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July 29, 2014

HR Regulations and Fear of Lawsuits Keep Managers from Firing Workers Who Do Not Work



(p. 1B) The biggest problem in your workplace has a name. His name is Jeff. . . .

Jeff sits two cubicles down from us, or three, or four. His real name may be John, Juan or Joan. He gets to the widget factory late, he leaves early and always mucks up his part of any group project. He complains, loudly, about the smallest things, and when you bring doughnuts for your birthday he probably takes three and then talks with his mouth full, too.


. . .


(p. 2B) . . . , morale suffers greatly when most of a company's employees perceive that their supervisor is failing to deal with their low-performing co-worker, month after month, year after year.

For this, Hoogeveen blames a corporate culture that is so concerned about HR regulations, and the often-imagined threat of litigation, that bosses often fail to take into account how the trouble employee affects the larger climate.


. . .


. . . if Jeff doesn't improve, he needs to be fired. This is perhaps the worst part of a boss's job, Hoogeveen thinks. His eyes mist as he recalls firing an employee whom he liked, but who was simply a bad fit at QLI.

It's human nature to avoid this conflict, to maintain the status quo and let Jeff be, he says. That's what can and does happen at most Omaha companies.

But it's bad for the employees, and it's bad for business.

"A lot of this stuff is incredibly easy to understand," says Omaha's workplace mechanic [Kim Hoogeveen]. "It's incredibly difficult to live."



For the full story, see:

Hansen, Matthew. "Workplace Guru: Don't Let Problem Worker Slide." Omaha World-Herald (Mon., July 21, 2014): 1B-2B.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the article had the title "Hansen: Don't let Jeff -- the problem worker -- slide, workplace guru says.")






July 25, 2014

"Ego Depletion" from Distractions Reduces Ability to Perform Cognitively Demanding Tasks



(p. B1) One study from Microsoft indicated that programmers who were interrupted by an incoming email lost 10 minutes every time they switched from their original task, on top of however long it took them to answer the email. Earlier studies suggest that workers lose (p. B2) as much as 40% of their productive time when they are regularly interrupted.


. . .


. . . , people underestimate the cost of . . . distractions, partly because we underestimate the effects of what psychologists call "ego depletion." The idea is that we have only so much willpower. Some neuroscientists believe the brain literally runs out of its fuel, glucose, when we have to perform cognitively demanding tasks. But exercising the self control required to not answer that incoming email is also cognitively demanding.



For the full story, see:

CHRISTOPHER MIMS. "KEYWORDS; The Distraction-Industrial Complex." The Wall Street Journal (Mon., June 30, 2014): B1-B2.

(Note: ellipses added.)

(Note: the online version of the story has the date June 29, 2014, and has the title "KEYWORDS; Say No to the Distraction-Industrial Complex.")


One of the early articles in the substantial literature on ego depletion, is:

Baumeister, Roy F., Ellen Bratslavsky, Mark Muraven, and Dianne M. Tice. "Ego Depletion: Is the Active Self a Limited Resource?" Journal of Personality and Social Psychology 74, no. 5 (May 1998): 1252-65.






July 23, 2014

How Sega Came Out of Nowhere to Leapfrog Near-Monopolist Nintendo



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Source of book image: http://images.eurogamer.net/2014/usgamer/original.jpg/EG11/resize/958x-1/format/jpg



(p. C10) "Console Wars" tells how Sega, an unremarkable Japanese manufacturer of games played in arcades, came out of nowhere to challenge Nintendo for dominance of the videogame world in the first half of the 1990s. Nintendo, which had revived the stagnant home videogame category a few years earlier, had something close to a monopoly in 1990 and behaved accordingly, dictating terms to game developers and treating retailers as peons. Sega, in Mr. Harris's telling, was a disruptive force in a highly concentrated market, introducing more advanced gaming technology, toppling Nintendo from its perch and becoming the largest seller of home videogame hardware in the U.S. by late 1993.

Mr. Harris's hero is a former Mattel executive named Tom Kalinske, who became president of Sega of America, then a small subsidiary, in 1990. Mr. Kalinske assembled a team of crack marketers who would not have gone near Sega but for his reputation and persuasiveness. Within a year and a half, according to Mr. Harris, Mr. Kalinske's leadership, along with a new gaming system called Genesis and a marketing assist from a mascot named Sonic the Hedgehog, made Sega the U.S. market leader in videogames.

And then, after only three years at the top, Sega fell from its pedestal. Sega's management in Japan, suffering mightily from not-invented-here syndrome, rejected Mr. Kalinske's proposals to collaborate with Sony and Silicon Graphics on new gaming systems. Instead, over his objections, Sega pushed out its ill-conceived Saturn game console in 1995. While Saturn flopped, Sony struck gold with its PlayStation; Silicon Graphics sold its chip with amazing graphics capabilities to Nintendo; and the game, so to speak, was over.


. . .


The author admits he has taken liberties: "I have re-created the scenes in this book using the information uncovered from my interviews, facts gathered from supporting documents, and my best judgment as to what version most closely fits the historical record," he writes. The result is more a 558-page screenplay than a credible work of nonfiction.



For the full review, see:

MARC LEVINSON. "Sonic Boom; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won." The Wall Street Journal (Sat., May 24, 2014): C10.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 23, 2014, an has the title "Book Review: 'Console Wars' by Blake J. Harris; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won.")


The book under review is:

J., Harris Blake. Console Wars: Sega, Nintendo, and the Battle That Defined a Generation. New York: HarperCollins Publishers, 2014.






July 13, 2014

Harvard Rejects Christensen's Advice to Try Disruptive MOOCs



PorterMichaelHBS2014-06-01.jpg "Harvard Business School faced a choice between different models of online instruction. Prof. Michael Porter favored the development of online courses that would reflect the school's existing strategy." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) Universities across the country are wrestling with the same question -- call it the educator's quandary -- of whether to plunge into the rapidly growing realm of online teaching, at the risk of devaluing the on-campus education for which students pay tens of thousands of dollars, or to stand pat at the risk of being left behind.

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes -- create online courses, but not in a way that undermines the school's existing strategy. "A company must stay the course," Professor Porter has written, "even in times of upheaval, while constantly improving and extending its distinctive positioning."

For Clayton Christensen, whose 1997 book, "The Innovator's Dilemma," propelled him to academic stardom, the only way that market leaders like Harvard (p. 4) Business School survive "disruptive innovation" is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school -- about $20,000 to $30,000 a course -- a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania.

"Do it cheap and simple," Professor Christensen says. "Get it out there."

But Harvard Business School's online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory.


. . .


"Harvard is going to make a lot of money," Mr. Ulrich predicted. "They will sell a lot of seats at those courses. But those seats are very carefully designed to be off to the side. It's designed to be not at all threatening to what they're doing at the core of the business school."

Exactly, warned Professor Christensen, who said he was not consulted about the project. "What they're doing is, in my language, a sustaining innovation," akin to Kodak introducing better film, circa 2005. "It's not truly disruptive."


. . .


One morning, [Harvard Business School Dean Nitin Nohria] sat down for one of his regular breakfasts with students. "Three of them had just been in Clay's course," which had included a case study on the future of Harvard Business School, Mr. Nohria said. "So I asked them, 'What was the debate like, and how would you think about this?' They, too, split very deeply."

Some took Professor Christensen's view that the school was a potential Blockbuster Video: a high-cost incumbent -- students put the total cost of the two-year M.B.A. at around $100,0000 -- that would be upended by cheaper technology if it didn't act quickly to make its own model obsolete. At least one suggested putting the entire first-year curriculum online.

Others weren't so sure. " 'This disruption is going to happen,' " is how Mr. Nohria described their thinking, " 'but it's going to happen to a very different segment of business education, not to us.' " The power of Harvard's brand, networking opportunities and classroom experience would protect it from the fate of second- and third-tier schools, a view that even Professor Christensen endorses -- up to a point.

"We're at the very high end of the market, and disruption always hits the high end last," said Professor Christensen, who recently predicted that half of the United States' universities could face bankruptcy within 15 years.



For the full story, see:

JERRY USEEM. "B-School, Disrupted." The New York Times, SundayBusiness Section (Sun., June 1, 2014): 1 & 4.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the story has the date MAY 31, 2014, and has the title "Business School, Disrupted.")


Some of Christensen's thoughts on higher education can be found in:

Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.



ChristensenClaytonHBS2014-06-01.jpg
















"On the topic of online instruction, Prof. Clayton Christensen said: 'Do it cheap and simple. Get it out there."" Source of caption and photo: online version of the NYT article quoted and cited above.






June 29, 2014

The Noise of Open-Office Plans Destroys Concentration



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Source of book image: DWIGHT GARNER. "Books of The Times; The Office Space We Love to Hate." The New York Times (Fri., APRIL 25, 2014): C21 & C31.





(p. C3) Open-office plans--then as now--mean noise, both visual and aural. People used to private offices couldn't concentrate because of all the chatter and typing. For all the supposed egalitarianism of the office landscape, managers usually allotted themselves more space than junior staff, and the creative use of screens and extra plants often let them carve out ad hoc private offices for themselves. By the 1970s, European workers' councils had rejected open-office plans, insisting that employees across the continent be granted private offices.

In the U.S., however, the open-plan remained unchallenged--until Propst. He concluded that office workers needed autonomy and independence--and therefore offered a flexible, three-walled design that could be reshaped to any given need.


. . .


Many workers I've spoken to in open offices find concentration and privacy elusive--and often miss their cubicles.



For the full commentary, see:

NIKIL SAVAL. "When Office Cubicles Looked Like Progress." The Wall Street Journal (Sat., May 10, 2014): C3.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date May 9, 2014, and has the title "A Brief History of the Dreaded Office Cubicle.")


For more of Saval's observations on the cubicle, see:

Saval, Nikil. Cubed: A Secret History of the Workplace. New York: Doubleday, 2014.






June 17, 2014

Schulman Grants that Kochs "Have Sincere Political Views that Go Beyond Being Just a Cover for Their Companies' Interest"



KochBrothersWilliamCharlesDavidFrederick2014-05-28.jpg "The Koch brothers, from left: William, Charles, David and Frederick." Source of caption and photo: online version of the NYT review quoted and cited below.


(p. 12) "Sons of Wichita" may strike some readers as surprisingly pro-Koch.  . . . [Schulman] grants Charles and David two key concessions: They have sincere political views that go beyond being just a cover for their companies' interest in lower taxes and fewer regulations, and many of their political activities have been right out in the open, rather than lurking in the shadows. He seems to be almost in awe of Charles, the most mysterious of the brothers, who runs Koch Industries by a system he devised called Market-Based Management. Summarizing, but not dissenting from, the views of Charles's employees, Schulman calls him "a near-mythic figure, a man of preternatural intellect and economic prowess," adding: "He is unquestionably powerful, but unfailingly humble; elusive, but uncomplicated; cosmopolitan, yet thoroughly Kansan." It's noteworthy, Schulman argues, that for decades the Koch family was definitely not welcome in the Republican Party. That they came to stand for Republicanism, at least in the minds of liberals, in 2010 and 2012 is testament to their persistence, to the weakening of the traditional party structures and to their success in making libertarianism a mainstream rather than a fringe ideology. "It's a brilliant, extraordinary accomplishment," Schulman quotes Rob Stein of the liberal Democracy Alliance as saying about the Kochs' rise to influence.


. . .


Even the Tea Party movement is not entirely dependent on intravenous feeding from the Kochs or that other favorite liberal villain, Fox News. And elements of Koch-style libertarianism, connected to the interests of major donors, now live within the Democratic Party too -- not just on social issues like same-sex marriage, but on economic and regulatory ones too. "Sons of Wichita" reminds us that political outcomes depend far more on ideas and organization, and the energy and persistence devoted to them, than they do on the balance of power between good guys and bad guys.



For the full review, see:

NICHOLAS LEMANN. "Billionaire Boys Club." The New York Times Book Review (Sun., MAY 25, 2014): 12.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the review has the date MAY 23, 2014.)


The book under review is:

Schulman, Daniel. Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty. New York: Grand Central Publishing, 2014.



SonsOfWichitaBK2014-05-28.jpg
















Source of book image: http://media.npr.org/assets/bakertaylor/covers/s/sons-of-wichita/9781455518739_custom-bd178f0c1a2667e448cf13ff7df2850774d77dd8-s6-c30.jpg






June 5, 2014

"Man Is Born Free, But He Is Everywhere in Cubicles"



CubedBK2014-05-28.jpg











Source of book image: online version of the NYT review quoted and cited below.





(p. C21) I've spent about half my working life sitting in, and loathing, cubicles. You've probably spent years in one, too. About 60 percent of us work in cubicles, and 93 percent of us dislike them.


. . .


(p. C31) Mr. Saval describes the image we have of the cubicle today: "the flimsy, fabric-wrapped, half-exposed stall where the white-collar worker waited out his days until, at long last, he was laid off."


. . .


When he discovers that half of Americans report that their bathrooms are larger than their cubicles, for example, he writes: "One wonders to what extent the extravagant growth of the American bathroom, and of the suburban home in general, is partly a reaction against the shrinking of cubicles, where the owners of those bathrooms spend so much of their time."


. . .


Putting a spin on Rousseau, he says,


. . .


By the end of "Cubed," the author is dropping in on Silicon Valley offices, where companies like Google cater to their employees' every need, almost eliminating the distinction between work and leisure. Mr. Saval savors the fact that so many well-known Silicon Valley figures dropped out of college yet want their offices to resemble college campuses.



For the full review, see:

DWIGHT GARNER. "Books of The Times; The Office Space We Love to Hate." The New York Times (Fri., APRIL 25, 2014): C21 & C31.

(Note: ellipses added.)

(Note: the online version of the review has the date APRIL 24, 2014.)


The book under review is:

Saval, Nikil. Cubed: A Secret History of the Workplace. New York: Doubleday, 2014.






May 31, 2014

When Labor Markets Are Flexible, Workers Need Not Fear New Technology



(p. 6) Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in "The Second Machine Age," a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, "Average Is Over." The upshot is that machines are often filling in for our smarts, not just for our brawn -- and this trend is likely to grow.

How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.


. . .


Labor markets just aren't as flexible these days for workers, especially for men at the bottom end of the skills distribution.


. . .


Across the economy, a college degree is often demanded where a high school degree used to suffice.


. . .


The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don't need such laws for, say, barbers or interior designers, although they are commonly on the books.


. . .


Many . . . labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn't always know who their worst workers were, or didn't want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions -- and the axes fell. The financial crisis thus accelerated what would have been a much slower process.

Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren't always fair, but that stigma isn't easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.



For the full commentary, see:

TYLER COWEN. "Economic View; Automation Alone Isn't Killing Jobs." The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date APRIL 5, 2014.)



The Brynjolfsson and McAfee book mentioned is:

Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.


The Cowen book that Cowen mentions is:

Cowen, Tyler. Average Is Over: Powering America Beyond the Age of the Great Stagnation. New York: Dutton Adult, 2013.






May 15, 2014

Koch Industries Was Only Major Ethanol Producer to Oppose Ethanol Tax Credits



(p. A17) I have devoted most of my life to understanding the principles that enable people to improve their lives. It is those principles--the principles of a free society--that have shaped my life, my family, our company and America itself.

Unfortunately, the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation's own government. That's why, if we want to restore a free society and create greater well-being and opportunity for all Americans, we have no choice but to fight for those principles.


. . .


Far from trying to rig the system, I have spent decades opposing cronyism and all political favors, including mandates, subsidies and protective tariffs--even when we benefit from them. I believe that cronyism is nothing more than welfare for the rich and powerful, and should be abolished.

Koch Industries was the only major producer in the ethanol industry to argue for the demise of the ethanol tax credit in 2011. That government handout (which cost taxpayers billions) needlessly drove up food and fuel prices as well as other costs for consumers--many of whom were poor or otherwise disadvantaged. Now the mandate needs to go, so that consumers and the marketplace are the ones who decide the future of ethanol.



For the full commentary, see:

CHARLES G. KOCH. "OPINION; I'm Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination." The Wall Street Journal (Thurs., April 3, 2014): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary was updated April 2, 2014, and has the title "OPINION; Charles Koch: I'm Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination." )


Koch's philosophy of the free market is more fully elaborated in:

Koch, Charles G. The Science of Success: How Market-Based Management Built the World's Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.






May 14, 2014

Delta Overcomes Obstacles that Ground Other Airlines



DeltaOvercomesObstaclesToKeepFlyingGraphic.jpgSource of graphic: online version of the WSJ article quoted and cited below.


Cancellations due to mechanical failures, piliot illness and government regulations are often announced as though they were acts of God, outside the possible control of airlines, for which the airline is blameless. But airlines can take actions, and improve processes, to reduce the frequency and consequences of such cancellations. In airlines, and in other firms, there is not a sharp line between what can and what cannot be under the firm's control.


(p. D3) Atlanta

The crew of Delta Air Lines Flight 55 last Thursday couldn't legally fly from Lagos, Nigeria, to Atlanta unless they waited a day due to new limits on how much pilots can fly in a rolling 28-day period. The trip would have to be canceled.

Instead, Delta headquarters told the captain to fly to San Juan, Puerto Rico, which they could reach within their duty limits. There, two new pilots would be waiting to take the Boeing 767 on to Atlanta. The plane arrived in San Juan at 2:44 a.m., quickly took on fuel and pilots, and landed in Atlanta only 40 minutes late.

The episode, unorthodox in the airline industry, illustrates the fanaticism Delta now has for avoiding cancellations. Last year, Delta canceled just 0.3% of its flights, according to flight-tracking service FlightStats.com. That was twice as good as the next-best airlines, Southwest and Alaska, and five times better than the industry average of 1.7%.


. . .


Managers in Delta operations centers move planes, crews and parts around hourly trying to avoid canceling flights. How well an airline maintains its fleet and how smartly it stashes spare parts and planes at airports affect whether your flight goes or not.

Delta thinks it has come up with new analytical software and instruments that can help monitor the health of airplanes and predict which parts will soon fail. Empty planes are ferried to replace crippled jets rather than waiting for overnight repairs.

Mechanics developed a vibration monitor to install on cooling fans for cockpit instruments. A plane can't be sent out on a new trip with a broken fan.

Now when vibration starts to increase, indicating that a bearing may be wearing down and getting close to failing, a new fan is swapped in. The wobbly fan goes to the shop for new bearings. That has reduced canceled flights.

So has spending $2 million to have spare starters for Boeing 767 engines at all 767 stations abroad. Starters last about five years. While each plane has two and both engines can be started with one, you can't send a plane out on a long trip over oceans with only one working.



For the full story, see:

SCOTT MCCARTNEY. "THE MIDDLE SEAT; A World Where Flights Aren't Canceled; How Smartly an Airline Stashes Spare Parts and Planes at Airports Affects Whether or Not Your Flight Takes Off." The Wall Street Journal (Thurs., April 3, 2014): D3.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 2, 2014, and has the title "THE MIDDLE SEAT; A World Where Flights Aren't Canceled; Inside Delta's new strategies to avoid stranding fliers.")






May 9, 2014

Managing Engaged Edison Only Half as Much as Inventing



(p. 146) In 1885, three years after the start of service at Pearl Street, a director of the company who chose to remain anonymous complained to the Philadelphia Press that Edison insisted on taking an active part in the management of the company "although he is not a bit of a business man." He gave an example of Edison's poor judgment: Edison had proposed installing a new cable in Manhattan that would cost nearly $30,000 a mile, oblivious to the fact that Western Union had one with similar capacity in operation that had only cost $500 a mile. "If he would leave it to practical business men to make money out of it and stick to his inventions," the director said, "the company would in time become very rich."

For Edison, "sticking to his inventions" full-time would mean relinquishing control of Edison Electric, which was anathema. Managing his company did not engage him half as much as creating it, but he could not bring himself to let go of the captain's chair. Edison's intellectual interests, however, wandered from one minor project to the next. He had always done best when attempting something both entirely new and gargantuan in scale, but in the mid-1880s he could not find a suitable project.



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

(Note: italics in original.)






April 30, 2014

Strategic Conversations: Vital to Creative Adaptation or Reinforcers of Lazy Consensus?



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Source of book image: online version of the WSJ review quoted and cited below.






(p. A15) "Moments of Impact" is at its best on the importance of promoting different perspectives. Businesses need to look at the world through as many disciplinary lenses as possible if they are to cope with the fast-changing threats that confront them. But day-to-day corporate life is all about fences and silos. Strategic conversations give companies a chance to examine their business models from the outside--and, as the authors put it, to "imagine operating within several different yet plausible environments."


. . .


Mr. Ertel and Ms. Solomon argue that companies increasingly face a choice between what Joseph Schumpeter called creative destruction and what they call creative adaptation--and that strategic conversations are vital to creative adaptation. Perhaps so. But strategic conversations can also reinforce lazy consensus, as people try to justify their jobs and protect their turf. Many bold decisions are driven by the opposite of "conversations"--by senior managers deciding to lop-off functions or take the company in a radically new direction.



For the full review, see:

ADRIAN WOOLDRIDGE. "BOOKSHELF; Go Ahead, Strategize; The best 'strategy meetings' unleash fresh thinking and offer maverick views; the worst and dull, unstructured time-sucks." The Wall Street Journal (Thurs., March 27, 2014): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 26, 2014, and has the title "BOOKSHELF; Book Review: 'Moments of Impact,' by Chris Ertel and Lisa Kay Solomon; The best 'strategy meetings' unleash fresh thinking and offer maverick views; the worst and dull, unstructured time-sucks.")


The book under review is:

Ertel, Chris, and Lisa Kay Solomon. Moments of Impact: How to Design Strategic Conversations That Accelerate Change. New York: Simon & Schuster, 2014.






April 2, 2014

In Hard Times Entrepreneurs Need Advice on How to Fire



TheHardThingAboutHardThingsBK2014-03-30.jpg












Source of book image: online version of the WSJ review quoted and cited below.






(p. A13) Every entrepreneur has experienced what Ben Horowitz terms "the struggle." That's when things are going really, really badly. It's when, as he puts it in "The Hard Thing About Hard Things," "people ask you why you don't quit and you don't know the answer." But there always is a way, Mr. Horowitz believes, and it's the ability to spot the next move during the struggle that separates winners and losers.

Mr. Horowitz has authority on this subject. He was a successful tech CEO, having co-founded the pioneering cloud-computing company LoudCloud and subsequently overseen its evolution into a software firm, Opsware. He's also one half of the venture-capital firm Andreessen Horowitz. Among the firm's winning bets: Facebook, Skype and Twitter.


. . .


The book, the author says, is written primarily for "wartime CEOs"--those like the late Steve Jobs, who returned to Apple in 1997 at a time when the company was verging on bankruptcy. Jobs recognized that to survive, Apple had to ditch most of its products and focus singularly on just four computer models.

Wartime CEOs don't need classic management books that "focus on how to do things correctly, so you don't screw up," Mr. Horowitz argues. What the author offers instead is "insight into what you must do after you have screwed up. The good news is, I have plenty of experience at that and so does every other CEO."


. . .


Parts of the book are dedicated to providing practical leadership advice: how to hire, fire and scale and when to sell and when to spurn offers. Some of the advice is counterintuitive. He dismisses the "don't bring me a problem without bringing me a solution" management maxim by asking: If an employee can't solve the problem he encounters, do you really want him to hide it?



For the full review, see:

DANIEL FREEDMAN. "BOOKSHELF; Business Tips From Karl Marx; Born to a family of Marxists, Ben Horowitz now invests in tech startups. Among his winning bets: Twitter and Facebook." The Wall Street Journal (Fri., March 7, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date March 6, 2014, and has the title "BOOKSHELF; Book Review: 'The Hard Thing About Hard Things,' by Ben Horowitz; Born to a family of Marxists, Ben Horowitz now invests in tech startups. Among his winning bets: Twitter and Facebook.")


The book under review is:

Horowitz, Ben. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. New York: HarperCollins Publishers, 2014.






March 23, 2014

Disabled Workers Are More Likely to Be Free Agent Entrepreneurs



HartfordKevinEntrepreneurWhoStutters2014-03-10.jpg "Kevin Hartford, right, and a colleague at his factory. He started his business after employers failed to hire him." Source of caption and photo: online version of the NYT article quoted and cited below.



HR departments have incentives to avoid hiring risky employees. But a determined high-risk employee can hire themselves by becoming a free agent entrepreneur. If we want to truly help the disabled, we should remove obstacles to entrepreneurship, such as burdensome regulations and high taxation.


(p. B4) Mr. Hartford, the father of two sons, thrived as a business consultant in his 20s and 30s. He was used to flying first class, staying at swank hotels and advising CEOs. Then the consulting firm unraveled in the mid-1990s. When he began looking for a new job, a stuttering problem--something he had always considered manageable--put off potential employers.

"I applied for job after job after job," says Mr. Hartford, now 58. "I was one of two finalists; I was one of three finalists. But I never got the job."

In the end, Mr. Hartford concluded that his only shot at a satisfying job was to create a company. He is now president and co-owner of Alle-Kiski Industries, which makes parts, such as exhaust pipes for train locomotives and prototype truck wheels, for larger manufacturers, including Alcoa Inc. and General Electric Co.

Like many before him, Mr. Hartford discovered that one option for people who don't fit into large organizations is to start a small one. That is particularly true for people with disabilities. About 11% of disabled workers are self-employed, compared with 6.5% of those with no disabilities, according to Labor Department data.


. . .


The business has grown to 38 employees from a dozen when Messrs. Hartford and Newell started in 2005. They own more than $2 million of equipment used to drill, groove and otherwise shape metal, arrayed in a 27,000-square-foot factory with an American flag hanging from one of the beams. Last year's sales of $6 million were the highest yet, Mr. Hartford says, and the company is building a 4,000-square-foot addition to house more equipment.



For the full story, see:

JAMES R. HAGERTY. "Entrepreneur Let No Impediment Stop Him; Out-of-Work Consultant Started His Own Company After Discovering His Stutter Put Off Employers." The Wall Street Journal (Thurs., Jan. 16, 2014): B4.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jan. 15, 2014.)






March 6, 2014

Carnegie Liked Partnership More than Incorporation



(p. 480) "Don't want anything to do with a corporation as long as I am in business--Partnership is the only thing--no one man can manage well--every one needs the companionships of equals in business to contradict and differ from him--one advises the other... I who write you thus have grown gray in the service and speak the words of soberness and wisdom."


Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






February 20, 2014

The Young, with Managerial Experience, Are Most Likely to Become Entrepreneurs



(p. A13) In a current study analyzing the most recent Global Entrepreneurship Monitor (GEM) survey, my colleagues James Liang, Jackie Wang and I found that there is a strong correlation between youth and entrepreneurship. The GEM survey is an annual assessment of the "entrepreneurial activity, aspirations and attitudes" of thousands of individuals across 65 countries.

In our study of GEM data, which will be issued early next year, we found that young societies tend to generate more new businesses than older societies. Young people are more energetic and have many innovative ideas. But starting a successful business requires more than ideas. Business acumen is essential to the entrepreneur. Previous positions of responsibility in companies provide the skills needed to successfully start businesses, and young workers often do not hold those positions in aging societies, where managerial slots are clogged with older workers.

In earlier work (published in the Journal of Labor Economics, 2005), I found that Stanford MBAs who became entrepreneurs typically worked for others for five to 10 years before starting their own businesses. The GEM data reveal that in the U.S. the entrepreneurship rate peaks for individuals in their late 20s and stays high throughout the 30s. Those in their early 20s have new business ownership rates that are only two-thirds of peak rates. Those in their 50s start businesses at about half the rate of 30-year-olds.

Silicon Valley provides a case in point. Especially during the dot-com era, the Valley was filled with young people who had senior positions in startups. Some of the firms succeeded, but even those that failed provided their managers with valuable business lessons.

My co-author on the GEM study, James Liang, is an example. After spending his early years as a manager at the young and rapidly growing Oracle, he moved back to China to start Ctrip, one of the country's largest Internet travel sites.



For the full commentary, see:

EDWARD P. LAZEAR. "The Young, the Restless and Economic Growth; Countries with a younger population have far higher rates of entrepreneurship." The Wall Street Journal (Mon., Dec. 23, 2013): A13.

(Note: the online version of the commentary has the date Dec. 22, 2013.)


The Lazear paper mentioned above, is:

Lazear, Edward P. "Entrepreneurship." Journal of Labor Economics 23, no. 4 (October 2005): 649-80.






January 28, 2014

Solitude May Allow "Making Novel Connections Between Far-Flung Ideas"



FocusBK2014-01-18.jpg




















Source of book image: http://ffbsccn.files.wordpress.com/2013/12/focus.jpg



(p. 16) What appears to be most at risk is our ability to experience open awareness. Always a rare and elusive form of thinking, it seems to be getting rarer and more elusive. Our modern search-engine culture celebrates information gathering and problem solving -- ways of thinking associated with orienting and selective focus -- but has little patience for the mind's reveries. Letting one's thoughts wander seems frivolous, a waste of practical brainpower. Worse, our infatuation with social media is making it harder to hear the mind's whispers. Solitude has fallen out of fashion. Even when we're by ourselves, we're rarely alone with our thoughts.

In the end, we may come to see the flights and fancies of open awareness as not only dispensable but pathological. Goleman points out that the brain systems associated with creative mind-wandering tend to be "unusually active" in people with attention-deficit disorder. When they appear to be "zoning out," they may actually be making novel connections between far-flung ideas.



For the full review, see:

NICHOLAS CARR. "Attention Must Be Paid." The New York Times Book Review (Sun., November 3, 2013): 16.

(Note: the online version of the review has the date November 1, 2013.)


Book under review:

Goleman, Daniel. Focus: The Hidden Driver of Excellence. New York: HarperCollins Publishers, 2013.






January 25, 2014

William Abbott Thought Tom Carnegie Was a "Better Business Man" than Andrew




The relationship between Andrew and Tom Carnegie sketched in the passage below seems, in some ways, similar to the relationship between Walt and Roy Disney.


(p. 138) William Abbott, who knew both Carnegies from their early days at the Pittsburgh iron mills, thought Andrew a genius, but regarded Tom as the "better business man." Tom, Abbott told Burton Hendrick, "was solid, shrewd, farseeing, absolutely honest and dependable." The two brothers had very different notions about business. Andrew was the ambitious one, (p. 139) filled with new ideas; Tom "was content with a good, prosperous, safe business and cared nothing for expansion. He disapproved of Andrew's skyrocketing tendencies, regarded him as a plunger and a dangerous leader. Tom wanted earnings in the shape of dividends, whereas Andrew insisted on using them for expansion." There were other differences as well. While Andrew sought out publicity, Tom ran away from it. He was silent, retiring, "not a mixer in society, was tongue-tied at dinner parties and social gatherings."


Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






January 23, 2014

Peck Shows that Job Interviews Do Not Identify Good Hires



(p. A18) Don Peck looked at how companies assess potential hires in an essay in The Atlantic called "They're Watching You at Work."

Peck demonstrates something that most of us already sense: that job interviews are a lousy way to evaluate potential hires. Interviewers at big banks, law firms and consultancies tend to prefer people with the same leisure interests -- golf, squash, whatever. In one study at Xerox, previous work experience had no bearing on future productivity.

Now researchers are using data to try again to make a science out of hiring. They watch how potential hires play computer games to see who is good at task-switching, who possesses the magical combination: a strict work ethic but a loose capacity for "mind wandering." Peck concludes that this greater reliance on cognitive patterns and game playing may have an egalitarian effect. It won't matter if you went to Harvard or Yale. The new analytics sometimes lead to employees who didn't even go to college. The question is do these analytics reliably predict behavior? Is the study of human behavior essentially like the study of nonhuman natural behavior -- or is there a ghost in the machine?



For the full commentary, see:

DAVID BROOKS. "The Sidney Awards." The New York Times (Fri., December 27, 2013): A18. [National Edition]

(Note: the online version of the commentary has the date December 26, 2013, and has the title "The Sidney Awards, Part 1.")


The article praised by Brooks is:

Peck, Don. "They're Watching You at Work." The Atlantic (Dec. 2013).






January 11, 2014

Gates Is Only One Who Can Reshape Microsoft's Culture



(p. 1D) Bill Gates should serve as Microsoft Corp.'s chief executive officer for a year as the software company he co-founded seeks a replacement for Steve Ballmer, Charles Schwab said Wednesday [November 20, 2013] at a conference in Chicago. . . . "I think it would behoove Gates to go back for at least a year," Schwab said. "He's the only guy who can really reshape the cultural aspects. Otherwise the organization will spit anybody out, anybody coming in."


For the full story, see:

"Schwab Suggests Gates Return as CEO." Omaha World-Herald (THURSDAY, NOVEMBER 21, 2013): 1D.

(Note: ellipsis, and bracketed date, added.)







January 7, 2014

Buffett's Returns Not Due to Ability to Pick Good Managers



(p. B7) Investors for years have been searching in vain for a formula to replicate Warren Buffett's legendary returns over the past 50 years.

The wait could be over.

A new study that claims to have uncovered this formula was published [in November 2013] . . . by the National Bureau of Economic Research in Cambridge, Mass. Its authors, all of whom have strong academic credentials, work for AQR Capital Management, a firm that manages several hedge funds and other investment offerings and has $90 billion in assets.

The study's authors analyzed Mr. Buffett's record since he acquired Berkshire Hathaway in 1964.


. . .


One factor that is conspicuous in its absence from the formula is anything to account for Mr. Buffett's significant investments in privately owned companies. But that isn't necessary, according to the researchers, because the public companies in which he has invested have outperformed the private ones.

This is somewhat surprising, given that Mr. Buffett has often trumpeted his abilities to pick good managers. Yet the researchers nevertheless find that his "returns are more due to stock selection than to his effect on management."



For the full commentary, see:

MARK HULBERT. "Hulbert on Investing; Can the Buffett Investing Formula Really Be Bottled?" The Wall Street Journal (Sat., Dec. 14, 2013): B7.

(Note: ellipses, and bracketed words, added.)

(Note: the online version of the commentary has the date Dec. 13, 2013, and has the title "WEEKEND INVESTOR; How to Invest Like Warren Buffett; How can investors emulate Warren Buffett's approach?")


The National Bureau of Economic Research (NBER) paper that is discussed above:

Frazzini, Andrea, David Kabiller, and Lasse H. Pedersen. "Buffett's Alpha." NBER Working Paper # 19681, November 2013.






January 1, 2014

"Carnegie Watched, Listened, Learned" from Scott's Process Innovations



(p. 65) Later in life, Scott would be better known for his political skills, but he was, like his mentor Thomson, a master of cost accounting. Together, the two men steadily cut unit costs and increased revenues by investing in capital improvements--new and larger locomotives, better braking systems, improved tracks, new bridges. Instead of running several smaller trains along the same route, they ran fewer but longer trains with larger locomotives and freight cars. To minimize delays--a major factor in escalating costs--they erected their own telegraph lines, built a second track and extended sidings alongside the first one, and kept roadways, tunnels, bridges, and crossings in good repair.

Carnegie watched, listened, learned. Nothing was lost on the young man. With an exceptional memory and a head for figures, he made the most of his apprenticeship and within a brief time was acting more as Scott's deputy than his assistant. Tom Scott had proven to be so good at his job that when Pennsylvania Railroad vice president William Foster died unexpectedly of an infected carbuncle, Scott was named his successor.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






December 31, 2013

"Western Union Bullied the Makers of Public Policy into Serving Private Capital"



WesternUnionAndTheCreationOfTheAmericanCorporateOrderBK2013-12-28.jpg












Source of book image: online version of the WSJ review quoted and cited below.







(p. A13) Until now there has been no full-scale, modern company history. Joshua D. Wolff's "Western Union and the Creation of the American Corporate Order, 1845-1893" ably fills the bill, offering an exhaustive and yet fascinating account.


. . .


If people today remember anything about Western Union, it is that its coast-to-coast line put the Pony Express out of business and that its leaders didn't see the telephone coming. Mr. Wolff tells us that neither claim is exactly true. It was Hiram Sibley, Western Union's first president, who went out on his own, when his board balked, to form a separate company and build the transcontinental telegraph in 1861; he made his fortune by eventually selling it to Western Union. And the company was very aware of Alexander Graham Bell's invention, patented in 1876, but history had supposedly shown that it wasn't necessary to control a patent to win the technology war. The company's third president, William Orton, was sure that Bell and his "toy" would not get the better of Western Union: "We would come along and take it away from him." They didn't.


. . .


Mr. Wolff contends that the company's practices set the template for today's "corporate triumphalism," not least in the way Western Union bullied the makers of public policy into serving private capital. Perhaps, but telecom competition today is so ferocious and differently arranged from that of the late 19th century that a "triumphant" company today may be toast tomorrow--think of BlackBerry--and can't purchase help with anything like Western's Union's brazenness and scope. Western Union had friends in Congress, the regulatory bureaucracy and the press. Members of the company's board of directors chaired both the 1872 Republican and Democratic national conventions. It seemed that, whatever the battles in business, politics, technology or the courts, the company's shareholders won.



For the full review, see:

STUART FERGUSON. "Bookshelf; The Octopus of the Wires." The Wall Street Journal (Mon., Dec. 23, 2013): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Dec. 22, 2013, and has the title "BOOKSHELF; Book Review: 'Western Union and the Creation of the American Corporate Order, 1845-1893,' by Joshua D. Wolff.")


Book under review:

Wolff, Joshua D. Western Union and the Creation of the American Corporate Order, 1845-1893. New York: Cambridge University Press, 2013.






December 29, 2013

Concentrating on One Task Results in Better Thinking



NassCliffordObit2013-11-10.jpg "Clifford Nass studied how new technology affected people." Source of caption and photo: online version of the NYT obituary quoted and cited below.



Nass focused on how interruptions from technology would reduce a person's ability to think well. But doesn't his research also imply that interruptions from other causes, including those from co-workers in open "collaborative" office designs, would likewise reduce a person's ability to think well?


(p. 27) Clifford Nass, a Stanford professor whose pioneering research into how humans interact with technology found that the increasingly screen-saturated, multitasking modern world was not nurturing the ability to concentrate, analyze or feel empathy, died on Nov. 2 near Lake Tahoe. He was 55.


. . .


One of his most publicized research projects was a 2009 study on multitasking.


. . .


"We all bet high multitaskers were going to be stars at something," he said in an interview with the PBS program "Frontline." "We were absolutely shocked. We all lost our bets. It turns out multitaskers are terrible at every aspect of multitasking. They're terrible at ignoring irrelevant information; they're terrible at keeping information in their head nicely and neatly organized; and they're terrible at switching from one task to another."

He added, "One would think that if people were bad at multitasking, they would stop. However, when we talk with the multitaskers, they seem to think they're great at it and seem totally unfazed and totally able to do more and more and more."

With children doing more multitasking and people asked to do more of it at work, he said, "We worry that it may be creating people who are unable to think well and clearly."


. . .


Dr. Nass found that people who multitasked less frequently were actually better at it than those who did it frequently. He argued that heavy multitasking shortened attention spans and the ability to concentrate.



For the full obituary, see:

WILLIAM YARDLEY. "Clifford Nass, Who Warned of a Data Deluge, Dies at 55." The New York Times, First Section (Sun., November 11, 2013): 27.

(Note: ellipses added.)

(Note: the online version of the obituary has the date November 6, 2013.)


The famous study on multitasking that Nass authored is:

Ophir, Eyal, Clifford Nass, and Anthony D. Wagner. "Cognitive Control in Media Multitaskers." Proceedings of the National Academy of Sciences (PNAS) 106, no. 37 (September 15, 2009): 15583-87.






December 8, 2013

Functional Stupidity Management



(p. 1194) In this paper we question the one-sided thesis that contemporary organizations rely on the mobilization of cognitive capacities. We suggest that severe restrictions on these capacities in the form of what we call functional stupidity are an equally important if under-recognized part of organizational life. Functional stupidity refers to an absence of reflexivity, a refusal to use intellectual capacities in other than myopic ways, and avoidance of justifications. We argue that functional stupidity is prevalent in contexts dominated by economy in persuasion which emphasizes image and symbolic manipulation. This gives rise to forms of stupidity management that repress or marginalize doubt and block communicative action. In turn, this structures individuals' internal conversations in ways that emphasize positive and coherent narratives and marginalize more negative or ambiguous ones. This can have productive outcomes such as providing a degree of certainty for individuals and organizations. But it can have corrosive consequences such as creating a sense of dissonance among individuals and the organization as a whole. The positive consequences can give rise to self-reinforcing stupidity. The negative consequences can spark dialogue, which may undermine functional stupidity.


Source of paper abstract:

Alvesson, Mats, and André Spicer. "A Stupidity-Based Theory of Organizations." Journal of Management Studies 49, no. 7 (Nov. 2012): 1194-220.







December 6, 2013

Interruptions and Distractions Disrupt Worker Productivity




Someday we will look back at open office plans as another way-overdone management fad. See also my earlier entry on the effects of workers switching tasks and my earlier entry on open offices.


(p. D2) Research led by Bing C. Lin, a doctoral candidate in industrial and organizational psychology at Portland State University in Oregon, found intrusions, or unexpected interruptions, increased exhaustion, physical strain and anxiety by one-third to three-fourths as much as the size of employees' actual workloads. Bottling up frustration when someone barges into your cubicle worsens the strain, according to the study of 252 employees, published earlier this year in the International Journal of Stress Management.


For the full story, see:

SUE SHELLENBARGER. "WORK & FAMILY MAILBOX; Sue Shellenbarger Answers Readers' Questions." The Wall Street Journal (Weds., Nov. 13, 2013): D2.

(Note: the online version of the review has the date Nov. 12, 2013, and has the title "WORK & FAMILY; The Toll of Office Disruptions; Latest Research on Distractions and Worker Efficiency.")


The Lin study summarized above is:

Lin, Bing C., Jason M. Kain, and Charlotte Fritz. "Don't Interrupt Me! An Examination of the Relationship between Intrusions at Work and Employee Strain." International Journal of Stress Management 20, no. 2 (2013): 77-94.






November 18, 2013

Google Was Lax in Killing Failed Projects



(p. 255) Oddly, whereas Google had built its data infrastructure to reroute around failure, it had no human infrastructure to deal with failed projects. "We didn't know which ones they were, because we never paused to ask ourselves that question," says Pichette. "The people working on that project know it's failing-- as senior management you have to say, 'Let's declare failure-- let's get the champagne out and kill this puppy. Then we can put you on stuff that's really cool and sexy.'" That had always been part of Google's philosophy, but whether from lack of rigor or just distraction, the company had been lax in actually issuing execution orders. One of the first puppies Pichette helped drown was a virtual-reality-style communications program called Lively.


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






November 14, 2013

Google Gave YouTube Entrepreneurial Autonomy



(p. 250) But after the purchase [of YouTube], Google did something very smart. Almost as if acknowledging that overattention from the top had hobbled Google's original video effort, the company made a conscious decision not to integrate YouTube. "They were edgy and small, and we were getting big," says Drummond. "We didn't want to screw them up." (Google was also smarting from its $ 900 million acquisition of dMarc Broadcasting, a company dealing in radio advertising, which had not gone well. "They had tried more of a top-down approach with dMarc and considered that a disaster," says Hurley.) YouTube would keep its brand and even stay in the building it had recently occupied in San Bruno, a former headquarters of the Gap.


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: bracketed words added.)






November 2, 2013

Google Used Auction Model to Allocate Internal Resources



(p. 202) Google's chief economist, Hal Varian, would later explain how it worked when new data centers open: "We'll build a nice new data center and say, 'Hey, Google Docs, would you move your machines over here?' And they say, 'Sure, next month.' Because nobody wants to go through the disruption of shifting. So I suggested we run an auction similar to what airlines do when they oversell a plane-- they keep offering bigger vouchers until enough customers are willing to give up their seats. In our case, we offer more machines in exchange for moving. One group might do it for fifty new ones, another for a hundred, and another won't move unless we give them three hundred. So we give them to the lowest bidder-- they get their extra capacity, and we get computation shifted to the new data center."

Google eventually devised an elaborate auction model for divvying up existing resources. In a paper entitled "Using a Market Economy to Provision Computer Resources Across Planet-wide Clusters," a group of Google engineers, along with a Stanford professor of management science and engineering, reported a project that essentially made Google's
computational resources into a silicon Wall Street. Supply and demand worked here not to fix stock prices but to place a value on resources. The system not only allowed projects at Google to get fair access to storage and computational cycles but identified shortages in computers, storage, and bandwidth. Instead of the Vickery auction used by AdWords, the system used an "ascending clock auction." At the beginning, the current price of each resource would be displayed, and Google engineers in competing projects could claim them at that price. The ideal outcome would ensure sufficient resources for everyone, in which case the auction stopped. Otherwise, the automated auctioneer would raise the prices for the next "time slot," and (p. 203) remaining competitors for those resources had to decide whether to bid higher. And so on, until the engineers not willing to stake their budgets on the most contested resources dropped out. "Hence," write the paper's authors, "the auction allows users to 'discover' prices in which all users pay/ receive payment in proportion to uniform resource prices."



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






October 28, 2013

Goldman I.P.O. Led to Pressure to Grow



WhatHappenedToGoldmanSachsBK2013-10-22.jpg











Source of book image: http://s.wsj.net/public/resources/images/OB-ZF094_bkrvgo_GV_20131008133334.jpg







(p. B8) Steven G. Mandis, a Ph.D. candidate in sociology at Columbia University, takes a measured, academic approach to the question in a new book, "What Happened to Goldman Sachs," an examination of the bank's evolution from an elite private partnership to a vast public corporation -- and the effects of that transformation on its culture.


. . .


Mr. Mandis said that the two popular explanations for what might have caused a shift in Goldman's culture -- its 1999 initial public offering and subsequent focus on proprietary trading -- were only part of the explanation. Instead, Mr. Mandis deploys a sociological theory called "organizational drift" to explain the company's evolution.

The essence of his argument is that Goldman came under a variety of pressures that resulted in slow, incremental changes to the firm's culture and business practices, resulting in the place being much different from what it was in 1979, when the bank's former co-head, John Whitehead, wrote its much-vaunted business principles.

These changes included the shift to a public company structure, a move that limited Goldman executives' personal exposure to risk and shifted it to shareholders. The I.P.O. also put pressure on the bank to grow, causing trading to become a more dominant focus. And Goldman's rapid growth led to more potential for conflicts of interest and not putting clients' interests first, Mr. Mandis says.



For the full review, see:

PETER LATTMAN. "An Ex-Trader, Now a Sociologist, Looks at the Changes in Goldman." The New York Times (Tues., October 1, 2013): B8.

(Note: ellipsis added.)

(Note: the online version of the review has the date SEPTEMBER 30, 2013.)


The book under review is:

Mandis, Steven G. What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences. Boston, MA: Harvard Business School Publishing, 2013.


MandisStevenAuthorGoldmanBook2013-10-22.jpg












"Steven G. Mandis is the author of "What Happened to Goldman Sachs."" Source of caption and photo: online version of the NYT article quoted and cited above.







October 23, 2013

Push the Flywheel, in Business and Life




Jim Collins makes wonderful use of the flywheel analogy in his Good to Great book. His point is that many achievements in business require long, gradual work to build to a major achievement that finally gets noticed by the business press and the general public. The business press often assumes that the success is overnight, when it is in fact long-building.


(p. C14) Flywheels - weighted wheels used for absorbing, storing and releasing energy - get used in everything from pottery wheels to car engines. Lately, they have showed up in corporate spin.

"Our more than 19,000 store global footprint, our fast-growing CPG presence and our best-in-class digital, card, loyalty and mobile capabilities are creating a 'flywheel' effect elevating the relevancy of all things Starbucks, and driving profitability," CEO Howard Schultz said in a statement accompanying quarterly earnings last month.

"So we have the flywheel spinning in the right direction because it is spinning one way and letting us generate these margins, contribution margins," said Overstock.com CEO Patrick Byrne last month. "And so now we can give some of that back and that makes it easier to get it spinning faster."

"We are at the one-mile market (sic) in a marathon," commented Symantec CEO Steve Bennett in an earnings call with analysts last week, "and the flywheel is just starting to spin."



For the full story, see:

JUSTIN LAHART. "Overheard." The Wall Street Journal (Weds., Aug 6, 2013): C14.

(Note: the online version of the story has the date Aug 6, 2013, and had the title "Ride a Painted Pony, Let the Spinning Wheel Fly." The print version did not identify an author. The versions were slightly different in two or three places--when different, the version quoted above follows the print version.)


The Collins book, mentioned above, is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap... And Others Don't. New York: HarperCollins Publishers, Inc., 2001.






September 27, 2013

Google's Bathrooms Showed Montessori Discipline



(p. 124) You could even see the company's work/ play paradox in its bathrooms. In some of Google's loos, even the toilets were toys: high-tech Japanese units with heated seats, cleansing water jets, and a control panel that looked as though it could run a space shuttle. But on the side of the stall--and, for men, at an eye-level wall placement at the urinals--was the work side of Google, a sheet of paper with a small lesson in improved coding. A typical "Testing on the Toilet" instructional dealt with the intricacies of load testing or C + + microbenchmarking. Not a second was wasted in fulfilling Google's lofty--and work-intensive--mission.

It's almost as if Larry and Sergey were thinking of Maria Montessori's claim "Discipline must come through liberty.... We do not consider an individual disciplined only when he has been rendered as artificially silent as a mute and as immovable as a paralytic. He is an individual annihilated, not disciplined. We call an individual disciplined when he is master of himself." (p. 125) Just as it was crucial to Montessori that nothing a teacher does destroy a child's creative innocence, Brin and Page felt that Google's leaders should not annihilate an engineer's impulse to change the world by coding up some kind of moon shot.

"We designed Google," Urs Hölzle says, "to be the kind of place where the kind of people we wanted to work here would work for free."



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis in original.)






September 25, 2013

Office Design that Forces Interaction, Causes Exhaustion, Stress, High Errors and Low Productivity



(p. D1) The big push in office design is forcing co-workers to interact more. Cubicle walls are lower, office doors are no more and communal cafes and snack bars abound.

Like most grand social experiments, though, open-plan offices bring an unintended downside: pesky, productivity-sapping interruptions.

The most common disruptions come from co-workers, as tempting as it is to blame email or instant messaging. Face-to-face interruptions account for one-third more intrusions than email or phone calls, which employees feel freer to defer or ignore, according to a 2011 study in the journal Organization Studies.

Other research published earlier this year links frequent interruptions to higher rates of exhaustion, stress-induced ailments and a doubling of error rates.



For the full story, see:

SUE SHELLENBARGER. "WORK & FAMILY; The Biggest Distraction in the Office Is Sitting Next to You." The Wall Street Journal (Weds., September 11, 2013): D1 & D3.

(Note: the online version of the story has the date September 10, 2013, and has the title "WORK & FAMILY; The Biggest Office Interruptions Are... ...not what most people think. And even a 2-second disruption can lead to a doubling of errors.")


Among the academic papers referred to in the article are:

Wajcman, Judy, and Emily Rose. "Constant Connectivity: Rethinking Interruptions at Work." Organization Studies 32, no. 7 (July 2011): 941-61.

Altmann, Erik M., J. Gregory Trafton, and David Z. Hambrick. "Momentary Interruptions Can Derail the Train of Thought." Journal of Experimental Psychology: General (Jan. 7, 2013): 1-12.






September 21, 2013

Messy Offices Encourage Creativity



(p. 12) Forty-eight research subjects came individually to our laboratory, . . . assigned to messy or tidy rooms.   . . . , we told subjects to imagine that a Ping-Pong ball factory needed to think of new uses for Ping-Pong balls, and to write down as many ideas as they could. We had independent judges rate the subjects' answers for degree of creativity, which can be done reliably.   . . .

When we analyzed the responses, we found that the subjects in both types of rooms came up with about the same number of ideas, which meant they put about the same effort into the task. Nonetheless, the messy room subjects were more creative, as we expected. Not only were their ideas 28 percent more creative on average, but when we analyzed the ideas that judges scored as "highly creative," we found a remarkable boost from being in the messy room -- these subjects came up with almost five times the number of highly creative responses as did their tidy-room counterparts.


. . .


Our findings have practical implications. There is, for instance, a minimalist design trend taking hold in contemporary office spaces: out of favor are private walled-in offices -- and even private cubicles. Today's office environments often involve desk sharing and have minimal "footprints" (smaller office space per worker), which means less room to make a mess.

At the same time, the working world is abuzz about cultivating innovation and creativity, endeavors that our findings suggest might be hampered by the minimalist movement. While cleaning up certainly has its benefits, clean spaces might be too conventional to let inspiration flow.



For the full commentary, see:

KATHLEEN D. VOHS. "GRAY MATTER; It's Not 'Mess.' It's Creativity." The New York Times, SundayReview Section (Sun., September 15, 2013): 12.

(Note: ellipses added.)

(Note: the online version of the commentary has the date September 13, 2013.)


The main academic paper referred to in the commentary is:

Vohs, Kathleen D., Joseph P. Redden, and Ryan Rahinel. "Physical Order Produces Healthy Choices, Generosity, and Conventionality, Whereas Disorder Produces Creativity." Psychological Science 24, no. 9 (Sept. 2013): 1860-67.






September 18, 2013

To Save Lego, CEO Fired Almost a Third of Workers



BrickByBrickBK2013-09-02.jpg











Source of book image: online version of the WSJ review quoted and cited below.







(p. A15) Only 10 years ago, Lego was posting record losses; retailers were backlogged with unsold Lego toys; and it was unclear whether Lego would survive as an independent company. An internal review discovered that 94% of the sets in its product line were unprofitable. The turnaround story that followed is well told by Wharton professor David Robertson in "Brick by Brick."


. . .


Upon coming to power, Mr. Knudstorp cut 30% of Lego's product portfolio, including many of its newer offerings. To stave off financial doom, he also sold the company's headquarters building and moved into simpler accommodations--and, more painfully, let go almost a third of the workforce.

But how to move beyond the rescue stage and toward growth? Based on input from top retailers and a large customer-research study, Lego executives concluded that even though young fans of buildable toys were a minority, there were enough of them to make a worthwhile market--and their parents were willing to pay premium prices. The company would now organize its innovation efforts around its potentially very profitable core audience.

Mr. Robertson, with the benefit of access to staff at Lego and partner companies, provides unusually detailed reporting of the processes that led to Lego's current hits (and, inevitably, some misses). Among the hits is the Mindstorms NXT, the second generation of Lego's robotics set, which hadn't been updated or advertised since 2001. Mr. Robertson describes how Lego navigated between relying on sophisticated users to determine the product's design and relying on its own expertise in the creation of building experiences.



For the full review, see:

DAVID A. PRICE. "BOOKSHELF; The House That Lego Built; Lego balked at licensing warlike 'Star Wars' toys. But then anthropological research convinced company executives that kids like to compete." The Wall Street Journal (Tues., July 23, 2013): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date July 22, 2013.)


The book under review, is:

Robertson, David. Brick by Brick: How Lego Rewrote the Rules of Innovation and Conquered the Global Toy Industry. New York: Crown Business, 2013.






September 12, 2013

Why IT-Savy Companies Are More Profitable



WeillPeterMIT2013-08-10.jpg











Dr. Peter Weill, Chair of the Center for Information Systems Research at the MIT Sloan School of Management. Source of caption information and photo: online version of the WSJ article quoted and cited below.




(p. R2) DR. WEILL: The IT-savvy companies are 21% more profitable than non-IT-savvy companies. And the profitability shows up in two ways. One is that IT-savvy companies have identified the best way to run their core day-to-day processes. Think about UPS or Southwest Airlines or Amazon: They run those core processes flawlessly, 24 hours a day.

The second thing is that IT-savvy companies are faster to market with new products and services that are add-ons, because their innovations are so much easier to integrate than in a company with siloed technology architecture, where you have to glue together everything and test it and make sure that it all works. We call that the agility paradox--the companies that have more standardized and digitized business processes are faster to market and get more revenue from new products.

Those are the two sources of their greater profitability: lower costs for running existing business processes, and faster innovation.



For the full interview, see:

Martha E. Mangelsdorf, interviewer. "EXECUTIVE BRIEFING; Getting an Edge From IT; Companies need to think strategically about their tech investments." The Wall Street Journal (Mon., November 30, 2009): R2.

(Note: bold in original.)






September 11, 2013

Yahoo Execs Complained that Google Did Yahoo Searches too Well



(p. 45) Even though Google never announced when it refreshed its index, there would invariably be a slight rise in queries around the world soon after the change was implemented. It was as if the global subconscious realized that there were fresher results available.

The response of Yahoo's users to the Google technology, though, was probably more conscious. They noticed that search was better and used it more. "It increased traffic by, like, 50 percent in two months," Manber recalls of the switch to Google. But the only comment he got from Yahoo executives was complaints that people were searching too much and they would have to pay higher fees to Google.

But the money Google received for providing search was not the biggest benefit. Even more valuable was that it now had access to many more users and much more data. It would be data that took Google search to the next level. The search behavior of users, captured and encapsulated in the logs that could be analyzed and mined, would make Google the ultimate learning machine.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






September 7, 2013

Yahoo Valued "Marketing Gimmicks" More than Search Speed



(p. 44) Google had struck a deal to handle all the search traffic of Yahoo, one of the biggest portals on the web.

The deal--announced on June 26, 2000--was a frustrating development to the head of Yahoo's search team, Udi Manber. He had been arguing that Yahoo should develop its own search product (at the time, it was licensing technology from Inktomi), but his bosses weren't interested. Yahoo's executives, led by a VC-approved CEO named Timothy Koogle (described in a BusinessWeek cover story as "The Grown-up Voice of Reason at Yahoo"), instead were devoting their attention to branding--marketing gimmicks such as putting the purple corporate logo on the Zamboni machine that swept the ice between periods of San Jose Sharks hockey games. "I had six people working on my search team," Manber said. "I couldn't get the seventh. This was a company that had thousands of people. I could not get the seventh." Since Yahoo wasn't going to develop its own search, Manber had the task of finding the best one to license.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: italics in original.)






August 18, 2013

Excite Rejected Google Because It Was too Good



(p. 28) Maybe the closest Page and Brin came to a deal was with Excite, a search-based company that had begun-- just like Yahoo-- with a bunch of sharp Stanford kids whose company was called Architext before the venture capitalists (VCs) got their hands on it and degeekified the name. Terry Winograd, Sergey's adviser, accompanied them to a meeting with Vinod Khosla, the venture capitalist who had funded Excite.


. . .


(p. 29) Khosla made a tentative counteroffer of $ 750,000 total. But the deal never happened. Hassan recalls a key meeting that might have sunk it. Though Excite had been started by a group of Stanford geeks very much like Larry and Sergey, its venture capital funders had demanded they hire "adult supervision," the condescending term used when brainy geeks are pushed aside as top executives and replaced by someone more experienced and mature, someone who could wear a suit without looking as though he were attending his Bar Mitzvah. The new CEO was George Bell, a former Times Mirror magazine executive. Years later, Hassan would still laugh when he described the meeting between the BackRub team and Bell. When the team got to Bell's office, it fired up BackRub in one window and Excite in the other for a bake-off.

The first query they tested was "Internet." According to Hassan, Excite's first results were Chinese web pages where the English word "Internet" stood out among a jumble of Chinese characters. Then the team typed "Internet" into BackRub. The first two results delivered pages that told you how to use browsers. It was exactly the kind of helpful result that would most likely satisfy someone who made the query.

Bell was visibly upset. The Stanford product was too good. If Excite were to host a search engine that instantly gave people information they sought, he explained, the users would leave the site instantly. Since his ad revenue came from people staying on the site--" stickiness" was the most desired metric in websites at the time-- using BackRub's technology would be (p. 30) counterproductive. "He told us he wanted Excite's search engine to be 80 percent as good as the other search engines," says Hassan. And we were like, "Wow, these guys don't know what they're talking about."

Hassan says that he urged Larry and Sergey right then, in early 1997, to leave Stanford and start a company. "Everybody else was doing it," he says. "I saw Hotmail and Netscape doing really well. Money was flowing into the Valley. So I said to them, 'The search engine is the idea. We should do this.' They didn't think so. Larry and Sergey were both very adamant that they could build this search engine at Stanford."

"We weren't ... in an entrepreneurial frame of mind back then," Sergey later said.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis between paragraphs added; ellipsis in last sentence, in original.)






August 11, 2013

"No Innovation Happens with 10 People in a Room"



EnglishPaulKayakCofounder2013-08-04.jpg













"Paul English, the co-founder of Kayak, said the company valued testing new ideas, not talking about them." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. B2) Q. You were a co-founder of Kayak nine years ago. What's unusual about the culture?

A. We're a little bit reckless in our decision-making -- not with the business, but the point is that we try things. We give even junior people scary amounts of power to come up with ideas and implement them. We had an intern last summer who, on his very first day at Kayak, came up with an idea, wrote the code and released it. It may or may not have been successful, but it almost doesn't matter, because it showed that we value speed, and we value testing ideas, not talking about them.


. . .


