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 They not only are often out of date, but they do also encourage envy and create enemies and rivals where there may have been none.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?