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

Rank Company Revenues
($ millions)
Profits
($ millions)
1 Exxon Mobil 442,851.0 45,220.0
2 Wal-Mart Stores 405,607.0 13,400.0
3 Chevron 263,159.0 23,931.0
4 ConocoPhillips 230,764.0 -16,998.0
5 General Electric 183,207.0 17,410.0
6 General Motors 148,979.0 -30,860.0
7 Ford Motor 146,277.0 -14,672.0
8 AT&T 124,028.0 12,867.0
9 Hewlett-Packard 118,364.0 8,329.0
10 Valero Energy 118,298.0 -1,131.0

2009-04-26

Does the MBA Prepare Business Leaders for Today Businesses?

"Class of 2009: Flexibility is crucial in a difficult job market"

By Linda Anderson  Published: January 26 2009 00:04 

With the global economy facing one of its most turbulent periods in history and wage and recruitment freezes commonplace, spare a thought for the business school class of 2009.

Traditional ports of call – investment banking, financial services, consultancies and industry have all reduced their MBA recruitment markedly. Students are anxious and so are schools. Clearly one of the hardest hit sectors is banking.

However, John Benson, founder and chief executive of eFinancialCareers, a website focused on the student community notes: "Recruitment activity is down but not out."

Banks are cutting back but they are not stopping their hiring, he adds. This is in marked contrast to 2002/03 (after the dotcom bubble burst) he says, when recruitment almost dried up.

Mr Benson notes that even those banks that have cut back are appearing at recruitment fairs and on campus, to maintain brand awareness. After all, he adds, the banking industry is not going to disappear.

He stresses the need for MBAs to demonstrate flexibility in terms of industry and geography.

At the MIT Sloan School of Management, Jackie Wilbur, director of the career development office, says recruitment opportunities began to disappear at the beginning of October.

Some companies withdrew from the interview schedule and others, while remaining on the schedule, have said they are now considering making offers in the second quarter.

Certain areas of finance, such as risk, remain strong, says Ms Wilbur. Technology recruiting is stable but she says recruitment into the energy sector is not as buoyant as she would wish and venture funding is stalling.

The picture is similar in China, with Ceibs in Shanghai reporting recruiters are in a "wait and see" frame of mind.

"Overall, students have to be more selective in their search activity and less inclined to seek multiple offers before signing," says Lydia Price, associate dean and academic director of MBA programmes.

Sectors that continue to grow and recruit MBAs include health, pharmaceuticals, private equity and venture capital. In addition, says Prof Price, many entrepreneurs are using the downturn to move into market areas vacated by larger companies.

She notes that recruitment performance indicators at Ceibs are approximately 20 per cent lower than in 2008, including number of recruiting companies, number of positions advertised and number of jobs accepted by students.

At Lancaster University Management School in the UK, Cana Witt, MBA career development manager, says MBAs are looking to other fields – such as manufacturing, consultancies and utilities.

Investment banking recruitment has never featured strongly at the school, "so from that point of view we are lucky", she says.

At HEC School of Management in Paris, there is a pessimistic mood on campus, says Valérie Gauthier, associate dean of the MBA programme.

However, HEC does not rely as heavily as some schools on financial sector jobs, she notes. Moreover, because some sectors – those with a long cycle of production, such as aeronautics – are still recruiting, she is hopeful that all 190 MBAs due to graduate in June will eventually find employment.

One trend identified both at HEC and Lancaster is that career switchers – those students who had intended to move into a different sector – are having to revise their plans. With employers paying close attention to a candidate's previous experience, some students are returning to the sectors they came from.

At London Business School, which places many of its students in finance and banking, Diane Morgan, director of career services, says the one-year Masters in Finance programme students appear to be the most worried but, in general, students are adopting a pragmatic approach.

"We were really thrilled to see all our corporate partners from last year returned [for the current recruitment round]."

Ms Morgan anticipates recruitment will be lower in finance this year, although there has been a hiring spike in private wealth management. Consultancy is also strong, with particular demand for candidates with language skills and regional knowledge.

On the whole, the picture is not entirely gloomy. According to data released earlier this month by the Association of Executive Search Consultants, several sectors are expected to strengthen.

