Harvard Business Review, Aug 09
Executives are beginning to look to the future after spending a full year in crisis mode. As they reengage in strategic thinking, they will need to continually assess the changing economic landscape—and they can effectively do that by keeping a close watch on the underlying forces outlined in this article.
1.Globalization is under fire - a declining trend
Increased protectionism and reduce global trade are reducing the global flow of people, goods and services – according to McKinsey.
2.Resources Feeling the Strain - a stable trend
While resource and commodity prices pulled back during the recession, the fundamental forces driving these prices have not changed.
3.Trust in Business is Running Out - an accelerating trend
The recession, its root causes and other factors have eroded consumer and public trust in businesses which raises the cost and lowers the brand value.
4.A Bigger Role for Government - an accelerating trend
Governments have played a significant role in stimuluating the recovery and re-regulating industries. Do not expect them to shrink back from these roles.
5.Management as a Science - a stable trend
Information and decision support technologies will continue to transform management and prevent the ‘decisions’ that led to the financial crisis.
6.Shifting Consumption Patterns - an accelerating trend
Consumption patterns are shifting as U.S. consumers pullback in the face of recession and debt in favor of Asia countries and older consumers.
7.Asia Rising - a stable trend
Asian economies continue to rise in importance and growth as both a supplier and consumer. They will become about a quarter of the world economy dominated by India and China.
8.Industries Taking New Shape - an accelerating trend
Industries are changing in the face of the recession that widens the gap between strong and weak rivals and continued disaggregation of industry structures. This requires a two tier strategy: seize immediate opportunities created by the recession and look for ways to redefine the industry in your favor.
9.Innovation Marches On - a stable trend
Resist the initial desire to cut back on R&D in the face of tough economic times. Rather continue investment, even through operational cuts, as innovation separates companies when the economy comes out of the recession.
Price Stability in Question - an accelerating trend
Economic forces are at play with a high probability of changing price stability either leading to inflation or deflation.
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Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Wednesday, November 25, 2009
Are you "strategic"
CFO Magazine, November 1, 2009
Today, as companies gear up for postrecession growth, CEOs are more eager than ever to hire CFOs who are not only "strategic," but "strategic business partners," according to the exact words of several executive recruiters..
However, they will prove that they have a broad enough command of the company that they could step into the CEO role at any time. A recent research suggests that only
only 17% were deemed to be "performance leaders," executives who react quickly to change and take advantage of opportunities for their companies, and whose actions can be correlated with shareholder returns during their tenure. The rest fell into categories that sound perfectly acceptable — "process optimizers" and "consensus builders" — but that indicate executives who do not move companies forward.
How can CFOs develop themselves to the role of a “business partner”.
Strategic CFOs delegate. CFOs must first hire or train others who are strong enough to handle their roles with a minimum of intervention.
Strategic CFOs start with the business, then move toward the numbers.
CFOs have strong relationships with various people in the businesses.
Strategic CFOs push the boundaries — but recognize the limits of their role. To broaden their horizons, CFOs should educate themselves about various areas of the business and take on incremental responsibilities, with an eye toward building up their experience base.
------------------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Today, as companies gear up for postrecession growth, CEOs are more eager than ever to hire CFOs who are not only "strategic," but "strategic business partners," according to the exact words of several executive recruiters..
However, they will prove that they have a broad enough command of the company that they could step into the CEO role at any time. A recent research suggests that only
only 17% were deemed to be "performance leaders," executives who react quickly to change and take advantage of opportunities for their companies, and whose actions can be correlated with shareholder returns during their tenure. The rest fell into categories that sound perfectly acceptable — "process optimizers" and "consensus builders" — but that indicate executives who do not move companies forward.
How can CFOs develop themselves to the role of a “business partner”.
Strategic CFOs delegate. CFOs must first hire or train others who are strong enough to handle their roles with a minimum of intervention.
Strategic CFOs start with the business, then move toward the numbers.
CFOs have strong relationships with various people in the businesses.
Strategic CFOs push the boundaries — but recognize the limits of their role. To broaden their horizons, CFOs should educate themselves about various areas of the business and take on incremental responsibilities, with an eye toward building up their experience base.
------------------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Friday, November 13, 2009
Nokia Rocks the World: The Phone King's Plan to Redefine Its Business
Fast Company, Sep 09
By Mark Borden
Addressing a diverse gathering at Greenwich Hotel in Tribeca one of the hosts for the evening ,Nokia's 43-year-old executive vice president of entertainment and communities, Tero Ojanperä, talked of Nokia’s impressive statistics: about being the No. 1 cell-phone company in the world, with nearly 40% market share and 1.1 billion users.
But he added that the numbers were unimportant and went on to explain to a group composed of music execs, about Nokia's Comes With Music service, which offers unlimited downloads of more than 6 million songs (that can be kept for life) and is paid for with a fee built into the cost of certain mid-to-high-end Nokia handsets. "The two forces we are competing against are actually non consumption and piracy," Ojanperä says. "If we can get people engaged with music and compete against piracy, then we have won the war. And we believe we are revolutionizing the way music is being consumed."
