Business Book Review

The Toyota Way - by Jeffrey K. Liker - About the Author

2007-03-24T06:48:00.000-07:00

About the Author

Jeffrey K. Liker, PhD, a principal of Optiprise, a lean enterprise/supply chain management consulting firm, is professor of Industrial and Operations Engineering at the University of Michigan, where he is also cofounder and director of the Japan Technology Management Program Lean Product Development Certificate programs. Dr. Liker, who was the editor of Becoming Lean: Experiences of U.S. Manufacturers (which won the 1998 Shingo Prize for excellence in manufacturing research), has written on Toyota for The Harvard Business Review, Sloan Management Review, and other leading publications.

For more information, please visit:www.optiprise.com

The Toyota Way - by Jeffrey K. Liker - CONTENTS

2007-03-24T06:47:00.002-07:00

CONTENTS

PART 1: THE WORLD-CLASS POWER OF THE TOYOTA WAY
Chapter 1: The Toyota Way—Using Operational Excellence as a Strategic Weapon
Chapter 2: How Toyota Became the World’s Best Manufacturer— the Story of the Toyoda Family and the Toyota Production System
Chapter 3: The Heart of the Toyota Production System— Eliminating Waste
Chapter 4: The 14 Principles of the Toyota Way—an Executive Summary of the Culture Behind TPS
Chapter 5: The Toyota Way in Action—the “No Compromises” Development of Lexus
Chapter 6: The Toyota Way in Action—New Century, New Fuel, New Design Process—Prius

PART 2: THE BUSINESS PRINCIPLES OF THE TOYOTA WAY
Section 1: Long-Term Philosophy
Chapter 7: Principle 1—Base Your Management Decisions on a Long-Term Philosophy, Even at the Expense of Short-Term Financial Goals
Section 2: The Right Process Will Produce the Right Results
Chapter 8: Principle 2—Create Continuous Process Flow to Bring Problems to the Surface
Chapter 9: Principle 3—Use “Pull” Systems to Avoid Overproduction
Chapter 10: Principle 4—Level Out the Workload (Heijunka)
Chapter 11: Principle 5—Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time
Chapter 12: Principle 6—Standardized Tasks Are the Foundation for Continuous Improvement and Employee Empowerment
Chapter 13: Principle 7—Use Visual Control So No Problems Are Hidden
Chapter 14: Principle 8—Use Only Reliable, Thoroughly Tested Technology That Serves Your People and Processes
Section 3: The Right Process Will Produce the Right Results
Chapter15: Principle 9—Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others
Chapter 16: Principle 10—Develop Exceptional People and Teams Who Follow Your Company’s Philosophy
Chapter 17: Principle 11—Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve
Section 4: Continuously Solving Root Problems Drives Organizational Learning
Chapter 18: Principle 12—Go and See for Yourself to Thoroughly Understand the Situation (Genchi Genbutsu)
Chapter 19: Principle 13—Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Decisions Rapidly
Chapter 20: Principle 14—Become a Learning Organization Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

PART 3: APPLYING THE TOYOTA WAY IN YOUR ORGANIZATION
Chapter 21: Using the Toyota Way to Transform Technical and Service Organizations
Chapter 22: Build Your Own Lean Learning Enterprise, Borrowing from the Toyota Way

The Toyota Way - by Jeffrey K. Liker - Reading Suggestions

2007-03-24T06:47:00.001-07:00

Reading Suggestions

Reading Time: 28-30 Hours, 352 Pages in Book

Liker notes that if you follow only a select few of the Toyota principles, the “result will be short-term jumps on performance measures that are not sustainable.” And, Fujio Cho, president of Toyota Motor Company, says that what is unique about Toyota’s remarkable success is putting all the elements of the Toyota Way together as a system and practicing this system daily and consistently, not in parts. Thus, as far as we’re concerned, if implementation doesn’t work in bits and pieces, fits and starts, there’s no point in reading this book in bits and pieces, fits and starts. Even if your company has already “dabbled” in TPS (especially, if you’ve merely dabbled), your greatest value lies in practicing a little genchi genbutsu from the beginning and discovering and understanding as much as possible about the purpose of The Toyota Way, the centrality of people in that purpose, and appropriately applying that understanding to your particular situation.

Liker is a longtime fan of the Toyota Way and brings the incisive energy of a perennial admirer to his vigorous, articulate, and accessible discussion. The book is an easy read, and each chapter is mercifully short and to the point, but you should not expect to just zip through. Our estimated reading time of 28 to 30 hours might be an overestimate, but we want to impress upon you the importance of taking your time. We suspect that you will want to take notes, take time to reflect, and perhaps even reread much of the material. In any event, you should perhaps plan ahead, schedule a block of time each day, and prepare to read no more than two or three chapters each sitting.

The Toyota Way - by Jeffrey K. Liker - Remarks

2007-03-24T06:44:00.002-07:00

Remarks

Everyone in the auto industry is familiar with Toyota’s dramatic business success and, of course, consumers are demonstrably aware of the company’s world-renowned quality. In fact, Toyota has done so well that, as Liker points out, many consider the company to be “boring.” For, after all, steadily growing sales, consistent profitability, huge cash reserves, operational efficiency (combined with constant innovation—not an easy complement to pull off), and top quality, year after year, are not the stuff of breaking news. But, despite this reputation as the best manufacturer in the world, and despite the huge influence of the lean movement, most attempts to emulate and implement lean production have been fairly superficial, with less than stellar results over the long term. “Dabbling at one level—the ‘Process’ level,” U.S. companies have embraced lean tools, but do not understand what makes them work together in a system.

This integration is precisely what The Toyota Way examines, explaining how to create a Toyota-style culture of quality, lean, and learning that takes quantum leaps beyond any superficial focus on tools and techniques. Suffice it to say, there are hundreds of books out there explaining, analyzing, and advocating lean—providing details and insight into the tools and methods of TPS. The two most noted among this treasure trove are, of course, the contributions of The Machine That Changed the World (Womack, Jones, Roos, 1991) and Lean Thinking (Womack and Jones, 1996), and both stand as excellent resources on the subject. The first introduced the world to the tools and techniques of lean manufacturing by extracting its principles from their initial Japanese application and examining them in detail. And, the second explained how “to make value flow smoothly at the pull of the customer in pursuit of perfection.”

