Managing Strategically

Seizure

2008-09-26T11:48:00.000-07:00

“Short-term money markets remained in turmoil, heightening the likelihood the credit pullback may harm the broader economy.

“Inside markets that are hidden to most Americans -- the overnight Treasury repo market, the short-term commercial-paper markets and the floating-rate municipal bond markets -- action was unfolding that will soon affect how companies meet payroll, pay vendors and make investments.

“These markets allow companies with ample reserves to squeeze out a few extra dollars by investing the cash in securities with life spans of just days or weeks. All that cash helps keep the economy lubricated by distributing money to other firms that need short-term loans to buy inventory or meet payroll.

“Some distressing signs emerged Thursday from one of the most important of these marketplaces, the commercial-paper market, where companies borrow money for periods of just a day to up to a year. The market contracted by $61 billion in the week ended Sept. 24, its largest decline since August 2007, when investors fled over some of the first warning signs of the subprime-mortgage crisis. In the latest week, banks and other financial companies accounted for most of the decline, as they took $50.3 billion of paper off the market.

“The decline follows a $52.1 billion shrinkage in the week ended Sept. 17, which reduces the overall market to $1.702 trillion.”

(“Debt Market Distress Spreads; Commercial Paper Shows Signs of Tightening as Investors Flee.” Liz Rappaport and Anusha Shrivastava. Wall Street Journal: September 26, 2008. pg. C.1)

NOTHING ELSE MATTERS if markets cease to function. That is the end of capital-ism as we know it.

We have long put our trust in the notion that value and worth were established by the invisible hand of buyers and sellers exchanging in an efficient nexus of supply and demand.

If we see markets ceasing to establish reliable indications of value and worth, if market prices appear capricious and disconnected from reality, we lose confidence in the validity of the market mechanism. We hold back from participating; there is no market, and we can't see anything.

Once this unreliability and invalidity catch hold in the minds and hearts of those who otherwise would be market participants, markets seize-up and a market-based economy falters and halts.

If this occurs in money markets, then other markets likely will freeze too.

Faith, hope, belief, trust -- the eyes, ears, mind, heart, spirit and soul of our world.

Perception Gap, Out of Touch, and Destroying Value

2008-09-15T11:43:00.000-07:00

“Josh Silverman is on the defensive. As the head of eBay's Skype unit, he's happy to talk about his company's more than 330 million users and six straight quarters of profitability. But the topic he has been asked to address more frequently in his six months at the helm is how eBay could have so grossly overestimated Skype's value when in 2005 it paid more than $2.5 billion for the Internet calling service. ‘There is this perception gap related to eBay and what people thought eBay would do with Skype,’ Silverman says.

“The gap is more than just a matter of perception. Executives at eBay bet Skype's cheap and easy-to-use Internet calling tools would help eBay users land more sales. But it turns out many of the small business owners who market their wares on eBay had little time to sit by the phone to take questions, and in October, eBay was forced to concede it overpaid, recording expenses of $900 million.

“Silverman's task now is to ensure that Skype earns its keep, giving eBay executives reason to retain the business rather than sell it to the highest bidder. So far, eBay Chief Executive John Donahoe says he'll keep Skype. ‘We know Skype is a great stand-alone business’ … Donahoe said during a conference call with analysts earlier this year.”

(“At eBay, Is Skype There to Stay? To earn its keep at eBay, the Internet calling service needs to goose growth and gain traction on mobile phones. Otherwise, a sale may be in the offing.” Catherine Holahan. businessweek.com: September 15, 2008)

A COMMUNITY OF CUSTOMERS cries for our understanding. How can we ignore, assume away, or misperceive their ways? How can we be blind to how they will, or will not, use our service?

We are blind when we fall prey to mantras, the sweep of our times, or the lures of investment bankers drooling to make a deal.

Reach out; get in touch; listen for what to ask.

And if we must chant mantras, let it be, "Big, unrelated mergers destroy value -- certainly for owners, often for customers;" and, "Most synergies are synthetic and as illusory as our assumptions about customers and value."

Be real. Stand alone.

One Word -- Panacea

2008-09-12T09:15:00.000-07:00

“Making millions — or even a few billion — by managing a hedge fund has been a running dream on Wall Street in recent years. But suddenly even the masters of this $2 trillion universe are falling on hard times…

“Hedge funds, those secretive investment vehicles for the rich and, increasingly, the not-so-rich, are supposed to make money whether markets go up or down. But many of them are being swept up in the turmoil in the financial world.

“The funds’ investment returns are sinking, and so are those big paydays for their managers, whose riches have helped redefine modern notions of wealth and helped drive up the price of everything from Picassos to Manhattan penthouses.

“Several big funds have faltered in recent weeks, some of them spectacularly so...

“The dimming fortunes of the industry have implications far beyond the rarefied world of hedge funds. Over the last decade, the size of this industry grew fivefold, as public pension funds, corporate pension funds and university endowments poured billions of dollars into these vehicles, in hopes of market-beating returns.

“A prolonged downturn might prompt some investors to rethink these investments...

“‘Everyone is looking for a panacea, everyone is looking for a quick way to make money fast, and everyone is pinning their dreams on the backs of these hedge funds,’ said Dan McAllister, the treasurer and tax collector of San Diego County... ‘But maybe it’s time to be a little cautious, and it’s time to look at things with a more discreet eye.’”

(“Hedge Fund Glory Days Fading Fast.” Louise Story. nytimes.com: September 12, 2008)

NOT EVERYONE! We certainly hope, we hope with some certainty, that all of us are not so insecure as to chase feverishly after sure things, cure-alls, and that which will solve all problems and prolong life indefinitely.

When they tell us, "We've got it all figured out," or "It's a lock," or "Things are different this time," or "The (old) rules don't apply here..." either head for the hills, or cling nervously to your shaman.

Oh, what did you see, my blue-eyed son?
Oh, what did you see, my darling young one?
I saw a newborn baby with wild wolves all around it
I saw a highway of diamonds with nobody on it,
I saw a black branch with blood that kept drippin',
I saw a room full of men with their hammers a-bleedin'...
I saw ten thousand talkers whose tongues were all broken,
I saw guns and sharp swords in the hands of young children,
And it's a hard, and it's a hard, it's a hard, it's a hard,
And it's a hard rain's a-gonna fall.
(Dylan)

Turn, Turn, Turn

2008-09-09T09:56:00.000-07:00

“The government's rescue of Fannie Mae and Freddie Mac may have averted a financial meltdown, but it could create other unintended problems.

“In the short term, auto makers and other troubled industries might use the move to argue that they, too, deserve a taxpayer lifeline. Some foreign governments will use Uncle Sam's generous backstop as justification for market controls that may not be quite so constructive. And the move might further fan the election-year populism that already has free-market advocates gnashing their teeth.

“The potential longer-term consequences may be more troubling. For one thing, unlike equity holders, debt holders in financial companies once again have been protected, as they were with Bear Stearns and others. That may lead these lenders to examine those companies less carefully, putting more burden on regulators to sniff out problems…

“In such regulatory soups new opportunities and risks are born. The Resolution Trust Corporation that ended the savings-and-loan crisis in the late 1980s led to a booming mortgage-securitization market that dumped buckets of cash on Wall Street. It also planted the seeds of the mess the government this weekend stepped in to solve.”

(“Ahead of the Tape.” Mark Gongloff. Wall Street Journal: September 9, 2008. pg. C.1)

THE SEEDS OF TOMORROW are planted in the excesses of today. As we create, we destroy. As we build, we tear down. As we win, we pay a price.

As in physics, so too in our lives -- for every action there is an equal and opposite reaction.

The Icarus Paradox Once More

2008-09-08T08:52:00.000-07:00

“Within hours of Warner Bros.'s decision to postpone the release of ‘Harry Potter and the Half-Blood Prince’ to next July, hate mail began to pour into the studio. An online petition expressing fans' disgust with the decision garnered more than 45,000 signatures. The studio says it even received death threats. ‘I hope you choke on your own saliva,’ snarled one fan in an email…

“Warner Bros. is in some ways a victim of the same forces that drove its success. The five prior Potter films have grossed almost $4.5 billion in world-wide box-office revenue, making the series the biggest franchise in history. In the past, Warner Bros. has invited staffers of Potter fan Web sites to movie premieres to help whip up hysteria ahead of upcoming movie releases. With its transgression, Warner Bros. inadvertently unleashed this powerful force against itself…

“Many fans felt Warner Bros.'s stated reason for the delay -- that the film would make a bigger splash in the middle of summer -- was a crass admission that the studio cares only about bigger box-office returns. ‘YOU just slapped the face of EVERY Harry Potter Fan and told us you don't care what we want -- you only want our money!’ stormed Natalie DeGennaro, a 50-year-old electronic-design engineer who lives in Hillsborough, N.C., in an email she sent to Time Warner Chief Executive Jeffrey Bewkes, Warner Bros. Chairman Barry Meyer and other executives…

“Some think the outsized reaction could actually be a boon for the studio. Steve Sansweet, who runs fan relations for George Lucas's Lucasfilm Ltd., says ‘Warner Bros. should be delighted. Sure, they have a problem on their hands, but they are also seeing the passion of their fans. The real problem comes when you have fans that don't give a damn.’

“The fans, however, are still angry. Many are still signing petitions planning protests and uploading angry videos to YouTube. Ms. Fink, the artist and administrative assistant, recently stood outside Warner Bros.'s Burbank lot with a large sign. ‘Dear Mr. Horn," she scrawled in red marker. ‘You will forever be known as ‘The man who changed Harry Potter's release date.’ Are you happy now?’”

(“Voldemort Hath No Fury Like Angry Harry Potter Fans; Studio Delays Movie, Gets Death Threats; 'I Hope You Choke on Your Own Saliva'.” Lauren A.E. Schuker. Wall Street Journal: September 8, 2008. pg. A.1)

THE VERY THING that allows us to soar can unexpectedly become the cause of our downfall and destruction. Whipping up fervor is the sister of whipping up hysteria is the sister of whipping up a mess.

As in both the yin and the yang, the seed of reversal lies at the heart of our strongest motions.

In order to work at the cutting edge, in order to play with fire, we must develop that fine sense, that delicate balance, that only comes through being in close touch with our constituencies.

Non-Strategic Management: Sizzle Fizzles

2008-09-04T11:42:00.000-07:00

“Barry Diller hoped breaking up IAC/InterActiveCorp would eliminate the ‘Diller discount’ that had bedeviled the shares. It's early… but so far the split-up hasn't exactly set the world on fire.

“On Aug. 20, the e-commerce company split into five: Ticketmaster; lending business Tree.com; home-shopping company HSN; Interval Leisure, a time-share provider; and a slimmed-down IAC, a collection of Internet properties…

“The new IAC, which Mr. Diller will continue to run. It was designed as a pure Internet portfolio whose stock, freed of the weight of underperformers, would soar.

“Instead… Wall Street is valuing the operating businesses at barely $1.1 billion, or an undemanding multiple of 5.5 times Ebitda. Google enjoys a multiple of 11.6; Amazon.com, 18.7; and slower-growing eBay, 7.4, says Cowen & Co.

“IAC is hardly set to expand at Internet speed. Sanford Bernstein estimates revenues will increase 11.5% in 2009 compared with 16.1% at eBay….

“Then there is the Diller factor.

“The onetime Hollywood executive, who once brought ‘sizzle’ to stocks with which he was associated, has taken a company that began in the mid-1990s as a collection of TV stations and HSN through a series of dizzying strategic twists and turns to end up where it is today.

“Mr. Diller has thrown hundreds of millions of dollars at a series of forgettable acquisitions, including Precision Response Corp., Styleclick and Cornerstone. More memorable, and painful, for investors is Lending Tree. IAC paid about $700 million for the lending concern in 2003. Tree.com's stand-alone stock-market value is now roughly $75 million…

“Even after the recent split, IAC remains a complex mix of businesses. The best chance for IAC shareholders to realize the true value of the assets is for Mr. Diller to take the next step and sell off the remaining pieces of his empire.”

(“IAC Story Not as Planned; Multiple Spinoffs Haven't Eliminated A 'Diller Discount'.” Martin Peers. Wall Street Journal: September 3, 2008. pg. C.18)

"FORGETTABLE" ACQUISITIONS? Hardly! Destroying $625 million seems pretty darned memorable we might think.

Perhaps the heart of our problems is in our forgetting, or trying to forget, foolishness of the past. Just because a seeming "strategy" worked once upon a time, should we continue to whip that dog into oblivion... ?

Can't we teach an old dog the (old) lesson -- synergies are mightily elusive, and mergers generally do destroy wealth!?

Strategic Priorities

2008-09-03T08:30:00.000-07:00

“Ben Verwaayen, Alcatel-Lucent SA's newly appointed chief executive, said Tuesday that the telecom-equipment company would focus on developing new technologies as a way to fight competition from low-cost rivals.

“‘We must rethink very efficiently where we are going to put our money and our best brains,’ Mr. Verwaayen told reporters… alongside the company's new chairman, Philippe Camus. The men… said they would both get to work smoothing cultural tensions that have bogged down the French-U.S. firm for two years. But neither gave any indication as to when Alcatel-Lucent might turn a profit again…

“Analysts have long said that Alcatel-Lucent has squandered research and development funds by investing in too wide an array of technologies…

“Messrs. Verwaayen and Camus are taking over at a tough time. When Alcatel and Lucent merged, executives thought their combined strengths would help the new company weather the ascent of new, low-cost rivals from Asia.

“But integration was slow, partly because the company tried to balance U.S. and French interests by dividing up its top positions by nationality. Alcatel-Lucent was left with a high cost base at a time when the price of telecom equipment was free-falling. The company has lost nearly two-thirds of its market value since the merger.”

(“Corporate News: Alcatel CEO Covets New Technology to Ward Off Rivals.” David Gauthier-Villars. Wall Street Journal: September 3, 2008. pg. B.3)

FIRST THINGS FIRST! When we forge a strong, clear culture, then we can see clearly enough to focus on those core competencies that are valued by the market.

Only then should we play the "technological innovation is the panacea" (???) card. A coherent heart and soul will unleash our "best brains."

Wall Street will be much more appreciative when they see that we have got our act together before proclaiming great initiatives.

Intellectual Inheritance

2008-08-28T05:36:00.000-07:00

“Each night during a recent sales trip to Rio de Janeiro, Black & Veatch Senior Vice-President Michael Perry would review the day's progress over dinner with several junior staffers accompanying him. After watching Perry in action, they had plenty of questions: Why had he worked toward a compromise when the Brazilian client clearly wasn't going to budge? How was he accounting for the different cultural perspectives of the British, Japanese, and South Korean businessmen who were potential partners in the deal? …

“The 59-year-old executive had done something that will probably prove even more valuable for the company in coming years, after his retirement: He instilled some of his specialized negotiating skills in his would-be successors.

“Knowledge handoffs like this are becoming more common at companies, motivated by the concern that droves of retiring baby boomers will mean huge losses in irreplaceable intellectual capital. ‘When people leave organizations today, they are potentially taking with them knowledge that's critical to the future of the business,’ says David DeLong, a business consultant...

“Meeting periodically over a nine-month period, representatives from Black & Veatch, American Express, Procter & Gamble, and six other companies compared notes on the best ways to facilitate a knowledge handoff from one generation of workers to the next.

“Many companies realize that they are on the verge of losing stores of knowledge but don't know where to begin efforts to retain it. ‘Focus on specific business needs,’ says Kent Greenes… an independent knowledge-management consultant who has worked with companies like Hess and Northrop Grumman…

“Experts agree that, over the coming years, companies that have these programs in place somewhere in their organization will gain a competitive edge. ‘Leveraging the collective knowhow of organizations is really going to pay for itself now, as we're approaching complex problems and going into new markets and working globally,’ says Greenes. ‘Wherever it has been difficult to do things, that's when you're going to see knowledge management come to the fore.’”

(“The Knowledge Handoff; How corporations are scrambling to tap the expertise of baby boomers before they retire.” Douglas MacMillan. businessweek.com: August 27, 2008)

IMPLICIT, INTANGIBLE, INHERENT in the touch, sense and feel of the experienced leader lie insight and understanding.

Can that be transferred? Will they listen? Will they hear? Can they comprehend beyond their years? Will we connect?

Touch the heart; reach the mind. Endow the future.

Mania-Depression: Naturally Yang then Yin

2008-08-27T12:04:00.000-07:00

“India's expected retail boom hasn't taken off, leaving companies large and small to rethink their expansion plans.

“Wal-Mart Stores Inc., which unveiled plans to enter India with a joint-venture partner two years ago amid great fanfare, will open its first wholesale store next year, but it won't comment on future plans. Three Build-A-Bear Workshop Inc. franchises in India opened by Murjani Group have closed. Straps, a chain run by India's Oswal Group that featured Wonderbra lingerie from U.S.-based Hanesbrands Inc., has closed its more than 20 stores. Big German retailer Metro AG, after five years here, operates only four wholesale stores; the company says it is taking its time developing its Indian business...

“Just three years ago, an explosion of conferences, analyst reports, Web sites and magazines predicted the arrival of a new Indian consumer who would change the global retail landscape. The first modern retail stores here were so popular that many entrepreneurs thought people would buy almost anything at any price. They were wrong, as both large and small retailers are discovering. For some, the forecast retail boom that promised jobs for Indians and a new market for global retail giants is already a bust.

“‘I was an eternal optimist; now I have become a realist,’ says Kishore Biyani, chairman of Pantaloon Retail India Ltd., India's largest retailer by sales, which has revamped its expansion plans as it discovered more about Indian consumers. ‘Everybody has miscalculated.’ …

“Many outlets discovered that consumers didn't really want their products. And unlike shoppers in Asia's other booming economy, China, Indians are rarely willing to pay three to 10 times more for an international brand than for its domestic equivalent...

“Ritu Sureka opened her home-furnishings store ‘All Living’ in the Grand Sigma Mall, Bangalore's newest, in 2005. She was sure the Indian tech capital's programmers and call-center workers would spend their rising salaries on stylish lamps and pillows for their new homes. Now she [says], ‘I think this retail thing has been a failure.’”

(“Retailers Take a Slower Road in India -- Coping With Competition, Tepid Growth; 'Everyone Has Miscalculated' the Pace.” Eric Bellman. Wall Street Journal: August 26, 2008. pg. B.1)

ALMOST ANYTHING at any price? Who would buy that?

Some pretty sorry people, I guess. Now they are paying the price for trying to strategize at the cutting edge.

Nature's balance: The more rapid the ignition, the more spectacular the flame out. Explosion-implosion, a classic yang and yin in the real world.

Think -- re-think.

Philosophy, Identity, Commitment & Flex

2008-08-26T11:28:00.000-07:00

“During the glory days of big pickups and sport utility vehicles, one automaker steadfastly refused to join the party.

“Despite the huge profits that its competitors were minting by making larger vehicles, Honda Motor never veered from its mission of building fuel-efficient, environmentally friendly cars like its Accord sedan…

“In today's fuel-conscious automotive market, Honda is reaping the rewards for its commitment. No major automaker in America is doing better than Honda...

“While competitors are scrambling to shift their product lineups to build more small vehicles and slash their bloated inventories of trucks, Honda can barely keep up with demand, particularly in the subcompact category…

“Honda's larger Japanese rival, Toyota, is hustling to adjust to the rapidly changing United States market. Toyota dedicated its latest American assembly plant in Texas to building full-size pickups. Honda's newest factory, in southern Indiana, is set to begin production of Civic compact cars this fall.

“Honda's focus on fuel efficiency and the environmental impact of its vehicles dates back to the Clean Air legislation of the 1960s and 1970s. [Ben] Knight, the head of Honda engineering in North America, recalled how Honda adopted an internal motto – ‘Blue skies for our children’ -- as a guideline for future vehicle development. ‘The discussions inside the company have always been consistent,’ said Mr. Knight, who joined the company in 1976...

“‘Honda is a philosophy-driven company,’ said Tetsuo Iwamura, president of Honda North America. ‘Even when the large S.U.V.'s and trucks were big sellers, they did not fit with our philosophy.’ …

“Unlike many other automakers, Honda has been able to capitalize on the switch in demand to cars because of the flexibility of its assembly plants. At Honda's plant in East Liberty, Ohio, for example, the assembly line can switch almost seamlessly from Civics to CR-Vs.”

(“Honda Stays True to Efficient Driving.” Bill Vlasic. The New York Times: August 26, 2008. pg. 1)

START WITH THE BIG QUESTIONS -- Who are we? Why do we exist? Discover foundational truths. Establish good, clear values. Act with integrity, true to these core principles.

Thus centered and grounded, we are able to move forward through chaos, change and complexity all around us. We will pass by those who are unbalanced without center or ground.

Paradoxically empowered, we can be appropriately strong, straight and flexible.

The Who?

2008-08-21T08:51:00.000-07:00

“Chrysler, inventor of the minivan (one of the best-selling ideas in automotive history), is starting to turn itself into a marketer and contract manufacturer of other people's cars. To plug gaping holes in its truck-heavy lineup, the U.S. automaker already plans to stick a Chrysler badge on a restyled Nissan Motors Versa subcompact. Now comes word that it is negotiating with the Japanese company to start selling a version of the Altima family sedan. Plus, to pick up the slack at its underutilized truck and minivan plants, Chrysler aims to become an assembler-for-hire for any maker that needs those vehicles.

“This plan did not spring from the brain of a car guy. It smells of the moneymen who are now deeply nested in Chrysler's operations. Cerberus Capital Management paid $7.4 billion for 80% of the company and, having underestimated the difficulty of turning it around, is looking to cut costs and conserve cash. Chrysler and Cerberus say they will save hundreds of millions or even billions of dollars in development costs for small cars and family sedans. And far better to share their factories, they say, than to lose money on them. Yes, it makes a strange kind of sense, but it virtually assures that Chrysler may never thrive as a standalone company…

“It steers Chrysler into me-too land and away from its roots as an innovator. The company has often risen Phoenix-like from a crisis with innovations such as the minivan or early SUVs such as the Jeep Grand Cherokee. Design breakthroughs like the Dodge Ram pickup and the PT Cruiser during the 1990s earned billions. More recently, the 300 sedan was a big, if short-lived, hit…

“A deepening partnership with Nissan means Chrysler is less likely to go it alone. This company will end up on the block again. The only question is when.”

(“A Strange Detour For Chrysler; Why turning into a marketer and contract manufacturer of other companies' cars is risky.” David Welch and David Kiley. Business Week: August 25, 2008. pg. 28)

HERE'S AN IDEA - Let's cost-cut our way to greatness! Oh no, sorry... all we want to do is hang on and milk the cow.

When it comes to the point where all we have (barely) is our name, and our identity is dubious, maybe we can figure out who we are by looking into someone else's mirror in lieu of reflecting deeply on our selves...

I used to check my reflection
Jumping with my cheap guitar
I must have lost my direction, cause I ended up a superstar
One night I was in the boardroom
Affected by the human race
You can learn from my mistakes, but you're posing in the glass again.

Well, who are you? Who are you? Who, who, who, who?
I really wanna know Who are you? Who, who, who, who?
Tell me, who are you? Who are you? Who, who, who, who?
'Cause I really wanna know Who are you? Who, who, who, who?
(Pete Townshend)

It's Not Rocket Science

2008-08-18T08:31:00.000-07:00

“Sales remain anemic, and Gap needs to get people excited about its clothes again even as consumers pull back and the competition heats up. The man largely responsible for making that happen is design chief Patrick Robinson... Since his appointment 14 months ago, Robinson, 41, has pushed Gap to reconnect with its roots: classic American apparel with a modern twist...

“When Gary Muto, who oversees adult apparel for Gap, opened Robinson's portfolio, he saw what he was looking for: the ability to create a cohesive look for everything from belt buckles to blouses, a skill Gap had lost in recent years. ‘If you look at his work,’ says Muto, ‘there is a consistent handwriting and point of view.’ Beyond bringing clarity to the brand, Gap's aim is to allow shoppers to mix and match garments and come up with different looks that make them feel individual. The hope, of course, is that Jane or Joe Consumer will buy several items per visit.

“Beyond that, Robinson had a pretty good idea of what ailed Gap. It was targeting too young a customer (18- to 24-year-olds), stocking poor quality clothes, and imitating Uniqlo, H&M, and Zara, which have transformed the industry with their focus on fast fashion -- rapid-fire mini-trends. ‘It wasn't being Gap,’ says Robinson, who was determined to get off the trend treadmill and revive the signature classics that he wore growing up in California...

“Gap, under former Disney executive Paul Pressler, relied heavily on focus groups and spent little time in the stores. Early on, Gap North American President Marka Hansen encouraged Robinson to have breakfast with store managers... ‘It was eye-opening,’ says Robinson of the meeting with store managers. ‘They are the only people who don't have a motive except to sell product. I've said to every designer, ‘Get into the stores and talk to the salespeople’.’”

(“A Fashion Guy Gets Gap Back To Basics; Charged with reviving the ailing brand, Patrick Robinson is putting a modern spin on classics.” Jane Porter. Business Week: August 18, 2008. pg. 56)

IT CERTAINLY DOESN'T TAKE A GENIUS to know who they are, what they do best, who they serve, and what not to do.

