities intended to generate as well as facilitate any exchange in order to satisfy human needs such that satisfying these needs happen with the most minimal input on the environment. Companies all across the globe have started differentiating their products and services by using go-green concern and have started utilizing ecological marketing approach as a mere competitive edge.
This green marketing approach is largely used as a gimmick by the gigantic corporate houses in order to make a difference in the consumer’s point of view when it comes to major market decisions.
The global changes in the environment are becoming critical not only for the consumers but also for the managements across the globe. Despite the fact that loads of environment protecting rules and regulations have been put into practice, there is a general belief that these laws lack competitiveness.
The green evolution has evolved steadily over the period of time. There were initially three long phases in the evolution of the much hyped green marketing. The first phase was known as the ecological phase. In this phase, all the marketing activities were carried out in order to assist the ever increasing environmental problems and offer solutions for these problems. The second phase was called the environmental phase as after the environmental problems, the entire focus was shifted on the implementation of cleaner technologies. This phase also led to the discovery or the invention of products that would better the environment or at least not increase the already existing problems. The last phase is termed as the sustainable phase of green marketing which is still prevalent. This phase came into existence by the late nineties and early millennium.
With the human wants escalating heavily, the resources are decreasing. Hence it has become mandatory for the marketers across the globe to use the resources efficiently and not waste them under any circumstances. World wide surveys indicate that consumers globally are changing their behaviour towards products and services. Green marketing is almost inevitable as the market for socially responsible products is increasing greatly.
July 1, 2011
Faced with an eroding core business, most companies seem to do...nothing. In the media and entertainment industry, look at Blockbuster's lackluster embrace of mail delivery and video streaming, newspapers' mainly tepid moves into digital publishing, and television networks' doubling-down on a small number of hot shows. A company in a turbulent industry often seems like a dairy farmer whose herd has been reduced to just one cow, whose only adaptation of his business plan is to milk that heifer extra-hard. The story cannot end happily.
Barnes & Noble (B&N), America's largest bookseller, is bucking these trends. While its biggest traditional competitor, Borders, has ended up in bankruptcy, B&N is creating a credible growth plan in the midst of upheaval. In the first quarter of 2011, industry-wide book sales were down 2.5% from the same period in 2010. Print books are in decline but e-books are rocketing ahead, growing nearly 150% year-on-year. B&N is moving boldly into this future in four ways that hold lessons for any company facing a troubled core:
Competing with its legacy business: Rather than swim against the e-book tide, B&N has embraced the inevitable with its Nook readers. Other bricks and mortar booksellers have offered e-books online, and Borders licensed a reader of its own from an outside company called Kobo. But B&N is the only legacy retailer to create its own devices — and rather than offer a single reader as a defensive move, it took the offense with a frequently updated family of products that are promoted prominently in-store. The company has moved so aggressively into the reader space that its e-book market share has grown to 26%, and Consumer Reports has rated the latest Nook as (by a hair-thin margin) the best reader in the industry.
Focusing on target customers: The Kindles try to be versatile, toting around pdf documents from a user's PC and allowing for easy text annotation. B&N's Color Nook has more modest aims as a device focused tightly on reading, but it is a stand-out in how it handles glossy magazines and children's books. In its functionality, design, and marketing, the device aims squarely for women who love to read. The more basic black and white model has been praised for its size, weight, and ultra-intuitive operation. B&N CEO William Lynch says it's made "for Grandma." While Amazon is rumored to be working on full-fledged tablet computers, B&N is carefully picking its shots. It has made a brave bet on customers who love reading yet have been under-addressed by its giant rival.
Experimenting relentlessly: B&N has long been in the vanguard of the bookselling industry. It was one of the first to discount bestsellers, publish its own titles, offer authors self-publishing options, create super-stores, and put coffee shops in its establishments. More recently, it has succeeded with selling toys and games. The company has also made its share of missteps, such as buying the mall-based bookstore chain B. Dalton whose shops have now been closed. In an industry stretching back centuries, it readily tries out new formulas and adjusts its approaches based on careful listening to marketplace reactions.
Staying humble about what can be known: While B&N has chosen a sensible target market of frequent readers, it does not pretend to know exactly how their habits will evolve. Any big retailer makes long-term financial forecasts to assess the viability of store sites, yet B&N understands that its projections must be exceptionally uncertain these days. It has typically taken 10-year leases on stores, but with over 100 store leases now up for renewal annually the company is negotiating short-term contracts that allow it to close stores quickly. Sometimes companies are lauded for making clear predictions about a hazy future, but the bravest and most honest forecast may be, "We just don't know." B&N is willing to incur higher lease costs in the near-term to provide it with much-needed flexibility over the medium-term.
An industry transitioning from physical products to virtual goods goes through about as jarring a change as can happen in business. Many companies don't manage to make the leap. The jury is still out about whether B&N will succeed, but investors seem willing to believe; the company's stock price has been retaining its value. If B&N can move so bravely, shouldn't companies with the luxury of healthier core businesses chart their futures this capably too?
An interesting battle is looming over Apple's newspaper and magazines subscription pricing for iOS devices (notably the iPad). Apple's offer to publishers is simple. They can offer an app that allows consumers to buy individual issues of their content or to subscribe to it from within the app; the publisher sets the pricing. But Apple will take a 30 percent cut of the revenues and it will also require the publisher not to undercut the price offered to iPad app users.