The Toyota Way is, however (according to Liker), the first business book in English to provide a blueprint of Toyota’s management philosophy for general business readers, dispelling the misconceptions that TPS is merely a collection of tools that lead to more efficient operations. Of course, there is no way of ascertaining the validity of this claim, without an extensive and time consuming exploration of the literature, but that truly doesn’t matter. The Toyota Way is an approach of such breadth, depth, and significance to the world of business that it has yet to be fully understood; thus, the subject has not yet been fully exhausted. Liker’s keen sense of the subtleties of TPS intrepidly challenges conventional understanding and transforms it with eloquent simplicity. He takes the reader deeply and comprehensively into the “heart and intelligence” of Toyota’s “way,” giving businesses in diverse industries some very practical and effective ideas that they can use to develop their own unique approach to TPS.

The Toyota Way - by Jeffrey K. Liker - PART III: APPLYING TPS AND THE TOYOTA WAY

2007-03-24T06:44:00.001-07:00

Introduction
PART I: USING OPERATIONAL EXCELLENCE AS A STRATEGIC WEAPON
PART II: FOURTEEN PRINCIPLES—THE CULTURE BEHIND TPS
PART III: APPLYING TPS AND THE TOYOTA WAY
Remarks
Reading Suggestions
CONTENTS
About the Author

PART III: APPLYING TPS AND THE TOYOTA WAY

“A prerequisite for change is for top management to have an understanding and commitment to leveraging the Toyota Way to become a ‘lean learning organization.’ ”

As manufacturing companies worldwide apply TPS on the shop floor and experience extraordinary improvements, many ask how the process can be applied to their technical and service operations. Although Liker acknowledges the difficulty of understanding the workflow in technical and service organizations in the same way it is possible to map the transformation of a physical product, it can indeed be made more manageable via the following five-step procedure: (1) Identify who the customer is for the each process as well as the added value the customer wants. (2) Separate the repetitive processes from those that are one-of-a-kind and apply TPS to the repetitive processes. (3) Map the flow to determine value added and non-value added. (4) Think creatively about applying the broad principles of the Toyota Way to these processes, using a future-state value stream map. (5) Start implementation and learn by implementing, using a PDCA cycle. Then, expand implementation to the less repetitive processes.
The author notes, however, that it is the broader philosophy—the way Toyota leads people and partners, solves problems, and learns—that is the most difficult for organizations to adapt, develop, and sustain. The toughest and most basic challenge is “how to create an aligned organization of individuals who each have the DNA of the organization and are continually learning together to add value to the customer.” Thus, the essential thing to take from Toyota’s example is the importance of developing a system, sticking with it, and improving it. The Toyota Way model was built from the ground up, intentionally, starting with a philosophy that starts with the CEO. The top executive and the executive team must be committed to a long-term vision of adding value to customers and society in general, and they must be committed to developing and involving employees and partners. Moreover, there must be continuity in top leadership philosophy. This does not mean that the same people should run a company forever, only that they must develop successors with the company’s DNA (as opposed to installing a new cast of characters with each crisis and/or frequent buyout).
In the meantime, Liker offers the some general tactical tips for transitioning into this kind of lean enterprise: Start with changes in the technical system; follow quickly with cultural change. Learn by doing first and training second. Start with value stream pilots as a means of demonstrating lean as a system and providing a “go see” model. Use value stream mapping to develop future state visions and to help “learn to see.” Use kaizen workshops to teach and make rapid changes. Organize around value streams. Make the shift to lean mandatory. Be opportunistic in identifying opportunities for making big financial impacts. Realign metrics with a value stream perspective. Build on your company’s own roots to develop its own “Toyota Way.” Hire or develop lean leaders and create a succession system. And, use experts for teaching and getting quick results.

* * *
End notes by chapter, a chapter-by-chapter bibliography, recommendations for further reading,
and a subject index are provided.

The Toyota Way - by Jeffrey K. Liker - PART II: FOURTEEN PRINCIPLES—THE CULTURE BEHIND TPS

2007-03-24T06:40:00.000-07:00

Introduction
PART I: USING OPERATIONAL EXCELLENCE AS A STRATEGIC WEAPON
PART II: FOURTEEN PRINCIPLES—THE CULTURE BEHIND TPS
PART III: APPLYING TPS AND THE TOYOTA WAY
Remarks
Reading Suggestions
CONTENTS
About the Author

PART II: FOURTEEN PRINCIPLES—THE CULTURE BEHIND TPS

“TPS is not a toolkit. It is not just a set of lean tools. … It is a sophisticated system of production in which all of the parts contribute to the whole. … When looked at more broadly, TPS is about applying the principles of the Toyota Way.”

“If production levels—the output—varies from day to day, there is no sense in trying to apply those other systems, because you simply cannot establish standardized work under such circumstances.”

“First work out the manual process, and then automate it. Try to build into the system as much flexibility as you possibly can. … And always supplement the system information with ‘genchi genbutsu,’ or ‘go look, go see.’ ”