"It's not only about music," he adds. "It's about paying. We want to make a difference in the payment for music. Nokia not only wants to revolutionize music, but I am claiming now that we will quickly be the world's biggest entertainment media network."
According to him, the ability of any device to gather and present information on demand is what will decide its fate, with the crumbling of barriers that divide television, computers, and cell phones. And he says that the cell phone has emerged, for now at least, as the single most important device in the global marketplace.
While, Apple has done the best job to date of creating a luxurious digital platform that scratches the modern itch for constant connectivity and content, Nokia has endless patience, a very long reach, and a willingness to study the competition. Nokia plans to win that scale game.
The company believes there are three reasons why people adopt new technology. The first is survival, the second is social, and the last is entertainment. The common thread among the three can be loosely described as culture, and Nokia has worked hard to develop a deep understanding of all the cultures in which it operates.
But it is Ojanperä's experiments with Dave Stewart that best reveal the range and depth of Nokia's ambition. Stewart's function at Nokia is to connect the company to talent, opportunities, and new ideas. While not a staff employee, he has an official title: change agent.
Beyond entertainment, Nokia sees in its billion-person base an opportunity to insert itself into all types of commercial exchanges.
By Mark Borden
Addressing a diverse gathering at Greenwich Hotel in Tribeca one of the hosts for the evening ,Nokia's 43-year-old executive vice president of entertainment and communities, Tero Ojanperä, talked of Nokia’s impressive statistics: about being the No. 1 cell-phone company in the world, with nearly 40% market share and 1.1 billion users.
But he added that the numbers were unimportant and went on to explain to a group composed of music execs, about Nokia's Comes With Music service, which offers unlimited downloads of more than 6 million songs (that can be kept for life) and is paid for with a fee built into the cost of certain mid-to-high-end Nokia handsets. "The two forces we are competing against are actually non consumption and piracy," Ojanperä says. "If we can get people engaged with music and compete against piracy, then we have won the war. And we believe we are revolutionizing the way music is being consumed."
"It's not only about music," he adds. "It's about paying. We want to make a difference in the payment for music. Nokia not only wants to revolutionize music, but I am claiming now that we will quickly be the world's biggest entertainment media network."
According to him, the ability of any device to gather and present information on demand is what will decide its fate, with the crumbling of barriers that divide television, computers, and cell phones. And he says that the cell phone has emerged, for now at least, as the single most important device in the global marketplace.
While, Apple has done the best job to date of creating a luxurious digital platform that scratches the modern itch for constant connectivity and content, Nokia has endless patience, a very long reach, and a willingness to study the competition. Nokia plans to win that scale game.
The company believes there are three reasons why people adopt new technology. The first is survival, the second is social, and the last is entertainment. The common thread among the three can be loosely described as culture, and Nokia has worked hard to develop a deep understanding of all the cultures in which it operates.
But it is Ojanperä's experiments with Dave Stewart that best reveal the range and depth of Nokia's ambition. Stewart's function at Nokia is to connect the company to talent, opportunities, and new ideas. While not a staff employee, he has an official title: change agent.
Beyond entertainment, Nokia sees in its billion-person base an opportunity to insert itself into all types of commercial exchanges.
Beyond economics: Factoring politics into investment strategies
Beyond economics: Factoring politics into investment strategies
Ian Bremmer discusses how businesses can limit risk exposure to political shocks.
The McKinsey Quarterly, May 2009
Ian Bremmer discussed the value of developing business strategies that help companies and investors limit their risk exposure to these shocks in his interview with McKinsey. He also shared political risk–management lessons from his new book, The Fat Tail: The Power of Political Knowledge for Strategic Investing, cowritten with colleague Preston Keat. Bremmer, the president and founder of political-risk consultancy Eurasia Group, spoke with McKinsey’s director of publishing, Rik Kirkland, in Eurasia Group’s New York office in March 2009.
Bremmer says that his book, The Fat Tail explains how politics is increasingly affecting the markets and creating a new set of winners and losers, short term, long term. It is very important for investors and business executives to know what is determining the likelihood of an exposure in a country, sector or an individual investment. The point of the book is that these shocks that many believe are not possible to be measured, that they’re impossible to predict and expect, they are increasingly about politics. They are about global political risk. And once you understand that, you realize that you can actually do a better job understanding them and a better job managing them.
Bremmer says that the structure of an organisation is very important in order for it to have an effective filter so it can use the information well. The information has to make its way though the decision process in the organisation. As a political scientist, Bremmer says that there is point when an executive can actually make a useful decision but to do that they need to be aware of what is going on.
Bremmer says, “A big part of The Fat Tail is actually not the management consulting part, because corporations have so gotten this wrong. They have so missed just paying attention to these variables that I think that we need to first get back to basics and say, “OK, what is political risk? What are the kinds of risks that are out there, from macro to micro, from social revolutions, geopolitical conflict, and terrorism to regulatory policies and nationalizations? And how do we identify them? And how do we understand where we might be facing them?”
=============================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Ian Bremmer discusses how businesses can limit risk exposure to political shocks.