Q. What else?

A. We're known for having very small meetings, usually three people. There's a little clicker for counting people that hangs on the main conference room door. The reason it's there is to send a message to people that I care about this issue. If there's a bunch of people in the room, I'll stick my head in and say, "It takes 10 of you to decide this? There aren't three of you smart enough to do this?"

I just hate design by consensus. No innovation happens with 10 people in a room. It's very easy to be a critic and say why something won't work. I don't want that because new ideas are like these little precious things that can die very easily. Two or three people will nurture it, and make it stronger, give it a chance to see life.



For the full interview, see:

ADAM BRYANT, interviewer. "CORNER OFFICE; Paul English; Ten People in a Meeting Is About Seven Too Many." The New York Times (Fri., July 26, 2013): B2.

(Note: ellipsis added; bold and italics in original.)

(Note: the online version of the interview has the date July 25, 2013, and has the title "CORNER OFFICE; Paul English of Kayak, on Nurturing New Ideas.")






July 16, 2013

Will Apple Innovate Without Jobs?



JobsSteveHoldingIphone2013-06-28.jpg "Steve Jobs, introducing the iPhone 4 in January [2011]." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B4) "The good news for Apple is that the product road map in this industry is pretty much in place two and three years out," said David B. Yoffie, a professor at the Harvard Business School. "So 80 percent to 90 percent of what would happen in that time would be the same, even without Steve."

"The real challenge for Apple," Mr. Yoffie continued, "will be what happens beyond that road map. Apple is going to need a new leader with a new way of recreating and managing the business in the future."


. . .


His design decisions, Mr. Jobs explained, were shaped by his understanding of both technology and popular culture. His own study and intuition, not focus groups, were his guide. When a reporter asked what market research went into the iPad, Mr. Jobs replied: "None. It's not the consumers' job to know what they want."


. . .


Great products, Mr. Jobs once explained, were a triumph of taste, of "trying to expose yourself to the best things humans have done and then trying to bring those things into what you are doing."

Mr. Yoffie said Mr. Jobs "had a unique combination of visionary creativity and decisiveness," adding: "No one will replace him."



For the full story, see:

STEVE LOHR. "Without Its Master of Design, Apple Will Face Challenges." The New York Times (Thurs., August 25, 2011): B1 & B4.

(Note: ellipses in text, and bracketed year in caption, added.)

(Note: the online version of the story has the date August 24, 2011, and the slightly longer title "Without Its Master of Design, Apple Will Face Many Challenges.")





June 26, 2013

Larry Page Makes an O.K. Decision Now, Rather than a Perfect Decision Later



PageLarryGoogleCEO2013-06-21.jpg "Larry Page has pushed for quicker decision-making and jettisoned more than 25 projects that were not up to snuff." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A1) MOUNTAIN VIEW, Calif. -- Larry Page, Google's chief executive, so hates wasting time at meetings that he once dumped his secretary to avoid being scheduled for them. He does not much like e-mail either -- even his own Gmail -- saying the tedious back-and-forth takes too long to solve problems.


. . .


(p. A3) Borrowing from the playbooks of executives like Steven P. Jobs and Mayor Michael R. Bloomberg, he has put his personal imprint on the corporate culture, from discouraging excessive use of e-mail to embracing quick, unilateral decision-making -- by him, if need be.

"Ever since taking over as C.E.O., I have focused much of my energy on increasing Google's velocity and execution, and we're beginning to see results," Mr. Page, 38, told analysts recently.


. . .


Despite the many external pressures on Google, it is dominant in its business and highly profitable. But, when asked at a recent conference about the biggest threat to his company, Mr. Page answered in one word, "Google."

The problem was that the company had ballooned so quickly -- it now has more than 31,000 employees and $27.3 billion in revenue so far this year -- that it had become sclerotic. A triumvirate of Mr. Page, his co-founder, Sergey Brin, and Eric E. Schmidt, Google's former chief and current chairman, had to agree before anything could be done. The unwieldy management and glacial pace of decision-making were particularly noticeable in the Valley, where start-ups overtake behemoths in months.

It is different now.

"It's much more of a style like Steve Jobs than the three-headed monster that Google was," said a former Google executive who has spoken with current executives about the changes and spoke anonymously to preserve business relationships. "When Eric was there, you'd walk into a product meeting or a senior staff meeting, and everyone got to weigh in on every decision. Larry is much more willing to make an O.K. decision and make it now, rather than a perfect decision later."



For the full story, see:

CLAIRE CAIN MILLER. "Google's Chief Works to Trim a Bloated Ship." The New York Times (Thurs., November 10, 2011): A1 & A3.

(Note: ellipses added.)

(Note: the online version of the story has the date November 9, 2011.)






June 15, 2013

Cuban Government Employees "Are Known for Surly Service, Inefficiency, Absenteeism and Pilfering"



(p. A10) However small, . . . , the private sector is changing the work culture on an island where state employees earn meager salaries and are known for surly service, inefficiency, absenteeism and pilfering.

Sergio Alba Marín, who for years managed the restaurants of a state-owned hotel and now owns a popular fast-food restaurant, said he was very strict with his employees and would not employ workers trained by the state.

"They have too many vices -- stealing, for one," said Mr. Alba, who was marching with his 25 employees and two large banners emblazoned with the name of his restaurant, La Pachanga. "You can't change that mentality."

"Even if you could, I don't have time," he added. "I have a business to run."



For the full story, see:

VICTORIA BURNETT. "HAVANA JOURNAL; Amid Fealty to Socialism, a Nod to Capitalism." The New York Times (Thurs., May 2, 2013): A6 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 1, 2013.)






April 13, 2013

Academia Rejected Maslow's Humanistic Psychology



EncounteringAmericaBK2013-04-05.jpg
















Source of book image: http://www.harpercollins.com/harperimages/isbn/large/9/9780061834769.jpg


(p. 23) Abraham Maslow, humanistic psychology's founding father, rejected the atomistic approaches of psychoanalysis and behaviorism that dominated the first half of the 20th century. He strove to develop a psychology that provided "a fuller, though still scientific, treatment of the individual" and understood the potential for growth as innate. His ideas got their most welcome reception from industrial management, to which Maslow retreated when academia failed to roll out the red carpet. But Grogan eloquently insists that humanistic psychology subtly revolutionized Americans' conception of the self and the role of therapy, and asserts that current trends in the field, like positive psychology, owe the theory a debt they have been reluctant to pay.


For the full review, see:

MEGAN BUSKEY. "Nonfiction Chronicle." The New York Times Book Review (Sun., March 31, 2013): 23.

(Note: the online version of the review has the date March 29, 2013.)


The book under review:

Grogan, Jessica. Encountering America: Humanistic Psychology, Sixties Culture, and the Shaping of the Modern Self. New York: Harper Perennial, 2012.






March 23, 2013

"The Ante for Being in the Room" at Apple Was Brutal Honesty




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 569) I don't think I run roughshod over people, but if something sucks, I tell people to their face. It's my job to be honest. I know what I'm talking about, and I usually turn out to be right. That's the culture I tried to create. We are brutally honest with each other, and anyone can tell me they think I am full of shit and I can tell them the same. And we've had some rip-roaring arguments, where we are yelling at each other, and it's some of the best times I've ever had. I feel totally comfortable saying "Ron, that store looks like shit" in front of everyone else. Or I might say "God, we really fucked up the engineering on this" in front of the person that's responsible. That's the ante for being in the room: You've got to be able to be super honest. Maybe there's a better way, a gentlemen's club where we all wear ties and speak in this Brahmin language and velvet codewords, but I don't know that way, because I am middle class from California.

I was hard on people sometimes, probably harder than I needed to be. I remember the time when Reed was six years old, coming home, and I had just fired somebody that day, and I imagined what it was like (p. 570) for that person to tell his family and his young son that he had lost his job. It was hard. But somebody's got to do it. I figured that it was always my job to make sure that the team was excellent, and if I didn't do it, nobody was going to do it.



Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 19, 2013

Real Entrepreneurs Do Not Launch a Startup in Order to Cash In and Move On




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

I agree with the part about real entrepreneurs not going public quick in order to cash in. But I disagree that the real entrepreneurs are mainly interested in building a lasting company. I think that often they are mainly interested in getting a project, or a series of projects, done (and done reasonably well). Recall that when Walt Disney couldn't convince Roy Disney to pursue the Disneyland project, Walt left the main Disney company to pursue the project through a secondary rump Disney company.


(p. 569) I hate it when people call themselves "entrepreneurs" when what they're really trying to do is launch a startup and then sell or go public, so they can cash in and move on. They're unwilling to do the work it takes to build a real company, which is the hardest work in business. That's how you really make a contribution and add to the legacy of those who went before. You build a company that will still stand for something a generation or two from now. That's what Walt Disney did, and Hewlett and Packard, and the people who built Intel. They created a company to last, not just to make money. That's what I want Apple to be.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 15, 2013

Jobs Believed Great Companies Decline When Salesmen (Rather than Engineers and Designers) Take Over




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 568) I have my own theory about why decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of (p. 569) the product becomes less important. The company starts valuing the great salesmen, because they're the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. John Akers at IBM was a smart, eloquent, fantastic salesperson, but he didn't know anything about product. The same thing happened at Xerox. When the sales guys run the company, the product guys don't matter so much, and a lot of them just turn off.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 7, 2013

Steve Jobs: "Never Rely on Market Research"




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 567) Some people say, "Give the customers what they want." But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, "If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 3, 2013

Profits Allow You to Make Great Products, But the Products, Not the Profits, Are the Motivation




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 567) My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It's a subtle difference, but it ends up meaning everything: the people you hire, who gets promoted, what you discuss in meetings.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.







February 27, 2013

Steve Jobs' "Nasty Edge" Helped Him Create an Apple "Crammed with A Players"



(p. 565) . . . I think . . . [Jobs] actually could have controlled himself, if he had wanted. When he hurt people, it was not because he was lacking in emotional awareness. Quite the contrary: He could size people up, understand their inner thoughts, and know how to relate to them, cajole them, or hurt them at will.

The nasty edge to his personality was not necessary. It hindered him more than it helped him. But it did, at times, serve a purpose. Polite and velvety leaders, who take care to avoid bruising others, are generally not as effective at forcing change. Dozens of the colleagues whom Jobs most abused ended their litany of horror stories by saying that he got them to do things they never dreamed possible. And he created a corporation crammed with A players.



Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipses and bracketed "Jobs" added.)






January 25, 2013

ExxonMobil's "Honorable If Rigid Corporate Culture"



PrivateEmpireBK2013-01-11.jpg












Source of book image: online version of the NYT review quoted and cited way below.






(p. C12) From Indiana to Indonesia, ExxonMobil is the multinational corporation that people love to hate. John D. Rockefeller's creation is famed and feared for its discipline, its disregard for public opinion and its ability, year after year, to pump out the largest profits of any corporation on the planet. In "Private Empire," Steve Coll provides a rare exploration of what makes a modern corporate giant tick and shows why the world looks different to the executives in the "God Pod" at ExxonMobil's Texas headquarters than it might to you or me.


For the full review essay, see:

Marc Levinson. "Boardroom Reading of 2012." The Wall Street Journal (Sat., December 15, 2012): C12.

(Note: the online version of the review essay has the date December 14, 2012.)



From another review of the same book:


"Private Empire" is meticulous, multi-angled and valuable. It is also, perhaps surprisingly, despite all the dark facts I have dumped above, impartial. Mr. Coll and his phlegmatic research assistants have interviewed more than 400 people, including Exxon Mobil's longtime chief executive Lee R. Raymond, a legendarily hard character.

It's among this book's achievements that it attempts to view a dysfunctional energy world, as often as not, through Exxon Mobil's eyes. The company is portrayed here, some egregious missteps aside, as possessing an honorable if rigid corporate culture that seeks to supply a product (unlike tobacco companies, to which it is often compared) that a functioning society actually must have.



For this full review, see:

DWIGHT GARNER. "Oil's Dark Heart Pumps Strong." The New York Times (Sat., April 27, 2012): C25 & C32(?).

(Note: the online version of the review essay has the date April 26, 2012 and has the title "BOOKS OF THE TIMES; Oil's Dark Heart Pumps Strong; 'Private Empire,' Steve Coll's Book on Exxon Mobil.")



The book under review, is:

Coll, Steve. Private Empire: ExxonMobil and American Power. New York: The Penguin Press, 2012.






January 17, 2013

A Well-Researched Case Study on How Mulally Saved Ford



AmericanIconBK2013-01-11.jpg













Source of book image: http://graphics8.nytimes.com/images/2012/04/01/business/01-SHELF/01-SHELF-articleInline.jpg



(p. C12) Tomes by management gurus telling you how to remake your company are a dime a dozen. Well-researched case studies are much rarer. In "American Icon," Bryce G. Hoffman takes a careful look at how Alan Mulally, recruited from Boeing in 2006, restructured Ford Motor Co. in the midst of the steepest economic downturn since the 1930s. An engineer with no automotive background, Mr. Mulally came into a company on the verge of collapse and brought it back with insistent demands for accountability, information-sharing and tough decisions. Mr. Hoffman, who wrote this book with the company's cooperation, provides a fascinating and detailed examination of how a dynamic leader brought about change. He makes clear that much of the credit goes to others, not least Don Leclair, then the chief financial officer, who, even before Mr. Mulally's arrival, was arranging to mortgage everything up to Ford's blue-oval trademark to amass the $23.6 billion in cash that enabled the company to survive the recession.


For the full review essay, see:

Marc Levinson. "Boardroom Reading of 2012." The Wall Street Journal (Sat., December 15, 2012): C12.

(Note: the online version of the review essay has the date December 14, 2012.)



The book under review, is:

Hoffman, Bryce G. American Icon: Alan Mulally and the Fight to Save Ford Motor Company. New York: Crown Business, 2012.






December 21, 2012

Ellison and Jobs on Money



(p. 299) . . . Jobs and his family went to Hawaii for Christmas vacation. Larry Ellison was also there, as he had been the year (p. 300) before. "You know, Larry, I think I've found a way for me to get back into Apple and get control of it without you having to buy it," Jobs said as they walked along the shore. Ellison recalled, "He explained his strategy, which was getting Apple to buy NeXT, then he would go on the board and be one step away from being CEO." Ellison thought that Jobs was missing a key point. "But Steve, there's one thing I don't understand," he said. "If we don't buy the company, how can we make any money?" It was a reminder of how different their desires were. Jobs put his hand on Ellison's left shoulder, pulled him so close that their noses almost touched, and said, "Larry, this is why it's really important that I'm your friend. You don't need any more money."

Ellison recalled that his own answer was almost a whine: "Well, I may not need the money, but why should some fund manager at Fidelity get the money? Why should someone else get it? Why shouldn't it be us?"

"I think if I went back to Apple, and I didn't own any of Apple, and you didn't own any of Apple, I'd have the moral high ground," Jobs replied.

"Steve, that's really expensive real estate, this moral high ground," said Ellison. "Look, Steve, you're my best friend, and Apple is your company. I'll do whatever you want."



Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






December 13, 2012

"Did Alexander Graham Bell Do Any Market Research Before He Invented the Telephone?"



(p. 170) After the Macintosh team returned to Bandley 3 that afternoon, a truck pulled into the parking lot and Jobs had them all gather next to it. Inside were a hundred new Macintosh computers, each personalized with a plaque. "Steve presented them one at a time to each team member, with a handshake and a smile, as the rest of us stood around cheering," Hertzfeld recalled. It had been a grueling ride, and many egos had been bruised by Jobs's obnoxious and rough management style. But neither Raskin nor Wozniak nor Sculley nor anyone else at the company could have pulled off the creation of the Macintosh. Nor would it likely have emerged from focus groups and committees. On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, "Did Alexander Graham Bell do any market research before he invented the telephone?"


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: italics in original.)






December 9, 2012

"What Marketing Guys Are: Paid Poseurs"



(p. 152) Jobs had asked Hertzfeld and the gang to prepare a special screen display for Sculley's amusement. "He's really smart," Jobs said. "You wouldn't believe how smart he is." The explanation that Sculley might buy a lot of Macintoshes for Pepsi "sounded a little bit fishy to me," Hertzfeld recalled, but he and Susan Kare created a screen of Pepsi caps and cans that danced around with the Apple logo. Hertzfeld was so excited he began waving his arms around during the demo, but Sculley seemed underwhelmed. "He asked a few questions, but he didn't seem all that interested," Hertzfeld recalled. He never ended up warming to Sculley. "He was incredibly phony, a complete poseur," he later said. "He pretended to be interested in technology, but he wasn't. He was a marketing guy, and that is what marketing guys are: paid poseurs."


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






September 12, 2012

Premortem Reduces Bias from Uncritical Optimism



(p. 265) As a team converges on a decision--and especially when the leader tips her hand--public doubts about the wisdom of the planned move are gradually suppressed and eventually come to be treated as evidence of flawed loyalty to the team and its leaders. The suppression of doubt contributes to overconfidence in a group where only supporters of the decision have a voice. The main virtue of the premortem is that it legitimizes doubts. Furthermore, it encourages even supporters of the decision to search for possible threats that they had not considered earlier. The premortem is not a panacea and does not provide complete protection against nasty surprises, but it goes some way toward reducing the damage of plans that are subject to the biases of WYSIATI and uncritical optimism.


Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.





September 4, 2012

Big Firm CFOs Were Confident about Their "Worthless" Stock Forecasts



(p. 261) For a number of years, professors at Duke University conducted a survey in which the chief financial officers of large corporations estimated the returns of the Standard & Poor's index over the following year. The Duke scholars collected 11,600 such forecasts and examined their accuracy. The conclusion was straightforward: financial officers of large corporations had no clue about the short-term future of the stock market; the correlation between their estimates and the true value was slightly less than zero! When they said the market would go down, it was slightly more likely than not that it would go up. These findings are not surprising. The truly bad news is that the CFOs did not appear to know that their forecasts were worthless.


Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.





August 15, 2012

"Planning Fallacy": Overly Optimistic Forecasting of Project Outcomes



(p. 250) This should not come as a surprise: overly optimistic forecasts of the outcome of projects are found everywhere. Amos and I coined the term planning fallacy to describe plans and forecasts that

  • are unrealistically close to best-case scenarios
  • could be improved by consulting the statistics of similar cases


. . .


The optimism of planners and decision makers is not the only cause of overruns. Contractors of kitchen renovations and of weapon systems readily admit (though not to their clients) that they routinely make most of their profit on additions to the original plan. The failures of forecasting in these cases reflect the customers' inability to imagine how much their wishes will escalate over time. They end up paying much more than they would if they had made a realistic plan and stuck to it.

Errors in the initial budget are not always innocent. The authors of unrealistic plans are often driven by the desire to get the plan approved--(p. 251)whether by their superiors or by a client--supported by the knowledge that projects are rarely abandoned unfinished merely because of overruns in costs or completion times. In such cases, the greatest responsibility for avoiding the planning fallacy lies with the decision makers who approve the plan. If they do not recognize the need for an outside view, they commit a planning fallacy.



Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.

(Note: ellipsis added; italics in original.)





August 11, 2012

"Unknown Unknowns" Will Delay Most Projects




Kahneman's frequently-used acronym "WYSIATI," used in the passage quoted below, means "What You See Is All There Is."


(p. 247) On that long-ago Friday, our curriculum expert made two judgments about the same problem and arrived at very different answers. The inside view is the one that all of us, including Seymour, spontaneously adopted to assess the future of our project. We focused on our specific circumstances and searched for evidence in our own experiences. We had a sketchy plan: we knew how many chapters we were going to write, and we had an idea of how long it had taken us to write the two that we had already done. The more cautious among us probably added a few months to their estimate as a margin of error.

Extrapolating was a mistake. We were forecasting based on the informa-(p. 248)tion in front of us--WYSIATI--but the chapters we wrote first were probably easier than others, and our commitment to the project was probably then at its peak. But the main problem was that we failed to allow for what Donald Rumsfeld famously called the "unknown unknowns:' There was no way for us to foresee, that day, the succession of events that would cause the project to drag out for so long. The divorces, the illnesses, the crises of coordination with bureaucracies that delayed the work could not be anticipated. Such events not only cause the writing of chapters to slow down, they also produce long periods during which little or no progress is made at all. The same must have been true, of course, for the other teams that Seymour knew about. The members of those teams were also unable to imagine the events that would cause them to spend seven years to finish, or ultimately fail to finish, a project that they evidently had thought was very feasible. Like us, they did not know the odds they were facing. There are many ways for any plan to fail, and although most of them are too improbable to be anticipated, the likelihood that something will go wrong in a big project is high.



Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.





June 14, 2012

"Under a Mountain in Omaha"



(p. 170) lnformatics had been run from the top down. Here's a story typical of the way the company worked. They had a trainer at headquarters who was told to educate the troops at the Federal Systems Division in northern California, which was run by Geno Tolari, a tough-minded football player from Pittsburgh. When the trainer arrived and announced, "I'm here to train your people," Geno shot back, "You can't train my people."

The trainer got haughty. After all, he was from headquarters. "I'm the education department. I train your people."

But Geno insisted, "You can't train my people because you don't know what they do."

So now the trainer asked, "Okay, what do they do?"

Geno answered, "I don't know."

The trainer thought Geno was joking with him, and insisted, "I'm the trainer; I need to know what they do."

That's when Geno confessed, "I can't tell you because I don't (p. 171) know. They're under a mountain in Omaha, and it's a military secret, and the Air Force won't tell us what they do."



Source:

Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.






June 5, 2012

Open Offices Create "the Urgent Desire to Throttle One's Neighbor"



TierneyJohnCubicleWithBookWall2012-06-02.jpg



John Tierney "at his cubicle with a wall of books." Source of caption quote and photo: online version of John Tierney's NYT article quoted and cited below.





(p. 18) The original rationale for the open-plan office, aside from saving space and money, was to foster communication among workers, the better to coax them to collaborate and innovate. But it turned out that too much communication sometimes had the opposite effect: a loss of privacy, plus the urgent desire to throttle one's neighbor.

"Many studies show that people have shorter and more superficial conversations in open offices because they're self-conscious about being overheard," said Anne-Laure Fayard, a professor of management at the Polytechnic Institute of New York University who has studied open offices. . . .

Take Mr. Udeshi's office, at the N.Y.U.-Poly business incubator, a SoHo loft with dozens of start-up companies housed in low cubicles. The entrepreneurs there say they sometimes get useful ideas from overheard conversations but also find themselves retreating to a bathroom or a broom closet for private chats. When they have to discuss a delicate matter with someone sitting next to them, they often use e-mail or instant messaging.

"You talk to more people in an open office, but I think you have fewer meaningful conversations," said Jonathan McClelland, an energy consultant working in the loft. "You end up getting interrupted a lot by people's random thoughts."


. . .


Researchers at Finland's Institute of Occupational Health have studied precisely how far those conversations carry and analyzed their effect on the unwilling listener: a decline of 5 percent to 10 percent on the performance of cognitive tasks requiring efficient use of short-term memory, like reading, writing and other forms of creative work.

"Noise is the most serious problem in the open-plan office, and speech is the most disturbing type of sound because it is directly understood in the brain's working memory," said Valtteri Hongisto, an acoustician at the institute. He found that workers were more satisfied and performed better at cognitive tasks when speech sounds were masked by a background noise of a gently burbling brook

.

For the full story, see:

JOHN TIERNEY. "From Cubicles, Cry for Quiet Pierces Office Buzz." The New York Times, First Section (Sun., May 20, 2012): 1 & 18.

(Note: the online version of the article is dated May 19, 2012, and has the title "From Cubicles, Cry for Quiet Pierces Office Buzz.")






May 29, 2012

"I Can't Explain Strategy at the Same Time that I'm Inventing It"



(p. 75) I felt deceived. I felt betrayed. Their 51 percent control could be like working for IBM or Honeywell again. I felt a threat to the most important value I was seeking: independence. I had to ask myself "Do I say no? Or do I say yes and accept their contract, even though it isn't what we shook hands on and it makes me uncomfortable?" "This was a major difficulty for me. The 51 percent issue is at the very core of what every entrepreneur is trying to do: control his own destiny.

We were talking about my company. I dreamed it up. I put it together and I was going to run it. I was not going to hand it over to some committee of lawyers and accountants. But neither could I let anger get hold of me.

I knew that "those whom the gods would destroy, they first make angry." That said, not getting angry does not mean not being firm. So I firmly told Jerry, "I want to run this company. I don't have time to sit around and explain to your staff what I'm doing. No offense, but they don't know beans about what I'm (p. 76) trying to do, and neither do you, for that matter. I've got to be able to run this business. I can't explain strategy at the same time that I'm inventing it."



Source:

Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.





May 12, 2012

Some Tasks Are Done Better in Private Offices



QuietBK2012-05-03.jpg
















Source of book image: http://timeopinions.files.wordpress.com/2012/01/quiet-final-jacket.jpg



(p. 4) When the R.C. Hedreen Company, a real estate development firm based in Seattle, commissioned a renovation of a 10,800-square-foot floor in an old downtown office building five years ago, it specified a perimeter of private offices. Collaborative spaces are provided for creative teamwork, but the traditional offices remain the executives' home ports.

''Individually, a lot of our workday is taken up with tasks that are better served by working alone in private offices,'' says David Thyer, Hedreen's president.

Susan Cain, author of ''Quiet: The Power of Introverts in a World That Can't Stop Talking,'' is skeptical of open-office environments -- for introverts and extroverts alike, though she says the first group suffers much more amid noise and bustle.

Introverts are naturally more comfortable toiling alone, she says, so they will cope by negotiating time to work at home, or by isolating themselves with noise-canceling headphones -- ''which is kind of an insane requirement for an office environment, when you think about it,'' she says.

Ms. Cain also says humans have a fundamental need to claim and personalize space. ''It's the room of one's own,'' she says. ''Your photographs are on the wall. It's the same reason we have houses. These are emotional safety zones.''



For the full story, see:

LAWRENCE W. CHEEK. "Please, Just Give Me Some Space: In New Office Designs, Room to Roam and to Think." The New York Times, SundayBusiness Section (Sun., March 18, 2012): 1 & 4.



The book mentioned is:

Cain, Susan. Quiet: The Power of Introverts in a World That Can't Stop Talking. New York: Crown, 2012.






April 21, 2012

Workers Want to See Compensation Related to Contribution



This is a great example contra (or at least qualifying) Daniel Pink's claim that all you need do for knowledge workers is provide them enough money so that they can provide for the basic needs of themselves and their family.



(p. 145) The public offering process brought details of the intended allocation of Pixar stock options into view. A registration statement and other documents with financial data had to be prepared for the Securities and Exchange Commission and a prospectus needed to be made ready for potential investors. These documents had to be reviewed and edited, and it was here that the word apparently leaked: A small number of people were to receive low-cost options on enormous blocks of stock. Catmull, Levy, and Lasseter were to get options on 1.6 million shares apiece; Guggenheim and Reeves were to get 1 million and 840,000, respectively. If the company's shares sold at the then-planned price of fourteen dollars, the men would be instant multimillionaires.

The revelation was galling. Apart from the money, there was the symbolism: The options seemed to denigrate the years of work everyone else had put into the company. They gave a hollow feel to Pixar's labor-of-love camaraderie, its spirit that everyone was there to do cool work together. Also, it was hard not to notice that Levy, one of the top recipients, had just walked in the door.

"There was a big scene about all that because some people got (p. 146) huge amounts more than other people who had come at the same time period and who had made pretty significant contributions to the development of Pixar and the ability to make Toy Story," Kerwin said. "People like Tom Porter and Eben Ostby and Loren Carpenter--guys that had been there since the beginning and were part of the brain trust."

Garden-variety employees would also get some options, but besides being far fewer, those options would vest over a four-year period. Even employees who had been with the organization since its Lucasfilm days a decade earlier--employees who had lost all their Pixar stock in the 1991 reorganization--would be starting their vesting clock at zero. In contrast, most of the options of Catmull, Lasseter, Guggenheim, and Reeves vested immediately--they could be turned into stock right away.

"I decided, 'Well, gee, I've been at this company eight years, and I'll have been here twelve years before I'm fully vested,' " one former employee remembered. " 'It doesn't sound like these guys are interested in my well-being.' A lot of this piled up and made me say, 'What am I doing? I'm sitting around here trying to make Steve Jobs richer in ways he doesn't even appreciate.' "



Source:

Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.

(Note: italics in original.)

(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)


For Daniel Pink's views, see:

Pink, Daniel H. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Books, 2009.






March 18, 2012

Simple Heuristics Can Work Better than Complex Formulas



(p. C4) Most business people and physicians privately admit that many of their decisions are based on intuition rather than on detailed cost-benefit analysis. In public, of course, it's different. To stand up in court and say you made a decision based on what your thumb or gut told you is to invite damages. So both business people and doctors go to some lengths to suppress or disguise the role that intuition plays in their work.

Prof. Gerd Gigerenzer, the director of the Max Planck Institute for Human Development in Berlin, thinks that instead they should boast about using heuristics. In articles and books over the past five years, Dr. Gigerenzer has developed the startling claim that intuition makes our decisions not just quicker but better.


. . .


The economist Harry Markowitz won the Nobel prize for designing a complex mathematical formula for picking fund managers. Yet when he retired, he himself, like most people, used a simpler heuristic that generally works better: He divided his retirement funds equally among a number of fund managers.

A few years ago, a Michigan hospital saw that doctors, concerned with liability, were sending too many patients with chest pains straight to the coronary-care unit, where they both cost the hospital more and ran higher risks of infection if they were not suffering a heart attack. The hospital introduced a complex logistical model to sift patients more efficiently, but the doctors hated it and went back to defensive decision-making.

As an alternative, Dr. Gigerenzer and his colleagues came up with a "fast-and-frugal" tree that asked the doctors just three sequential yes-no questions about each patient's electrocardiographs and other data. Compared with both the complex logistical model and the defensive status quo, this heuristic helped the doctors to send more patients to the coronary-care unit who belonged there and fewer who did not.



For the full commentary, see:

By MATT RIDLEY. "MIND & MATTER; All Hail the Hunch--and Damn the Details." The Wall Street Journal (Sat., December 24, 2011): C4.

(Note: ellipsis added.)


A couple of Gigerenzer's relevant books are:

Gigerenzer, Gerd. Gut Feelings: The Intelligence of the Unconscious. New York: Penguin Books, 2007.

Gigerenzer, Gerd. Rationality for Mortals: How People Cope with Uncertainty. New York: Oxford University Press, USA, 2008.





February 27, 2012

Big Data Opportunity for Economics and Business



(p. 7) Data is not only becoming more available but also more understandable to computers. Most of the Big Data surge is data in the wild -- unruly stuff like words, images and video on the Web and those streams of sensor data. It is called unstructured data and is not typically grist for traditional databases.