Recruitment consultants anticipate executive job opportunities will increase in healthcare, pharmaceuticals/biotechnology, government and natural resources. Professional services, IT, non-profit and education recruitment are expected to remainstable throughout the year.

Peter Felix, president of AESC, says: "Our members are optimistic that strategic recruiting will pick up by the second half of the year."

Nonethless, there is no doubt that graduating MBAs will face a tough climate, as they compete for jobs in sectors that have already experienced large-scale redundancies.

Those with language skills or who are prepared to be flexibile about the sector and region they work in may fare better than those who are determined to hold out for a particular opportunity.

The class of 2009 would appear to have its work cut out.

2009-04-06

Five ways to transform a business

A large number of well-documented business change/transformations have been studied and compared not only to the standard change model but also to non-mainstream ideas about transformation. The result: five distinct, reproducible ways (transformation processes) of radically altering organizations. Each has important strengths that make it appropriate for particular purposes. If a leader senses a need for major change, an understanding of the five ways will be an important aid to going forward.

The five transformation processes

Each approach is explained, including pro- and con- aspects.

Holism transformation following the standard model
The ambidextrous form
Acquisitions/restructuring
“Good-to-Great” process
Improvisational transformation
In practice, hybrid versions of the five change models occur when circumstances require. Furthermore, some leaders may use as many as three or four of the five transformation processes in turn to renew their company.
Choosing the right approach

It is possible to list four fairly simple questions that can sort out which of the five kinds of transformation are most likely to be appropriate for a particular company at a particular time.

Question #1. Can you clearly define the change you seek? If yes, even if it is just a partial picture, it’s worthwhile to consider three different ways of pursuing your goal:
A holistic transformation following the standard model of planned organizational change
Change through use of the ambidextrous form
Transformation through acquisition.
Question #2. Can you buy the competences you need?
If yes, then acquisition may be central to transformation. If no, ask the third question.

Question #3. Must the whole organization be transformed, or will a core continue to exploit the old ways? If the whole is to be transformed, use the standard change models, practicing holism. If a core will pursue old ways, use the ambidextrous form, creating different kinds of units for different jobs.

Question #4. If you cannot define the desired change clearly, then ask: Should you pursue a new but stable positioning or a capability for continuing strategic revolution?
If you seek a new, stable position, follow Collins’ Good to Great process.
If you need continuing revolution, pursue improvisational transformation: Improvise, then learn from what works.
Regardless of which course is adopted, managing transformation requires alertness about whether the path chosen is the right one, and a non-dogmatic willingness to change. In industries that reward adaptability to change, understanding paths of business transformation is an essential leadership skill.

Case: Sun Ray’s struggle to overcome innovation trauma
Jay Moldenhauer-Salazar and Liisa Välikangas
Until now there has been little attention paid to the emotional costs of innovation failures, and in particular, how prior innovation failures hinder subsequent new, related innovation. The saga of Sun Microsystems’ Sun Ray computer illustrates the devastating impact of institutional innovation failure trauma.

The new Sun Ray offering replaced the earlier JavaStation product. As it was launched, the Sun Ray endeavor encountered the classic “innovator’s dilemma” problems that are well known to those who attempt to champion disruptive innovations. The result: despite its many strong competitive advantages, the Sun Ray computer has unsuccessfully struggled to catch hold with customers. To a large degree the causes are Sun Microsystems’ inability to learn from its earlier innovative JavaStation failure and to recover from the trauma of that failure.

In organizational literature, trauma is seen as a possible byproduct of discontinuous change, such as downsizing, that has a high personal cost. A crisis that necessitates severe measures for which the organization (and consequently, its employees) is not prepared will likely cause trauma. The intense negative impact of trauma is far reaching.

Therefore, managers need to address the conditions under which innovation is likely to cause trauma. The Sun Ray case cannot fully define these conditions but it can suggest the existence of the phenomenon and guide its discovery. With innovation trauma, there is the personal devastation that innovators feel, often together with a team of colleagues. This situation potentially leads to a degree of hopelessness about whether innovation will ever work in the company. Interestingly, as the Sun Ray case suggests, major parts of the organization can experience innovation trauma together.