Focus on the primary questions: Who are we? Why? What is our core? What makes us distinctive? What are we good at that others will value? What do our workers see? And, how does our customer feel?

And remember, imitation may be flattering, but it surely makes for poor strategy.

That's it.

Your Attention Please

2008-08-15T12:38:00.000-07:00

“Swiss banking giant UBS AG has for years trumpeted the idea that melding an aggressive investment bank and wealthy-client private bank would create a revenue machine. On Tuesday, UBS conceded it had all been a bad idea.

“In an effort to scale back ambitions and take on less risk, UBS says it now plans to apply a little tough love to its investment bank...

“The moves are another blow to the cause of ‘universal banking,’ a concept that came in vogue during the 1990s positing that banks could cram a range of different products and services under one, cheaply-funded, banking umbrella. The idea has crumbled amid the credit- markets crunch, leaving the likes of Citigroup and UBS grasping for new directions.

“While UBS will continue pushing the private bank and investment bank to share clients, internally their separation was seen as a dramatic and disappointing capitulation.

“Chairman Peter Kurer says the old structure was the wrong one to run a big, global bank in Zurich, London and New York.

“‘Agility -- we want to get that back,’ Mr. Kurer said Tuesday.”

(“UBS Gets Tough on Its Investment Bank In a Retreat From 'Universal' Concept.” Carrick Mollenkamp and Katharina Bart. Wall Street Journal: August 13, 2008. pg. C.1)

FOCUS -- What do you know best? Focus -- What do you do best? Focus -- Who can you serve best?

There is little room for those who are not at their best. Without focus, the world will eat you up.

Get rid of the vogue -- stop watching and listening to others -- and learn the agility of focus.

It's So Easy

2008-08-14T10:05:00.000-07:00

“Ronald E. Hermance Jr. is something of an oddity these days. He is a banker who has not been battered by the credit crisis.

“Hudson City Savings Bank, where he has served as chairman and chief executive for 11 years, never issued a subprime mortgage or sold a collateralized debt obligation. It did not hopscotch into faster-growing markets offering easy money, nor did it plunge into making risky construction loans...

“‘It seems dull and boring,’ Mr. Hermance said, flashing a grin in a recent interview. ‘But it happens to have made a lot of money over the past year.’ ...

“As many of the nation's lenders widened their loan offerings, Hudson City stuck to collecting deposits and issuing mortgages, preferring to operate as a mom-and-pop boutique instead of a financial department store. It continued to screen borrowers carefully, since it planned to hold their loans instead of selling them to outside investors. And it steered clear of complex investments its executives could not value...

“Now, the bank that flew under the radar screen … has been on a tear. Shares have risen more than 51 percent since the credit crisis began last August …

“‘They have stuck to their markets. They have stuck to their loan product, and they didn't chase,’ said Tom Alonso, a banking analyst at Fox-Pitt Kelton. ‘Now, they are sort of the last man standing.’ …

“Founded 140 years ago by immigrants in Jersey City, N.J., the bank never strayed from its roots as a community lender. Mr. Hermance is fond of describing Hudson City as an old-fashioned bank…

“Hudson City [has] remained focused with a simple business model... And it kept its costs more than 50 percent lower than its big banking peers by offering fewer products and frills at its branches, while maintaining a relatively small back-office staff.

“‘This is not a black box,’ Mr. Hermance said. ‘This is a glass box. You see how everything operates.’”

(“Caution Pays For a Lender In New Jersey.” Eric Dash. The New York Times: August 14, 2008. pg. 1)

A CLEAR MIND and a steady heart make everything so much simpler. Simplicity separates the wheat from the chaff, and demystifies the way things work. Distractions and foolish enticements are eliminated. And focus becomes a real power.

What are the two or three factors upon which success hinges in your field? Can you explain it clearly to your grandmother in one sentence?

What is the core of delivering value to your customers? to your employees?

Sell stuff for more than it cost you.

Greater Fools?

2008-08-11T07:46:00.000-07:00

“In Charles Dickens's ‘Great Expectations,’ Miss Havisham lives a life stopped in time by her canceled wedding. Floating around her house in a tattered wedding dress, with a marital feast decomposing on the table, she pretends that life never changed.

“Miss Havisham may well be the model for companies that launched quixotic, failed bids to take over rivals. The executives of two of those companies -- Microsoft Corp. and Blockbuster Inc. -- have described a future in which they gained all the advantages of an acquisition without actually doing one.

“Blockbuster Chief Executive Jim Keyes argued to investors on Thursday that his company is just as well off after dropping its $1.35 billion bid for Circuit City Stores Inc. as it would have been if it had done the deal...

“Of course, that result must only make investors wonder why Blockbuster offered a hefty 58% premium for Circuit City back in April, with no knowledge of its target's finances...

“Even as Blockbuster barreled forward, the market dragged down Blockbuster's stock. Investors feared a big acquisition would be a distraction to Blockbuster's turnaround, take the video-rental company far afield of its business model and use up financing that could be devoted to other purposes.

“The same pattern could be detected in Microsoft's bid for Yahoo Inc.

“The unsolicited offer… defied any predictable takeover strategy. Microsoft argued that an acquisition of Yahoo would improve its standing in the search business.

“Investors weren't quite so sure about the deal, which would have been a radical strategic move for Microsoft.

“Microsoft's shares sank on the fear that a large acquisition with a lightly thought-out integration would only drag down the software giant and denude its strong cash position.

“When Microsoft finally said it would drop its bid, it disavowed its aggressive pursuit and adopted a ‘Yahoo who?’ stance. ‘Yahoo was never the strategy we were pursuing,’ Chief Executive Steve Ballmer said.”

(“Deal Journal / Breaking Insight From WSJ.com” Heidi N. Moore. Wall Street Journal: August 11, 2008. pg. C.3)

DISINGENUOUS, dissembling, dissimulating -- look them up in the dictionary, and you'll see pictures of Jim Keyes, Steve Ballmer, and the whole gang.

Say what you mean; mean what you say. Or, try to have it both ways. We are taken for fools.

Idiot wind, blowing through the buttons of our coats,
Blowing through the letters that we wrote.
Idiot wind, blowing through the dust upon our shelves,
We're idiots, babe.
It's a wonder we can even feed ourselves.
(Dylan)

Icarus, Einstein & Commitments

2008-08-07T08:41:00.000-07:00

“In 1991, General Motors posted a then-amazing, full-year loss of $4.45 billion, and 10 months later CEO Robert Stempel was out. Last week, GM reported a $15.5 billion loss for just one quarter, and GM's board this week reaffirmed its support for CEO Rick Wagoner. GM's loss easily eclipsed the quarterly loss of $8.7 billion announced by Ford just a week earlier. As for Chrysler, pick a number. The company is owned by private-equity firm Cerberus Capital Management, and thus its results aren't public…

“Should Detroit have seen this disaster coming? Yes. Gasoline prices have been climbing steadily for more than three years now...

“But the Detroit Three stuck with a business model based on leasing SUVs for way too long...

“Let's acknowledge that it's human nature to resist changing behavior that has been successful, as SUVs were for two decades. If Detroit is Exhibit A, then Exhibit B surely must be the newspaper and magazine industry. It has been equally clear for most of this decade that the business models of print publications, which are based on selling advertising, were becoming as obsolete as big SUVs…

“Not many journalists saw this sea change coming, much less acted on it, in their own business. The stock of McClatchy, one of the nation's largest newspaper chains, has plunged from nearly $75 a share to around $4 a share in the last three years, a 94% collapse that exceeds even the 89% nosedive in GM's stock since the beginning of this decade…

“Detroit's fight for survival doesn't threaten economic doomsday for America, but it's incredibly sad nonetheless. The three companies, and General Motors especially, once symbolized the bedrock strength of American capitalism….

“Motor City residents must be regretting the message on a T-shirt popular in their town for years – ‘Detroit. Where the Weak are Killed and Eaten.’ Let's hope it wasn't a prophecy about General Motors, Ford and Chrysler.”

(“Can America's Auto Makers Survive?” Paul Ingrassia. Wall Street Journal: August 7, 2008. pg. A.13)

ICARUS LEARNED TOO LATE that the very thing that allows us to soar can become the cause of our downfall and destruction.

Einstein noted that doing the same thing over and over again and expecting different results is insanity.

Liberation from a failing course of commitments requires a paradigm shift away from risk aversion, the enshrinement of consistency, and a culture of defensiveness toward trust in experimentation and learning that challenge orthodoxy. It requires genuine, reality-based humility.

Strategy's Heart & Soul

2008-08-06T12:49:00.000-07:00

“There's no question what Wall Street thinks about Motorola's new co-chief executive, Sanjay Jha. The communications conglomerate's shares jumped 11% to nearly $10 on Aug. 4 after announcing the former Qualcomm chief operating officer would take the reins of Motorola's mobile-phone business. Jha brings loads of industry experience and extensive familiarity with wireless investors, ending the Schaumburg, Ill. company's five-month search for an executive to head the troubled cell-phone unit. ‘He is the perfect guy for Motorola,’ says Mark McKechnie, an analyst with American Technology Research... ‘If anyone can turn this handset division around, it's Sanjay Jha.’

“Still, for all of Jha's experience, he faces one huge challenge: Motorola's corporate culture. For the cell-phone unit to recover, Jha will have to fully cleanse Motorola of its sluggish, bureaucratic ways and teach a company that has long let engineers drive product development to think more like marketers, in tune with consumer tastes. It's a challenge that has proved insurmountable for several top Motorola executives…

“Every CEO who has run the company since Gary Tooker took over in 1993 has attempted to infuse the company with more entrepreneurial DNA. Under Edward Zander, who left in December, Motorola managed to hasten the production of a new slim phone, which became the spectacularly successful Razr. But leadership could not keep pace when consumers turned their attention away from hardware to an increasing focus on the software that bestows new functionality on phones...

“Jha, an engineer by training, sounds hesitant to overhaul the company's deep-rooted engineering culture, however. ‘I think the engineering culture is a tremendous asset to Motorola,’ he told BusinessWeek in an interview. ‘I think the challenge is to make that culture stay in tune with the marketplace. When it's a problem is when it gets disconnected with the marketplace. And my job is to keep it connected.’”

(“Motorola: The New CEO's Real Challenge; Co-CEO Sanjay Jha has strong experience in wireless, but his most important task is dismantling the mobile-phone unit's bureaucratic culture.” Roger O. Crockett and Olga Kharif. businessweek.com: August 5, 2008)

ALL ACTION, ALL CHANGE, all strategy comes from our foundational beliefs about the way things are and the way things work, and from our values and priorities.

When shared norms exist around these beliefs and values, there will be either inertia or potency, recalcitrance or revolution, momentum or initiative.

But it all begins in the heart and soul of the firm, begging the question, "Is the CEO in touch?"

Perceptions and Icarus

2008-08-05T09:01:00.000-07:00

“Investors have sharply cut the stock price of Whole Foods Market Inc. in the past year, pushing shares into the low $20s from more than $50…

“A big part of the company's problems stem from its success. After branding itself as a high-end shopping experience, it's now contending with an apparent misperception among consumers that it's expensive.

“While Whole Foods is ostensibly a consumer staple (a company that performs in a down economy because consumers must shop for food), the reality is that ‘the shares actually trade like a consumer discretionary stock,’ says Mark Miller, at William Blair & Co. Stock analysts who have done apples-to-apple comparisons report that Whole Foods, despite its image, is competitive on prices. The chain doesn't sell the down-market brands its peer do, but where products overlap, and with its well-regarded private-label brand, Whole Foods is often as a good a deal or better than traditional grocers. But shoppers often stuff their carts with pricier items that fatten their bills, leading to the impression that the chain is a luxury.”

(“Ahead of the Tape.” Jeff D. Opdyke. Wall Street Journal: August 5, 2008. pg. C.1)

THE VERY THING that allows you to soar can become the cause of your downfall and demise...

...especially to the degree that our world of action is founded upon a world of decisions founded in a universe of perceptions, images and impressions.

We weave our realities as our eyes, minds and hearts filter what is being filtered by others' eyes, minds and hearts.

The New Ball & Chain

2008-08-04T09:45:00.000-07:00

“Should a [CEO] use a computer? … Are there jobs that are too important for the office holder to be spending the day deleting spam or closing pop-up windows in a browser? …

“It's a fair question to ask: Can someone who never touches a computer truly be in touch with what is happening in the world? The computer industry has worked very hard over the past few decades to cause us to suspect as much. But what about the opposite question: Does anyone who spends all day in front of a PC, forging a river of data posing as information, have any time to think?

“A group of technology reporters once received the CEO of a midsize, low-tech company eager to impress his listeners with his connectedness. He described his day as one long session checking emails and news alerts, save for the occasional interruption of a staff meeting or a sales call.

“All this was related with pride, as though it was what modern executives were doing. His listeners, though, were struck by how he seemed to have no time left in the day to think, which was surely why he had yet to realize that he was spending his day consuming the information version of junk food…

“A computer, far from making you more productive, instead loads you down with things to do, and it's important for the machine to know who is boss…

“For a [CEO], a computer can be a … distraction. Sure, he could spend five minutes reading an especially insightful blog post from one of his core constituencies. But it would be better for him to be spending the time having coffee with the person thinking the thoughts that the world will be blogging about a week or a month hence.

“With the world at his beck and call, a [CEO] is one of the few people lucky enough to be able to learn more off-line than he would chained to a keyboard.”

(“Technology; Portals: Note to Next President: Avoid Computers.” Lee Gomes. Wall Street Journal: July 30, 2008. pg. B.6)

LOOK 'EM IN THE EYE. Listen to them breathe. See them think. Hear their hearts beating. Get in touch. Connect.

Connected strategists turn off the workplace version of the boob tube, leave their offices behind, and listen, watch and connect on the shop floor and out in the field.

That's the real world; that's the real deal. There is real insight.

My World, The World

2008-08-01T08:46:00.000-07:00

“Many newspaper readers, recalling what they read at the beginning of this year, must be rubbing their eyes. How can the economy still be functioning despite the perfect storm of recession and housing collapse that was supposed to engulf it?

“Although markets are volatile and segments of the country are having a hard time, the national output is up, not down, this year. How has the economy pulled this off? Is there something the pessimists were missing?

“The answer is yes, and here's why. People tend to anthropomorphize the world around them, and not just in economics. We look at the outside world and assume that it is governed in the same way as our own lives…

“The same parochial streak in human nature is rife in economic commentary. In the context of a household or a business, debt is a burden and can become a threat. But for society as a whole, debt finance is a prime means of capitalizing production and growth.

“It's extraordinary, then, that in national debate the narrow view drowns out the broad…

“What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits…

“We shouldn't expect forecasters to shrug off the depressing effects of what's happening in their own back yards. This is human nature. We just need to keep things in perspective when we listen to them. A more objective diagnosis is especially needed during an election year, in which many unfounded fears are broadcast and amplified by the media…

“Failure to recognize this endangers the mental health of our society. We create a far bigger tragedy when we lose heart, change the rules of the game, or act recklessly with quick fixes.”

(“Economics as Metaphor.” David Ranson. Wall Street Journal: July 25, 2008. pg. A.15)

EYES, MIND, HEART, actions. That is the universal pattern of managing strategically.

Objective business and social realities are constructed out of millions of perceptions, interpretations and feelings weaving together through time. So, the way things are may not match the way things ought to be; but still, that is indeed the way things are.

Our real challenge then is to remain clear-eyed, open-minded, and true-hearted through the bobbing and weaving of our times.

Perception 1, Reality 2

2008-07-31T08:40:00.000-07:00

“Business confidence is falling but at a less alarming rate than previously, according to the latest global business barometer, a quarterly survey of more than 1,000 executives conducted for The Economist by the Economist Intelligence Unit, its sister company. The overall confidence index, which measures the balance of bosses who think business will pick up over those who expect it to worsen, was still fairly negative. Yet most industries saw only a small decline in confidence, and the mood of executives in entertainment, media and publishing, and in health care has lifted a little. North and Latin America were the only regions to see an overall improvement in executive mood in the past three months.”

(“Global business barometer.” The Economist: July 26, 2008. pg. 53)

UNDERSTANDING that perception is reality, then what is the reality of our perceptions?

(check out tomorrow's posting for more... )

Hire, then Higher than Higher Ed

2008-07-29T08:30:00.000-07:00

“Indian industry isn't relying on India's education system to gain an edge. Indian industry has developed a surrogate education system that can take workers with weak educational backgrounds and turn them into world-class R&D specialists…

“India graduates around 200,000 engineers a year, but the quality of the students varies widely. India's main tech trade group, NASSCOM, says that only half of these new graduates are employable…

“Yet… India is rapidly becoming a global R&D hub in several industries. Its scientists are doing sophisticated drug discovery for Big Pharma. Its engineers are designing key components of jetliners for Boeing and Airbus, [and] developing next-generation networking equipment for companies like Cisco Systems…

“In all of the companies we studied, we found that the intense focus by senior corporate executives on implementing companywide staff-development initiatives caused dramatic improvements in productivity and performance.

“Workforce development helps to explain, for example, how IT service firms have been able to increase billing rates and productivity levels and maintain high levels of growth and profitability despite skilled-talent shortages, rising salaries, falling exchange rates, and other challenges. Employee development similarly explains how companies in India are able to hire bright but largely inexperienced talent to successfully engage in R&D and other innovation.

“The achievements of companies in India show that employee investment, development, and empowerment are central and critical means to building and sustaining long-term competitiveness and innovative capacities in a global knowledge economy. The U.S. can learn and incorporate these lessons from India as it rethinks how to train and develop its workforce to maintain its global competitive edge. U.S. companies have long played the guru. Perhaps the time has come for the guru to learn from a disciple.”

(“What the U.S. Can Learn from Indian R&D; Engineering companies in India play a leading role in educating their research employees, a practice the U.S. can adopt to help keep its global competitive edge.” Vivek Wadhwa. BusinessWeek.com: July 24, 2008)

IF PEOPLE ARE INDEED potentially your greatest asset and your greatest potential liability, then what is your best investment?

Private enterprise has always out-educated educational institutions. So let's not lose our grip on the future by loosening our grasp on where the future really lies.

Retrospective Sensemaking

2008-07-28T08:23:00.000-07:00

“Microsoft Corp. Chief Executive Steve Ballmer tried to put a good face on the software maker's failed attempt to buy Yahoo Inc. and pressed the case for Microsoft's continued investment in online services -- particularly Internet search…

“Mr. Ballmer's comments came at Microsoft's annual meeting with analysts at its headquarters in Redmond, Wash. He and other executives devoted much of the meeting to addressing investor concerns about Microsoft's Internet business. Central to his strategy, Mr. Ballmer said, will be boosting spending on online-related technologies and marketing, and on buying other companies.

“‘We're going to have to ante up in a significant way to even be in this game,’ Mr. Ballmer said.

“Microsoft spent most of this year trying to strike a deal with Yahoo -- first trying to buy the whole company and then trying to buy its Internet-search business -- but that quest ended when Yahoo rejected Microsoft's offers...

“Mr. Ballmer Thursday said that Microsoft didn't want to buy Yahoo ‘at the wrong price’ and noted that the inability to reach an agreement in the spring made it impossible to start a regulatory review of any deal before a new U.S. president took office. He also said that buying Yahoo would have created ‘huge integration overhead’ to merge the two companies.

“Without Yahoo, he said, Microsoft will have more flexibility to try to attack Google Inc. with new technologies and acquisitions in Internet search. ‘I'm not going to say it's not a big bet. It is. I'm not going to say it's not risky. It is,’ he said.”

(“Microsoft Makes Case for Online Push --- Ballmer Plans to Bulk Up Technology, Marketing And Pursue Acquisitions.” Robert A. Guth and Jessica E. Vascellaro. Wall Street Journal: July 25, 2008. pg. B.7)

"NOW I SEE WHY we didn't buy Yahoo; it would have been too costly and burdensome!"

Whether in hindsight or in foresight, watch out for the hidden challenges of buying into salvation through acquisition.

You bet your life! Learning is for those who value clearer vision.

Loose Firm

2008-07-24T09:27:00.000-07:00

“In its early days, Chris Wallace's company didn't always have enough work to keep its staff fully occupied designing interactive Web sites for clients. But it didn't want to lose any talent. So he and his co-founders decided to tell employees they could pursue their own interests in their downtime, doing just about whatever they wanted, on the clock.

“An unexpected side benefit emerged. Employees spent some of their spare time writing music and building photography and video skills. When the company needed ideas to pitch to potential clients, it tapped into employees' personal projects. Mr. Wallace says he has had meetings with potential clients where 40% of the work he showed them was done by employees in their downtime…

“These days, downtime is less frequent. But management's philosophy is the same: As long as employees get their work done, they're free to pursue outside projects from their cubicles. The company continues to lean on employees' personal projects to help win new clients and expand the work it does with existing clients.

“The model works, Mr. Wallace says, because of the company's small size and collegial atmosphere. Most people in SuperGroup's Atlanta headquarters know what their colleagues are working on in their personal lives. Twice a week, the whole staff gathers to discuss both company business and personal projects. ‘A larger organization wouldn't have that intimate knowledge,’ says Mr. Wallace.”

(“Small Business Link: Tapping the Creativity of Downtime; Web-Design Firm Uses Projects Employees Pursue in Their Spare Time at Work to Help Win New Business.” by Simona Covel. Wall Street Journal: July 24, 2008. pg. B.5)

GRIP SAND TIGHTLY in your fist, and it will run out quickly.

Hold a bird in your hand just firmly enough to allow it to live, and perhaps it will sing.

We may be our work, and our work may be who we are. Why not magnify the whole, lightly in touch?

The Heart of the Matter

2008-07-22T09:33:00.000-07:00

“Roche Holding AG's $44 billion bid to gain full ownership of Genentech Inc. took the staunchly independent biotechnology company by surprise and risks upsetting the highly successful -- but delicate -- relationship the partners have developed over two decades...

“Genentech employees expressed concern about the proposed takeover's impact on Genentech's culture and identity…

“Roche's chief executive, Severin Schwan, said repeatedly in a conference call… that Roche wants Genentech's drug researchers to keep working as an independent group.

“‘We will do everything to preserve the unique and science-driven culture of Genentech, something which made Genentech so successful and something we want to build on,’ he said in a separate interview.

“The danger, though, is that the big Swiss company will instead prove stifling to Genentech's scientists and other employees. When big drug makers have taken over biotech companies in the past, key scientists have often defected to start-ups or other opportunities...

“Michael Ross, a Ph.D. biochemist from the California Institute of Technology and Harvard who was an early Genentech employee, left six months after Roche acquired its initial stake in 1990.

“Dr. Ross… said Roche would be foolish to tamper with ‘a unique culture, a Valley culture that has aspects of Google and the old Hewlett-Packard.’ But, if Roche doesn't touch Genentech governance or culture, the deal ‘could be smart,’ Dr. Ross said…

“When Roche first bought control of Genentech in 1990, it allowed the company to keep working as an independent unit that decided which research to pursue and how to spend its money. Both companies have always maintained that this arms-length relationship is crucial to Genentech's success.

“Mr. Schwan said Roche would offer Genentech employees ‘attractive and competitive’ packages to try to keep them. But he said that ‘protecting their culture and providing an environment where they feel respected’ would be more important in retaining them.”

(“Roche Bid Blindsided Genentech; Top Executives to Meet Today to Discuss Swiss Drug Giant's $89-a-Share Offer for Rest of Biotech Firm.” Jeanne Whalen, Dana Cimilluca and Marilyn Chase. Wall Street Journal: July 22, 2008. pg. B.1)

MORE THAN MONEY, more than title... heart, soul, humanity, self-determination, and relationships of trust drive our world.

While mainstream pharmaceutical firms have tried to scientificize and bureaucratize innovation, deft CEOs understand that connection, touch and feel are the prime tools of delicate success.

Outsourcing Management

2008-07-21T09:25:00.000-07:00

“Accenture… a leader in management consulting and technology outsourcing, profits handsomely by helping big corporations change continually to meet the demands of their markets…

“Like their brethren at McKinsey, Accenture's nearly 15,000 management consultants help businesses and governments implement strategic plans to improve such things as customer relationships, finance and performance management.

“It also takes on an outsourcing role for companies to help them lower costs, assuming responsibility for such functions as human resources, finance and information technology. Like EDS, it also handles IT-infrastructure outsourcing…

“CEO William Green has said clients are looking to enter new markets, lower costs, manage increased levels of risk and ‘tackle the headwinds’ of the economy. ‘That is the stuff that makes our business go,’ he said during the company's third-quarter conference call...

“The trends don't appear to be slackening. In late June, Accenture once again raised its outlook for revenue growth in the fiscal year ending Aug. 31, to the upper end of its previously announced 9%-12% guidance in local currency, and its forecast for diluted EPS to $2.63 to $2.65, from its previous range of $2.55 to $2.60.

“CEO Green said in the conference call that ‘we feel better looking at '09 than we felt this time last year when we were looking at '08.’ …

“[Tim] Fidler of Ariel Investments says that consulting is sometimes one of the first things to be cut during a recession, ‘Accenture projects are typically mission-critical to an organization.’

“And unlike its competitors, the same Accenture professionals who are selling projects to customers later help with actual work on the project. That's one reason, Fidler says, that Accenture's win rates are so high.”