But the computer tools for gleaning knowledge and insights from the Internet era's vast trove of unstructured data are fast gaining ground. At the forefront are the rapidly advancing techniques of artificial intelligence like natural-language processing, pattern recognition and machine learning.

Those artificial-intelligence technologies can be applied in many fields. For example, Google's search and ad business and its experimental robot cars, which have navigated thousands of miles of California roads, both use a bundle of artificial-intelligence tricks. Both are daunting Big Data challenges, parsing vast quantities of data and making decisions instantaneously.


. . .


To grasp the potential impact of Big Data, look to the microscope, says Erik Brynjolfsson, an economist at Massachusetts Institute of Technology's Sloan School of Management. The microscope, invented four centuries ago, allowed people to see and measure things as never before -- at the cellular level. It was a revolution in measurement.

Data measurement, Professor Brynjolfsson explains, is the modern equivalent of the microscope. Google searches, Facebook posts and Twitter messages, for example, make it possible to measure behavior and sentiment in fine detail and as it happens.

In business, economics and other fields, Professor Brynjolfsson says, decisions will increasingly be based on data and analysis rather than on experience and intuition. "We can start being a lot more scientific," he observes.


. . .


Research by Professor Brynjolfsson and two other colleagues, published last year, suggests that data-guided management is spreading across corporate America and starting to pay off. They studied 179 large companies and found that those adopting "data-driven decision making" achieved productivity gains that were 5 percent to 6 percent higher than other factors could explain.

The predictive power of Big Data is being explored -- and shows promise -- in fields like public health, economic development and economic forecasting. Researchers have found a spike in Google search requests for terms like "flu symptoms" and "flu treatments" a couple of weeks before there is an increase in flu patients coming to hospital emergency rooms in a region (and emergency room reports usually lag behind visits by two weeks or so).


. . .


In economic forecasting, research has shown that trends in increasing or decreasing volumes of housing-related search queries in Google are a more accurate predictor of house sales in the next quarter than the forecasts of real estate economists. The Federal Reserve, among others, has taken notice. In July, the National Bureau of Economic Research is holding a workshop on "Opportunities in Big Data" and its implications for the economics profession.



For the full story, see:


STEVE LOHR. "NEWS ANALYSIS; The Age of Big Data." The New York Times, SundayReview (Sun., February 12, 2012): 1 & 7.

(Note: ellipses added.)

(Note: the online version of the article is dated February 11, 2012.)





January 24, 2012

Personal Risk Lovers Make Better CEOs?



(p. C4) Chief executives with a penchant for personal risk-taking are also corporate risk-takers who take on more debt, aggressively pursue mergers and acquisitions, and make bold equity plays. But, in general, they are also more effective leaders who create more value in their organizations than their less risk-loving counterparts. And they do so, the researchers add, without additional incentives; they imprint their risk-loving natures on their companies because it's simply who they are.


For the full summary, see:

DAVID DISALVO. "Management; For Effective CEOs, Look Up." The Wall Street Journal (Sat., August 20, 2011): C4.



The article summarized is:

Cain, Matthew D., and Stephen B. McKeon. "Cleared for Takeoff? CEO Personal Risk-Taking and Corporate Policies." SSRN eLibrary (2011).





January 11, 2012

Gentle Oshman Inspired Loyalty as He Made Work Fun in Silicon Valley



OshmanMKennethSiliconValleyMentor2011-11-14.jpg














"M. Kenneth Oshman" Source of caption and photo: online version of the NYT obituary quoted and cited below.




(p. 19) M. Kenneth Oshman, who helped create one of the early successful technology start-up firms in Silicon Valley, one that embodied the informal management style that came to set the Valley apart from corporate America, died on Saturday in Palo Alto, Calif. He was 71.


. . .


In the 1970s and '80s, Rolm was the best example of an emerging Silicon Valley management style that effectively broke down the barrier between work and play. Setting out to recruit the most talented technical minds, Rolm became known as a great place to work, so much so that it was nicknamed "G.P.W."

Early on as chief executive, Mr. Oshman took funds normally used for company Christmas parties and used them to help construct a company recreational center, consisting of swimming pools, racquetball courts, exercise rooms and other amenities to attract new employees and underline the image that Rolm was a fun place to work.

But there was a tradeoff, said Keith Raffel, who left a staff position on Capitol Hill to become an assistant to Mr. Oshman at Rolm before starting his own company.

"The quid pro quo was you would be driven and work really hard," he said.

With a gentle, understated style, Mr. Oshman stood apart from other well-known leaders in Silicon Valley, many of whom were seen as capricious and even tyrannical. He was a mentor to a generation of Silicon Valley technologists and able to inspire a kind of loyalty in his employees not frequently seen in high-tech industries.



For the full obituary, see:

JOHN MARKOFF. "M. Kenneth Oshman, Silicon Valley Mentor, Dies at 71." The New York Times, First Section (Sun., August 10, 2011): A10.

(Note: ellipsis added.)

(Note: the online version of the obituary is dated August 10, 2011 and has the title "M. Kenneth Oshman, Who Brought Fun to Silicon Valley, Dies at 71.")





December 30, 2011

More Firms Adopt 'Bring Your Own Device' (BYOD) Policies to Empower Workers and Cut Costs



CitrixSystemsWorkersPickOwnLaptops2011-11-10.jpg"At Citrix Systems, Berkley Reynolds, left, uses his Alienware laptop, and Alan Meridian, his MacBook Pro, paid for with stipends." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) SAN FRANCISCO -- Throughout the information age, the corporate I.T. department has stood at the chokepoint of office technology with a firm hand on what equipment and software employees use in the workplace.

They are now in retreat. Employees are bringing in the technology they use at home and demanding the I.T. department accommodate them. The I.T. department often complies.

Some companies have even surrendered to what is being called the consumerization of I.T. At Kraft Foods, the I.T. department's involvement in choosing technology for employees is limited to handing out a stipend. Employees use the money to buy whatever laptop they want from Best Buy, Amazon.com or the local Apple store.

"We heard from people saying, 'How come I have better equipment at home?' " said Mike Cunningham, chief technology officer for Kraft Foods. "We said, hey, we can address that."

Encouraging employees to buy their own laptops, or bring their mobile phones and iPads from home, is gaining traction in the workplace. A survey published on Thursday by Forrester Research found that 48 percent of information workers buy smartphones for work without considering what their I.T. department supports. By being more flexible, companies are hoping that workers will be more comfortable with their devices and therefore more productive.

"Bring your own device" policies, as they are called, are also shifting the balance of power among electronics makers. Manufacturers good at selling to consumers are increasingly gaining the upper hand, while those focused on bulk corporate sales are slipping.


. . .


(p. B6) Letting workers bring their iPhones and iPads to work can . . . save companies money. In some cases, employees pay for equipment themselves and seek tech help from store staff rather than their company's I.T. department. "You can basically outsource your I.T. department to Apple," said Ben Reitzes, an analyst with Barclays Capital.

A similar B.Y.O.D. program at Citrix Systems, a software maker that also helps its clients implement such programs, saves the company about 20 percent on each laptop over three years. Of the 1,000 or so employees in Citrix's program, 46 percent have bought Mac computers, according to Paul Martine, Citrix's chief information officer. "That was a little bit of a surprise."



For the full story, see:

VERNE G. KOPYTOFF. "More Offices Let Workers Choose Their Own Devices." The New York Times (Fri., September 23, 2011): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the article is dated September 22, 2011.)






December 28, 2011

Collins Says Successful CEOs Are Empirical and Disciplined



GreatByChoiceBK.jpg















Source of book image: online version of the WSJ review quoted and cited below.







(p. A15) 'Great by Choice" is a sequel to Jim Collins's best-selling "Good to Great" (2001), which identified seven characteristics that enabled companies to become truly great over an extended period of time. Never mind that one of the 11 featured companies is now bankrupt (Circuit City) and another is in government receivership (Fannie Mae). Mr. Collins has a knack for analysis that business readers find compelling.

Mr. Collins's new book tackles the question of how to steer a company to lasting success in an environment characterized by change, uncertainty and even chaos. Like his previous work, this book builds its conclusions on a framework of painstaking research, conducted over nine years and overseen by Mr. Collins and his co-author, Morten T. Hansen, a management professor at the University of California, Berkeley.


. . .


Messrs. Collins and Hansen draw some interesting and counterintuitive conclusions from their research. First, the successful leaders were not the most "visionary" or the biggest risk-takers; instead, they tended to be more empirical and disciplined, relying on evidence over gut instinct and preferring consistent gains to blow-out winners. The successful companies were not more innovative than the control companies; indeed, they were in some cases less innovative. Rather, they managed to "scale innovation"--introducing changes gradually, then moving quickly to capitalize on those that showed promise. The successful companies weren't necessarily the most likely to adopt internal changes as a response to a changing environment. "The 10X companies changed less in reaction to their changing world than the comparison cases," the authors conclude.


. . .


If "Great by Choice" shares the qualities that made "Good to Great" so popular, it also shares some that drew criticism. The authors' conclusions sometimes feel like the claims of a well-written horoscope--so broadly stated that they are hard to disprove. Their 10X leaders are both "disciplined" and "creative," "prudent" and "bold"; they go fast when they must but slow when they can; they are consistent but open to change. This encompassing approach allows the authors to fit pretty much any leader who achieves 10X performance into their analysis. Would it ever be possible, one wonders, to find a leader whose success contradicted their thesis?



For the full review, see:

ALAN MURRAY. "BOOKSHELF; Turbulent Times, Steady Success; How certain companies achieved shareholder returns at least 10 times greater than their industry." The Wall Street Journal (Tues., OCTOBER 11, 2011): A15.

(Note: ellipses added.)






December 15, 2011

How Entrepreneurship Rebuilt San Francisco After the Fire



(p. 5) At 5:12 a.m. on April 18, 1906, Amadeo Peter Giannini felt an odd sensation, then a violent one, a slight, almost imperceptible shift in his surroundings coupled with a distant rumble like faraway thunder or a train! Pause. One second. Two seconds. Then-bang!-his house in San Mateo, California, began to pitch and shake, to, fro, up, and down. Seventeen miles north in (p. 6) San Francisco, the ground liquefied underneath hundreds of buildings, while heaving spasms under more solid ground catapulted stones and facades into the streets. Walls collapsed. Gas mains exploded. Fires erupted.

Determined to find out what had happened to his fledgling company, the Bank of Italy, Giannini endured a six-hour odyssey, navigating his way into the city by train and then by foot while people streamed in the opposite direction, fleeing the conflagration. Fires swept toward his offices, and Giannini had to rescue all the imperiled cash sitting in the bank. But criminals roamed through the rubble, prompting the mayor to issue a terse proclamation: "Officers have been authorized by me to KILL any and all persons found engaged in Looting or in the Commission of Any Other Crime." With the help of two employees, Giannini hid the cash under crates of oranges on two commandeered produce wagons and made a nighttime journey back to San Mateo, where he hid the money in his fireplace. Giannini returned to San Francisco the next morning and found himself at odds with other bankers who wanted to impose up to a six-month moratorium on lending. His response: putting a plank across two barrels right in the middle of a busy pier and opening for business the very next day. "We are going to rebuild San Francisco," he proclaimed.

Giannini lent to the little guy when the little guy needed it most. In return, the little guy made deposits at Giannini's bank. As San Francisco moved from chaos to order, from order to growth, from growth to prosperity, Giannini lent more to the little guy, and the little guy banked even more with Giannini. The bank gained momentum, little guy by little guy, loan by loan, deposit by deposit, branch by branch, across California, (p. 7) renaming itself Bank of America along the way. In October 1945, it became the largest commercial bank in the world, overtaking the venerable Chase National Bank. (Note of clarification: in 1998, NationsBank acquired Bank of America and took the name; the Bank of America described here is a different company than NationsBank.)



Source:

Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.






December 10, 2011

Collins' "How the Mighty Fall" Is Useful Business Book



HowTheMightyFallBK.jpg

















Source of book image: http://www.harpercollins.com/harperimages/isbn/large/9/9780977326419.jpg



Jim Collins' business books are usually sensible, and are full of arresting examples and memorable hypotheses. His latest full-scale research effort (Great by Choice) is just out, but I have not yet read it. In the next few weeks, I will quote a few of the more thought-provoking or useful passages in his 2009 small book How the Mighty Fall.

Book discussed:

Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.






October 16, 2011

Finance and Strategy Should Be More Integrated



ChristensenClayton2011-07-19.jpg"'God never said that finance and strategy are fundamentally different functions.' --Clayton Christensen" Source of caption and photo: online version of the WSJ interview quoted and cited below.




MR. MURRAY: We've talked about the innovator's dilemma, but what's the solution?

MR. CHRISTENSEN: The financial function stands in the way of much of this. God never said that finance and strategy are fundamentally different functions, yet the business schools decided to teach strategy and teach finance. This gets implemented in companies where strategy is the responsibility of this group, and finance this group. And a lot of the things that make sense financially make no sense strategically.


. . .


MR. MURRAY: The United States has led the world in various types of innovation for much of the past century. Is that something that will continue?

MR. CHRISTENSEN: I am very worried about America. I was thinking about this hard over the past year. It turns out that the majority of the entrepreneurs that made Silicon Valley happen weren't Americans. They were from Israel, China and India. We were a magnet to bring to our shores the best technologists in the world. Now our message to the rest of the world is, "You guys, we don't want you." The minute we say that and push those to Singapore and to Britain and elsewhere, I worry.



For the full interview, see:

Alan Murray, interviewer. "The Innovator's Solution; Clayton Christensen, Glenn Hutchins and Ellen Kullman on being cutting edge--without breaking the bank." The Wall Street Journal (Weds., June 27, 2011): C9.

(Note: bold and italics in original; ellipsis added.)





October 4, 2011

Neuroscientist Sees Entrepreneurs as "Never Satisfied" Due to "Attenuated Dopamine Function"



Compass-of-Pleasure-BK.jpg














Source of book image: http://www.kurzweilai.net/images/The-Compass-of-Pleasure-Linden-David-J-9780670022588.jpg





David J. Linden is the author of The Compass of Pleasure and a Johns Hopkins University School of Medicine Professor of Neuroscience.



(p. 4) . . . , the psychological profile of a compelling leader -- think of tech pioneers like Jeff Bezos, Larry Ellison and Steven P. Jobs -- is also that of the compulsive risk-taker, someone with a high degree of novelty-seeking behavior. In short, what we seek in leaders is often the same kind of personality type that is found in addicts, whether they are dependent on gambling, alcohol, sex or drugs.

How can this be? We typically see addicts as weak-willed losers, and chief executives and entrepreneurs are people with discipline and fortitude. To understand this apparent contradiction we need to look under the hood of the brain, and in particular at the functions that relate to pleasure and reward.


. . .


Crucially, genetic variants that suppress dopamine signaling in the pleasure circuit substantially increase pleasure- and novelty-seeking behaviors -- their bearers must seek high levels of stimulation to reach the same level of pleasure that others can achieve with more moderate indulgence. Those blunted dopamine receptor variants are associated with substantially increased risk of addiction to a range of substances and behaviors.


. . .


The risk-taking, novelty-seeking and obsessive personality traits often found in addicts can be harnessed to make them very effective in the workplace. For many leaders, it's not the case that they succeed in spite of their addiction; rather, the same brain wiring and chemistry that make them addicts also confer on them behavioral traits that serve them well.

So, when searching for your organization's next leader, look for someone with an attenuated dopamine function: someone who is never satisfied with the status quo, someone who wants the feeling of success more than others -- but likes it less.



For the full commentary, see:

DAVID J. LINDEN. "Addictive Personality? You Might be a Leader." The New York Times, SundayReview Section (Sun., July 24, 2011): 4.

(Note: ellipses added.)

(Note: the online version of the commentary is dated July 23, 2011.)


The book mentioned above is:

Linden, David J. The Compass of Pleasure: How Our Brains Make Fatty Foods, Orgasm, Exercise, Marijuana, Generosity, Vodka, Learning, and Gambling Feel So Good. New York: Viking Adult, 2011.





September 29, 2011

McKinsey Finds 30% of Employers Will Drop Health Coverage in Response to Obamacare



McKinsey is probably the best known business consulting and forecasting firm in the United States. Many well-known management gurus, and corporate executives, have spent time working for McKinsey (as did Chelsea Clinton). One of their senior partners (Foster) co-authored a useful book called Creative Destruction.


(p. A2) A report by McKinsey & Co. has found that 30% of employers are likely to stop offering workers health insurance after the bulk of the Obama administration's health overhaul takes effect in 2014.


. . .


Previous research has suggested the number of employers who opt to drop coverage altogether in 2014 would be minimal.

But the McKinsey study predicts a more dramatic shift from employer-sponsored health plans once the new marketplace takes effect. Starting in 2014, all but the smallest employers will be required to provide insurance or pay a fine, while most Americans will have to carry coverage or pay a different fine. Lower earners will get subsidies to help them pay for plans.

In surveying 1,300 employers earlier this year, McKinsey found that 30% said they would "definitely or probably" stop offering employer coverage in the years after 2014. That figure increased to more than 50% among employers with a high awareness of the overhaul law.



For the full story, see:

JANET ADAMY. "Study Sees Cuts to Health Plans." The Wall Street Journal (Weds., JUNE 8, 2011): A15.

(Note: ellipsis added.)


The Foster book is:

Foster, Richard N., and Sarah Kaplan. Creative Destruction: Why Companies That Are Built to Last Underperform the Market---and How to Successfully Transform Them. New York: Currency Books, 2001.






September 10, 2011

The Anecdote for Malignant Perfectionism: "I'll Fix that in My Next Piece"



MoreauWellesChimesAtMidnight2011-08-08.jpg"Jeanne Moreau and Orson Welles in 'Chimes at Midnight,' a 1965 Shakespeare-based film that's recently been restored." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. D8) Every great artist, . . . , strives for perfection. In fact, that's part of what makes them great: They're never entirely satisfied with anything that they do. The classical pianist Artur Schnabel once remarked that he was only interested in performing music that was "better than it can be performed...unless a piece of music presents a problem to me, a never-ending problem, it doesn't interest me too much." This sums up the plight of all serious artists: They lead lives of endless frustration, struggling to reach the top of the hill, then seeing another, higher hill just beyond it.


. . .


Alas, that kind of suffering goes with the territory. The trick, as every artist knows, is not to let it interfere with getting things done. The wisest artists are the ones who finish a new work, walk away and move on to the next project. Whenever a colleague pointed out a "mistake" in one of Dmitri Shostakovich's compositions, he invariably responded, "Oh, I'll fix that in my next piece."

The road to malignant perfectionism, by contrast, starts with chronic indecision. Jerome Robbins, whose inability to make up his mind was legendary throughout the world of dance, was known for choreographing multiple versions of a variation, then waiting until the last possible minute to decide which one to use. Beyond a certain point, this kind of perfectionism is all but impossible to distinguish from unprofessionalism, and Mr. Welles reached that point early in his career. . . .


. . .


Mr. Welles's problem was that he wanted it both ways. He was a perfectionist who expected his collaborators to sit around endlessly waiting for him to make up his mind--and to pay for all the overtime that he ran up along the way. Simon Callow, his biographer, has summed up this failing in one devastating sentence: "Any form of limitation, obligation, responsibility or enforced duty was intolerable to him, rendering him claustrophobic and destructive." That's the wrong kind of perfectionism, and it led, as it usually does, to disaster.



For the full commentary, see:

TERRY TEACHOUT. "The Snare of Perfectionism: When Artists Aim Too High." The Wall Street Journal (Fri., July 22, 2011): D8.

(Note: ellipsis in Schnabel quote was in original; other ellipses added.)





September 6, 2011

The Movie Auteur as a Model for Technology Entrepreneurship



AuteurVersusCommittee2011-08-07.jpg Source of image: online version of the NYT article quoted and cited below.



(p. 3) Two years ago, the technology blogger John Gruber presented a talk, "The Auteur Theory of Design," at the Macworld Expo. Mr. Gruber suggested how filmmaking could be a helpful model in guiding creative collaboration in other realms, like software.

The auteur, a film director who both has a distinctive vision for a work and exercises creative control, works with many other creative people. "What the director is doing, nonstop, from the beginning of signing on until the movie is done, is making decisions," Mr. Gruber said. "And just simply making decisions, one after another, can be a form of art."

"The quality of any collaborative creative endeavor tends to approach the level of taste of whoever is in charge," Mr. Gruber pointed out.

Two years after he outlined his theory, it is still a touchstone in design circles for discussing Apple and its rivals.

Garry Tan, designer in residence and a venture partner at Y Combinator, an investor in start-ups, says: "Steve Jobs is not always right--MobileMe would be an example. But we do know that all major design decisions have to pass his muster. That is what an auteur does."

Mr. Jobs has acquired a reputation as a great designer, Mr. Tan says, not because he personally makes the designs but because "he's got the eye." He has also hired classically trained designers like Jonathan Ive. "Design excellence also attracts design talent," Mr. Tan explains.



For the full story, see:

RANDALL STROSS. "DIGITAL DOMAIN; The Auteur vs. the Committee." The New York Times, SundayBusiness Section (Sun., July 24, 2011): 3.

(Note: the online version of the story is dated July 23, 2011.)





September 3, 2011

Edison Excelled as an Organizer of Systems




(p. 131) Where Edison truly excelled was as an organizer of systems. The invention of the light bulb was a wondrous thing but of not much practical use when no one had a socket to plug it into. Edison and his tireless workers had to design and build the entire system from scratch, from power stations to cheap and reliable wiring, to lampstands and switches. Within months Edison had set up no fewer than 334 small electrical plants all over the world; (p. 132) within a year or so his plants were powering thirteen thousand light bulbs. Cannily he put them in places where they would be sure to make maximum impact: on the New York Stock Exchange, in the Palmer House Hotel in Chicago, La Scala opera house in Milan, the dining room of the House of Commons in London. Swan, meanwhile, was still doing much of his manufacturing in his own home. He didn't, in short, have a lot of vision. Indeed, he didn't even file for a patent. Edison took out patents everywhere, including in Britain in November 1879, and so secured his preeminence.


Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.





August 3, 2011

To Succeed in the Car Business, It Helps if You Care about Cars



CarGuysBK.jpg














Source of book image: online version of the WSJ review quoted and cited below.







(p. B1) . . . , General Motors embarked on a series of initiatives to overcome both the perception and reality of the growing import threat. The 1950s and '60s marked the decline of the "product guy" at GM and the ascendancy of "professional management," often individuals with a strong financial background.

It's not that senior GM management disliked cars. It was more an atmosphere of "benign neglect," a generalized consensus that we were, after all, primarily in the business of making money, and cars were merely a transitory form of money: put a certain quantity in at the front end, transform it into vehicles, and sell them for more money at the other (p. B12) end. The company cared about "the other two ends"--minimizing cost and maximizing revenue--but assumed that customer desire for the product was a given.

Responsibility for creation of the right product was delegated to lower levels in the organization, often to people with little understanding of quality design or great driving characteristics. I maintain that without a passionate focus on great products from the top of the company on down, the "low cost" part will be assured but the "high revenue" part won't happen, just as it didn't at GM for so many years.



For the full excerpt, see:

Bob Lutz. "Japan's Advantage and How the Cadillac Lost Its Shine." The Wall Street Journal (Mon., JUNE 13, 2011): B1 & B12.

(Note: ellipsis added.)


The excerpt is excerpted from:

Lutz, Bob. Car Guys Vs. Bean Counters: The Battle for the Soul of American Business. New York: Portfolio, 2011.





July 18, 2011

"If We Can't Win on Quality, We Shouldn't Win at All"



ImFeelingLuckyBK.jpg












Source of book image: online version of the WSJ review quoted and cited below.






(p. A13) At the tail end of the 1990s dot-com boom, Douglas Edwards took a gamble: He left his marketing job at an old-media company, taking a $25,000 salary cut to start work at a small, little-known Internet concern in its second year of operation. That his new employer was losing money and burning through venture capital went without saying. But unlike the footloose 20-somethings who usually populated Silicon Valley start-ups, Mr. Edwards had little margin to bet wrong; he was 41, with a mortgage, three children and a worried wife. He hoped he could get his old job back if the company ran out of money.


. . .


Mr. Edwards came to his job as a subscriber to the conventional wisdom. In an early presentation to cofounder Larry Page and others, Mr. Edwards unwisely declared that only marketing, not technology, could set Google apart. "In a world where all search engines are equal," he asserted, "we'll need to rely on branding to differentiate us from our competitors."

The room became quiet. Then Mr. Page spoke up. "If we can't win on quality," he said, "we shouldn't win at all."



For the full review, see:

DAVID A. PRICE. "BOOKSHELF; How Google Got Going; Branding, shmanding, a marketer was told. 'If we can't win on quality,' Larry Page said, 'we shouldn't win at all.'" The Wall Street Journal (Tues., July 12, 2011): A13.

(Note: ellipsis added.)


Book being reviewed:

Edwards, Douglas. I'm Feeling Lucky: The Confessions of Google Employee Number 59. New York: Houghton Mifflin Harcourt Publishing Co., 2011.






July 6, 2011

Google CEO Larry Page Admires Steve Jobs



BrinPageSchmidtGoogle2011-06-05.jpg "Former colleagues describe Larry Page, center, as strong-willed and sometimes impolite. He is said to admire Apple CEO Steve Jobs." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B1) Larry Page's PageRank algorithm was the basis for Google Inc.'s search engine. As Google's new chief executive, Mr. Page will face the challenge of leading a company that has grown far beyond that algorithm and must compete with agile Web upstarts such as Facebook Inc. and Groupon Inc.

On Friday, a day after being named to replace outgoing CEO Eric Schmidt in April, Mr. Page gave little hint of how he planned to tackle such challenges. The 38-year-old Google co-founder didn't immediately address employees in an all-hands note or meeting, said a person familiar with the matter, though the company has a weekly Friday meeting that Mr. Page was expected to attend.

But several of Mr. Page's former colleagues describe him as having similarities to Apple CEO Steve Jobs, whom Mr. Page has said he admired. Both men are strong willed, sometimes impolite and push engineers hard to execute their ambitious projects.

Some former colleagues said Mr. Page is likely to try to pierce through the sometimes "paralyzing" bureaucracy that product managers and engineers have faced when trying to launch some Google products in recent years.

On Thursday, Messrs. Page and Schmidt said some top-level decision-making had gotten slower and the management change would improve that. Also, the company has said it is trying to allow more projects to operate like start-ups inside of Google in order to speed up innovation.



For the full story, see:

AMIR EFRATI and SCOTT MORRISON. "TECHNOLOGY; Chief Seeks More Agile Google; As CEO, Larry Page Must Pierce Bureaucracy, Compete With Nimble Upstarts." The Wall Street Journal (Tues., January 22, 2011): B1 & B4.





June 28, 2011

At NeXT Steve Jobs Learned to Delegate, Retain Talent, and Attend to the Price



JobsSteve2011-06-05.jpg











"Steve Jobs, after returning to Apple in 1999. Would Apple be what it is today had he never left?" Source of caption and photo: online version of the NYT article quoted and cited below.



(p. 5) Suppose Mr. Jobs had not left in 1985. Suppose he had convinced the Apple board to oust his nemesis, John Sculley, then chief executive and president. Under Mr. Jobs's uninterrupted direction, would Apple have arrived at the pinnacle it has reached today, but 12 years earlier?

It's hard to see how anything like that would have transpired. The Steve Jobs who returned to Apple was a much more capable leader -- precisely because he had been badly banged up. He had spent 12 tumultuous, painful years failing to find a way to make the new company profitable.

"I am convinced that he would not have been as successful after his return at Apple if he hadn't gone through his wilderness experience at Next," said Tim Bajarin, president of Creative Strategies, a technology consulting company.


. . .


Mr. Jobs's lieutenants tried to warn him away from certain disaster, but he was not receptive. In 1992-93, seven of nine Next vice presidents were shown the door or left on their own.

In this period, Mr. Jobs did not do much delegating. Almost every aspect of the machine -- including the finish on interior screws -- was his domain. The interior furnishings of Next's offices, a stunning design showplace, were Mr. Jobs's concern, too. While the company's strategy begged to be re-examined, Mr. Jobs attended to other matters. I spoke with many current and former Next employees for my 1993 book, "Steve Jobs and the NeXT Big Thing." According to one of them, while a delegation of visiting Businessland executives waited on the sidewalk, Mr. Jobs spent 20 minutes directing the landscaping crew on the exact placement of the sprinkler heads.

Next's computer hardware and software were filled with innovations that drew a small, but devoted, following. Mr. Jobs had created the first easy-to-use Unix machine, but the mainstream marketplace shrugged. He had already helped bring to market an easy-to-use machine, the Mac, so the Next couldn't differentiate itself enough -- and certainly not at the price the company charged.


. . .


And he had always been able to attract great talent. What he hadn't learned before returning to Apple, however, was the necessity of retaining it. He has now done so. One of the unremarked aspects of Apple's recent story is the stability of the executive team -- no curb filled with dumped managers.

Kevin Compton, who was a senior executive at Businessland during the Next years, described Mr. Jobs after returning to Apple: "He's the same Steve in his passion for excellence, but a new Steve in his understanding of how to empower a large company to realize his vision." Mr. Jobs had learned from Next not to try to do everything himself, Mr. Compton said.



For the full commentary, see:

RANDALL STROSS. "DIGITAL DOMAIN; What Steve Jobs Learned in the Wilderness." The New York Times, SundayBusiness Section (Sun., October 3, 2010): 5.

(Note: ellipses added.)

(Note: the online version of the commentary is dated October 2, 2010.)





April 19, 2011

To Do Business in India, Bureaucrats Still Must Be Bribed



TataRatan2011-04-18.jpg "In the twilight of his career heading Tata Group, Ratan Tata says he was thwarted in his homeland by arbitrary regulatory decisions and corruption."


(p. B1) NEW DELHI--Ratan Tata has transformed Tata Group into the world's best-known Indian company, the owner of Jaguar cars, the Pierre Hotel in New York and Tetley tea.

But in the twilight of his career as chairman of the $67.4 billion conglomerate, Mr. Tata, 73 years old, is frustrated that he hasn't been able to expand more in his native India. He says bureaucratic delays, arbitrary regulatory decisions and widespread corruption have thwarted his domestic ambitions in such sectors as steel, power, aviation and telecommunications.


. . .


. . . 20 years after . . . reforms began, New Delhi still exerts tight control over large swaths of the economy. All too often, Mr. Tata and other critics say, regulators are picking winners and losers through their decisions, either by delaying certain projects and green-lighting others or by freeing up natural resources for some companies at the expense of others.