Causes of innovation-failure induced trauma

Based upon the study of Sun Ray, some notable sources of innovation trauma are discussed:

Unrealistic expectations of success.
Market complexity.
Loss of control.
Contagious trauma.
Six ways to minimize innovation trauma

Going forward, learn from others’ mistakes: sensitized managers to practices that are detrimental to derailing innovation teams at critical junctures. And, beyond avoiding such damaging mistakes, develop proactive management practices to prevent major trauma and consequent innovation paralysis. Six ways to do so are offered.

Case: How El Al Airlines transformed service strategy with employee participation
Ram Herstein and Yoram Mitki
The El Al Airline case study suggests that any attempt by a company to change its service culture and to reach high-quality standards should be led by a planned strategy, which fully involves employees, utilizing their knowledge and experience.

The logic followed was this: adopting a new service culture required the cooperation and training of the company’s 6,000 employees. The first step in the process of changing their employees’ behavior patterns was an in-depth analysis of current service. This study revealed that El Al had a reputation for providing poor service and not fulfilling the needs and expectations of its passengers. Intensive attempts in recent years to improve service had not led to any fundamental enhancement in the company’s image. Also found was that line managers regarded employees as a tool to be exploited and easy to be replaced.

El Al management realized that in order to create a new service culture it must treat its employees as a critical resource, and obtain their cooperation and involvement in achieving the new objectives. The management, therefore, adopted the following four guiding principles:

Employees are the company’s most valuable assets.
Employees and management share a common goal and, therefore, must work together harmoniously and cooperatively.
Rewards and incentives are essential tools for motivating employees and encouraging initiative and excellence.
Employee participation is a key factor in the creation of a premium-service culture. Under this approach, company employees would use their unique perspective of the pre-flight, in-flight, and post flight experience to help design the new service and become “ambassadors” of the new culture.
Lessons and applications

El Al gave new significance to the concepts of stakeholder participation and cooperation by deciding to shape the new service culture together with its employees (internal customers), who would than transmit this new culture to the service-receiving community (external customers). The exercise proved that company employees know customer needs very well, and their rich experience enabled them to transform management’s service vision into an action program. Accordingly, the cooperation of the employees also shortened the time period required to transform the existing culture. Such cooperation created trust between them and the management, and removed communication barriers and pockets of resistance that generally make it difficult to carry out significant changes.

The Sears acquisition: a retrospective case study of value detection
Joseph Calandro Jr
Many M&A deals create shareholder losses because the acquiring company paid too much or the selling company under priced their business. This case introduces the base-case-valuation concept, which is derived from the modern Graham and Dodd valuation methodology, familiar to alternative investment firms, such as hedge funds but seemingly little known in corporate M&A circles. It demonstrates how base-case-valuation could be utilized in M&A by way of a case study of the Sears acquisition in 2004.

The Sears acquisition deal offers valuable lessons:

Corporations that evaluate acquisitions only through the use of traditional valuation techniques, such as equity multiples, miss strategic knowledge.The Graham and Dodd (G&D) method assesses value along a unique continuum structure, which facilitates focused valuations of assets (NAV), earnings (EPV), competitive advantage (franchise value), and growth in the context of one overall framework. The comprehensive nature of that framework reveals embedded elements of value, which at times can be underestimated or overlooked by practitioners of traditional forms of valuation. The identification and exploitation of overlooked value could be a contributing factor to M&A successes, such as the Sears acquisition.
Companies that engage in deals with alternative-investment firms using the G&D method will need to understand how they are computing value.A detailed analysis of Sears’ net asset value and earning power value (two of the four levels in the G&D analysis) are presented, illustrating the mechanics and demonstrating how embedded elements of value can be effectively identified and quantified.
The modern G&D approach can be successfully employed in M&A and be utilized in the formulation of an M&A-negotiating strategy, shareholder-communication plan, and performance-improvement plan.
In practice, many valuations stop after just two levels of value because many companies do not operate with a sustainable competitive advantage. When NAV and EPV turn out to be relatively close, as they did in the Sears case, that pattern can be referred to as base-case-value because the companies that reflect it are generating profits consistent with the cost of their capital and, as such, are valued at a level that is relatively consistent with the reproduction value of their assets. Despite the common occurrence of base case value, that pattern can present a lucrative M&A opportunity, if the acquisition is priced appropriately. The Sears acquisition proves this point.