(“The King of Cost Cutting.” Robin Goldwyn Blumenthal. Barron’s: July 21, 2008. pg. 21)

IF MANAGEMENT CAN'T handle strategic planning, customer relationships, finance, performance management, HR, IT -- the "mission-critical" responsibilities that "makes our business go" -- then what are they doing... ?

If they are not driving strategy, tactics or implementation, then what are they doing?

With such high-priced hand-holding so rampant, are shareholders paying twice... for managers who ought to be in touch, and for consultants who are not?

What are they doing?

Opportunity in Weakness

2008-07-18T08:17:00.000-07:00

“Across the U.S. banking industry, a chasm is opening between the strong and the weak.

“More than a month after scooping up Bear Stearns Cos., J.P. Morgan Chase & Co. posted a smaller-than-expected 53% decline in quarterly profit, helped by underlying revenue strength in the New York company's main businesses. The results helped spur a rally by beleaguered bank stocks, even though the future looks as treacherous as ever.

“Like Wells Fargo & Co., the San Francisco-based bank that lifted the stock market with surprisingly decent second-quarter results Wednesday, J.P. Morgan's net income of $2 billion, or 54 cents a share, showed that some battered U.S. banks remain resilient enough to capitalize on the havoc rippling through the industry as the economy struggles.

“‘There's a pretty big significant differentiation between the people who like their balance sheets and the people who don't -- and we're all going to be living with our balance sheets for a while,’ said James Rohr, chairman and chief executive of PNC Financial Services Group Inc. …

“The Pittsburgh bank's profit rose 19% to $505 million, or $1.45 a share, from $423 million, or $1.22 a share in last year's second quarter. PNC largely stuck to its roots as many regional-bank rivals chased go-go growth during the housing boom, a decision that will haunt them for years.

“J.P. Morgan, the biggest U.S. bank by stock-market value, is benefiting from its emphasis on cost-cutting and a strategy of squeezing additional revenue from existing operations. Executives at both banks made it clear Thursday that they will accelerate efforts to snatch market share from badly wounded rivals.

“‘This is a tremendous time of opportunity for our company given the weakness we're seeing broadly,’ said Michael Cavanagh, chief financial officer of J.P. Morgan.”

(“Banking's Winners, Sinners Part Ways; J.P. Morgan, PNC Results Show Resilience; Comerica Net Reflects Toll on Regional Firms.” Robin Sidel. Wall Street Journal: July 18, 2008. pg. C.1)

ALWAYS REMEMBER who you are and what you represent. Remember what you stand for, what you will not stand for, and what you will not fall for.

As the balance sheet reflects the priorities and principles of a firm's management, so too our personal sense of balance is centered and grounded in our values and integrity.

Good clear values, and solid integrity allow us to keep our balance and to prosper in times of weakness.

Remember your roots.

Inflection

2008-07-17T11:02:00.000-07:00

“In an effort to fuel growth, two of the biggest companies in the videogame-console business, Microsoft Corp. and Sony Corp., are announcing new games and services that target mainstream users as never before...

“A factor in the moves by Sony and Microsoft is the stunning commercial success of rival Nintendo Co. That game maker turned industry convention on its head over the past two years by going after casual game players with its Wii gaming system from the day the console went on sale. Nintendo did that by emphasizing fun, intuitive Wii games that use the console's motion-sensing controller rather than the pricey, hyper-realistic graphics favored by hard-core players.

“‘We are at an inflection point in our business where we've secured the core and now we're reaching out to mainstream audiences,’ said David Hufford, senior director for Microsoft's Xbox 360 business.

“In the U.S., Microsoft and Nintendo have each sold nearly the same number of their latest generation of consoles, trailed by Sony. Nintendo, though, is significantly outselling its competitors on a monthly basis.”

(“New Videogames Set Their Sights On Mainstream.” Nick Wingfield and Yukari Iwatani Kane. Wall Street Journal: July 15, 2008. pg. D.1)

IT CERTAINLY IS fun and intuitive to turn things upside down. And no doubt, the hard core is indeed a tough nut to crack -- consistenly at least...

Yet the primary questions remain: How do we add real value in the eyes, minds and hearts of our target? And, how do we do that in a way that no one else can?

Aye, there's the nub.
(the kernel)

Artistic "Science"

2008-07-16T07:59:00.000-07:00

“Since the Enron scandal, a coterie of corporate-governance firms has emerged as standard-bearers for shareholder rights... The firms -- which include the Corporate Library and RiskMetrics Group's ISS Governance Services … sell, among other things, ratings that say whether a company is well governed or not.

“But a new study from Stanford University's law and business schools gives mostly dismal grades to four of the biggest rating services...

“Statistical tests run by the Stanford academics found little or no correlation between the different services' ratings. Pfizer, for instance, earned a perfect ‘100’ from ISS in 2005, but a ‘D’ from the Corporate Library. Lockheed Martin scored a 9.5 out of ten from GMI, but Corporate Library gave it its worst possible grade, an ‘F’ …

“Companies, fearing the scrutiny of shareholder activists or the wrath of the raters, sometimes do pirouettes to improve scores…

“The Stanford team found very little or no statistical evidence of links between the ratings and company performance, undermining the firms' very reason for being… On average, [ISS’s] top-ranked companies were more likely to have class-action lawsuits than its lowest-rated companies.

“‘The fact that our primary customers are investment managers suggests they are finding value in what we deliver,’ said Howard Sherman, CEO of GMI…

“The Stanford findings reinforce a growing sentiment that governance ratings are an art, not a science. ‘It points out that there's no grand unified theory of corporate governance,’ says Cary Klafter, vice president of legal and corporate affairs at Intel.”

(“Who's Watching the Watchdogs?” James Bandler, Doris Burke. Fortune: July 7, 2008. Vol. 158, Iss. 1; pg. 18)

THE DANCE IS A FRENZY, and the music is manufactured. Hey, if customers like it, then why not... ?

We look for what we want to discover. We see what we want to appear.

"Torture the data until they confess!"

Direction, Execution And Timing

2008-07-15T08:10:00.000-07:00

“Vikram S. Pandit summoned 60 executives to Armonk, N.Y., last Tuesday to present his plan to buck up Citigroup, the beleaguered bank he runs…

“Mr. Pandit tried to lift spirits and brainstorm for ideas about how to reshape his company's culture. He pushed 60 top managers to build on his seven rules, which he unveiled in the last few weeks. Those rules include items like ‘client connectivity,’ ‘transparency’ and ‘product excellence.’

“But some Citigroup insiders roll their eyes at what they see as dull platitudes. Instead of embarking on a bold new course, as some investors had hoped, Mr. Pandit seems to be turning to the playbook of his predecessor, Charles O. Prince III, who was forced out last year...

“Mr. Pandit's executives say they are confident the strategy will pay off, but they have no illusions about how long it may take.

“‘This isn't like a sprint. This really is a marathon,’ said Gary L. Crittenden, Citigroup's finance chief. It could be two to three years before the bank's returns improve significantly, he said.

“Wall Street is growing impatient. ‘Some of the objectives set forth have been in motion for many years,’ said William Tanona, who follows Citigroup for Goldman Sachs. ‘With each passing quarter, there will be increased urgency for people to see results.’”

(“Appointments With Red Ink.” Eric Dash. The New York Times: July 15, 2008. pg. 1)

FIRST SURVIVAL, then growth, then thriving, then adaptation.

Mess up that sequence and you have chaos. Get it right and results will come into line, and spirits will soar.

Both And

2008-07-14T09:24:00.000-07:00

“What is the CEO of a Global 500 company to do? Listen to the doom-and-gloom economists and act cautiously, or keep pushing into fast-growing but fragile economies? Smart executives are doing a bit of both, seeking new growth markets with the full understanding that their plans will be shaped and changed by global forces. Some of those trends are huge and long-lasting, like the rise of the global middle class. Others are not: Carrefour, for example, almost had a disaster on its hands when Chinese consumers threatened to boycott the chain over an event it could not foresee or control: A pro-Tibetan protester in Paris assaulted a wheelchair-bound Chinese Olympic torchbearer.

"Robert McDonald, Procter & Gamble's chief operating officer, has borrowed a military term to describe this new business world order: ‘It's a VUCA world,’ he says -- volatile, uncertain, complex, and ambiguous. ‘The idea that a butterfly flaps its wings in Africa and an earthquake occurs somewhere else in the world is our reality. It's no longer just a nice book that Thomas Friedman wrote,’ he adds, referring to the New York Times columnist's book on globalization. ‘It's my life.’”

(“The New New World Order.” Barney Gimbel. Fortune: July 21, 2008. Vol. 158, Iss. 2; pg. 156)

NO MORE either-or thinking.

Indeed, we live in a world where the only way to cope with volatility, uncertainty, complexity and ambiguity is to develop a fine touch for the craft of balancing through paradox.

This involves a bit of science infused with a very healthy dose of art -- perspective, interpretation, touch and feel.

The ancients comprehended this. Our immediate predecessors tended to forget. We must remember.

Not Unusual At All

2008-07-10T11:04:00.000-07:00

“In 2005, radio-giant Clear Channel Communications Inc. learned that a writer named Alec Foege was planning a book about it. The book's working title, ‘The Monster That Ate Mass Media,’ suggested something less than a puff piece was in the works.

“Clear Channel mounted a counteroffensive, lining up its own writer to tell the Clear Channel story its way.

“As a result, dueling books about Clear Channel have recently hit the shelves. Mr. Foege's book -- now titled ‘Right of the Dial: The Rise of Clear Channel and the Fall of Commercial Radio’ -- chronicles the company's role in the consolidation of the radio industry.

“It competes with ‘Clear Vision: The Story of Clear Channel Communications,’ by Reed Bunzel, former editor of the trade magazine Radio Ink. Mr. Bunzel says Clear Channel paid him to do the book but declines to say how much. Another journalist says he was offered more than $100,000 to take on the project. The book doesn't disclose Mr. Bunzel's financial relationship with Clear Channel, but careful readers may notice that the company holds the copyright to the book.

“Self-published corporate histories aren't unusual. But Peter Hawes, editorial director of Greenwich Publishing, a publisher specializing in corporate histories, says he has ‘never seen a situation in which a company has said, Hey, there's another book coming out. We don't think we're going to like it. Let's get our own book out.’ …

“Lisa Dollinger, Clear Channel's communications director, spearheaded the book project. She calls it an ‘evenhanded look at Clear Channel’ that ‘was written from an independent point of view by a journalist with decades of experience in radio.’”

(“Why Clear Channel Tale Is Told Twice.” Sarah McBride. Wall Street Journal: July 10, 2008. pg. B.1)

FIRST IMPRESSIONS matter a great deal we know.

So do lasting impressions.

It's not unusual to be loved by anyone…
It's not unusual; it happens every day
No matter what you say
You find it happens all the time
Love will never do what you want it to
Why can't this crazy love be mine?
(Tom Jones)

Just the Numbers?

2008-07-09T11:55:00.000-07:00

“Silicon Valley star Diane Greene was ousted as chief executive of VMware Inc. by its corporate parent, EMC Corp., which said the fast-expanding software company she co-founded had grown beyond her ability to manage it...

“Ms. Greene's removal ends an uneasy relationship in which she sought to guard VMware's independence while its stock price had fallen amid new competition...

“Joseph Tucci, chief executive of EMC and chairman of VMware, said in an interview that the VMware board concluded Ms. Greene lacked the experience to continue running a company that expects to have revenue nearing $2 billion this year. He said the board invited her to stay in a different ‘very active role,’ but she declined.

“Ms. Greene, reached at her home, said she wasn't allowed to talk about the situation.

“In past interviews, Ms. Greene has said she wanted more independence from EMC, a maker of large computer storage systems, to make her own decisions...

“EMC acquired VMware in 2003 for $635 million and retained 86% of its stock following an eye-popping initial public offering last summer…

“Mr. Tucci said that Ms. Greene had run VMware successfully and ‘built a great company,’ but ‘the board felt it was appropriate to bring in leadership with the experience to double or triple’ the company's sales. He said talks with Ms. Greene about a succession plan failed to reach agreement…

“Following the sale, Ms. Greene became an executive vice president of EMC, but remained on the West Coast. She sometimes visited a VMware development lab in Cambridge, Mass., without making the trip 30 miles west to EMC headquarters...

“Ms. Greene was a popular leader within her company, especially among women. EMC has often been criticized for having few women executives.”

(“VMware Ousts Star CEO as Growth Slows; Diane Greene's Removal, Forecast Hit Shares of Highflier and Parent EMC.” William M. Bulkeley. Wall Street Journal: July 9, 2008. pg. B.1)

IMPRESSIONS, IMAGE AND INTRIGUE shape most of our corporate work, and our personal worlds as well.

It looks like a rough and tumble game governed by the kid who owns the ball, or a beauty pageant where Miss Congeniality never seems to win.

Watch your numbers; watch your aura, and watch out for what's in the air...

What It's All About

2008-07-08T09:10:00.000-07:00

“General Electric Co. plans to turn a tiny airplane-engine company in the Czech Republic into a competitor against archrival Pratt & Whitney, the leading maker of turboprop engines for commuter airlines, corporate aviation and private aircraft owners.

“GE's aviation unit this week completed the acquisition of Walter Engines, which has earned a reputation during its 85-year history for building rugged propeller engines used heavily in Eastern Europe and niche markets such as agricultural and cargo planes.

“Although the small-engine business will fill an important hole at the low end of GE's jet-engine product line, GE officials are also relishing the prospect of forcing Pratt & Whitney to cut prices on one of its most lucrative products. Pratt made a similar move two years ago when it began making spare parts for one of GE's best-selling jet engines, ratcheting up the companies' longstanding rivalry…

“‘We think the world deserves a choice,’ said Chet Fuller, general manager of marketing for GE Aviation…

“A spokeswoman for Pratt, which delivered almost 3,000 small airplane engines last year, said the company will ‘obviously take any competition seriously,’ but she noted that Pratt ‘has a 45-year head start,’ having produced more than 35,000 PT6 engines.”

(“GE Takes On Jet-Engine Rival; Goal Is to Build Up Small Czech Firm To Challenge Pratt.” J. Lynn Lunsford. Wall Street Journal: July 3, 2008. pg. B.2)

ALTRUISM -- That is so kind of General Electric to care about us!

And Pratt seems not to have a real worry in the world.

How nice; all is well...

Strategic? People!

2008-07-07T09:42:00.000-07:00

“In the latest attempt to persuade restive investors it can fix itself, Yahoo! is reorganizing its management ranks. The widely expected revamp, unveiled June 26, centralizes product and sales operations under President Sue Decker.

“The reorganization comes a day after co-founder and Yahoo CEO Jerry Yang and Chairman Roy Bostock sent shareholders a public letter explaining why the company rejected a deal that would have combined its Web search operations with those of Microsoft.

“The public statements follow a flurry of management departures in the wake of failed takeover discussions with Microsoft. They also signal Yahoo is ratcheting up efforts to rally support for its independence ahead of an Aug. 1 annual shareholder meeting. Yang, Decker, Chief Financial Officer Blake Jorgensen, and Yahoo directors will take their appeal straight to large investors in a road show due to begin next week…

“The reorganization presents little fundamental change in Yahoo's top leadership, which has been roiled by high-level defections recently. In the past year, Yahoo has seen the departure of more than 100 managers, including top executives such as Jeff Weiner, former executive vice-president for Yahoo's Network Div., who left last week…

“Some of the people who left did so because they were growing weary of the off-and-on Microsoft negotiations. They decided to make their move after Microsoft walked away from its proposed buyout, as they faced many more months of uncertainty about Yahoo's prospects and direction. With the reorganization, they say, more talent could walk out the door. ‘The patience is growing thin’ within Yahoo's walls, says one former Yahoo executive. The sentiment is shared outside the walls, too.”

(“Yahoo Tries to Heal Itself – Again.” Robert Hof. www.businessweek.com. June 27, 2008)

LEAD WITH STRATEGY, then people will follow?

Alternatively, lead people, and your strategy will emerge, coalesce and crystalize!

Strategic! Thinking?

2008-07-03T10:39:00.000-07:00

“Any forecast calling for a ‘permanent’ shift in auto tastes based on a quantum as volatile as the price of gasoline is nuts.

“GM's leaders are not nuts, and yet to pour hundreds of millions into a race to launch an electric car, the Chevy Volt, guaranteed to lose money on every unit sold, begins to seem a peculiar strategy for a company in dire liquidity straits.

“With each hectic advance in the development process, the expected sticker price to consumers has gone up... At last leakage, GM is saying now the Volt may need a sticker price of $45,000.

“At best, the Volt will be an affluent family's third car. It will have to be plugged in for six hours a day... It won't be a car for a city dweller who parks on the street or in a public lot. It will travel 40 miles on a six-hour charge. After that, a small gas motor will kick in to recharge the battery while you drive. Some reports claim the Volt will get 50 mpg in this mode, but that's hallucinatory: If using a gasoline engine to power an electric motor were so efficient, the streets would be full of such vehicles...

“Customers value flexibility in their vehicles. For a car with the Volt's narrow usability to sell would require an unlikely revolution in consumer behavior...

“And for those who think the Volt's justification is greenhouse emissions, notice that electric cars play Three Card Monte with energy inputs: It all depends on where the electricity is coming from…

“GM executives are not nuts. They justify the costs and risks of the Volt as a way of changing GM's image in the minds of consumers and politicians. To commit a pun, the Volt is GM's vehicle for making a bailout of GM politically acceptable...

“CEO Rick Wagoner last week laid out the case to Barack Obama personally for turning GM into a ward of the state, by way of direct and indirect subsidies… Shareholders should note that a big part of the company's turnaround gamble consists also of eliciting favor once again from Washington.”

(“Business World: What Is GM Thinking?” Holman W. Jenkins, Jr.. Wall Street Journal: July 2, 2008. pg. A.11)

PERCEPTIONS AND PERSPECTIVES get managed first. Interpretations come next. All hinge on values, beliefs and assumptions.

Now we get to work, working to drive the way we are seen, and seeing as we need to so we can do what we want to do.

Both Sides Now

2008-07-02T11:05:00.000-07:00

“For a decade it appeared there was no such thing as too many Starbucks for U.S. coffee drinkers, whose willingness to buy its $4 lattes and dark drip brews rationalized a second green-and-white mermaid awning just down the street — and sometimes even a third. But in a sign that those days are over, Starbucks Corp. announced Tuesday it will close 600 company-operated stores in the next year as the faltering U.S. economy hastened the pain caused by the company's own rapid expansion.

“Starbucks shares, which have been falling steadily for nearly two years, jumped 72 cents, or 4.6 percent, in extended trading after the announcement…

“Starbucks is closing 19 percent of all U.S. company-operated stores that opened in the last two years, Chief Financial Officer Pete Bocian said…

“In total, the company forecast up to $348 million in charges related to the closures, $200 million to be booked in the fiscal third quarter ended June 30. Starbucks reports third-quarter results at the end of July.

“The company had previously planned to shut 100 stores. The 500 more that will be closed had been on an internal watch list for some time. They were not profitable, not expected to be profitable in the foreseeable future…

“Some analysts had wondered whether Starbucks' explosive growth in the U.S. would come back to haunt it as the market became saturated.

“But before Tuesday, the company avoided acknowledging that saturation was an issue and pinned weak financial results and adjustments to new store openings on the economy…

“‘We believe we still have opportunities to open new locations with strong returns on capital,’ Bocian said.”

(“Starbucks to close 600 US stores, rein in growth.” by Jessica Mintz of the Associated Press. news.yahoo.com. July 2, 2008)

GROWTH OR PROFIT, what will it be? How long and how well can we pursue both sides of this balancing act?

What will be rewarded? How will that enable the ongoing accomplishment of our mission?

Emergence, growth, maturity, decline -- all systems move through life cycles as surely as sunshine follows rain, and rain follows the sun.

What are we learning and changing within each stage?

I've looked at life from both sides now
From up and down, and still somehow
It's life's illusions I recall...
(Joni Mitchell)

Rational AND Intuitive -- Just the Tip...

2008-07-01T12:44:00.000-07:00

“Fishing in the stream of consciousness, researchers now can detect our intentions and predict our choices before we are aware of them ourselves. The brain, they have found, appears to make up its mind 10 seconds before we become conscious of a decision -- an eternity at the speed of thought.

“Their findings challenge conventional notions of choice.

“‘We think our decisions are conscious,’ said neuroscientist John-Dylan Haynes at the Bernstein Center for Computational Neuroscience in Berlin, who is pioneering this research. ‘But these data show that consciousness is just the tip of the iceberg’ …

“In ways we are only beginning to understand, the synapses and neurons in the human nervous system work in concert to perceive the world around them, to learn from their perceptions, to remember important experiences, to plan ahead, and to decide and act on incomplete information…

“Such experiments suggest that our best reasons for some choices we make are understood only by our cells. The findings lend credence to researchers who argue that many important decisions may be best made by going with our gut -- not by thinking about them too much.

“Dutch researchers led by psychologist Ap Dijksterhuis at the University of Amsterdam recently found that people struggling to make relatively complicated consumer choices -- which car to buy, apartment to rent or vacation to take -- appeared to make sounder decisions when they were distracted and unable to focus consciously on the problem.

“Moreover, the more factors to be considered in a decision, the more likely the unconscious brain handled it all better they reported.”

(“Currents; Science Journal: Get Out of Your Own Way; Studies Show the Value of Not Overthinking a Decision.” Robert Lee Hotz. Wall Street Journal: June 27, 2008. pg. A.9)

I THINK THAT I am thinking. What do we see when we observe our own thought processes?

Stop the war between the head and the heart, the mind and the gut, knowing and feeling. Learn to balance both sides; add richness to your understanding.

Yang AND Yin.

Resource Drivers and Levers

2008-06-30T10:56:00.000-07:00

“A small but growing number of companies are grading -- and paying -- top managers on their ability to hang on to employees.

“Car retailer Penske Automotive Group Inc. tied 8% of Chief Executive Roger Penske's 2007 bonus to holding employee turnover below 31%, according to a March proxy statement. Mr. Penske earned his $240,000 reward. The company, which owns 300 dealerships world-wide, posted 30.8% attrition in 2007, down from 31.2% a year earlier and more than 80% in 1999 when Penske Corp. acquired a controlling stake.

“Other companies that recently factored employee retention into executive-pay plans include Pep Boys and Extreme Networks Inc.

“A study by management consultancy Hay Group suggests that the practice is gaining popularity. In the 2007 survey of 182 organizations, 8.2% of respondents said they use turnover as a performance measure in executive-incentive plans, more than three times the 2.3% who responded similarly in 2005.

“‘It is a recognition, on the one hand, of people as a driver of business success,’ says Hay Group consultant Mark Royal…

“The attention to turnover is part of a broader trend of employers focusing on talent management, as well as financial metrics, in evaluating company leaders.

“In the 2007 Hay Group survey, 55% of respondents said they incorporate ‘employee performance’ criteria into executive-bonus plans, more than double the 23% who said so in 2005. Such criteria included turnover, workplace diversity and employee satisfaction.”

(“Theory & Practice: In Some Offices, Keeping Workers Earns a Bonus; More Firms Like Penske Tie Top Managers' Pay To Employee Retention.” Cari Tuna. Wall Street Journal: June 30, 2008. pg. B.6)

DO WE UNDERSTAND our appropriate metrics? Do we know what resources are critical for us to survive, grow, thrive and adapt?

Do we understand the drivers of those metrics, and the levers that move them?

What moves your people?

They Zag; We Zig

2008-06-26T12:04:00.000-07:00

“Most companies play it safe in hard times, cutting expenses and scaling back growth plans. Ambition gives way to caution. But some aggressive companies are shrugging off their own challenges and, in the words of management scholar Walter Ferrier, ‘going for the jugular of weak rivals.’

“Hewlett-Packard, Southwest Airlines and FedEx all have been sharpening their claws lately. Tactics include hiring extra salespeople, storming into new markets or holding down prices in a bid to pry business away from the competition.

“There's a risky side to these measures, because they can put extra pressure on short-term profits. But executives believe the long-term results will justify their audacity. As they see it, market share is most likely to be up for grabs in a downturn -- when some competitors are too hard-pressed to defend their position vigorously. New customers won today may become profitable accounts for years to come…

“Southwest Airlines… has been exploiting a huge cost advantage it enjoys over other airlines, which are reeling from the impact of $130-a-barrel oil. Southwest is paying far less for its aviation fuel this year, thanks to its active hedging program. As a result, Southwest can profitably add flights to attractive markets, even as other carriers are forced to retrench…

“At FedEx, the company's freight business has been picking up market share at the expense of long-established trucking companies. Douglas Duncan, president of FedEx Freight, says… FedEx's recent gains in freight market share have grown out of its decision in July to reduce its diesel-fuel surcharge by 25%... Competitors generally haven't matched that price cut, and customers at first waited to see whether FedEx would stick with it, Mr. Duncan says. As it became clear that FedEx's price break was here to stay, he says, that's proven to be a powerful tool in winning new business…

“And in some high-tech markets, such as chip-making equipment, aggressive strategies are all about continuing to roll out more advanced products even when demand is weak. ‘That's how the market recovers from down cycles,’ says Michael Splinter, CEO of Applied Materials. ‘Customers want new products.’”