A publisher could grab a customer directly on their own site and avoid the 30 percent sharing rule, but publishers could not simultaneously offer the customer a discount to bypass Apple. That is, they could choose not to share revenues with Apple but could not do a side-deal with customers. Apple appears to have relaxed that rule, but others — for instance, Amazon — maintain it.
Not surprisingly, publishers would prefer not to share revenues in this way. And, of course, they needn't — if they attract paying customers "off pad," so to speak. But Apple has some real advantages in grabbing customers. Purchases made from an iPad are easy and can use Apple's iTunes accounts, so there's no extra adding of credit card information. That may not give Apple an advantage if publishers can sell their customers subscriptions who otherwise would not have been bothered. But if that ease is cannibalizing customers who otherwise would have purchased directly from a publisher, then that publisher will lose out. In fact, they may be better off not having an iPad app at all.
What makes you effective at work? Perhaps you'd say it is your excellent communication skills, your deep background in your field, or perhaps your ability to think on your feet. Chances are, you wouldn't focus much on your habits. Yet your routines are a powerful force that affects your daily behavior.
Habits are associations that relate aspects of your world to an action. Your brain is a habit creating machine that allows you to perform those actions without having to think. An organized workspace allows you to focus your thoughts on the difficult new problems that you face without having to think about mundane aspects of work like filling out routine forms, pulling out a sheet of paper to take notes, or picking up the phone to answer a call. Indeed, if you move to a new office you probably find the first few weeks uncomfortable because your old habits no longer work and you have not yet developed new ones. You suddenly find yourself thinking about all kinds of simple tasks.
In this age of consumer analytics and customer-centricity, most companies don't develop products and services before talking to customers, identifying latent needs and wants, and studying behaviors. However, while coming to grips with myriad customer segments and mountains of data, executives may well have forgotten a way of developing new products and services that stood them in good stead for decades. An old-fashioned process, proposition innovation starts with companies — not consumers — and entails developing products and services that aren't based on consumer feedback or profiles.
If you think about it, several enterprises still routinely develop products and services without talking or listening to consumers. Italy's best-known industries adopt this approach; for instance, fashion houses, from Armani to Prada, create new lines every season, setting trends that others quickly copy. (Walk down Milan's Via Montenapoleone, and you will see the most unlikely people covertly taking pictures of the big labels' latest products in shop windows.)
In most of these fashion houses, a single designer (sometimes, a small team) is the only source of innovation. She or he designs clothes and accessories based on subjective ideas of the world as well as visions of how people should dress. Milan's design cluster — the local community of artists, architects, design schools, textile-makers, critics, et al — may shape their ideas as does Italian history, arts, and style. Still, the innovations stem from deep within the company.
Most companies don't feel that proposition innovation is effective; that employees are capable of pulling it off; or that it will yield results without links to the outside world. Executives are also convinced the process is difficult to replicate because the "genius" model works only in industries where innovation is idiosyncratic and intuition is essential. However, according to my recent research, that may not be always true.
Take the case of Elica, an Italian company that has become a global market leader by relying on proposition innovation. Although it is located in the middle of nowhere, the company has transformed range hoods, of all things, from noisy things you keep hidden, to quiet and eye-catching devices that make kitchens look more attractive. Elica transformed itself from a low-end supplier to an innovative organization by proposing — and imposing — a radically different vision on the interntaional market.
Ten years ago, the Italian company decided to sell range hoods that would make cooking more enjoyable while looking good too. As a first step, Elica developed a powerful and compact air-treatment system that would fit into a small cylinder. Then, it engineered the system so it would be quieter than rival products, managing to reduce noise levels by as much as 35%. Finally, it designed a range of attractive hoods — such as a ceiling-mounted lamp range hood, which casts a soft light on the countertop; a futuristic-looking circular wall-mounted one; a menhir-like island range hood, and so on.
Elica's premium products aren't based on the creative genius of executives or designers, but are the result of its innovation system. The top team started out thinking that the ability to come up with innovative products and services depends on employees' ability to see the world; it wasn't about studying customer data and responding. They therefore reoriented the organization.
One major problem the company faced was the lack of imagination. The town of Fabriano, Elica's base, is encircled by the Apennines. Few employees spoke English; even fewer had traveled around Europe, Italy, or even outside the valley. To tear down barriers and develop a culture that would produce a constant flow of new ideas, Elica created a company-wide community — from blue-collar workers to white-collar designers across functions — and ensured that they interacted freely and frequently.
Elica uses several novel levers to foster innovation:
It has designed a workplace that encourages people to exchange ideas. Every function, including manufacturing, surrounds a large square, which resembles the Greek agora or the Roman forum, where people can gather, chat, and share.
The company counts on spouses and children to expose employees to new cultures. For instance, Elica offers sponsorships to employees' children so they can travel and study abroad. That naturally helps broaden employees' outlooks.
Elica uses art as a transformational device. It runs workshops and artist sessions at which employees from all functions and levels can participate. This helps destroy mental stereotypes, catalyze new ideas, and allow employees to develop a taste for aesthetics.
By 2010, Elica had generated revenues of € 370 million (around $532 million), carving out a 41% market share in Europe and 17% worldwide. Moreover, 30% of its revenues came from products introduced in the last three years; the figure was just 10% in 2005. In addition, The Great Places to Work Institute has adjudged Elica one of the best places to work in Italy for three years in a row — an unforeseen benefit.
When was the last time your company experimented with proposition innovation?