Thursday, December 21, 2006

Managers leave money on the table when they ignore Brand Value

Brand Value represents a large part of the value of a company. In the case of a consumer goods or service business, it may exceed all other constitutents combined. In the case of a Business to Business company, it may be less important, but may still be well over 10-20% of the value. Yet, top management frequently does not act as though it is so critical. Some Private Equity firms now understand this well, paying a premium for a strong brand, and focusing on building the brand. However, most specialized turnaround management experts do not yet understand it, and have even less idea of how to manage it.

We fully expect this to change in the next few years. Managers will come to realize that a brand is valuable and can be made even more so.

Saturday, December 09, 2006

So what does Target do right?

It is not easy to put your finger on why the companies which do things right, get them right. I ascribe it to a closeness to the market, a sort of finger tip sensitivity and identification with the consumer. This does not mean that management has to be the same as the target market, but it needs to have a humility in listening to the market. As soon as a company thinks it has cracked the code and can do no wrong, it starts to falter. This is very difficult to reverse, as panic starts to set in. Toyota gets it right, GM does not. Toyota, while prospering, constantly is thinking of ways to do better. BMW does the same, while Ford allowed itself to become complacent. In retailing, Sears and A&P were behemoths standing astride their markets, until they started to take their consumer for granted. The old IBM did the same, and it took an outsider to the industry to change and save it.

Friday, December 08, 2006

The inevitability of Crisis - Wal-Mart

So it is becoming more and more public. After fake blogs, Andrew Young, a spokesman, putting down ethnic minorities, and continued missteps in its treatment of workers, Wal-Mart has a very public firing of a Senior Vice President of Marketing communications. The company hired her to shake up the culture, and it is clear that she did so. Whatever the rights and wrongs of her firing, it was handled clumsily, amid accusations of malfeasance. It seems that Wal-Mart has become tone deaf to society and the media. She had just hired a new advertising agency, with 10 executives voting to hire them, and now Wal-Mart has fired it, even though it has started hiring people to staff the account. So clumsy. The company has to catch its breath and think through its actions thoroughly before it pulls the trigger.

At this stage, I do not see it getting better. Competition is getting tougher, and the pressure is intensifying.

Saturday, December 02, 2006

Keeping secrets often backfires

Whether you are in business or politics, it is getting more difficult to keep secrets. All too often, if you try, and they eventually come out, the negative repercussions are even worse than if they were simply released as part of routine communications.

Tuesday, November 28, 2006

How do smart people at Microsoft keep making mistakes?

The Zune seems to be having little success at this time. Microsoft, by some estimates, spent $!0 Billion and 5 years to develop Vists, its new operating system. It keeps on losing against Intuit, is about to go up against McAfee and Symantec, is behind Google on innovation, continues to fail with enterprise software. Yet, the company has more smart people than anywhere else. What is happening? It seems that the processes are not in place, and an intellectual snobbery slows down the ability to bring really great products to market.

Saturday, November 18, 2006

Many People who think they are "good" are really not

The absence of evil does not mean that someone is "good." Yet many people who would never lie, steal, cheat, kill, or break the law, think of themselves as good people. Yet they may never do a stranger a kindness, put another ahead of themselves, or inconvenience themselves to help another.

A few days ago, I heard someone say that while he is looking for a job, he has no time to help anyone else. Yet, it is while looking for a job for oneself that one is most likely to come across an opportunity for another. I hear of many people who engage in questionable business practices, such as paying someone who is in a difficult financial position far less than it is worth for an idea or piece of property. No wonder that so many went along with back-dated stock options, channel-stuffing, or null trades.

Monday, November 06, 2006

The $ value of perceptions

We all know that perceptions can be worth money. Whether they are of an individual or a product, changing perceptions can change the amount of money you can earn or the price people will pay for a product. Once it was thought that Advertising adds value, but we now know that the components are far more complex than advertising alone.

So if this value is real, then it can be measured and managed. However, few do. Perhaps the purest example of this are the companies or private equity firms which buy old, tired brands and grow their value. There are several tried and tested methods to do this. None of them are magic, just good management.

Saturday, November 04, 2006

Finance or Marketing - which are the real business people?

There seems to be a continued version of C. P. Snos's "two cultures" in business. Twenty years ago, marketing provided more CEOs than Finance, whereas now, the reverse is true. The fact is that business needs both disciplines. However, having said that, many marketers are not disciplined. There is a tendency among some to admire undirected creativity, and to consider measurement to be a constraint. The fact is that marketers can only succeed if they apply the same processes that finance people do to measurement. Good marketing needs to be treated in much the same way that an engineer treats physical phenomena. Develop a solution from first principles, and then test the outcome, first in the lab, then in the real world. Sadly, now, some marketers are not business people at all, whereas all finance people are.

Monday, October 30, 2006

People are so separated from each other

Fights and arguments are so common, that we wonder why. People regularly think the worst of others. Instead of giving others the benefit of the doubt, we assume that the other meant to attack, put down, or take advantage of us. In fact, that is not often the case.

We see it in flame wars in online discussion boards. Yet, a simple commitment to always be polite and kind soon puts a stop to this. If we would resolve to do this all the time, people would be more successful at everything they do.

Saturday, October 21, 2006

What really is turning around a company?

This Week's Business Week had a cover story about how private equity companies are extracting unearned fees from companies they buy. In far more cases companies are being revitalized and renewed. Turning around a company is not easy, but neither is it new. American Standard was one of the great turnarounds of the 1970s, but successful turnarounds were extremely rare until the past 20 years. In the past, almost inevitably, a company in decline was irretrievably doomed. The existence of Chapter 11 in the US (most other countries only have some form more similar to Chapter 7), encouraged management (even if it is new management) to try to fix the company.

However, a true turnaround is not just cosmetic, but repositioning the company for future growth. Continental Airlines is such an example, and Chrysler certainly seemed to be that, though the changes may have not been deep enough.

Thursday, October 19, 2006

Has "branding" been dumbed down?

Before most people thought of brands, the few who did saw them not merely as logos, but as a reputation with $ value to the company. However, as designers, ad agencies and others have entered the business with a creative perspective, they saw the brand as being defined by logo and presentation. Therefore, it became far more subjective. The core value of a brand has been obscured, and companies fail to maximize them. In some ways, when a private equity company buys a brand such as Pert from P&G, this is a more accurate measure of a brand than any logo (which can be changed at a moment's notice).

Saturday, October 14, 2006

Whether in business, politics or in personal life, partnerships are difficult

The latest UN vote on sanctions against North Korea demonstrates how differing interests make any partnership difficult. While China and South Korea put stability first, the US wants to see the North Korean regime collapse. Since this means that the US and its partners have opposed objectives, there will never be strong, focused actions.
This applies to business partnerships and marriages as well. They are formed for one set of reasons, but it is rare that there is complete agreement on everything for ever.

Friday, October 06, 2006

People always underestimate the difficulty of anything they have never done

Not only common sense, but research shows that people think that anything they are not expert in, or have never done, is easier than it is. This makes it difficult for people to seek out and take advice. I have seen very recently how a CEO, who had a technical background, failed to respect the expertise of his CFO and CMO. As a result, the company got into major difficulty and is unlikely to survive.

Thursday, October 05, 2006

The problems at Wal-Mart escalate

The company does not seem to be able to get out of its own way. We can expect to see continued bizarre reactions from the company. It is now shooting from the hip, and the instincts which served it so well in its C and D county days are completely wrong in the rest of the country. Whether is is the countries it enters, or the people it hires, the company is making misstep after misstep. I fully expect to see that looking back on this year, we will see it as the acceleration of the end of the company, while Target, Best Buy and others continue to be sure-footed.

Even as it hires people who do not fit the culture, it manages them poorly. It brings in people knowing they are different because it expects different ideas. Then it will reject them rapidly. The only people who will stay will be those who will be able to become like the existing management!

Monday, October 02, 2006

Is there a breakdown in the moral fabric of society?

Today, we hear about the third US school shooting in a few weeks. Someone, with no apparent motive, went into a school and killed a number of pre-teenage girls. We ask how anyone can do this awful thing.

We see in a survey from the Center for Academic Integrity at Duke University that over half of all graduate business students have cheated.

The Sunday New York Times wrote that when the justices of the Ohio Supreme Court we faced with cases where plaintiffs or defendents had been political contributors, instead of recusing themselves, they all voted in favor of the entity which gave them money.

We hear that Representative John Murtha, one of the most respected, runs a "favor exchange," where members of the House trade their votes for "earmarks" added to bills wherein their constituents get additional pork.

US Universities, those critical academic institutions, unlike any others in the Western world, give preferential admission, even scholarships, to people who meet none of the academic standards required for a University - I refer to the professional athletes, especially football players, who go to the highest bidder. They also openly give admission preference to "legacy" applicants.