(“Business: In Hard Times, Some Firms 'Go for the Jugular'”. George Anders. Wall Street Journal: June 25, 2008. pg. B.2)

AUDACIOUS EXCELLENCE -- born out of care-full, thought-full preparation when times were good.

The mortgage bankers ran so fast in boom times that now they are depleted. Wise strategists pace themselves so that they can pounce when all around them slow down before getting devoured.

Warren Buffett is buying!

Eyes, Ears, Heart, Mind & Soul

2008-06-25T08:25:00.000-07:00

“With Chrysler LLC losing money and its market share plunging in the U.S., Chief Executive Robert Nardelli is tackling what he sees as the root cause of most of the auto maker's problems: its Old Detroit mind-set…

“‘The traditional way of running the company got us where we are now,’ Mr. Nardelli said in an interview last week. ‘So we're trying to break some of the old paradigms.’ …

“Mr. Nardelli has taken charge of re-evaluating some of Chrysler's traditional ways of doing business. The campaign for cultural change is ‘a big focus for Bob,’ said Nancy Rae, Chrysler's head of human resources...

“Mr. Nardelli doesn't have much time for his new ideas to sink in. Although he says Chrysler is hitting its financial targets, he acknowledges the company is chalking up losses and burning through cash...

“Nardelli's campaign started earlier this year with detailed assessments of the company's 300 leading executives, many done by Mr. Nardelli himself...

“One possible impediment to the campaign's success is Mr. Nardelli's brusque style, which hasn't always gone over well with Chrysler employees. While some embrace his new ideas, others brush them off as consultant-speak. Others say his determination to do away with established methods rubs some people the wrong way…

“Chrysler [recently] got a reminder of how much farther it still needs to go. J.D. Power & Associates… [released] a closely watched quality survey in which the company's three brands -- Chrysler, Dodge and Jeep -- all ranked below the industry average, and Jeep was dead last.

“Just before the survey was made public, Mr. Nardelli wrote a memo reminding employees to confront the company's problems. ‘Do not let anything override the priority to satisfy the customer,’ he wrote. ‘To win in a competitive market, We need to install a mind-set of never being satisfied with good enough.’”

(“Nardelli Tries to Shift Chrysler's Culture.” Neal E. Boudette. Wall Street Journal: June 18, 2008. pg. B.1)

MORE THAN A GENERATION has passed since the world changed with the first wave of the Japanese invasion. It took forty years in the wilderness for a generation of the children of Israel to pass in preparation to enter the Promised Land.

Can we change our selves, fight off our fears, and walk with new vision? Or will we continue to cling to the old dying comforts?

What is your choice?

Supplying Demand, or Demanding Supply?

2008-06-24T09:27:00.000-07:00

“Last year, directors of fund manager Waddell & Reed Financial Inc. looked at the roughly $70 million Chief Executive Henry Herrmann had collected in stock, pension benefits and deferred compensation over his 36-year career, and deemed it ‘sufficient’ for retirement, according to its proxy statement. The board stopped extra contributions to Mr. Herrmann's retirement fund.

“Waddell & Reed is among a growing number of companies scrutinizing how much they have paid executives over time. Nearly 15% of Fortune 500 firms said they took such ‘accumulated wealth’ into account in setting 2007 executive pay, up from 8.4% in 2006...

“The sums involved can be significant. The median CEO in Equilar's study of 338 large companies held $56.7 million in stock, outstanding stock options and accumulated retirement benefits...

“‘Compensation committees are all wrestling with the question of how much is too much,’ says Miles Meyer, vice president for human resources at Kellogg ...

“‘Intuitively, there's some point at which you'd say, Gee, that seems like enough wealth accumulated for the time being,’ says Mr. Meyer. He says the committee hasn't discussed where that point might be...

“When directors realize how much they have given executives, there are ‘eye-opening, Holy Cow moments,’ says Jesse Brill, a San Francisco lawyer…

“Many CEOs aren't happy with the idea of capping pay. Aflac Inc. Chief Executive Daniel P. Amos, who holds 9.9 million shares valued at about $650 million, says he views equity awards as a way to keep score of his performance and that he would be less motivated if his pay was cut below that of other CEOs.

“But Richard Brooks, chief executive of apparel maker Zumiez Inc., says his 3.7 million shares -- valued at about $72 million -- are adequate incentive. Mr. Brooks hasn't received stock options or equity since 1993, and when other executives accumulate sufficient equity they won't either, he says.

“‘At some point [getting more stock] doesn't change behavior,’ says Mr. Brooks. ‘So how is it going to change performance?’”

(“Firms Measure a CEO's (Net) Worth; In Vetting Pay, Companies Take Stock of Accumulated Wealth; Directors Wrestle With 'Turning Off the Hose'.” Phred Dvorak. Wall Street Journal: June 23, 2008. pg. B.1)

SIGNIFICANT, ENOUGH, TOO MUCH... what do they mean? Where might that point be?

Who is to tell? Is it the board (Are their eyes now open?), or the labor market, or the financial markets?

Do you understand the linkages among outcomes, measurement, actions, objectives, and strategies?

Once we understand linkages, then we can begin to pull the right levers to get the results we need.

Proactive Humility

2008-06-17T11:33:00.000-07:00

“The ouster of American International Group Inc. Chief Executive Martin Sullivan is the latest casualty among new CEOs who were unable to overcome a company's troubles.

“Dozens of companies have replaced their CEOs in recent years, as shareholders and boards have grown more assertive and sentiment has turned against so-called imperial CEOs.

“But just as firing the manager rarely revives a last-place sports team, companies are finding that ousting a CEO is rarely a cure-all for corporate ills.

“Three years ago, Mr. Sullivan was promoted at AIG amid a wave of optimism that he could steer the company through the regulatory and legal hurdles left by former CEO Maurice ‘Hank’ Greenberg. Since then, AIG shares have lost nearly half their value.

“Another CEO from the class of 2005, Aylwin Lewis, who succeeded the demoted Alan J. Lacy at Sears Holdings Corp. in September that year, was himself ousted by Chairman Edward S. Lampert in January...

“A Wall Street Journal survey of 30 companies in the Standard & Poor's 500-stock index that removed CEOs between January 2005 and June 2007 reveals that the shares of those companies have declined far more often than they have increased. The decliners include Eastman Kodak Co., Newell Rubbermaid Inc., UnitedHealth Group Inc. and Home Depot...

“Recruiters, consultants and executives said the problems at a troubled company are often bigger than a single, fresh leader can repair quickly…

“Some new CEOs are big heroes. Mark Hurd has boosted revenue and profit at Hewlett-Packard Co. since succeeding Carly Fiorina in 2005; H-P shares have more than doubled. Walt Disney Co. shares have risen under Robert Iger.

“These successful successors are decisive leaders with ‘a really heightened ability to listen and interact with all of their constituencies,’ says Roger J. Brunswick, a managing partner at New York consulting firm Hayes Brunswick & Partners LLC. He said Mr. Hurd wins points for frequent meetings with customers and for being accessible and open to criticism from lower-level staffers.”

(“Corporate News: New CEO Is Rarely a Quick Fix; Too Many Problems, Too Little Time Vex AIG, Other Firms.” Joann S. Lublin. Wall Street Journal: June 17, 2008. pg. B.8)

BE QUIET; listen. Be still; listen. Be humble; listen. Be teachable; learn.

Now act.

But It's A Great Product

2008-06-16T11:45:00.000-07:00

“The burnt orange and deep-water-blue Dodge Challengers turned heads and drew finger-pointing from motorists who rolled by the Whistle Stop diner in the Detroit suburb of Birmingham on Monday.

“Inside, Dodge Brand Director Mike Accavitti shared his personal stories of people stopping him on the street to ask about the Challenger slated to start production in late July and roll into showrooms in September.

“But it will take more than just finger-pointing and stories for Chrysler LLC to pull off a major product gamble -- marketing and launching a retro-1970s muscle car at a time when gasoline is $4 a gallon and the economic outlook is murky.

“‘There is certainly going to be an impact [from high fuel prices] but we think there is a pent-up demand for this vehicle,’ said Mr. Accavitti, who also said Chrysler already has 7,000 orders for the Challenger. ‘There is a certain segment that is indifferent to fuel prices and they will help drive sales.’ …

“Chrysler could have sold about 40,000 vehicles if it was released last year, said Rebecca Lindland, a Global Insight analyst. Now the auto maker will struggle to meet that estimate, although holding it back would have cost the auto maker more since it has been in the planning for a few years.

“‘There is nothing wrong with the vehicle. It isn't lacking and it has a fun retro look that reminds you of Daisy Duke,’ Ms. Lindland said, referring to the short-shorts-wearing waitress from the 1970s ‘Dukes of Hazzard’ TV show. ‘But this isn't a miniskirt environment.’ …

“Sales of Ford Motor Co.'s Mustang, the nearest competitor for the Challenger, dropped 45% in May and were down 32% for the first five months of the year…

“Mr. Accavitti admits that the auto maker is being realistic and a ‘steep’ decline has been factored after the first year of sales. Chrysler hasn't disclosed how many Challengers it expects to sell.

“He will also attempt to soften the Dodge brand's image to ‘strong and fun’ rather than one tied solely to power that elicits image of fuel being wasted as tires squeal, and television ads of guys screaming: ‘That thing got a Hemi?’”

(“Chrysler Gambles on Muscle Car.” Jeff Bennett. The Wall Street Journal: June 11, 2008. pg. B.7-D)

STANDING OUT is one thing, but insanity ("Doing the same thing over and over again and expecting different results." -Einstein) is entirely another.

Yes, we certainly do need to set ourselves apart from the competition. And yes, the competition is moving toward more fuel-efficient vehicles. But blindness in the face of a gale is not vision.

Zig or Zag?

2008-06-13T08:22:00.000-07:00

“Taking cues from technology companies like Intel and Qualcomm, Disney launched its own in-house VC fund in 2000 to find emerging entrepreneurs and products in media… Now other industry players are following Disney. Last year, NBC Universal started a similar vehicle, hiking its size from $250 million to $1 billion in April…

“Steamboat operates like a traditional VC fund. John Ball… and his team scour conferences and work the phones, looking for media startups in the U.S. and China with promising products, technologies, or services into which they can plow $2 million to $15 million. Once they decide to invest, a team member will often join the company's board or make hiring suggestions...

“Although Disney executives have oversight through a six-person committee… they have yet to overrule an investment idea. ‘We decided that if we were going to get into the VC business, we had to do it in a way that looked, smelled, and behaved like a disciplined venture capitalist,’ says Ball. Translation: The team members, who get a percentage of the fund's returns, had to be free to swing for the fences without Disney second-guessing them.

“Of course, being part of Disney has its benefits. Steamboat sometimes taps Disney executives to help scout investment opportunities. It called on folks from the theme parks' retail crew to help vet Pure Digital Technologies, which makes disposable digital cameras. Disney used its hit ABC show Ugly Betty to promote the scrapbook site Scrapblog, a Steamboat investment. ‘They're really good at opening doors for you,’ says Michael Yavonditte, the former CEO of online ad company Quigo Technologies, another holding…

“So far… the hits appear to outnumber the misses. Disney says it made $37 million on an estimated $6 million investment in Quigo, which AOL bought in November. Steamboat also made money on a stake in flat-panel display maker Iridigm Display; the entire company was sold to Qualcomm for $188 million. Overall, Steamboat's first $75 million fund is expected to return at least $150 million, according to sources familiar with it. That's a middling return in the VC world but not bad for a fund started in the depths of the last bust.”

(“Disney: When You Wish Upon A Startup; Its media-oriented VC fund, Steamboat Ventures, is quietly nurturing entrepreneurs.” Ronald Grover. Business Week: June 16, 2008. pg. 85)

WHEN EVERYONE "KNOWS" that something won't work, or you just can't do that now, see if your competence really can be applied distinctively. Try a different angle at the seemingly impossible; take a different tack.

Focus on what you know best; and remember that to be outstanding, you must stand out.

Let's Stay In Touch

2008-06-12T12:11:00.000-07:00

“Microsoft has irked consumers and corporate customers with the most recent version of its Windows operating system, which they complain requires hefty investments in PC hardware and offers a paucity of compelling new features in return. Now there are signs that companies' reluctance to install Vista is starting to weigh on Wall Street's outlook for the company's stock.

“Charles Di Bona, a senior analyst at Sanford C. Bernstein and a noted bull on Microsoft, said in a June 10 report that ‘dampening’ adoption of Vista by corporate customers will shave $395 million in revenues and 2% a share in earnings from the company's financial results for the 2009 fiscal year... According to a Bernstein Web survey… companies expect just 26% of their PCs to be running Vista by the beginning of 2011, down from an estimate of nearly 68% of computers by respondents to a similar survey a year ago.

“The new survey… also shows Vista's requirement of running on PCs crammed with lots of memory and powerful processors to be a deterrent. Companies expect to install Vista on only about 10% of the PCs they already own, compared with estimates last year that they'd be able to do so on 27% of their machines.

“‘It seems like the IT community has turned tepid to negative’ on Vista, says Di Bona... ‘There aren't any features in there they find compelling -- even ones that haven't had bad PR.’ For example, companies said in the survey that they were indifferent to Vista's Windows Presentation Foundation technology for building visually compelling programs...

“Vista… has suffered from a number of shortcomings. Besides the hardware requirements, customers have complained about clumsy new security procedures and a lack of compatibility with some companies' existing software programs. As a result, companies including General Motors are considering bypassing the system altogether and waiting for Microsoft's next operating system, code-named Windows 7…

“For Microsoft, a key challenge in its Windows business right now is to encourage companies to keep installing Vista while it trickles out information about Windows 7. At a recent conference, Microsoft Chairman Bill Gates and CEO Steve Ballmer demonstrated Windows 7's new user interface, which allows users to manipulate objects on a PC screen using their fingertips.”

(“Microsoft: What Cost the Vista Fiasco? After a survey of corporate customers, one Wall Street analyst cuts his expectations for revenue and profit growth.” Aaron Ricadela. businessweek.com, June 12, 2008)

JUST BECAUSE WE CAN DO IT certainly does not mean that we should.

Real value added comes only through relentless focus on enhancing the customer's experience as they see it.

Customers first, business sense second, technology third.

We already knew that, right?

(P.S. I keep wondering how I will enjoy and benefit from raising my hands to touch a screen of spreadsheets and documents... )

Focus on...

2008-06-11T12:56:00.000-07:00

“Fewer projects with greater focus. That's the new direction at high-tech giant Hewlett-Packard Co.'s advanced research group, HP labs. The company says the goal of the research group's new approach is to ‘balance exploratory research with an entrepreneurial approach’ so breakthrough technology can be transferred more quickly into commercial applications for customers.

“The new HP labs consists of 23 labs across seven worldwide locations, led by Prith Banerjee. The research group will pursue 20 to 30 large research projects rather than the 150 smaller projects it had in the past.

“‘In the past, HP labs took the approach of let 1,000 flowers bloom,’ Banerjee explains on the HP Web site. ‘The trouble with that approach is that not enough resources were allocated to any particular research area.’

“Open innovation will play a greater role as well, as input from universities, partners, customers and venture capitalists gains greater significance. A review board composed of HP technologists and business executives will provide guidance to lab researchers, identifying the most promising discoveries to turn into commercial offerings and building business plans early in the research lifecycles.”

(“Focus Please.” Jill Jusko. Industry Week: June 2008. Vol. 257, Iss. 6; pg. 86)

MANAGE INNOVATION through relentless focus on adding value to the customer's experience as they see it.

Customers first, business sense second, technology third.

That's it.

What Myths Are Made Of

2008-06-10T11:52:00.000-07:00

“Federal fraud charges unsealed Thursday against former Broadcom Corp. Chief Executive Henry T. Nicholas III for allegedly backdating stock options were overshadowed by a second federal indictment accusing the executive of distributing drugs and slipping them in business associates' drinks.

“The criminal charges are a major blow to Mr. Nicholas, a prominent Southern California technology executive who co-founded Broadcom, a maker of specialized computer chips based in Irvine, Calif…

“Prosecutors allege that the former Broadcom chief engaged in a pattern of drug use and abuse over a nearly seven-year period. The charges against him include conspiracy to distribute Ecstasy, cocaine and methamphetamine.

“Among the more sensational charges is that Mr. Nicholas spiked the drinks of Broadcom customers and others with drugs without their knowledge. Although the indictment doesn't identify any such persons by name, it cites an early 2000 incident in New Orleans at which the Broadcom chief allegedly used Ecstasy, also known as MDMA, to spike the drink of a 'technology executive.'

“Prosecutors also allege that Mr. Nicholas in 2001 directed a Broadcom employee to pay a drug courier between $5,000 and $10,000 in cash in the lobby of Broadcom's headquarters. The same year, they say, marijuana smoke aboard Mr. Nicholas's private plane was so thick during a trip to Las Vegas that the pilot had to put on an oxygen mask.”

(“Drugs Grab Spotlight in Broadcom Case.” Mark Maremont and Justin Scheck. Wall Street Journal: June 6, 2008. pg. B.1)

HIGH-FLYING EXECUTIVES are dangerous -- to their firms, to others, and to themselves.

When we become down-to-earth, we grow grounded in reality, and rooted in integrity.

"He fell in love with an insubstantial hope,
mistaking a mere shadow for a real body…
He gazed at the shape that was no true shape
with eyes that could never have their fill,
and by his own eyes he was undone."
(Ovid)

Measured News

2008-06-09T14:34:00.000-07:00

“Good news is hard to come by at Chrysler these days. Its sales have been tanking, and industry observers regularly chatter about whether Cerberus Capital made a worse mistake buying the automaker last year at the front end of a recession than Daimler-Benz did in 1999. But the influential Harbour Report produced by consulting firm Oliver Wyman, which annually tracks factory productivity, says Chrysler's restructuring under Daimler-Benz made its factories as efficient as those of industry leader Toyota.

“Those two companies hold a marginal lead over General Motors and Ford, as well as Honda, Nissan, and Hyundai. In fact, the chief author of the study, Ron Harbour, says: ‘There is near parity among the top three American and top three Japanese automakers.’ He notes that Detroit's improvement has been staggering and stands in stark contrast to the 1990s, ‘when the Japanese beat Detroit in productivity two-to-one.’

“The year-over-year improvement by Chrysler, the best in the industry, couldn't be happening at a better time for the U.S. industry -- or Chrysler. ‘Sales are falling, and the shift to smaller cars is happening faster than the Detroit companies can adapt their manufacturing and downsize,’ says Harbour. ‘Can you imagine how much they'd be hurting if they hadn't been making these improvements?’

“Chrysler and Toyota take 30.37 human hours to produce a vehicle on average, across all manufacturing of vehicles and parts that go into them. GM takes 32.29 hours, and Ford takes 33.88 hours…

“With productivity gains tend to come increases in quality. As carmakers have focused on designing potential problems out of their vehicles from the first hour of computer-generated design and making assembly methods at factories simpler and more stress free, vehicle quality has risen.

“But there are exceptions. Harbour's top U.S. assembly plant for productivity is a Jeep plant in Toledo, Ohio, that manufactures the Jeep Wrangler. But this week, J.D. Power & Associates noted that Jeep had fallen to dead last in quality.”

(“U.S. Automakers See Surge In Efficiency.” businessweek.com. June 6, 2008)

HOW ARE WE DOING? Are we headed in the right direction? Are our strategies working? Are our executives doing a good job?

Is it stock price? profitability? sales growth? market share? productivity? reputation or image?

Yes, yes and yes; all of the above. But, who can move all the levers at once? How much can we expect from our leadership?

Balance... balancing once more and again...

Where's Yin? The Case of Yang

2008-06-05T07:00:00.000-07:00

“There's no shortage of ambition among corporate top lieutenants. But if they collide with a founder who mightn't yet have reached age 40, that's a recipe for management upheaval. It's also likely to provoke intense anxiety among investors, customers and employees.

“Anyone attending The Wall Street Journal's D: All Things Digital conference last week saw how challenging such human interplay can be. Three famous high-tech founders -- Microsoft Corp.'s Bill Gates, Yahoo Inc.'s Jerry Yang and Facebook's Mark Zuckerberg -- took the stage for separate appearances. Each was joined by his company's most powerful nonfounding executive.

“While all the speakers did their best to make nice, it didn't take a Geiger counter to sense that offstage, each management team might have a few issues to work out.

“Microsoft's executives were the most candid about the challenges. Mr. Gates said he had a hard time pulling back from day-to-day decisions after handing over the CEO's job to longtime colleague Steve Ballmer in 2000...

“At the conference, Messrs. Gates and Ballmer talked about how it has taken a while for them to establish that Mr. Ballmer has risen to be the ‘senior partner’ in their business relationship, while Mr. Gates has become the ‘junior partner’ ...

“Mr. Yang's toughest moment came when he was asked to define Yahoo's business. ‘We want you to start your day with Yahoo,’ he said. ‘We want you to come to Yahoo multiple times a day.’

“That brought a quick interjection from Sue Decker, the company's 44 year-old president... Aware that Yahoo has been criticized in the past for sprawling into too many areas, she said: ‘It's a little bit of a change. We still do hundreds of things. But we want to focus Yahoo on four things’ -- its home page, search, email and mobile communications.

“After the Yahoo presentation, conference attendees were buzzing about what struck them as a hazily defined strategy. With Mr. Yang and Ms. Decker emphasizing different elements...

“‘Once you've founded a company, you tend to think extremely highly of your abilities,’ says David Lewin, a professor at the UCLA Anderson School of Management. ‘And in some ways you should.’ But founders' hubris can often get them in trouble, he cautions...

“Adam Galinsky, a professor at Northwestern University… says. ‘Many people have to learn the lessons themselves. Their own experience counts for much more than anything anyone else will tell them.’”

(“Business: Founders' Hubris Fuels Corporate Drama.” George Anders. Wall Street Journal: June 4, 2008. p. B.2)

SPRING AND FALL, sunshine and shadow, fire and ice -- yang is the former, yin is the latter.

The tension of paired opposites can tear us apart, or it can generate creation as two complement each other in a dynamic cycle of birth, growth, maturity, decline and re-birth.

Shall we dance?

Opportune Opportunism Opportunity

2008-06-04T10:01:00.000-07:00

“Carl Icahn is stepping up his rhetoric against Yahoo Inc., saying he will seek to remove Chief Executive Jerry Yang if the activist investor's bid for board control is successful...

“Mr. Icahn in an interview accused Mr. Yang and the company's board of being disingenuous about their willingness to consider an acquisition offer, and of setting up a costly employee-retention plan that would deter any deal.

“‘I'm very cynical about many of the boards and CEOs in this country, but even I am amazed at the lengths that Jerry Yang and the board went to entrench themselves in this situation,’ said Mr. Icahn...

“Yahoo issued a statement saying that ‘Yahoo's board of directors, including Jerry Yang, has been crystal clear that it would consider any proposal by Microsoft that was in the best interests of its shareholders... Mr. Icahn's assertions ignore this clear factual record.’

“Sparking much of Mr. Icahn's ire is a lawsuit filed by Yahoo shareholders and unsealed by a Delaware court this week that sheds new light on the negotiations with Microsoft...

“Mr. Icahn estimated that Yahoo's [employee] retention plan could have cost Microsoft $2.5 billion or more to keep Yahoo employees -- a heavy cost that effectively deterred a deal...

“‘It's no longer a mystery to me why Microsoft's offer isn't around,’ he said. ‘How can Yahoo keep saying they're willing to negotiate and sell the company on the one hand, while at the same time they're completely sabotaging the process without telling anyone?’

“Mr. Icahn said he is convinced that Microsoft executives no longer trust Mr. Yang and won't make a new bid as long as he is at Yahoo's helm.”

(“Icahn Aims to Oust Yahoo CEO Yang If Bid for Board Control Succeeds.” Gregory Zuckerman and Jessica E. Vascellaro. Wall Street Journal: June 4, 2008. pg. B.3)

EVERYTHING I NEEDED TO KNOW, I learned in middle school.

It may not be a game, but it sure looks like one.

Play nice, boys; play nice!

(Un)conditional? Reversals

2008-06-03T07:52:00.000-07:00

“The board of Wachovia Corp. forced out longtime Chief Executive Officer G. Kennedy Thompson after months of shareholder criticism and deteriorating financial performance.

“The surprise ouster was the culmination of a four-day drama inside the bank's Charlotte, N.C., headquarters. Just three weeks ago, the bank's chairman, Lanty L. Smith, had expressed unconditional support for the 57-year-old chief executive. On Thursday, however, Mr. Smith informed Mr. Thompson that he'd lost the confidence of the board and should retire. By Sunday afternoon, when the board met, he was out.

“Mr. Thompson's reputation as an effective leader… crumbled in an avalanche of bad news.

“Mr. Smith, who will take over temporarily as chief executive, said that the removal of Mr. Thompson wasn't in reaction to any new troubling developments, and that Wachovia has plenty of capital. ‘The fact that we're doing this in a thoughtful way should inspire confidence, since we're not doing this in the midst of a barrage of bad news,’ he said...