The eight principles of strategic authenticity
B. Joseph Pine II and James H. Gilmore
What do consumers really want? Value, yes. To enjoy the experience of their purchase, yes. But, as more companies wrap their offering with “an experience”, it is important that authenticity is understood to be a critical consumer sensibility. In a world where purveyors of goods and services increasingly offer deliberately and sensationally stage purchasing experiences and ill-conceived innovations, consumers often choose to buy or not buy based on how genuine they perceive an offering to be. Any fakery, phoniness, or manipulation that becomes associated with your offering will harm the brand.

Executives must therefore learn to understand, manage, and excel at delivering authenticity. Pushing employees to do the impossible and forcing customers to view a completely “new you” means that you, as a company, are aiming outside of the realms of possibility for what you are today. Moreover, it means forgoing those possibilities that are both profitable and perceived as authentic.

So how can leaders tell the difference between bogus and authentic business opportunities without having to suffer through a customer rebellion, storm of bad press, and stockholder disaffection? Offered is a short case study of the Walt Disney Company, a global experience powerhouse, to show that authenticity will not result when a company strives for a strategic position that is not achievable.

Understanding strategic limits

The execution zone is the set of decisions and actions that a company can make and still be perceived as true to self. For companies that try to operate outside their execution zone there is little likelihood that the resultant offerings will be perceived as authentic.

Defining your execution zone

With the Disney lesson in mind, use the following eight principles to guide you in delineating where exactly your own “execution zone” lies, and thereby stake out viable, powerful, and compelling competitive positions strategies that are both achievable and authentic.

Study your heritage.
Assess industry growth positioning.
Gauge your trajectory.
Know your limits.
Stretch your execution capabilities.
Scan the periphery.
Formulate your strategic intention.
Execute well
Bottomline: To discover your company’s authentic opportunities, use the eight principles to peer into your future until you determine where you should go. And then treat that future not as a destination but as a guide to the path before you. Such a process provides the best means of ensuring you not only have a future but that it will be an authentic, vigorous, and prosperous one.

Defending corporate reputation from litigation threats
Helio Fred Garcia and Anthony Ewing
Class action litigation has the potential to severely damage the image customers have of a company (brand), often with calamitous consequences for its strategy. Such risks increase when the plaintiff is represented by some of the more aggressive and sophisticated lawyers. Often these lawyers use all of the instruments of influence to embarrass and persuade large corporations to settle large lawsuits before they ever reach a courtroom.

Companies that cede the litigation communication advantage to their adversaries commit a fundamental mistake. They fail to understand the threat they face.

Corporations facing class action litigation need to understand two essential principles in order to protect themselves from such aggressive and determined adversaries:

It is more than a legal fight.
Plaintiffs’ lawyers count on corporate defendants to act (and communicate) in predictable and often counterproductive ways.
It’s more than a legal fight

Litigation (and all supporting communication) is at its core a battle for the hearts and minds of the stakeholders. It is a simultaneous public relations and political war being waged against the defendant company. The company must show up to defend itself on all fronts. For example, when journalists cover litigation, their purpose is not to seek justice but to tell an interesting story that their audience will want to read or watch. In turn, public awareness and sympathy draw the attention of politicians, who may decide to take sides or even promote legislation.

Plaintiffs’ lawyers count on corporate defendants to act (and communicate) in predictable and often counterproductive ways

Plaintiffs’ lawyer tactical plans include: 1) striking at the point of least expectation and least resistance; 2) keeping the opposition off balance; 3) seizing, retaining and exploiting the initiative; and 4) using the opposition’s strength against it.

How to defend reputation in litigation

Understand the context of the fight.Litigation is a business problem with many elements legal, reputational, financial and operational.
Identify the likely assault.Draft definitive, compelling refutation to the likely assault, and do it fast.
Pre-empt your adversary.To succeed, corporate leaders should plan to: seize, retain, and exploit the initiative to define both the position of your adversary and that of your organization before the adversary does.
Act quickly to control the terms of the discussion.
Communicate forcefully.There is lots of room to maneuver between self-defeating silence and self-destructive bluster.

