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September 10, 2004

Excerpts: Everything You Need to Know About Strategy - Part VI

By: 800-CEO-READ @ 1:57 PM – Filed under: Management & Workplace Culture

4. Long-term, its a Top-line World: Is creating a culture that cherishes above all things Innovation and Entrepreneurship your primary aim? Remember: Innovation ... not Imitation! Flash: Jeff has halted Jacks buying binge! Immelt is Jeff, CEO of GE. Jack is Welch, former CEO of GE. At the moment of transition, Jack apparently told Jeff to blow old (Jacks) GE up. Jeff apparently listened. Consider this from Business 2.0 in its July 2004 issue: Welch was to a large degree a growth-by-acquisition man. In the late 90s, Immelt says, we became business traders and not business growers. Today organic growth is absolutely the biggest task of every one of our companies. If we dont hit our organic revenue targets, people are not going to get paid. Immelt has staked GEs future growth on the force that guided the company at its birth and for much of its history: breathtaking, mind-blowing, world-rattling technological innovation. Love that: breathtaking ... mind-blowing ... world-rattling. Now consider this parallel assertion from the most imaginative, free-thinking business commentator of the day, Seth Godin: This is an essay about what it takes to create and sell something remarkable. It is a plea for originality, passion, guts, and daring. You cant be remarkable by following someone else whos remarkable. One way to figure out a great theory is to look at whats working in the real world and determine what the successes have in common. But what could the Four Seasons and Motel 6 possibly have in common? Or Neiman Marcus and Wal*Mart? Or Nokia (bringing out new hardware every 30 days or so) and Nintendo (marketing the same Game Boy for 14 years in a row)? Its like trying to drive looking in the rearview mirror. The thing that all of those companies have in common is that they have nothing in common. They are outliers. Theyre on the fringes. Superfast or superslow. Very exclusive or very cheap. Extremely big or extremely small. The reason its so hard to follow the leader is this: The leader is the leader precisely because he did something remarkable. And that remarkable thing is now takenso its no longer remarkable when you decide to do it.
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The short road to ruin is to emulate the methods of your adversary.Winston Churchill
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Immelt and Godin (and Churchill) are onto something, even though theyve traveled different roads to get there. We are assaulted by a siege of me too ... at exactly the wrong time, at a time of profound and rapid change coming from every point of the compass at literally the speed of light over a fiber optic cable. It is thus a moment that cries out for profound innovation, from the CIA and FBI headquarters to the Corporate Boardroom. (Start innovating in the Boardroom itself ... see above concerning board homogeneity.) Cultural commentator Paul Goldberger, writing about retail in the New York Times Magazine, called this troublesome phenomenon a the sameness of things. While everything may be better, he asserted, it is also increasingly the same. Barry Gibbons took over an ailing Burger King some years ago and made the same assessment Goldberger did. He called it Nightmare #1, or, more precisely, When we did it right it was still pretty ordinary. Gibbons continues on a more general note: I thought, What a dreadful mission I have in life. Id love to get six-thousand restaurants up to spec, but when I do its Ho-hum. Its bugged me ever since. Its one of the great paradoxes of modern business. We all know distinction is key, and yet in the last twenty years we have created a plethora of ho-hum products and services. Just go fly in an airplane. It could be such an enlightening experience. Ho-hum. We swim in an ocean of ho-hum, and Im going to fight it. Im going to die fighting it. Another prominent CEO would seem to agree with Gibbons. Soon after arriving at once premier innovator Hewlett-Packard, Carly Fiorina declared, We make over three new product announcements a day. Can you remember them? Our customers cant! Likewise, a renowned industry analyst explained the dramatic incursion of the discount providers in his industry, Customers will try low cost providers ... because the Majors have not given them any clear reason not to. And in Funky Business, Swedish business strategy professors Kjell Nordstrm and Jonas Ridderstrle ice the cake as they offer these trenchant observations: The surplus society has a surplus of similar companies, employing similar people, with similar educational backgrounds, coming up with similar ideas, producing similar things, with similar prices and similar quality. To succeed we must stop being so goddamn normal. In a winner-takes-all world, normal = nothing. These assertions, from a diverse set of movers and shakers, observers and prime movers, capture my sentiments exactlyand offer the unassailable case, as I see it, for a renewed emphasis on Fundamental Innovation. Or, recall per Immelt: breathtaking ... mind-blowing ... earth-rattling. The problem: A culture change of the first order is requisite, from the Boardroom to B-school. We saw the boardroom is the ultimate sameness of things. And a recent examination of leading B-schools revealed that not a single one had a Core Course on ... innovation. (Good God!) But the problem manifested in the B-school curriculum starts much earlier. Consider this lament from Jordan Ayan, in his book Aha!: My wife and I went to a [kindergarten] parent-teacher conference and were informed that our budding refrigerator artist, Christopher, would be receiving a grade of Unsatisfactory in art. We were shocked. How could any childlet alone our childreceive a poor grade in art at such a young age? His teacher informed us that he had refused to color within the lines, which was a state requirement for demonstrating grade-level motor skills. (Good God ... redux.) The implications of a perverse set of educational incentives are all too aptly summarized by Richard Farson and Ralph Keyes in Whoever Makes the Most Mistakes Wins: Thomas Stanley has not only found no correlation between success in school and an ability to accumulate wealth, hes actually found a negative correlation. It seems that school-related evaluations are poor predictors of economic success, Stanley concluded. What did predict success was a willingness to take risks. Yet the success-failure standards of most schools penalized risk takers. Most educational systems reward those who play it safe. As a result, those who do well in school find it hard to take risks later on. (Uncle!) In the face of an enormous set of challenges, from uncertainty induced by the threat of terrorism to the dramatic rise of India and China as competitors, only a national (from the classroom to the boardroom) commitment to re-kindling the flames of mind-blowing, earth-rattling Entrepreneurship and Innovation will change the odds currently stacked against continued U.S. economic dominance. Bottom line: No promotion to senior levels of public or private enterprise should ever again be granted to anyone who does not present a CV saturated by a clear and compelling demonstration of sustained commitment to Radical Change. Do we wish for good strategists? Why not! But the heart of the matter goes far beyond any plan, no matter how brilliant. The heart of the matter is Heart & Will ... a record of upsetting apple carts, dislodging establishments and fundamentally altering deep-rooted cultures to embrace change of the most primal sort. I titled my most recent book Re-imagine! Business Excellence in a Disruptive Age. Excellence in a disruptive age is not excellence amidst placid waters. The notion of excellence itself changes ... dramatically. We need our public and private Churchills, leaders who can re-imagine, who can call forth wellsprings of daring and guts and spirit and spunk, from one and all, to topple the way things may have been for many generationsand who inspire us to venture forth into todays and tomorrows whitewaters with insouciance and bravado and determination.
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Acquisitions are about buying market share. Our challenge is to create markets. There is a big difference.Peter Job, former CEO, Reuters
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