SARS is back!

SARS is back! And, this time the long-term implications could be even worse than the first time. True? Wellllll, not exactly. SARS, or Severe Acute Respiratory Syndrome, which first gained our attention in November 2002, and which is caused by the SARS coronavirus has, thankfully, not reappeared. What is back, however, are the same seeds of doubt about the reliability of China’s role in global value-chains that were so rampant nearly five years ago. The rest of this opinion can be found at http://www.cbiz.cn/news/showarticle.asp?id=2470

Virtuoso Teams: Some Summer Reading

Summer, with all of its joys, is one of the great periods of the year where I can "squander" time on reading things that I normally wouldn't be able to devote sufficent time to. Few moments are as relaxing as being on the rocks along Italy's Ligurian coast, or the beaches of North Carolina, with a bag of books and not much else to do! Last summer, a British magazine entitled MBA Business asked me to share some thoughts on my recommendations for summer reading. I was fresh from the Virtuoso Teams project and recommended three great reads, which I think are still are a sure bet for both leisure and learning:

Last Place on Earth [UK publisher: Abacus, 2000], by Roland Huntford – The race to the South Pole in 1911 by Roald Amundsen’s small team of virtuoso performers against Robert Falcon Scott’s much better-endowed and bigger-branded organization, and the story of how they won, provides a host of insights into how to build a great team and then employ knowledge as a competitive advantage. This book is as much about leadership and team-building as any book on a business shelf, and much more enjoyable reading!

I’ve long thought that jazz groups are the perfect metaphor for project teams, and no one ran a jazz group better than Miles Davis. Despite being vilified as the “Prince of Darkness” for his personal ideosyncracities, Davis nonetheless revolutionized his business in three successive decades, with different teams. John Szwed’s biography, So What [UK publisher: Arrow, 2003], provides ample evidence of Davis’ leadership genius in a style that grooves to the music that Davis did so much to create.

A whole new generation of viewers have come to know Edward R. Murrow through the recent George Clooney-directed movie Good Night, and Good Luck, which chronicles Murrow’s principled-stand against the tyranny of Senator Joe McCarthy and his Red-hunting excesses. This alone should merit the attention of all of us, as it speaks directly to the centrality of personal values in the business world. Murrow’s other remarkable contribution to business, however, came in the creation of the modern broadcasting industry, and the redefinition of the organizational attributes necessary for timely global coverage and informed reporting. Veteran American broadcaster Bob Edwards has recently written a compact yet comprehensive book on Murrow and his work: Edward R. Murrow and the Birth of Broadcast Journalism [John Wiley, 2004].

The Persistence of Old Frameworks

Sometimes, “old” works better than “new”. I say this not in defense of my age, but as a simple observation of what works and what doesn’t. For example, what did I learn from reading about “blue oceans”? Simply, that I’m a “red ocean” type of guy, at heart. And, that I really couldn't figure out what a "blue ocean" really was, or why anyone would want to jump into it? Somewhat similarly, I regularly find myself defending my continued reliance upon Michael Porter's simple, but 30 year old, five-forces model, in the face of "newer, better, more complex" models, churned out daily by academics in the pursuit of tenure. Why do I stick with Porter? Largely, because it works. Almost always, in a complex world, simpler is better than complex. The moral is: never discard "old but useful/reliable" in return for "new but complex/glitzy" without thinking it through very carefully, and certainly never merely to be au courant[I hope that my wife Marie is reading this].

The Porter model is not, however, the only "old" framework that is still around. Recently, there seems to be a renaissance of enthusiasm for the BCG Portolio Matrix [cash cows, dogs and stars, etc.] and for the Treacy triangle [which argues, much as Porter did, at one time, that you can really only be great in one "value discipline": operational excellence, product leadership, or customer intimacy]. Both of these frameworks are more than a decade old and both have experienced periods where they had nearly faded from managerial consciousness, only to return again into fashion. They are also, for me, vivid testimony to my second conclusion which is that "sometimes, old doesn't work very well anymore, and should be discarded. "