"Economically it is a much more open environment. It's one that fosters a fair amount of free enterprise until you need approvals or some kind of sanction to get something done," Mr. Tata said during an interview at the Tata-owned Taj Mahal hotel in New Delhi. "Then you still have problems, and maybe more acute then you did before."


. . .


As chairman, one of Mr. Tata's first goals was to get Tata back into the airline business. The company's former airline had been nationalized to form Air India. He planned a venture with Singapore Airlines. But, he says, aviation ministry bureaucrats held up his application for years despite his constant prodding. An aviation ministry spokeswoman didn't respond to a request for comment.

In 1998, after seven years of government inaction, Mr. Tata withdrew the application. "We went through three governments, three prime ministers, and each time there was a particular individual that thwarted our efforts," he said in a TV interview last fall. He recalled a conversation with a fellow industrialist several years ago. "He said, 'I don't understand. You people are very stupid.... Why don't you just pay?'"

Paying bribes isn't his style, Mr. Tata says. "Maybe I'm stupid or old fashioned, but I really want to go to bed at night saying I haven't succumbed to this."



For the full story, see:

AMOL SHARMA. "India's Tata Finds Home Hostile; Chair of Nation's Best-Known Company Says Bureaucracy Slows Domestic Growth." The Wall Street Journal (Weds., April 13, 2011): B1-B2.

(Note: ellipses added, except for the one after the word "stupid" which appears in the original.)

(Note: in the online version of the article, the final paragraph quoted above reads: "Mr. Tata says paying bribes isn't his style. "Maybe I'm stupid or old fashioned, but I really want to go to bed at night saying I haven't succumbed to this," he says."





March 28, 2011

"The Really Good People Want Autonomy"



BethuneGordonContinentalAirlinesFormerCEO2011-03-09.jpg









"Gordon M. Bethune, chief executive of Continental Airlines from 1994 to 2004, says that "being good at your job is predicated pretty much on how the people working for you feel."" Source of caption and photo: online version of the NYT article quoted and cited below.




Gordon Bethune is usually given credit for introducing marginal cost pricing to the airline industry, and thereby bringing Continental Airlines back from bankruptcy.

His views on how to hire and manage employees are worth serious consideration:


(p. 2) Q. How do you hire people?

A. The really good people want autonomy -- you let me do it, and I'll do it. So I told the people I recruited: "You come in here and you've got to keep me informed, but you're the guy, and you'll make these decisions. It won't be me second-guessing you. But everybody's going to win together. We're part of a team, but you're going to run your part." That's all they want. They want a chance to do it.



For the full interview Adam Bryant conducted with Gordon Bethune, see:

Gordon M. Bethune. "Corner Office; Remember to Share the Stage." The New York Times, SundayBusiness Section (Sun., January 3, 2010): 2.

(Note: the online version of the article is dated January 2, 2010.)





March 18, 2011

Roy E. Disney as a "Real-life Jiminy Cricket"



DisneyRoyE2011-03-08.jpg"Roy E. Disney, shown in 1996, was considered a tough and outspoken critic of top executives at the Walt Disney Company." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B18) LOS ANGELES -- Roy E. Disney, who helped revitalize the famed animation division of the company founded by his uncle, Walt Disney, and who at times publicly feuded with top Disney executives, died on Wednesday in Newport Beach, Calif. He was 79.

His death, at Hoag Memorial Hospital Presbyterian, was caused by stomach cancer, a spokeswoman for the Walt Disney Company said. Mr. Disney, who had homes in Newport Beach and the Toluca Lake district of Los Angeles, was the last member of the Disney family to work at the entertainment conglomerate built by his uncle and his father, Roy O. Disney.

As a boy the younger Roy would play in the halls of his uncle's studio, where animators often used him as a test audience as they toiled on movies like "Pinocchio." As an adult he helped bring the animation studio back from the brink, overseeing a creative renaissance that led to "The Little Mermaid," "Beauty and the Beast" and "The Lion King."

But the soft-spoken Mr. Disney was primarily known for a willingness to question the company's top managers, aggressively and publicly, when he felt they were mishandling the family empire. Some people in the company referred to him as its real-life Jiminy Cricket: a living conscience who was at times intensely disliked by management for speaking out.


. . .


Returning to the company in 1984, Mr. Disney set about revitalizing the floundering animation division. He obtained financing, for instance, for a computerized postproduction facility, helping to make possible the revolving ballroom scene in "Beauty and the Beast."



For the full obituary, see:

BROOKS BARNES. "Roy E. Disney Dies at 79; Rejuvenated Animation." The New York Times (Thurs., December 17, 2009): B18.

(Note: ellipsis added.)





January 29, 2011

"It Isn't the Consumers' Job to Know What They Want"



iPadChild2011-01-21.jpg "Steven P. Jobs has played a significant role in a string of successful products at Apple, including the iPad, shown above, which was introduced last year." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) Shortly before the iPad tablet went on sale last year, Steven P. Jobs showed off Apple's latest creation to a small group of journalists. One asked what consumer and market research Apple had done to guide the development of the new product.

"None," Mr. Jobs replied. "It isn't the consumers' job to know what they want."

For years, and across a career, knowing what consumers want has been the self-appointed task of Mr. Jobs, Apple's charismatic co-founder. Though he has not always been right, his string of successes at Apple is uncanny. His biggest user-pleasing hits include the Macintosh, the iMac, iBook, iPod, iPhone and iPad.

But as he takes a medical leave of absence, announced on Monday, the question is: Without him at the helm, can Apple continue its streak of innovation, particularly in an industry where rapid-fire product cycles can make today's leader tomorrow's laggard?


. . .


(p. B4) With the iPad tablet, Apple jump-started a product category. But with the iPod (a music and media player) and iPhone (smartphone), Apple moved into markets with many millions of users using rival products, but he gave consumers a much improved experience.

"These are seeing-around-the-corner innovations," said John Kao, an innovation consultant to corporations and governments. "Steve Jobs is totally tuned into what consumers want. But these are not the kind of breakthroughs that market research, where you are asking people's opinions, really help you make."

Regis McKenna, a Silicon Valley investor and marketing consultant, said employees at Apple stores provide the company with a powerful window into user habits and needs, even if it is not conventional market research.

"Steve visits the Apple store in Palo Alto frequently," said Mr. McKenna, a former consultant to Apple.


. . .


In a conversation years ago, Mr. Jobs said he was disturbed when he heard young entrepreneurs in Silicon Valley use the term "exit strategy" -- a quick, lucrative sale of a start-up. It was a small ambition, Mr. Jobs said, instead of trying to build companies that last for decades, if not a century or more.

That was a sentiment, Mr. Jobs said, that he shared with his sometime luncheon companion, Andrew S. Grove, then the chief executive of Intel.

"There are builders and traders," Mr. Grove said on Tuesday. "Steve Jobs is a builder."



For the full story, see:

STEVE LOHR. "The Missing Tastemaker?" The New York Times (Weds., JANUARY 19, 2011): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the article is dated January 18, 2011 and has the title "Can Apple Find More Hits Without Its Tastemaker?.")





January 21, 2011

Those Who Paid Attention to Risk, Did Better in Crisis



DownsideRiskCROcentralityGraph2010-1.jpgSource of graph: screen capture from p. 43 of NBER paper referenced below.



At the American Economic Association meetings in Denver from January 6-9, I attended several sessions dealing the causes and cures of the economic crisis of the last few years.

One issue that came up more than once was whether, and to what extent, various decision makers were blameworthy in what happened. Was this a crisis that well-trained, hard-working and prudent managers, regulators and legislators should have seen coming? Or was it a once in 100 year storm that nobody should be expected to have foreseen?

One compelling bit of evidence was presented in a talk on January 8th by Charles Calomiris in which he presented a graph from a 2010 NBER paper by Ellul and Yerramilli. The graph, shown above, indicates that firms that took risk seriously, as proxied by their giving an important pre-crisis role to a Chief Risk Officer (CRO), tended to suffer less downside volatility during the crisis.


Source:

Ellul, Andrew, and Vijay Yerramilli. "Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies." NBER Working Paper # 16178, July 2010.






October 25, 2010

Entrepreneurial Improvisation is Like "Jumping Rock to Rock Up a Stream"



HoppingCreekStones2010-10-04.jpg"Crossing the Sulphurous River." Source of caption and photo: http://www.flickr.com/photos/33506763@N00/211985842#/photos/sparlingo/211985842/lightbox/


In The Venturesome Economy book, and later (pp. 129 and 142) in the book quoted below, Bhidé describes the entrepreneur's decision process as "improvisation."


(p. 18) Entrepreneurs who start uncertain businesses with limited funds have little reason to devote much effort to prior planning and research. They cannot afford to spend much time or money on the research; the modest likely profit doesn't merit much; and the high uncertainty of the business limits its value.

Sketchy planning and high uncertainty require entrepreneurs to adapt to many unanticipated problems and opportunities. One entrepreneur likens the process of starting a new business to jumping from rock to rock up a stream rather than constructing the Golden Gate Bridge from a detailed blueprint. Often, to borrow a term from Elster's discussion of biological evolution, entrepreneurs adapt to unexpected circumstances in an "opportunistic" fashion: Their response derives from a spur-of-the- moment calculation made to maximize immediate cash flow. Capital-constrained entrepreneurs cannot afford to sacrifice short-term cash for long-term profits. They have to play rapid-fire pinball rather than a strategic game of chess.


Source:

Bhidé, Amar. The Origin and Evolution of New Businesses. Oxford and New York: Oxford University Press, 2000.

[Note to self: the search phrase "jumping rock stream" seems most productive of relevant images]



Chris_and_Andrea_Jumping_from_Rock_to_Rock_Up_a_Stream.JPG"Chris and Andrea Jumping from Rock to Rock Up a Stream." Source of caption and photo: http://picasaweb.google.com/lh/photo/Q-FvMT8GFG7kZdvUm8d_Jw


JumpingRiverRocks2010-10-04cropped.jpg

























"Girl (10-12) jumping on rocks in river." Source of caption and photo: http://cache4.asset-cache.net/xc/200447463-001.jpg?v=1&c=NewsMaker&k=2&d=B3B7071D257FC0393BFC8E309AE4811E35B7CE0CF91BE8709437A3EAE6A5D3E800123AA3B5A18ED0





October 12, 2010

Forecasting Errors Increase in Complex Environments




(p. 54) There is a great deal of evidence that suggests that when people-- for example, investors and managers--are taken out of a familiar environment--an environment of continuity--their ability to deal with the future deteriorates rapidly. John Sterman, J. Spencer Standish professor of management and director of the System Dynamics Group of MIT, who has studied the ability of managers to learn over long periods of time, says that in complex environments, the more experience people have the more poorly they perform. Here is a distillation of Sterman's findings:


• "Even in perfectly functioning markets, modest levels of complexity cause large and systematic deviations from rational behavior."
• "There is little evidence of adaptation of one's 'rules' as the complexity of the task increases." When the environment is complex, people seem to revert to simple rules that ignore time delays and feedback, leading to lowered performance.
• Individuals "forecast by averaging past values and extrapolating past trends. [They] actually spend less time making their decisions in the complex markets than in the simple ones."
• The lowered performance people exhibit as a result of greater com-(p. 55)plexity does not improve with experience. People become "less responsive to critical variables and more vulnerable to forecasting errors--their learning hurts their ability to perform well in the complex conditions."
• Most individuals do not learn how to improve their performance in complex conditions. In relatively simple conditions--without time delays or feedback--people "dramatically outperform the 'do nothing' rule, but in complex situations many people are bested by the 'do nothing' rule." Attempts individuals make to control the system are counterproductive.

Markets that are undergoing rapid or discontinuous change are extremely complex. Economic systems are highly networked and involve substantial feedback. Given Professor Sterman's findings, it is not surprising that forecasting deteriorates in the face of rapid change.



Source:

Foster, Richard N., and Sarah Kaplan. Creative Destruction: Why Companies That Are Built to Last Underperform the Market---and How to Successfully Transform Them. New York: Currency Books, 2001.





October 7, 2010

Creative Destruction Book Is Useful for Documenting Dynamism of U.S. Firms



CreativeDestructionBK.jpg












Source of book image: http://www.innovation-creative.com/IMAGES/Livres_innovation_2/Foster_&_Kaplan/Foster_&_Kaplan-(US).jpg



The first couple of chapters of Creative Destruction are useful at providing some statistics on the degree of dynamism in U.S. companies over the past century or so.

In the rest of the book the authors present some interesting examples and refer to some useful research, but too often fall into the too-quick and too-easy management fad-advice mode---and Christensen and Raynor make a sound point in claiming that Foster and Kaplan sometimes oversell their main point.

Still there is some thought-provoking material here and there. I will be quoting a couple of the neater insights in the next couple of weeks.


Book discussed:

Foster, Richard N., and Sarah Kaplan. Creative Destruction: Why Companies That Are Built to Last Underperform the Market---and How to Successfully Transform Them. New York: Currency Books, 2001.





October 2, 2010

CFOs Are Bad at Forecasting, and Don't Realize They Are Bad



(p. 5) . . . , three financial economists -- Itzhak Ben-David of Ohio State University and John R. Graham and Campbell R. Harvey of Duke -- found that chief financial officers of major American corporations are not very good at forecasting the future. The authors' investigation used a quarterly survey of C.F.O.'s that Duke has been running since 2001. Among other things, the C.F.O.'s were asked about their expectations for the return of the Standard & Poor's 500-stock index for the next year -- both their best guess and their 80 percent confidence limit. This means that in the example above, there would be a 10 percent chance that the return would be higher than the upper bound, and a 10 percent chance that it would be less than the lower one.

It turns out that C.F.O.'s, as a group, display terrible calibration. The actual market return over the next year fell between their 80 percent confidence limits only a third of the time, so these executives weren't particularly good at forecasting the stock market. In fact, their predictions were negatively correlated with actual returns. For example, in the survey conducted on Feb. 26, 2009, the C.F.O.'s made their most pessimistic predictions, expecting a market return of just 2.0 percent, with a lower bound of minus 10.2 percent. In fact, the market soared 42.6 percent over the next year.

It may be neither troubling nor surprising that C.F.O.'s can't accurately predict the stock market's path. If they could, they'd be running hedge funds and making billions. What is troubling, though, is that as a group, many of these executives apparently don't realize that they lack forecasting ability. And, just as important, they don't seem to be aware of how volatile the market can be, even in "normal" times.



For the full commentary, see:

RICHARD H. THALER: "Economic View; Often Wrong, But Never in Doubt." The New York Times, SundayBusiness Section (Sun., August 22, 2010): 5.

(Note: ellipses added.)

(Note: the online version of the article is dated August 21, 2010 and has the somewhat shorter title "Economic View; The Overconfidence Problem in Forecasting.")


The Ben-David et al article is:

Ben-David, Itzhak, John R. Graham, and Campbell Harvey. "Managerial Miscalibration." Fisher College of Business Working Paper No.2010-03-012, July 2010.





September 20, 2010

Christensen's Innovator's Dilemma Is "Most Influential Business Book"



(p. W3) . . . in today's world, gale-like market forces--rapid globalization, accelerating innovation, relentless competition--have intensified what economist Joseph Schumpeter called the forces of "creative destruction."


. . .


When I asked members of The Wall Street Journal's CEO Council, a group of chief executives who meet each year to deliberate on issues of public interest, to name the most influential business book they had read, many cited Clayton Christensen's "The Innovator's Dilemma." That book documents how market-leading companies have missed game-changing transformations in industry after industry--computers (mainframes to PCs), telephony (landline to mobile), photography (film to digital), stock markets (floor to online)--not because of "bad" management, but because they followed the dictates of "good" management. They listened closely to their customers. They carefully studied market trends. They allocated capital to the innovations that promised the largest returns. And in the process, they missed disruptive innovations that opened up new customers and markets for lower-margin, blockbuster products.



For the full commentary, see:

ALAN MURRAY. "The End of Management; Corporate bureaucracy is becoming obsolete. Why managers should act like venture capitalists." The Wall Street Journal (Sat., AUGUST 21, 2010): A17.

(Note: ellipses added.)


The most complete and current account of Christensen's views can be found in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





September 17, 2010

Charles II Took a Gamble on Toleration



GamblingManBK2010-09-01.jpg











Source of book image: online version of the WSJ review quoted and cited below.






(p. A19) Early in "A Gambling Man," a detailed and thoroughly engrossing examination of the Restoration's first decade, Jenny Uglow notes that Charles Stuart, upon his ascension, "wanted passionately to be seen as the healer of his people's woes and the glory of his nation." Cromwell's regime had featured constant war and constant taxes. The population was bitterly divided among Anglicans, Catholics and dissenting Protestants--Presbyterians, Puritans, Quakers, Baptists. A huge standing army had burdened the people financially and frightened them; such an army, it was not unreasonably thought, could be used to impose a tyranny.


. . .


As a result of such divisions, Charles became a "gambler," as Ms. Uglow puts it--not at cards or gaming tables but at affairs of state. His biggest gamble was on something he fervently wanted to achieve: religious toleration for all sects and the freedom for Englishmen to follow their own "tender consciences" in individual worship. He forwarded this policy in Parliament only to receive his first major defeat with the passage of the Corporation Act, a law that took the power of corporations (governing towns and businesses) away from Nonconformists and handed it back to the Church of England. Charles had gambled on "the force of reasonable argument," Ms. Uglow says, but was ultimately defeated "by the entrenched interests of the [Anglican] Church" and "the deep-held suspicions" of Parliament, which believed that England's dissenting sects posed a persistent threat. That Charles was willing to go head-to-head with Parliament for such a cause, even in failure, was especially audacious, considering his father's fate.


. . .


In his desire to be a monarch of the people, Charles was determined to make himself accessible--in the early days of his reign he threw open the palace of Whitehall to all comers. He gambled, with some success, that (in Ms. Uglow's words) "easy access would make people of all views feel they might reach him, preventing conspiracies." During the 1666 Great Fire of London he and his brother, James, duke of York, went out into the streets and put themselves alongside soldiers and workmen. They could be seen "filthy, smoke-blackened and tired," frantically creating a firebreak as the blaze consumed London like a monstrous beast.



For the full review, see:

NED CRABB. "BOOKSHELF; Risky Business; A bitterly divided nation, a monarchy splendiferously restored.." The Wall Street Journal (Fri., NOVEMBER 27, 2009): A19.

(Note: ellipses added; bracketed word in original.)

(Note: the online version of the review is dated NOVEMBER 26, 2009.)


Book being reviewed:

Uglow, Jenny. A Gambling Man: Charles II's Restoration Game. New York: Farrar, Straus and Giroux, 2009.





August 12, 2010

Inventors Should Work Alone, Even If They Have to Moonlight



(p. 291) If you're that rare engineer who's an inventor and also an artist, I'm going to give you some advice that might be hard to take. That advice is: Work alone.

When you're working for a large, structured company, there's much less leeway to turn clever ideas into revolutionary new products or product features by yourself. Money is, unfortunately, a god in our society, and those who finance your efforts are businesspeople with lots of experience at organizing contracts that define who owns what and what you can do on your own.

But you probably have little business experience, know-how, or acumen, and it'll be hard to protect your work or deal with all that corporate nonsense. I mean, those who provide the funding and tools and environment are often perceived as taking the credit for inventions. If you're a young inventor who wants to change the world, a corporate environment is the wrong place for you.

(p. 292) You're going to be best able to design revolutionary products and features if you're working on your own. Not on a committee. Not on a team. That means you're probably going to have to do what I did. Do your projects as moonlighting, with limited money and limited resources. But man, it'll be worth it in the end. It'll be worth it if this is really, truly what you want to do--invent things. If you want to invent things that can change the world, and not just work at a corporation working on other people's inventions, you're going to have to work on your own projects.

When you're working as your own boss, making decisions about what you're going to build and how you're going to go about it, making trade-offs as to features and qualities, it becomes a part of you. Like a child you love and want to support. You have huge motivation to create the best possible inventions--and you care about them with a passion you could never feel about an invention someone else ordered you to come up with.

And if you don't enjoy working on stuff for yourself--with your own money and your own resources, after work if you have to-- then you definitely shouldn't be doing it!

. . .


It's so easy to doubt yourself, and it's especially easy to doubt yourself when what you're working on is at odds with everyone else in the world who thinks they know the right way to do things. Sometimes you can't prove whether you're right or wrong. Only time can tell that. But if you believe in your own power to objectively reason, that's a key to happiness. And a key to confidence. Another key I found to happiness was to realize that I didn't have to disagree with someone and let it get all intense. If you believe in your own power to reason, you can just relax. You don't have to feel the pressure to set out and convince anyone. So don't sweat it! You have to trust your own designs, your own intuition, and your own understanding of what your invention needs to be.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

(Note: Italics and centered ellipsis in original.)





July 31, 2010

Apple Fired Mike Scott for Firing the Laggards



Wozniak writes of pre-1983 management troubles at Apple, in the passage quoted below. The passage highlights that large companies usually lose flexibility in hiring and firing. Good managers who have tacit (or just insufficiently documented) judgment about who the best employees are, have limited ability to act on that knowledge.

I wonder if this is a necessary disadvantage of size, or a disadvantage that is due to our laws, customs and institutions?


(p. 231) By this time, I should point out, Mike Scott--our president who took us public and the guy who took us through the phenomenally successful IPO--was gone. During the time the Apple III was being developed, he thought we'd grown a bit too large. There were good engineers, sure, but there were also a lot of lousy engineers floating around. That happens in any big company.

It's not necessarily the lousy engineer's fault, by the way. There's always going to be some mismatch between an engineer's interests and the job he's doing.

Anyway, Scotty had told Tom Whitney, our engineering manager, to take a vacation for a week. And meanwhile he did some research. He went around and talked to every engineer in the company and found out who was doing what and who was working and who wasn't doing much of anything.

Then he fired a whole bunch of people. That was called Bloody Monday. Or, at least, that's what it ended up being called in the Apple history books. I thought that, pretty much, he fired all the right ones. The laggards, I mean.

And then Mike Scott himself was fired. The board was just very pissed that he'd done this without a lot of backing and enough due process, the kind of procedure you're supposed to follow at a big company.

Also, Mike Markulla told me Mike Scott had been making a lot of rash decisions and decisions that just weren't right. Mike thought Scotty wasn't really capable of handling the company given the point and size it had gotten to.

I did not like this one bit. I liked Scotty very, very much as a person. I liked his way of thinking. I liked his way of being able to joke and be serious. With Scotty, I didn't see many things fall (p. 232) through the cracks. And I felt that he respected the good work that I did--the engineering work. He came from engineering.

And as I said, Scotty had been our president, our leader from day one of incorporation until we'd gone public in one of the biggest IPOs in U.S. history. And now, all of a sudden, he was just pushed aside and forgotten.

I think it's sad that none of the books today even seem to recall him. Nobody knows his name. Yet Mike Scott was the president that took us through the earliest days.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 27, 2010

The Problems of Design by a Marketing Committee



(p. 226) So why did the Apple Ill have so many problems, despite the fact that all of our other products had worked so great? I can answer that. It's because the Apple III was not developed by a single engineer or a couple of engineers working together. It was developed by committee, by the marketing department. These (p. 227) were executives in the company who could take a lot of their power and decide to put all their money and resources in the direction of their own ideas. Their own ideas as to what a computer should be.

Marketing saw that the business community would be the bigger market. They saw that the typical small businessman went into a computer store, bought an Apple II, a printer, the VisiCalc spreadsheet program, and two plug-in cards. One was a memory card, which allowed them to run larger spreadsheets. And the other was an eighty-column card, which allowed them to present eighty columns of characters across the video display, instead of the normal forty. Forty columns was the limit of American TVs.

So they came up with the idea that this should all be built into a single machine: the Apple III. And it was built.

Initially there was virtually no software designed for the Apple III. Yet there were hundreds of software programs you could buy for the Apple II. So to have a lot of software right away, Apple built the Apple III as a dual computer--there was a switch that let you select whether the computer started up as an Apple II or as an Apple III. (The Apple III hardware was designed to be extremely compatible with the Apple II, which was hard to improve on.) It couldn't be both at. once.

And it was here they did something very wrong. They wanted to set the public perception of the Apple III as a business computer and position the Apple II as the so-called home hobby machine. The little brother of the family. But get this. Marketing had us add chips--and therefore expense and complexity--to the Apple III in order to disable the extra memory and eighty column triodes if you booted it up as an Apple II.

This is what killed the Apple Ill's chances from the get-go. Here's why. A businessman buying an Apple II for his work could easily say, "I'll buy an Apple III, and use it in the Apple II mode since I'm used to it, but I'll still have the more modern machine." (p. 228) But Apple killed the product that businessman would want by disabling the very Apple II features (extra memory and eighty- column mode) he was buying the computer for.

Out of the chute, the Apple Ill got a lot of publicity, but there was almost nothing you could run on it. As I said, it wasn't reliable. And in Apple II mode, it was crippled.

To this day, it boggles my mind. It's just not the way an engineer--or any rational person, for that matter--would think. It disillusioned me that big companies could work this way.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 19, 2010

HP Turns Down Wozniak Again



(p. 193) But I went to talk to the project manager, Kent Stockwell. Although I had done all these computer things with the Apple I and Apple II, I wanted to work on a computer at HP so bad I would have done anything. I would even be a measely printer interface engineer. Something tiny.

I told him, "My whole interest in life has been computers. Not calculators."

(p. 194) After a few days, I was turned down again.

I still believe HP made a huge mistake by not letting me go to its computer project. I was so loyal to HP. I wanted to work there for life. When you have an employee who says he's tired of calculators and is really productive in computers, you should put him where he's productive. Where he's happy. The only thing I can figure is there were managers and submanagers on this computer project who felt threatened. I had already done a whole computer. Maybe they bypassed me because I had done this single-handedly. I don't know what they were thinking.

But they should've said to themselves, "How do we get Steve Wozniak on board? Just make him a little printer interface engineer." I would've been so happy, but they didn't bother to put me where I would've been happiest.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





March 23, 2010

"Strategy, as We Knew It, Is Dead''



(p. B7) During the recession, as business forecasts based on seemingly plausible swings in sales smacked up against reality, executives discovered that strategic planning doesn't always work.

Some business leaders came away convinced that the new priority was to be able to shift course on the fly. Office Depot Inc., for example, began updating its annual budget every month, starting in early 2009. Other companies started to factor more extreme scenarios into their thinking. A few even set up "situation rooms,'' where staffers glued to computer screens monitored developments affecting sales and finances.

Now, even though the economy is slowly picking up, those fresh habits aren't fading. "This downturn has changed the way we will think about our business for many years to come," says Steve Odland, Office Depot's chairman and chief executive.

Walt Shill, head of the North American management consulting practice for Accenture Ltd., is even more blunt: "Strategy, as we knew it, is dead,'' he contends. "Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future."

Companies have long planned for changing circumstances. What's new--and a switch from the distant calendars and rigid forecasts of the past--is the heavy dose of opportunism. Office Depot stuck with its three-year planning process after the recession hit, largely to make sure employees had a common plan to rally around, Mr. Odland says. But the CEO decided to review the budget every month rather than quarterly so the office-supply chain could react faster to changes in customers' needs.




For the full story, see:

JOANN S. LUBLIN and DANA MATTIOLI. "Theory & Practice; Strategic Plans Lose Favor; Slump Showed Bosses Value of Flexibility, Quick Decisions." The Wall Street Journal (Mon., January 22, 2010): B7.





March 3, 2010

Many of McDonald's Best New Products, Started With Franchise Operators



(p. 163) Some of my detractors, and I've acquired a few over the years, say that my penchant for experimenting with new menu items is a foolish indulgence. They contend that it stems from my never having outgrown my drummer's desire to have something new to sell. "McDonald's is in the hamburger business," they say. "How can Kroc even consider serving chicken?" Or, "Why change a winning combination?"

Of course, it's not difficult to demonstrate how much our menu has changed over the years, and nobody could argue wish the success of additions such as the Filet-O-Fish, the Big Mac, Hot Apple Pie, and Egg McMuffin. The most interesting thing to me about these items is that each evolved from an idea of one of our operators. So the company has benefited from the ingenuity of its small businessmen while they were being helped by the system's image and our cooperative advertising muscle. This, to my way of thinking, is the perfect example of capitalism in action. Competition was the catalyst for each of the new items. Lou Groen came up with Filet-O-Fish to help him in his battle against the Big Boy chain in the Catholic parishes of Cincinnati. The Big Mac resulted from our need for a larger sandwich to compete against Burger King and a variety of specialty shop concoctions. The idea (p. 164) for Big Mac was originated by Jim Delligatti in Pittsburgh.

Harold Rosen, our operator in Enfield Connecticut, invented our special St. Patrick's Day drink, The Shamrock Shake. "It takes a guy with a name like Rosen to think up an Irish drink," Harold told me. He wasn't kidding. "You may be right," I said. "It takes a guy with a name like Kroc to come up with a Hawaiian sandwich . . . Hulaburger." He didn't say anything. He didn't know whether I was kidding or not. Operators aren't the only ones who come up with creative ideas for our menu. My old friend Dave Wallerstein, who was head of the Balaban & Katz movie chain and has a great flair for merchandising--he's the man who put the original snack bars in Disneyland for Walt Disney--is an outside director of McDonald's, and he's the one who came up with the idea for our large size order of french fries. He said he loved the fries, but the small bag wasn't enough and he didn't want to buy two. So we kicked it around and he finally talked us into testing the larger size in a store near his home in Chicago. They have a window in that store that they now call "The Wallerstein Window," because every time the manager or a crew person would look up, there would be Dave peering in to see how the large size fries were selling. He needn't have worried. The large order took off like a rocket, and it's now one of our best-selling items. Dave really puts his heart into his job as a director, now that he's retired and has plenty of time. There's nothing he likes more than traveling with me to check out stores.

Our Hot Apple Pie came after a long search for a McDonald's kind of dessert. I felt we had to have a dessert to round out our menu. But finding a dessert item that would fit readily into our production system and gain wide acceptance was a problem. I thought I had the answer in a strawberry shortcake. But it sold well for only a short time and then slowed to nothing. I had high hopes for pound cake, too, but it lacked glamor. We needed something we could romance in advertising. I was ready to give up when Litton Cochran suggested we try fried pie, which he said is an old southern favorite. The rest, of course, is fast-food history. Hot Apple Pie, and later Hot Cherry Pie, has that special quality, that classiness in a finger food, that made it perfect for McDonald's. The pies added significantly to our sales and (p. 165) revenues. They also created a whole new industry for producing the filled, frozen shells and supplying them to our stores.

