"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.
(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.
"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:
(Note: ellipses added.)
"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.
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.)
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:
(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.")
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.
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.
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.)
(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.)
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.)
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.)
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.
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:
(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.
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
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:
Source of graph: online version of the WSJ article cited above.
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:
(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:
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.)
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:
(Note: ellipsis added.)
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:
(Note: ellipses added.)
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:
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.
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:
The reference to the book, is:
James F. Thompson. THE CUBICLE SURVIVAL GUIDE. (Villard, 216 pages, $12.95)
(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.
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.
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:
(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.
(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.
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.
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.
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.