The McKinsey Quarterly, May 2009
Ian Bremmer discussed the value of developing business strategies that help companies and investors limit their risk exposure to these shocks in his interview with McKinsey. He also shared political risk–management lessons from his new book, The Fat Tail: The Power of Political Knowledge for Strategic Investing, cowritten with colleague Preston Keat. Bremmer, the president and founder of political-risk consultancy Eurasia Group, spoke with McKinsey’s director of publishing, Rik Kirkland, in Eurasia Group’s New York office in March 2009.
Bremmer says that his book, The Fat Tail explains how politics is increasingly affecting the markets and creating a new set of winners and losers, short term, long term. It is very important for investors and business executives to know what is determining the likelihood of an exposure in a country, sector or an individual investment. The point of the book is that these shocks that many believe are not possible to be measured, that they’re impossible to predict and expect, they are increasingly about politics. They are about global political risk. And once you understand that, you realize that you can actually do a better job understanding them and a better job managing them.
Bremmer says that the structure of an organisation is very important in order for it to have an effective filter so it can use the information well. The information has to make its way though the decision process in the organisation. As a political scientist, Bremmer says that there is point when an executive can actually make a useful decision but to do that they need to be aware of what is going on.
Bremmer says, “A big part of The Fat Tail is actually not the management consulting part, because corporations have so gotten this wrong. They have so missed just paying attention to these variables that I think that we need to first get back to basics and say, “OK, what is political risk? What are the kinds of risks that are out there, from macro to micro, from social revolutions, geopolitical conflict, and terrorism to regulatory policies and nationalizations? And how do we identify them? And how do we understand where we might be facing them?”
=============================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Tuesday, November 10, 2009
The Definitive Guide to Recruiting in Good Times and Bad
Harvard Business Review, May 09
This article offers our best thinking about the most effective way to hire top-level managers, based on a combination of our own and established research about the relationship between recruiting and long-term corporate performance. The following is, to our knowledge, the first time that an end-to-end set of best practices has been put forward in one place. Our compendium comprises seven steps, which cover the full recruitment spectrum: anticipating the need for new hires, specifying the job, developing a pool of candidates, assessing the candidates, closing the deal, integrating the newcomer, and reviewing the effectiveness of the hiring process.
Anticipate your future leadership needs, based on your strategic business plan. Intuit’s deep analysis of long-term staffing needs has contributed to famously smooth management transitions.
• Identify the specific competencies required in each position you need to fill. For example, ask, “Does this job require an entrepreneur, manager, or leader?”
• Develop a sufficiently large candidate pool. Considering both inside and outside candidates increases the likelihood you’ll find the right person for each job.
Steps to effective recruiting:
Anticipate Your Needs
Every two to three years review your high-level leadership requirements in light of your strategic business plan. Answer these questions:
• How many people will we need, in what positions, in the next few years?
• What will the organizational structure look like?
• What must our leadership pipeline contain today to ensure that we find and develop tomorrow’s leaders?
Specify the Job
For each leadership position you’ve identified, specify competencies needed in that role. For example:
• Job-based: What capabilities will the job require?
• Team-based: Will the applicant need to manage political dynamics?
• Firm-based: What resources (supporting talent, technology) will the organization need to provide the person who fills this role?
Develop the Pool
Cast your net widely for candidates by asking suppliers, customers, board members, professional service providers, and trusted insiders for suggestions. Consider “inside-outsiders” (internal candidates not bound by corporate tradition and ideology) and “outside-insiders” (former employees, customers, suppliers, advisers, or anyone who’s worked closely with a trusted insider).
Assess the Candidates
Have each candidate’s prospective boss, boss’s supervisor, and the top HR manager conduct “behavioral event interviews”: Ask candidates to describe experiences they’ve had that resemble situations they’ll face in your organization. Probe for exact actions candidates took and the reasoning they followed.
Evaluate a broad spectrum of references—former bosses, peers, and direct reports—asking about specific things candidates did and actual results achieved.
Close the Deal
Once you’ve settled on your final choice of candidate, boost the chances your job offer will be accepted:
• Share your passion about the company and the position, showing genuine interest in the candidate.
• Acknowledge the role’s opportunities and challenges, differentiating the opportunities at your firm from those of competitors.
• Strike a creative balance between salary, bonus, and other long-term incentives.
Integrate the Newcomer
Integrate new hires into your company’s culture:
• During their first few months, have bosses and the HR manager check in regularly with each new recruit.
• Assign each newcomer a mentor—an established star in your organization. Mentors should provide ongoing support, not just an initial “buddy” fix to help newcomers feel at home.
• During newcomers’ meetings with mentors, bosses, and HR, explore questions such as: Are we providing you with enough support? What other types of support would be useful? Can you describe the relationships you’ve developed throughout the organization? What other types of relationships would you find useful?
------------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
This article offers our best thinking about the most effective way to hire top-level managers, based on a combination of our own and established research about the relationship between recruiting and long-term corporate performance. The following is, to our knowledge, the first time that an end-to-end set of best practices has been put forward in one place. Our compendium comprises seven steps, which cover the full recruitment spectrum: anticipating the need for new hires, specifying the job, developing a pool of candidates, assessing the candidates, closing the deal, integrating the newcomer, and reviewing the effectiveness of the hiring process.