So we also see that Representative Foley, accused of inappropriate communication with underage boys, even though her was Head of the Congrssional Caucus on Children's ussues. To compound matters, we are told, that like Mel Gibon's apparent racist outburst, we should put it all down to alcoholism. It is difficult to see how alcohol could make racists or pedophiles out of people who were not to start with.

Sunday, October 01, 2006

Are US Universities serving society with sports as brand driver?

The New York Times last Sunday carried an article talking about how the real student athlete is being pushed out by the "professional" college footbal player. This is the only nation in which individuals can get admission and scholarships to Universities on the basis of athletic ability. This must have a harmful effect on academic achievement by demonstrating to others that athletic prowess is more valued than academic performance.

I have never understood how anyone can be a politician

It seems to be a required skill to be able to hug someone publicly who has a few days before aimed poisoned barbs at you. Principles are secondary to contributions and power. I have never understood how people who are supposed to be fighting for what they believe can feel quite so comfortable compromising at every turn.

Are we acting in the public interest if we challenge the fairness of the system?

When an individual or a newspaper challenges some element of the system, that is "rocking the boat." It may reduce confidence in the system. Is it better to do that or to let it slide? We can tell ourselves that it is better to live in an imperfect system, than in one in which people have lost confidence.

Recently, The New York Times has two articles casting doubt on two elements of the legal system. It pointed out that in much of New York state, local courts were presided over by people with no legal training or even, it seems, common sense. As a result, there have been the most egregious miscarriages of justice, with innocent people being sent to jail on no evidence at all. Today, the paper pointed out that as judges across the country need larger and larger campaign contributions to win re-election, these campaign contributions are influencing judgements. It used the Ohio Supreme court as an example where judges are apparently siding with their contributors.

We can also doubt the democracy of the "first past the post" electoral system, the democracy of the Senate, where Montana has the same number of Senators as California, and the House of Representatives, where electoral districts have been so gerrymandered that few incumbents face a meaningful challenge. Are we better off being aware of that, or are we happier being in ignorance of the facts?

Friday, September 29, 2006

Are you not responsible if you do not read your emails?

It used to be said that "ignorance of the law is no excuse." I suppose that these days, not reading your email is sufficient reason to escape culpability.

Wednesday, September 27, 2006

The degree to which GM is out of touch is breathtaking. Is Wal-Mart next?

GM's management is intelligent, well educated, and dedicated. However, it operates in an insular world in which they have lost touch with the consumer. The fact is that GM is dead, but like a rotten tree, it looks solid on the outside. It even sprouts green leaves. They are likely to continue to circle the wagons and cut themselves off even more from outsiders. Bringing in an outsider may not be enough when the outsider has spent 37 years at one company - a company which does not deal with consumers at all.

In a similar fashion Wal-Mart is running in circles. The strengths which made it successful - the ability to bring low prices and wide variety to customers in C and D counties, rural ones, and its incredibly strong supply chain from retail stores back to its suppliers, have reached the point of diminishing returns. It has no skills in cultural sensitivity, so it has failed in Germany, Korea, is struggling in China (vs. Carrefour) and the UK (vs. Tesco). It is having difficulty dealing with market entry into the urban East and West Coast. its new committment to Organic Food and designer clothes may leave its existing customer behind, without winning customers from Target and Whole Foods. Its move from one store format to four is too little, too late. It is hiring 200 new marketing people, most of whom do not understand retail and will under-estimate the difficulty. Right now, they are optmistic, but there will be a culture clash, and the inevitable short-fall will be seized upon by old-timers to push out the newcomers. Just as once, people thought that A&P, and then Sears, were invincible, yet lost their market positions, so will Wal-Mart, which is now where Gm was 10-15 years ago, as it brought in many consumer marketers, and started acquiring luxury brands.

Tuesday, September 26, 2006

Private Equity and Turnaround Management firms do not often understand Brand Value

Most managers in Private Equity and Turnaround Management firms do not completely understand Brand Equity and how to manage it. Yet, it is an essential part of what they do since in many cases, the brand value can be more than tangible assets.

However, most marketers do not understand finances well enough to help.

Sunday, September 24, 2006

"I don't know" - A powerful tool

I have never undertood why saying "I don't know" is such a difficult thing. However much I do know, there is much more which I do not. Admitting that I do not know, or do not know everything about the topic may result in learning something new. "I already know about that" is the phrase which will ensure that you never learn any more about it. So many of us get into trouble because we assume we know something, but do not know it well enough.

Many years ago, a major consulting firm's Brussels office carried out a three month investigation of the European market for hockey equipment. Only when the client arrives in Brussels for the presentation did everyone discover that the firm has investigated the market for field hockey (more common in Europe), whereas the client meant the ice hockey market!

Thursday, September 21, 2006

Why would anyone believe what a politician says about an opponent?

I have always treated what any politician says about an opponent. Yet, time after time, we do see that negative advertising seems to work in politics. This is puzzling. If an advertisement says something negative about a competitor, I assume that this is self-serving and likely to be untrue or taken out of context. Politians are even more likely to do this, yet it seems to work. Given the scepticism with which politicians are viewed in general, this is astonishing.

Monday, September 11, 2006

Supermarket recycling in the UK shows more societal differences

European consumers are far more aware of issues such as recycling and global warming than US consumers are. They are prepared to make real changes in their lives to meet the needs. while energy use in the US continues to climb per capita, in Europe it is dropping. Supermarkets in the UK are moving towards compostable packaging in the case of Sainsbury, or reuse of shopping bags in the case of Tesco. No one in Europe seriously challenges the idea that gasoline taxes need to be high to keep prices as a disincentive to use. Meanwhile in the US, the idea that prices should be low is the prevailing philosophy.

Sunday, September 10, 2006

In our wish to make all cultures look alike, we gloss over deep-seated differences.

"Today, in the West, there are no good excuses for religious belief - unless we think that ignorance, reaction and sentimentality are good excuses. This is of course not so in the East, where, we acknowledge, almost every living citizen in many huge and populous countries is intimately defined by religious belief. The excuses, here, are very persuasive; and we duly accept that 'faith' - recently and almost endearingly defined as 'the desire for the approval of supernatural beings' - is a world-historical force and a world-historical actor."

Now this was by Martin Amis in The Guardian newspaper in England. In the US, or in many other countries it would be an outrageous statement, but in the UK it was greeted with apathy. The fact that two countries may be English speaking and share many traditions does not mean that people think alike. Watching a British TV program, I am always struck by the differences in pace, script, and ways in which even sex and violence are treated. Clearly, the two countries are different. If this is so, how different are countries where language, religious tradition, literature, education, and politics are completely different?

Saturday, September 09, 2006

Simplification is essential, but dangerous

Situations are complex. They are often too complex for individuals to grasp. Whether we are examining the situation in the Middle East or the market for flash memory, it is incredibly convoluted. So management consultants, academics and journalists work hard to simplify the situation so that people can understand the issues. As a result, politicians, executives, and voters often think that the issues are simple. So we are caught in a "Catch 22." If we do not simplify, the issue is incomprehensible and often goes unadressed. If we do simplify, the problem can be tackled, but later it can come back to haunt us. Sometimes even the people who do the simplification become victims and start seeing it as easy.

While we may have to deal with a situation by simplifying it, we need to recognize that there is often much complexity which lies behind the issue.

Wednesday, September 06, 2006

So H-P follows ENRON into the corporate lack of ethics Hall of Fame

One of the interesting things about corporate and government life may not be that people have become less ethical, but that there is less sense of shame about it. How can Patricia Dunn, the Chairman of the Board of H-P, use people who pose as individual Directors to get their phone records? It seems that much as companies such as ENRON, Peregrine Systems, and many others saw nothing wrong with what they did, so too companies feel OK about options backdating, or channel stuffing, or null trades. Elected representatives see nothing wrong with voting for measures which will enable them to profit from, for example, the sale of land. Perhaps people have always been out for themselves, but the constraints on dishonorable behavior have grown less.

Sunday, September 03, 2006

Pattern recognition skills rather than industry expertise

Industry expertise is very dangerous. When someone runs a business on the basis of what has been already done in that industry, it becomes a self-fulfilling prophecy and the business suffers. The most innovative thinking in an industry often comes from someone outside the industry, but who has worked in a number of industries and has learned pattern recognition. It took Lou Gerstner to turn IBM around. An industry insider could never have done it.

Friday, September 01, 2006

So what does it take first to turnaround a business?

Some twenty years ago I inherited a division in trouble. It was a frozen food business which my predecessor had pushed my corporation to buy. As its boss, he kept on expanding the number of products it sold, and the geography in which it sold them. As I saw back then, you cannot sell your way to profitability if your costs are out of control. The first thing to do is to control your costs. This business had become spread too thinly, so withdrawing and cutting costs was the first prerequisite to turning around the business. This is not easy of course, and having had to do it several times since, I recognize that experience is important.