Porter's five-forces and McKinsey's 7 S, work well, despite their age, because they are not epoch-bound and because they raise questions of durable strategic import, rather than proposing answers which can be correct in one vintage and inappropriate in another. The BCG matrix, and Treacy's pyramid, on the other hand, provide answers, and answers that reflect the limitations of the time that they were developed in, at that. Here's the point: it would appear reasonable that, for eternity perhaps, it will be a sound and sober idea, when considering strategic choices, to consider what the customer wants and how powerful suppliers are [Porter five forces]. Or, for that matter, that it will always be reasonable to ask "how does our style and structure agree with our strategy [McKinsey 7 S or Galbraith's star]?" Is it still reasonable, however, in the 21st century, to embrace "the tyranny of the ands" [Jim Collins' words in Built to Last] and suggest that you can only excel in one value discipline? I don't think so! Here's a case where an old framework is no longer useful. Less true, but also reflecting an earlier way of life, when conglomerates ruled the world, is that the BCG matrix still has the answers for complex, multi-business companies. It, actually, never did, as it often misrepresented the ways in which such organizations worked, but more importantly, for me at least, is that it is so typically misinterpreted as to what it means, and how it is measured, that it leads to more, not fewer, debates about strategy, and not value-adding ones, at that.

So, Old is not necessarily bad, and New is certainly not necessarily better. How's that for a lesson?

Nixon and Mao: A Good Read!

Ah, the old days!! Anyone who worked around China in the early 1980s remembers "the way it used to be." Not at all like today; a world of real mystery, and, not coincidentally, intrigue as well. And, of course, we were all so young; modern China included. All of this is vividly brought back to life in Margaret Macmillan's new book Nixon and Mao which describes not only [in the book's subtitle] "the week that changed the world," but much of the background leading up to that week as well. Especially fascinating for an American audience [authored by a well-known Canadian academic], it's a well-written read for anyone interested in China, and really does recall the way things used to be. In addition, however, there are some real take-aways worth noting:

• 
  The sheer audacity of it all! I mean, what Nixon, Kissinger, Zhou and Mao did was unthinkable; great politics, grand theatre, and we are all beneficiaries of it, still today;
• 
  The book reminds us that we have forgotten, all too easily, the carnage of the Great Proletarian Cultural Revolution, and that China was just coming out of it only thirty some-odd years ago;
• 
  The principal characters are fascinating: Mao comes across in the book as someone who could cut quickly to the core of a problem, and then had the unchallenged power to solve it, as well as being a master of the grand gesture. His unique mixture of acute perceptions, high-intellect and peasant-ways is vividly portrayed;
• 
  Zhou Enlai remains an enigma for me. Loved by so many Chinese people, and admired by all of the foreigners who dealt with him, he still eludes an easly definition of who he was and what he stood for.
• 
  Lest anybody doubt the role of Taiwan in China's national conciousness, this book establishes quite clearly the centrality and emotion in China's political mindset over the renegade island province;
• 
  Kissinger comes across less worldly than I would have expected. Was he really so taken with "the mystery of the Orient"?
• 
  Nixon is as mysterious as ever; seemingly careening from moment of being high-minded and strategic to moments of being manipulative and petty.
• 
  Finally, I'm struck by a comment of Zhou Enlai to Kissinger [page 213] which could be applied in many corporate strategic conversations today: "This awakening consciousness of the people is promoting changes in the world, or we might call it turmoil. ... Shall this generation of peace be based on hopes for the future, or on old friends?"
  
  