Anticipate your future leadership needs, based on your strategic business plan. Intuit’s deep analysis of long-term staffing needs has contributed to famously smooth management transitions.
• Identify the specific competencies required in each position you need to fill. For example, ask, “Does this job require an entrepreneur, manager, or leader?”
• Develop a sufficiently large candidate pool. Considering both inside and outside candidates increases the likelihood you’ll find the right person for each job.
Steps to effective recruiting:
Anticipate Your Needs
Every two to three years review your high-level leadership requirements in light of your strategic business plan. Answer these questions:
• How many people will we need, in what positions, in the next few years?
• What will the organizational structure look like?
• What must our leadership pipeline contain today to ensure that we find and develop tomorrow’s leaders?
Specify the Job
For each leadership position you’ve identified, specify competencies needed in that role. For example:
• Job-based: What capabilities will the job require?
• Team-based: Will the applicant need to manage political dynamics?
• Firm-based: What resources (supporting talent, technology) will the organization need to provide the person who fills this role?
Develop the Pool
Cast your net widely for candidates by asking suppliers, customers, board members, professional service providers, and trusted insiders for suggestions. Consider “inside-outsiders” (internal candidates not bound by corporate tradition and ideology) and “outside-insiders” (former employees, customers, suppliers, advisers, or anyone who’s worked closely with a trusted insider).
Assess the Candidates
Have each candidate’s prospective boss, boss’s supervisor, and the top HR manager conduct “behavioral event interviews”: Ask candidates to describe experiences they’ve had that resemble situations they’ll face in your organization. Probe for exact actions candidates took and the reasoning they followed.
Evaluate a broad spectrum of references—former bosses, peers, and direct reports—asking about specific things candidates did and actual results achieved.
Close the Deal
Once you’ve settled on your final choice of candidate, boost the chances your job offer will be accepted:
• Share your passion about the company and the position, showing genuine interest in the candidate.
• Acknowledge the role’s opportunities and challenges, differentiating the opportunities at your firm from those of competitors.
• Strike a creative balance between salary, bonus, and other long-term incentives.
Integrate the Newcomer
Integrate new hires into your company’s culture:
• During their first few months, have bosses and the HR manager check in regularly with each new recruit.
• Assign each newcomer a mentor—an established star in your organization. Mentors should provide ongoing support, not just an initial “buddy” fix to help newcomers feel at home.
• During newcomers’ meetings with mentors, bosses, and HR, explore questions such as: Are we providing you with enough support? What other types of support would be useful? Can you describe the relationships you’ve developed throughout the organization? What other types of relationships would you find useful?
------------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
How Executives Can Make Bad Decisions
Sloan Management Review,July 1, 2009
Social networks provide greater access to information, which improves people’s judgment and decision making, right? Not always, according to some recent research.
The conventional wisdom is that social networks are good for decision making because they help people to acquire knowledge that then enables them to make better choices. In other words, the more extensive and active your social networks, the better decisions you’ll presumably make. But could social networks actually impair your judgment and decision making? Consider a recent study conducted by Francis J. Flynn, an associate professor of organizational behavior at the Graduate School of Business at Stanford University, and Scott S. Wiltermuth, a Ph.D. student in organizational behavior there. (Their paper, “Who’s with Me? False Consensus, Advice Networks, and Ethical Decision Making in Organizations,” is under invited resubmission at the Academy of Management Journal.)
In their research, Flynn and Wiltermuth asked participants for their opinions on different ethical dilemmas. For example, in one of the hypothetical scenarios, an employee is caught pilfering pens, paper and other small office supplies. Corporate policy requires that the person be fired on the spot, but she is one of the best workers at the company and is also a long-time employee. So her manager decides to give her a second chance. Was that ethical? The study participants were also asked to estimate how their colleagues might view those same dilemmas. Lastly, they were asked for information that helped determine their position in a social network of their peers. Whom, for instance, did they turn to when they needed advice?
Flynn and Wiltermuth conducted the experiment with three groups: graduate business students, executive education students and employees in the marketing department of a large manufacturing company. For all three samples, the results were the same: The more that people were centrally connected to their peers, the more they tended to overestimate the degree to which their judgments were in agreement with the views of others (a phenomenon called “the false consensus effect”). This was true even when the study participants held a minority opinion on an issue — but mistakenly believed they were in the majority. Simply put, social ties tended to exacerbate — and not mitigate — the false consensus effect. In essence, social ties strengthened the illusion of consensus even when none existed.
That result might seem counterintuitive, but it has a straightforward, plausible explanation. Past studies have shown that when people interact, they tend to affirm the things they have in common. Two colleagues who are fans of a particular sports team, for example, will frequently talk about the team in their workplace conversations. This could then lead the two colleagues to the mistaken belief that they have more in common than they actually do. That misperception might be especially true with respect to their ethical and moral attitudes, because coworkers tend not to discuss such issues. Instead, they are more likely to talk about their families, current events and other “safe” topics. Flynn and Wiltermuth have shown that this ethical “blind spot” can be particularly dangerous for people who are the centers of social networks, because such individuals are likely to perceive themselves as being more in touch with the opinions of others than they really are. “If members of organizations erroneously assume that their ethical judgments are in line with the prevailing view,” state Flynn and Wiltermuth, “they may feel emboldened to act and only learn of their misjudgment when it is too late to avert the consequences.”