Once you have successfully cut costs, and redefined the business model so that it is possible to make money, you can start to think about growth. Business expansion can only come after all else is stable and you are not sure that you are simply going to put yourself back where you were when you inherited the business.

Thursday, August 31, 2006

You cannot order people to be curious or open-minded

Among the characteristics which we say we value most are curiosity and open-mindedness. Yet so many people have that shut down as they grow up. Children who ask many questions are told to shut up and do as they are told. Parents and teachers show unshakeable beliefs in many things. Society tends to respect people who will not consider alternative viewpoints. Changing one's mind is considered a sign of weakness. Young people not only often have poor role models, but are intentionally limited in their thinking by adults.

Wednesday, August 30, 2006

Company turnarounds are not only financially driven

There is a growing turnaround industry. The Turnaround Management Association has grown in 15 years to over 6,000 members. Yet, so much of the industry looks like its predecessors, the liquidation and bankruptcy industries. While in many cases, use of Chapter 11 gives companies much needed breathing space, it may not be enough. This is particularly true outside the US, where bankruptcy laws look more like Chapter 7, and there is less room to manoevre in bankruptcy.

Companies in trouble, such as Quantum, whose shareholders just administered a stinging rebuke to management and the Board, need to have a two-pronged approach. This addresses financial issues such as debt, expenses, etc., but also customer loyalty, pricing, and market share. All too often, companies in trouble simply hunker down.

Tuesday, August 22, 2006

Afraid of Michael Moore

"Sick" is the name of Michael Moore's upcoming movie. According to Advertising Age, the industry is so afraid of it, even though they do not know what it will say, that it is already trying to discredit him.

Again and again we see management in companies living in their own insular world. They really believe that they can control information about themselves. Ater the Tylenol crisis, everyone praised J&J for allowing unfettered access to the media, yet other companies have not taken this to heart. The best way to make people convinced that you are hiding dark secrets is to keep outsiders away.

Monday, August 21, 2006

Business people and politicians do not understand technology well enough

C.P.Snow coined the term "The Two Cultures" over 50 years ago. Since then, they have grown further apart, not closer. So many of the isssues which face us today require understanding of science and technology - global warming, nuclear energy, industrial policy, defense, education, etc. Yet, the people who are most likely to have to make the decisions are the least likely to understand the problem, the solutions, and implications of their decisions.

Everyone needs to spend some time learning and even keeping up to date with science and technology. These issues are too important to be overseen by people who do not understand them.

Friday, August 11, 2006

Predictions of doom are usually correct

One of the facts which so many forget that is that what goes up, must come down. The booming stock market, drops. The surging housing market will inevitably collapse. Interest rates will go up and down. We live in a world of cycles. Not just predictable Kondratief cycles, but irregular cycles.

Those who are aware of this do well. Those who forget it, can run into trouble.

Wednesday, August 02, 2006

Can we really pass on knowledge? The evidence says no!

It seems that each generation has to relearn most of what its parents know. As is well recognized, each new generation thinks of the one before as rather to be pitied for their lack of knowledge. So each generation has to learn for itself. Furthermore, the learning is no faster than for the previous generation. As has been written before, we none of us know what we do not know. The really smart thing is to assume that there is more we do not know than we do, and approach each situation with a spirit of discovery. Unfortunately, so many people approach each situation as though they already know everything they need to.

As a result, this very much slows down learning, because, at best, we have to make mistakes to learn.

Monday, July 31, 2006

Optimism rules!

Over the years, I have seen so many projects which are clearly bound for failure to any objective outsider, continue to be pushed by intelligent people. There are many reasons for this. People do not know what they do not know, and therefore do not examine the situation accurately. Furthermore, in the midst of a situation there seems to be a need to believe in a favorable outcome. So people twist all the evidence, if there is any, to convince themselves and others that they will succeed.

I have seen and continue to see, so many inevitable failures upon which so much time and money is being lavished. I suspect this will still be happening many years to come.

Sunday, July 30, 2006

The business magazine unintended doom prediction

It is quite amazing how when a major business magazine features a topic or person on its front cover, soon after, there is a sudden crash. So when the three major magazines talk about the never-ending bull market, the stock market crashes. When Carly Fiorina, to pick just one person, is featured on many magazine covers, it presages problems in her tenure at H-P. Beware of magazine features! They not only are often out of date, but they do also encourage envy and create enemies and rivals where there may have been none. Equally, by the time a business magazine writes about economic disaster, or boom, the tide has usually turned. Yet, the magazines keep on doing so, while the readers not only lap it up, but pass it on and quote the stories in making decisions.

Logically, Top Executives should be getting older.

There have been forces at the bottom and top of the age issue forcing change. Through the second world war, few companies hired college graduates. The G.I. Bill was responsible for the huge expansion in college degrees, even when Ford Motor Company hired Robert McNamara in 1946, he was not only the first MBA there, but one of the first college graduates. College graduates went on to law, education, or medicine in those days. Most executives started after high school (and a high school diploma was rarer than a college degree is now), at 18. So in 1925, by the time they reached 50, they had 32 years experience, but in 1960, it was down to 28, and with the expansion in MBAs in the 70s and 80s, it is now down to 24. On the other end, in just a few generations, health has grown not only life-spans, but the age at which you are healthy. In 1900, 13 percent of people who were 65 could expect to see 85, now it is almost 50 percent. in 1900, 28 % of white men between 50 and 64 had a heart murmur, now it is under 2%. Even since 1950, life expectancy for 20 year olds (to eliminate infant mortality) has climbed from 70 to almost 80. In each generation, not only has longevity increased, but so has it's health. This means that while someone starting work in 1945, would be an old man by 65, anyone starting work in 1970, would not reach that same level until well over 70, and as to those starting on 1995 - who knows? So logically, the age of business executives should keep on rising, as the age at entry keeps on doing the same.

Since in 1925, 75% of all executives were over 48, then today, they should be over 58. Yet, they are in fact, not. This means that business is filling an expanding need for executives from a shrinking pool.

Friday, July 28, 2006

Wal-mart, as predicted, keeps on making mistakes

Today it was announced that Wal-Mart is pulling out of Germany, as it recently has in Korea. It loses money in Japan, is losing share in the Uk, and is half Carrefour's revenue in China, with much the same number of stores. Success in global retailing is very difficult, other than fast-food. Yet, Wal-Mart is simply floundering overseas in much the same way as it is in the USA. Moving upscale in clothing, adding organic food, building a huge Marketing department, where once there was none. These all address symptoms, and are a sign of the loss of the clear vision which built Wal-Mart. Perhaps it had become less relevant to new customers, but Wal-Mart is in danger of moving away from its old ones. Its UK rival, Tesco, went through much the same change, from a "pile it high, watch it fly," mentality to a new model of customer intimacy. It will be interesting to see how it succeeds in the US next year.

Successful companies carry the seed of their own destruction

As The Economist pointed out today, many of the successful high tech companies founded 25 years ago have hit a wall. From 3Com to Silicon Graphics, Novell to Borland, and perhaps even Microsoft or Dell, each faces huge problems. These are not only problems of reduced growth or profitability, but of survival. I find it interesting that of the eight companies I have worked for (not many these days over a long career), only two still exist as independent entities. Three ceased to exist while I was with them. Both of these are boring Consumer Packaged Goods companies, one a soap company founded over 175 years ago. Even among CPG companies, most of the well-regarded ones of a few years ago no longer exist - Quaker Oats, Pillsbury, General Foods, Hunt-Wesson, etc.

So why do so companies go through this cycle? Firstly, they are usually formed around a great idea. They boom and prosper. Management and employees start to think that they are smart, not just lucky. They believe that they have moved through the four stages all the way to "unconscious competence" without passing through "conscious incompetence " and "conscious competence." In fact, in many important respects, they may still be at "unconscious incompetence."

Tuesday, July 25, 2006

Global Branding

Global Branding is a complicated issue. Few people understand it. Few are qualified to. It is importan to live in a few countries to understand conceptually how brands can be seen differently. It is essential to have appropriate market research (and so much is culturally badly translated, even if it is linguistically).

There are a limited number of brands which have it right. Most are the result of unplanned and haphazard brand-building. To compound it, over time, the brand harmonization efforts have been ill-conceived or poorly executed.

Yet there are principles to follow, if the company has the will, the process, and the organization.

Saturday, July 22, 2006

Predictions will be wrong - AdAge 1980 proves it.

I recently found an old special edition of Advertising Age from 1980, about "the next 20 years." Knowing how much the world of advertising has indeed changed, I started reading it. Of course, it was so completely off target, that it was funny. The past is an awful predictor of the future, but we keep projecting in a straight line and trying it. It assumed the same limited media world, relying on more accurate audience measurement to target consumers. It did not conceive of the Internet, even though it had started by then. Interestingly, none of the writers seemed to be aware of any of the potentially disruptive technology which was even then on the horizon. I would speculate that this is still true today, and much of what really will change the world is not being considered today.