Inside the Mind of the Chinese CEO: Profits

Just what is going on in Chinese enterprises? Are they making smart decisions? Are they making money? And, are their managers incentivized to continue to do this? The answers are fragmentary, but appear to all be in the affirmative. Chinese enterprises [maybe it's time to call them firms], appear to be rapidly maturing into organizations that we in the West can more easily recognize. Arthur Kroeber, who runs Dragonomics, and whose work I continually rely upon, put it pretty directly last September, in a China Insight, entitled "The Mystery of Profit," when he observed: • "Industrial profit growth in China is real and broad based • The "margin squeeze" story has been exaggerated • Economy-wide profit growth, however, tells us nothing about the rate of return at individual firms • Financial investors find it difficult to profit because in China’s high-growth environment, companies rationally target expansion, not rate of return" These conclusions were reinforced in Dragonomics 2nd Quarter, 2007, China Quarterly Economic Outlook, which reported that: "Margins are improving even in both upstream [logical because of the energy industry impact, and the more general monopoly-like character of such industries in China] and non-upstream sectors: • Upstream (oil/gas/coal/mining) profit margin (profit/revenue) is close to 30%. • In most other industries profit margin is between 5-8%. • Midstream processing industries (e.g. steel and some metals smelting; oil refining) faced margin pressure in 2005 but are now recovering; in most manufacturing sectors margin pressure is not very evident." Now, a research project out of a team from several Hong Kong universities, and reviewed in February 2007 issue of The Academy of Management Perspectives, entitled "What Drives Compensation for China's CEOs?" [which can be found on the IMD Online Databases, using TOC Premier, under "Business Source Complete"] uses late 1990s-early 2000 data [unfortunately] to consider evidence of incentivizing around profits. Reassuringly, they find that incentive links tied to profits do exist and tend to be most likely found in foreign invested enterprises [not surprisingly], but can also be found in those SOEs that report [not owned by] to the Central, as well as local, governments.

Lessons from Three War Books

Perhaps because I've just returned from both Japan and North Africa, I've recently gotten caught-up in three books that chronicle different WWII episodes in these regions. The books are: An Army at Dawn (The War in North Africa, 1942-1943), Rick Atkinson; Incredible Victory (The Battle of Midway), Walter Lord; and Letters from Iwo Jima [published in the U.S. with the title: So Sad to Fall in Battle] , Kumiko Kakehashi. I'd recommend each of them as a "good read," but, more importantly, there are interesting lessons associated with considering them as a whole:

• To start off, it's hard to read them and not be terribly depressed by the both the futility of war and the tragedy of unfufilled youth. So many young men, and civilians, who lost their lives, and their dreams, in these conflicts....
• The pervasiveness of leadership hesitancy and the lack of urgency, that marks all of the combatants in these sagas, and which almost always had significantly damaging consequences. For example: Eisenhower's remoteness from the North African battlefields, and the slowness by which the Allied forces moved across this theatre; Montgomery's similar failure to close, when he had Rommel's army on the run; and, at Midway, the failure of the Japanese naval leaders, time and again, to move faster, which probably determined the difference between success and failure.
• The consequences of not doing your homework, and not paying sufficient attention to details, prior to a major engagement. This was particularly telling among the Allied armies in North Africa, and always resulted in unnecessary deaths, sometimes of staggering proportions.
• The pervasive power of industrial strength: you cannot fail to recognize that while neither side had a monopoly on brave young men, the war was probably won by the factories and supply-chains that allowed America's industrial system to keep on delivering assets to the front, wherever it might be.
• The common humanity among the "grunts" on all sides. As with most other war books I've read, I come away thinking that the guys on the ground, no matter who they are, deserve better leaders than they have, usually at the battalion level and above.

War is terrible to consider, even it if lives between the covers of a book, but these three books all portray it in vivid and instructive detail.

Tips for Energizing Leadership

• According to Jack Welch, “The world of the [future] will not belong to managers … who make the numbers dance …. The world will belong to passionate, driven leaders – people who not only have an enormous amount of energy but who can energize those who they lead.” Why? Because the difference between dreams and delivery often has less to do with what you say, than how you say it. We've all heard too many new strategies, too many new initiatives, to get inspired each and everytime another one comes along. And, if we can't inspire ourselves, what chance do we have with the people who work with us? This is why "Leader as an Energizer" is so important. Recently, I had the opportunity to work with a group of Scandanavian managers who had some great tips for energizing people around a message. I think that their list is worth sharing:
  * Make sure the message is crisp, sharp, and clear
  * Give them the brutal facts –No B.S. –Don’t evade or avoid – be honest!
  * Emphasize the uniqueness of our new idea/offering
  * Give people reasons to believe –Why will this time be different? –How you will win if we do this!
  * Be inclusive rather than exclusive (recognize contributions and make this "our" plan rather than "mine" –You need buy-in to make this work –More ideas are better than fewer
  * We’re going to “kill’em”… and have fun! –This ought to be bold, serious, energizing, and a bit outrageous
  * Get’m to believe –By zooming-in on key issues –Referring to customer perceptions –Don’t try to fool your own people
  *Show them what we’ve got… make it tangible –All too frequently, we’re in this position because we can’t get past the dreams; this time it’s different!
  *Have a story to tell –Build a thread that winds its way, inexorably, to a successful finish & make it vivid
  * Present the campaign –This is the place for specifics: what will we do? where will we do it? When? What will make it different? How will we make money?

