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| Volume 6, Issue 5 |
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In This Issue:
 Tearing up the Jack Welch playbook
A conversation with Warren Buffet
 Why CEOs are not plug-and-play
The promise of Channel stewardship
Creating strategy in an unknowable universe
The morning meeting ritual
Make the most of your off-site
Peter Drucker on managerial courage
Why technology negotiations are different
 Left brain, right brain: Creating a new business model
 Executive onboarding: That tricky first 100 days
 Staying a step ahead of the rest
Building a stellar cellar
 America’s youngest CEOs
Sun protection secrets
 Are you marathon material?
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Tearing up the Jack Welch playbook
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The Six Sigma master was once the undisputed authority in management. But Fortune
is finding that today's smart CEOs are following a different set of rules. Once upon
a time, there was a route to success that corporate America agreed on. But in
today's fast-changing landscape, that old formula is getting tired.
Even now, nearly five years after his retirement from General Electric (Charts),
Jack Welch commands the spotlight. He is still power-lunching, still making the
gossip columns, still the charismatic embodiment of the star CEO. His books
are automatic bestsellers. More than any other single figure, he stands as a
model not just for the can-do American executive but for a way of doing business
that revived the U.S. corporation in the 1980s and dominated the world's
economic landscape for a quarter century. Just try to find an executive who
hasn't been influenced by his teachings. What came to be known as Jack's Rules
are by now the business equivalent of holy writ, bedrock wisdom that has been
open to interpretation, perhaps, but not dispute. But the time has come:
Corporate America needs a new playbook. The challenge facing U.S. business
leaders is greater than ever before, yet they have less control than ever -
and less job security. The volatility of the markets is so unpredictable, the
pressure from hedge funds and private-equity investors so relentless, the
competition from China and India so intense, that the edicts of the past are
starting to feel out of date.In executive suites across the country, a
dramatic rethinking is underway...
Read the article. Back to top
A conversation with Warren Buffett
FORTUNE EXCLUSIVE: Editor-at-large Carol Loomis speaks with Buffett on why he
sped up his plan to give away his money and why he chose the Bill & Melinda Gates Foundation.
In an exclusive interview, the Berkshire Hathaway CEO speaks with FORTUNE's
Carol Loomis about why he shifted gears, his relationship with Bill Gates and
what it feels like to give away so much. Question: “Coming from you, this plan
is pretty startling. Up to now you haven't been famous for giving away money.
In fact, you've been roundly criticized now and then for not giving it away. So
let's cut to the obvious question: Are you ill?”...
Read the article. Back to top
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Why CEOs Are Not Plug-and-Play
"Is talent management portable?" That's the question asked and answered in a
recent Harvard Business Review article discussing issues surrounding how top
managers can transfer their skill sets to a new company.
The authors—faculty and a researcher at Harvard Business School—look at the
experiences of General Electric alumni who went to new companies. Among the
findings: "Even gifted executives with the best and most admired management
training don't necessarily make star CEOs," the authors report. This excerpt
focuses on potential mismatches between an executive's skills and the needs of
his or her new employer...
Read the article. Back to top
The Promise of Channel Stewardship
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“Despite much talk of customer-focused companies, customers are often ignored when it comes to distribution”
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Most company distribution systems are designed ad-hoc when needed, and serve
neither value chain partners nor end users well—just look at the frustrating
new-car buying process set up by American auto makers. At the same time, says
Harvard Business School marketing professor V. Kasturi "Kash" Rangan,
distribution channels are the hardest to change of all the elements of
marketing strategy. Clearly, companies need a new strategy for going to market,
he says. In his new book Transforming Your Go-to-Market Strategy, Rangan introduces
the concept of the channel steward—the one actor in the chain best positioned to
create a process that benefits all. In this excerpt, Rangan discusses the promise
of channel stewardship.
Senior managers of most of the companies involved in moving goods or services
from suppliers to end users would agree: Their distribution channels are outdated
and unwieldy, serving neither customers nor channel partners as well as they should.
In a few cases, distribution channels are streamlined and satisfying for
all participants. In some cases, technology has improved things dramatically. But
in most scenarios, distribution channels, taken as a whole, seem more like a
repository of lost opportunities than an effective delivery system that
appropriately serves and rewards all participants. Powerful channel members
routinely impose their will; weaker participants suffer along because they see
no way out; and customers...? Despite much talk of customer-focused
companies, customers are often ignored when it comes to distribution. Most
participants agree on the problem, but solutions have been elusive...
