Bain & Company: "Next generation competition: Driving innovation in telecommunications"
Bain briefs Publications
2009-12-16
2009-11-15
A CEO’s guide to reenergizing the senior team
In today’s tough and fast-changing environment, CEOs must help their top leaders to work through fear and denial and to learn new rules.
SEPTEMBER 2009 • Derek Dean
From https://www.mckinseyquarterly.com/ghost.aspx?ID=/Marketing/Sales_Distribution/A_CEOs_guide_to_reenergizing_the_senior_team_2444
When business conditions change as dramatically as they have in the past year, CEOs need to be able to rely on their best leaders to adapt quickly. But what should they do when their strongest executives seem unable to play a new game? The costs—organizational drift, missed opportunities, unaddressed threats—are so big that it’s tempting to replace leaders who are suffering from paralysis. But this is a mistake when, as is often the case, these executives possess valuable assets, such as superior market knowledge, relationships, and organizational savvy, that are difficult to replace.
Before sending promising executives off the field, CEOs should try to help them learn to play by new rules. While part of the task—making a compelling case for change, helping him or her meet new job demands—involves appealing to an executive’s rational side, there’s also frequently an emotional element that is at least as important. Empathizing with the complex emotions executives may be feeling as the assumptions underlying their business approach unravel can be a critical part of overcoming the fear, denial, and learning blocks keeping them stuck (see sidebar, “CEOs, tough times, and emotions”).
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CEOs, tough times, and emotions
Robert I. Sutton
I was taken with Derek Dean’s compassionate essay about how CEOs can help their direct reports work through emotions and blind spots during tough times. This piece echoes numerous recent conversations I’ve had with CEOs who tell me they are spending big hunks of time helping top-team members who are “freaking out.” It also is right in line with academic research indicating that anxiety, cognitive narrowing, and clinging tightly to old ways are natural responses when individuals and groups feel overwhelmed by scary events that they did not anticipate, do not understand, and believe they cannot control.
Here I want to expand on Mr. Dean’s argument in three ways. One is to underscore a point that’s implicit but unstated in his essay: CEOs must work just as doggedly to confront and deal with their own demons and foibles as they do to help their charges come to grips with theirs. This is crucial because followers—who usually watch the boss’s moves closely anyway—become hyperfocused on every little move that their superiors make when they are worried about what tough financial times will mean for their fates.
An executive in a leadership program at Stanford, for example, described an assistant in his office who stopped a senior executive in the hall to ask him, “When are the layoffs coming?” This executive was dumbfounded by the question because, though layoffs were in the works, this was a well-guarded secret. After the executive confessed that job cuts were likely to happen, he asked how she knew. She explained that he had been unable to look anyone in the eye all day and instead looked down at his shoes when he spoke to others. She further said it was well known that when this boss was “having an interesting shoes day,” it meant that bad news was on the way. The lesson is that executives, including CEOs, are real people too. Especially during tough times, they must go to even greater efforts than usual to unearth the fears that they can’t quite articulate or don’t feel safe enough to reveal. And they must make it safe enough for their people to point out when they are spreading fear or clinging irrationally to misguided assumptions.1
The second thing that struck me was how well Harrah’s CEO, Gary Loveman, seemed to understand that when senior teams are freaked out and frozen in their tracks, the only way to enable reasonable decision making is to create a psychological safety zone. My research and experience suggest that CEOs create safety through the hundreds of little things that they say and do when dealing with their teams—like smiling at the right time, offering praise and reassurance, admitting their own mistakes, and gently but firmly calling out people who fuel fear, cynicism, and hostility. This is why being a skilled leader, especially a CEO, requires years of experience and relentless attention to tiny details, and why the job is a lot harder than it looks.
For example, Harrah’s had for years faced highly elastic demand curves with its core gaming customers: offering them incentives and rewards stimulated incremental visits and revenue (both gaming and nongaming). In this recession, Harrah’s found itself confronted with inelastic demand curves in several of its key segments. As a result, it seemed impossible to justify the company’s traditional types of marketing investments; they simply couldn’t stimulate the customer behavior (and associated revenue) needed to generate positive returns.