Liker contends that if a company does not understand the culture behind TPS, even though it has all the tools and techniques of TPS in place, the real work of implementing lean has just begun. Essentially, TPS is about applying the principles of the Toyota Way so that workers are contributing to the improvement of the system and of themselves. The Toyota Way encourages, supports, and demands employee involvement, for it is people who bring the system to life by working, communicating, resolving issues, and growing together. Thus, it is a culture even more than a set of efficiency and improvement techniques.
Based on the author’s 20 years of studying Toyota, he offers 14 principles that constitute the Toyota Way and form the basis of the culture behind TPS. For ease of understanding, he divides these principles into the four categories—Philosophy, Process, People/Partners, and Problem Solving—that correlate to the four high-level principles (genchi genbutsu, kaizen, respect, and teamwork) explained in Toyota’s own internal Toyota Way training document.
Long-Term Philosophy
Principle 1: Base management decisions on a long-term philosophy, even at the expense of short-term financial goals.
The Right Process Will Produce the Right Results
Principle 2: Create continuous process flow to bring problems to the surface.
Principle 3: Use “pull” systems to avoid overproduction.
Principle 4: Level out the workload (heijunka)—work like the tortoise, not the hare.
Principle 5: Build a culture of stopping to fix problems, to get quality right the first time.
Principle 6: Standardized tasks are the foundation for continuous improvement and employee empowerment.
Principle 7: Use visual control so no problems are hidden.
Principle 8: Use only reliable, thoroughly tested technology that serves your people and processes.
Add Value to the Organization by Developing Your People and Partners
Principle 9: Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
Principle 10: Develop exceptional people and teams who follow the company’s philosophy.
Principle 11: Respect your extended network of partners and suppliers by challenging them and helping them improve.
Continuously Solving Root Problems Drives Organizational Learning
Principle 12: Go and see for yourself to thoroughly understand the situation (genchi genbutsu).
Principle 13: Make decisions slowly by consensus, thoroughly considering all options: implement decisions rapidly (nemawashi).
Principle 14: Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen).
Throughout the company, every person has a philosophical sense of purpose that supersedes any short-term decision making, and all work, grow, and align the entire organization toward a common purpose that is bigger than making money. Generating value for the customer, society, and the economy is the starting point, and every function is evaluated in terms of its ability to achieve this objective. Each person understands his or her place in the history of the company and works to bring the organization to the next level. Thus, individuals strive to be responsible, to act with self-reliance, to trust in their own abilities, and to maintain and improve the skills that enable them to produce added value.
Toyota strives to cut back to zero the amount of time that any work project is sitting idle. When a customer places an order, this triggers the process of obtaining the raw materials needed for that specific order. These materials then flow immediately to supplier plants that immediately fill the order with components that flow immediately to a plant and are assembled. The completed order then flows immediately to the customer (the entire process is designed to take a few hours or days, rather than a few weeks). Creating this kind of one-piece flow, whether of materials or of information, and using small lots and closely situated processes, exposes any inefficiencies or defects that demand immediate attention, motivating everyone concerned to fix the problem. It is an approach that builds in quality, creates real flexibility, results in higher productivity, frees up floor space, improves safety, improves morale, and reduces cost of inventory.
Toyota provides its downline customers with what they want, when they want it, and in the amount they want. This practice of letting consumption initiate material replenishment is the basic principle of JIT, which minimizes work in process and warehousing of inventory by stocking small amounts of each product and frequently restocking, based on what the customer actually takes away. Thus, Toyota is responsive to day-by-day shifts in customer demand and does not rely on computer schedules and systems to track wasteful inventory.
Pulling a system to avoid overproduction goes hand in hand with heijunka. Eliminating waste is just one-third of the equation for making lean successful. It is also necessary to eliminate any overburden to people and equipment (muri) that comes as a result of uneven production schedules (mura). Thus, as an alternative to the stop/start approach of working on batches that is typical at most companies, Toyota levels out both volume and product mix of all manufacturing and service processes. Instead of building products according to the actual flow of customer orders, which can swing up and down wildly, it takes the total volume of orders in a period and levels them out so the same amount and mix are made each day in a predictable sequence, spreading out different product types and leveling volume. This provides Toyota the flexibility to make what customers want when they want it, reduces the risk of unsold goods, balances use of labor and machines, and smoothes demand on upstream processes and the plant’s suppliers.
Nonetheless, warns Liker, there are some basic requirements to meet before any of these benefits can be garnered. Not only must the first three principles, be in place, principles five, six, seven, and eight must also be adhered to. Because Toyota believes that quality should be built in, devices are built into machines to detect abnormalities and automatically stop an operation. Moreover, in the case of humans, the company gives them the power to push buttons, or pull cords—called andon cords—which can bring an entire assembly line to a halt. Every team member has the responsibility to stop the line every time something is out of standard. Thus, quality is the responsibility of every individual, and every individual is empowered to make it happen.
Because building in quality is a principle, not a technology, quality control is simple and involves team members, rather than a lot of complex statistical tools. It entails: going and seeing, analyzing the situation, using one-piece flow and andon to surface problems, and asking “Why?” five times when a problem is uncovered, in order to get a root-cause analysis and to discover the proper countermeasures.
At Toyota, standardized work is not intended to be a coercive management tool imposed on a hapless workforce; quite the contrary. Rather than enforcing rigid standards that make jobs routine and degrading, standardized work is the basis for empowering workers and innovation. As a foundation for flow and pull, the organization uses stable, repeatable methods everywhere to maintain the predictability, regular timing, and regular output of its processes. In this way (by standardizing today’s best practices), it can capture the accumulated learning about a process up to a point in time. This allows creative and individual expression to emerge from those actually doing the work so that they can improve upon the standard and hand this learning off to the next person.
