“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... )
Perception 1, Reality 2
Hire, then Higher than Higher Ed
“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
“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
“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
“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
“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
“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
“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"
“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
“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
“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.