One result was that Harrah’s needed to cut its costs dramatically, which involved figuring out ways to reduce services, amenities, staffing levels, and “comps” without angering loyal customers. But the trickier challenge has been to learn new ways of applying the old tools (relationship marketing, guest service, and loyalty programs) in response to new and different customer behavior. The learning process instigated by Loveman has helped Harrah’s leaders create new rules to manage falling as well as rising investments, to stimulate growth with less capital, and to deliver guest service effectively at much lower cost. These new rules, in turn, have led to new job mandates, new data to manage the business, and new norms for decision making—norms the team has put into action through a series of marketing, service, and lean-operations pilots.
Fear, denial, and the need to learn aren’t new challenges, but more senior executives are falling prey to them in today’s shockingly tough and fast-changing environment. It’s up to CEOs to help their leaders work through these issues, including the powerful emotions involved.
2009-09-13
2009-09-02
Purpose Bigger Than Product
ANTHONY TJAN :
I recently sat down with my BlackBerry voice recorder and Mats Lederhausen to ask him to share his philosophy of "purpose bigger than product." Mats is a great entrepreneur and also had one of the most successful careers at McDonald's where he was a driving force for its turnaround. He currently runs his private investment vehicle Be-Cause and is a Special Partner at our firm, Cue Ball.
What is your philosophy of "purpose bigger than product" all about?
At its core, it is about being real and idea-driven. Trust is perhaps the most important currency in business, and big ideas may be the only true source of competitive advantage. Lack of trust is a form of tax. And that tax rate has increased in the past number of years. Customers simply don't trust institutions as much today. Particularly large businesses. The main reason is that we now live in an "information everywhere" and more transparent world. Every customer has a camera in their cell phone, a Facebook in their pocket and Twitter at their fingertips. This means we hear and see evidence of businesses not walking their talk. Their products don't match their promise. In order to regain this trust you must simply make sure that all your products, your merchandising, your advertising, your people and the totality of your touch points with consumers sing from the same hymn. And that hymn is what I call purpose. Some people call it vision. Others call it focus. It is the same thing. It is source of your promise. It answers the question: Why are you here?
Talk a little more on the notion of "big ideas."
I often talk about "altitude creates attitude". When you meet people that have a big idea it is almost impossible to be unaffected. It is like a perfume. You can smell it miles away. I firmly believe that the source of human energy and creativity can be found in the distance between where we are and where we'd like to be. It is that creative dissonance that is the entrepreneurial rocket fuel. If human beings could have walked everywhere on the planet I don't believe we would have invented trains, planes and automobiles. So, if you really want to build great companies you need big ideas.
Certainly, not all big ideas may be viable in all incarnations. What about the reality of these ideas?
Of course they have to be believable. They can't be pipedreams. Or as John Naisbitt once said: You can't get so far ahead of the parade that no one knows you're in it.
From an execution perspective, you have to think big, start small, and scale fast. You can't think big and start big, that's almost impossible. You need miniature versions of your grand idea so you can validate its parts, and then iterate and tweak constantly. There's nothing wrong with having a really big idea and launching only aspects of that idea. Rome wasn't built in a day. Take Chipotle, for example. Steve Ells had a very big idea about food, but he didn't start by executing 100% of his vision; he gradually did what he could towards that theme.
It is also important to remember that your purpose is not what you "tell" customers, but what you do. The best way to disappoint everyone is to over-promise and under-deliver. Therefore you must be humble AND committed at the same time. In fact, customers are more forgiving when you make mistakes if those mistakes are honest efforts in trying to improve towards a known and worthwhile direction.
How can a purpose be instrumental in leading an organization?
I look at purpose as the guiding star. The compass. The soul. Steve Jobs once said "Design is the fundamental soul of a man-made creation". And everything we do is design in one form or the other. And if you have a fuzzy idea of your own soul, your design will suffer. On the other hand, like Steve Jobs does, if you have a sharp idea of your soul and what footprints you want to leave, all your design will complement and reinforce that soul of yours.
How did you come to have this philosophy?
There are a few parts of the answer. First, to be honest, it's hard to know the answers to the bigger questions in life, like why we believe what we believe. To a certain extent it's the result of the sum of all of our experiences since birth. Second, I've been influenced by seeing what really works. I think strong conviction and a sense of purpose enables focus, and the biggest culprit of bad performance in a company is lack of focus. It's hard to set direction if you don't know who you are. Thirdly, I've decided that I only want to work with companies that are trying to do something important. It's about human progress and adding value to society.
What do mean when you say "important?"