“A series of public pronouncements that were subsequently reversed -- including repeated expressions of confidence in Mr. Thompson -- threaten to undermine investor confidence in Wachovia's board. After insisting for months that it wouldn't need to cut its dividend or raise additional capital, Wachovia slashed the dividend by 41% in April and moved to raise $8 billion...

“Mr. Smith says he doesn't think he or the board has lost credibility. He says he meant it when he expressed prior support for Mr. Thompson. The board has been deliberative and ‘very thorough,’ he says…

“There was no major new catalyst for the board's ouster of Mr. Thompson over the weekend, people close to the situation say. ‘There's just a point at which the board says, Enough,’ one of these people says...

“Mr. Thompson was slow to acknowledge how seriously the bank's credit profile was deteriorating, according to people close to the board. Data on the performance of Golden West's adjustable-rate-mortgage portfolio… were far worse than internal projections had indicated, one of these people says. Mr. Thompson remained too optimistic about the company's prospects, this person says. ‘What he has been telling the board hasn't been realistic,’ this person says.”

(“Wachovia Board Ousts CEO As Bank's Missteps Mount; Thompson Faulted for Response to Credit Woes, Stock Slump.” Valerie Bauerlein and David Enrich. Wall Street Journal: June 3, 2008. p. A.1)

STAND UP AND DELIVER; or at least stand up, even if you can no longer deliver.

To know where you stand, you must stand where you know... know your world, your people, and yourself... really, in reality.

The Toughest Job

2008-06-02T10:52:00.000-07:00

“When Disney bought its rival, Pixar, in 2006 for $7.4 billion, many people assumed the deal would play out like most big media takeovers: abysmally. The worries were twofold: that either Disney would trample Pixar's esprit de corps,… or that Pixar animators would act like spoiled brats and rebuke their new owner…

“But two years into the integration of Pixar… the merger is notable for how well it's faring. Indeed, in an industry where corporate marriages often create internal warfare (Paramount and DreamWorks SKG are the most prominent example) Disney and Pixar have found a way to make it work.

“‘Most acquisitions, particularly in media, are value-destroying as opposed to value-creating, and that certainly has not turned out to be the case here,” said David A. Price, author of a newly published book from Knopf, ‘The Pixar Touch: The Making of a Company’…

“‘None of this has been easy,’ said Richard Cook, chairman of Walt Disney Studios, ‘but it helps when everyone has tremendous respect both professionally and personally for one another’…

[Pixar President Edwin] “Catmull concedes that trust didn't come easily, especially in an age when some companies promise one thing before a merger and then seem to do another once the deal is done.

“‘It took about a year before there was a collective letting down the guard,’ he said. ‘Initially people were thinking, Is something going to happen?’…

“In the Pixar acquisition, Disney, despite its legendary corporate identity and strong will, held back...

“‘There is an assumption in the corporate world that you need to integrate swiftly,’ [Disney CEO Robert] Iger said. ‘My philosophy is exactly the opposite. You need to be respectful and patient.’

“Key to the successful integration, analysts say, has been Mr. Iger's decision to give incoming talent added duties. Instead of just buying Pixar and moving on, Mr. Iger understood what made the acquisition valuable, said Mr. Price, the author. ‘If you are acquiring expertise,’ he said, ‘then dispatch your newly purchased experts into other parts of the company and let them stretch their muscles.’”

(“Disney and Pixar: The Power of the Prenup.” Brooks Barnes. The New York Times: June 1, 2008. pg. 1)

RECOGNIZING THE SOURCES of real value creation may be shrouded in mystery and cloaked in assumptions.

Take it slow. Hold off for a moment or two. Humble your self, and quiet the many voices to the contrary. Sanity comes with humanity.

Hurricane Terror

2008-05-30T08:18:00.000-07:00

“Bear Stearns Cos., a powerhouse on Wall Street for nearly nine decades, ceased to exist Thursday in a meeting that lasted about 11 minutes.

“Gathered in a crowded second-floor auditorium of Bear's Madison Avenue headquarters, several hundred stockholders voted to approve their company's sale to J.P. Morgan Chase & Co. for $1.4 billion. In doing so, they sealed a deal made in haste two months ago amid one of the most terrifying bank runs in history.

“The meeting was led by Chairman James Cayne, 74 years old, who ran Bear Stearns as chief executive for 14 years before stepping down in January. Mr. Cayne, a tough-talking former broker, has operated largely below the radar since the leadership transition.

“As the votes were counted, Mr. Cayne made his first public comments in months, expressing for the first time his own sadness at the shocking turn of events. ‘I personally apologize,’ he said, according to attendees, fiddling with the microphone as he spoke. ‘Words can't describe the feelings that I feel.’

“Mr. Cayne said Bear ran into ‘a hurricane’ and summed up his feelings on the firm's demise as ‘remorse’ as opposed to ‘anger.’

“Moments later, the deal was approved -- by holders of 84% of Bear Stearns's stock. No questions were asked.

“In early 2007, before the rout, Bear's market capitalization was $25 billion.”

(“The Fall of Bear Stearns: Bear's Final Moment: An Apology And No Lack of Ire.” Kate Kelly, Mike Spector and Randall Smith. Wall Street Journal: May 30, 2008. pg. C.1)

EVEN IN THE FACE OF hurricane winds that we cannot control, and that are well beyond our power to cope, own up, take responsibility, feel bad, apologize.

The terror is in the dodge, not in facing the storm.

"Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.

"It'll soon shake your windows
And rattle your walls..."
(Dylan)

It's Time!

2008-05-28T07:09:00.000-07:00

“Chief Executive Officer Howard Stringer, after grappling with Sony Corp.'s unwieldy corporate culture for the past three years, has told managers that it is time to be more aggressive.

“At a closed-door management conference Wednesday, Mr. Stringer said the company should act more quickly in order to take back its leadership position in the electronics industry, say people who attended the meeting.

“‘I'm asking you to get mad,’ Mr. Stringer said in one of his most strongly worded speeches, according to those people. He also asked them to be more ‘energetic,’ ‘bold’ and ‘imaginative’ in running their businesses...

“The meeting is an annual event in Tokyo attended by more than 1,000 Sony managers from around the world, and is meant to set the direction for the coming year. This year was particularly important because it came after the company had completed a turnaround plan, and before it sets a growth strategy for the next three years. Sony says it will unveil this plan in June.

“When Mr. Stringer took over the helm of the Japanese electronics maker in June 2005, Sony's core electronics unit was losing money, there was infighting among executives, and different product groups were reluctant to work together…

“To fix this, Mr. Stringer over the past several years has used the slogan ‘Sony United’ to encourage employees to work more closely together. He has also made the company leaner, by closing factories, shedding jobs and getting rid of unprofitable businesses...

“At the management meeting, Mr. Stringer implored the audience to ‘not be complacent,’ said the people who attended the meeting. At times, he employed his trademark humor, showing a slide of a big fork sticking in the middle of a road. He told them that Sony was ‘at a fork in the road,’ in which its various units needed to step up their combined efforts further to come up with new products.

“He also encouraged employees to be more innovative, and suggested energy, medicine and the environment as examples of areas where Sony might play a bigger role.”

(“Sony CEO Urges Managers 'to Get Mad'; Conference Told That Company Needs to Be More Innovative, Bold.” Yukari Iwatani Kane. Wall Street Journal: May 23, 2008. pg. B.8)

VISION, HUMOR, SLOGANS, anger, metaphors, catch phrases, meetings, and cutbacks (but fortunately no paintball, ropes courses, or trust walks)...

All that remains is execution.

I Don't Know

2008-05-27T15:29:00.001-07:00

“Twelve hours after agreeing to sell Bear Stearns Cos. for $2 a share, Alan Schwartz wearily made his way to the company gym for a much-needed workout.

“It was 6:45 a.m., March 17, and Bear Stearns's chief executive had slept little since hammering out the ugly details of his fire-sale deal with J.P. Morgan Chase & Co.'s chief executive had slept little since hammering out the ugly details of his fire-sale deal with

“When Mr. Schwartz, already dressed in his business suit, trudged into the locker room, Alan Mintz, still in his sweaty gym clothes, made a beeline for the boss.

“‘How could this happen to 14,000 employees?’ demanded the 46-year-old senior trader, thrusting his face uncomfortably close to Mr. Schwartz's. ‘Look in my eyes, and tell me how this happened!’

“Two and a half months later, Mr. Schwartz still isn't quite sure. To Mr. Mintz and others, he has blamed a market tsunami he didn't see coming. He told a Senate committee last month: ‘I just simply have not been able to come up with anything, even with the benefit of hindsight, that would have made a difference.’”

(“The Fall of Bear Stearns: Lost Opportunities Haunt Final Days of Bear Stearns --- Executives Bickered Over Raising Cash, Cutting Mortgages.” Kate Kelly. The Wall Street Journal: May 27, 2008. pg. A.1)

IF IGNORANCE IS INDEED the beginning of wisdom, are you ready to start learning?

"Where have all the young men gone?
Gone for soldiers every one.
When will they ever learn?
When will they ever learn?"

Once Again and Again

2008-05-22T11:36:00.001-07:00

“They're called ‘tweeners,’ one- to two-year-old Web 2.0 companies with some name recognition and maybe a bit of revenue. They managed to raise one round of funding, but it's running out fast -- no real revenues, plus a bum economy in general. Yikes. So they're swarming around VCs on both coasts, begging for more. ‘We see dozens that fit that profile every week,’ says Todd Dagres, a VC with Boston's Spark Capital. ‘They're going to have a hard time raising more money.’

“Pageflakes is a tweener. Founded in late 2005, the site lets users personalize a browser's home page with widgets. It raised an estimated $4 million from Balderton Capital but never caught fire. Former Yahoo exec Dan Cohen came on as CEO and in January went looking for financing. No luck. In the absence of a big user base or a clear path to revenue, VCs scoffed. ‘The environment is much tougher than it was six months ago,’ says Cohen. ‘The bar for the second round is much higher.’

“Cohen sold Pageflakes to LiveUniverse and says he eked out a small return. But such exits are fading fast, leaving Web 2.0 companies with fewer and fewer options. No IPO window. M&A shriveling. What's left? ‘There are hundreds of cute little application companies out there that have no real hope for revenue,’ says Sharon Wienbar, a VC with Scale Venture Partners in Silicon Valley. ‘They're about to go out of business.’”

(“Cash Runs Dry for Web 2.0” Michael V. Copeland. Fortune: May 26, 2008. pg. 40)

GET TOUGH, ENVIRONMENT; GET TOUGH! Here is creative destruction at its best, destroying me-too-itis throughout the land -- hurrah!

We are glad that you cuties give it a try, but we are just as glad to see rigor rearing its fearsome head.

Let's hear it for the invisible hand's push toward the highest and best use of resources!

From "It Ain't Me Babe" Dylan, to Hendrix

2008-05-21T10:37:00.000-07:00

“This decade has already seen burst bubbles in tech stocks, homes and credit. Now, it seems, another segment has fallen victim to irrational exuberance: the U.S. auto market.

“Like investors who sent dot-com stocks or house prices to unsustainable levels, auto manufacturers in the U.S. have pushed their sales volumes to new peaks over the past decade. They invited customers to buy cars at employee prices, extended no-interest loans for up to six years and sold unprecedented numbers of vehicles to rental fleets -- all strategies that some analysts say drove U.S. auto sales to artificial highs.

“Through most of the 1990s, auto makers sold a little over 15 million cars and light trucks a year in the U.S. market. That changed in the late 1990s: With gasoline prices low and many U.S. consumers feeling flush from the tech-stock boom, auto sales surged. Sales peaked at 17.4 million in 2000 and remained near 17 million for another five years. Heads of General Motors Corp. and Toyota said the U.S. was entering a golden age of the automobile. In 2003, Toyota's head of North American sales predicted the industry would soon be selling 20 million vehicles a year.

“They were wrong. Sales started falling in 2006 and this year are expected to be right back where they were in the 1990s, at just over 15 million...

“The slump in auto sales is already complicating the turnaround efforts of the Big Three -- GM, Ford Motor Co. and Chrysler LLC -- and pinching the earnings of foreign auto makers including Toyota Motor Corp. and Nissan Motor Co.

“A bubble occurs when market participants push prices of assets -- stocks, homes, tulips -- higher than their intrinsic values would appear to merit. While the auto-industry doesn't fit the classic formula of an asset bubble, a similar degree of mania was apparently at work: Makers believed they could sell vehicles in much greater numbers than the market would ultimately bear.

“GM spokesman Tony Cervone said the company didn't overestimate demand and blamed the current sales slump on the U.S. economy's slowdown. Earlier in the decade, he said, trends in household income and spending power all pointed toward steady growth.”

(“Rear View: Car Makers' Boom Years Now Look Like a Bubble.” Neal E. Boudette and Norihiko Shirouzu. Wall Street Journal: May 20, 2008. pg. A.1)

BLAME SOMEBODY ELSE. You did all you could. Exogenous factors are not within your control, so how could you be responsible for your actions? Everything you wanted to look at pointed the way toward doing what you wanted to do, and what you wanted to believe.

So what else could we expect? Don't we yearn for the narcotic that success is intrinsic while struggles are extrinsic?

From mania to depression, Hendrix said it best:

“Manic depression is a frustrating mess.”

Re-writing The Rules

2008-05-20T12:08:00.000-07:00

“Late last year Mark Zuckerberg, the 24-year-old CEO of social-networking phenomenon Facebook, got onstage before a Madison Avenue crowd and declared that he was leading a once-in-a-century media revolution. Long story short: The revolution hasn't panned out. Six months later, advertisers could be forgiven for mistaking Facebook for a smaller MySpace or a much larger Friendster (remember them?). And far from changing media as we know it, the virtual home of Superpokes, Funwalls, and other such time wasters is showing cracks in its foundation…

“Facebook's biggest concern has to be the blasé attitude that media buyers have toward the company. Microsoft paid $240 million for 1.6% of Facebook, giving the startup an eye-popping valuation of $15 billion; according to media reports, as of early May the Redmond crew has been exploring ways to buy Facebook outright. But Microsoft's ardor obscures the fact that Facebook generated only $145 million in revenue last year, according to eMarketer, much of it from an ad deal with Microsoft. MySpace, by contrast, had $510 million in revenue. Facebook ads can sell for as little as 15 cents per 1,000 impressions (CPM) -- compared with the estimated $13 on Yahoo properties. And even at those bargain prices, marketers are reluctant to spend money on a venue where users aren't paying attention. Jeff Ratner, a managing partner at WPP's MindShare Interaction, whose clients include Motorola and Unilever, spends less on Facebook than he did six months ago... ‘Facebook doesn't look that different,’ Ratner says. ‘It just becomes another buy, and there are cheaper, more efficient ways to reach eyes.’”

(“Finding Cracks in Facebook.” Jessi Hempel. Fortune: May 26, 2008. pg. 37)

WE ARE DIFFERENT. The (old) rules don't apply to us. We are re-defining the rules of the game. We are re-defining the industry. Old calculations don't apply to us. We are introducing a new calculus.

It will be different this time.

This Time It Will Be Different

2008-05-19T12:37:00.000-07:00

“When Hewlett-Packard announced its $13.9 billion acquisition of tech services giant Electronic Data Systems on May 13, pundits heralded it as a bold move by HP Chief Executive Mark Hurd. In one stroke, it seemed, he had put HP on a more equal footing with market leader IBM in the fiercely competitive tech services business...

“Yet a closer look at the deal raises questions about Hurd's strategy and choice of dance partner. EDS… was slow to respond in the early 2000s to the threat of nimble Indian rivals offering services at sharply lower prices. Revenues stagnated, and EDS racked up huge losses. Eventually, the company began hiring more overseas, and bought control of an Indian company, MphasiS. But even now MphasiS operates independently, with its own sales force and customer base.

“So this deal won't change the game when it comes to one of the most important factors in tech services. The top-tier services companies need large, low-cost, global work forces, and their operations need to be tightly integrated so employees with diverse skills collaborate smoothly.

“IBM, Accenture, and Indian companies such as Infosys Technologies lead in this effort, while EDS and HP have lagged...

“Sanford C. Bernstein analyst Toni Sacconaghi questioned Hurd's choice of EDS. ‘You could have bought a smaller, faster-growing company with the offshore characteristics.’ … Hurd rejected suggestions that Indian companies such as Cognizant Technology Solutions or Satyam Computer Services might have been a better match. ‘We thought this made sense,’ Hurd said.

“For Hurd, the logic is simple. He prizes EDS's giant outsourcing business because it has a large number of customers producing annuity-style revenues. There isn't much overlap between the companies. And he says there will be considerable cost savings...

“EDS… [CEO Ronald] Rittenmeyer says, ‘We'll look at integrating all of these things over time, and we'll do it efficiently and effectively.’

“Hurd, who excels at cost cutting, had a choice between buying a big racehorse seemingly past its prime or a young colt with lots of potential. He bought the mature horse. Now we'll see if he can whip EDS back into shape.”

(“Can HP Whip EDS into Shape? The much-heralded purchase of Electronic Data Systems by Hewlett-Packard has its critics. But CEO Hurd insists it is the right choice.” Steve Hamm. businessweek.com: May 15, 2008)

PHOENIX SYNERGIES -- the dysfunctional are beguiled by a hobbling partner's promises of wedded bliss.

Microsoft & Yahoo, Blockbuster & Circuit City, Sears & K-Mart, Delta & Northwest, WB & UPN, Chrysler & Daimler... Imagine people getting married like this!

But we just have to do something, don't we? The clock is ticking...

Added Value -- Turn, Turn, Turn

2008-05-16T12:04:00.000-07:00

“The nation's typical worker now retires at age 62, up from 60 a decade ago, according to the Employee Benefit Research Institute. About 60% of men between 60 and 64 are in the labor force, and 20% of men over 65, up from 55% and 17%, respectively, a decade ago, says the Bureau of Labor Statistics. The pattern is similar for women.

“But will employers want more older workers?

“‘There's a lot of happy talk around that we're going to have slowing in the rate of growth in young workers and, therefore, employers are going to want to hire older workers just at the time that older workers are going to want to work,’ says Boston College economist Alicia Munnell... ‘We think it's much less clear than that.’

“The ‘happy talk’ case relies on the demographic fact that the ranks of prime-age workers will shrink as the huge baby boom generation ages and on the logic that employers will have no alternative to older workers...

“At the Blue Cross Blue Shield Association in Chicago, 40% of 1,000 mainly professional employees are 50 or older and 25% are 55 or older. ‘We want to keep these people as long as we can. They know the business, the values, the customs. And recruitment is becoming more difficult,’ says William Colbourne, senior vice president for human resources...

“For all the heart-warming pictures such efforts produce, they appear to be exceptions. Buyouts of graying colleagues and early-retirement parties are common in many workplaces. ‘Relatively few companies thus far have fully positioned themselves for the coming work-force demographic shifts,’ consulting firm Towers Perrin said in a 2005 report...

“While employers are ‘reasonably comfortable’ with the older workers they currently employ, "they are not keen on retaining even half who want to stay on to age 67 or 69," the Boston researchers concluded. They predict ‘a messy and uncomfortable mismatch with large numbers of older workers wanting to stay on while employers prefer that they do not.’ …

“The image of companies loyally retaining scarce, seasoned workers is at odds with reality. Among male workers between 58 and 62, only 44% still work for the outfit that employed them at 50, down from 70% two decades ago. And even if labor shortages emerge, they argue, many employers will hire younger immigrants, shift work overseas or deploy labor-saving technology (like the cashier-less grocery-store checkout) instead of hiring older workers.”

(“Older Staffers Get Uneasy Embrace.” David Wessel. Wall Street Journal: May 15, 2008. A.2)

MOVE FORWARD today. Create tomorrow. Don't look back.

Employees and employers, we become what we choose to see.

Corny as it may sound, very few can build on the past, look toward the future, and thrive in the here and now.

"To every thing there is a season,
and a time to every purpose
under Heaven."

Interesting Times

2008-05-15T10:29:00.000-07:00

“At around $125 a barrel, crude oil has more than doubled in price since the end of 2006. How is it possible that the vast majority of government forecasters, stock analysts, economists, traders, and journalists who follow the oil market failed to foresee this? Moreover, how can it be that even today, the bulls and bears on oil are extremely far apart, disagreeing not only on the oil outlook but even the present situation?

“The answer is simple. You can't predict what oil prices are going to do even in the short-to-medium term unless you have a good handle on the forces of supply and demand. And that requires thorough and reliable data -- which don't exist...

“The scarcity of good global data is a key reason why it's impossible to know for sure whether the next ‘super-spike’ in oil in the coming three or four years will be up to $200 or more or down to $80 or less. Even though the statistics aren't exact, they're all anyone has to go on, so they still have an enormous impact…

“What makes good information so important in the oil market is that both the supply and the demand for oil are extremely inflexible, especially in the short term. That means even a small, unanticipated shortfall in output… or a bigger-than-expected rise in consumption can send prices through the roof. On the other hand, prices can plummet if demand growth drops because of an economic slowdown or production jumps because some delayed project finally comes on line.

“One indication of uncertainty is the extreme range of bets being made in the oil options market. On May 13, bulls were willing to pay around $1.40 per barrel for a ‘call’ option that will pay off if oil goes over $200 a barrel by next February. Bears, meanwhile, were paying about the same amount for a ‘put’ option that will be in the money if oil goes below $84 by then…

“In other words, there's a big slab of unknown built into the price of oil. Lots of people will confidently predict where prices are headed next, but most of them, including the bulls, have been wrong more than once. Truth is, the world is almost as starved for information as it is thirsty for oil.”

(“Oil's Murky Math; Where are we headed: Up to $200 a barrel? Down to $80? With little good data on supply or demand, oil's next price move is anyone's guess.” Peter Coy. businessweek.com. April 14, 2008)

ONE'S UNCERTAINTY is another's opportunity.

Ambiguity appears to hinge upon where we stand.

1917, 1929, 1941, 1963, 1968, 1973, 1981, 1987, 2001...

Vision

2008-05-14T09:24:00.001-07:00

“Circuit City is finally throwing in the towel. Confronted with weak sales, impatient shareholders, and a U.S. consumer pummeled by recession, the electronics chain capitulated on May 9 and retained Goldman Sachs to help negotiate a deal. The same day, Circuit City Stores agreed to allow three board nominees from activist shareholder Mark Wattles to stand for elections.

“The moves almost certainly presage a sale of the chain, likely to Blockbuster, where Carl Icahn has stepped up and agreed to finance a Circuit City acquisition. The billionaire -- Blockbuster's largest shareholder -- has bought into a ‘game-changing’ scheme announced last month in which the troubled electronics retailer would be combined with the troubled movie retailer to create a new national chain selling consumer hardware and software.

“Wall Street is dubious, and no other buyers have emerged wanting Circuit City…

“Last year, several electronics stores were decimated, CompUSA shuttered all its stores before being bought by a restructuring firm in December, and Tweeter Home Entertainment, Harvey Electronics, and Rex Stores all filed for bankruptcy. ‘This is the kind of mess the electronics business is in -- it's like buying a sinking Titanic,’ says Howard Davidowitz, chairman of Davidowitz & Associates...

“Blockbuster has its own litany of troubles. Blockbuster has been forced to reckon with a shift from on-site movie rentals to new venues, with increased competition from video rental models like the one from Netflix and downloads from Apple. ‘The question is will the combination of two crippled companies end up crippling both even further,’ says Burt Flickinger III, managing director of Strategic Resource Group…

“Almost all of Wall Street, and many in the tech community, are puzzled by [Blockbuster CEO Jim] Keyes' pursuit of Circuit City. Keyes envisions a new digital retail company that leverages complementary products and higher-quality, better-focused store sites.

“‘Combined, our companies would create a game-changing $18 billion global retail enterprise that is uniquely positioned to capitalize on the growing consumer appetite for content-enabled consumer devices,’ Keyes said…

“He also anticipates cross-merchandising opportunities, and the opportunity to sell electronics with access to personalized preloaded movies and digital subscriptions. ‘That is what I mean when I say game-changing entertainment retail concept,’ Keyes said. Yet Wall Street smells the potential for a very expensive flop.”

(“Circuit City Gives Up the Fight; The electronics chain puts out the "For Sale" sign, hiring Goldman Sachs to assist on a deal, most likely with Blockbuster.” Pallavi Gogoi. businessweek.com. May 12, 2008)

CHANGING THE RULES of the game, built upon imagined revenue synergies, disparate cultures and the anticipation of consumer shifts is only for the most robust and well-adjusted of firms.

Maybe they should call the Sears / K-Mart team...

"You say you got a real solution
Well, you know
We'd all love to see the plan.

"You ask me for a contribution
Well, you know
We're doing what we can."

Change Masters Twist and Shout

2008-05-13T10:25:00.000-07:00

“It's not every day a titan of industry eats humble pie -- at least not in public. But Steve Ballmer, Microsoft's CEO, did just that this week, climbing down from his $45 billion bid to acquire Yahoo!.

“When Microsoft announced the deal in February, Ballmer hailed it as ‘the next major milestone in our companywide transformation to embrace online services, search, and advertising.’ ...

“So why did Ballmer have a change of heart about the deal? …

“If Ballmer thought he would be greeted as a ‘liberator’ in acquiring Yahoo, he was as misguided as the Bush Administration was about Iraq. Jerry Yang, CEO of Yahoo, wasn't just coy in response; he openly repudiated the offer, and his board backed him up...