Read the article. Back to top
Creating Strategy in an Unknowable Universe
| In his book The Origin of Wealth, Eric D. Beinhocker
argues that a radical new view sees economics as a
highly dynamic and evolving system with implications
for companies and organizations everywhere. An excerpt. | |
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“We should think of strategy as a portfolio of experiments.”
“This shift in perspective implies a major redesign of the strategic planning process.”
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Editor's note: In his new book The Origin of Wealth, McKinsey & Company
Senior Advisor Eric D. Beinhocker argues that the traditional view of economics
as a static, equilibrium-balanced system is going through a radical rethinking
involving a multitude of disciplines. The new spin: "complexity economics," in
which the economy is viewed as a highly dynamic and constantly evolving system
that is all but impossible to predict. This excerpt deals with how companies can
set strategy when the future is unknowable.
Strategy as a portfolio of experiments
The key to doing better is to "bring evolution inside" and get the wheels
of differentiation, selection, and amplification spinning within a company's four
walls. Rather than thinking of strategy as a single plan built on predictions of
the future, we should think of strategy as a portfolio of experiments, a population
of competing Business Plans that evolves over time. We will look at the elements
of such an approach shortly, but first, an example will help illustrate what a
portfolio of strategic experiments looks like. Let's return to the Microsoft story
and imagine it is now the year 1987, six years after Gates signed the contract with
IBM. The still nascent PC industry has just gone through a period of explosive growth.
No one has ridden that growth harder than Microsoft. But MS-DOS is now coming to the
end of its natural life cycle. Customers are beginning to look for a
replacement operating system that will take better advantage of the graphics and
greater power of the new generation of machines. A change in the S-curve is coming,
and the industry is far from certain how things will work out. Despite its
success, Microsoft was still a $346 million minnow in 1987 compared to
the multibillion-dollar giants hungrily eyeing its lucrative position. IBM
was developing its own powerful multitasking OS/2 system; AT&T was leading a
consortium of other companies, including Sun Microsystems and Xerox, to create
a user-friendly version of the widely admired Unix operating system; and
Hewlett-Packard and Digital Equipment Corporation were pushing their own version
of Unix. Apple was also still a threat, consistently out-innovating the rest of
the industry, and its highly graphical Macintosh was selling well. We can imagine
the options that Microsoft faced at this point. Option one: Gates could...
Read the article. Back to top
The Morning Meeting Ritual
| Is your organization plagued by inefficient
communications, finger pointing, and lack of
accountability? Get all key decision makers to
the table—same time, every day. Welcome to Marty
Linsky's The Morning Meeting. From Harvard Management Communication Letter. | |
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“Issues cannot be covered over, and people can no longer hide.”
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A global petrochemical company struggling to create a coherent strategy after
a merger with a very different kind of firm. A small advertising and design house
trying to manage itself during a time of rapid growth. A public agency facing a
series of budget cuts that threaten core services and deeply held values. An
established bank losing market share to new boutique players coming into its market
and cherry-picking high-margin products.
As diverse as the challenges facing these organizations seemed, when my colleagues
and I looked closely, we recognized that they shared two closely linked
underlying causes: chronic communication problems within the executive team and a
lack of shared accountability. When communication is stifled and turf protection
the order of the day, an organization's senior leadership team is less than the sum
of its parts and cannot grapple with strategic and operational challenges
most effectively. Expertise and energy go untapped: less than frank
communication sometimes means that team members do not know the full extent of
one another's issue; and a lack of shared accountability leads some to think,
"Hey, that's his problem and he's got to fix it." In contrast, two
qualities characterize high-functioning leadership teams:...
Read the article. Back to top
Make the Most of Your Off-Site
| The key: advance preparation. This means restricting in
advance the scope and number of issues to a manageable
few. And don't invite too many people. An excerpt
from Harvard Business Review. | |
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“The meeting is not the place to
plod through data.”
“If most companies have
too many participants, they have too few off-site sessions.”
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A strategic off-site's success is largely determined by what happens before it convenes.
To make sure the meeting generates tangible results, its designer must do three
things. First, answer the most basic questions:...
Read the article. Back to top
Peter Drucker on Managerial Courage
| Each product, operation, and activity should be justified every two or three years, wrote Peter F. Drucker in 1963. But that's a hard step for managers to take. A Harvard Business Review classic. | |
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Unfortunately I know of no procedure or checklist for managerial courage.
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I do not propose to give here a full-blown "science of management economics," if only because I have none to give.