While we have significant global issues to be concerned about, an important business doesn't have to be grandiose or socially driven in order to be important. General contribution to the well-being of another human being is worthwhile. It could be a restaurant that's creating jobs and leaving customers just a tad bit happier than when they arrived. Or a concept such as MiniLuxe, our Cue Ball investment that is trying to "Starbuck" the nail salon, which has innovated a lot around hygiene and customer experience. It is an example of a business with a clear purpose that is trying to do something remarkably better than the industry norm.
What companies really celebrate this philosophy?
Nike is a company that understands it. They have always had this idea that it's more than a sneaker. They are about getting into the game, being more than a spectator in life, and embracing activity. In their words, "Just do it." If you go to their headquarters in Oregon, it's like being in a gym: it breathes "active lifestyle." That's what they're about and they have consistently executed around it.
Southwest Airlines is about giving people the freedom to fly. They are about seeking and loving freedom, and they enjoy being a bit nutty about celebrating that notion. And there are many others as well. Apple, Berkshire Hathaway, Microsoft, Google, Patagonia, IKEA, and a host of others. There is one thing that is interesting to me to note about all these companies. They are very different in so many ways. But they are also very similar in one way. They all have their founders alive and kicking. When the source of the original idea is still around it is harder to lose why you came to this world in the first place.
By ANTHONY TJAN
From : http://blogs.harvardbusiness.org/tjan/2009/08/purpose-bigger-than-product.html?cm_mmc=npv-_-TOPICEMAIL-_-SEPT_2009-_-INNOVATION1
2009-08-18
Top 10 Management Tools
Since 1993, Bain & Company's global Management Tools and Trends surveys have been an excellent gauge of the business climate. That remains true today. In an extraordinary time, the 2009 questionnaire produced a telling set of findings.
Benchmarking, a cost-cutting tool, was the most heavily used among the 25 tools surveyed. Outsourcing, another way to reduce costs, jumped to No. 4, while Business Process Reengineering remained on the Top Ten list. As another indication of where executives feel their companies are headed, the vast majority-88 percent-of those who downsized in 2008 plan more cuts in 2009. And only 24 percent of executives believe that today's market leaders will still lead in five years.
Top 10 Mgt Tools
1.Benchmarking
2.Strategic Planning
3.Mission and Vision Statements
4.CRM
5.Outsourcing
6.BSC
7.Customer Segmentation
8.Business Process Reengineering
9.Core Competencies
10.Merger & Acquisition
There's also regional variation-and a wake-up call-in that hopefulness: Managers in Asia's emerging economies are much more focused on growth and innovation than their counterparts in North America.
From Management Tools for turbulent times
Results Brief newsletter 06/12/09
by Darrell Rigby and Barbara Bilodeau
2009-08-13
5 Personal Core Competencies for the 21st Century
Every epoch requires people and organizations to develop core competencies or skills needed to be successful. In the time of Henry VIII (yes, I am watchingThe Tudors), key competencies to master probably included fealty to a powerful lord and skill with a rapier. Not so much in demand today, however.
What are the core competencies needed in this century? Harvard Graduate School of Education professor Helen Haste has identified five that we should begin teaching our students. We business managers should also consider how to bring these skills to our companies and careers.
- Managing Ambiguity. “Managing ambiguity is that tension between rushing to the clear, the concrete, and managing this ambiguous fuzzy area in the middle. And managing ambiguity is something we have to teach. Because we have to counter the story of a single linear solution.”
- Agency and Responsibility. “We have to be able to take responsibility and know what that means. Being an effective agent means being able to approach one’s environment, social or physical, with a confidence that one actually will be able to deal with it.”
- Finding and Sustaining Community. “Managing community is partly about that multitasking of connecting and interacting. It’s also, of course, about maintaining community, about maintaining links with people, making sure you do remember your best friend’s birthday, that you don’t forget that your grandmother is by herself this weekend, and of course recognizing also that one is part of a larger community, not just one’s own private little world.”
- Managing Emotion. “Really it’s about getting away from the idea that emotion and reason are separate… Teaching young people to manage reason and emotion and not to flip to one or the other is an important part of our education process.”
- Managing Technological Change. “When we have a new tool, we first use it for what we are already doing, just doing it a bit better. But gradually, the new tool changes the way we do things. It changes our social practices.”