During the Christmas holidays in 1972, I happened to be visiting in Santa Barbara, and I got a call from Herb Peterson, our operator there, who said he had something to show me. He wouldn't give me a clue as to what it was. He didn't want me to reject it out of hand, which I might have done, because it was a crazy idea--a breakfast sandwich. It consisted of an egg that had been formed in a Teflon circle, with the yolk broken, and was dressed with a slice of cheese and a slice of grilled Canadian bacon. This was served open-face on a toasted and buttered English muffin. I boggled a bit at the presentation. But then I tasted it, and I was sold. Wow! I wanted to put this item into all of our stores immediately. Realistically, of course, that was impossible. It took us nearly three years to get the egg sandwich fully integrated into our system. Fred Turner's wife, Patty, came up with the name that helped make it an immediate hit--Egg McMuffin.



Source:

Kroc, Ray. Grinding It Out: The Making of McDonald's. Chicago: Henry Regnary Company, 1977.

(Note: ellipsis and italics in original.)





February 27, 2010

Ray Kroc's Account of How Filet-O-Fish Came to McDonald's



One of the challenges of efficiently running a business is when to encourage experimentation and innovation among employees, and when to enforce standardization. Sam Walton seemed to have handled this well at Wal-Mart.

In the passage quoted below, Ray Kroc gives a glimpse of how he handled the issue at McDonald's.


(p. 137) . . . , the quality of our french fries was a large part of McDonald's success, and I certainly didn't want to jeopardize our business with a frozen potato that was not up to our standard. So we made certain that the frozen product was thoroughly tested and that it met every condition of quality before we made it part of the system.

There was another product being tested at this time that would prove to have a tremendous effect on our business. This was the (p. 138) Filet-O-Fish sandwich. It had been born of desperation in the mind of Louis Groen in Cincinnati. He had that city as an exclusive territory as a result of some horse trading he'd done with Harry and me back in the days when we were using everything but butterfly nets to catch franchisees. Lou's major competition was the Big Boy chain. They dominated the market. He managed to hold his own against them, however, on every day but Friday. Cincinnati has a large Catholic population and the Big Boys had a fish sandwich. So if you add those two together on a day the church had ordained should be meatless, you have to subtract most of the business from McDonald's.

My reaction when Lou first broached the fish idea to me was, "Hell no! I don't care if the Pope himself comes to Cincinnati. He can eat hamburgers like everybody else. We are not going to stink up our restaurants with any of your damned old fish!"

But Lou went to work on Fred Turner and Nick Karos. He convinced them that he was either going to have to sell fish or sell the store. So they went through a lot of research, and finally made a presentation that convinced me.

Al Bernardin, who was our food technologist at the time, worked with Lou on the type of fish to be used, halibut or cod, and they finally decided to go with the cod. I didn't care for that; it brought back too many childhood memories of cod liver oil, so we investigated and found out it was perfectly legal to merchandise it as North Atlantic whitefish, which I like better. There were all kinds of fishhooks in developing this sandwich: how long to cook it, what type of breading to use, how thick it should be, what kind of tartar sauce to use, and so forth. One day I was down in our test kitchen and Al told me about a young crew member in Lou Groen's store who had eaten a fish sandwich with a slice of cheese on it.

"Of course!" I exclaimed. "That's exactly what this sandwich needs, a slice of cheese. No, make it half a slice." So we tried it, and it was delicious. And that is how the slice of cheese got into the McDonald's Filet-O-Fish.

We started selling it only on Fridays in limited areas, but we got so many requests for it that in 1965 we made it available in all our stores every day, advertising it as the "fish that catches people." I (p. 139) told Fred Turner and Dick Boylan, both of whom happen to be Catholic, "You fellows just watch. Now that we've invested in all this equipment to handle fish, the Pope will change the rules." A few years Later, damned if he didn't. But it only made those big fish sales figures that much sweeter to read.



Source:

Kroc, Ray. Grinding It Out: The Making of McDonald's. Chicago: Henry Regnary Company, 1977.





February 24, 2010

Business Decisions Often Need to Be Made Before You Have Much Data



McGrathRitaGunther2010-01-27.jpgRita Gunther McGrath is a member of the faculty of the Columbia Business School. Source of photo: online version of the WSJ article quoted and cited below.


(p. R2) BUSINESS INSIGHT: You and Prof. Ian C. MacMillan of the Wharton School of the University of Pennsylvania wrote a book called "Discovery-Driven Growth." What is discovery-driven growth?

DR. MCGRATH: Discovery-driven growth is a way of planning to grow that doesn't require a lot of analytical information at the outset. It recognizes that many of the data that you need to make decisions don't exist at the time that you have to make the decisions. It's a plan to learn.

I think we all live with a conceptual overhang from an industrial era when things were more predictable. You had big production runs. At least if you were an American company, you had a lot of markets with very little competition, and what competition there was was more or less predictable. In many businesses you could use the past as an adequate guide to what the future held for you.

In more and more industries, those conditions no longer apply. You're seeing temporary advantages, very rapid swings in who's on top competitively, new technologies that make older ones irrelevant at an ever-faster clip--the usual litany of things people moan about today. But I think one of the things that has not yet quite been fully recognized is that these have an impact on our management processes--or should.



For the full interview, see:

Martha E. Mangelsdorf. "Executive Briefing; Learning From Corporate Flops; When starting new ventures, companies should revisit their assumptions early and often." The Wall Street Jounal (Mon., OCTOBER 26, 2009): R2.

(Note: italics in original.)


DiscoveryDrivenGrowthBK.gif















Source of book image: http://events.roundtable.com/iguru/DiscoveryDrivenGrowth.gif.






February 23, 2010

Entrepreneurial Judgment Can Be Right Even When It Is Hard to Articulate



Entrepreneurs may develop a good sense of people, even though they cannot articulate their judgment. Yet their firms, and our economy, might be more efficient and productive if they were allowed to follow their judgments, rather than follow Human Resource Department credentialism and paper trails.

The entrepreneurs might make mistakes, but in an open economy they would pay a price for their mistakes in profits foregone, and hence would have an incentive to correct the mistakes. And there would be plenty of alternative jobs for anyone mistakenly fired.



(p. 91) I've been wrong in my judgments about men, I suppose, but not very often. Bob Frost, one of our key executives on the West Coast, will remember the time he and I were checking out stores, and I got a very unfavorable impression of one of his young managers. As we drove away from the store I said to Bob, "I think you'd better fire that man." "Oh, Ray, come on!" he exclaimed. "Give the kid a break. He's young, he has a good attitude, and I think he will come along."

"You could be right, Bob," I said, "but I don't think so. He has no potential."

Later in the day, as we were driving back to Los Angeles, that conversation was still bugging me. Finally I turned to Bob and yelled, "Listen goddammit I want you to fire that man!"

One thing that makes Bob Frost a good executive is that he has the courage of his convictions. He also sticks up for his people. He's a retired Navy man, and he knows how to keep his head under fire. He simply pursed his lips and nodded solemnly and said, "If you are ordering me to do it, Ray, I will. But I would like to give him another six months and see how he works out."

I agreed, reluctantly. What happened after that was the kind of (p. 92) personnel hocus-pocus that government is famous for but should never be permitted in business, least of all in McDonald's. The man hung on. He was on the verge of being fired several times in the following years, but he was transferred or got a new supervisor each time. He was a decent guy, so each new boss would struggle to reform him. Many years later he was fired. The assessment of the executive who finally swung the ax was that "this man has no potential."

Bob Frost now admits he was wrong. I had the guy pegged accurately from the outset. But that's not the point. Our expenditure of time and effort on that fellow was wasted and, worst of all, he spent several years of his life in what turned out to be a blind alley. It would have been far better for his career if he'd been severed early and forced to find work more suited to his talents. It was an unfortunate episode for both parties, but it serves to show that an astute judgment can seem arbitrary to everyone but the man who makes it.



Source:

Kroc, Ray. Grinding It Out: The Making of McDonald's. Chicago: Henry Regnary Company, 1977.





January 29, 2010

Another Boeing BHAG Takes Flight



BoeingDreamlinerFirstFlight2010-01-23.jpg "Members of the public watched the first test flight of the Boeing 787 on Tuesday in Everett, Wash." Source of caption and photo: online version of the NYT article quoted and cited below.



In their stimulating business best-seller Built to Last Collins and Porrus have a chapter in which they argue that one way to attract and retain the best employees is to give them a difficult but important project to work on. They call such projects "BHAGs," which stands for Big Hairy Audacious Goals. Among their main examples (e.g., p. 104) of BHAGs were Boeing's development of the 707 and 747.

Boeing's latest BHAG is the 787 Dreamliner.


(p. A25) EVERETT, Wash. -- The new Boeing 787 Dreamliner lifted into the gray skies here for the first time on Tuesday morning, more than two years behind schedule and burdened with restoring Boeing's pre-eminence in global commercial aviation.

"Engines, engines, engines, engines!" shouted April Seixeiro, 37, when the glossy twin-engine plane began warming up across from where spectators had informally gathered at Paine Field. Ms. Seixeiro was among scores of local residents and self-described "aviation geeks" who came to watch the first flight.

Moments after the plane took off at 10:27 a.m., Mrs. Seixeiro was wiping tears from her eyes. A friend, Katie Bailey, 34, cried, too.

"That was so beautiful," Ms. Bailey said.



For the full story, see:

WILLIAM YARDLEY. "As 787 Takes Flight, Seattle Wonders About Boeing's Future." The New York Times (Weds., December 16, 2009): A25.

(Note: the online version of the article has the title "A Takeoff, and Hope, for Boeing Dreamliner" and is dated December 15, 2009.)


The reference for the Collins and Porras book is:

Collins, James C., and Jerry I. Porras. Built to Last: Successful Habits of Visionary Companies. New York: HarperBusiness, 1994.





January 22, 2010

Bert Sutherland Was the "Hero of Xerox PARC"



The failure of Xerox to take advantage of the innovations developed at Xerox PARC, is a legendary example of management failure. A couple of books have been written on the subject that I hope to read sometime.


(p. 194) Beyond his efforts in VLSI design, Bert Sutherland had supported the work at Xerox PARC that led to the "windows" and the "mouse" on nearly every workstation and many personal computers, from Apple and Atari to Apollo and Sun. He formed the research department that made Ethernet the dominant small computer network and that conceived the "notebook" lap computer. Xerox's lead in IC design gave the company the tools--if the firm had only understood them--to lend new special features to every copier and printer and even to create the kind of electronic "personal copiers" later pioneered by Canon.

Bert Sutherland was the hero of Xerox PARC: that is history. But that was not life. In real life, Xerox fired him in 1979. While he worked day and night on the novel projects in Palo Alto that were to give Xerox an indelible role in the history of computer technology, jealous rivals conspired against him at headquarters. They said that his research, which would fuel the industry for a decade, was irrelevant to the needs of the company. In corning years, the research leadership that replaced him would make the company nearly irrelevant to the needs of the world.




Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.





January 19, 2010

Microsoft Hired Good People and Gave Them the Space and Privacy to Think



OfficeSpaceShrinks2010-01-16.jpg Not Microsoft. "Mark Clemente, a Steinreich Communications vice president, in the firm's smaller Hackensack, N.J., office." Source of caption and photo: online version of the WSJ article quoted and cited below.


The article quoted below documents the trend in business toward small, and more open offices. I believe that this trend is largely a mistake.

Another trend in business (see Levy and Murnane 2004) is for more jobs to involve thinking and creativity. Thinking and creativity are harder in an environment of noise and frequent and unpredictable interruptions.

David Thielen's book on the secrets of Microsoft's success that said that Microsoft emphasized hiring really good people, and then respected them enough to give them an office with a door, so they could have the space and privacy to think and create (e.g., pp. 17-35 & 147-150).

Microsoft had the right idea.


(p. B7) The office cubicle is shrinking, along with workers' sense of privacy.

Many employers are trimming the space allotted for each worker. The trend has accelerated during the recession as employers seek to cut costs and boost productivity.


. . .

Tighter quarters and open floor plans also can present challenges. David Lewis, president of OperationsInc LLC, a Stamford, Conn., provider of human-resources services to more than 300 U.S. companies, says open floor plans and low cubicle walls can create discord and lead to increased turnover.

"Now everybody knows everybody else's business," he says. "It actually starts to create a level of tension in an office that never existed before. People can't focus on work because they're on top of each other."




For the full story, see:

SARAH E. NEEDLEMAN. "THEORY & PRACTICE; Office Personal Space Is Crowded Out; Workstations Become Smaller to Save Costs, Taking a Toll on Employee Privacy." The Wall Street Journal (Mon., DECEMBER 7, 2009): B7.

(Note: ellipsis added.)


The Levy and Murnane book mentioned above, is:

Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.


The Thielen book is:

Thielen, David. The 12 Simple Secrets of Microsoft Management: How to Think and Act Like a Microsoft Manager and Take Your Company to the Top. New York: McGraw-Hill, 1999.





December 21, 2009

Did Fairchild Fail Due to Bad Management or Disruptive Technology?



Clayton Christensen has shown how good management, following respected practices, can fail in the face of disruptive technologies. It would be interesting to investigate whether Fairchild was an example of what Christensen is talking about, or whether it just did not have good management.


(p. 89) Andrew Grove . . . had played a central role in bringing Fairchild to the threshold of a new era. But Fairchild would not enjoy the fruits of his work. Following the path of venture capital pioneer Peter Sprague were scores of other venture capitalists seeking to exploit the new opportunities he had shown them. Collectively, they accelerated the pace of entrepreneurial change--splits and spinoffs, startups and staff shifts--to a level that might be termed California Business Time ("What do you mean, I left Motorola quickly?" asked Gordon Campbell with sincere indignation. "I was there eight months!").

The venture capitalist focused on Fairchild: that extraordinary pool of electronic talent assembled by Noyce and Moore, but left essentially unattended, undervalued, and little understood by the executives of the company back in Syosset, New York. Fairchild leaders John Carter and Sherman Fairchild commanded the microcosm: the most important technology in the history of the human race. Noyce, Moore, Hoerni, Grove, Sporck, design genius Robert Widlar, and marketeer Jerry Sanders represented possibly the most potent management and technical team ever assembled in the history of world business. But, hey, you guys, don't forget to report back to Syosset. Don't forget who's boss. Don't give out any bonuses without clearing them through the folks at Camera and Instrument. You might upset some light-meter manager in Philadelphia.

They even made Charles Sporck, the manufacturing titan, feel like "a little kid pissing in his pants." Good work, Sherman, don't let the big lug put on airs, don't let him feel important. He only controls 80 percent of the company's growth. Widlar is leaving? Great, he never fit in with the corporate culture anyway. Sporck has gone off with Peter Sprague? There are plenty more where he came from.

"It was weird," said Grove, "they had no idea about what the company or the industry was like, nor did they seem to care. . . . Fairchild was just crumbling. If you wish, the semiconductor division management consisted of twenty significant players: eight went to National, eight went into Intel, and four of them went to Alcoholics Anonymous or something." Actually there were more than twenty and they went into startups all over the Valley; some twenty-six new semiconductor firms sprouted up between 1967 and 1970. "It got to the point," recalled one man quoted in Dirk Hanson's The New Alchemists, "where people were practically driving trucks over to Fairchild and loading up with employees."





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: the first ellipsis was added; the others were in the original. The italics were also in the original.)





November 12, 2009

Videos of Routines Are Better than Focus Groups and Surveys



ChangeByDesignBK.jpg














Source of book image: http://bobsutton.typepad.com/.a/6a00d83451b75569e20120a5fa1e26970c-800wi.



(p. W8) Mr. Brown argues . . . emphatically for the close observation of users in their natural habitats. Traditional market-research tools--focus groups, surveys--rarely produce breakthrough findings, he claims. IDEO and others follow users around--making video recordings of them as they go about their routines, recording conversations with them--to build an understanding of what they really need. An IDEO employee in the health-care area, for instance, pretended to have a foot injury and checked himself into an emergency room with a hidden video camera to get a better view of the patient experience. This anthropological form of market research, Mr. Brown notes, has been adopted by companies such as Intel and Nokia.


For the full review, see:

DAVID A. PRICE. "The Shape of Things to Come; Design is more than aesthetics and ease of use. It's a way of doing business." The Wall Street Journal (Fri., OCTOBER 9, 2009): W8.

(Note: ellipsis added.)


Reference the book being reviewed:

Brown, Tim. Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation. New York: HarperBusiness Publishers, 2009.





November 2, 2009

Monty Python Success Arose from Freedom, Not Plans



Pythons1969.jpg"The unusual suspects, 1969: top row from left, Graham Chapman, Eric Idle and Terry Gilliam; bottom row from left, Terry Jones, John Cleese and Michael Palin." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 24) "A lot of contemporary comedy seems self-conscious," Mr. Palin said. "It's almost documentary, like 'The Office.' That's a very funny show, but you're looking at the human condition under stress. The Pythons made the human condition seem like fun."

He added: "I'm proud to be a Python. It's a badge of silliness, which is quite important. I was the gay lumberjack, I was the Spanish Inquisition, I was one-half of the fish-slapping dance. I look at myself and think that may be the most important thing I've ever done."

Mr. Cleese and Mr. Jones, in rare agreement, both suggested that one reason the Pythons have never been successfully imitated is that television executives nowadays would never let anyone get away with putting together a show like theirs. When they began, they didn't have an idea what the show should be about or even a title for it. The BBC gave them some money, and then, Mr. Cleese joked, the executives hurried off to the bar.

"The great thing was that in the beginning we had such a low profile," he said. "We went on at different times, and some weeks we didn't go on at all, because there might be a show-jumping competition. But that was the key to our feeling of freedom. We didn't know what the viewing figures were, and we didn't care. What has happened now is the complete reverse. Even the BBC is obsessed with the numbers."

So obsessed, Bill Jones pointed out, that in the case of "Monty Python: Almost the Truth" some people encouraged the documentarians to see if they couldn't squeeze the six hours down to one.




For the full story, see:

CHARLES McGRATH. "Television; On Comedy's Flying Trapeze." The New York Times, Arts & Leisure Section (Sun., October 4, 2009): 1 & 24.

(Note: ellipses added.

(Note: the online version of the article is dated September 30, (sic) 2009.)


PythonsPremeireSpamalot2009-10-23.jpg"Above from left, Mr. Jones, Mr. Gilliam, Mr. Cleese, Mr. Idle and Mr. Palin at the premiere of "Spamalot."" Source of caption and photo: online version of the NYT article quoted and cited above.





July 13, 2009

Justice Department is Creating Barriers to Companies Trying to Create New Technologies



BarrettCraigIntel2009-06-20.jpg















Intel CEO Craig Barrett. Source of caricature: online version of the WSJ article quoted and cited below.



(p. A9) Craig Barrett is spending the last days of his tenure as Intel chairman the same way he spent his previous 35 years at the corporation: moving at a superhuman pace that leaves exhausted subordinates in his wake.

Mr. Barrett has maintained this lifestyle since he replaced Andrew Grove as CEO of Intel in 1998. "Was it hard to follow a legend?" he asks himself in his typical blunt way, adding, "What do you think?" Mr. Barrett barely broke pace when he became chairman in 2005, and shows no sign of slowing even now, at age 69, as he faces retirement.


. . .


The latest thing that has him animated is the record $1.45 billion antitrust fine levied against Intel by the European Union this week. Mr. Barrett shakes his head and says, "The antitrust rules and regulations seem designed for a different era. When you look at high-tech companies, with the high R&D budgets, specialization and market creation they need to hold their big market shares, it's so very different from the old world of oil companies and auto makers that the antitrust regulations were designed for. They are out of sync with reality.

"And how do you reconcile European regulators, who don't believe that any company should have more than 50% market share -- even a market that company created -- with the way we operate here? Of course, now it seems as if our Justice Department is preparing to march in lock-step behind Europe. In the end, all they are going to do is create barriers to companies growing, entering into new markets, and bringing new technologies into those markets. And when we stop being the land of opportunity, all of those smart immigrant kids getting their Ph.D.s here are going to start heading home after they graduate. Then watch what happens to our competitiveness."



For the full story, see:

MICHAEL S. MALONE. "OPINION: THE WEEKEND INTERVIEW with Craig Barrett; From Moore's Law to Barrett's Rules; Intel's chairman on antitrust silliness and the secrets of high-tech success." Wall Street Journal (Sat., MARCH 16, 2009): A9.

(Note: ellipsis added.)





July 3, 2009

Berkshire BYD Technology Bet Based on Munger's View of BYD Manager



MungerCharlie2009-06-19.jpg











"BOOK VALUE: Berkshire Hathaway's Charles Munger reads businesses well -- and, as a bibliophile, he goes through several books a week." Source of caricature and caption: online version of the WSJ article quoted and cited below.



At a Berkshire Hathaway annual meeting a few years ago, I remember hearing Warren Buffett say that he stays away from technology stocks because he does not know how to judge which technologies are likely to succeed in the long-run. So I was a bit puzzled by the news that Berkshire Hathaway was investing in BYD, a Chinese company producing an electric car.

The passages quoted below may partially solve the puzzle: the investment in BYD was pushed by Charlie Munger and David Sokol, and was based more on a judgment about the quality of BYD's management, than the prospects for BYD's technology.


(p. C1) Mr. Munger's views have pushed Berkshire into some surprising directions. Several years ago, Mr. Munger learned of an obscure Chinese maker of batteries and automobiles called BYD Inc., which hopes to create a cheap, functional electric car.

A Chinese tech company is nothing like the shoe and underwear makers Berkshire had been buying. But Mr. Munger was enthusiastic, less about the technology than about Wang Chuanfu, who runs BYD. Mr. Wang, Mr. Munger says, is "likely to be one of the most important business people who ever lived."

Mr. Buffett was skeptical at first. But Mr. Munger persisted. David Sokol, chairman of Berkshire utility MidAmerican Energy Holdings Co., paid a visit to BYD's factory in China and agreed with Mr. Munger's assessment. Last year, MidAmerican paid $230 million for a 10% stake in BYD.

"BYD was Charlie's idea," Mr. Buffett said. "When he encounters genius and sees it operating in a practical way, he gets blown away."




For the full story, see:

SCOTT PATTERSON. "Here's the Story on Berkshire's Munger." Wall Street Journal (Fri., MAY 1, 2009): C1 & C3.






May 16, 2009

"Every Organization Has Too Many Meetings"



HastieReidMeetings2009-05-15.jpg"Reid Hastie, a professor at the University of Chicago, contends that "every organization has too many meetings, and far too many poorly designed ones." " Source of photo and caption: online version of the NYT article quoted and cited below.



The author of the following wise words is a Professor of Behavioral Science at the School of Business at the University of Chicago. One of the main points of the commentary, in the language of economics, is that meeting planners often fail to consider the opportunity cost of attendees' time:


(p. 2) As a general rule, meetings make individuals perform below their capacity and skill levels.

This doesn't mean we should always avoid face-to-face meetings -- but it is certain that every organization has too many meetings, and far too many poorly designed ones.

The main reason we don't make meetings more productive is that we don't value our time properly. The people who call meetings and those who attend them are not thinking about time as their most valuable resource.


. . .


Probably most important, we are blind to lost time opportunities. When we choose where to invest our time, as opposed to where to invest money, we are more likely to neglect what else we could have done with it.



For the full commentary, see:

REID HASTIE. "Preoccupations - Meetings Are a Matter of Precious Time." The New York Times, SundayBusiness Section (Sun., January 18, 2009): 2.

(Note: ellipsis added.)





March 25, 2009

Steuben Saw "The Genius of this Nation"


SteubenBaronVon.jpg











"German soldier of fortune and American ally Baron von Steuben (1730-94)" Source of caption and photo: online version of the WSJ review quoted and cited below.



(p. W9) The essence of Steuben's achievement was his modification of the brutal, robotic precision of the Prussian system to fit American conditions. He was able to do this because he was one of the first foreign observers, military or civilian, to grasp an essential strain of the American character. "The genius of this nation," he wrote a European friend, "is not in the least to be compared with that of the Prussians, Austrians or French. You say to your soldier, 'Do this,' and he doeth it. I am obliged to say, 'This is the reason why you ought to do that,' and then he does it."

. . .

While Mr. Lockhart tends to soft-pedal some of Steuben's more dubious deeds -- ignoring, for instance, his attempt to interest Prince Henry of Prussia, Frederick the Great's younger brother, in becoming king of the independent colonies before the adoption of the Constitution -- the author generally treats his subject with balance, understanding and great good humor, aptly concluding that, "although he blurred a few details of the past in order to seek preferment in the United States, somewhere between his arrival and the achievement of American independence, the Baron became something very much like the man he had pretended to be."



For the full review, see:

ARAM BAKSHIAN JR. "BOOKS; Revolutionary Scamp." The Wall Street Journal (Sat., NOVEMBER 8, 2008): W9.


The reference to the book under review is:

Lockhart, Paul. The Drillmaster of Valley Forge. New York: HarperCollins Publishers, 2008.


DrillmasterOfValleyForgeBK.jpg















Source of book image: http://robertos-book-picks.blogspot.com/2008/11/drillmaster-of-valley-forge-baron-de.html





February 13, 2009

New Business Model for Promoting Disruptive Innovation


ChristensenClayton2009-01-21.jpg








"Clayton M. Christensen" Source of caption and photo: online version of the WSJ interview quoted and cited below.


(p. R2) BUSINESS INSIGHT: . . . There must be, . . . , cases where concerns about the market cause companies to abandon their plans for new products or really retrench. Or do you see that happening less these days as companies realize the importance of keeping up with changing markets?

DR. CHRISTENSEN: In the next two years, I think the answer will hinge quite a bit on the role that hedge funds play in driving stock prices. By now, 95% of all trades on the stock exchange are executed by hedge funds, mutual funds or pension funds that you could not call shareholders. They're share owners, but they don't even hold the shares long enough, on average, to vote the proxy. And long-term shareholders are always better for innovation than the short-term people are.

BUSINESS INSIGHT: So we might see innovation more from private companies?

DR. CHRISTENSEN: Absolutely right. And there's another business model toward which more and more companies need to move. It's a business model you see with Li & Fung in Hong Kong, Tata Sons in India, and Cox Enterprises in Atlanta. In this model, the holding company is privately held, and then certain of the subsidiary companies that have the right characteristics take their shares public on the market.

What that allows those companies to do is, when they have a disruptive innovation that they need to launch, they can just do it under the private umbrella of the holding company, and not have it reduce the near-term performance of the publicly held subsidiaries.



For the full interview, see:

Martha E. Mangelsdorf, interviewer. "Executive Briefing; How Hard Times Can Drive Innovation." Wall Street Journal (Mon., DECEMBER 15, 2008): R2.

(Note: ellipses added.)




November 30, 2008

Einstein on What Counts


"Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."


Source:

Albert Einstein, as quoted in Koch, Charles G. The Science of Success: How Market-Based Management Built the World's Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.




October 17, 2008

"Leapfrog Over the Other Players in Their Industry"


(p. 152) The early market is driven by the demands of visionaries for offerings that create dramatic competitive advantages of the sort that would allow them to leapfrog over the other players in their industry.


Source:

Moore, Geoffrey A. Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet. 1st ed. New York: HarperCollins Publishers, Inc., 2000.




August 31, 2008

Kodak Ignored Digital to Its Peril


SassonStevenKodakInventor.jpg "Steven J. Sasson, an electrical engineer, created the first digital camera." Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak's problems in detailed in the article below, fit very well Christensen's account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER -- Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management's dismay at his feat.

"My prototype was big as a toaster, but the technical people loved it," Mr. Sasson said. "But it was filmless photography, so management's reaction was, 'that's cute -- but don't tell anyone about it.' "

. . .

(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.'s -- organic light-emitting diodes -- for displays in cameras, cellphones and televisions.

This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.

. . .

Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.

"I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream," said Philip J. Faraci, Kodak's president. "The technology was half-baked, but it was a real breakthrough."

Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. "I've been here five years, and I'm still learning about all the things they already have," he said. "It seems Kodak had developed antibodies against anything that might compete with film."

It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.

"This was a supertanker that came close to capsizing," said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.



For the full story, see:

CLAUDIA H. DEUTSCH. "At Kodak, Some Old Things Are New Again." The New York Times (Fri., May 2, 2008): C1-C2.

(Note: ellipses added.)


CampAllenTechnicianKodak.jpg "Allan Camp, a technician at Kodak's inkjet development center in Rochester, works on the development of print heads for printers." Source of caption and photo: online version of the NYT article quoted and cited above.




August 29, 2008

NASA Suffers From "Utterly Dysfunctional Funding and Management System"


UniverseInAMirrorBK.gif











Source of book image: http://press.princeton.edu/images/k8618.gif

(p. A13) The space shuttle Discovery arrived safely home over the weekend, and I suppose we are all rather relieved - that is, those of us who were aware that the shuttle had blasted off a couple of weeks ago on yet another mission. Space exploration is attracting a lot of excitement these days, but the excitement seems to have less to do with the shuttle and more to do with private space ventures, like Richard Branson's Virgin Galactic or Robert Bigelow's plans for space hotels or Space Adventures Ltd., whose latest customer for a private space trip is Google co-founder Sergey Brin. He bought a ticket only last week.

Robert Zimmerman's "The Universe in the Mirror" serves to remind us that NASA, too, can do exciting things in space. Yet the career of the Hubble Space Telescope has been both triumphant and troubled, bringing into focus the strengths and the weaknesses of doing things the NASA way.

. . .

In addition to telling a thrilling tale, Mr. Zimmerman provides a number of lessons. One, he says, is the importance of having human beings in space: Had Hubble not been designed for servicing by astronauts, it would have been an epic failure and a disaster for a generation of astronomers and astrophysicists. Though robots have their uses, he notes, "humans can fix things, something no unmanned probe can do." . . .

But the biggest lesson of "The Universe in a Mirror" comes from the utterly dysfunctional funding and management system that Mr. Zimmerman portrays. Hubble was a triumph, but a system that requires people to sacrifice careers and personal lives, and to engage in "courageous and illegal" acts, in order to see it succeed is a system that is badly in need of repair. Alas, fixing Hubble turned out to be easier than fixing the system that lay behind its problems.



For the full review, see:

GLENN HARLAN REYNOLDS. "Bookshelf; We Can See Clearly Now." The Wall Street Journal (Mon., June 16, 2008): A13.

(Note: ellipses added.)




August 5, 2008

Investment in General Purpose Technologies is Partly a "Leap-of-Faith"


BrittGlennTimeWarnerCable.jpg





Caricature of Glenn Britt. Source of caricature: online version of the WSJ article quoted and cited below.