The fact is that ARPA started on the early Internet under Eisenhower. CompuServe was started in 1969, with email starting in 1978, chat in 1980 and file exhange in 1981. Yet no one foresaw in 1980 that this could be an advertising medium.

Thursday, July 20, 2006

One generation has resulted in huge change

I recently came across a book which I had bought 25 years ago when I was promoted to a General Management position. This book gave much of the same advice which "onboarding" experts these days, such as PrimeGenesis, provide. However, there was one key difference. These days we knwo that the first 60 to 90 days are the crucial ones. A generation ago, we had more time. While today's books talk about the first 100 days or first 90, the book from 1981, is titled "Shooting the Executive Rapids - The First Crucial Year of a New Assignment."

These days, we live in an accelerated world. Today, we regard multi-tasking as normal. Snap judgements as essential. Yet human physiology and psychology has not changed in the past 50 years. So each time we acccelerate some work or increase the load, something suffers. We do something less well. Research tells us that we sleep too little, more sleep improves our thinking processes, yet we take pride in how little sleep we get. We do more things less well, but will not admit it to anyone for fear of being seen as weak or old.

Saturday, July 15, 2006

We do not seem to learn to talk to our enemies

We should know by now that if you want to make peace, you have to talk to your enemies. Talking only to your friends does no good. If when you first talk to your enemies, they attack back, you have to continue to talk. Defend yes, but not attack back. After several hundred years, Britain learned this in dealing with the IRA, and Spain with ETA. The IRA looked a lot like Hezbollah - with a military wing and a "political" wing which had elected representatives in Parliament. However, in spite of continued attacks, the talking went on. The progress versus these two groups shows that you can negotiate with terrorists, and even slowly absorb them into society. The Negotiation Program at Harvard law school has taught this for many years, and the process has been shown to work. Yet our instincts, when attacked are to strike back harder. This simply creates more polarization and more terrorists.

I am confident in predicting that as long as people think you can crush terrorism militarily, it will not happen. No terrorist group in history has ever been crushed by force. Of course in 1916 the USA invaded Mexico to "punish" Pancho Villa, who had attacked Americans in the USA. The end result was that the USA retreated in complete failure several months later.

Thursday, July 13, 2006

How is it possible to have an International business?

It may be a miracle that companies succeed in having prosperous international businesses. After all, the company is going to a country where the language, culture, and physical circumstances are very different. It should not surprise us that most companies international operations struggle for quite a while. Some even give up, others never reach the level of performance the home operation does. Most companies underestimate the challenges. For example, it is known that most people assume much greater homogeneity in groups to which they do not belong. So if you are a Harvard alumnus, you know there is wide variety among alumni, but someone who is not will feel comfortable generalizing about Harvard alumni. Americans will generalize about the French, while the French will generalize about Americans. So we are poor at understanding the subtleties of foreign cultures.

Equally, living in a place is very different from visiting there, however often. Even withn a country, living in LA is not the same visiting, and visting Mumbai is not the same as living there.

Monday, July 03, 2006

Hubris - yet again GM will drag down a fabled boss

I will predict absolutely that Carlos Ghosn will not fully grasp his own limits. Further, if he does succeed in creating a "merger" of Renault, Nissan and GM, it will drag all three down. Size alone is not a problem, but when size is created by merging entities with different cultures and histories, it becomes a drag. Since neither Nissan or Renault is fully out of the woods yet, and GM is deep inside, the sum of the parts is a very weakened dinosaur.

None of us fully know what we do not know, or what we can't do. However, as we become more successful we believe that we can do anything. We underestimate the complexity of that which we do not know. We always think the other person's job or industry is easier than ours. As a result, when we take it on, we fail.

Saturday, July 01, 2006

Which countries will lead the world in 2100?

So often these days, people say that China will lead the world much as the United States led it in 2000 and Great Britain in 1900. The only problem with this is that none of the previous leaders were obvious a century before. In 1900 in seemed that even if Britain would be overtaken, it could equally be by Germany or Brazil or even Japan.

We never seem to learn that predicting the future by projecting the past in a straight line is rarely accurate. So, if China is not the woeld leader, what country will?

Wednesday, June 28, 2006

The frustration of being able to help

I am not sure how many people understand that when others see a situation where someare struggling and they can help, it can get quite frustrated. The fact that an outsider can help is not necessarily based on intelligence, but on perspective and a lack of "received wisdom." It took an outsider, Lou Gerstner, from RJR Nabisco and American Express, to turn around IBM. Yet, all too often, people will say, "you have not worked in this industry," without realizing that it may be the biggest recommendation. GM has many smart people, but they seem to make no progress at all in fixing the company.

Monday, June 26, 2006

What comes after "convergence?"

We know, or should know that technology does not stand still. The promise of "convergence" has been with us for over 15 years, and is only now beginning to be fully commercialized. This will not be complete for another fifteen. So what could come after? We read today that for the first time a man has controled a computer and simple mechanical devices with his brain. Perhaps we will get to the stage where we can not only replace parts of the body perfectly, but to the point where humans will be able to control mechanical and electronic devices with the mind. We will get to the point when we will be able to access the sum total of human knowledge simply by thinking about it. Of course that will not stop people acting like idiots!

Friday, June 23, 2006

Executives who know their business can be improved, but won't do it

It is not only the low level employee who sees effort as a nuisance, customers as an irritation, and feels threatened by ideas for improvement. Many executives feel the same way. All companies can be improved in a number of ways. Improvement has to come from inside and outside. Yet many executives are proud of their inability or resistance to change. They insist on trying to remake the world around them in the way which they want it to be. AOL has often been a good example of this, and many of the power companies are. Such companies often believe that market power or regulation can skew things their way. For a while it can, but the reverberations are severe when the marketplace gets its revenge.

Thursday, June 22, 2006

The Sales prevention department

In a recent New York Times blog article by David Pogue, he describes how a Kinko's employee tries to turn away business:
Unfortunately, this is quite common. We each meet it often. Ulimately, we cannot blame the employee, but the top management which allows this to happen.

Sunday, June 18, 2006

Do companies like Kraft really understand?

Companies are talking more and more about "open innovation." Procter & Gamble has shown us how it can be done - being genuinely open and eager to outside innovation. So many of the company's new products were developed externally. Intel and Nokia are pushing the concept. Companies such as Jones soda, and Threadless are putting the customer in charge. Kraft recently said it would encourage ideas from consumers instead of automatically rejecting them as in the past, however good. Nevertheless, they have made the process so procedure ridden, threatening (they say that if the idea is not legally protected enough, they will take it and pay the submitter $5,000, thus declaring up front that consumers cannot trust them). It is clear that they just don't understand what putting the customer in the driver's seat means, and the attempt may well do more harm than good.

If you want to let the customer drive innovation, you must give him or her the controls. Allow the customer to innovate and be scrupulously ethical. While the lawyers will warn you to limit liability, the cost of this may be consumer trust and credibilty.

Saturday, June 17, 2006

The promise of Wikipedia

I am a fan of Wikipedia. I have even made some small additions and modifications to a few articles. An enclopedia written by everyone seems a wonderful concept. However, it is actually a modest group of 1,000 or so people aho do the bulk of the work. As with so much, a tiny minority do most of the work, with a slightly larger majority who contibute in a lesser way. The majority of users do not contribute.

So in many parts of life few contribute to volunteer activities. Now this is fine as long as those who do recognize this. I see often that volunteers become bitter and frustrated as they see others do little but take. All volunteers need to recognize that the reward is in the doing. Helping others brings great rewards.

Tuesday, June 13, 2006

Is Soccer leading business in globalization?

"Transnationals," defined as people who are living outside their home countries are increasing. If you were to take all transnationals today, the size of the group would be equivalent to the fifth largest country on the planet. In world cities like London, transnationals account for up to one-third of the population. Transnational movement has doubled since 1975, a substantial trend. In American corporations, we have seen the number of non-Americans in top management positions grow from virtually zero to at least a significant minority in a generation.

Yet, in soccer we see something far more expreme. In a business where results are all that count, we have seen in one generation, a situation where we have gone from top club teams being made up players from within 30 miles of where the club is basedm to one in which they come from all over the world. As an example, in a recent English Premiership game between Arsenal and Fulham, two London-based teams, of the 22 starting players, only 3 were English, with the remaining 19 players coming from 14 nations.

If corporations were genuinely merit-based, would we see the same? In a situation where corporations must be increasingly globally skilled and aware, will we see them promoting more and more transnationals - which means Americans in European, Asian and Latin American corporations too!

Sunday, June 11, 2006

The Business press is dangerous

The business press is A follower. Whether a magazine such as Business Week, Fortune, Fornes, Fast Company, or a daily paper such as the Wall Street Journal or Fincancial Times, it reports what has gone before. Unfortunately, it often does so in a tone of breathless excitement as though it had discovered the Laws of Gravition.