From By Sean Silverthorne August 13th, 2009
2009-07-02
Chief Transformation Officer
CTO: Chief Transformation Officer
By Michael G. Winston
THE HUFFINGTON POST , July 2,2009
http://www.huffingtonpost.com/michael-g-winston/as-chief-transformation-o_b_147808.html
This is the second installment in a three part series addressing leadership challenges Barack Obama will face in these turbulent times. In addition to Commander-In-Chief, the 44th President will play the roles of CEO, CTO, and most importantly, CLO. These refer to roles of Chief Executive Officer, Chief Transformation Officer and Chief Leadership Officer. Last time, we addressed President as Chief Executive Officer. This time, we will examine his role as Chief Transformation Officer.
A clear vision, sound strategy and high-performance culture are enablers of real change today. The focus must be on moving the Country in a different direction... and on some issues to move it faster and more predictably. This goes to our very survival. If our country is moving ahead and developing its economy to the fullest, we will have the resources to meet our commitments here at home and away. That we achieve this is essential because in the next 10 years the balance of power will move in the world from one direction or another- towards us or away. Here are some of the action implications for this President-Elect:
Transformation Imperatives
* Articulate a vision and a strategy that most people can embrace - The vision must be explicit...it cannot be implicit.
* Act quickly and decisively to minimize disruption - Uncertainty is often worse than bad news, and it is usually better to be 80 percent correct in time than 100 percent correct too late.
* Organize to gain the power of a big "organization" with the agility of a small one - Strength with speed is the beginning of efficiency and effectiveness.
* Start at the top and challenge every assumption culturally - Show that the transformation effort is serious and inclusive.
* Treat diverse cultures as an asset, not an excuse - Embrace the "best of the best" in both people and practices to make the culture stronger than the sum of its parts.
* Communicate...communicate...communicate - With all constituencies, internal and external.....here and abroad.
* Make the process of governing transparent, but the benefits apparent.
* Sharply focus our resources- natural, financial, technological, and human on highest return endeavors.
* Ruthlessly prioritize to ensure our greatest sustaining efforts are employed on the biggest opportunities.
* Build success upon the Country's key strengths.
* Put the power of the entire country behind a few very big initiatives - ones that really count.
Managing the Transformation
1.Redesign Organization Structure-The United States' evolving situation on the world stage defines the challenge... with two wars, market meltdown, financial Armageddon and a myriad of challenges and opportunities. We must simultaneously address those while optimizing the country's many strengths.
Many organizations fail by trying to implement new strategies without changing their old structures. Some structures are inherently more capable of responding rapidly to strategic situations than are others. The organization's core culture also must be consistent with its overall objectives.
Recently, we have heard both parties rail about the excessive government bureaucracy. The bureaucratic morass should be eliminated or, at least, reduced. As Tom Peters and Bob Waterman observed in their landmark book, In Search of Excellence, "left to their own devices, organizational systems evolve to greater and greater levels of complexity, taking on a life of their own. They become more thorough, more detailed, demanding more and more uniformity and controlling more and more of everything. Formal committees with power to grant approvals begin to multiply. Committees drone on. More and more sign-offs are needed to get anything done. Ultimately, these "support" systems inhibit rather than facilitate performance. They consume the very resources they are designed to protect. People often give up on good ideas because the hoops they must jump through to get something done in the system are so numerous and cumulatively restrictive." The incoming administration must obliterate these systems and cut needless government bureaucracy.
In today's zero-lag-time world, courageous leaders ensure that the team focuses on the work that really matters. They wage war on the bureaucracy, realizing that the overly complex systems and procedures invade the real work of innovating, servicing, producing with quality. They work aggressively to overthrow existing systems and structures which do not support their vision. They eliminate (not reduce!) excessive paperwork, redundant or inhibiting support functions, excessive reports, presentations and meetings.
2. Set Higher Standards - Elevating performance and productivity requires establishing high standards of performance, ethics and evaluation. Unlike a custodial manager, the "transformational leader" must be especially hyper-vigilant and intolerant of ineffective subordinates. Some managers who consider themselves excellent at developing subordinates take pride at attempting to get people to change their behavior radically. Many of these same managers are also quite reluctant to fire or replace an individual, always hoping for performance improvement.