In Japan there are “5S programs” for eliminating wastes that contribute to errors, defects, and injuries in the workplace (i.e., for cleaning it up, making it visual). These five S’s are: (1) sort—separate items and dispose of what is not needed); (2) straighten—make a place for everything and put everything in its place; (3) shine—as a form of inspection, clean up, so as to expose abnormal conditions that could hurt quality or cause machine failure; (4) standardize—develop systems and procedures to maintain and monitor sort, straighten, and shine; and (5) sustain—impose self-discipline to maintain a stabilized workplace as an ongoing process of continuous improvement. Nonetheless, the Toyota Way is not about using 5S to maintain a clean and shiny environment, but to support a smooth flow and to help make problems visible.
At Toyota, visual control refers to the design of JIT information of all kinds, integrated into the process of value-added work, to ensure fast and proper execution of operations and processes. Its well-developed visual control system (which includes such lean production tools as kanban and andon) increases productivity, reduces defects and mistakes, helps meet deadlines, facilitates communication, improves safety, lowers costs, and generally gives workers more control over their environment. And, because the Toyota Way recognizes that visual management complements the visual, tactile, and auditory orientations of humans, it seeks a balance and takes a conservative approach to using information technology to maintain its values. It does not avoid information technology, but creatively uses the best available means to create true visual control.
Although Toyota does not lead the industry in acquiring technology, Liker notes that it is a global benchmark on how to use value-added technology that supports the appropriate processes and people. At Toyota, new technology is introduced only after it has been thoroughly evaluated and tested, with a broad cross-section of people, to ensure it adds value to the process and does not conflict with the principles of valuing people over systems, using consensus decision making, and eliminating waste. If it meets these criteria, it is used to support continuous flow in the production process and help employees perform better, according to Toyota Way standards.
Throughout Toyota’s history (with the Toyoda family, behind the scenes, carefully selecting and grooming), key leaders have been found within the company, at the right time, to shape the next step in the company’s evolution. Unlike typical U.S. companies that at every crisis, go “shopping” for new CEOs and presidents to take them in new directions, Toyota develops its leaders to live and thoroughly understand its genchi genbutsu culture day by day. Leaders must demonstrate this ability and understand how work gets done at the shop-floor level. Leaders must teach their subordinates the Toyota Way, which means they must understand and live the philosophy. And, they must support the culture continuously so that it can create the environment for a learning organization and lay the foundation for genuine long-term success.
Toyota encourages its employees to work diligently, to do their jobs perfectly, and to strive for daily improvement by building a system that conforms to the principle of developing exceptional people and teams who follow the company’s philosophy. This is not a matter of adopting simple solutions or applying motivational theories as an afterthought. Rather, it is about making the training of exceptional people, and the building of individual work groups, the backbone of the company’s management approach—one that integrates the social system with the technical system. Toyota’s “respect-for-humanity” social framework and its culture of continuous improvement fully support the system in which one-piece flow drives positive problem-solving behaviors and motivates people to improve.
Toyota also follows a principle of finding solid partners and growing together with them so both can benefit in the long term. New suppliers must prove their sincerity and commitment to Toyota’s high performance standards for quality, cost, and delivery. If they demonstrate this, they get larger orders, are taught the Toyota Way, and adopted into the Toyota family. Once inside, they are not kicked out except for the most egregious behavior. As Ohno has stated, “Achievement of business performance by the parent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.” It is unthinkable for the company to switch suppliers simply to save a few percentage points in cost. Nonetheless, Toyota is not an easy mark. Just as it challenges its employees to improve, it challenges its suppliers to develop by setting a series of aggressive targets and challenges.
Liker has found that genchi genbutsu is the factor that most distinguishes the Toyota Way from other management approaches. Tables and numbers may measure results, but they do not reveal the details of the actual process being followed every day. Thus, whether they are in manufacturing, product development, sales, distribution, or public affairs, people trained in the Toyota Way take nothing for granted, nor do they rely on reports, but go and see for themselves. Moreover, observing is not enough, employees and managers must also “deeply” understand the processes of flow and be able to provide critical evaluations and analyses.
According to Alex Warren, former senior vice president of Toyota’s manufacturing plant in Kentucky, Toyota will spend nine to ten months planning a yearlong project. Then it will implement in a small way with a pilot project and be fully implemented by the end of the year, with virtually no remaining problems. This is in direct contrast to most American companies that tend to spend about three months planning, before implementation, and then spend the rest of the year correcting all the problems they encounter.
For Toyota, how a decision is arrived at is just as important as the quality of the decision. Underlying the entire process of planning, problem solving, and decision making lies careful attention to every detail including: (1) finding out what is really going on (genchi genbutsu is an important part of this); (2) understanding underlying causes (asking “Why?” five times); (3) broadly considering alternative solutions and developing a detailed rationale for preferred solutions; (4) building consensus within the team, including employees and outside partners; and (5) employing very efficient communication vehicles to complete the first four items, preferably using one side of one sheet of paper. This five-step approach helps to uncover facts that could lead to many problems down the road, it gets support from all parties before implementation begins, and a great deal of learning is achieved up front before anything is planned or implemented.
Liker believes that this last point, learning, is Toyota’s greatest accomplishment. The company is a true learning organization, for it views continuous improvement as a relentless companywide process in which superiors motivate and train subordinates, predecessors do the same for successors, and team members at all levels share knowledge. As he has emphasized, the Toyota Way is far more than tools and techniques—it is designed to push everyone to think and grow through a process in which mistakes are used as opportunities for learning. This involves: perceiving the problem, clarifying it, determining the root cause of the problem, providing effective countermeasures, evaluating the results, and standardizing the approach. Then, the new knowledge is transferred to the right people so as to make it part of the company’s repertoire of behavior.