Not to simgle it out, but the latest issue of Business Week is a classic. Highlighting Innovation, it reads as though Innovation is new, and so are the rules of Innovation. It features some predictable faces and repeats old truths. For example, it states that innovators have an exlectic, rather tan specialized education, as though it had never heard the term "renaissance man." Leonardo Da Vinci could have taught most of the people featured a few lessons. It was Thomas Edison who invented the concept of the R&D lab (a visit to his factory and laboratory is essential to anyone who wants to learn how to innovate). Arkwright invented the Spinning Jenny, Gutenberg the movable type printing press, Henry Ford, mass production (though some would argue that Samuel Colt did before him), and many, many other innovators managed to innovate long before they read Business Week, Even the 9 rules printed in Business Week are old one, which date from many years ago. As for the polymath who is the inventor, this is not new. It is only recently, that business people became specialists. I, although I studied multiple scisnces and engineering, also learnt Latin and Greek! And though the magazine raves about the young, neither Colonel Sanders nor James Dyson were young when they created KFC and the Dyson vacuum machine. The founder of University of Phoenix and creator of the concept of for-profit higher educationm, was over 60 when he started his business.

Wednesday, June 07, 2006

Stock Option repricing - ethics did exist

There has been much written about companies repricing stock options so that they were apparently issued at the price on the lowest price day of a period. While this clearly did happen in many cases, there were companies which were highly honest. I remember when I joined Remedy Corporation in 2000, Larry Garlick, the founder and CEO, told me that my initial stock options would be at the price of the stock on the Monday I joined. He commented that it was a pity I had not joined a week before as I would have had them at a lower price. However, it never entered either of our minds to pick a different date and rewrite history to give me a lower price.

While I have seen management indulge in unethical behavior, I have also seen most managers not only stick to the law, but also be ethical in all their dealings. We must focus on instilling these values in people while they are young. Business School or a company is too late.

Monday, June 05, 2006

Bad managers hire skills, good ones hire talent

So often I see that to fill a position, a company is looking for, essentially, someone who has done precisely the same job in a similar company. The hiring manager would rather hire someone who is less talented, but can do the job adequately from Day 1, than someone who has to learn the job, but who will eventually perform it spectacularly. Sadly, the person hired will keep on doing the job adequately as the company or industry marches towards obsolescence. Companies need people who will challenge the accepted wisdom, can not only learn, but create new skills. Unfortunately, this happens rarely.

So when you write or read a job description, look for one which focuses on talent, not skills.

Saturday, June 03, 2006

The glory of "Gap year"

Today's New York Times had an article on the increased pressure on graduating high school seniors as they prepare for college. Just as pressure on American youth is increasing, so it seems to move in the opposite direction for British and Australian youth. In the 19th century, the wealthy young took "The Grand Tour," during which they traveled around Europe and met people in those countries. During the 20th century, young people who were bound for Oxford or Cambridge, with the Universities' encouragement, worked at a job or travelled around Europe or even the world during a "gap year". Now in the UK and Australia, it has become a rite of passage to, either before any University or after graduating, travel for a year and meet local people. During this year, the young people have the opportunity to gain some maturity and awareness of the world. I believe that by not doing this, Americans miss a lot. Even when Americans spend "a year abroad" it is usually in an organized group, while people from Australia or the UK will travel alone or with one friend. It has become so important that there are even websites devoted to it, such as:

As pressure on people increases in the US, so does it become more manageable in Europe. Europeans are becoming more cosmopitan faster than Americans are.

Tuesday, May 30, 2006

Age does matter in the game of musical jobs

Job tenure for senior and middle managers continues to shorten. A study by Greg Welch of Spencer Stuart suggested that the average tenure of a CMO is now down to 23 months. Now I know some who have lasted no more than 3 months, and a few who have been in the job for years. The reality is that a newly appointed CMO is likely to be out of the job quite fast.

The other issue is that over 50, however talented and energetic someone might be, the chances of landing a new position in corporate life are slim. So in the game of musical chairs which is today's job market, a typical CMO who is perhaps in his or her late 40s, is quite likely to find that unemployment strikes just as they reach an age of diminished employability.

Therefore, trite though it may be, itis key that managers in their late 40s take great care to hang on to their jobs.

Sunday, May 28, 2006

The decline in belief in all our institutions

In the past few generations we have seen much which makes us lose faith in our institutions. We see corporate chieftains found guilty of falsifying financials. Politicians seem to compete in taking bribes and we see others do every thing they can to protect colleagues. Doctors hide incompetence, the military engages in cover-ups of incompetence or illegal actions. Enron is not alone.

We wonder why voting turnout keeps dropping, yet we see that a political contribution is more valued than a vote. We are exposed to political ads which tell us that each candidate is corrupt or incompetent. Drug companies withhold evidence of dangerous side-effects. Tobacco companies denied that cigarettes caused lung cancer, energy companies that power generation or gasoline powered cars are causing global warming. Journalists fabricate stories. Perhaps this has always happened, but we now have a constant stream of evidence of it. Our faith in the good intentions and integrity of all the institutions which make our society work has been eroded.

We need to demand higher standards from all who lead us.

You can't make peace if you only talk to your friends

It has long surprised me that so many people who need to work with others will not talk to those whom they dislike or distrust. Whether it is two nations with common borders, or two managers who work on the same team, the only effective way to make the relationship work is to talk extensively with those whom we dislike and distrust. To refuse to talk to those whom we regard as enemies and competitors is self-destructive. This does not mean that we have to acquiesce when we do not want to, but simply talking and discussing the issues is the only way to resolve them.

Friday, May 26, 2006

The prime of your life

Today we heard about FDA approval of a new shingles vaccine for people over 60. Shingles is a devastating illness which hits older people. It causes intense pain, and often the nerve sheath damage is so great that it never goes away. There is no painkiller which works, so news of a vaccine is wonderful.

The phrase "the prime of your life" is applied so often, and it seems to mean whatever age you are now. Parents say it to children when they are twenty, spouses at thirty or forty. The reality is that these days, the prime of your life can easily be in your fifties, sixties or even seventies. People today can have remarkable physical fitness, mental acuity, energy, and a powerful knowledge base as they reach ages at which a hundred years ago they would have been regarded as old.

Yet, society does not make good use of these people. FOr each middle-aged person who is underused because of age perception, we are hurting ourselves and society.

Wednesday, May 24, 2006

The half life of credentials

There is a time for everything. The High school you go to, and the extra-curricular activities in which you indulge will help you to get into a great University. Graduating from a great University helps you get into an "academy" company or organization which is known for quality training. That first job will help you to get a wonderful second job. However, if you step off the ladder for any length of time, it is much more difficult to get back. The older your credentials, the less value they have. The homeless Harvard graduate may be rare, but it is possible. If you were to look at a cross-section of people in each age cohort, it would be clear that as the cohorts age, more members drop to a lower level, while only a few continue to rise all their careers.

Over the past few years, I have been quite involved in company and University alumni groups, and it is unfortunate to see that the percentage of members who have fallen off the ladder rises with age. In fact, the higher the 40 year old rises, the higher the proportion who fall off in their 50s. It is easier to maintain the respectable, but undistinguished career than the shooting star.

Tuesday, May 23, 2006

Loyalty is not for ever

Businesses confuse customer loyalty with the kind of loyalty which we mean in patriotism. Customer loyalty is not necessarily linked to emotional loyalty, but purely to behavior. When a customer switches, he or she is disloyal. Now this may be because he or she moved and has to change, say cable company, or airline most frequently flown. So when companies put a lot of emphasis into measuring satisfaction, they are only measuring one component. Customers are also loyal because of convenience, contracts, exit barriers, peer pressure, and they may outweigh dissatisfaction measures.

Behavioral measures in so many things are far more valuable than perceptions and attitides of mind. This is why such analytical tools as Dunn Humby are so much more valuable than attitudes. This is why anthropology can be more valuable than psychology in that it centers around observed behavior rather than claimed behavior.

Monday, May 22, 2006

The business news is not

The "Business" pages in the newspaper focus on the activities of public companies. This is because the business news is really more about investing in public companies. It is rare that privately owned companies such as Cargill, Bechtel, Mars, SAS, and many, many others are discussed except in the context of public competitor performance.

At least the Wall Street Journal is well named!

Saturday, May 20, 2006

Should we call it "medium band?"

In 1996, while the use of 56.6 Kbps dial up was growing, most people were still using 28.8 Kbps. So when we, in the cable industry, introduced 3.0 Mbps high speed data, we could say that it was 100 times faster than most people were using, and 50 times faster than almost anyone, except for those with access to a T1 line, which worked at about 1.5 Mbps. Now, ten years later almost everyone claims to be offering "broadband." However, this covers a very wide range. The cell-phone companies offer wireless data over EV-DO and similar networks which allow downstream speed of 500-700 Kbps. Phone companies offer DSL at up to 1.5 Mbps. Most cable companies routinely offer 3 Mbps, while Cablevision's "Boost" line provides up to 30 Mbps (with upstream speeds of 2 Mbps, vs. a more typical 256 Kbps).