Transformational leaders do not tolerate ineffective subordinates, however friendly, nice, or part of the family they are. They have the courage to "act on people." They clearly and substantively differentiate between outstanding and mediocre performers in their reward systems, and promptly terminate or move aside non-performers and counter-productive politicians.
3. Take charge - Weak leadership will not work with groups that are splintered, floundering, confused, scared, angry or dispirited as many sources of the media have described the American people. A transformation calls for a leadership stance that inspires confidence in the wisdom of moving in a new direction and in the direction selected. Change creates turmoil, and turmoil cries out for someone to take charge. Just as soldiers more readily close ranks behind a strong commander during combat, teams in transition need a leader who stands tough and has the courage of his convictions.
Tentativeness must not prevail. Transformations proceed most successfully when they're driven hard. When the person in charge takes charge and makes things happen that need to happen.
Transformation effectiveness depends heavily on credibility. Credibility is undermined by those who waffle, wallow, or go whichever way the wind blows (or are perceived to). People will not rally behind a President who is tentative.
4. Set a Clear Agenda- New priorities should be mapped out. They should be kept pure and simple and tied to a specific timetable. Short-term goals should be set that people can achieve quickly. By all means, adapt the agenda as the situation demands it. But, always keep it clear, and communicate it constantly. Otherwise, your team will wallow and lose precious months trying to find itself.
5. Discipline- The Chief Transformation Officer (CTO) must function, along with the Chief of Staff, as the main disciplinary agent for the team. The CTO sets high standards. Then, defends them valiantly, consistently enforcing expectations. Becoming a transformation leader requires working to be a change agent who is personally dissatisfied with the status quo, creates a vision of excellence, and aligns commitment and support to achieve that vision of excellence. Change and progress occur as a response to dissatisfaction.
The CTO challenges conventional wisdom, pushes the status quo and attacks "sacred cows." Success in the past always becomes enshrined in the present by the over-evaluation of habits, policies and attitudes which accompanied that success. As long as the environment and behavior do not change, these habits contribute to the stability of a system. But, these habits are the main obstruction in the constant struggle to respond to a changing world.
The challenge is to recognize and adapt to change before a crisis. Exceptional people are able to do just that. They have a striking capacity to institutionalize change. They never stand still. Moreover, they seem to recognize that they had internal strengths that could be developed as conditions changed.
Required Skills
The Chief Transformation Officer must effectively utilize a broad array of skills including:
* Architect of Strategy- The transformation leader is the architect of the transformation strategy. As architect the leader requires interpersonal skills, analytical ability, creativity and self-awareness.
* Implementer of Strategy- As Chief Transformation Officer, the President will be an implementer of strategy required to supply, promote, defend and judge the effectiveness of the strategy. An implementer must be tough-minded and have objective orientation, self-confidence, decisiveness, good negotiating and interviewing skills, high standards of evaluation and, most importantly, an impatience to get something done.
* Decision Making -- Transformation leaders must be able to make bold, decisive moves quickly. They make fast decisions on new ideas and are quick to terminate losing or unpromising activities. The accent of the CTO is on action, on bold, decisive moves. The CTO is willing to accept reasonable risk and even occasional failure and, with a minimum of cover-up, to ferret out mistakes early in the game. He focuses on one task of prime importance at a time.
* Teamwork -- Recognizing the importance of teams in realizing executive, legislative and judicial objectives; understanding the appropriate circumstances for the use of teams and people with different perspectives; strong ability to use teams to increase productivity, quality, involvement, and commitment; demonstrating the ability to build and mold teams; foster openness and two-way communication and increase overall team effectiveness; modeling and rewarding teamwork.
* Personal Drive -- Demonstrating a deep-seated need for achievement and excellence; motivated by high internal standards and consistently meeting or exceeding other people's expectations; thriving on challenges and persevering despite obstacles; balancing needs for power with strong needs for personal mastery and accomplishment.
* Personal Leader -- The transformation leader is a personal leader, someone distinctive from all other people in government. The personal traits of the leader must inspire confidence in the ultimate survival and renewal of a troubled country. Not only must the Chief Transformation Officer be self-confident, he must project this fact.
Successful transformation leaders seem to sense which task merits the highest priority, are able to seize the initiative and devote enormous energy to driving the "organization" and themselves to task completion. They consistently are dogged in their pursuit of objectives and the accomplishment of goals, while maintaining the flexibility to change intermediate goals as the situation develops. They are very tenacious.