From : Catherine Gorrell
President of Formac, Inc. a Dallas-based strategy consulting organization and a contributing editor of Strategy & Leadership.

: Strategy & Leadership, Volume 36, Issue 3, By Osvald M. Bjelland and Robert Chapman Wood

Vision statements instilling values will motivate India Inc

Most self-improvement literature would emphasise the need to have a challenging personal vision and goal. All management literature would talk

about strategic planning to create vision, mission and goals as a tool for reaching the corporate dream. Do CEOs and entrepreneurs really consider creating, communicating and operationalising vision and values important?

Bain & Company launched a multi-year research project in 1993 to gather facts about the use and performance of management tools. Their objective was to help inform managers about the tools available to them and provide them with the information they need in order to identify, select, implement and integrate the right tools to improve their company’s performance.

Over the past 14 years, they have completed 11 surveys, assembling a database that now includes 8,504 respondents from more than 70 countries in North America, Europe, Asia, Africa, the Middle East and Latin America. On a scale of 1 to 5 where 5 is 100% satisfaction, vision and mission in this survey from 1993 to 2007 scored around 4 showing high level of satisfaction.

Another study that emphasised the importance of vision and values was by authors James C Collins and Jerry I Porras. They studied the differences between companies that are merely good and those that have established long-standing reputations for excellence and wrote the book Built to Last. They found that great companies had developed a core ideology and an envisioned future.

According to the authors, this critical core ideology expresses both what we stand for and why we exist. It is not composed or just nicely written but is discovered by looking inside the company to find what is already there.
Now let us look at the Indian canvas.

How far and to what extent Indian organisations feel the need for creating and operationalising vision and values? We reached out to a large number of people from large, medium and small organisations through a survey. So both the Bain study and Built to Last emphasise the importance of vision, values and aligning people around it. Indian organisations, however, have still not utilised the power of this tool effectively, our study shows.


In the study, we examined the websites of 100 organisations and reached out to 500 people from different organisations asking if they are aware of a vision statement . Mostly the people we contacted were in middle to senior management, considering that, if there is some talk about vision, they would know about it.

What comes out very clearly is that Indian CEOs and managers do not use the power of a well-stated vision and values to energise and motivate the workplace. Many organisations do not talk, even on their websites, about vision and values.

Interestingly, within the group of companies covered in our survey, the younger companies seem to have a well defined vision while the older companies do not. For example, Hero Honda motors do not talk about a vision statement, but their other organisations like Easy Bill and Hero ITES talk about vision and values.

Also, a large number of new age organisations—software , BPOs, KPOs—seem to talk more about vision and values than the brick and motor companies (Tata is an exception). We need to keep in mind that this study was to see if leaders use this as a tool to motivate people or integrate vision and values into the system.

I am sure leaders of our great companies would have a vision but what we are saying is that they fail to communicate that effectively. Airtel , we found, as another organisation that constantly communicated vision and values to the employees.

There is an interesting confusion between vision and mission statements that many organisations face. A mission statement tells you what the company is now. It concentrates on the present; it defines the customer(s), critical processes and it informs you about the desired level of performance and vision statement outlines what a company wants to be.

It concentrates on the future; it is a source of inspiration ; it provides clear decision-making criteria. Many organisations have given a goal as a vision statement. May be, in the tough times they confront, more and more CEOs of Indian organisations need to use this simple tool to ignite the organisational souls and engage employees to a meaningful purpose.

From:7 Nov 2008, 0441 hrs IST, Sathosh Babu, THE ECONOMIC TIMES
http://economictimes.indiatimes.com/News/Economy/Vision_statements_instilling_values_will_motivate_India_Inc/articleshow/3683497.cms

2009-04-01

Top 10 Ideas Changing the World

The annual top 10 list, which appeared in a special March 23 issue of Time this year, reflects what the publication says are new answers to new questions wrought by today’s economy, environmental and geographic challenges, medical advancements and shifting collective consciousness.

Time’s top 10:

1. Jobs are the New Assets: Though the last decade saw many real-estate investments and stock-portfolio values skyrocket, today’s recession and many assets’ subsequent loss in value is causing Americans to re-evaluate how they define themselves, putting much more emphasis on the fact that they have a job – their human capital – and less importance on their dwindling assets. This, experts say, is leading to a society that may more carefully live within its means and may ultimately focus on finding increased job satisfaction.