CEOs and other high-level executives are particularly vulnerable to such erroneous assumptions, because past research has also shown that people in positions of power are more likely than others to search for evidence that confirms their beliefs — instead of trying to explore any contradictory information. Moreover, ethical dilemmas are inherently tricky because many moral standards aren’t necessarily cast in black and white. Rather, they may be etched in gray, according to the principles and values that are socially agreed upon at a given time. So if people don’t have a firm grasp of what is “socially agreed upon” (that is, if they don’t know the majority view), then how can they be sure that they’re acting ethically?
Flynn and Wiltermuth’s study provides a new lens through which to view the recent financial crisis — in particular, the subprime mortgage meltdown. Some people signed up for mortgages that they would later have a hard time paying, and mortgage companies approved the applications. Wall Street packaged those questionable loans into collateralized debt obligations, which were then approved by the ratings agencies and sold. At every step in that sequence, the false consensus effect could have played a role, making people feel more comfortable in what they were doing — even when those actions involved questionable business practices — because of the misperception that “everyone” was doing it. And, Flynn and Wiltermuth’s research suggests, that might have been particularly true for well-connected individuals — such as Wall St. executives.
---------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Sloan Management Review,July 1, 2009
Social networks provide greater access to information, which improves people’s judgment and decision making, right? Not always, according to some recent research.
The conventional wisdom is that social networks are good for decision making because they help people to acquire knowledge that then enables them to make better choices. In other words, the more extensive and active your social networks, the better decisions you’ll presumably make. But could social networks actually impair your judgment and decision making? Consider a recent study conducted by Francis J. Flynn, an associate professor of organizational behavior at the Graduate School of Business at Stanford University, and Scott S. Wiltermuth, a Ph.D. student in organizational behavior there. (Their paper, “Who’s with Me? False Consensus, Advice Networks, and Ethical Decision Making in Organizations,” is under invited resubmission at the Academy of Management Journal.)
In their research, Flynn and Wiltermuth asked participants for their opinions on different ethical dilemmas. For example, in one of the hypothetical scenarios, an employee is caught pilfering pens, paper and other small office supplies. Corporate policy requires that the person be fired on the spot, but she is one of the best workers at the company and is also a long-time employee. So her manager decides to give her a second chance. Was that ethical? The study participants were also asked to estimate how their colleagues might view those same dilemmas. Lastly, they were asked for information that helped determine their position in a social network of their peers. Whom, for instance, did they turn to when they needed advice?
Flynn and Wiltermuth conducted the experiment with three groups: graduate business students, executive education students and employees in the marketing department of a large manufacturing company. For all three samples, the results were the same: The more that people were centrally connected to their peers, the more they tended to overestimate the degree to which their judgments were in agreement with the views of others (a phenomenon called “the false consensus effect”). This was true even when the study participants held a minority opinion on an issue — but mistakenly believed they were in the majority. Simply put, social ties tended to exacerbate — and not mitigate — the false consensus effect. In essence, social ties strengthened the illusion of consensus even when none existed.
That result might seem counterintuitive, but it has a straightforward, plausible explanation. Past studies have shown that when people interact, they tend to affirm the things they have in common. Two colleagues who are fans of a particular sports team, for example, will frequently talk about the team in their workplace conversations. This could then lead the two colleagues to the mistaken belief that they have more in common than they actually do. That misperception might be especially true with respect to their ethical and moral attitudes, because coworkers tend not to discuss such issues. Instead, they are more likely to talk about their families, current events and other “safe” topics. Flynn and Wiltermuth have shown that this ethical “blind spot” can be particularly dangerous for people who are the centers of social networks, because such individuals are likely to perceive themselves as being more in touch with the opinions of others than they really are. “If members of organizations erroneously assume that their ethical judgments are in line with the prevailing view,” state Flynn and Wiltermuth, “they may feel emboldened to act and only learn of their misjudgment when it is too late to avert the consequences.”
CEOs and other high-level executives are particularly vulnerable to such erroneous assumptions, because past research has also shown that people in positions of power are more likely than others to search for evidence that confirms their beliefs — instead of trying to explore any contradictory information. Moreover, ethical dilemmas are inherently tricky because many moral standards aren’t necessarily cast in black and white. Rather, they may be etched in gray, according to the principles and values that are socially agreed upon at a given time. So if people don’t have a firm grasp of what is “socially agreed upon” (that is, if they don’t know the majority view), then how can they be sure that they’re acting ethically?
Flynn and Wiltermuth’s study provides a new lens through which to view the recent financial crisis — in particular, the subprime mortgage meltdown. Some people signed up for mortgages that they would later have a hard time paying, and mortgage companies approved the applications. Wall Street packaged those questionable loans into collateralized debt obligations, which were then approved by the ratings agencies and sold. At every step in that sequence, the false consensus effect could have played a role, making people feel more comfortable in what they were doing — even when those actions involved questionable business practices — because of the misperception that “everyone” was doing it. And, Flynn and Wiltermuth’s research suggests, that might have been particularly true for well-connected individuals — such as Wall St. executives.