The Toyota Way - by Jeffrey K. Liker - PART I: USING OPERATIONAL EXCELLENCE AS A STRATEGIC WEAPON

2007-03-24T06:39:00.000-07:00

Introduction
PART I: USING OPERATIONAL EXCELLENCE AS A STRATEGIC WEAPON
PART II: FOURTEEN PRINCIPLES—THE CULTURE BEHIND TPS
PART III: APPLYING TPS AND THE TOYOTA WAY
Remarks
Reading Suggestions
CONTENTS
About the Author

PART I: USING OPERATIONAL EXCELLENCE AS A STRATEGIC WEAPON

“All manufacturing and service companies that want to be successful in the long term must become learning enterprises. Toyota is one of the best models in the world.”

“Everyone should tackle some great project at least once in their life. … should make an effort to complete something that will benefit society.”
--Sachichi Toyoda

“Out of the rubble of WWII … ‘with a creative spirit and courage’ [Ohno] solved problem after problem and evolved a new production system. … This same process has been played out time and again throughout the history of Toyota.”

Liker believes that Toyota’s consistent success is a direct result of its turning operational excellence into a strategic weapon, using such tools and quality improvement methods as just-in-time (JIT), one-piece flow, jidoka, and heijunka (that make up the Toyota Production System [TPS]). But its continued success at implementing these tools comes from its philosophy (the Toyota Way), which is based on an understanding of people and what motivates them. Thus, the company’s achievement ultimately emerges from its ability to cultivate leadership, teamwork, and culture; to devise strategy; to build supplier relationships; and to maintain a learning organization. In this manner, the Toyota Way and the TPS form the “double helix” of the company’s “DNA,” for they define its management style and what is unique about the company.
TPS, Toyota’s distinctive approach to manufacturing, is the basis of the “lean production” revolution it helped spawn. According to Womack and Jones (Lean Thinking), “lean manufacturing [is] a five-step process: defining customer value, defining the value stream, making it ‘flow,’ ‘pulling’ from the customer back, and striving for excellence.” A lean enterprise is, then, the end result of applying TPS to all these aspects of a business.
After World War II, Ford and General Motors used economies of scale and big equipment to produce as many parts as possible, as cheaply as possible. However, because Toyota’s market was small, forcing it to make a variety of vehicles on the same assembly line, flexibility was key to its operations. This need to be flexible led to the critical discovery that when lead times are short, and production lines are kept flexible, higher quality, better customer response, better productivity, and better utilization of equipment and space ensue. This drive (in the 1940s and 1950s) to eliminate wasted time and material from every step of the production process, from raw material to finished goods, addresses the same need companies face today—“the need for fast flexible processes that give customers what they want, when they want it, at the highest quality and affordable cost.”
Toyota has discovered that non-value-added waste has little to do with running labor and equipment as hard as possible and everything to do with the manner in which raw material is transformed into a saleable commodity. This is why TPS begins with the customer, “because the only thing that adds value in any type of process—be it manufacturing, marketing, or … development … is the physical or information transformation of that product, service, or activity into something the customer wants.”
The roots of these TPS and Toyota Way principles can be traced back to the history and personalities of the company’s founders, who left their indelible marks on Toyota’s culture, through generations of consistent leadership.
In the 1890s, Sakichi Toyoda used trial-and-error tinkering and getting his hands dirty (genchi genbutsu—an approach that would become part of the foundation of the Toyota Way), to invent a sophisticated and highly successful automated wooden loom, which contained a special mechanism for automatically stopping the loom whenever a thread broke. It was a capability that evolved into the broader system, jidoka (automation with a human touch), one of the two pillars of TPS. Essentially, jidoka means “mistake proofing,” or building in quality as material is produced. It also refers to designing operations and equipment so that workers are not tied to machines and are free to perform value-added work.
In 1929, Sakichi sent son Kiichiro to England to sell the patent rights for the popular “mistake-proof” loom. With the 100,000 English pounds received from the sale, he gave Kiichiro the task of building the Toyota Motor Corporation. The objective was not to increase the family fortune, but to move the company into a future technology (automobiles) and to give his son his opportunity to contribute to the world.
Despite his formal engineering education, Kiichiro, like Sakichi, learned by doing and added his own innovations to his father’s philosophy and management approach. He was especially influenced by the U.S. supermarket system of replacing products on the shelves as customers purchased them. Thus, while Sakichi contributed the jidoka pillar to TPS, Kiichiro contributed JIT. Still, it was his actions as a leader that left the greatest imprint on Toyota. For after World War II, when rampant inflation threatened the company, Kiichiro resigned as president—despite the fact that the crisis was beyond anyone’s control. Not only did this personal sacrifice help quell worker dissatisfaction, it also laid the foundation for Toyota’s philosophy (one still extant in the company today) of thinking beyond individual concerns to the long-term good of the company and taking responsibility for any problems.
One of the family leaders who shaped the company after Kiichiro was cousin Eiji Toyoda, who eventually became Toyota’s president and, then, chairman, helping to build the company into a global powerhouse. Like Sakichi and Kiichiro before him, he learned to get his hands dirty, learned the spirit of innovation, understood the value of contributing to society, and had the vision of creating a special company with a long-term future. He also played a key role in selecting and empowering Toyota’s subsequent leaders who shaped sales, manufacturing, product development and, most importantly, TPS.
In 1950, Eiji gave plant manager, Taiichi Ohno, the assignment of improving Toyota’s manufacturing process so that it equaled Ford’s productivity. Nonetheless, this did not mean competing head-on with Ford, it meant improving Toyota’s manufacturing within the protected confines of the Japanese market. So Ohno began by benchmarking the competition and studying Henry Ford’s book, Today and Tomorrow, which preached the importance of creating continuous material flow throughout the manufacturing process, standardizing processes, and eliminating waste. What Ohno saw, however, was that the company did not always practice what it preached, for it used “wasteful batch production methods that built up huge banks of work-in-process inventory throughout the value chain, [pushing] product onto the next stage of production.” Toyota did not have the luxury of creating this kind of waste, but it could use Ford’s idea of continuous material flow to develop an efficient system of one-piece flow, flexible enough to change, according to customer demand.
Ohno turned to Toyota’s shop floor for a “hands-on” application of the principles of jidoka and one-piece flow, which he combined with the concept of the “pull system,” inspired by American supermarkets. On the shop floor, this means that the first step in a process does not replenish parts until the second step uses up its supply from step one, down to a small amount of “safety stock.” In this manner, every step of every process has the equivalent of a built in “gas gauge” (kanban), signaling the previous step when parts need to be replenished. This creates backwards pull to the beginning of the manufacturing cycle. Thus, JIT is dependent upon kanban.
Toyota also assimilated the teachings of American quality pioneer, W. Edwards Deming, who taught that, in a business system, meeting and exceeding both external and internal customer requirements is the task of everyone in the organization. Thus, he originated the “the next process is the customer” principle, which in a pull system, translates into “the preceding process must always do what the subsequent process says” (atokotei wa o-kyakusama); otherwise, JIT does not work.
Deming also advocated the systematic Plan-Do-Check-Act (PDCA) Cycle approach to problem solving that is a cornerstone of continuous improvement (kaizen). This is the process of making incremental improvements, no matter how small, and achieving the lean goal of eliminating all waste that adds cost without adding value. It is a total philosophy that strives for perfection and sustains TPS on a daily basis, in that it pushes the decision making and/or proposal making down to the workers and requires open discussion and a group consensus before any decision can be implemented.
This new manufacturing system, which Ohno and his team created, did not just pertain to one company in one market and culture, but was a new paradigm in manufacturing or service delivery. It was a new way of seeing, understanding, and interpreting what is happening in a production process and, as a result, propelling a company beyond the mass production system. Still, the power of TPS and lean manufacturing remained mostly unknown outside of Toyota and its affiliated suppliers until the business world was overtaken by the quality movement and learned that when companies focus on quality rather than solely on cost, costs are reduced even more. Moreover, through the work of Womack, Jones, and Roos (The Machine That Changed the World), manufacturing worldwide discovered “lean production”—what the authors identified as Toyota’s way of “shortening lead time by eliminating waste in each step of a process [so as to get the] best quality and lowest cost, while improving safety and morale.”
As Liker notes, the first question in TPS is always “What does the internal and external customer want from this process?” Thus, many of the tools of TPS and principles of the Toyota Way derive from the focused behavior of eliminating non-value-added waste, or muda, in business or manufacturing processes. The traditional approach to process improvement focuses on identifying local efficiencies, such as improving uptime, making a cycle faster, or using automated equipment to replace the human being. And, though there might be a significant improvement for an individual process, there is little impact on the overall value stream. Without a lean improvement initiative, most companies are unable to see the huge opportunities for reducing waste by getting rid of, or reducing, non-value-added steps.
Toyota identifies seven major types of non-value-adding muda, to which Liker adds an eighth (all can be applied to any process in manufacturing, information or service):
1. overproduction, which generates excess inventory, which, in turn, leads to overstaffing and increased storage and transportation costs;
2. waiting for the next step, tool, part, etc;
3. unnecessary transport or conveyance of work in progress (WIP);
4. overprocessing or incorrect processing due to poor tool and product design;
5. excess inventory in the form of excess raw material, WIP, or finished goods, causing longer lead times, obsolescence, damaged goods, transportation and storage costs, and delay (excess inventory also hides production imbalances, late supplier deliveries, defects, equipment downtime, and long setup times);
6. unnecessary movement, such as walking and/or looking for, reaching for, or stacking parts or tools;
7. defects that result in repair, rework, scrap, replacement production, and inspection; and
8. unused employee creativity (i.e., losing time, ideas, skills, improvements, and learning opportunities by not engaging or listening to employees).