So now the difference between the fastest and slowest "broadband" is about 50 times - the same difference as between fast dial up and the original broadband. As speeds available to consumers continue to climb, I believe that it becomes inappropriate to describe both by the same word. We either have to create a new descriptor for the 30 Mbps service or abandon "broadband" for services of 3 Mbps or less.

Tuesday, May 16, 2006

Limits to Social Networks

The Dunbar number was first calculated by the anthropologist Robin Dunbar. For most purposes it shows that around 150 is the largest number which can form a cohesive network. This applies to companies, villages, academics, and any other and is based on the capacity of the human neocortex. In order to do this, he calculated that the group has to spend about 42% of its time on social grooming. In theory, computer software allows us to reduce this time as well reduce the dependance on propinquity. However, there is no evidence that this really happens. People with too many people in their social circle simply do not have the closeness and reciprocity of a genuine social network.

As a group becomes larger, smaller sub-groups form and it becomes hard work to build and maintain linkages betwen them.

Sunday, May 14, 2006

The Beginnings of Broadband

MediaOne makes 'broadband' pitch.

Date: 5/19/1997; Publication: Multichannel News; Author: Haugsted, Linda

Continental Cablevision Inc., the cable industry's third-largest MSO, officially changed its name to MediaOne last week, as expected. But, in a surprise move, it branded the new company as a "broadband-services company," with the tag line: "This is broadband. This is the way."

Amos B. Hostetter Jr., CEO of MediaOne and co-founder of Continental, said the operator - which has nearly 5 million subscribers in 19 states - would support the relaunch-and-branding effort with a $20 million marketing campaign for the rest of the year.

MediaOne, a division of U S West Media Group, which acquired Continental last year for $10.8 billion, also relaunched its Highway1 high-speed Internet-access service as MediaOne Express and announced its expansion to the metropolitan Chicago market, along with existing service in Boston; Jacksonville, Fla.; and Detroit. Homes in Atlanta; Los Angeles; Richmond, Va.; and southwest Florida are set to be connected to the service by the end of the summer.

Hostetter said the renamed company would "define a whole new industry - broadband," which he described as a "powerful two-way wire" that can deliver computer, television and telephone services to the home.

Many industry observers were puzzled by MediaOne's emphasis on the term "broadband," but Hostetter strongly defended it. He cited a recent survey of 1,000 Americans commissioned by MediaOne from research firm Roper Starch, which, they said, showed widespread public receptiveness to both the term broadband and its perceived benefits, such as speed and delivery of a wide array of services.

Hostetter said the broadband tag tested "surprisingly well," and he expected MediaOne to "follow the computer-penetration curve in the home" with Internet-based services.

Richard Guha, senior vice president of marketing for MediaOne, who joined the company six months ago after a career as a marketing consultant and manager for Procter & Gamble Co. and M&M/Mars, said MediaOne would not only have to market a new name and identity, but a new category - broadband - as well.

While that represented an additional marketing challenge, he argued that the company would benefit by being able to define the category on its own terms.
"People get it," he said of the broadband concept. "What they get is use of lots of stuff."

The marketing campaign, he said, would include ads on broadcast television, radio, newspaper ads, outdoor advertising, Internet ads and direct-mail and direct-response programs.

Branding and competitive-strategy experts were divided on the wisdom of MediaOne's reliance on broadband as a branding strategy, with some consultants arguing that the term was obscure and uninspiring, while others felt that it was a bold stroke that could truly differentiate the company and help it to gain credibility.

Glen Freidman, president of Los Angeles-based Ideas&Solutions! Inc., said that while there are "magic words" that link customers to technology, "broadband is not one of them."

David Aaker, professor of marketing strategy at the University of California at Berkeley's Haas School of Business, called the broadband strategy a risk, but he said it would be a "worse risk if [MediaOne] did not differentiate themselves."
Aaker, author of Building Strong Brands, said research has shown that a successful "branded component" on a brand, such as "Intel Inside," "Sony Trinitron" or Hewlett-Packard Co.'s "Resolution Enhancement," printer, allows companies to charge more for the product.

While Aaker added, "It doesn't really matter if people don't understand what the term means," he warned that MediaOne did run a risk if technology changed quickly, or if the term broadband "starts to mean something else."

COPYRIGHT 1997 Reed Business Information

Tuesday, May 09, 2006

Is any group doomed to die out?

The "Tragedy of the Commons" states that in any group which shares a common resource, conservation and long term benefit of the group as a whole take a back seat to the immediate benefit of the individual. For example, if ten people share use of a common plot of land sufficient to graze 100 sheep for ever, the logical solution is that each has ten. However, if one has 12, while this may reduce the average results per sheep by 2%, for the greedy individual, he or she can gain a net 17% (+20%, less 2% of the new total). So many of the people will enter an internal competition to use the resources. Those who aim to lead by good example will lose, yet if they join in the process of deterioration will accelerate.

This applies whether the ressources are fossil fuel, clean air, job leads, or anything. Strict policing by an authority which has real power over all is needed to keep the resources from being depleted. In a corporation, people will fight for resources and power, even though this may mean the ultimate end of the company. It does not require that all act in this way, but even one who takes more that their "fair share" can destroy the group. Nevertheless, we must remember that that individual will prosper in the short run, so incentives exist to be selfish.

In fact, many of the "successful" people in our society, from Donald Trump to Larry Ellison have seized what they could. However, we must ask what impact this has on society. Does it hasten the end of the society?

Friday, May 05, 2006

Do not assume others' motivations are the same as your own

One of the assumptions we make as children is that all others around us think like us. As we mature, we do learn that others use logic differently, are influenced by emotion differently, yet most people assume that others are driven by the same motivation. This is not true. Some are influenced by money, others by power, while yet others seek knowledge.
We know this intellectually, but we do not internalize it very well. Managers assume that subordinates are motivated by the same things they are. Understanding what drives others is a key first step in managing others and even more when you have to achieve tasks through others whom you do not control. Even subordinates can sabotage your efforts if you fail to appreciate what drives them and you attempt to use something which actually gets them to act against you - quite possible if you choose money to motivate someone who is motivated by wanting to help others for example.

Saturday, April 29, 2006

Shareholders do not own companies

In the past few months, the press has carried a number of articles discussing shareholder ability to express their disapproval of CEO compensation by voting against the board. In fact, we never see this happen. Recently, over 20% of Pfizer shareholders voted against the election of two members of the board, and the press trumpeted this as an example of shareholder power. There are several reasons why this is not true. Firstly, unlike in political elections, shareholders who do not vote at all have their votes cast with management. Secondly, shareholders who really disagree with maanegement are more likely to simply sell and buy shares in another company.

If we consider the characteristics of ownership, shareholders do not have many of them. They do not have rights of disposal (in the sense of destruction), or even of access (try getting into an R&D lab as a shareholder). The reality is that companies are "owned" by top management, and shareholders simply acquire rights to dividends and appreciation. As such ownership is simply passed on, much like in North Korea. It is only regulation and legislation which keeps companies under control/

Sunday, April 23, 2006

Spotting opportunities the President Clinton way

One of President Clinton's best friends is Ron Burkle. An unlikely pair, Mr. Burkle was a successful and very Republican entrepreneur when they met. According to the New York Times, they first met when Mr. Clinton was running for President in 1992 and touring neighborhoods in Los Angeles that had been set on fire during riots after the acquittal of police officers charged with beating Rodney King. Mr. Clinton noticed that some supermarkets were still open, and asked why. He was told that those stores were not burned because the owner, Mr. Burkle, treated his customers and employees fairly. Mr. Clinton asked to meet him. This illustrates how he not only observes what was happening around him, but had the curiosity to want to learn more.

His aides quickly set up a meeting with Mr. Burkle at Burbank airport. He was then a registered Republican who ran a chain of California supermarkets. The two men drove to a political event, then kept talking in the car for 45 minutes. Mr. Burkle said he came away in awe. Their relationship grew during his presidency, when Mr. Clinton was a frequent overnight guest of Mr. Burkle's. Since then, Mr. Clinton has been part of Mr. Burkle's investment funds and has made a lot of money from them.

The lesson to be learned is that Mr. Clinton notes all that he sees, is curious, finds out the answer, and then acts on the idea. Too many people are not curious or action oriented.

Irrational economics

We continue to do things which are not economically justifiable. We vote, even in places where our vote is irrelevant. We buy lottery tickets. We fear air travel, while happily talking on our cell phones as we drive to the airport. Our instinct lets us down when calculating the odds of so many things.

So if we make these mistakes in regard to such critical matters to ourselves, how reliable are our instincts when we make business judgements or decisions about people. The evidence suggests that they are not to be trusted. Perhaps this is why after more and more managers go through business education, business decisions do not get any better. Our inability to be objective in a way which removes our own psychology from the calculation means that our decisions are often not to be trusted.