As the old saying goes...Be careful what you wish for...
2009-05-29
2009-05-20
The World Competitiveness in 2009
WHO is the best of the world Competitiveness in 2009
Based on the results of the World Competitiveness Yearbook 2009, IMD is pleased to announce an additional ranking – the Stress Test on Competitiveness. Denmark finishes in first place in the “Stress Test” rankings, an analysis of which countries are better equipped to fare through the financial crisis and improve their competitiveness in the near future. In other words, the test is future oriented – it focuses on exposure, readiness and resilience in a period of world recession.
....
Despite finishing first in the overall 2009 World Competitiveness Yearbook rankings, the United States comes in 28th position in the Stress Test, underlining the concern of the market with the depth of the crisis and the time that it will take to solve it.
Between the 18th and 30th positions in the Stress Test are the larger exporting nations led by China (18th), and which includes Taiwan (21st), Brazil (22nd), Germany (24th), Japan (26th) and Korea (29th). Ireland (25th) could have been higher in terms of resilience but the suddenness and the magnitude of the real estate and the financial crisis have probably taken the country aback.
The UK (34th) is in a disquieting position; just as is France (44th), Italy (47th) and Spain (50th), stressing how much the recovery in these countries may be hampered by structural rigidities. Finally, Russia in 51st position may not have had enough years of economic growth to consolidate the structure of its economy and to create the necessary buffer to cope with a crisis of this magnitude.
Between the 18th and 30th positions in the Stress Test are the larger exporting nations led by China (18th), and which includes Taiwan (21st), Brazil (22nd), Germany (24th), Japan (26th) and Korea (29th). Ireland (25th) could have been higher in terms of resilience but the suddenness and the magnitude of the real estate and the financial crisis have probably taken the country aback.
The UK (34th) is in a disquieting position; just as is France (44th), Italy (47th) and Spain (50th), stressing how much the recovery in these countries may be hampered by structural rigidities. Finally, Russia in 51st position may not have had enough years of economic growth to consolidate the structure of its economy and to create the necessary buffer to cope with a crisis of this magnitude.
From : http://www.imd.ch/news/IMD-WCY-2009.cfm
2009-05-19
Finding your innovation fulcrum
Finding your innovation fulcrum
The Wall Street Journal 12/20/05
by Mark Gottfredson and Mike Booker
The Wall Street Journal 12/20/05
by Mark Gottfredson and Mike Booker
It's a constant trade-off faced by even the most successful companies, from Nokia to Honda to Starbucks: Customers are crying out for more and more innovation. Yet if you create too many offerings, costs spiral out of control; too few, and you miss out on profitable sales. The dilemma puts a premium on finding just the right balance. In our experience, firms that master this "innovation fulcrum" -- between product variety and operating complexity -- can boost their balance sheets, with cost reductions of as much as 35% along with up to a 40% increase in sales.
The problem is where to start: According to a recent Bain survey of more than 900 global executives, nearly 70% admit that excessive complexity is raising costs and hurting profits, but many miss how complexity begins in the product line. The usual response -- launching a Six Sigma or other "lean operations" program -- falls short because standard accounting systems don't pick up complexity's full costs. Incremental approaches miss the gradual buildup of systems and mechanisms for managing complexity. Nor can they gauge actual customer desires.
What's needed, then, is a systematic review. H-E-B, a supermarket firm operating in Texas and Mexico, took a look at its overall offerings and found that it could simplify and improve the perception of variety by tailoring store offerings to local tastes and streamlining processes. In its Rio Grande Valley stores, for example, H-E-B focuses on traditional border customers and their ethnic preferences. Its Central Market division, however, offers a world of produce to upscale shoppers with "a passion for fresh and unique food." Yet all stores have a simple, standard operating model with similar ratios as targets for sales and gross margin.
We think of this approach as "Model T" analysis: On the operating side companies need to think about what processes would look like with just one standard offering -- like Henry Ford's Model T, which came only in black. On the customer side, firms need to understand where variety really counts -- something Ford missed when competitors introduced colorful autos in the 1920s.
Choosing the right "Model T" can be tricky. Firms should identify a basic version of their core offering. This allows managers to imagine whole systems and processes that could be radically changed in a simple environment. Big companies that find it difficult to isolate a "typical" offering should look for a proxy -- a smaller, perhaps non-traditional competitor operating with a simpler set of offerings.