You Don't Always Get What You Measure

We’re all familiar with the old adage that “No matter what you do; you get what you measure!” In fact, I must admit that I’ve relied on this a lot as sort of a glib "throw-away" comment on any number of managerial conversations. Too bad it’s not true! In fact, you won’t always get what you measure if you don’t change the other dimensions of the Galbraith Star, or McKinsey’s 7S, or whatever framework you rely upon to think about execution. I write this while attending a corporate workshop that could result in a fundamental rethinking of how one multinational corporation operates, and what’s especially fascinating to me is how ready people are to consider changes in what they measure, but how resistant they are to think about the other concomitant changes that are necessary to allow people to really take full advantage of the promise offered by the new measures. And, it’s not only structural changes that are resisted, but virtually all others. The lesson is quite clear: you don’t always get what you measure, and, in fact, you reduce the probability of getting what you measure, unless you consider changing all of the other variables that are included in the organizational performance equation, including: the skills and styles of the people you are measuring, the way you organize talent to fit the measures, the process and platforms you put in place to make sure that the measurement is achievable and inspiring, and a clear, understandable business strategy that provides meaning to the measures. Only with such considerations, do you stand a reasonable chance of achieving what we all have promised in the past: actually getting what you measure.

You Can't Save Your Way to Greatness

It seems like every time I turn around, another firm that I work with has launched a new campaign to cut costs. It’s not that it’s not a good idea. It is, of course. Who could ever be against cost-management? The big problem is that cost-control requires discipline and most firms lack that. They also lack the vision and the leadership that are central to this. Mindlessly cutting back on the distinctive competencies of the corporation, in an effort to be “cheaper”, will almost always erode the possibility of a sustainable future.

What comes to mind, in particular, is a recent memo (http//stabucksgossip. com) that Starbucks’ chairman, Howard Shultz, sent to his top team decrying the diminishing of the “Starbucks experience” as an unintended consequence of operational efficiency measures. The memo itself is an amazing statement of strategy and leadership. Shultz deplores the loss of “romance and theatre” that accompanied the adoption of automatic espresso machines, as well as the loss of aroma and the sound of bean-scooping that disappeared with the introduction of flavour- locked packaging. He even worries about the loss of the “soul of a neighbourhood store”. These are details, but it is the details that matter. If “strategy is choice”, then the efficiency choices that were made in the pursuit of an ambitious growth strategy may well have resulted in a threat to the promises that lie at the heart of the Starbucks brand.

Also worth noting is that the chairman is raising the issue, not middle-management, nor the customer—yet. It is the guy at the very top, who is taking responsibility for being part of the management team that made these choices, and is now calling for correcting them. This is sober and responsible leadership. What makes it even more amazing is that it is being worried about in an organisation that Business Week ranked 10th among it’s annual listing of “Customer Service Champions”, and which Fortune ranked 16th among its 100 Best Places to Work, for 2007.

The lessons for all of us, from Starbuck’s experience, are profound:
Cost-control needs to be controlled. Left on its own, the mindlessness which often accompanies such crusades can attack the very essence of the brand-promise
Senior management is ultimately responsible for the outcome of such initiatives, and they should act quickly if they suspect a wrong turn—being wrong is correctable; being gone is not
Enhancing offerings and charging more, rather than paring offerings and getting trapped in a downward margin spiral, is a better way to go.

This column originally ran in The Times of India, Mumbai edition, April 3, 2007.