2. Recycling the Suburbs: The housing bust is causing the American suburbs as we know them to die, Time said. This, combined with changing demographics – including a lower number of overall households with children and a rising preference for urban amenities – is steadily wiping out the recent “American Dream” of a suburban house with a big lawn. Though environmentalists are applauding the demise of car-addicted sprawl, experts acknowledge that the country will face a huge challenge in “remaking” the far-flung, abandoned infrastructure to create things people will want to use again.

3. The New Calvinism: Recent religious trends in the US are showing a resurgence in what Time calls “new Calvinism,” complete with “an utterly sovereign and micromanaging deity, sinful and puny humanity and…predestination.” The shift, which may in part be driven by people’s need for blanket assurance and the security that an all-knowing god and a predestined life can bring in troubling times, is steadily gaining steam.

4. Reinstating the Interstate: President Obama’s plans to revitalize the crumbling and decrepit US interstate system can potentially reinvigorate not only the roadways themselves, but also create new and creative energy and transportation systems along them that will help Americans use power more efficiently, enable public transportation and be better for the environment. Though the government’s ownership of the interstates and the land surrounding them can potentially clear the way for innovative projects, states, regions and other governing bodies and organizations involved in the revamp must work together in unprecedented ways to make it happen.

5. Amortality: A term recently coined by Time writer Catherine Mayer, “Amortals,” embodied by such celebrities as music producer Simon Cowell and singer Madonna, are those who live in the same way, look the same, and do the same things from their teen years until they die. These extinction-dreading amortals, as Mayer calls them, could very well relegate age-appropriate behavior to history books and could have social, medical and commercial ramifications.

6. Africa as Business Destination: Though news media accounts that portray Africa as a “hopeless place of war and famine…populated by tyrants and children with flies in their eyes,” generate the popular belief that Africa needs charity dollars, many multinational corporations, including Ecobank and other Chinese firms, are finding that business investments in parts of Africa offer some of the world’s highest returns. This shift toward “trade, not aid,” is changing the way the world relates to Africa, and transforming the African psyche to one that actively contributes to the world economy rather than taking handouts from it.

7. The Rent-a-Country: The end of food isolationism caused by last year’s high oil prices is giving way to a growing number of food-growing deals between nations, where countries with plentiful, arable land supply food to other nations with the money to pay for it. Though this idea is not new, there is a rising consciousness that many of the food-growing nations cannot even feed their own people and investors face growing risks of popular and governmental backlash. Still, the model has potential if economic and regulatory conditions can mutually benefit all parties involved.

8. Biobanks: Officials at theUS’s National Cancer Institute are spearheading an effort to set up the country’s first national biobank, which would store tissue samples, tumor cells, DNA and other biological material from the American public. Though deposits into such a biobank could ultimately bring about advancements in medical science and improve the overall population’s health, the challenge will be gaining the public’s acceptance and trust and maintaining the privacy of “depositors” by restricting access to researchers and those who have permission to access the information.

9. Survival Stores: Retailers throughout America are cutting prices and offering deep discounts to entice shoppers to buy, but the shop of the future might not look anything like what we have today. Instead, Time says today’s stores may give way to places that offer consumers the opportunity to buy low-cost, long-lasting durable goods and also provide experiences to help them cope during difficult times. For instance, a so-called survival store might offer a bicycle to replace the car a consumer can’t afford, and also offer yoga or financial planning to help address stress and money problems.

10. Ecological Intelligence: The global economy and the complicated supply chains involved in producing many of today’s products have grown faster than most consumers’ ability to understand the environmental and ethical consequences of this production. Over the past several decades, industrial ecologists have been using a method called LifeCycle Assessment (LCA) to break down these production processes and supply chains and help major companies improve their ecological consciousness. Recent web startups, such as Good Guide are helping consumers do this too, because ultimately, ecological intelligence involves understanding that what we do in the world is interconnected with everyone else, Time said.

Fromhttp://www.marketingcharts.com/print/top-10-ideas-changing-the-world-8558/?utm_campaign=newsletter&utm_source=mc&utm_medium=textlink