The Toyota Way - 14 Management Principles from the World’s Greatest Manufacturer - by Jeffrey K. Liker - Introduction

2007-03-24T06:30:00.000-07:00

Introduction

When Gary Convis, managing officer and president of Toyota Motor Manufacturing in Kentucky, joined Toyota after working in the U.S. auto industry for 18 years, he witnessed how one of the worst workforces in General Motors was transformed into one of the best in any U.S. manufacturing facility. This transformation, which occurred at NUMMI (the Toyota/GM joint venture plant in Fremont, California), was a direct result of the “Toyota Way,” the fundamental method by which Toyota does business. This approach, when coupled with the Toyota Production System—the basis for much of the worldwide “lean production” movement—makes up Toyota’s “DNA.”

The Toyota Way describes the 14 principles that form the foundation of this uniquely successful management style. Using profiles of a diverse group of organizations, from a variety of industries, it demonstrates how this model of success can be applied in any organization, to improve the quality, efficiency, and speed of any business process, including sales, product development, marketing, logistics, and management. This blueprint of Toyota’s management philosophy offers managers in blue-collar, white-collar, manufacturing, or service environments specific tools and methods for becoming the best in their industries on cost, quality, and service.

Thinking Inside The Box - by Kirk Cheyfitz - About the Author

2006-11-04T15:33:00.000-08:00

About the Author

An award-winning reporter and successful businessman, Kirk Cheyfitz has built the world’s first and largest global custom publishing network for McCann-Erickson WorldGroup, the world’s largest advertising agency. After only four years, The Publishing Agency International has full-service companies in New York, Amsterdam, Brussels, London, Madrid, and Seattle. Cheyfitz was a Pulitzer finalist for investigative work at the Detroit Free Press and won the prestigious Sigma Delta Chi Bronze Medallion for investigative reporting, among many national and regional journalism honors.

For more information, please visit: www.simonsays.com

Thinking Inside The Box - by Kirk Cheyfitz - Reading Suggestions & CONTENTS

2006-11-04T15:32:00.000-08:00

Introduction
THE PLANKS THAT MAKE UP THE BOX—SOME THINGS NEVER CHANGE
KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T
UNIFYING THE WHOLE BUSINESS
The People Box
Nothing Lasts Forever
Remarks
Reading Suggestions & CONTENTS
About the Author

Reading Suggestions

Reading Time: 5-6 hours, 272 pages in book

Using his subtitle, “The 12 Timeless Rules for Managing a Successful Business,” the author organizes his book around the twelve rules, with one chapter devoted to each fundamental rule, each being a plank “in the box.” Although the rules, and therefore the chapters, are somewhat sequential (he begins with the fundamentals of profits, cash flow management, and expenses, proceeds through customers, marketing, and growth strategies, concluding, logically, with exit strategies), it is possible to read any of the chapters without reading previous chapters.

We recommend reading, at minimum, the introduction, “Read This First: Don’t Do Anything Stupid,” followed by Chapter 1, “The Basic Box: Some Things Never Change.” At the beginning of each chapter, the author presents the rule—usually in one sentence—that is detailed in the chapter, and at the end of the chapter, he provides a numbered summary of the key points, making it possible to read through the book selectively. However, Cheyfitz’s book is written with such wit and humor, that although readers might be attempted to skim, they will, very likely, find themselves reading each chapter.

CONTENTS

Chapter 1: The Basic Box: Some Things Never Change
Chapter 2: The Jack in The Box: Profits
Chapter 3: The Money Box: Cash Is Everything
Chapter 4: The Bottom-Line Box: Knowing What Can Be Controlled and What Can’t
Chapter 5: The Box Top: Customers Are the Boss
Chapter 6: The Marketing Box: Unifying the Whole Business
Chapter 7: The Getting-Bigger-Faster Box: If You Can Buy It, Don’t Start It Up
Chapter 8: The People Box: Hire Smart or Manage Hard
Chapter 9: The Treasure Box: Secure the Real Assets
Chapter 10: The Ends-Over-Means Box: Results Are More Important Than Process
Chapter 11: The Renewable Box: Nothing Lasts Forever
Chapter 12: The Houdini Box: Have an Exit Strategy

Thinking Inside The Box - by Kirk Cheyfitz - Remarks

2006-11-04T15:30:00.000-08:00

Remarks

Cheyfitz was prompted to write Thinking Inside The Box after observing the corporate scandals of the business world during the 1990s and in the first few years of the 2000s, a time period during which, Cheyfitz says, the business world essentially lost its head. These errors in business practice were largely based on the erroneous assumption that the foundations of business had been radically and fundamentally altered by technological and social change. His thoughts hearken back to the great twentieth century economic thinker Herbert Simon and his classic 1947 work, Administrative Behavior.

Simon wrote, “Human organizations, quite large ones, have been with us for at least four thousand years. Although the physical technology a modern army employs is wholly different from the technology employed by the armies of Nineveh or Egypt or X’ian, the processes people used in these ancient armies to make decisions or to manage people appear quite familiar to us and largely unchanged over the centuries.” (In fact, on the occasion of the fiftieth anniversary of the publication of Administrative Behavior Simon declined to make changes to his book saying that in the half century that had passed people, and the way they make decisions, had not changed.) Cheyfitz’s book, like Simon’s work, is based on sound historical documentation to illustrate that there is, indeed, nothing new under the sun. The fundamental rules of commerce have not changed since the Middle Ages—so don’t try to change them.

His observations on innovation, change, and technology are central to the premise of the book. “If you listen to most of the business gurus,” according to Cheyfitz, “there’s a business revolution every minute, each one driven by technology.” Robert Sutton, the noted Stanford expert on innovation and organizational psychology believes that excitement about building better products and companies sometimes makes us forget that most new ideas are bad and most old ideas are good. By no means are Cheyfitz and Sutton saying that companies shouldn’t innovate. “Creativity,” as Sutton points out, “is largely about seeing old things in new ways. And being creative requires detailed knowledge of old ideas so those ideas can be adapted to new uses and directions.”