---------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Monday, November 2, 2009
Why Emotional Messages Beat Rational Ones
Advertising Age, 2 March 2009
There has been a debate between ‘hard sell’ and ‘soft sell’ ever since the DDB creative revolution in the 1960s. Though recently the tide has begun to turn in favor of emotional engagement, with some high-profile converts at Procter & Gamble, the argument is far from over.
Therefore the authors included this topic as a key issue in their book, "Brand Immortality" -- a manual on how to keep brands healthy in the long term. Their primary data source is the U.K.'s Institute of Practitioners in Advertising Effectiveness Awards, which were founded in 1980. The book's analyses are based upon the accumulated learning from 880 case studies from the U.K. national and international competition.
The data shows that emotional campaigns are almost twice as likely to generate large profit gains as rational ones, with campaigns that use facts as well as emotions in equal measure fall somewhere between the two. They also help in reducing price sensitivity.
Emotional campaigns also help to create a sense of differentiation for the brand, one that can endure and will not disappear with the next product launch from a competitor.
Fame campaigns are a higher level of emotional engagement and they get the brand talked about. They amplify the strengths of "ordinary" emotional engagement -- especially the ability to reduce price.
The author’s analyses also show that emotional strategies continue to work well during downturns, although there is a need to match the competitive price and promotional messages that proliferate during these times. Nothing can guarantee brand immortality, especially in a recession, but powerful, emotionally engaging campaigns are proven to help. In addition, they say that emotional engagement increases in importance during the life cycle of market sectors, as persuasion-based strategies progressively lose the product differentiation they depend upon. There are very few effective persuasion campaigns in declining categories in the IPA Databank.
There has been a debate between ‘hard sell’ and ‘soft sell’ ever since the DDB creative revolution in the 1960s. Though recently the tide has begun to turn in favor of emotional engagement, with some high-profile converts at Procter & Gamble, the argument is far from over.
Therefore the authors included this topic as a key issue in their book, "Brand Immortality" -- a manual on how to keep brands healthy in the long term. Their primary data source is the U.K.'s Institute of Practitioners in Advertising Effectiveness Awards, which were founded in 1980. The book's analyses are based upon the accumulated learning from 880 case studies from the U.K. national and international competition.
The data shows that emotional campaigns are almost twice as likely to generate large profit gains as rational ones, with campaigns that use facts as well as emotions in equal measure fall somewhere between the two. They also help in reducing price sensitivity.
Emotional campaigns also help to create a sense of differentiation for the brand, one that can endure and will not disappear with the next product launch from a competitor.
Fame campaigns are a higher level of emotional engagement and they get the brand talked about. They amplify the strengths of "ordinary" emotional engagement -- especially the ability to reduce price.
The author’s analyses also show that emotional strategies continue to work well during downturns, although there is a need to match the competitive price and promotional messages that proliferate during these times. Nothing can guarantee brand immortality, especially in a recession, but powerful, emotionally engaging campaigns are proven to help. In addition, they say that emotional engagement increases in importance during the life cycle of market sectors, as persuasion-based strategies progressively lose the product differentiation they depend upon. There are very few effective persuasion campaigns in declining categories in the IPA Databank.
What only the CEO can do
HBR, May 09
The current issue of the Harvard Business Review contains a rare piece of commentary from a serving chief executive, Procter & Gamble’s AG Lafley. His article is called “What only the CEO can do”. It contains a run-down of the key tasks and responsibilities that fall to the organisation’s most senior manager.
Mr Lafley should be congratulated for sticking his head above the parapet and engaging in debate. Not enough CEOs do this. But then, not too many of them would be able to marshal an argument in such an interesting way.
Luckily I was able to follow up with “AG” on the phone last week. It turns out that in writing this piece P&G’s boss was repaying a long-standing debt to the late Peter Drucker. “I went to see him two or three times a year towards the end of his life,” Mr Lafley explained. “I committed to turning his notes into something.” After nine years in the CEO’s chair, he feels able to answer the question that Drucker used to put to him: what is the work of the CEO?
The central task, Mr Lafley argues, is to link the outside world with what is going on inside the corporation. This involves four main challenges. First, making sure that the voice of the consumer is heard loudest and clearest of all, above that of any other stakeholder. Second, deciding what business you are in – and equally, what businesses you should not be in. “People don’t volunteer to exit a business,” Mr Lafley told me. “That’s one of my jobs: to weed the garden.”
Third, balancing the need for performance in the short term with the need to invest for the longer term – “we err on the side of investing in the long term,” Mr Lafley said, “in fact we’re more like a Japanese company than a western one in that regard.” And fourth, the CEO has to shape values and standards. The values have to be connected to the realities of the outside world. “At P&G we’re purpose driven and values led,” Mr Lafley writes in his HBR article.