Rather die than change?

All the evidence, both scientific or by observation, suggests that people would rather die than change. They keep smoking, use cell-phones while driving, eat too much, drink alcohol to excess. Yet we seem to not have learned this lesson. I see in a networking group which I chair, that members, who pay annual dues, do not update their profiles on the website even though they know that it enables them to be found more easily for job or consulting opportunities.

People resist change, perhaps because their need for security means that they cannot leave the old habits behind. Even when it is clear to any intelligent person that change is inevitable, they will not learn new skills, move to a new place, or even make new friends. Fortune 500 companies last, on average, about half the average career length of an individual, yet few prepare for that. Many senior positions are held for less than two years, yet once someone gets a new job, they almost always relax and act as though they will have the job for life.

If it ain't broke, break it!

More companies go out of business by not changing than by changing. So often the buggy whip maker keeps making better and better buggy whips while people stop using horses. While this may be obvious, less obvious ones happen every day. The magazine which keeps making graphic redesigns, but does not understand how to deal with a digital age, the onlline service (think Prodigy, CompuServe, Delphi) which stays still as the world moves on. Car companies, airlines, food companies, each looks at the situation in a frozen snapshot of time. Humans seem to have greater difficulty seeing change over a large amount of time than they used to. A few hundred years ago, when the world moved slower, people thought about the long view. This seems to be more difficult. Whether it is global warming, shifts in economic power, culture change, or technology, we seem to have less perspective than before.

To have the long view, you need a long perspective, great mental flexibility, and the ability to sit and think without preconceptions. Multi-tasking is a handicap, as are interruptions. Then assume that there is a radically different way to do everything, and look for it. It you do not make revolutionary changes, then you will eventually become obsolete. Many years ago this may have taken years, now it takes a lot less.

Saturday, April 15, 2006

The Billion $ Executive

It seems that it is only a matter of time before a CEO gets a $ Billion pay package. This past week it was announced that Lee Raymond, CEO of Exxon Mobile earned a total of $686 Million from 1993 to 2005, or $144,573 for each day in his job. Of course Steve Jobs earned $775 Million in 2000, but from the appreciation of stock options (and $1 in salary).

Perhaps we should just accept that compensation is not related to value or performance. There are firefighters who earn little, but save many lives, while TV personalities earn many times what they do. Is the person who presents the network news really worth quite so many times what the person who presents the local news is? How much of their value is due to their ability, and how much to their celebrity? Is the same true of top executives? Their value becomes a self-fulfilling prophecy.

General Motors stumbles on

It seems that General Mostors is incapable of seeing the obvious. I have no doubt that top management is made up of intelligent, well-trained and involved people. Yet no one seems to be capable of making the kinds of changes needed to save the company. Both Crysler and Nissan were saved by the introduction of interesting, innovative card. General Motors does not seem to be able to do this. While it is clear that "badge engineering" - putting different brands on the same product has harmed GM and led to the demise of Oldsmobile, no one seems to have leaned the lesson. So they may as well just take a short-cut and shut down Saturn right now. It seems that the next generation of Saturn cars will be simply rebadged versions of other GM cars. Thus will GM destroy the one car brand which has a distinctive image and very loyal purchasers.

Friday, April 14, 2006

Where lives amaze us

I have always found the point at which biography, memoir and obituary intersect to be a fascinating one. While biography should be scholarly and accurate, memoir is allowed to be subjective and incomplete. Obituary however, is the journalistic take on each, with a focus on brevity. Some of the most fascinating obituaries are not of the rich and famous, who are so well covered during their lifetimes, but of people who led relatively obscure, though purpose-filled lives. The quiet man at the end of the road Charles Shepens, who invented amazing surgical techniques, diagnostic instruments, saved hundreds of lives in the Second world war, and personally risked his life on many occasions, yet told no one about it, until it was discovered only a short time before his death. How about the artist Joash Woodrow, working on his own all his life, whose works were discovered as they were about to be destroyed and he was to be placed in a nursing home. The discovery led to many exhibitions, but his mind had detreriorated too far for him to appreciate it.

Obituaries, particularly of seemingly ordinary people help us to realize that ordinary people can be quite extraordinary. This can give us a new appreciation of friends and neighbors.

Tuesday, April 11, 2006

How to deal with Immigration

This is a major issue these days, and one to which there seems to be no simple solution. There is a conflict between two apparently irreconcilable objectives. On the one hand, the US (and we see the same in Western Europe and even wealthy Middle Eastern countries) need more skills and labor. There is little debate about the need to import doctors, engineers and scientists, although there may be arguments about the specific number. There is more discussion about importing low-cost labor.

The USA has a particularly challenging dilemma in that it was created by immigration, yet needs to manage it. Firstly, let us understand that even the Berlin Wall, with barbed wire, searchlights, mined strips and watchtowers with machine guns, could not completely stop people crossing it. It was also much, much shorter than the US-Mexican border. We will never completely be able to stop people crossing who are desperate enough.

Furthermore, the US cannot afford to have billions of people feeling resentful about what may be seen as a dog in the manger attitude. So the US needs to manage the immigration flow much better than it does. For example, let us take a look at US expats living in other countries, and there are many. Most are temporary, but some are permanent. Obtaining visas and work permits for most western countries is fairly straightforward and fast. The US makes it more complex, slow and seemingly random. Once you have a temporary work visa, such as an H1-B, which may take 8-9 months, life is still not simple. Your freedom of movement in and out of the US may be restricted. If you have to leave the US (even for a family emergency), you will have to get your visa re-stamped in the country of original application, and it may take months to get an appointment for this! As has been said, the US needs to make the fence high, but the gate wide. Clearly when people say that illegal immigrants are mostly law-abiding people, they are not. They have broken the law. However, they mostly wish to be law-abiding, and they should have the opportunity.
We need a system which allows in, as fast and simply as possible, those who have needed skills and work ethics. We have to make sure that we do not bring in so many that we depress salaries and wages for people in the US. We have to discourage people without those qualifications, while giving them hope if they have to stay in their own countries, and a clear path to follow should they wish to continue to pursue the dream of moving to America.

Sunday, April 09, 2006

ENRON and the South Sea Bubble

We are so poor at learning. In the book "Extraordinary Popular Delusions & the Madness of Crowds," Charles Mckay provided a rivetting history of how people are taken in by the promise of wealth, however ludicrous it may be. In 1624, tulips were being sold in Holland for more than gold. In the early 1700s a group of merchants formed the South Seas Trading Company, which originally simply purchased some debt from the British Government to be repaid at 6% interest. However, on this solid foundation, they proposed to make money by trading in South Anerican gold and the stock soared. Now no-one read the fine print, which said that King Philip of Spain would only let one ship a year set sail. As the stock soared, many other companies were formed to take advantage of the capital in the market. Sadly, on one day in September, 1720, no one wanted to buy. So the cries of "sell, sell!" grew louder and many wealthy people lost all, as well as many poorer ones.

So there have been many other financial bubbles. In the 1920's it was Florida land, in the 1990s it was the Internet and ENRON. The continued belief that it is possible to make extraordinary financial returns with no risk is amazing. How could sensible people believe that Webvan could make enormous returns in a very low margin industry with huge investment in warehouses and truck makes the mind boggle. But not only did experienced business people talk about a "new financial model," in which profit was not important, but many of them continued to prosper afterwards. While ENRON was a high-profile failure, many others occurred at the same time. Empty shells of buildings which used to house huge companies joined the ghosts of the offices of the South Sea Company.

The one thing of which we can be sure is that there will be many more.

Saturday, April 08, 2006

CEOs would work as hard for one tenth the pay

According to a study last year by Carola Frydman, a doctoral candidate at Harvard, and Raven E. Saks, an economist at the Federal Reserve, the average top executive's salary was 170 times the average workers in 2004. This is up from 68 times in 1940. a few companies, such as Costco limit the CEO's pay to a modest multiple of the average worker's but most have no limits. We see CEOs "double dipping" by getting guaranteed severance packages, multiple years credit for each year's service towards a pension, and "consulting contracts" for doing no work at all.

This is one of the issues which most Americans agree on. As the multiple continues to grow without any controls, there is likely to be a backlash of some size.

Ultimately, as companies have become larger and more complex, the demands on the CEO have become greater, but the CEO has less impact on the company. The CEO does not even know most of what happens in the company, and since he or she relies on information channeled up, much of it is wrong or incomplete. so ironically, as CEOs are being paid more, even the wonderful ones, and there are some, are hadicapped.

We could also conclude that a CEO would work at least as hard for 17 times the average worker's pay - perhaps even harder since it would not be as easy to earn enough to retire on in a few years alone!

Monday, April 03, 2006

How naive can you get?