It is important to note, finally, that the author does not deny that there is such a thing as “thinking outside the box.” However, the first step to “thinking outside the box” is to think “inside the box,” and this is the step—a big step and a basic step—that many forget.

Thinking Inside The Box - by Kirk Cheyfitz - Nothing Lasts Forever

2006-11-04T15:29:00.000-08:00

Nothing Lasts Forever

One of the fundamental functions of a business is to keep an eye fixed on the future, not the distant future, but the immediate future. When Peter Drucker suggested that marketing and innovation were the two basic functions of business, he would subsequently define innovation as “purposeful innovation.” He advises following three straightforward guidelines, regardless of the type of business: 1) keep it simple; 2) concentrate on the needs of today, not some imagined future; 3) look for clear opportunities and avoid big risks. Businesses must be dynamic, and companies have to change. Any company that fails to renew itself ensues its own doom. But that does not mean that businesses should be constantly undertaking fundamental change. The key to renewing a business is to make it an evolutionary process. It is in actuality a process that is more responsiveness than revolution, an essentially conservative process.

Companies must always remain sensitive to changes that could affect their growth, profits, and results. Drucker writes that success comes to those who systematically analyze the sources of innovative opportunity, then pinpoint the opportunity and exploit it. Conservative, meaningful change usually comes from one, or a combination of four sources: technology (which can have direct and indirect effects), government policy (in the form of changing government subsidies, taxes, and regulations), changes in customer needs and lifestyles (how they live and what they need are what drives business), and competitors (new competitors or new initiatives by established competitors). Success—and even survival—depends upon the response to the opportunities afforded by change. Response—renewal—is therefore a constant process that goes on every day in every business sector. Successful companies are those that keep a single-minded focus on the problems of day-to-day management along with the application of imagination and vision as to what will happen in the near future. The challenge of both operating and renewing a business each day is to regard all conditions as both passing and permanent.

Risk and uncertainty are always part of the picture no matter how well a company is managed. Many businesses steer a course through trouble that inevitably lies ahead, and others will not be able to do so. It is important to understand when it is prudent to get out of the business. For public and private companies, strategies to exit business are similar: sell publicly, sell privately, break-up (spin off a division or a part of a larger company as a separate business), merge (acquire or join with another company), refinance, or write-off.

The way to accomplish the best exit possible is to plan for it. The best time to plan on getting out of a business, in fact, is before getting into it. Arriving at a good way out depends a great deal on established markets for the business being exited. If there is a strong history of M&A activity in a given business, if there are widely accepted methods of valuing the business, if banks are in the habit of lending money to such businesses—all of these are important signs that favorable exits will be available under most circumstances. Failure to secure a profitable exit renders all the other rules of business retroactively meaningless. Generally speaking, it is simply impossible to succeed in a business where there is no good way to get the money out of the corporation and into its owners’ pockets.

Just as important is the rule that exits have to be fair to everyone involved; powerful insiders cannot be allowed to exit and leave everyone else behind. Conduct of this sort, as has been observed all too frequently in major corporate scandals of 2001 and 2002, has led from bad feelings to lawsuits to congressional investigations, criminal prosecutions, stock market crashes, and what the author describes as a general breakdown of our economic system. The legitimate end of all corporate activity is to enrich the individual members of the ownership community; giving everybody in the community fair access to the exit is at the center of management’s responsibilities. Understanding, of course, that rewards have to be related to the contributions made and the real risks taken by each group of members. Most good exit strategies are very straightforward sales, involving some variation on the theme of a business is developed and then sold, either to the public or to a larger firm in the same business. Other exits are more complex, involving complex transactions that move companies from high-risk businesses to lower-risk ones, stabilizing the entire corporation and setting the stage for an orderly exit.

***
Endnotes by chapter and a subject index are provided.

Thinking Inside The Box - by Kirk Cheyfitz - The People Box

2006-11-04T15:27:00.000-08:00

The People Box

Successful corporate acquirers make M&A a core business activity; they master it and execute it based on a tried-and-true process.

Empowered employees can and should take control on the job; management and non-management employees should collectively act as if they were all in command together. Employees who are most likely to do the right thing are those who work with a previously formed consensus, who work in small units with well-defined goals, who have been taught to understand their mission, and who have the incentive to do the job well. They also need freedom in deciding how to perform their duties, and they must take collective responsibility for getting the goal accomplished.

It is impossible for managers to be everywhere at every moment making decisions for people and supervising every detail. No manager has the time, energy, knowledge, or judgment; further, talented, capable employees do not need to be micromanaged. Further, micromanaging reduces the chances of building a constructive relationship between managers and employees. In a Gallup research study conducted over a twenty-five year period, the single most powerful discovery was that talented employees needed great managers, and that the single greatest determining factor in employees’ longevity and productivity was their relationship with their immediate supervisors.

The primary question, then, becomes how to find and keep the best people. William C. Taylor, founding editor of Fast Company, once said, “Hire for attitude, not skill,” an opinion echoed by Cheyfitz. It is more important, when evaluating a prospective employee, to look at personal intrinsic personal qualities, such as intelligence and honesty, than to rely solely on a resume of past jobs. A person’s knowledge can be increased and broadened fairly quickly. A person’s basic human qualities and characteristics usually cannot be changed greatly. The success of Southwest Airlines, one of the world’s most successful companies, can be directly attributed to its single-minded focus on finding employees with certain fundamental personality traits, traits that ensure that Southwest keeps its commitment to making flying “fun” for its customers. Southwest has consistently earned the top rank as the U.S. airline with the smallest number of customer complaints.

Hiring good people—people who are well suited to their jobs—is only part of the equation. The other part is providing the environment necessary to enable these people to do what needs to be done. This includes providing pleasant places to work, creating units small enough to function cohesively, and making sure that management does not get in the way—in short, to treat people decently, for its people and their expertise, are, very often, one of a company’s greatest assets.

At first glance, a company’s real assets should be easy to identify. The key assets, in many cases, however, turn out to be unique, abstract assets that can include the company’s structure, its expertise, reputation, and its relationships—all direct results of its employees and management. If anything happens to these abstract assets, the hard assets lose their value rapidly. Recent examples include Enron and Arthur Andersen, which prove that even very large corporations can be victims of damage to their reputations. These two highly publicized corporate scandals, combined with other smaller, less well-known scandals, have, without doubt, had a negative impact on the public perception of corporate America to such an extent that they affected the stock market in the early 2000s, and therefore the entire U.S. economy. This occurred even though the only assets being impaired were abstract ones of reputation and trust. No ‘real’ assets were destroyed.