Only the CEO can achieve these tasks, he argues. This is what leadership means. Setting an example (Mr Lafley spends hours with customers all over the world on “in-home” visits). And never forgetting that you are being watched closely by all your colleagues.
“Employees are watching you even when you think you can’t be seen,” Mr Lafley says. The hugely successful turnaround of the Cincinnati-based giant since Mr Lafley’s arrival in 2000 would suggest that this is one CEO well worth watching.
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Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
The current issue of the Harvard Business Review contains a rare piece of commentary from a serving chief executive, Procter & Gamble’s AG Lafley. His article is called “What only the CEO can do”. It contains a run-down of the key tasks and responsibilities that fall to the organisation’s most senior manager.
Mr Lafley should be congratulated for sticking his head above the parapet and engaging in debate. Not enough CEOs do this. But then, not too many of them would be able to marshal an argument in such an interesting way.
Luckily I was able to follow up with “AG” on the phone last week. It turns out that in writing this piece P&G’s boss was repaying a long-standing debt to the late Peter Drucker. “I went to see him two or three times a year towards the end of his life,” Mr Lafley explained. “I committed to turning his notes into something.” After nine years in the CEO’s chair, he feels able to answer the question that Drucker used to put to him: what is the work of the CEO?
The central task, Mr Lafley argues, is to link the outside world with what is going on inside the corporation. This involves four main challenges. First, making sure that the voice of the consumer is heard loudest and clearest of all, above that of any other stakeholder. Second, deciding what business you are in – and equally, what businesses you should not be in. “People don’t volunteer to exit a business,” Mr Lafley told me. “That’s one of my jobs: to weed the garden.”
Third, balancing the need for performance in the short term with the need to invest for the longer term – “we err on the side of investing in the long term,” Mr Lafley said, “in fact we’re more like a Japanese company than a western one in that regard.” And fourth, the CEO has to shape values and standards. The values have to be connected to the realities of the outside world. “At P&G we’re purpose driven and values led,” Mr Lafley writes in his HBR article.
Only the CEO can achieve these tasks, he argues. This is what leadership means. Setting an example (Mr Lafley spends hours with customers all over the world on “in-home” visits). And never forgetting that you are being watched closely by all your colleagues.
“Employees are watching you even when you think you can’t be seen,” Mr Lafley says. The hugely successful turnaround of the Cincinnati-based giant since Mr Lafley’s arrival in 2000 would suggest that this is one CEO well worth watching.
-----------------------------------------------------------------------------------------
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthly. The purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues become more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Where innovation creates value
McKinsey Q, Feb 2009
Off shoring of manufacturing to countries with low-wage, unskilled labor, was followed by off shoring of services of data entry, routine software programming and testing, and the operation of phone banks. Now overseas workers are analyzing financial statements, test trading strategies, and design computer chips and software architectures for US companies.
This gives rise to worries that the United States could become significantly less competitive “as large developing countries like China and India harness their growing scientific and engineering expertise to their enormous, low-wage labor forces.”
According to the author there is no need to fear that the United States is on the verge of being pummeled by a technological hurricane. He says that worries about the off shoring of R&D and the progress of science in China and India arise from a failure to understand technological innovation and its relation to the global economy. Innovation does play a major role in nurturing prosperity, but we must be careful to formulate policies that sustain rather than undermine it—for instance, by favoring one form of innovation over another.
The most important point for national prosperity is not where scientific discoveries and breakthrough technologies originate who commercializes them. The United States is not behind in that race.
All innovators and innovations play necessary and complementary roles. Innovations that sustain prosperity are developed and used in a huge game involving many players working on many levels over many years.
Similarly, globalization is characterized by complexity and a variety of cross-border flows can be important innovators. Many kinds of global interactions have become more common, but not in a uniform way: international trade in manufactured goods has soared, but most services remain untraded. Of the many activities in the innovation game, only some are performed well in remote, low-cost locations; many midlevel activities, for example, are best conducted close to potential customers.
The author feels that Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs, ignoring the contributions of the other players—contributions that don’t generate publications or patents since they rarely distinguish between the different levels and kinds of know-how.
Globalization is also oversimplified. Since in today’s world breakthroughs travel easily, their national origins are fundamentally unimportant.
Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.
====================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthlyThe purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
Off shoring of manufacturing to countries with low-wage, unskilled labor, was followed by off shoring of services of data entry, routine software programming and testing, and the operation of phone banks. Now overseas workers are analyzing financial statements, test trading strategies, and design computer chips and software architectures for US companies.
This gives rise to worries that the United States could become significantly less competitive “as large developing countries like China and India harness their growing scientific and engineering expertise to their enormous, low-wage labor forces.”
According to the author there is no need to fear that the United States is on the verge of being pummeled by a technological hurricane. He says that worries about the off shoring of R&D and the progress of science in China and India arise from a failure to understand technological innovation and its relation to the global economy. Innovation does play a major role in nurturing prosperity, but we must be careful to formulate policies that sustain rather than undermine it—for instance, by favoring one form of innovation over another.
The most important point for national prosperity is not where scientific discoveries and breakthrough technologies originate who commercializes them. The United States is not behind in that race.