(p. B2) WSJ: You invested $550 million in Clearwire Corp., which is building a wireless broadband network. Why?

Mr. Britt: We saw that as a defensive move. The business today is largely about making voice telephone calls, text messaging, and some data.

This venture is about very fast broadband delivery, but the technologies and the products are as yet not fully defined. It's a bit of a start-up, leap-of-faith kind of thing.

WSJ: What uses could this wireless network be put to?

Mr. Britt: An obvious one is using your laptop in a portable way just as you might today with WiFi hot spots. Another is going to be the PDA, the smallest device you can use to access the Internet. If you have an iPhone you can start seeing what that might look like with a more robust network.

Out in the future, people are talking about machine-to-machine communication, the idea of heart monitors talking to hospitals, your camera automatically uploading photos to Shutterfly or whatever printing service you might use.

WSJ: What about the idea of mobile video delivered to portable devices?

Mr. Britt: I know people talk a lot about mobile video, and I certainly think there is some application for it. But I quite honestly haven't seen it as a big deal. People do want to get video wherever they are. We already have a robust over-the-air television system which, as it goes digital, will be able to have a mobile component to it. But I don't know how big the ultimate market is in this country. I'm skeptical.



For the full story, see:

VISHESH KUMAR. "BOSS TALK; Cable Boss Airs Growth Plans; Time Warner Cable CEO Sees New Freedoms, Threats After Its Spinoff." The Wall Street Journal (Mon., June 2, 2008): B1-B2.

(Note: the title of the online version of the article is "BOSS TALK; Grappling With Cable's Future; Time Warner's Glenn Britt Sees Freedoms, Threats As Unit Readies for Spinoff.")




July 29, 2008

Talking a Good Game is Little Correlated with Getting it Done


Bossidy and Charan's advice below on hiring managers fits with Christensen and Raynor's advice to hire managers who have had the right experiences, in preference to those who have the 'right stuff' (aka 'charisma').

(p. 119) In our experience, there's very little correlation between those who talk a good game and those who get things done come hell or high water. Too often the second kind are given short shrift. But if you want to build a company that has excellent discipline of execution, you have to select the doer.


Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.




July 24, 2008

CEO Michael Dell's Management Advice


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Source of book image: http://ramz-thoughts.blogspot.com/2007/12/new-addition-to-my-book-shelf.html

I have had Direct from Dell on my 'to-read' list for years, and it finally made it to the top. The book has some interesting anecdotes, and some useful generalizations, but not as many as I had hoped.

In fairness, if I had read the book closer to its publication year, in 1999, maybe some of the observations would have seemed fresher, that today seem like stale clichés.

For example, it is clever to quote (p. 209) the hockey player Wayne Gretzky as saying that he doesn't skate to where the puck is; he skates to where it will be. And then apply the saying to business by advising that managers skate, not to where the profits currently are, but to where the profits will be in the future. Reading this in Dell's book did not excite me, because I had already read it in Christensen and Raynor. But Dell's book came out before Christensen and Raynor, and it's not a failing of the Dell book that I had read the Christensen and Raynor book first.

But some of what Dell writes, was a cliché even back in 1999. For example, it is a cliché that customers should matter; but simply saying 'listen to your customers' is not very useful. Sometimes customers are not very articulate about what they would value, and sometimes they need to be educated, and sometimes your current customers might not buy an innovation that other potential customers might love.

Christensen and Raynor in The Innovator's Solution, have emphasized the desirability of thinking about what job customers need to have done.

One useful bit of advice in Direct from Dell is that companies should segment themselves into different units to serve different kinds of customers. This might be a useful stratagem to make it easier to execute Christensen and Raynor's advice. (But it goes against another common dictum in management books: achieve economies by cutting out duplication and by achieving economies of scale.)

The book has some interesting examples and observations, but the signal to noise ratio is not as high as in the very best management books by former CEOs, such as in Andy Groves' Only the Paranoid Survive and in Jack Welch's Jack: Straight from the Gut.

References:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Dell, Michael. Direct from Dell: Strategies That Revolutionized an Industry. New York: HarperCollins Publishers, Inc., 1999.

Grove, Andrew S. Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company. New York: Bantam Books, 1999.

Welch, Jack. Jack: Straight from the Gut. New York: Warner Business Books, 2001.




July 7, 2008

"Become Pioneers of Leapfrog Technology"


Here is the latest entry in my continuing effort to document uses of the "leapfrog" concept in business and innovation. The entry below appears in a table entitled "Strategy Milestones" and is under the third of three column headings, which is entitled "Long Term (5+ Years)."

(p. 149) Become pioneers of leapfrog technology

Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

(Note: the quotation is presented as being Bossidy's.)




July 3, 2008

"Most Interview Processes Are Deeply Flawed"


(p. 129) Developing leaders begins with interviewing and assessing candidates. I'm not talking about overseeing the HR department and interviewing finalists; I'm talking about hands-on hiring. Most interview processes are deeply flawed. Some people interview well, and some people don't. A person who doesn't interview well may nonetheless be the best choice for the job. That's why it's so important to probe deeply, know what to listen for, and get supplemental data. It takes time and effort to drill down further, but it's always worth the trouble.


Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

(Note: the quotation is presented as being Bossidy's.)




June 25, 2008

Robust Dialogue Fosters Creativity and Innovation


Omaha culture puts a huge emphasis on surface politeness. (When I first arrived here, I was sometimes thought to be from New York, a thought that I took as a complement, although that was not how it was intended.)

Bossidy and Charan emphasize that harmony is an over-rated virtue--that what they call "robust dialogue" is important for getting things done.

(p. 102) You cannot have an execution culture without robust dialogue---one that brings reality to the surface through openness, candor, and informality. Robust dialogue makes an organization effective in gathering information, understanding the information, and reshaping it to produce decisions. It fosters creativity---most innovations and inventions are incubated through robust dialogue. Ultimately, it creates more competitive advantage and shareholder value.

. . .

(p. 103) . . ., harmony---sought by many leaders who wish to offend no one---can be the enemy of truth.



Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

(Note: ellipses added.)




June 19, 2008

In Many Capitalist Companies "People Think They're Involved in Socialism"


Empirical comparisons between capitalism and socialism are in some ways unfair to capitalism, because many capitalism managers act as though they believed in socialist ideas. The difference in productivity and economic growth would be even greater, if capitalist managers consistently acted as though they believed in capitalism. Consider the following, from a portion of Execution written by Larry Bossidy:

(p. 73) Larry: When I see companies that don't execute, the chances are that they don't measure, don't reward, and don't promote people who know how to get things done. Salary increases in terms of percentage are too close between top performers and those who are not. There's not enough differentiation in bonus, or in stock options, or in stock grants. Leaders need the confidence to explain to a direct report why he got a lower than expected reward.

A good leader ensures that the organization makes these distinctions and that they become a way of life, down throughout the organization. Otherwise people think they're involved in socialism. That isn't what you want when you strive for a culture of execution. You have to make it clear to everybody that rewards and respect are based on performance.



Source:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.

(Note: in the book, the quotation is presented as being Bossidy's.)




June 16, 2008

Uncommon Common Sense: Bossidy Execution Book


ExecutionBK.jpg









Source of book image: http://a1055.g.akamai.net/f/1055/1401/5h/images.barnesandnoble.com/images/8280000/8285699.jpg


Bossidy and Charan's book is not exactly a page-turner of unexpected insights, but the authors say some things that need saying.

Business gurus often forget that success depends on more than vision and inspiration. It depends on courage (to face brutal facts, and to fire the lazy or incompetent), and it requires persistent attention to enough of the details to know what needs to be done, and to know who is doing it.

Much of their practical advice is way easier said than done, but maybe it's still worth saying.

It occurred to me while reading this book, that I sometimes write and speak as though innovation and economic growth are inevitable with the right institutions. But that is not so.

Even under the best institutions, progress still requires entrepreneurs and managers who work very hard, demonstrate courage, and who care about getting the job done.

Reference to book:

Bossidy, Larry, Ram Charan, and Charles Burck. Execution: The Discipline of Getting Things Done. New York: Crown Business, 2002.




April 7, 2008

Creative Sparks Arise from Opportunistic Innovation


StrategicIntuitionBK.jpg










Source of book image:
http://ecx.images-amazon.com/images/I/51vovIVI5sL.jpg


(p. D16) One of the insights of "Strategic Intuition" is that business makes progress by following the opportunistic innovation model, while governments and international-aid agencies aim repetitively at rigid social goals. Such rigidity happens partly for a reason that Mr. Duggan is too polite to mention -- bureaucrats, by nature, rarely give off a creative spark. Mr. Duggan prefers to emphasize a structural cause: The public demands solutions to problems of great social importance; thus bureaucrats get stuck with fixed objectives. Yet Mr. Duggan also shows that social progress often happens by emulating the opportunism of business. Among the most powerful of his examples is Muhammad Yunus's invention of microcredit.

. . .

If there are still businessmen who feel compelled to follow a fixed-goal plan -- missing out on the profits of opportunistic flexibility -- then at least there is the free market to punish them. Market feedback is surely one big reason that we have so many innovative entrepreneurs. Where the old approach does most of the damage is in social policy, where the feedback is either fuzzy (as in domestic policy) or absent (foreign aid). Social policy could use a lot fewer commencement speakers and a lot more creative sparkers.


For the full review, see:

WILLIAM EASTERLY. "BOOKSHELF; Surprised by Opportunity." The Wall Street Journal (Weds., November 14, 2007): D16.

(Note: ellipsis added.)


The reference to the Stratetic Intuition book is:

Duggan, William. Strategic Intuition: The Creative Spark in Human Achievement. New York: Columbia University Press, 2007.




February 16, 2008

Persistence and Efficiency Matter More than Teamwork and Enthusiasm, for CEO Success

 

 





Source of image: online version of the WSJ article quoted and cited below.

 

(p. B3)  What are the traits that chief executives of successful companies share? A new study suggests that hard-nosed personal virtues such as persistence and efficiency count for more than "softer" strengths like teamwork or flexibility.

The findings are sure to intensify debate about how much toughness is appropriate in a CEO. Some famously hard-charging bosses of big companies have retired or been shunted aside in recent years. Successors at companies such as General Electric Co., International Business Machines Corp. and Hewlett-Packard Co. are seen as quieter, less strident team-builders.

But the new study, by three University of Chicago business-school professors, draws on detailed personal assessments of 313 CEO candidates to present a starker view of good leadership's ingredients. Of these candidates, 225 were hired. Their subsequent performance fuels most of the study's conclusions.

"We found that 'hard' skills, which are all about getting things done, were paramount," says lead author Steven Kaplan, a professor of finance and entrepreneurship. "Soft skills centering on teamwork weren't as pivotal. That was a bit of a surprise to us."

Prof. Kaplan and colleagues Mark Klebanov and Morten Sorensen didn't size up the CEOs themselves. Instead, they tapped into a consultant's database long coveted by academic researchers. It contains assessments of individuals' strengths and weaknesses compiled by ghSmart Inc. The Chicago management-assessment company evaluates CEO candidates on behalf of corporate clients.


For the full story, see:

GEORGE ANDERS. "THEORY & PRACTICE; Tough CEOs Often Most Successful, A Study Finds."  The Wall Street Journal  (Mon., November 19, 2007):  B3.



Included with the WSJ article was an interesting summary table:


LEADING PROFILE

Here are five CEO traits that correlate most closely with business success at buyout companies -- and five that score lowest, according to University of Chicago researchers.

Traits that matter...

• Persistence
• Attention to detail
• Efficiency
• Analytical skills
• Setting high standards

...and not so much

• Strong oral communication
• Teamwork
• Flexibility/adaptability
• Enthusiasm
• Listening skills





January 22, 2008

Alaska Air Used Skunk Works to Develop Check-In Innovation

 

AlaskaAirDeparturesTable.gif   Source of graphic:  online version of the WSJ article cited below.

 

The innovation described in the article excerpted below is credited as arising from a 'skunk works' project.  There's a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology.  (Their plant was in a smelly part of town, so it was dubbed the 'Skunk Works.')

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure. 

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.) 

 

(p. B1)  ANCHORAGE, Alaska -- When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don't want is a ticket counter," said Ed White, the airline's vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier's 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach -- which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport -- has doubled Alaska's capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4)  Alaska's design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn't trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta's vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago -- and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn't aware of a visit to Anchorage but doesn't dispute it.

. . .  

Alaska, the nation's ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline's ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

 

For the full story, see: 

SUSAN CAREY.  "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters."  The Wall Street Journal  (Thurs., August 9, 2007):  B1 & B4.

 

  Source of graphic:  online version of the WSJ article cited above.

 




September 28, 2007

"We're Not Looking to Achieve Incremental Advances"

 

LevinsonArthurGenentechCEO.jpg   Genentech CEO Dr. Arthur D. Levinson.  Source of image:  online version of the WSJ article cited below.

 

(p. B1)  WSJ: You have multiple blockbuster biotech drugs on the market and more on the way. In such an uncertain business, how do you manage scientists to achieve that kind of success?

Dr. Levinson: We are first and foremost committed to doing great science. If a drug can't be the first in class or the best in class, we're just not interested. We're not looking to achieve incremental advances or extend patents or do X, Y, Z unless it is going to really matter for patients. That allows us to bring in phenomenal scientists and encourage them to do the basic and translational research.

We decided 15 years ago that we would be committing (p. B2) to oncology, which at the time for us was new. We are now the leading producer of anticancer drugs in the United States. We took a lot of risks. In many cases, those risks paid off. We are now also in immunology. Again, the role of management here is to set the broad direction and then hire absolutely the best scientists and bring them in and say, 'Do your stuff.'

 

For the full interview, see:

MARILYN CHASE. The Wall Street Journal "How Genentech Wins At Blockbuster Drugs CEO to Critics of Prices: 'Give Me a Break'."   The Wall Street Journal  (Tues., June 5, 2007):  B1 & B2.

 

 GenentechStockPrices.gif   Source of graph:  online version of the WSJ article cited above.

 




September 27, 2007

A Competent, Caring, Ultimate Authority Needed for Open Source to Work: Linux and Wikipedia

 

The excerpt below is from a WSJ summary of an article from the Summer issue of the journal Strategy + Business.

 

Linux's success isn't as egalitarian as it seems, says Mr. Carr. In 1997, Mr. Raymond praised Linux's founder, Linus Torvalds, for realizing that "given enough eyeballs, all [software] bugs are shallow." However, Linux has always had a central authority -- originally, Mr. Torvalds himself; later, a small group of engineers -- that synthesized the work of the volunteers.

Similarly, the expansiveness of Wikipedia's entries lies in its contributors' wide range of interests. However, the encyclopedia is slowly putting together a management team to identify and improve poorly written articles and correct imbalances like the one where the "Flintstones" entry is twice as long as the one on "Homer."

 

For the full summary, see:

"Informed Reader; TECHNOLOGY; Small Teams Advance Open-Source Effort."  The Wall Street Journal  (Weds., June 6, 2007):  B5. 

 




September 13, 2007

With Right Incentives, Workers Make Better Tech Purchases Than Managers

 

(p. A7)  Corporate technology managers usually pick laptops, software and other technology for employees. Now some tech managers are finding workers can do a better job when they choose and buy the equipment themselves.

At KLM Royal Dutch Airlines, a unit of Air France-KLM SA, employees had expressed frustration at the company's policy of providing and supporting only one type of laptop, the Lenovo A30 (formerly IBM), and one smartphone, the Nokia 6021. Last November, Martien van Deth, a senior technology officer in the Amsterdam office, tried a new system: He gave 50 information-technology staffers an allowance of $203, covering two years, to buy cellphones for corporate use. Those who picked more expensive phones paid the extra. Those who chose cheaper phones kept the change. As long as the phone ran Microsoft Corp.'s Windows Mobile version 5 or 6 operating system, KLM guaranteed access to corporate email. The catch: Users had to deal with technical problems themselves and replace phones that broke.

Not only did the program cost less than the $231 the company paid (p. A9) for phones and support over the same period, it was a hit with employees -- some of whom bought phones with fancy ringtones and video players. Now "no one can complain that their corporate phone doesn't have a camera," says Mr. van Deth, who plans to offer a tech allowance to KLM's entire 1,000-person IT department later this summer, and wants to take the program companywide. He's also about to start a tech-allowance program for laptops.

 

For the full story, see: 

BEN WORTHEN.  "Office Tech's Next Step:  Do It Yourself."  The Wall Street Journal  (Tues., July 3, 2007):  A7 & A9.

 




September 10, 2007

When You Need to Know the Difference Between Glacier Creek and Big Thompson River

 

  Is it Glacier Creek, or Big Thompson River?  Source of photo:  me. 

 

On May 17, 2007, in Estes Park, Colorado, I was the co-leader of a "two hour" hike with 15 Montessori middle-schoolers from Omaha, Nebraska.  At some point what we were seeing didn't seem to correspond with what our roughly drawn YMCA map told us we should be seeing--we worried that we had taken a wrong turn and were lost.

II we were on course, then the water beside us should be Glacier Creek.  If we were lost, then it was probably Big Thompson River.  (It's appearance didn't help--it looked a bit larger than a creek, but a lot smaller than a 'big river.')

The first person I found to ask was a tourist who admitted upfront that she was extremely uncertain about where we were.  She pulled out a modest map, and pointed to where she thought we might be, which was along the Big Thompson River.

Seeking confirmation, I apologetically interrupted a fellow teaching his girl-friend how to fly fish.  This fellow was dressed as an outdoors-man, and exuded confidence.  He talked about hiking on a glacier the day before.  He helpfully strode back to his SUV with me and pulled a detailed, authoritative-looking map.  With no doubt, he pointed on the map to where we were, on Glacier Creek, as I had hoped.  As we walked back to where he had been fishing, he pointed in the direction that we had been hiking, and said that without question, we should continue to hike in that direction.

The scenery was fantastic, but Cindy began to worry whether we were going in the right direction, pointing out that there didn't seem to be any opening in the mountains in the direction in which we were supposing the YMCA camp should be.  I agreed with her observation, but said that there must be some non-obvious route, because the fellow who pointed us in this direction had exuded credibility.

We finally got to a small museum.  There, an old park service employee asked where we were from.  When I said "Omaha" he jokingly asked if knew his old friend Warren Buffet?  He told us that he had lived in this area all his life, and that we were definitely walking along Big Thompson River.  Then he tried to draw a map to show us how to get back.  He scratched his head, discarded his first attempt, and started trying again.  Then he asked us (again) where we were from?  At this point, I was really worried.

But his second attempt at a map was a good one--it got us back to the YMCA camp.

Maybe we should look for advice from those who are self-critical, as the old man was, rather than from those who exude undoubting self-confidence, as the fly fisherman did?  (Or maybe the key was local credentials?)

Maybe, I made a mistake that Christensen and Raynor warn against in their The Innovator's Solution:  looking at charisma and confidence as signs of who to follow.  (In fairness to myself, at the time, I didn't have much else to go on.)

 




August 26, 2007

Firms Install Internal Betting Markets for Better Forecasting

 

Charles Plott, of Cal Tech, co-authored a nifty study several years ago in which he installed a betting market inside of Hewlett Packard to do internal forecasting.  The nifty part was that the forecasts produced by the betting market were generally more accurate than the official forecasts that HP's official forecasters were producing. 

The likely reason is not that the official forecasters were stupid or incompetent, but that they were under considerable pressure by corporate higher-ups to spin the forecasts in a favorable way.  In contrast, the participants in the internal betting market remained anonymous, and received higher payoffs, the more accurate their forecasts turned out to have been.

The result was not surprising, once you think it through.  But what I did find surprising was that HP didn't keep the betting market going, after the Plott study was finished.  (From a long-run perspective, top management should benefit more from accurate forecasts, than from consistently optimistic forecasts.) 

In any case, the excerpt from the commentary below indicates that some other companies have gotten the point:

 

(p. C1)  Over the last few years, Intrade -- with headquarters in Dublin, where the gambling laws are loose -- has become the biggest success story among a new crop of prediction markets. The world's largest steel maker, Arcelor Mittal, now runs an internal market allowing its executives to predict the price of steel. Best Buy (p. C6) has started a market for employees to guess which DVDs and video game consoles, among other products, will be popular. Google and Eli Lilly have similar markets. The idea is to let a company's decision-makers benefit from the collective, if often hidden, knowledge of their employees.

But there's a broader point here, too. For a couple of centuries now, long before Intrade or even the Internet existed, financial markets have been making it easier to bet on what the future will bring.

In the mid-1800s, contracts tied to the future price of wheat, pigs and other commodities began to change hands. In 1972, the Chicago Mercantile Exchange introduced futures for foreign exchange rates. Treasury bonds tied to the future rate of inflation came along in the 1990s, and last year, the Merc began selling contracts based on the direction of house prices in 10 big metropolitan areas.

In every case, the market price reflects the sum of the traders' knowledge -- about the extent of the housing bubble in Los Angeles, for instance, or the likely size of next year's wheat crop.  . . .

N. Gregory Mankiw, a former adviser to President Bush, who has written about Intrade on his blog, explains it this way: ''Everybody has information from their own little corner of the universe, and they'd like to know the information from every other corner of the universe. What these markets do is provide a vehicle that reflects all that information.''

 

For the full commentary, see: 

DAVID LEONHARDT.  "ECONOMIX; Odds Are, They'll Know '08 Winner."  The New York Times  (Weds., February 14, 2007):  C1 & C8.

(Note:  ellipsis added.)

 




August 17, 2007

Why CEOs Are Paid So Much More than Other Near-Top Execs

 

   Source of graph:  online version of the NYT article quoted and cited below.

 

(p. A1)  Like most companies, Office Depot has long made sure that its chief executive was the highest-paid employee. Ten years ago, the $2.2 million pay package of its chief was more than double that of his No. 2. The fifth-ranked executive received less than one-third.

But the incentive for reaching the very top of the company is now far greater. Steve Odland, who runs Office Depot today, made almost $12 million last year, more than four times the compensation of the second-highest-paid executive and over six times that of the fifth-ranking executive in the current hierarchy.

As executive pay has surged in most American companies, attention has focused on the growing gap between the earnings of top executives and the average wage of workers in cubicles or on the shop floor. Little noticed, though, is how much the gap has also widened between the summit and the next few echelons down.

. . .

The pay of chief executives, analysts say, is being driven by superstar dynamics similar to those that determine the inordinate rewards for pop stars and athletes — a phenomenon first explained by Sherwin Rosen of the University of Chicago in (p. C7) 1981 and underlined more than a decade ago by the economists Robert H. Frank and Philip J. Cook in their book “The Winner-Take-All Society” (Free Press, 1995).

As American companies, American hedge funds — and even American lawsuits — have grown in size, it has become ever more valuable to get the “best” chief executive or fund manager or litigator. This has fueled a fierce competition for talent at the top, which has pushed economic rewards farther up the ladder of success, concentrating the richest pay levels even more.

“There is an interaction between technology and scale which is true in all these businesses,” said Steven N. Kaplan, a finance professor at the Graduate School of Business of the University of Chicago. “One person can oversee more assets, and this translates into more money.”

. . .

As companies grow and expand globally, the value of the top executive can grow exponentially. In a study last year, two economists, Xavier Gabaix of the Massachusetts Institute of Technology and Augustin Landier of New York University, argued that the fast rise in pay of corporate C.E.O.’s mostly reflected the growing size of American corporations.

Processing reams of data, the economists estimated that hiring the most effective chief executive in the country would, statistically, increase the stock value of a company by only 0.016 percent, compared with hiring the 250th chief executive. But at a company like General Electric, which is worth about $380 billion, that tiny difference would amount to $60 million.

This, the economists argued, helps explain why that top chief executive earned five times as much as the 250th. “Substantial firm size leads to the economics of superstars, translating small differences in ability to very large deviations in pay,” the economists wrote.

 

For the full story, see: 

EDUARDO PORTER.  "More Than Ever, It Pays to Be the Top Executive."  The New York Times  (Fri., May 25, 2007):  A1 & C7.

(Note:  ellipses added.)

 




July 30, 2007

"I Fly with Leslie"

 

FlyWithLesliePoster.jpg  A poster that is displayed in some Wall Street Journal offices in solidarity with a Bancroft family member who has openly expressed doubts about Rupert Murdoch's proposed purchase of the Journal.  Source of the image:  online version of the NYT article cited below.

 

A lot of the news media imitate each other in viewpoint and content.  The Wall Street Journal is fresh and innovative, and frequently gives us important news that is new.

And there have been times throughout recent decades when the editorial page of the Journal was one of the few voices for truth, justice and freedom.  It would be a great loss for that voice to be silenced.

On the other hand, I have noted in an earlier entry, that the business side of the Journal is in need of improvement. 

I do not know if in the end, the Murdoch bid is the best chance for the long-run survival of what is good about the Journal.  But I do wish the Journal, and the Journal's journalists, well. 

 

(p. C1)  On May 14, more than 100 reporters, editors and executives clustered in The Wall Street Journal’s main newsroom to mark the retirement of Peter R. Kann, the longtime leader of their corporate parent, Dow Jones & Company.

Mr. Kann, in rolled-up shirtsleeves, was typically self-effacing about his own contributions to the company. But the celebration of the past was muted by worry about The Journal’s future. A few weeks earlier, Rupert Murdoch’s News Corporation had offered $5 billion to buy Dow Jones. The Bancroft family, owners of a controlling stake in the company, rebuffed the offer at first, but there were signs that some of them were wavering.

Mr. Kann, who had been advising the family against selling, expressed hope that Mr. Murdoch would not prevail, using an image of The Journal as a citadel trying to repel an invasion by tabloid barbarians.

“The drawbridge is up,” Mr. Kann told the group. “So far, so good.”

For employees at Dow Jones, the 11 weeks since they learned of the Murdoch offer have been a wrenching time, raising the prospect of fundamental changes at an organization that had already had its fill of big changes in the last couple of years — with Mr. Kann being replaced by Richard F. Zannino as chief executive, with Marcus W. Brauchli taking over from Paul E. Steiger as top editor; and with a shift of its mission, by adding a Saturday paper and more lifestyle articles to appeal to new advertisers, and investing heavily in its digital properties.

. . .  

(p. C12)  The anti-Murdoch forces enjoyed one of their brief lifts on June 29 when The Journal reported that Leslie Hill, a Bancroft family member, had grave reservations about selling to Mr. Murdoch. Someone enlarged The Journal’s dot drawing of Ms. Hill, a retired airline pilot, adding the words “I Fly with Leslie” above her face. Copies of the makeshift poster appeared in Journal offices around the country.

. . .  

As the chances of an alternative have appeared to wane, more reporters and editors have polished their résumés and approached rival publications about jobs. Some have even talked of starting their own business news Web site.

Many voiced disappointment in the Bancrofts, the family that has owned the company for more than a century and taken great pride in it, for not playing a leading role in running it for more than 70 years.

“We understand that for the Bancrofts this is a choice between getting much richer, and holding onto something because they believe in it,” a reporter said. “What they may not realize is that many of us in the newsroom have made the same choice. There are a lot of people here who could be traders or lawyers, people with M.B.A.’s, who could be making a lot more money. To us, this is not an abstract choice.” 

 

For the full story, see: 

RICHARD PÉREZ-PEÑA. "At The Gates; Murdoch’s Arrival Worries Journal Employees." The New York Times  (Thurs., July 19, 2007):  C1 & C12. 

 

MurdochRupert.jpg Rupert Murdoch.  Note that the image is a tribute, or humorous small jab at, the hallmark image style of the Wall Street Journal, in which photographs are re-done by artists into an example of something like pointillism.  (True also of the poster image above.)  Source of the image:  online version of the NYT article cited above.

 




July 4, 2007

"The Least Hospitable Environment on Earth"

 

   Source of the book image:  http://images.usatoday.com/money/_photos/2007/03/26/cubicle-bookx-large.jpg

 

Office humor is an oxymoron. At least that was the prevailing view until Scott Adams's "Dilbert" comic strip and, more recently, British television import "The Office" opened up this fertile ground for mainstream ridicule. The latest entry in the growing corpus of workplace-whacking is "The Cubicle Survival Guide: Keeping Your Cool in the Least Hospitable Environment on Earth," by first-time author and Web-site production coordinator James F. Thompson.

Mr. Thompson's target: the cubicle, or "cube," as it is not so fondly known. It's surprising to learn that this ubiquitous steel-and-fabric prison was not invented until the 1960s, the dubious brainstorm of a Colorado fine-arts professor named Bob Probst. His goal, according to Mr. Thompson, was to encourage co-workers to "freely exchange ideas and inspiration" -- and not, as commonly believed, to breed a legion of the undead who feel they are somehow unworthy of, say, a door.

 

For the full review, see: 

MARTIN KIHN.  "BOOKS; The Best Way to Labor Away in Our Little Boxes." The Wall Street Journal  (Weds., March 14, 2007):  D9. 

 

The reference to the book, is: 

James F. Thompson.  THE CUBICLE SURVIVAL GUIDE.  (Villard, 216 pages, $12.95)

 




May 20, 2007

Should Netscape Be Viewed as a Failed Company, or as a Successful Project?

 

(p. 53)  Recall the story of Netscape, once the darling of the New Economy.  Netscape was formed in 1994.  It went public in 1995.  And by 1999, it was gone, purchased by America Online and subsumed into AOL's operation.  Life span:  four years.  Half-life:  two years.  Was Netscape a company---or was it really a project?  Does the distinction even matter?  What matters most is that this short-lived entity put several products on the market, prompted established companies (notably Microsoft) to shift strategies, and (p. 54) equipped a few thousand individuals with experience, wealth, and connections that they could bring to their next project.

And Netscape is not alone.  A University of Texas study found that between 1970 and 1992, the half-life of Texas businesses shrank by 50 percent.  Likewise, a Federal Reserve analysis of New York companies found that the type of firm that created the most new jobs (microbusineses with fewer than ten employees) often had the shortest life span.  The life cycle of companies has been that jobs, too, have diminishing half-lives.  Ten years ago, nobody ever heard of a Web developer.  Ten years from now, nobody may remember Web developers.

Most important, at the very moment the longevity of companies is shrinking, the longevity of individuals is expanding.  Unlike Americans in the twentieth century, most of us today can expect to outlive just about any organization for which we work.  It's hard to imagine a lifelong job at an organization whose lifetime will be shorter--often much shorter--than your own.

 

Source:

Pink, Daniel H. Free Agent Nation: How America's New Independent Workers Are Transforming the Way We Live. New York: Warner Business Books, 2001.