“Ballmer prophesied that joining forces would yield a bounty of synergies: bringing two of the four highest-traffic Web portals under one roof; more plentiful engineering talent; enhancements in online services; and, of course, the elimination of redundant operations and staff... But then reality reared its ugly head. Antitrust considerations made it unlikely the combined company could unite the world's two top e-mail services... Ditto for instant messaging: The merged entity would control as much as 90% of that market.

“These issues paled in comparison with the lack of cultural fit between the two players. Many Yahoo employees regarded Microsoft as the enemy. And… Yang signaled he was prepared to damage the company rather than yield to the so-called evil empire. This included striking a preliminary deal with Google to deliver ads for Yahoo's search results, essentially installing an archrival's Trojan horse in the Yahoo boardroom.

“When Yahoo rebuffed Microsoft's opening bid, Ballmer huffed and puffed. He openly scorned the ‘deteriorating’ performance of Yahoo's business, only to see his prey perform above expectations in the first quarter. He threatened to ‘go hostile,’ as they say, but Yahoo's board yawned over his menacing imprecations. Yet none of this compared with the scorn he encountered among his own Microsofties, who saw the offer as yet another chapter in the continuing saga of overpriced acquisitions, sluggish innovation [Zune anyone?], and ineffective online strategies….

“So the grand gesture to secure Microsoft's status… as a major force on the Web… quickly became bogged down and unpopular, even among his own brethren...

“Leave aside that the largest acquisition Microsoft had ever made was last year's purchase of aQuantive for $6 billion... Consider that $45 billion would be enough to buy both Ford and General Motors with nearly $20 billion to spare. More pertinently, it would be enough for Microsoft to clear the market if it went shopping for other major Net assets.

“For the same money, Ballmer could roll up AOL at, say, $25 billion; either Facebook or MySpace at $15 billion; and ValueClick at $3 billion, again with a few billion left over.”

(“Why Ballmer Bailed on Yahoo; According to consultant Jeffrey F. Rayport, there are five reasons Microsoft's chief gave up on his bid for Yahoo, including its cost and its not making sense.” Jeffrey F. Rayport. businessweek.com. May 12, 2008)

WHEN YOU'RE NOT SURE what to do, why not shake things up a bit?

"You say you want a revolution
Well, you know
We all want to change the world.

"You tell me that it's evolution
Well, you know... "

We Will Survive

2008-05-09T10:18:00.000-07:00

“When Sony Corp. announces what are expected to be improved earnings next Thursday, the results will highlight a new television set that wouldn't have been possible three years ago.

“Unlike traditional products that were designed entirely in Japan, this TV set was invented largely by Sony engineers in Mexico using off-the-shelf parts...

“The new line is one piece of a crucial culture shift needed to pull Sony out of a long downturn. In the year ended March 31, profit is expected to have doubled and sales to have risen by 25%, compared with three years earlier...

“It shows Sony managers are starting to get the hang of collaborating better, says Chief Executive Howard Stringer. ‘We're not in the bunker anymore. We're blinking in the sunlight,’ he says...

“Sony's consumer-electronics business still faces huge challenges. Competition from Samsung Group and upstarts such as Vizio Inc. has forced Sony to cut prices, and it is still struggling to earn consistent profits in the business. Meanwhile, the threat of a U.S. recession and a stronger yen, which diminishes the value of its overseas earnings, is threatening to derail much of the progress achieved so far...

“Though engineers at Sony tend to work on the same kind of products for their entire careers, [Katsumi] Ihara has set a goal of shuffling about 5% of consumer-electronics managers between products to encourage idea-sharing.

“The new cooperation has yielded other small results. Closer work between the television and camera units resulted in a feature on the television that automatically adjusts the picture to an optimal resolution for photos when a Sony single-lens-reflex camera is connected to it. Users can also get a single remote control for a Sony television and a Blu-ray disc player for the first time...

“‘We're showing signs of life everywhere, but I don't feel ready to celebrate,’ says Mr. Stringer. ‘We've got a long way to go.’”

(“Sony's Newest Display Is a Culture Shift -- A Low-Cost TV Shows the Way To Better Profits.” Yukari Iwatani Kane. Wall Street Journal: May 8, 2008. pg. B.1)

TWIN THREATS of stiffer competition and a shrinking market lend us the opportunity to revisit and renew our heart and soul -- our core competence.

Note: We cannot linger longer in Plato's cave (i.e., "the bunker"); we cannot go it alone.

O Hunger, My Hunger!

2008-05-08T11:45:00.000-07:00

“The guru game is changing.

“Psychologists, journalists and celebrity chief executives crowd the top of a ranking of influential business thinkers compiled for The Wall Street Journal. The results, based on Google hits, media mentions and academic citations, ranked author and consultant Gary Hamel No. 1.

“But Dr. Hamel is the only traditional business guru in the top five, which includes two journalists, Thomas Friedman and Malcolm Gladwell, and a former CEO, Bill Gates. Mr. Gladwell is among three thinkers in the top eight who focus on psychology. His 2005 book ‘Blink: The Power of Thinking Without Thinking’ examined the role of snap judgments in decision-making. Howard Gardner, a professor of education at Harvard best known for the theory of ‘multiple intelligences,’ is No. 5, while Daniel Goleman, a psychologist who has written about ‘emotional intelligence,’ ranks eighth.

“Thomas H. Davenport, a management professor at Babson College, compiled the ranking, employing the same methodology he used in a 2003 book, ‘What's the Big Idea?’ Several well-known business gurus fell lower in the updated list, including Michael Porter and Tom Peters, who topped the 2003 ranking and dropped to Nos. 14 and 18, respectively…

“Dr. Davenport says the changes show that time-strapped managers are hungry for easily digestible advice wherever they can find it. Today, the most pressing themes include globalization, motivation and innovation. Traditional business gurus writing ‘weighty tomes’ are in decline, he says.

“Managers say it's no coincidence they tap a broad range of thinkers. ‘The demands on all of us for decision-making have grown exponentially,’ says Susan Flygare, a sales-strategy executive at Blue Cross and Blue Shield of Minnesota who has attended speeches by a Harvard-educated stand-up comic…

“No matter who's preaching, managers are wary of blindly embracing advice. ‘People have to use all these gurus with some caution,’ says Michael Mauboussin, chief investment strategist at Legg Mason Capital Management. He is a fan of Clayton Christensen, the Harvard professor known for his writings on ‘disruptive innovation,’ who ranks No. 17 on the list, up from 49 in 2003. Mr. Mauboussin says gurus often idolize certain companies during good times, and then chastise the same ones during bad. ‘The reality is, they were never so good, and they were never so bad,’ he says.”

(“New Breed of Business Gurus Rises --- Psychologists, CEOs Climb in Influence, Draw Hits, Big Fees.” Erin White. Wall Street Journal: May 6, 2008. pg. B.1)

"THE PORT IS NEAR, the bells I hear, the people all exulting,
While follow eyes the steady keel, the vessel grim and daring..."
So grant me food, any food that's easy for digesting.

Rules: Golden or Platinum?

2008-05-07T10:38:00.000-07:00

“Shut down the headquarters of Wm. Wrigley Jr. Co. Convert the landmark Wrigley Building into condos. Tear the Wrigley name off the Chicago Cubs' ballpark. Close the corporate wallet to local nonprofits. Fire a whole lot of people. This is the future many Chicagoans saw on learning that after 117 years here, the Wrigley family's company had been sold to Mars for $23 billion, to create the world's biggest candy producer. Holy Cow.

“Don't worry, Bill Wrigley assured one and all. The company's executive chairman and great-grandson of its founder insisted that the only thing that is changing is the owners; everything else would remain as it has long been. His namesake confectioner would remain in Chicago, run from the Wrigley Building... Right now, it looks as if everybody -- from the mayor to the media -- wants to believe him.

“It's a sweet sentiment. But I'll wager a king-size Milky Way bar that in a few years, Chicago won't recognize the old Wrigley as it is downgraded into just another regional office of a giant corporation based someplace else. Why the skepticism? For one, the deal itself will force this outcome. For another, previous takeovers of age-old companies by out-of-towners have all ended this way.

“Big premiums mean big cuts, and Mars is clearly paying a big premium. Its $80-a-share price is 34% higher than Wrigley's three-month average price before the deal was announced…

“That money will have to be paid back with interest, and Mars won't be able to do it just by selling packs of M&M's and Orbit. Instead, it'll require selling superfluous assets, consolidating redundant operations, and cutting costs, including labor.

“The chewing-gum company is sitting on one quick source of cash -- its North Michigan Avenue headquarters. The 1920s-era building is beautiful but expensive to maintain. In 2005, Wrigley explored the notion of turning the terra-cotta ‘wedding cake’ into luxury condos but tabled the idea. The Mars family would have no emotional ties about unloading it…

“The sad thing is we've heard assurances like these too many times before in Chicago. Amoco, Ameritech, and First Chicago are among homegrown institutions that have been bought by outsiders. At first, the acquirers swore that nothing would change. But before long, each was subsumed into the parent, greatly diminishing local management and operations, along with philanthropic and civic giving. Thousands of jobs were lost. Bill Wrigley insists that this acquisition will defy history. But when Mars wraps up the deal, the company will lose control of its fate. All else is sound and fury.”

(“Wrigley: Another Great One Soon Gone; With the takeover by Mars, Wrigley is about to follow Amoco and Ameritech into Chicago's ash bin.” Bob Reed. businessweek.com. May 5, 2008)

WHAT DO YOU SAY? 'Do unto others as they would have done unto you'? 'Do unto others as they have done unto you'?

What about, 'He who has the gold rules'?

What about, 'In the good old days...'?

Like Grandma in the Kitchen

2008-05-06T13:26:00.000-07:00

“Steven A. Ballmer, Microsoft's chief executive, walked away from a Yahoo deal on Saturday still looking for an answer to his company's fundamental problem: its time-tested recipe for success isn't working against Google, the leader in the current wave of Internet computing.

“With a bid for Yahoo, Microsoft was trying to buy its way out of the problem. It was a controversial step and a gamble, but at least it was a big move. Now, there is no clear prospect of a quick fix for Microsoft, as the center of gravity in computing continues to move away from the personal computer, Microsoft's stronghold, and to the Internet.

“Microsoft remains a powerful company, and highly profitable, but its stock price has stagnated amid doubts about future growth. Years of antitrust scrutiny have tempered its competitive behavior in new markets.

“Mr. Ballmer, 52, must lead the Internet-era shift in strategy and corporate culture without the man who, to many, is still the public face of Microsoft: Bill Gates...

“‘Steve Ballmer will be defined by how he manages this tremendous Internet transformation over the next few years, and his record hasn't been distinguished so far,’ said George F. Colony, chief executive of Forrester Research…

“Though he became chief executive in 2000, Mr. Ballmer has typically been cast as a marketing dynamo: tireless, hyperkinetic and a booming orator, renowned for his uninhibited performances at Microsoft sales meetings. But Mr. Ballmer, colleagues say, has a deep mastery of strategy and finance. He is a math whiz who as a student scored a perfect 800 on the SAT math exam.

“Yet Mr. Ballmer's business skills have not yet helped Microsoft much in trying to catch Google, analysts say…

“Looking at Microsoft today, Mitchell Kapor, an elder statesman of modern computing, is reminded of another industry power that was chastened by a lengthy antitrust struggle and a seismic shift in the technology landscape -- I.B.M. in the 1980s and early 1990s, as the mainframe gave way to personal computing.

“‘I.B.M. came out of those years still large and enormously important to its customers, but I.B.M. was displaced by Microsoft,’ he said. ‘I.B.M. was no longer the defining company.’

“‘The irony is that what Microsoft did to I.B.M., Google is doing to Microsoft,’ said Mr. Kapor.”

(“A Step Back For Microsoft.” Steve Lohr. The New York Times. May 5, 2008. pg. 1)

YOU MAY HAVE the time-tested recipe for success, but Grandma had the touch, the sense, the feel, and her secret ingredient...

love.

Follow The Money

2008-05-05T14:31:00.000-07:00

“Western firms are always complaining about the theft of intellectual property in China. From knock-off designs to copycat brand names, pirated music and fake drugs, China has a well-earned reputation as a free-for-all when it comes to patents and copyrights. Worse, there often seems little hope of redress: the courts are too distant and too incompetent; the laws are too weak or too vague; the culture is too resistant to the very idea of intellectual property. Yet help is at hand, in the form of Chinese firms with patents to defend.

“Since 2003 the number of trademark applications has grown by 60%; the number of patents has nearly doubled… and the number of lawsuits about intellectual property has more than doubled. The government is encouraging the trend in many ways, including signalling to the press to cheer it on.

“This enthusiasm marks a dramatic change. During the Maoist era, private property of any kind was seen as theft from the masses, and so subject to just expropriation. Only in 1985 did China begin to enact laws to protect patents. It did not enforce them much until 2001, when the authorities promised to crack down in order to win admission to the World Trade Organisation…

“Unsurprisingly, the main beneficiaries of the sudden interest in intellectual property are Chinese lawyers. Some reportedly earn more than $5M a year. Non-Chinese law firms sometimes provide advice on thorny cases. But they are not allowed to file patents or appear in court on behalf of a client — a proprietary process that Chinese lawyers are keen to defend.”

(“850,000 lawsuits in the making - Doing business in China.” The Economist. April 12, 2008)

WHAT MOVES deeply held ideologies, cultural values, and political stongholds?

What moves mankind?

What moves you?

World-wide Learning

2008-05-02T08:01:00.000-07:00

“Oreos were first introduced in 1912 in the U.S., but it wasn't until 1996 that Kraft introduced Oreos to Chinese consumers. Nine years later, a makeover began. Shawn Warren, a 37-year-old Kraft veteran who had spent many years marketing the company's cookies and crackers around the world, arrived in Asia in 2005 and noticed that Oreo's China sales had been flat for the previous five years.

“Back then, Kraft was selling the U.S. version of Oreos in China. Albert Einstein's definition of insanity -- doing the same thing repeatedly and expecting different results – ‘characterized what we were doing,’ says Mr. Warren, vice president of marketing for Kraft Foods International…

“In China, Kraft began a grassroots marketing campaign to educate Chinese consumers about the American tradition of pairing milk with cookies…

“Students rode around Beijing on bicycles outfitted with wheel covers resembling Oreos and handed out cookies to more than 300,000 consumers. Others held Oreo-themed basketball games to reinforce the idea of dunking cookies in milk. Television commercials showed kids twisting apart Oreo cookies, licking the cream center and dipping the chocolate cookie halves into glasses of milk.

“[Chief Executive Irene] Rosenfeld calls the bicycle campaign ‘a stroke of genius that only could have come from local managers. The more opportunity our local managers have to deal with local conditions will be a source of competitive advantage for us.’

“Still, Kraft realized it needed to do more than just tweak its recipe to capture a bigger share of the Chinese biscuit market...

“So in China in 2006 Kraft remade the Oreo itself, introducing for the first time an Oreo that looked almost nothing like the original. The new Chinese Oreo consisted of four layers of crispy wafer filled with vanilla and chocolate cream, coated in chocolate…

“Kraft's Oreo efforts have paid off. In 2006, Oreo wafer sticks became the best-selling biscuit in China, outpacing HaoChiDian, a biscuit brand made by the Chinese company Dali. The new Oreos are also outselling traditional round Oreos in China, and Kraft has begun selling the wafers elsewhere in Asia, as well as in Australia and Canada.”

(“Kraft Reformulates Oreo, Scores in China.” Julie Jargon. Wall Street Journal: May 1, 2008. pg. B.1)

CLEARLY, WE CAN TEACH an old dog new tricks.

Get closely in touch; just listen...

Bust That Mantra!

2008-05-01T09:25:00.000-07:00

“In another era at Time Warner, before a star-crossed Internet merger, the hard-held belief of Gerald M. Levin, then the chief executive, was that ‘content is and will remain king, but distribution is the power behind the throne.’

“These days the king seems to be losing his throne.

“On Wednesday, Jeffrey L. Bewkes, who became chief executive in January… said that Time Warner would completely spin off its cable company, essentially shedding the pipes that have underpinned much of the company's fortune.

“Although the announcement was largely anticipated by Wall Street… it still underscored a profound philosophical shift.

“For years, it was a widely held belief within Time Warner and the media business that there were real financial advantages to owning both the content -- television shows and films -- and the means of distributing it to people's homes.

“But Wednesday's cable announcement, which came as Time Warner reported first-quarter earnings, spotlighted the company's future as a pure content provider. From now on the media company will revolve around two core content businesses that have been out of the limelight in recent years: the Warner Brothers movie studio and Turner Networks, which includes the television channels TNT, TBS, HBO and CNN.

“Although those divisions have produced steady revenue and cash flow, investors and the media have focused instead on the debate over cable and the drama unfolding (still) at AOL.

“Without the cable business, the bulk of Time Warner's revenue will come from the movie studio and the cable networks…

“Time Warner is not the only big media company that has disavowed the industry mantra of marrying distribution and content. Rupert Murdoch, the controlling shareholder of News Corporation, recently agreed to give up control of the satellite company DirecTV in an asset swap with Liberty Media.

“Part of the rationale for the mantra in the first place was that owning both sides of the equation gave companies instant distribution when introducing new networks, as well as leverage with other cable companies.

“‘There is huge growth in further original programming,’ Mr. Bewkes said in an interview. ‘There's more money in putting resources into HBO, TNT and TBS to create hits than into a start-up channel.’”

(“Time Warner Refocusing With Move to Spin Off Cable.” Tim Arango. The New York Times: May 1, 2008. pg. 1)

OKAY, so our mantra was not so transcendental after all.

Now focus becomes our higher state of consciousness.

At least we're reassured that others are headed this way... ?

In Times Like These

2008-04-30T12:10:00.000-07:00

“Food and energy companies have learned a lot since the 1970s about how to deal with public indignation over soaring commodity prices. Now, all that knowledge may be put to the test.

“Crude-oil prices have tripled since 2004, pushing gasoline to more than $4 a gallon in some markets...

“Archer Daniels Midland Corp., the country's largest ethanol producer, is fighting to avoid being portrayed as the villain in rising farm-product prices…

“Energy and food companies may spend less time in the spotlight today because their output commands a smaller share of people's pocketbooks than in decades past. Gasoline, for example, currently accounts for about 5.4% of household budgets, down from 7% to 8% in the early 1980s.

“For the first half of the 20th century, food spending accounted for at least 20% of Americans' disposable income, according to the Agriculture Department. That percentage dropped to 13.6% in 1974 and has been slightly below 10% this decade. Indeed, as the U.S. becomes more prosperous, extra household earnings are more likely to be spent on flat-panel televisions, casino junkets or college tuition than on food…

“Adam Sieminski, chief energy economist at Deutsche Bank, has been trying to calculate how much oil prices would need to rise for consumers world-wide to feel as alarmed as they did in 1980, when crude soared to a then-unheard-of price of $40 a barrel.

“If one adjusts for constant dollars… oil at $100 a barrel today would be comparable, he says. But if one also adjusts for the somewhat smaller bite oil takes out of personal income -- as people have become more energy efficient -- it would take a price of $135 to $150 a barrel to produce the dislocations caused by the 1980s price spike.

“Another new factor at play: the public's increased familiarity with commodity-price volatility. The sudden price run-ups of the 1970s were especially jarring because they came after at least two decades of relatively stable prices. People who had become very accustomed to paying about 29 cents a gallon for gasoline suddenly saw prices increase by that amount in a matter of months.

“By contrast, modern consumers are all too familiar with gyrating prices. We may grumble when prices soar. But we don't regard each spike as an assault on our general sense of order.”

(“Fat Profits Test Public-Relations Skills.” George Anders. Wall Street Journal: April 30, 2008. pg. B.1)

AND EVERY GENERATION feels that it is living through times of unprecedented dislocation. So once again and again, it is our feelings that drive policy, not the bare facts.

See, think, feel, act.

Would You, or Wouldn't You?

2008-04-28T14:16:00.000-07:00

“You might suppose that the stars are in near-perfect alignment for major reform of CEO pay. The mammoth pay and disastrous performance of Countrywide Financial's Angelo Mozilo, Citigroup's Chuck Prince, and Merrill Lynch's Stan O'Neal should be enough to make the public furious. Each CEO departed with $100-million-plus compensation after misadventures with subprime mortgages. Now add the economic slowdown to the mix; ordinary Americans are worried about making ends meet while failed pooh-bahs rake it in. Then throw in one more element -- a presidential election. Put it all together, and how could change not be imminent?

“The answer is that whatever remedies reformers enact, corporate boards can always find a way to pay the boss whatever they like. Over the past 25 years CEO pay has risen regardless of the economic or political climate. It rises faster than corporate profits, economic growth, or average workforce compensation. A recent study by the compensation consulting firm DolmatConnell & Partners found that CEO pay in the companies of the Dow Jones industrials increased at a blowout 15.1% annual rate over the past decade.

“A more sensible alternative to the current compensation system would require CEOs to own a lot of company stock. If the stock is given to the boss, his salary and bonus should be docked to reflect its value…

“Meanwhile, let the reformers battle on. One of the most prominent, Nell Minow of the… Corporate Library, which rates board effectiveness, says, ‘My colleagues and I have found that there is no more reliable indicator of investment, litigation, and liability risk than excessive CEO compensation.’”

(“Rewarding Failure.” Geoff Colvin. Fortune: April 28, 2008. pg. 22)

AND ENRON'S MANAGEMENT were the smartest guys in the room.

And who has the power -- the smart? the lucky? the wise? the fool? the favored? Where would you stand?

No Touch, No Feel, No Sense

2008-04-25T13:04:00.000-07:00

“For Mattel Inc. and its flagship icon Barbie, chasing the ever-changing tastes of American girls is turning out to be more difficult than expected.

“Amid a rare quarterly loss reported Monday, the El Segundo, Calif., company reported flat world-wide sales for the Barbie brand. That reflects a 12% decline in the U.S., repeating a pattern the company struggled with last year...

“Mattel's struggle to breathe life back into the buxom blonde, more than a year after problems in its Barbie business surfaced, shows the ongoing challenge the toy industry faces in attracting the fickle attention of young girls. In many of last year's Barbie lines, for example, the company sought to modernize the doll with more electronic features.

“‘We're seeing an ever evolving and changing girl,’ said Chuck Scothon, senior vice president of Mattel's girls division. ‘I think there's more competition for girls' attention,’ he said, citing items like consumer electronics.

“Yet some of Mattel's attempts to address the competition posed by iPods and other electronic items has only confused its young customers. The recent Magic of the Rainbow, a fantasy doll marketed under the Barbie brand, doubled as a remote control, came with a CD-ROM game and featured wings that fluttered at the push of a button. ‘Girls asked -- is this a doll?’ said Mr. Scothon. ‘We put too much in.’ …

“Mattel is looking to make Barbie over with a series of changes to simplify. ‘We're looking for a simple doll and a better aesthetic as opposed to being overly innovative,’ said Mr. Scothon…

“Mattel also is hoping to find a rainmaker in its Web site, BarbieGirls.com, a meet-and-greet online world that has attracted 11 million users. So far the company has struggled to convert the free site into an active source of revenue. A $60 MP3 player that unlocked additional online features proved a disappointment at retail, and Mattel is phasing it out.”

(“Corporate News: As Barbie Sales Slow, Mattel Looks to Simplify Its Iconic Line.” Nicholas Casey. Wall Street Journal: April 22, 2008. p. B.3)

WHO IN THE WORLD thought of turning Barbie into a remote control? Oh... a middle-aged man. Of course!

Throw more technology at the problem; that always works!

Certainly, we can't have a male executive getting to know what little girls like to play with.

Outstanding is Standing Out

2008-04-24T12:33:00.000-07:00

“As corporate America gets greener, Earth Day is following the path of Valentine's Day, Easter and Christmas, and turning into a corporate marketing opportunity. But instead of advertising chocolates or toys, companies are selling themselves and their greenness -- and often, the biggest marketers are those with sizable carbon footprints.

“This week, for instance, Anheuser-Busch is airing four new television ads as well as print ads featuring employees "discussing the company's commitment to the environment," according to a news release. Anheuser-Busch, whose beer cans often end up littering roadsides, has operated a large aluminum-can recycler for 30 years and has other environmental programs.

“Similarly, Accor North America, a unit of Paris hotel group Accor, which operates Novotel, Motel 6 and other chains, has declared this week "Earth Guest Week," with fluorescent-bulb and battery-recycling programs, organic food on restaurant menus, free parking for hybrid cars at the Sofitel in Los Angeles, and other initiatives…

“So many eco-friendly marketing messages are piling up that it no longer is clear whether companies jumping on the environmental bandwagon get much advantage for doing so, marketing experts say. Instead, a green marketing campaign now is standard operating procedure for big companies.

“‘Every company is out there touting 'we're green' -- it's the new requirement for being a good corporate citizen,’ says Allen Adamson, managing director of WPP Group's branding consultancy... ‘The noise level is so high now,’ he says. ‘The first few people into it had some benefit. Now it's a cost of entry.’ …

“The eco-friendly push has created a surge in the number of green-related trademark applications, according to an annual study of trends in trademarks... Last year, more than 2,400 applications were filed for logos or phrases that used the word ‘green’ … About 900 applications were filed for the word ‘clean,’ and the prefix ‘eco’ also was hot. The popularity of ‘eco’ doubled in 2007 from the year earlier to 900 new applications...