All innovators and innovations play necessary and complementary roles. Innovations that sustain prosperity are developed and used in a huge game involving many players working on many levels over many years.
Similarly, globalization is characterized by complexity and a variety of cross-border flows can be important innovators. Many kinds of global interactions have become more common, but not in a uniform way: international trade in manufactured goods has soared, but most services remain untraded. Of the many activities in the innovation game, only some are performed well in remote, low-cost locations; many midlevel activities, for example, are best conducted close to potential customers.
The author feels that Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs, ignoring the contributions of the other players—contributions that don’t generate publications or patents since they rarely distinguish between the different levels and kinds of know-how.
Globalization is also oversimplified. Since in today’s world breakthroughs travel easily, their national origins are fundamentally unimportant.
Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.
====================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthlyThe purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
CFOs Put Away Their Crystal Balls
CFO, April 09
With the economy still shaky, many companies are refraining from providing quarterly earnings guidance. There will be a lesser number of CFOs offering investors short-term guidance during this earnings season.
Many business groups in recent years have tried to check the demand by investors, analysts, and CNBC commentators to provide absolutely accurate predictions about how their next quarterly financial results will turn out.
Once the credit markets started to close up, since September and the economy's future began to appear bleak, an increasing number of companies have shifted their guidance policies by stopping quarterly earnings guidance and trying to focus investors' attention onto other metrics, such as expected revenue, same-stores sales, or capital expenditures. Some are instead providing earnings guidance only on an annual basis.
The figures are also not pretty and when major companies began sharing their latest earnings results over the past few days, their figures have fallen below market expectations.
Aetna, Cogent Communications, General Electric, Ingram Micro, Intel, Knoll, Nexstar Broadcasting, Unilever, and Universal American are some of the companies that have announced plans to stop quarterly earnings guidance or scale back on detailed guidance for other metrics in recent months.
Corporate law firm Bass, Berry & Sims sent an alert to its clients advising them not to commit to resuming guidance or give any indication of when that could happen. But if the company chooses to stop the forecasts for reasons beyond the financial crisis, such as because of a belief that investors are too reliant on short-term goals, and then it should let investors know the decision is permanent, the firm noted.
NIRI's Morgan recommends that companies be upfront with investors about changing guidance policies, and to do so in advance of investor conference calls. The decision should "not be a kneejerk reaction" to negative financial results, he adds.
However, in recent years in spite of business advocates' hopes, such as the U.S. Chamber of Commerce, that companies would band together to stop investors' expectation for on short-term guidance, the practice of giving any kind of earnings guidance had been increasing. Though the companies that do stop the practice, run the risk of outside analysts doing the predictions for them and feeling pressure to meet those targets or having to explain every three months why they haven't met them.
======================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthlyThe purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
With the economy still shaky, many companies are refraining from providing quarterly earnings guidance. There will be a lesser number of CFOs offering investors short-term guidance during this earnings season.
Many business groups in recent years have tried to check the demand by investors, analysts, and CNBC commentators to provide absolutely accurate predictions about how their next quarterly financial results will turn out.
Once the credit markets started to close up, since September and the economy's future began to appear bleak, an increasing number of companies have shifted their guidance policies by stopping quarterly earnings guidance and trying to focus investors' attention onto other metrics, such as expected revenue, same-stores sales, or capital expenditures. Some are instead providing earnings guidance only on an annual basis.
The figures are also not pretty and when major companies began sharing their latest earnings results over the past few days, their figures have fallen below market expectations.
Aetna, Cogent Communications, General Electric, Ingram Micro, Intel, Knoll, Nexstar Broadcasting, Unilever, and Universal American are some of the companies that have announced plans to stop quarterly earnings guidance or scale back on detailed guidance for other metrics in recent months.
Corporate law firm Bass, Berry & Sims sent an alert to its clients advising them not to commit to resuming guidance or give any indication of when that could happen. But if the company chooses to stop the forecasts for reasons beyond the financial crisis, such as because of a belief that investors are too reliant on short-term goals, and then it should let investors know the decision is permanent, the firm noted.
NIRI's Morgan recommends that companies be upfront with investors about changing guidance policies, and to do so in advance of investor conference calls. The decision should "not be a kneejerk reaction" to negative financial results, he adds.
However, in recent years in spite of business advocates' hopes, such as the U.S. Chamber of Commerce, that companies would band together to stop investors' expectation for on short-term guidance, the practice of giving any kind of earnings guidance had been increasing. Though the companies that do stop the practice, run the risk of outside analysts doing the predictions for them and feeling pressure to meet those targets or having to explain every three months why they haven't met them.
======================================================
Business Leaders Digest
Information You Can Use. Knowledge You Can Trust
This summary is taken from Business Leaders Digest monthlyThe purpose of BLD is to offer strategic insights, how-to articles, thought leadership pieces and other information to help you and your colleagues more effective. Summaries from global top 100 business & management magazines, newspapers, websites & reports are published monthly in Business Leaders Digest which can be subscribed at a modest annual subscription of Indian Rs.900 only and US$50 overseas. To subscribe or receive a sample issue, email at busleadersdigest@gmail.com
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