Having established the baseline, companies need to add back those options valued by attractive segments of their customer base. The secret: Add only a single variable at a time and then trace the effect through the value chain.
Of course getting rid of complexity is only half the challenge. Companies also need to keep things simple. Four practices help stem complexity creep:
-- Start by raising the hurdle rate. Requiring a higher rate of return on new products not only makes it more difficult to arbitrarily add variations, it also boosts innovation discipline.
-- Postpone complexity. The further down the value chain you introduce complexity, the less it costs. A few years ago, Starbucks began "semi-automating" its latte-manufacturing process. Today, Starbucks patrons can still customize their lattes by size, type of milk, temperature and flavors -- but everything works off the same standard platform. Smart suppliers to do-it-yourself chains offer products that can be customized at the last step in the assembly or distribution process.
-- Institutionalize simplicity in decision making. Executives must pinpoint responsibility for making innovation decisions. Take the example of one food company. Marketers used to order up numerous packaging concepts for a popular snack, creating manufacturing nightmares. Today, its brand managers must meet checkpoints with manufacturing and sourcing managers.
-- Stay balanced. A company's innovation fulcrum can shift over time. Japanese auto makers provide a classic example. In the 1970s, U.S. auto makers competed on their breadth of car choices. Toyota and Honda went another route. Rather than offering millions of possibilities, Honda offered 32 build-combinations with four colors. Today, Honda has redesigned its engines to reduce fuel consumption and emissions, and streamlined engine manufacturing.
What's the right balance? It's a question Henry Ford should have asked before his competitors' colorful vehicles started appearing everywhere. Eventually, he introduced the Model A, done up in multiple hues. But the lesson remains: Companies that hit the right balance between innovation and complexity create more efficient operations and more profitable customer relationships.
2009-05-14
In the right hands, big turnarounds do happen.
Once upon a time, there was a car company that was one of the world's sickest. Its managers spent their time fighting one another. The one thing its workers did most reliably was go on strike. Its bankers debated how big a bailout would keep it out of bankruptcy.
The company was Fiat. Yes, the same Fiat that is now taking over Chrysler. What kind of shape was Fiat in? Well, back in 2000,General Motors (GM) had signed a deal to buy Fiat. Then when the deal was supposed to close, in 2005, GM decided it was hopeless. "Being forced to buy Fiat," Business Week reported, was "GM's nightmare scenario." To avoid having to go through with the purchase, GM paid Fiat $2 billion just to get out of the deal. Most folks thought it was money well spent.
The man who let GM out of the deal for a mere $2 billion was Sergio Marchionne. He was a financial expert who had taken the helm of Fiat in 2004. Fiat then was on the verge of bankruptcy. Marchionne had never even worked at an auto company, let alone run one.
By 2007, just two years after GM walked away, Fiat was profitable. Now Marchionne is not only taking over Chrysler, but looking at buying GM's European division, Opel, as well. So recently deemed completely worthless, Fiat now has a market value of about $12 billion. A combination of Chrysler, Opel, and Fiat would leave Marchionne running the second biggest auto company in the world, after Toyota (TM).
By Mark Gimein
http://www.thebigmoney.com/articles/money-trail/2009/05/10/worlds-best-ceos?page=full
2009-05-06
Global Economic Crisis Hits China HR
Changes Recruiting/Retention and Compensation
We asked an outstanding ILR graduate student to update our research on HR trends in China in light of the landscape of the current global economic crisis and recession:
Recruiting and Selecting Talent
Investing in Employees for Multiple Benefits
Compensating HR Employees
Retaining High Potentials
Rapid Change: Increasing Maturity of a Profession
from HR Spectrum News
http://www.ilr.cornell.edu/cahrs/hrSpectrum/May09-globalEconomicCrisis.html
2009-04-27
Top 10 Winners of Fortune 500
The new Fortune 500 list confirms it: 2008 was a terrible year, even for the winners. The collective profits of the 500 biggest U.S. companies fell nearly 85% in 2008, with four of the top 10 companies showing losses for last year. Thirty-eight firms dropped off the list completely. It's not all gloom and doom, however, as the list has a new No. 1 company (ExxonMobil) and a number of fresh faces have risen to replace fallen members of the old guard. CBS News (04/19)
Top 10 winners of Fortune 500
Top 10 winners of Fortune 500
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