 




May 8, 2007

Pushing the Flywheel of Business (and Life)

 

FlywheelGiant.gif   A flywheel lathe from the mid-1700s.  Source of image:  http://www.stuartking.co.uk/articles/lathe.htm

 

In Jim Collins' book Good to Great, I really liked his flywheel analogy, that makes the point that in business (and life), success often is mainly due to the day-in-day-out exertion of effort and care.  The version below is from a Collins article, based on his book.

 

Now picture a huge, heavy flywheel. It's a massive, metal disk mounted horizontally on an axle. It's about 100 feet in diameter, 10 feet thick, and it weighs about 25 tons. That flywheel is your company. Your job is to get that flywheel to move as fast as possible, because momentum -- mass times velocity -- is what will generate superior economic results over time.

Right now, the flywheel is at a standstill. To get it moving, you make a tremendous effort. You push with all your might, you make a tremendous effort...and finally you get the flywheel to inch forward. After two or three days of sustained effort, you get the flywheel to complete one entire turn. You keep pushing, and the flywheel begins to move a bit faster. It takes a lot of work, but at last the flywheel makes a second rotation. You keep pushing steadily. It makes three turns, four, five, six turns. With each turn it moves faster, and then - at some point, you can't say exactly when - you break through. The momentum of the heavy wheel kicks in your favor. It spins faster and faster, with its own weight propelling it. You aren't pushing any harder, but the flywheel is accelerating, its momentum building, its speed increasing.

 

Source: 

Jim Collins.  "Good to Great."  Fast Company 51 (September 2001):  90.

 




April 23, 2007

"Solitude Serves as a Refreshing Balm"

The WSJ summarizes an April 2007 Psychology Today article.  The study that is discussed sounds relevant to the one-sided push for more collaboration and team production in business, and co-authorship in academics.  The benefits of collaboration should not blind us to the costs.

 

Amanda Guyer, a psychologist at the U.S. National Institutes of Health in Bethesda, Md., has found that individuals who withdraw from other people's company are more sensitive than extroverts to a wide range of positive emotional cues. Situations rife with emotional triggers, such as parties, can be wearying for such people, while solitude serves as a refreshing balm.

 

For the full story, see:

"Informed Reader; PSYCHOLOGY; Loners May Not Fear Others, They Just Need Some Solitude."  The Wall Street Journal  (Thurs., March 1, 2007):  B7.

 




April 14, 2007

Give People Something Better than What They Say They Want

(p. 205)  The picture palaces were a commercial success.  Between 1914 and 1922, four thousand new Palace Theaters opened in the United States.  Movie-going became an increasingly important entertainment event for Americans of all economic levels.  As Roxy pointed out, "Giving the people what they want is fundamentally and disastrously wrong.  The people don't know what they want . . . [Give] them something better."  Palace Theaters effectively combined the viewing environment of opera houses with the viewing contents of nickelodeons---films---to unlock a new blue ocean in the cinema industry and attract a whole new mass of moviegoers:  the upper and middle classes. 

 

Source: 

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.




April 5, 2007

Jim Collins on How Boeing Leapfrogged McDonnell Douglas

(p. 202)  Wisely, through the 1940s, Boeing had stayed away from the commercial sphere, an arena in which McDonnell Douglas had vastly superior abilities in the smaller, propeller-driven planes that composed the commercial fleet.  In the early 1950s, however, Boeing saw an opportunity to leapfrog McDonnell Douglas by marrying its experience with large air-(p. 203)craft to its understanding of jet engines. 

 

Source:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don't. New York: HarperCollins Publishers, Inc., 2001.

 




March 6, 2007

The New York Times Bests the Wall Street Journal at Business

 

We had a major winter storm in Omaha on Thurs., March 1st.  Schools were closed on Thursday and again on Friday.  Throughout the storm, the Omaha World-Herald got a paper delivered every day. 

The New York Times missed Thurs. and Fri., (there is no Saturday delivery).  The Wall Street Journal missed Thurs., Fri., and Sat.

The main difference is that in the end, the New York Times made good on eventually delivering me all the papers that I had paid for.

After a half hour wait to get through to a customer service person, the Wall Street Journal told me that they could not get me copies of the Thursday and Saturday papers.  They were all out, and I "should go to the library."  (During the long wait, every couple of minutes, an automated voice would come on to tell me how important my call was to them---if the call is so important, why don't they hire enough people so that customers don't have to wait for a half hour?)

The weather problem was not a secret.  Wouldn't a good business anticipate publicly known problems, and have a contingency plan for dealing with them?  Wouldn't they increase their production in order to be able to make good on the papers their logistical operation was incompetent to deliver?  Even if they did not have a clue at the beginning of the storm, couldn't they have acquired a clue by Saturday, three days into the storm?

If the Omaha World-Herald can deliver, and the New York Times can make good when it can't deliver, then the Wall Street Journal should be able, at least, to do as well as the New York Times.  The Wall Street Journal insults its customers when it tells them to "go to the library." 

It's no way for the nation's leading business newspaper to run its own business.

 




March 2, 2007

"Market Research Rarely Reveals New Insights"

   Source of book image:   http://images-eu.amazon.com/images/P/1591396190.01.LZZZZZZZ.jpg

 

(p. 69)  Competition in an industry tends to converge not only on an accepted notion of the scope of its products and services but also on one of two possible bases of appeal.  Some industries compete (p. 70) principally on price and function largely on calculations of utility; their appeal is rational.  Other industries compete largely on feelings;  their appeal is emotional.

Yet the appeal of most products or services is rarely intrinsically one or the other.  Rather it is usually a result of the way companies have competed in the past, which has unconsciously educated consumers on what to expect.  Companies' behavior affects buyers' expectations in a reinforcing cycle.  Over time, functionally oriented industries become more functionally oriented; emotionally oriented industries become more emotionally oriented.  No wonder market research rarely reveals new insights into what attracts customers.  Industries have trained customers in what to expect.  When surveyed, they echo back:  more of the same for less.

 

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

 

 

 




February 25, 2007

"Good to Great" is Good, but Not Quite Great

  Source of book image:  http://images.barnesandnoble.com/images/7770000/7775266.jpg

 

When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen's The Innovator's Dilemma.  Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin's Good to Great.

Ricketts is not alone.  Good to Great has become a business classic since it came out.  Recently I finally got around to reading it.

Well, I think it's good, but not quite great.  I like the empirical, inductive methodology mapped out at the beginning.  And some of the conclusions ring true.  For example the importance of facing the "brutal facts."  And the importance of developing a thought-out "hedgehog" concept.  And the importance of getting the right people on the bus.  And the importance of slowly, consistently building momentum.

But I've got some big bones to pick, too. 

Maybe the biggest "bone" is Collins' assumption that our goal should be the survival and greatness of a firm.  Instead of almost viewing firms as ends in themselves, why can't we view firms as vehicles for getting great things done? 

Maybe great things can be done through firms that last and are lastingly great.  Or maybe great things can be done by shooting star firms, that are glorious while they last, but don't last long.  Collins says it must be the former.  But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest.  Well maybe.  But some of that conclusion is derived from Collins' defining "great" in terms of high growth of stock value.  A modest leader will be unappreciated by Wall Street, and her company's stock value will show higher growth when she succeeds.  But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company's future prospects, and hence generated more realistic expectations from Wall Street?  Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected.  (On this issue, Collins should read the first couple of chapters of Christensen and Raynor's The Innovator's Solution.)

But don't get me wrong:  this is a very good book.  Those interested in how the capitalist system works, should read it, as should those who want to manage well.

 

The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don't. New York: HarperCollins Publishers, Inc., 2001.

 




February 23, 2007

New Book on Wiki (Quick) Process

   Source of book image:  http://ec2.images-amazon.com/images/P/1591841380.01._SS500_SCLZZZZZZZ_V37439749_.jpg

 

A new book is out on the wiki ("quick") phenomenon.  Chris Anderson has some stimulating comments on this phenomenon in his The Long Tail.  The Wikinomics book appears to be less profound, but may still be of interest.  (It appears to be a quick-read, management guru-jargon type book.)

The wiki issue that interests me is how wiki collaboration processes might substitute for rigorous editing and peer-review, as a way to get a lot of high-quality information out there fast.  (This is what Anderson claims, and the more I use the Wikipedia, the more plausible I find the claim.)

 

The reference to the book is:

Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. Portfolio, 2006.

 




December 20, 2006

"The Referee Should Not Be Too Quick With His Whistle"

I found the following wise comments while reading a short review of an old book by Edgar Monsanto Queeny, who followed his father as CEO of the Monsanto corporation, and who wrote a book called The Spirit of Enterprise which Schumpeter praised in a letter to Queeny.

(The abbreviation T.N.E.C. stands for the Temporary National Economic Committee, which I believe was an ad hoc congressional committee during part of F.D.R.'s presidency.)

Mr. Queeny does not give us a satisfactory analysis of the T.N.E.C. reports but his observations are always commonsensical and suggestive.  What emerges, and what is important, is that the positive Liberal State should not aim at too subtle a plan for freedom.  The referee should not be too quick with his whistle nor too ready to order players off the field.  The rules of the game may well allow for a little hurly-burly.  Economists like Professor Hutt, who are working out the rules of the game of free enterprise, deserve the highest praise.  But they should realize that refinement has its price as well as simplicity, and of the two simplicity costs the less.

Shenfield, A. A. "Review of the Spirit of Enterprise by Edgar M. Queeny." Economica 12, no. 48 (November 1945): 264.

 

The reference to Queeny's book is:

Queeny, Edgar M. The Spirit of Enterprise. New York: Charles Scribner's Sons, 1943.

 




December 2, 2006

Microsoft's VX-6000 LifeCam Really Stinks

  Microsoft's VX-6000 LifeCam.  Source of image:  http://www.microsoft.com/presspass/images/gallery/hardware/WC6_Angle_Silver_lg.jpg

 

I posted this to Amazon.com, late on Thurs., Nov. 30, 2006:

I have spent a frustrating afternoon and evening trying to install the VX-6000 on a fully updated MS XP pro system. The install took forever, because every couple of minutes the install program couldn't find a needed file (if they need it, why not put it on the install CD?). So I had to browse my system and point them to where the file was (why couldn't they design the install program to search for the file instead of making me do it?). Finally I got a successful install, and then I was informed there was an updated version, and I needed to install that. So I went through the whole time-consuming process all over again, including the schtick about searching for the location of several files. Finally it again said I had installed the program successfully. So I rebooted my PC, and clicked on the Microsoft LifeCam icon. After cranking for awhile I get "initialization error". I try rebooting again---same error. So I type in "initialization error" in the search bar of the "help" section, and I get back "no topics found." So they sell me an expensive camera, run me ragged installing it, send me a repeated error message, and provide me no clue on what to do about it. (I guess now that Bill Gates is saving the world through philanthropy, nobody's left minding the shop?)

 

The final comment is probably a bit too snide or harsh.  Microsoft has always had the deserved reputation of letting some products out the door before they are ready.  E.g., the first couple of versions of Windows paled in comparison to the graphical-user-interface operating system that Apple was offering at the time.  And the CD that accompanied Bill Gates' The Road Ahead would not work on what was then Microsoft's premier operating system:  Windows NT.

Maybe these kind of glitches result from a conscious operating strategy that gives employees a lot of freedom to make their own decisions.  The upside can be speedy decisions, and creativity.  The downside can be glitches such as the VX-6000 LifeCam.  Taking the broad, professorial view, maybe overall, the upside justifies the downside.  Tom Peters endorses companies accepting this trade-off rather than adopting layered, rule-bound, slow, bureaucratic decision-making.  (See his:  Re-imagine!)

(But did I mention that the VX-6000 LifeCam really stinks?) 

 

The reference to the Peters book is:

Peters, Tom. Re-Imagine! London: DK, 2003.

 




November 29, 2006

Without Incentives, the Energetic become Lazy


Wise words from Frederick W. Taylor, who is known as the father of scientific management:


(p. B1) "When a naturally energetic man works for a few days beside a lazy one," Mr. Taylor wrote, "the logic of the situation is unanswerable.  'Why should I work hard when that lazy fellow gets the same pay I do and does only half the work?' "


As quoted in: 

CYNTHIA CROSSEN.  "DEJA VU; Early Industry Expert Soon Realized a Staff Has Its Own Efficiency."  Wall Street Journal  (Mon., November 6, 2006):  B1.





November 22, 2006

Examine Your Assets and See If, and Where, They Can Add Value

In Gerstner's book, there is an intriguing passage in which he defends turning IBM into an integrated services firm.  As an aside, he says that it might not now have made sense to build up IBM's diverse assets, but now, having them in existence, it made sense to use them.  And he points out that even in the age of modularity, many customers needed, and were willing to pay for, a company that was able and willing to put everything together for them.

At first glance, this comment might seem at odds with the economist's dictum that "sunk costs are sunk."  But Gerstner was not advocating the integration of IBM services because IBM had historically invested a lot in building up the parts of the organization.  He was pointing out that diverse parts, if properly integrated, would provide substantial added-value to an important sub-group of customers.

 

Here is the relevant passage from Gerstner:

(p. 61)  Unfortunately, in 1993 IBM was rocketing down a path that would have made it a virtual mirror image of the rest of the industry.  The company was being splintered---you could say it was being destroyed.

Now, I must tell you, I am not sure that in 1993 I or anyone else would have started out to create an IBM.  But, given IBM's scale and broad-based capabilities, and the trajectories of the information technology industry, it would have been insane to destroy its unique competitive advantage and turn IBM into a group of individual component suppliers---more minnows in an ocean. 

 

The reference to the book, is:

Gerstner, Louis V., Jr. Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change. New York: HarperCollins, 2002.




November 20, 2006

Good Management Takes Guts and Time

Gerstner recognizes that decentralization is sometimes a good thing, but thinks in some ways the trend has gone to far in business---some business functions may be efficient to centralize: 

 

(p. 246)  I'm thinking here of common customer databases, common fulfillment systems, common parts numbering systems, and common customer relationship management systems that permit your customer-service people to provide integrated information about everything a customer does with our company.

On the surface it would seem that these are logical and powerful things to do in an enterprise.  Nevertheless, they usually require profit-center managers to do something very hard---relinquish some of the control they have over how they run their business.  Staff executives, consultants, or reengineering teams cannot do this without active line management involvement.  The CEO and top management have got to be deeply involved, reach tough-minded conclusions, then ensure that those decisions are enforced and executed across the enterprise.  It takes guts, it takes time, and it takes superb execution.

 

Reference to the book:

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.







November 18, 2006

For Major Changes, CEOs Need to Change Who "Calls the Shots"


Some of the best advice in Gerstner's book concern 'execution' issues of rewards, incentives, and who has the power to make which decisions.  Consider:

(p. 249)  If a CEO thinks he or she is redirecting or reintegrating an enterprise but doesn't distribute the basic levels of power (in effect, redefining who "calls the shots"), the CEO is trying to push string up a hill.  (p. 250)  The media companies are a good example.  If a CEO wants to build a truly integrated platform for digital services in the home, he or she cannot let the music division or movie division cling to its existing technology or industry structure---despite the fact that these traditional approaches maximize short-term profits.

. . .

I knew we could not get the integration we needed at IBM without introducing massive changes to the measurement and compensation system.  I've already explained that the group executives who ran IBM's operating businesses were not paid bonuses based on the unit's performance.  All their pay was derived from IBM's total results.

When a CEO tells me that he or she is considering a major reintegration of his or her company, I try to say, politely, "If you are not pre-(p. 251)pared to manage your compensation this way, you probably should not proceed."

 

The reference for the book is:

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.

(Note:  ellipsis added.)

 




November 17, 2006

Managers Get, Not What They Expect, But What They Inspect

Louis Gerstner is well-known for down-playing the 'vision' thing. he emphasizes that seemingly more mundane issues are often more important than the lofty ones. For example, one of Gerstner's key insights is often ignored in business: most workers perform well, when management takes the time and effort to observe performance, and to reward it when it is good:

(p. 250)  I have already pointed out that people do what you inspect, not what you expect.  Leaders who are thinking about creating true integration in their institutions must change the measurement and reward systems to reinforce this new direction.

(Note: italics in original. Also, see related passages on pages 212, and 230-231.)

 

Reference for the book:

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.




November 14, 2006

Antitrust Cases Can Hurt (Even Those that Get Dropped)

The antitrust lawsuit against IBM was dropped, and that against Microsoft result in the imposition of only minor legal remedies.  So some may conclude that IBM and Microsoft bore little ill effects from the suits.  But such suits can reduce morale, result in loss of talent, and restrain the efficiency, innovativeness and competitiveness of the prosecuted companies. 

In the case of IBM, Lou Gerstner has made some strong, and plausible, comments on the deleterious effects of U.S. antitrust action:

 

(p. 118)  The other critical factor---one that is sometimes overlooked---is the impact of the antitrust suit filed against IBM by the United States Department of Justice on January 31, 1969, the final day of the Lyndon B. Johnson administration.  The suit was ultimately dropped and classified "without merit" during Ronald Reagan's presidency, but for thirteen years IBM lived under the specter of a federally mandated breakup.  One has to imagine that years of that form of scrutiny changes business behavior in very real ways.

Just consider the effect on vocabulary---an important element of any culture, including corporate culture.  While IBM was subject to the suit, terms like "market," "marketplace," "market share," "competitor," "competition," "dominate," "lead," "win," and "beat" were systematically excised from written materials and banned at internal meetings."  Imagine the dampening effect on a workforce that can't even talk about selecting a market or taking share from a competitor.  After a while, it goes beyond what is said to what is thought.

 

The reference to the book, is: 

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change. New York:  HarperCollins, 2002.

 




November 12, 2006

"Bet the Company"

When entrepreneurs, or innovative companies, take large risks, and succeed, we sometimes begrudge them their success.  But we should remember that sometimes they took great risks, and that they could have lost everything if they had lost the 'bets' they made.

One of the most famous examples of 'betting the company' is when Tom Watson, Jr. of IBM 'bet the company' on the development of the expensive, but pathbreaking, system 360.  

This episode is mentioned many places.  One that I ran across recently is in Gerstner's memoir of his own time at IBM.  The following lines appear in Gerstner's brief summary of some important periods in IBM's earlier history:

Much has been written about this period and how Tom "bet the company" on a revolutionary new product line called the System/360---the original name of IBM's wildly successful mainframe family.

To grasp what System/360 did for IBM and its effect on the computing landscape, one needs to look no further than Microsoft, its Windows operating system, and the PC revolution.  System/360 was the Windows of its era---an era that IBM led for nearly three decades.  (p. 114)

 

The reference to the Gerstner book, is: 

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change. New York:  HarperCollins, 2002.




November 8, 2006

Gerstner's Insights on Business

 Source of book image:  http://ec1.images-amazon.com/images/P/0060523794.01._SS500_SCLZZZZZZZ_V1122531345_.jpg

 

Gerstner is known for turning around IBM, when many business experts thought it was headed down the tubes.  His book is useful as a report on what happened at IBM during his time as CEO, and also has some more broadly applicable observations.  I'll mention a few of these in this and a few other postings in the next couple of weeks. 

It is interesting how many successful and important business leaders and experts have spent some time associated with the McKinsey consulting group, where Gerstner started his career.  One major McKinsey figure, Richard Foster, is a strong advocate and elaborator of Schumpeter's process of creative destruction. 

I wonder if perhaps some of the success of McKinsey is due to the firm's embracing and applying Schumpeter's ideas?

Those who oppose creative destruction emphasize the destructive effect that the process has on some workers.  In fact the effects on labor are seen by many (e.g., Thomas Friedman) who are otherwise sympathetic, to be the major drawback of the process.  As a result some of them (e.g., Thomas Friedman) propose paternalistic 'safety net' labor policies.

We usually think of government as the main implementer of such policies, but among firms, IBM's labor policies were among the most paternalistic.  This is usually viewed as one of the positives about IBM.  But one of Gerstner's insights is to suggest that some of those in the IBM work force were hurt by IBM's paternalistic policies:

(p. 186)  . . . I came to feel that the real problem was not that employees felt they were entitled.  They had just become accustomed to immunity from things like recessions, price wars, and technology changes.  And for the most part, they didn't even realize that this self-contained, insulated system also worked against them.  I was shocked, for instance, to discover the pay disparities---particularly in very important technical and sales professions---of IBM comployess when comapred to the competition and the industry in general.  Our best people weren't getting what they deserved.

Maybe I should mention that I don't endorse everything in the book.  For example, Gerstner seems to think that a desire to "win" is crucial to success in business.  But I think the analogy between business and competitive sports is usually taken too far.  Can't one also succeed in business from a desire to innovate and to improve the world?

 

The reference on the book is: 

Gerstner, Louis V., Jr.  Who Says Elephants Can't Dance? Leading a Great Enterprise through Dramatic Change.  New York:  HarperCollins, 2002.

(Note:  in the quote, the ellipsis was added, but the italics was in the original.)

 




October 25, 2006

The Missing Pillow: A Lack of Incentives Leaves an Obvious 'Job' Undone


In late July, I had an appointment for a treadmill stress-test at Omaha's Methodist Hospital.  They told me the process would be over in an hour, but it took about two hours, due to another patient having some sort of crisis during their stress-test. 

They had me put on a gown, they stuck an I-V "dye" drip in back of my hand, and they pasted about six electrodes to my chest, after shaving and applying something like sand paper to the parts of the chest where the electrodes were attached.  Then they had me lie on my side on a hard table, to wait.  It was very uncomfortable.  The first nurse said that there was supposed to be a pillow on the table, but did nothing to obtain one.  Every several minutes some technician or nurse would stop in to ask if I was ready for them.  (I was always ready.)  But it turned out that someone needed to do something to me first, and that person was, I guess, taking care of the crisis next door.  At least one of these visitors also mentioned that I was supposed to have a pillow, but did nothing to acquire one.  If memory serves, the first nurse came back in, and again mentioned that I was supposed to have a pillow, but again did nothing to obtain one.

These people were all pleasant and friendly.  For example, they had a lot of friendly chats amongst themselves, that I could not help but over-hear.  (One of them was pregnant with twins, but did not know the genders of the babes-to-be, and so had not yet spent the time to come up with names.)

But two hours later, when the whole process was over, I still did not have a pillow.

A week or two after the test, I received a several page survey from Methodist Hospital asking a bunch of questions about how I thought they had done during the test.  You see they really "care" about my opinion.  (They also run frequent, slick TV ads about how much they "care.")

Marketers, and management gurus, say that organizations need to invest in surveys and the like to figure out what the customer wants and needs.  And Clayton Christensen advocates spending resources to figure out what "job" the customer needs to have done.  And maybe, sometimes, it does take surveys and research.

But sometimes it is obvious that the customer needs a pillow.

What is missing is not a survey, or statistical analysis.

What is missing is the incentive for someone to go get the pillow. 

 

P.S.  You may wonder, then, if it is simply a mistake for the hospital to send out the survey?  I suspect that those who send out the survey are not making a mistake, but are trying to get a different job done than the one that appears to be intended.  It appears that they are trying to find out what customers want and need.  But maybe they already know that.  Maybe they are mainly sending out the survey so that if anyone asks if they are "customer-oriented" they can whip out the survey to prove that yes-indeed, they sure are.  In other words, the point of the survey is not to learn about customers; it is to cover rear-ends.





July 25, 2006

Tom Peters: Over-the-Top Schumpeterian


Source of book image:  http://www.amazon.com/gp/product/customer-reviews/078949647X/ref=cm_cr_dp_2_1/104-2835260-2878345?ie=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155

 

Tom Peters became famous as the co-author of the business classic In Search of Excellence (1982).  His Re-imagine! is exuberant, optimistic, exaggerated, and stylistically over-the-top.  I find it fun, bracing, entertaining, and sometimes edifying.  If you like the prose of The Cluetrain Manifesto and Gilder's Telecosm, then you may also like Re-imagine!

Here is an early, very brief passage: 


(p. 9)  My overall vision, in brief:  Business is cool. It's about Creativity and Invention and Growth and Service.  It's about Adam Smith's "hidden hand."  And Nobel laureate Frederick Hayek's "spontaneous discovery process."  And economist Joseph Schumpeter's "gales of creative destruction."  At its best, it's about building things that make life less burdensome than it was in medieval times.  About getting us beyond---far, far, far beyond---the quasi-slavery of the Middle Ages, the indentured servitude of the first 150 years of the Industrial Revolution, and the cubicle slavery of the last three-quarters of a century. 

Yes, business is cool.

(Or at least it can be.)

 

The citation to the book is:

Peters, Tom. Re-Imagine! London: DK, 2003.

(Note:  the italics in the above passage appears that way in the original.)





May 20, 2006

Charles Koch Participates in Schumpeter's Process of Creative Destruction

 

KochClharles.gif Charles Koch.  Source of image:  online version of WSJ article cited below.

 

I heard Charles Koch speak at the April 2005 Orlando meetings of the Association of Private Enterprise Education.  Part of his speech involved how he has tried to apply in his own business, Schumpeter's process of creative destruction.  For a long time Koch has been a stalwart defender of the free market in word and deed.

Ideas seem to exhilarate him.  This no doubt explains in part why this professorial CEO delivers "dozens and dozens" of lectures around the country to his employees on these very topics.  But what does any of this have to do with explaining his company's prodigious profitability?  Well, everything -- he believes.  Mr. Koch contends that the key insight of his business career was melding these philosophical insights about the way the wealth-creation process works into a business operating system called "Market Based Management."  This system, which he has trademarked, enables every division of his business empire to operate as a separate, autonomous, profit-maximizing unit.  It is intended to reward employees who think like entrepreneurs.

"Long-term success entails constantly discovering new ways to create value for customers and building new capabilities to capture new opportunities," he instructs.  "In this sense, maintaining a business is, in reality, liquidating a business."  Mr. Koch likens the cycle to Schumpeter's "creative destruction" -- where the old and inefficient are ruthlessly swept away by the new.

 

For the full commentary, see: 

STEPHEN MOORE. "THE WEEKEND INTERVIEW with Charles Koch; Private Enterprise." The Wall Street Journal (Sat., May 6, 2006): A8.

 




May 13, 2006

"life is too short"

Source of book image:  http://www.amazon.com/gp/product/customer-reviews/0738204315/ref=cm_cr_dp_2_1/104-9985403-1047968?%5Fencoding=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155

The Cluetrain Manifesto is a thought-provoking, entertaining, uneven, overly-mystical, somewhat dated classic on the impact of the internet on business and life.  Here is the book's startling start:

WE DIE.

You will never hear those words spoken in a television ad.  Yet this central fact of human existence colors our world and how we perceive ourselves within it.  "Life is too short," we say, and it is.  Too short for office politics, for busywork and pointless paper chases, for jumping through hoops and covering our asses, for trying to please, to not offend, for constantly struggling to achieve some ever-receding definition of success.  (p. 1)

Locke, Christopher, Rick Levine, Doc Searls, and David Weinberger. The Cluetrain Manifesto: The End of Business as Usual. Cambridge, Mass.:  Perseus Books Group, 2001.

 

 




May 10, 2006

Google Evolves

Gary Hamel has recently penned some thoughtful observations about what practices of Google have led to its success.  An excerpt from that analysis appears below.  (Hamel earlier wrote a popular book in which he makes extensive use of Schumpeter's process of creative destruction.)

Only time will tell whether Google has succeeded in building an evolutionary advantage.  But consider:  Since it's founding, it has repeatedly morphed its business model.  Google 1.0 was a search engine that crawled the Web but generated little revenue; which led to Google 2.0, a company that sold its search capacity to AOL/Netscape, Yahoo and other major portals; which gave way to Google 3.0, an Internet contrarian that rejected banner ads and instead sold simple text ads linked to search results; which spawned Google 4.0, an increasingly global entity that found a way to insert relevant ads into any and all Web content, dramatically enlarging the online ad business; which mutated into Google 5.0, an innovation factory that produces a torrent of new Web-based services, including Gmail, Google Desktop, and Google Base.  More than likely, 6.0 is around the corner.

Of course Google may ultimately fall victim to hubris and imperial overstretch as it takes on Microsoft, Yahoo, eBay, the occasional telecom giant and pretty much everyone else in cyberspace.  Or like Microsoft, it may simply become like every other big company as it grows.  But that's not the way I'd bet.  Google seems to have grasped the new century's most important business lesson:  The capacity to evolve is the most important advantage of all.

 

For the full commentary, see:

Hamel, Gary.  "Management à la Google."  The Wall Street Journal  (Weds., April 26, 2006):  A16.

 

 

 

And here is the information on Hamel's most recent book:

 

Hamel, Gary. Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life. Revised & Updated ed.  Harvard Business School Press, 2002.

 

 Source of image: http://www.amazon.com/gp/product/B000EPFVBE/sr=8-1/qid=1146333251/ref=pd_bbs_1/104-5668094-9083929?%5Fencoding=UTF8




March 24, 2006

Welch: Importance of Taking and Spreading Best Employee Ideas

Sam Walton may have been the grand master of absorbing good ideas of others and then spreading the ideas across the company. Another master was Jack Welch:

 

(p. 383) Getting every employee's mind into the game is a huge part of what the CEO job is all about. Taking everyone's best ideas and transferring them to others is the secret. There's nothing more important. I tried to be a sponge, absorbing and questioning every good idea. The first step is being open to the best of what everyone , everywhere, has to offer. The second is transferring that learning across the organization.

 

Source:

Welch, Jack. Jack: Straight from the Gut. New York: Warner Business Books, 2001.

See also pp. 197-198 for Welch's description of the specifics of how Wal-Mart got this job done.

For even more details, see: Walton, Sam. Made in America: Doubleday, 1992.

 




November 12, 2005

Peter Drucker Saw the Importance of Creative Destruction



12drucker_184.jpg1999 photo of Drucker from NYT online article cited below.



Peter F. Drucker, the political economist and author, whose view that big business and nonprofit enterprises were the defining innovation of the 20th century led him to pioneering social and management theories, died yesterday at his home in Claremont, Calif. He was 95.


For the full obituary, see:

BARNABY J. FEDER. "Peter F. Drucker, a Pioneer in Social and Management Theory, Is Dead at 95." The New York Times ( November 12, 2005) online version dowloaded from http://www.nytimes.com/2005/11/12/business/12drucker.html?pagewanted=1


Peter Drucker is sometimes given credit for helping keep the ideas of Schumpeter alive, and helping spur their revival in the 1980s. See Drucker's article:

Drucker, Peter F. "Modern Prophets: Schumpeter or Keynes?" Reprinted as Ch. 12 in The Frontiers of Management. New York: Penguin Putnam, Inc., 1986, pp. 104-115 (originally published as: "Schumpeter and Keynes." Forbes (May 23, 1983): 124-128).





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