Even less do I intend to present a magic formula, a "checklist" or "procedure"
which will do the job for the manager. For his job is work—very hard,
demanding, risk-taking work. And while there is plenty of laborsaving machinery
around, no one has yet invented a "work-saving" machine, let alone a "think-saving"
one. But I do claim that we know how to organize the job of managing for
economic effectiveness and how to do it with both direction and results. The
answers to the [following] three key questions . . . are known, and have been
known for such a long time that they should not surprise anyone.
1. What is the manager's job? It is to direct the resources and efforts
of the business toward opportunities for economically significant results. This
sounds trite—and it is. But every analysis of actual allocation of resources and
efforts in business that I have ever seen or made showed clearly that the bulk of
time, work, attention, and money first goes to "problems" rather than to
opportunities, and, secondly, to areas where even extraordinarily successful
performance will have minimum impact on results.
2. What is the major problem?...
Read the article. Back to top
Why Technology Negotiations Are Different
| Technology negotiations are complex and many managers are left with a sense of unease. Am I getting the best deal? Will the ERP system I buy today be obsolete tomorrow? Lawrence Susskind offers keys to help you avoid the pitfalls. From Negotiation. | |
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Executives are increasingly faced with the task of negotiating in a realm that many know little about: technology.
Whether you're bargaining over the purchase of a new companywide network, coping
with a possible infringement of patented technology, or seeking better customer
service from a software supplier, technology negotiations have become a fact
of managerial life. How do such negotiations differ from those that are
less technologically complex? You can anticipate four specific problems to crop
up more often in the technology arena:...
Read the article. Back to top
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Left Brain, Right Brain: Creating a New Business Model
An interviewer once asked Albert Einstein how he developed his complex
scientific theories. In reply, Einstein reportedly pointed to his head and said
that he used a pencil and a piece of paper to develop his ideas.
This clearly demonstrates the perfect union of analytics and creativity
in problem-solving. Out of Einstein's working process came many famous
scientific theories, including the theory of relativity. Nothing could better
illustrate the integration of left brain and right brain: logic and reasoning
coupled with imagination and creativity. Einstein's interesting quote (above) points
to a current, fundamental shift in business thinking. In fact, business leaders
are embracing, with great impact, the concept of integrating analytical abilities
and creativity. And this is where our left brain-right brain discussion takes
us. Stephen J. Adler, Editor-in-Chief of Business Week, has dubbed today's
business environment "the Creativity Economy." In a memorable editorial, "Ready.
Set. Innovate," from August 2005, he states:
The creativity economy may sound like another over-hyped catch-phrase,
but companies that have embraced the concept are gaining a bottom-line edge over
those who haven't...innovation and design point the way out of a lot of the
difficulties U.S. companies face as high-paying jobs in tech and manufacturing
shift overseas. But the smartest U.S. companies are learning that they can still
lead the way if they listen closely to their customers and rethink product
design. That's how Starbucks can charge so much for a cappuccino and why the
Swiffer is eclipsing the mop.
While innovation and creative design in products and services seem to point the
way to future business success, we should expand on Adler's idea...
Read the article. Back to top
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Executive onboarding: That tricky first 100 days
The business of helping executives get off to a good start is booming.
Being boss of an American firm may be fabulously well paid, but never has the
position of top banana been harder to cling on to.
According to Challenger, Gray & Christmas, a consultancy, 728 chief executives
left their jobs in the first half of this year—some willingly, many not. That was
6.9% more than during the same period in 2005, a year with an all-time record high
of 1,322 departures. Many of these changes were at smaller firms, but there
have recently been several sudden, high-profile exits at firms including Kraft,
Novell and Williams-Sonoma. With increased turnover comes reduced tenure in the
top job—and, indeed, in other senior positions. Executives are now being judged
more quickly than ever, it seems. This trend has spawned a business designed to
help newly appointed corporate leaders to hit the ground running. “The average CEO
is in the job for under four years now,” says Rich Rosen of Heidrick & Struggles,
a recruitment firm. “So firms are looking for a new CEO to make a quicker impact,
and are prepared to invest in making sure it happens.” Reflecting the
management industry's addiction to jargon, this process has been named
“onboarding” (that is, helping a new executive successfully climb on board)...
Read the article. Back to top
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Staying a Step Ahead of the Rest
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Modern-day competitive intelligence is the ability to do far more than simply
collect and digest published data on the competition. It requires special insights
in order to see outside your own business and stay ahead of disruptions,
distortions, rumors and smokescreens. Ultimately, the market measures and
rewards a CEO on performance but most of the time this translates into
internal corporate measures, such as revenue growth and margins.