“It is ‘green gridlock with multiple companies filing for almost-identical marks at nearly the same time,’ says Glenn A. Gundersen, chairman of Dechert's trademark practice.”

(“Firms Use Earth Day to Show Their Green Side; Eco-Friendly Messages Fill the Air, but Are They Being Heard in the Din?” Betsy McKay and Suzanne Vranica. Wall Street Journal: April 22, 2008. p. B.7)

WHILE EVERYONE WANTS TO THINK outside the box, I keep wondering where is the box... ? What box... ?

Maestro, Guru, Savant

2008-04-23T07:54:00.000-07:00

“As the drug industry wrestles with major challenges, some top companies are turning to a new kind of executive for help: strategy master.

“Over the past six months, at least four large U.S. drug makers, including Johnson & Johnson and Pfizer Inc., have created top-level executive positions tasked with overseeing company strategy, with titles such as senior vice president of strategy. In some cases, they report to the chief executive.

“Their responsibilities, which vary from company to company, include identifying new business opportunities, overseeing the cost-cutting programs that have spread through the industry and improving coordination among company divisions.

“The drug industry's embrace of strategy masters comes as companies are under pressure. Sales and profit growth have been slowed by generic competition, research stumbles and increased government scrutiny of pricing, marketing practices and drug safety. Many large pharmaceutical companies are laying off workers and closing plants to save money, while seeking new medicines that can sustain profits. A strategy point person might help set priorities and allocate resources more efficiently.

“It is a bit early to know what difference these strategy chiefs are making, and companies are fairly tight-lipped about what they are up to...

“At least two drug companies, Eli Lilly & Co. and Wyeth, named strategy executives a few years ago. In the more recent wave, J&J in November created an Office of Strategy and Growth. Its mission is to identify new business opportunities in health care that are distinct from its current businesses of pharmaceuticals, medical devices and consumer products. J&J has indicated one new potential opportunity is in health-care information technology…

“In the past, strategic decisions often were made by individual business divisions, said Matt Gurin… Hay Group vice president. Now, companies are concluding that priorities need to be set at the top ‘to try to get a bigger bang for their buck.’”

(“Drug Firms Employ Strategy Masters.” Peter Loftus. Wall Street Journal: April 14, 2008. p. B.5)

WHERE IS THE CEO? Where are operating leaders? Are they in touch with their environment? Aren't they seeing where things are going? Don't they have a feel for, and a sense of, strategic possibilities? Can't they think more broadly?

When strategy is decoupled from tactics and operations, how can we help but wander?

Who will save us???

An Investment Banker As CEO?

2008-04-16T11:00:00.000-07:00

“While radical corporate transformations are sometimes necessary, gutting a company and then rebuilding it is just as risky as it sounds.

“Former Thomson SA Chief Executive Frank Dangeard found that out the hard way. Over the past eight years, he engineered an audacious makeover at Thomson. He dumped the Paris-based company's unprofitable TV business, which made RCA- and Thomson-branded sets and picture tubes, and he bought dozens of small companies to create a 5.6 billion euros ($8.8 billion) provider of set-top boxes, DVDs and video-production services. He also cut more than two-thirds of the work force and reduced the size of the executive team. By last summer, more than 80% of the company's 23,000 employees had joined since 2001. Then the Canadian-born, Harvard-educated investment banker declared the hard work of assembly finished…

“But Thomson's latest transformation was extremely unusual in its scope and speed, and it left the company disjointed…

“Mr. Dangeard envisioned creating a ‘one-stop shop’ of digital-content equipment and services for cable and telecommunications companies, movie studios and TV channels. The theory was that a broadcaster purchasing a set-top box for high-definition television, for instance, might also hire Thomson to edit its TV shows or take over its production department.

“Inside the company, though, the changes were overwhelming. So many of the top 300 executives were new in 2005 that when 20-year veteran and Chief Operating Officer Didier Trutt was introduced to them, he barely knew any, Mr. Collis says...

“Each unit typically sold only its own products -- often under its own brand -- even when a different part of Thomson offered a related product. Some units, like Technicolor, preferred buying equipment and technology from outside the company, rather than using those developed by Thomson's research-and-development labs…

“Analysts remained skeptical. Many had long questioned whether there were benefits to housing Thomson's varied parts under a single corporate roof. They said there was no evidence that companies wanted to buy all of Thomson's offerings from a single vendor...

“Mr. Dangeard says Thomson's customers like the breadth of the company's offerings, even if they don't take advantage of them. He says Thomson would ‘lose credibility’ with customers if it broke itself up. In announcing Mr. Dangeard's departure, the board said that it was sticking to the strategy of making Thomson a world leader in ‘video solutions.’”

(“How Remaking Thomson Cost Its Chief His Job.” Phred Dvorak & Leila Abboud. Wall Street Journal: April 14, 2008. p. B.1)

BUYING AND SELLING BUSINESSES is the easy part, contrary to the view of it as "the hard work of assembly."

The hard work, the heavy lifting, is being in touch with customers and employees.

With no evidence to support their theory of revenue synergies, and no sense of touch nor feel for their core constituencies, the board fires a sacrificial CEO and persists in his strategies.

So once again, change may be vital, but it always is costly, risky and threatening.

Communication and Collaboration, Yes. But Rigor... ?

2008-04-14T13:32:00.000-07:00

“Executives say they are harnessing a new Web tool, called prediction markets, to transform the idea pipelines inside their companies. Companies like the InterContinental Hotels Group, General Electric and Hewlett-Packard are using prediction markets to try to improve forecasting, reduce risk and accelerate innovation by tapping into the collective wisdom of the work force.

“Like blogs and wikis, prediction markets can spur communication and collaboration within a company. Yet they add rigorous measurement to business forecasts, like estimating the sales of a new product or the chances that a project will be finished on time.

“Corporate prediction markets work like this: Employees, and potentially outsiders, make their wagers over the Internet using virtual currency, betting anonymously. They bet on what they think will actually happen, not what they hope will happen or what the boss wants. The payoff for the most accurate players is typically a modest prize, cash or an iPod.

“The early results are encouraging. ‘The potential is that prediction markets may be the thing that enables a big company to act more like a small, nimble company again,’ said Jeffrey Severts, a vice president who oversees prediction markets at Best Buy…

“For years, public prediction markets have been used for politics, like the Iowa Electronic Markets and Intrade, where buyers and sellers bet on which candidate will win a particular race. And there are prediction markets where people place bets on news events (Hubdub, among others), video game sales (simExchange) or movie box-office receipts (Hollywood Stock Exchange).

“These markets have often been more accurate than professional pollsters or market researchers. The idea is that the collected knowledge of many people, each with a different perspective, will almost surely be more accurate than an individual or small group or even experts…

“Today, analysts say, there are dozens of major corporations testing these markets. The companies include Google, Cisco Systems, GE Healthcare, General Mills, ArcelorMittal, the world's largest steelmaker, and Swisscom, a large telecommunications company.”

(“Betting to Improve the Odds.” Steve Lohr. The New York Times. April 9, 2008. pg. 1)

ILLUSIONS OF RIGOR now haunt credit markets. Swelling confidence led to a confidence crisis, a confidence game.

Grow very, very wary when they tell you they have it all figured out.

Can You Relate?

2008-04-11T11:09:00.000-07:00

“Compared with other forms of human interaction, online social networking is really not all that social.

“People visit each other's MySpace pages and Facebook profiles at various hours of the day, posting messages and sending e-mail back and forth across the digital void. It's like an endless party where everybody shows up at a different time and slaps a yellow Post-it note on the refrigerator.

“Now a new wave of Silicon Valley companies is bringing live socializing back into a medium that has, in the parlance of the technologists, grown overly asynchronous.

“Vivaty, a start-up based in Menlo Park, Calif. , is creating 3-D virtual chat rooms that people can add to the Web pages and social networking profiles on the sites where they spend most of their Internet time…

“With videogame-like precision, they can then navigate that virtual space, which may feature their Facebook photos hanging from the walls and a YouTube video playing on a widescreen TV. Up to 15 others can choose avatars and enter the same room at the same time for text-based live socializing…

“Similar online services like Second Life and games like World of Warcraft have existed for years. But they are not accessible through a Web browser. Instead they require users to install large and cumbersome programs and have plenty of Internet bandwidth for a satisfyingly immediate experience…

“The entrepreneurs and investors behind… ‘live Web’ companies say that the intermittent socializing on most Web sites ignores the primal human instinct that once drove people to the town square and now brings them into real-world social groups to watch the Super Bowl or the latest episode of ‘Battlestar Galactica.’

“‘A lot of basic human communication needs have been lost in this age of siloed, one-to-one communications,’ said Roelof Botha, a partner at the venture capital firm Sequoia Capital. ‘At the end of the day, we are a social species.’ …

“[Keith] McCurdy from Vivaty said he did not expect these live services to travel far across the generational divide. The younger video-game generation ‘has more craving for contact,’ he said. ‘They are using their computers for emotional experiences, and a video-game experience is more emotional than looking at a blue and white Facebook page’.”

(“Online Chat, As Inspired By Real Chat.” Brad Stone. The New York Times. March 31, 2008. pg. 1)

TOUCH IS A KEY SENSE in managing strategically. When we are in touch with others, we develop a sense of feel that unlocks insight and understanding.

See them think. Hear them breathe. Connect with them in person.

Ephemeral Data, Real Need?

2008-04-10T12:44:00.000-07:00

“The digital revolution has spawned billions upon billions of gigabytes of data… By 2011 the digital universe of ones and zeros will be 10 times the size it was in 2006.

“But the downside is that much of this data is ephemeral, and society is headed toward a kind of digital Alzheimer's…

“Data is ‘the natural resource for the Internet age,’ said Francine Berman, director of the San Diego Supercomputer Center... But, she added, ‘digital data is enormously fragile.’ …

“For all their qualities, electrons can seem awfully feeble when compared with a good old-fashioned book. ‘With the right kind of paper and the right kind of stewardship,’ Dr. Berman said, ‘you can keep a book for 100 years or more.’ The interface is as simple as it gets: open the book and look at the page...

“No one is suggesting that we try to hold on to every bit of data lingering in every obsolete corner. Choices must be made about the kind of material that should be kept fresh and accessible for 5 years, or 50, or 1,000 …

“Dr. [Brian] Lavoie said… ‘you can have the most elegant technological solution to the digital-preservation problem, but if there's no economics underpinning it, then there's no solution at all.’ …

“Dr. [Margaret] Hedstrom said, ‘the issue is about losing the ability, in a systematic way, of being able to preserve anything.’ … People think that because the cost of storage is dropping ‘we can save everything,’ she said. ‘But that's based on a naive view of what 'everything' actually is.’ …

“She said she was thrilled, therefore, to see serious projects coming from the National Science Foundation and heartened that many approaches were being considered. ‘If everybody's doing the same thing, we might all be making the same mistake’.”

(“In Storing 1's and 0's, The Question Is $” John Schwartz. The New York Times. April 9, 2008. pg. 1)

SEE A GAP. Fill a need. Be distinctive.

What's Good? What's Bad?

2008-04-09T07:50:00.000-07:00

“More chief executives are spurning bonuses earned for fiscal 2007. Their voluntary cutbacks, most common among financial companies affected by the mortgage meltdown, don't always assuage demoralized staffers and unhappy investors. And they can stoke anger about other executive-pay practices.

“The heads of at least eight major U.S. companies -- ranging from Bear Stearns Cos. to Zions Bancorp -- turned down last year's bonus, while a ninth requested a shrunken one…

“It isn't unusual for bosses to slash their rewards when business sours. But a sacrifice by otherwise well-paid chiefs rarely impresses the rank and file, says Edward Lawler, director of the Center for Effective Organizations… In some cases, it ‘lowers the credibility of the CEO,’ he says. Corporate leaders are more likely to win favor when they insist their bonuses be shared with troops…

“Warner Music Group Corp. CEO Edgar Bronfman Jr. refused a bonus for the year ended Sept. 30, after receiving a $6 million bonus the prior year. He asked the board pay panel to put the funds into the bonus pool ‘for employees other than executive officers,’ its latest proxy said. Warner swung to a loss for the year. Its shares declined more than 60%.

“Mr. Bronfman turned down between $1.35 million and $1.8 million, based on the range of bonuses awarded to fellow top officers. Warner's compensation committee said in its proxy that it offered bonuses despite the poor results because of ‘unexpectedly challenging conditions in the recorded music industry.’ Will Tanous, a Warner senior vice president, says the company's operating performance was strong, with U.S. sales increasing even as overall industry sales fell 10%.

“Mr. Tanous says some employees viewed Mr. Bronfman's gesture as ‘a morale booster’ …

“Declined bonuses don't always please disgruntled investors. That was clear at Washington Mutual… where CEO Kerry Killinger was eligible for a $1.19 million bonus last year. He told analysts that he wouldn't accept the bonus because of the company's poor results…

“Mr. Killinger was eligible for 32.6% of his bonus, because the company achieved 32.6% of its 2007 goals for certain earnings, expenses and customer-loyalty measures… The foregone award will count toward Mr. Killinger's post-retirement benefits, because he earned the money.

“That's ‘a bait and switch,’ insists Richard Clayton, research director of CtW Investment Group.”

(“Theory & Practice: More CEOs Are Saying No (Voluntarily) to Bonuses; Mortgage Crisis Spurs Wave of Turndowns; Not Everyone Is Happy.” Joann S. Lublin. Wall Street Journal: April 7, 2008. pg. B.6)

WHERE ARE OUR EYES? What performance criteria are we watching? What is excellent performance? Is it unidimensional? What is reward-worthy? What is to be incentivized?

The company lost money; shareholders lost 60% of their holdings, yet a sales increase is trumpeted. And for facing challenging conditions a CEO should be rewarded? Or, for yielding a bit a CEO thinks to be heroic?

How disingenuous are they? How distracted are we?

Good News for the Fearful & Brave

2008-04-08T16:15:00.000-07:00

“With $39 billion on hand from the sale of Alcon Inc., Nestle SA will be in the market for acquisitions as part of its strategy to bulk up its fast-growing nutrition business…

“It is a tough time to be running a food company. Commodity prices have been rising, the competition for shelf space at retailers is brutal, and as the economy sours, consumers pull back on their spending. So far, Nestle has been navigating well; it recently raised its 2008 sales forecast and said its cost-cutting programs and large size were helping it weather current conditions.

“Dealmaking to adjust Nestle's portfolio of brands has been a hallmark of Mr. Brabeck's decade as CEO. He has been cutting products and brands that don't meet his profit and sales expectations. He shed lower-margin staples like some frozen foods and purchased more premium brands like Dreyer's ice cream. He has also pushed Nestle aggressively to develop foods that have nutritional elements, viewing those as commanding higher prices at retail and also benefiting from demographic trends like aging consumers.

“The cash from the Alcon deal gives Nestle firepower to finance any future acquisitions at a critical time: The global financial crisis has made credit harder to come by, even for investment-grade-rated companies like Nestle. Nestle's strategy is the latest evidence that some corporations, known as strategic buyers, see opportunity in the turmoil in the mergers and acquisitions market. For companies that can ride out the financial and economic storm, there may be opportunities to pick up businesses from struggling rivals on the cheap, at a time when once-fierce competition from private-equity buyers has disappeared.”

(“Cash May Feed Deal Appetite at Nestle.” Dana Cimilluca and Jeanne Whalen. Wall Street Journal: April 8, 2008. pg. B.1)

REMEMBER WARREN THE WEALTHY: “Be brave when others are fearful, and fearful when others are brave.”

Are we prepared to move forward? Or, are we forced into retreat?

Our world is a construction of our choices.

Seeing Anew

2008-04-04T09:43:00.000-07:00

“In the early days, fortunes changed swiftly for Autodesk... Indeed, the San Rafael company has been on a roller coaster for much of its quarter-century history. The low point of Autodesk's ride occurred during the height of the Internet boom, when it embarked on a fateful shift in sales strategy. The company turned its back on the so-called channel partners that had long sold its engineering software and instead branched out into selling new services online. The lure of selling without the support of resellers turned out to be wrong for products as sophisticated as those in Autodesk's portfolio...

“Then Autodesk made a move that sent it on a climb that has lasted five years. The company found and nurtured a hidden asset that would reverse its fortunes and cause the top line to grow from $824 million in 2003 to $2.17 billion in 2008 with profitability growing more than 10 times...

“Autodesk is among a handful of companies that have been able to revive a core business by discovering and harnessing hidden assets -- in this case, undervalued customer segments… Making the most of hidden assets is an approach that has worked as successfully for companies nearing their natural limits to growth, as it has for companies that need a new strategy. In addition to discovering an undervalued customer segment, companies can find hidden customer assets by discovering an untapped influence they may have over a specific group of customers or reevaluating proprietary information that can be used to alter, deepen, or broaden the customer relationship...”

(“Autodesk's Turnaround Secret; How the CAD software maker reinvented itself by refocusing on its customer segments, product differentiation, and a new sales model.” Chris Zook and George Cogan. BusinessWeek.com. April 1, 2008)

WHAT LURES US away from the heart of our work? What tempts us to turn our back on our home base?

How can you see that which has been overlooked?

Periodically, return to your original foundations. Question your current assumptions. And see if you may have wandered away from seeing clearly.

Conventional Wisdom or Distinctive Differentiation?

2008-04-03T05:59:00.000-07:00

“Autodesk represents one of the most dramatic examples of how a company has made the most of a hidden customer asset. In the late 1990s, Autodesk made a series of moves it would live to regret. The company decided to expand beyond the design tools that had been the keystone of its success and instead add services and products that were neither part of its core business nor natural adjacent businesses. Autodesk also decided it could save on costs by selling to its customers directly and over the booming Internet, instead of through its network of resellers. ‘The company had adopted a Hail Mary strategy, trying lots of new and different things, often throwing business analysis and [proven] practices to the wind,’ says CEO Carl Bass.

“The strategy backfired. Not only were the new offerings unsuccessful, but the company also learned -- the hard way -- that its resellers were better at selling its products than Autodesk was. Performance plummeted, and Autodesk knew it needed to change. But the how-to wasn't obvious. Like many other companies, Autodesk didn't know where it was falling short with its customers and where it could differentiate itself by developing new products and services.

“In a 2004 survey of 259 executives worldwide, Bain & Co. found that for many, there is a huge gap between perception and reality when it comes to serving customers. Among respondents, 80% of executives thought they were doing a good job of delivering ‘very differentiated’ products and services. But when we compared this belief with a similar sample of their customers, only about 8% said they thought their suppliers were highly differentiated. “

(“Autodesk's Turnaround Secret; How the CAD software maker reinvented itself by refocusing on its customer segments, product differentiation, and a new sales model.” Chris Zook and George Cogan. BusinessWeek.com. April 1, 2008)

TO BE OUTSTANDING, we must stand out.

When everybody knows something... where do you go?

oops!

2008-04-02T12:57:00.000-07:00

“FairPoint Communications Inc. completed its purchase of Verizon Communications Inc.'s wired telephone lines and high-speed Internet service in northern New England, and was promptly punished by investors.

“FairPoint's stock fell 12%, or $1.24, to $9.02 in 4 p.m. composite trading on the New York Stock Exchange.

“Goldman Sachs analyst Jason Armstrong added FairPoint to his ‘sell’ list and said the multibillion-dollar deal will push risk ‘materially higher.’

“Wall Street's reaction came as FairPoint CEO Gene Johnson touted the deal's closing in New York as catapulting the North Carolina-based phone company into one of the nation's largest.

“‘This is a great day in our progression. Many dedicated employees have worked tirelessly to achieve this milestone and I am ever grateful,’ Mr. Johnson said. ‘The result of our efforts is the creation of the eighth-largest telephone company in the United States’."

(“FairPoint Closes Verizon Deal and Sees Shares Fall.” Wall Street Journal. April 1, 2008. pg. B.2)

RISK not only comes with increased leverage in a slowing market, but with complexities heretofore not perceived.

Not My Fault!

2008-04-01T14:03:00.000-07:00

“Citigroup Inc., as it unveiled the final in a flurry of internal organizational changes, appears to be getting started on a restructuring of its board.

“The banking giant said in a statement on its Web site that its board ‘is actively seeking new directors’ and is placing a ‘particular emphasis on expertise in finance and investments.’

“The board has been criticized by shareholders and, in private, by some Citigroup executives. They are frustrated with the board's failure to sound the alarm as the bank piled up big risks in the years before the credit crunch hit, saddling Citigroup with more than $20 billion in losses since last summer.

“The board has few members with experience in financial services. Only two outside directors -- Richard D. Parsons, Time Warner Inc.'s chairman, who ran a New York thrift in the early 1990s, and Robert L. Ryan, who was a Citibank vice president from 1975 to 1982 -- have any banking background. Mr. Ryan, Medtronic Inc.'s chief financial officer, joined the board last year.

“Citigroup spokeswoman Christina Pretto said the board ‘has diligently carried out its responsibilities, including with respect to issues surrounding mortgage-related exposures.’ She added that the board is ‘highly experienced with a unique knowledge of the company, and regularly reviews and unanimously supports’ Citigroup's planning process and Chief Executive Officer Vikram Pandit's strategy.

“Robert E. Rubin, the former Treasury secretary who is chairman of Citigroup's executive committee, has been singled out for sharp attacks. Some investors and executives say Mr. Rubin, who was the chief advocate of naming Mr. Pandit as CEO in December, deserves blame for Citigroup's larger appetite for risk-taking in recent years...

“Mr. Rubin, however, is unlikely to step down from the board anytime soon, said a person familiar with the matter. He has defended his role by noting that he isn't responsible for any risk-management or trading functions at Citigroup.”

(“Citi Seeks Finance-Savvy Directors.” David Enrich and John Flowers. Wall Street Journal. April 1, 2008. pg. C.3)

WELL, WE MIGHT FEEL REASSURED that board decisions are unanimous (in support of strategies with which they have no experience).

And we are reassured that a former U.S. Treasury Secretary has nothing to do with "risk-management or trading functions." We wouldn't want him gumming up what we really want to do.

Why?

2008-03-28T09:25:00.000-07:00

“A sweeping five-month investigation into the collapse of one of the nation's largest subprime lenders points a finger at a possible new culprit in the mortgage mess: the accountants.

“New Century Financial, whose failure just a year ago came at the start of the credit crisis, engaged in ‘significant improper and imprudent practices’ that were condoned and enabled by auditors at the accounting firm KPMG, according to an independent report commissioned by the Justice Department...

“Some of its accusations echo charges that surfaced about the accounting firm Arthur Andersen after the collapse of Enron in 2001.

“E-mail messages uncovered in the investigation showed that some KPMG auditors raised red flags about the accounting practices at New Century, but that the KPMG partners overseeing the audits rejected those concerns because they feared losing a client…

“Mr. Missal drew an analogy to Enron and said there was evidence that KPMG auditors had deferred excessively to New Century.

“‘I saw e-mails from the engaged partner saying we are at the risk of being replaced,’ Mr. Missal said in a telephone interview about a KPMG partner working on the audit of New Century. ‘They acquiesced overly to the client, which in the post-Enron era seems mind-boggling.’ …

“In one exchange in the report, a KPMG partner who was leading the New Century audit responded testily to John Klinge, a specialist at the accounting firm who was pressing him on a contentious accounting practice used by the company…

“[New Century’s] three founders together made more than $40.5 million in profits from selling shares in the company from 2004 to 2006.”

(“Inquiry Assails Accounting Firm In Lender's Fall.” Vikas Bajaj. The New York Times. March 27, 2008. pg. 1)

WHAT SEPARATES these folks from me? from you? What triggers foolishness in each of us? What are we watching out for?

Cool Niche or Warm Touch?

2008-03-27T10:51:00.000-07:00

“On March 6 Apple announced new features for the iPhone, including some that will make it possible for people to fetch Microsoft Exchange e-mail with this device. In the overhyped, ever-breathless world of Silicon Valley this routine announcement got the kind of reception you might expect for the discovery of life on Mars. Apple is invading corporate America! Game over!

“Or maybe not. Apple has done a great job selling the iPhone to consumers, but tapping into the corporate market will take more than just supporting Microsoft e-mail and adding a few security features...

“The way to get corporate business is to create a product so appealing that people begin using it at work even though it's forbidden; then they force their IT department to accommodate them...

“However... hurdles stand in Apple's way. Research In Motion has 14 million BlackBerry subscribers worldwide, about two-thirds of them in corporate accounts. Those companies won't be in a hurry to tear out their BlackBerry systems, nor will they be eager to support two systems instead of one, no matter how sexy that new device may be...

“Businesses also value close relationships with vendors. ‘RIM has had a direct sales force meeting with Global 2000 companies for years,’ says Robert Laikin, chief executive of Brightpoint... ‘They have a reputation for security and a track record. They have deals with all the major carriers in the United States, who have trained their sales forces to sell the RIM product.’

“Apple, in contrast, has some really cool ads, snazzy stores and an exclusive deal with AT&T, which could put off enterprise customers who prefer a choice of carriers...