Today we see that the big news is that Lucent is merging with Alcatel, and Pat Russo of Alcatel is going to run the show from Paris. I wonder if she really belives that. When Mercedes-Benz bought Chrysler, it was trumpeted as a "merger of equals" - until Chrysler hit a wall, and Daimler moved a management team from Germany to take it over. When US West "merged" with Continental Cablevision, that was also supposed to be a "merger of equals." But one fine day, the folks from Denver ousted Amos Hostetter, Chairman, even though he was the biggest single shareholder in the merged company.

I will confidently predict that Pat Russo's position will be seen to be a smokescreen and in less time than expected, she will be replaced by an Alcatel person.

Any time there is a merger, there is a winner and a loser. Occasionally, it is not as expected, but it is usually predictable. The management of Gillette will soon learn how well they can succeed in the Procter & Gamble culture. So for all those involved in a merger, take the money and run!

Monday, March 27, 2006

More Effective Networking

I recently read a new book about using networking in job change. The principles apply in using networking for other activities too. The book is "The $100,000+ Career: The New Approach to Networking for Executive Job Change."

It always surprises me that so many people handle networking without finesse. Networking is not a "hey, give me leads and contacts so I can disappear from your life" game. Networking is about building a network of friends so that you have this network throughout your life. It means not simply reciprocity, not a "quid pro quo" approach, but a genuine desire to help others and act as a model for good behavior. In the long run, this pays off, not simply materially, but in terms of virtue being its own reward.

So go out and make some new friends. Any financial benefit is purely cream on the cake.

Tuesday, March 21, 2006

Effective Networking

A common question is how to network. A common complaint is the inappropriate use of networking. There is a saying that "the most popular girl in school isn't." The reason is that once someone is identified as "most popular" everyone wants to be his or her friend, but he or she cannot manage that many friendships, so people feel excluded and therefore resent the "most popular," even if they do not say so to others for fear of being ostracized. Often people with a huge network of acquaintances cannot manage all they have. I hear from people who complain about repeated invitations to join a virtual stranger's LinkedIn, or similar, network.

Let me give an example. While we all "know" that networking is the way to find a new job, it may be being overused and misapplied since its "recent" discovery. It is not a quick fix. Networks take time to build and maintain. They require reciprocity, not just use. Ask not what your network can do for you, but you for your network. If you are looking for a new job, in addition to quantity, why not try another approach. Find a small number of people (say 5-8) whom you trust and respect. Form a sort of co-operative in which each person focuses on finding the other members a new job. So this means that you are not soliciting recruiters in a self-serving way for a job for yourself. They have become inured to job seekers by now and are not exactly clamoring to talk to them. However, you are telling recruiters about someone they should get to know. This is still rare enough that it may get the recruiter's attention, and you can rave about your friend in extreme terms without seeming crass or immodest.

While social networks can be valuable, please ensure that you invite people whom you already know and trust. Please try to respect the invitee by personalizing the invitation instead of using the standard one. This approach will increase the value of the network.

Wednesday, March 15, 2006

The law of unintended consequesnces

It seems to be rare in business that people take the long view. So many apparently well thought through strategies turn out to be quick fixes, which then become albatrosses around the company's neck. For example, Western automobile companies were quick to leap into China, in spite of laws requiring giving control to Chinese partners. Now, just a few years later, when sales for many of these companies are in the '00s of thousands, we see that the Chinese partners are setting up their own state-of-the art factories to export many more cars back to the West. In the long run, the Western companies will have trained and set up their own worst nightmares.

Tuesday, March 07, 2006

The ghost of AT&T strikes back

This week it was announced that AT&T is taking over BellSouth. Now AT&T is really Southwestern Bell, which recently acquired what was left of AT&T. So instead of the old AT&T, plus SNET, plus GTE, plus MCI, we will have AT&T, plus Verizon, plus Quest. All via the "breakup" of AT&T into seven regional Bells plus a long-distance company. Yet they now compete with cable companies and soon others. As technology has advanced the entire competitive set has transformed. So do things change all the time. Sears Roebuck is no longer the threat to the consumer which it was once thought, nor is A&P. Trader Joes is growing faster than most better known chains. McDonnel Douglas, PanAm, Arthur Anderson, all are gone!

In the past year, I have known many people who lasted well under a year in new jobs. The pace of change is accelerating, and we have not realized it yet.

Thursday, February 16, 2006

Ethics in everyday life

These days we are surrounded by lapses of ethics. Frankly, I suspect that they have always occurred, but were less visible. However, as a result, people see poor role models every day. We see authors such as James Frey, Clifford Irving and many others fabricate material they claimed was non-fiction. Today we read that David Edmondson, CEO of Radio Shack, fabricated a degree. Well, he was not original, Ron Zarella, CEO of Bausch & Lomb fabricated one, and even though it was discovered in 2002, he remains CEO. So, while it is one thing to see a leader in the community, fabricating a key fact, we see that the people in the community don't seem to care. It makes it more difficult to hold young people to a higher standard.

Saturday, February 11, 2006


This week the Wall Street Journal has been running a column of readers' comments on Wal-Mart. Even in the WSJ, most readers have been questioning Wal-Mart's motives, and others have doubted that Wal-mart can be both socially responsible and highly profitable based on their low cost model. When a generally pro-business, conservative group such as this have started questioning Wal-Mart, it is clear that Wal-Mart has some growing challenges on its hands. The skills which made it successful are being challenged as socially undesirable. Its focus on "backroom" efficiency is seen as contrary to the new need for consumer facing skills. In order to continue to prosper, Wal-Mart will have to make some substantial changes.

Wednesday, February 08, 2006

Energy - the great vulnerability

In the West we use an enormous amount of energy. The USA uses most of it. If we keep using it in this way, we will accelerate global warming, raise the sea level so much that many people will be homeless, run out of fossil fuel, and give the least stable, dictator prone parts of the world great power over us. Simply slowing growth is not enough. We must stop and reverse it. We need a set of policies which encourage sensible alternatives and penalize continued use of fossil fuels.

I have worked in the energy industry at a high level. We need to eliminate oil and coal powered plants, which are also dangerous in terms of lives lost mining coal. We must build more safe and moderate cost nuclear plants, hydro and wave powered plants can be helpful. We have to switch as much automobile fuel use to renewable fuels such as ethanol, or at least replace gasoline by clean diesel.

Wednesday, February 01, 2006

Why a wide perspective is needed to be successful

In developing countries, there are many opportunities. Are local entrepreneurs or outsiders more likely to be successful? In practice we find that both are often successful. One of the most attractive ways is by "the transfer of success."

This means that the entrepreneur identifies an opportunity which has been successfully addressed in another country, and translates the solution to the developing country. The translation is key. In most cases, you cannot simply implement it unchanged. As in any translation, you need to be fluent in both cultures. Since the solution could come from any of many countries, the most likely to be successful is someone who knows the culture of the developing country, and many other cultures. Is what made it successful based on a cultural uniqueness?

Monday, January 16, 2006

The changing role of women worldwide

In recent weeks we have seen several events which symbolize the changing role of women. In global politics, on three continents, we have seen South America, in chile, elect its first woman President who did not take over from a dead husband. In Africa, Liberia inaugurated the first elected woman leader on the continent, while Finland re-elected a woman President, and Germany's first woman Chancellor visited Washington.

We continue to see women make more steps in business. Norway's law requiring that at least 40% of Board members of public companies be women, seems to be very successful. Countries such as India, Pakistan, Bangladesh, Israel and many others have had women leaders. This will continue to increase over the next decade, and provides role models for many of our daughters, as well as affirmations for women of all ages.

Sunday, January 15, 2006

The need to eliminate bureaucracy

Ironically, many of the poorest countries in the world have the greatest bureaucracy. In most developed economies, the need to streamline government and business is recognized. In many of the poor ones, the need to maintain unionized jobs or keep doing things the old way is given priority. Visa processes discourage vistitors and investors. Even getting a passport can be daunting. Setting up a business is a challenge and buying a cell phone is penalized.

Most poor countries would benefit from an almost complete elimination of bureaucracy, and allowing the natural energy of the people to flourish.

Sunday, January 08, 2006

Transportation in developing countries.

India suffers from poor transportation. Railroads are slow and cumbersome, the road system is primitive and air travel is far less convenient and reliable than in the West. The road system is currently being transformed by a new plan to build a national network of highways, privately owned airlines are proving much better than government ones, but airportw are still inefficent. Britain buld an empire through control of the seas, and later railroads. The US Interstate Highway system enabled an enormous expansion of commerce. China has committed to a great modernization of its air and road transportation system - Chinese airports are a generation ahead of Indian ones in facilities and user friendliness.

Friday, January 06, 2006

Comments from my travels

Over the past six months, I have been fortunate enough to travel to Europe, Asia and Latin America. As a result, I have a number of observations about these areas relating to business there. I will be commenting on several of these in posts to come, but am listing a few of the topics I will cover:
The importance of transportation in developing economies
The need to minimize bureaucracy
Why a wide perspective is needed to be successful
How managers in different countries see many things very differently