Yet the unspoken and often unrecognized other strength a CEO brings to a company
is a drive to digest large gobs of information, assess its value and
act expediently—ahead of the competition. Such a CEO will know a supplier’s
and even a customer’s moves before the rest of the market. Sometimes this
intelligence will tell the executive it’s best to sit tight; other times, it
screams for action before the competitive opportunity disappears. There are nearly
as many ways to express the competitive intelligence competency as there are CEOs.
For some, such as Vasella, it’s a cultural acuity, an ability to sort out the useful
and potential profitable competitive insight from many competing and distracting
pieces of information. In Crandall’s case, competitive knowledge is all about
the numbers. Taylor likes to act quickly on the basis of instinct. While for
Pickens, competitive intelligence means literally seeing your competition on the
ground, watching its day-to-day movement...
Read the article. Back to top
Building a Stellar Cellar
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Plan the perfect wine collection.
Not too long ago after doing my best Zorro imitation by sobering the top off a
Champagne bottle as the finale to a wine tasting, I was approached by a newly
minted chief executive of a high tech company, who wanted some advice on stocking
a new wine cellar. He and his wife were in the midst of designing and constructing
a dream house. That, in conjunction with his newfound enthusiasm for wine, created
the perfect opportunity. As a wine educator, it’s not often that I can start with a
bare palette. “My wife and I enjoy entertaining and have started to really
get interested in wine,” he explained. “So it seemed like a good idea to add to
our small stash and create a proper storage place for what we will be
collecting.” “Let’s start with the two words you mentioned, entertaining
and collecting,” I responded. “They’re not the same thing. If all you want is a
supply of everyday wines with a proportion of special wines for entertaining,
you’ll need a functional cellar geared to the size and number of dinners you plan
to host. If, on the other hand, you want to also lay down fine and rare wines to
improve with age and show your collection to friends, you’ll want a very
different cellar both in construction and content.”...
Read the article. Back to top
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America's Youngest CEOs
There's a fittingly playful nature at the offices of children's clothier Gymboree.
A lot of that has to do with the tone set by 33-year-old Matthew McCauley, the
youngest CEO ever to head the $700 million outfit in its 30-year history. A
graduate of Brigham Young University who got his start handling distribution at
Payless Shoes and The Gap, McCauley suspects his youth keeps him open to
new perspectives. "I love to riff and bounce ideas off of people. Regardless of
what their function is, [Gymboree's employees] are all talented, bright people,"
says McCauley, who routinely solicits feedback from staffers throughout the company
and in different departments. That open strategy seems to be working:
Gymboree's first-quarter sales reached...
Read the article. Back to top
Sun Protection Secrets
If you think slathering yourself with sunscreen will keep you from getting skin cancer, think again.
No, the sun protection industry hasn't been waging a misinformation campaign. The
fact is, "sunscreen" is not the same thing as "sunblock." And if you don't know
the difference, you're not alone. It's one of the many misconceptions and
unknowns surrounding sun protection--and unfortunately, ignorance in this area can
cost you. Most of us are guilty of some form of sun worship. When the weather is
bright, we lounge at the beach, run out for a round of golf or putter in the
garden. Such simple acts of leisure can lead to more serious consequences than
sunburn. Daily exposure to ultraviolet rays can add up to premature aging, wrinkles
and skin cancer...
Read the article. Back to top
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Are you marathon material?
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| Runners start the New York City Marathon last November. The running of the 36th
annual road race featured one of the most competitive fields ever,
including 35,000 participants from 99 countries and all 50 U.S. states.
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Endurance events are trendy, but crossing the finish line is still tough.
Jacob Havenar ran his first marathon in 2000 with some soccer buddies who were
looking for a new challenge. His motivation to keep up with the guys — and earn
bragging rights — helped him make it to the finish line. But his main drive came
from deeper within. "It's nice to be able to say you've done a marathon," he says.
"But for me, the part that meant the most was the sense of personal accomplishment.
It changed my life. It made me feel like I could do anything in the world."
Like Havenar, more and more first-time marathoners are getting in the race.
Statistics from USA Track and Field show that more than 400,000 runners now compete
in an estimated 400 U.S. marathons each year, up from about 236,000 participants
in 1990.
Marathon running is increasingly popular for several reasons, Havenar and others
say. Some people are inspired by success stories common in the media and want to
achieve such a big personal goal. Some are hoping to improve their health or
lose weight. Others want to do a good deed; more participants are now competing to
raise money for their favorite charity. And why they decide to participate may make
a big difference in whether they'll succeed, according to new research by Havenar,
now a doctoral candidate in physical activity, nutrition and wellness at Arizona
State University. Going the distance isn't for everyone...
Read the article. Back to top
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