“Apple also has a history of creating new products that are not compatible with their predecessors, something consumers might put up with but businesses can't tolerate. It also helps explain why Apple computers are so rarely used at corporate sites despite being better in almost every way than Windows PCs...

“‘We think the iPhone will continue to appeal to a niche willing to pay for the sizzle of leading-edge technologies,’ says Sean Magee, senior vice president of information technology at Ricoh Americas Corp. ‘While the touchscreen, overall presentation, data management and navigation are cool, at the end of the day it is just an overpriced PDA with a lot of challenges in front of it.’”

(“Tough Customers; The earth shook. Mountains trembled. The world momentarily stopped turning on its axis.” Daniel Lyons. Forbes; April 7, 2008, Volume 181 Issue 7. pg. 54)

GOOGLE APS TOO, in spite of their cool tech and public sizzle, largely are not penetrating the corporate world.

The utility of an old-fashioned, well-entrenched behemoth -- technically inferior though it may be -- often trumps the latest fashion. Until the behemoth gets that idea too far into their head for too long. Then, watch out!

Credibility: Plans, Actions, Results

2008-03-26T08:31:00.000-07:00

“Walgreen Co. thrived for decades by opening stores faster than its competitors -- a new location pops up every 16 hours -- and by pushing out more prescriptions per year than any other chain.

“But facing pressure from rivals, a weak economy and cracks in the health system, Walgreen is changing its time-tested formula. Instead of simply bottling pills, it is refashioning itself into a broad health-care provider…

“In the last few years, Walgreen has begun making bolder moves. It has dropped its longtime aversion to acquisitions and snapped up specialty pharmacies that are experts in infertility, cancer, AIDS and other conditions that are expensive to treat. It is opening pharmacies in hospitals and assisted-living facilities. Last year, it quadrupled the number of pharmacists certified to give flu shots and other immunizations.

“Investors, though, aren't sure it is taking the right approach. In October, Walgreen reported its first quarterly earnings decline in nearly a decade, hurt by lower generic-drug reimbursements, and higher store and advertising expenses. Investors were rattled by the rare wobble from Walgreen's normally steady business. Since then, its stock price has dropped nearly 22%.

“‘It hasn't had the consistency over the last year,’ says Mark Miller, a William Blair & Co. retail analyst. ‘It's rebuilding credibility.’ …

“While Walgreen shares have fallen, CVS Caremark shares have risen 17% in the last 52 weeks. Last year was the first time since 2002 that Walgreen shares posted an annual decline.

“Walgreen's share price has recovered some ground since the beginning of the year. But drugstores' profits are currently under pressure...

“‘What folks are missing is that multiple strategies are able to win in such a big area,’ Gregory Wasson, Walgreen's president, said in an interview. ‘It's easy to see something big and tangible. CVS has had its shareholders gain value. Ours is a winning strategy. People may not have realized the value yet.’ …

“‘The real opportunity is to begin to connect the dots,’ says Mr. Wasson.

(“How Walgreen Changed Its Prescription for Growth.” Amy Merrick. Wall Street Journal: March 19, 2008. pg. B.1)

CHANGE IS COSTLY, risky, threatening -- and vital. Buy-in comes slowly as plans are announced, gradually as actions unfold, and then perhaps as results are interpreted and framed.

Seeing afar what others cannot yet perceive is indeed a rare gift, yet its value may only lie in your ability to open the eyes of your market.

Buy Lower; Sell Higher

2008-03-25T14:55:00.000-07:00

“Under mounting pressure from surging commodity prices, makers of the name-brand foods that fill the nation's grocery shelves are fighting back… One of the most effective weapons used to defend their bottom lines -- and one they rarely discuss in public -- involves placing big bets in the grains market, a strategy known as hedging.

“Food makers use hedges to protect against sudden price moves, smoothing out some of the peaks and valleys in the commodities market by managing risk through futures and options. This gives them a better idea what costs they are likely to encounter in the months ahead, crucial to budget planning...

“The company should be in a strong position to offset future costs. For 2008, General Mills has hedged 66% of its costs for key commodities, such as wheat and fuel.

“‘They are smartly locked in,’ said Edward Jones analyst Matt Arnold… ‘They are as well-hedged as anybody.’

“Food makers are facing unprecedented costs for their ingredients. The Agriculture Department forecasts average prices for wheat, corn and soybean meal will continue to hover well above their 10-year averages through 2008…

“It has become dicier these days to pinpoint the costs of grains and other commodities…

“Sanderson Farms Inc., a major buyer of soybeans and corn to feed its chickens, said 10% of its soybean delivery has been priced in through the rest of the year.

“On the other hand, the company said it is fully exposed to market prices for corn, with any market advantage on this front hinging entirely upon whatever terms it can negotiate with suppliers. Laurel, Miss.-based Sanderson Farms doesn't stockpile feed grains, keeping only a week's worth in its mills at a time.

“‘At these values, we just think it would be the wrong time to do a lot of forward pricing,’ said Chief Executive Joe Sanderson… citing uncertainty about the amount of corn being planted. This is the cautious approach taken by buyers wary of locking in high prices when there is a chance prices in the grain market might move lower.”

(“Corporate News: Food Firms Hedge Against the Grain.” Matt Andrejczak. The Wall Street Journal. March 24, 2008. pg. B.4)

EXCELLENT STRATEGIC MANAGERS detect discontinuity by disrupting our thinking.

Is this a trend? Does it have legs? What about reversion toward the mean? Has there been a seismic structural shift in the way markets behave? Are the rules being re-written? Will the norm prevail?

Who can see? For every buyer who sees a low price, there is a seller who sees a fully-valued price. Maybe this is why we say "bets" ...

Principles & Critical Success Factors

2008-03-24T12:15:00.000-07:00

“When the Formula One racing season starts on Sunday with the Australian Grand Prix, Toyota Motor Corp., which can practically do no wrong in the factory and the showroom, will be out to prove after years of disappointing finishes that it can finally turn things around in the world's top auto-racing circuit.

“Since joining F1 in 2002, Toyota has never won a race or ended a season in better than fourth place despite spending an estimated $2.5 billion the past six years. Last year, it finished sixth out of 11 teams, causing restlessness among Toyota's top executives…

“Now, Toyota is pinning its hopes on fully implementing its vaunted consensus-management style, which is out of step with the rest of the world of grand-prix racing, to breathe life into its half-billion-dollar-a-year F1 team…

“While governments, hospitals and manufacturers world-wide have successfully copied Toyota's celebrated philosophy, many racing analysts question whether it is suited to the competitive world of F1…

“Historically, the most successful teams have been led by strong personalities who function like field generals in battle, calling all the shots not only during the race but also during the design phase.

“‘To shine in F1, you have to be reactive, very quick in everything,’ says Patrick Camus, an F1 analyst…

“[Toyota's F1 executive Tadashi] Yamashina says he was struck by the limitations of this traditional management style, which he says relied too much on the experience and skills of one individual…

“While all F1 teams rely on teamwork -- involving hundreds of people from aerodynamicists to materials engineers to test drivers -- the Toyota philosophy takes it to a new level…

“Many Toyota team members, accustomed to the faster-paced decision- making process of traditional F1 teams, resisted the changes at first…

“Critics say Toyota performed best under the leadership of British technical director Mike Gascoyne, who is known in racing circles for his aggressive style. With Mr. Gascoyne, the team ended the 2005 season in fourth place, its highest finish to date. By 2006, however, Toyota suspended Mr. Gascoyne because of ‘differences of opinion,’ Toyota says. Mr. Gascoyne declined to be interviewed for this story.”

(“Will Toyota's Way Win on the Track?; Car Maker Is Counting On Its Consensus Style to Break Formula One Losing Streak.” John Murphy. Wall Street Journal: March 14, 2008. pg. B.1)

CONSENSUS MANAGEMENT is widely considered to be the optimal right way to lead. Can the "right" way be the wrong way in the right situation? Is managing strategically situational or universally principled?

What do we do when following industry norms has led to moderate, mediocre results?

Will bucking the apparent trend improve results, or is there something deeper to blame?

Crisis and Reality Construction

2008-03-21T11:05:00.000-07:00

“Borders Group Inc. has decided you can sell a book by its cover.

“In a radical move aimed at jump-starting sales, the nation's second-largest book retailer is sharply increasing the number of titles it displays on shelves with the covers face-out. Because that takes up more room than the traditional spine-out style, the new approach will require a typical Borders superstore to shrink its number of titles by 5% to 10%.

“That makes the strategy a big gamble for Borders. Reducing inventory goes against the grain of booksellers' efforts over the past 25 years or so…

“With the book market facing unmitigated gloom, Borders has little choice but to experiment….

“Some think the move is overdue. Unlike modern supermarkets, booksellers haven't done enough to make books look attractive on the shelves, says John Deighton, editor of the Journal of Consumer Research.

“‘Breakfast cereals are not stocked end-of-box out,’ he says. ‘You want to your product to be as enticing as possible. It's a little bizarre that it's taken booksellers this long to realize that the point of self-service is to make the product as tempting as possible.’

“At the same time, Borders' willingness to reduce the number of titles it stocks reflects a growing view that store customers can be intimidated by too great a selection. ‘We can be overwhelmed or thrust into indecisiveness by the presence of a large number of temptations,’ Mr. Deighton adds. ‘People don't want choice, they want what they want. And what they want is sometimes constructed for them in the store by the attractiveness of what's on offer.’

“Borders says customers visiting its prototype store said their impression was that more books were available.”

(“Borders Tries About-Face on Shelves; Counting on Covers to Sell, Bookseller Changes Display While Cutting Titles Stocked.” Jeffrey A. Trachtenberg. Wall Street Journal: March 12, 2008. pg. B.1)

SO, WHICH MAKES YOU MORE NERVOUS -- change or stasis? constructing the customer's perceived experience or leaving them to "want what they want?"

The Mythical Beast vs Real Life

2008-03-19T10:30:00.000-07:00

“In recent times, most economists have pretended that the economy is essentially predictable and understandable. Economic decision- and policy-making in the private and public sectors, the thinking goes, can be reduced to a science. Today we are seeing consequences of this conceit in the financial industries and central banking. ‘Financial engineering’ and ‘rule-based’ monetary policy, by considering uncertain knowledge to be certain knowledge, are taking us in a hazardous direction…

“Friedrich Hayek began a movement to bring key points of uncertainty theory into the macroeconomics of employment…

“In the 1970s, though, a new school of neo-neoclassical economists proposed that the market economy, though noisy, was basically predictable. All the risks in the economy, it was claimed, are driven by purely random shocks -- like coin throws -- subject to known probabilities, and not by innovations whose uncertain effects cannot be predicted.

“This model took hold in American economics and soon practitioners sought to apply it. Quantitative finance theory became a tool relied on by most banks and hedge funds. Policy rules based on this model were adopted at the Federal Reserve and other central banks…

“Current experience is putting these claims to the test…

“Entrepreneurs' willingness to innovate or just to invest -- and thus create new jobs -- is driven by their ‘animal spirits’ as they decide whether to leap into the void. Central bankers… can try to guess which way entrepreneurs are going to jump, but some wide swings in employment are inevitable…

“There may be other mechanisms at work. Uncertainty reigns.”

(“Our Uncertain Economy.” Edmund S. Phelps. Wall Street Journal: March 14, 2008. pg. A.19)

DECISION-MAKING IS NOT A SCIENCE. Policy cannot be engineered. Management is messy, and strategic management is the messiness of uncertainty.

The Mythical Beast is that data and facts drive decisions directly with no "animal spirits" of human interpretation. We slay that myth through the sense of feel we develop as we get in touch with the processes from which data are extracted.

Understanding and insight trump knowing once again.

Reality In Numbers

2008-03-18T14:08:00.000-07:00

“When market confidence collapses, Wall Street, like the cowardly Kansas town in ‘High Noon,’ needs strong, silent types for protection.

“Last week's Gary Cooper was J.P. Morgan Chase, which "rescued" Bear Stearns as a prelude to devouring it. This week, investment banks will report quarterly financial results, just as investors are trying to identify which brokerage houses will be strong enough to weather the credit-market storm…

“The tricky part is that in this environment balance sheets may not be the best indicators of strength. Early last week, Buckingham Research analyst James Mitchell, based in part on numbers reported at the end of Bear's fourth quarter, estimated that Bear Stearns had $35 billion in liquid assets and borrowing capacity, enough to operate for 20 months. Turns out it had enough for three days…

“As Bear Stearns learned, in this environment whispers of weakness alone can cause a pack of nervous lenders to flee from you.

“‘A company is only as solvent as the perception of its solvency,’ Oppenheimer analyst Meredith Whitney wrote in downgrading Bear Stearns on Friday.”

(“Ahead of the Tape.” Mark Gongloff. Wall Street Journal: March 17, 2008. pg. C.1)

WHAT IS ENACTED REALITY? What we manage is what the masses perceive as real. The objectivity of managed reality lies within its inter-subjective creation.

Our balance sheet is as real as it is perceived to be.

Moods & Feelings

2008-03-17T13:38:00.000-07:00

“Many bankers are steeling themselves for the global financial crisis to both last longer and grow deeper, a shift in mood that could magnify the potential for upheaval in markets and economies world-wide…

“The fact that yesterday's Bear Stearns deal puts a paltry $2-a-share value on the storied investment bank, which as recently as a week ago was trading around $70, is unlikely to assuage fears that the worst is in the past.

“The next four weeks will be critical in determining whether or not bankers' gloomy mood is justified. Tomorrow, the worlds' biggest banks and brokers will start reporting precisely how much money they lost in the first quarter on bad investments, on top of previous losses. These reports will also hold vital clues to what they feel the future holds.

“As last week's meltdown at Bear Stearns shows, bankers' mood swings can sometimes bring about the very scenarios they fear.”

(“Banks Fear a Deepening of Turmoil.” Carrick Mollenkamp and Mark Whitehouse. Wall Street Journal: March 17, 2008. pg. A.1)

ONCE AND FOR ALL -- feelings shape where we look, how we see, how we understand, what we believe, and how we decide to act on what is perceived and interpreted.

Not only do our actions generate the world upon which we are acting, but more powerfully, our actions are the product of a causal chain of feelings, perceptions, interpretations and beliefs.

Even the "objective," formula-rich world of high finance demonstrates this time and again.

Data, Perception and Understanding

2008-03-07T17:29:00.000-08:00

“Monthly retail sales have long been an important tool for gauging the health of the American economy as well as the retailers themselves.

“But tomorrow, when retailers around the country report their February sales for stores open at least a year, the statistics will be a lot less meaningful. Macy's Inc., the nation's largest traditional department-store operator by revenue, will stop making its monthly disclosure, joining other retail titans such as Sears Holdings Corp., Home Depot Inc. and Dollar General Corp. …

“Two other retailers, Jos. A. Bank Clothiers Inc. and CVS Caremark Corp., abandoned reporting monthly sales as of January.

“‘There's obviously a common theme among all of these retailers,’ says Ken Perkins, president of Retail Metrics Inc., a research-consulting firm. ‘This is a trend when things get lean and difficult.’ …

“‘Giving less information at a time of high investor concern heightens the perception that there might be bad results,’ says David Dreman, chairman and chief investment manager of Dreman Value Management…

“At Macy's, informal discussions for months focused on the benefits of abandoning monthly disclosure of same-store sales... Executives at the Cincinnati-based company began debating that the obligation to report monthly same-store sales was a big distraction...

“Macy's spokesman Jim Sluzewski notes that companies in other industries -- like Motorola or Dell -- don't report sales monthly.

“‘The practice of reporting sales monthly unfortunately has encouraged a short-term orientation that distracts retailers such as Macy's,’ adds Mr. Sluzewski…

“‘Increasingly the thought is that reporting monthly sales results makes retailers susceptible to managing on a month-to-month basis,’ says Frank Badillo, senior retail economist at Retail Forward...

“But critics of retailers that abandon monthly sales reports note that, in good times, chains go out of their way to trumpet big gains in monthly sales. ‘It always seems to be the companies that are having problems’ that go mum, says George Whalin, president of Retail Management Consultants... He complained to both Home Depot and Sears about their lack of disclosure, saying he tracks the numbers closely. He says he got no response.”

(“Macy's Joins Trend Of Retailers Ending Monthly Reports.” Vanessa O'Connell. Wall Street Journal: March 6, 2008. pg. B.1)

COPING WITH UNCERTAINTY may leave uncertainty in its wake. Just be sure where you stand, what you watch, and how you share.

Diminishing Returns

2008-03-05T11:15:00.000-08:00

“Mark Zuckerberg, Facebook Inc.'s 23-year-old chief executive, is finding that he and his company have to grow up at Internet speed. The latest sign: He has poached a top Google Inc. executive, Sheryl Sandberg, to help expand his social-networking company.

“Ms. Sandberg, a six-year Google veteran who has been the search giant's vice president of global online sales and operations, will become Facebook's chief operating officer. In that role, the 38-year- old executive will try to help expand the privately held company's operations, revenue and international reach. She will also lead sales, business development, public policy and communication. Ms. Sandberg will report directly to Mr. Zuckerberg, who has been searching for a second-in-command for several months.

“Ms. Sandberg's appointment comes as Mr. Zuckerberg is trying to adjust to being head of a company that is quickly outgrowing its position as one of Silicon Valley's hottest startups while preparing himself to be able to lead it to Google-like international heft...

“In early December, the CEO had a conversation with one of his mentors, Silicon Valley investor Roger McNamee, in which he admitted he was having a tough time with some new pressures he was facing as chief. ‘Is being a CEO always this hard?’ he asked…

“Ms. Sandberg joins a roster of recent Facebook hires that includes Chief Financial Officer Gideon Yu, formerly CFO at YouTube, and Vice President of Product Marketing and Operations Chamath Palihapitiya, a former head of AOL's instant-messaging business. Mr. Zuckerberg is also seeking to hire a new general counsel and a vice president of communications and public policy...

“Part of the struggle for quickly maturing startups is that founders don't want to lose their stamp on the company -- something they fear may happen if they hand the reins to a hired CEO. Mr. Zuckerberg says he is trying to build Facebook on his own terms, and indicated recently that he doesn't want another No. 1 in the company. Owen Van Natta, chief revenue officer who previously held the role of Facebook COO, last month said he was leaving the company. The departure was related to Mr. Van Natta's ambitions to be CEO of a company, a title Mr. Zuckerberg isn't willing to relinquish, both men say.

“In Ms. Sandberg… Mr. Zuckerberg is seeking an experienced hand who can also enable him to hold on to the reins. ‘It's going to be very valuable for me to have a partner [to help] me to think about how to do operations, especially as the organization grows very large and as we scale internationally,’ says Mr. Zuckerberg.”

(“Facebook CEO Seeks Help as Site Grows Up; Google Veteran to Be Zuckerberg's No. 2; Search for Revenue.” Vauhini Vara. Wall Street Journal: March 5, 2008. pg. A.1)

BILL GATES? Steve Jobs? Michael Dell? Sergey Brin? Larry Page? Or... how about Jerry Yang? Who is your role model?

One of the enduring strengths of the modern corporate form is its impersonal longevity beyond the scope of its founders, owners, managers, employees and customers.

Remember the Beatles swan song -- "I Me Mine"?

Threats? Opportunities?

2008-03-04T10:08:00.000-08:00

“Ever a showman, Virgin Atlantic Airlines President Richard Branson opened a vial of jet fuel made with oil from coconuts and Brazilian babassu nuts and drank it, forcing a stiff smile...

“On Sunday, Virgin flew a Boeing 747 from London's Heathrow Airport to Amsterdam with one of the four engines burning a mixture of 80% jet fuel and 20% oil from naturally grown plants. The first commercial airline test of biofuel came off without a hitch… demonstrating that someday planes may not fly on petroleum alone.

“Virgin, and the handful of other companies involved in the project, are hopeful that in three to six years, passengers may be riding on jets at least partially powered by naturally grown oil. The project's participants believe this could lead to a 20% reduction in total emissions.

“Airlines are under mounting pressure to reduce greenhouse gas emissions that contribute to global warming, even though aviation's pollutants amount to less than 3% of all emissions...

“As a result, airlines are now realizing that environmental issues, more than economic slowdowns or airspace congestion, may be the greatest threat to the future growth of air travel...

“Biofuel doesn't burn any cleaner in jet engines than kerosene, the basis for jet fuel today. Emissions are actually about the same, fuel experts say. But proponents say biofuel can reduce total environmental damage by 20% because it is less harmful to produce...

“Technology can make biojet fuel out of just about any renewable crop, and the substance that may hold the most promise for air travel is algae -- pond scum. Sewage-treatment plants offer an ample source, and algae-produced fuel wouldn't use up food crops like corn, soybeans or even coconuts.

“A fuel that is made completely from renewable sources and has the same energy output as kerosene is possible within five years... But before any biofuel starts getting pumped into airplanes, manufacturing plants have to be built, fuels have to win regulatory approval and customers have to be interested. It will be a long process.”

(“The Middle Seat: Virgin Puts Biofuels On Maiden Voyage.” Scott McCartney. Wall Street Journal: February 26, 2008. pg. D.1)

IT IS WHAT IT IS? Or, it is what we make it to be? Do we take our world as a given, or as the construction that we make it to be? Do we take our perceptions as a given , or as the enactment of what we see, hear, think and feel?

As we define and construct our threats, let us be sure to build a world of opportunities as well.

Perceptions And Mantras

2008-03-03T12:34:00.000-08:00

“After long benefiting from an image more upscale than that of archrival Wal-Mart Stores Inc., Target finds itself on the losing end of the marketing game as Wal-Mart hammers home its ‘Every Day Low Prices’ mantra to shoppers ready to cut back on cheap-chic.

“Target yesterday reported its fiscal fourth-quarter profit dropped 8.1% from the year-earlier period, signaling a new stumble as shoppers snub its stylish but discretionary designer duds and homewares in favor of low-priced necessities…

“While Wal-Mart has always been the price leader, Target has thrived by emphasizing the ‘expect more’ part of its ‘Expect More. Pay Less.’ advertising slogan. Wal-Mart attempted to go upscale itself, in its stores and advertising. But as consumer spending tightened and the economic outlook dimmed, Wal-Mart trumped Target's successful ads by shifting its marketing back to its traditional low-price message. Its new slogan: ‘Save Money. Live Better.’ …

“Consumer perceptions have been on Target's side in the past, with shoppers flocking to Target because of its reputation for stylish, affordable goods. But now perceptions are working against the retailer, analysts say. While historically there's been only a 1% to 3% price difference in like items at Wal-Mart and Target, 87% of the shoppers recently surveyed by Citigroup Global Markets Inc. said they thought Wal-Mart had better pricing…

“[Target] is feeling the squeeze from above as well as below, as midtier department stores have improved their fashion quotient in accessories, home furnishings and apparel -- frequently by stealing a page from the Target playbook of getting recognized designers to create a more affordably-priced line that appeals to the masses.

“Meanwhile, Wal-Mart is offering a wider range of branded merchandise… [while] Target watchers seem to agree that offerings from the company once on the cutting edge of apparel style have grown tired.”

(“As Message Misses Mark, Target's Profit Drops.” Ann Zimmerman. Wall Street Journal: February 27, 2008. pg. B.1)

MANTRAS MAY elevate us to a higher state of transcendent consciousness, and they may distract us from stark, shifting reality as we buy into our own press.

Focused power, potency and blinders all in one -- imagine!

Organic Coke: The Real Deal

2008-02-29T08:21:00.000-08:00

“Coca-Cola Co. said on Friday it would continue to make acquisitions, but they were not necessary for the world's largest soft drink maker to meet its long-term growth objectives.

“Coca-Cola reiterated its long-term targets to increase its annual sales volume by 3 percent to 4 percent, revenue by 5 percent to 6 percent, operating income by 6 percent to 8 percent and earnings-per-share by a high single-digit percentage rate.

“Those targets do not include acquisitions, said Coke Chief Financial Officer Gary Fayard during a presentation at a conference in Florida hosted by the Consumer Analyst Group of New York.

“‘We will continue to do bolt-on acquisitions but they are not included in the growth model,’ Fayard said, adding that the company's picture of success was to reach its targets by growing its existing business.

“‘We can never replace organic growth with acquisitions,’ said Chief Operating Officer Muhtar Kent, who will soon become chief executive officer. ‘Organic growth is the oxygen of our business.’

“Kent also said that acquisitions would have to be done in a disciplined manner.

“‘You can't just keep adding things to your system,’ Kent said. He also said the company was looking at fewer, but more important brands, than in the past.

“‘We're not focused on big bets that are going to be big and important,’ Kent said.

“Coca-Cola has benefited from its recent acquisitions of FUZE teas and Glaceau vitaminwater, which have boosted sales at a time its traditional carbonated soft drinks, including Coca-Cola, Diet Coke and Sprite, were experiencing sluggish U.S. sales, as many consumers began choosing drinks like bottled water and tea, which are viewed as healthier.”

(“Coca-Cola says M&A not needed for growth targets.” Martinne Geller. www.reuters.com. February 22, 2008)

ADOPTING AND SWALLOWING what others have developed, abandoning our own quest for internal development, is a high-risk strategy for corporations and individuals.

Surely, we do adopt somewhat from others, but who are we and what do we have that can be built into distinctive value?