The idea persists, however, that hard assets (factories, real estate, equipment, machinery, etc.), are somehow more important than abstract ones and hold absolute value that endures no matter what happens to the company. Particularly in knowledge-based industries, where the real assets are always abstract, hard assets can quickly become worthless if they are separated from the moneymaking ideas or relationships. However, the same can also be true for industrial ventures. Take, for example, Samsung’s disastrous entry into the auto manufacturing industry in the 1990s. Samsung’s state-of-the-art manufacturing plant turned out to be essentially valueless without the design expertise to create marketable automobiles, the reputation and goodwill of a strong dealer organization, and trusting relationships with customers.

All companies should, on an annual basis, review each major segment of their business and identify the true sources of their revenue. This analysis will point to the key assets that produce the company’s revenues and profits. Once key assets have been identified, a plan can be created not only to best exploit the asset long-term to increase profits, but also to protect these key assets.

Management theory holds that it is a good thing to have processes—established ways of doing things. Processes exist, or should exist, to help ensure some degree of management control over results. For it is the end result that really matters. Processes that become detached from results tend to produce no results. Processes can become detached for several reasons: when needed results are not clearly defined, or when the company fails to exercise control, and to measure results. The results a company achieves are more important than how it got there. Adhering to this fundamental rule, Cheyfitz has discovered, is an essential part of success, while ignoring it leads inevitably to disaster.

Focusing on results is, in essence, the endless repetition of a five-part process: first, determining a goal and defining it precisely; second, creating a plan for achieving the goal; third, creating measurements that will tell management what progress has been made toward the goal and when the goal has been reached; fourth, capturing and reporting the results regularly so that progress can be continually assessed; and finally, starting over again with new goals once the a goal is achieved. Measuring results, or outcomes, is all about improving performance. Research confirms, according to Steven Kelman, a professor at Harvard’s John F. Kennedy School of Government, that giving people a goal improves their performance by serving as a motivator.

It is often a tough task to get companies to focus on results rather than on processes. Because processes are internal and familiar, they are controllable. Focusing on process is very attractive for an organization. Results, on the other hand, involve interacting with the world beyond an organization’s walls, so results are never completely controllable and are always seen as involving risk. To shift the focus from processes to results, the author counsels setting goals that can be measured—goals that are ambitious, but achievable, explaining both the results needed and the measurements that will be used to measure progress, and paying and promoting employees based on results.

Thinking Inside The Box - by Kirk Cheyfitz - UNIFYING THE WHOLE BUSINESS

2006-11-04T15:24:00.000-08:00

UNIFYING THE WHOLE BUSINESS

The primary rule of The Marketing Box is that, without a sale at the end of the rainbow, all is lost. So every business had better be selling all the time, or else.

Marketing, for many, has become for many a synonym for advertising. However, nothing could be further from the truth. Marketing, in fact, encompasses all management, and has no end point. It is the single discipline that embraces and unites virtually every aspect of business activity. Marketing guides production by defining what products will be produced. It governs distribution by determining the most effective ways to price goods and services, and then placing them in front of customer prospects, and delivering them. Marketing defines exactly who the target consumer is and what will be communicated to each prospect and customer to attract their attention, achieve a sale, maintain their loyalty, and create future sales from the same customers.

To accomplish the marketing function, companies must meet customers’ needs and expectations in ways that create and maintain trust. Trust is, and has always been, the basis of commerce. Trust is important when things go well. The crisis that is created when things go wrong can still produce a loyal customer if there is a basis of trust, and if the response to the problem is fast, relevant, and satisfying.

Marketing is not simply a department or something provided by an ad agency, it is, rather, the process of putting the customer at the center of the business. Management sage Peter Drucker has written that business’s only purpose is “to create a customer,” and that marketing and innovation are the two basic functions of business. Marketing, for Drucker, is a central dimension of the entire business. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.

Corporate history is littered with examples of companies that failed to see new products from customers’ point of view, among the best known of which are Ford’s Edsel automobile of the late 1950s and the more recent “New Coke” of the mid-1980s. Conversely, often good products and services fail for lack of appropriate distribution and promotion. The only way to improve the odds for the launch of a new product, or to improve the performance of an existing product, is, according to Cheyfitz, to reach inside the lives of prospects and customers to increase the opportunities for a sale and to make sure there is a strategy in place to take advantage of every selling opportunity. Selling is always the end result of marketing.

Communicating with the right people in the right words—personally and directly addressing the consumers most likely to buy the product or service promoted—is the final fundamental of marketing. Technology, particularly interactive technology, provides marketing with an important tool. Contacts with prospects or customers can be documented and retained, thus increasing companies’ knowledge of the people they are communicating with. Stan Rapp, the founder and CEO of MRM Partners Worldwide, has said that in marketing the straight-line progression is from mass to individualized marketing. Marketing can, today, as a result of technology, consider the lives, the wants, the needs of individual consumers, not as huge, undifferentiated groups, not even as well-defined niches, but as individuals. Thus, technology-enabled marketing returns the business world to the kind of personal interaction that was once the norm.

To create market power, as well as to improve efficiency, provide diversification, and extend a company’s core business to new geographic markets, most companies find that they can grow faster and more efficiently, and with less risk and less uncertainty, by buying companies rather than by starting companies. Many successful entrepreneurs began their business ventures with the acquisition of an existing company, not with a start-up. Starting a business means having no operating history to work from. Buying a business, on the other hand, means acquiring something that is already working (with assets, an established stream of revenue, a share of the market, a list of customers, distribution and sales channels, and experienced managers and workers). Because established businesses have assets and cash flow, banks will, generally, lend money at reasonable rates for acquisitions. Using borrowed money to finance an acquisition reduces the need for equity investment, so it increases returns on equity. Great wealth has been created and consolidated through smart acquisitions. Although no formula works all the time, growing by acquisition, done right, works for everyone from huge conglomerates to small, family-oriented entrepreneurs.

The primary question, then, is not whether to acquire, but, why, when, and how to acquire so that the odds in favor of making the merger work, are as high as possible. The author outlines five timeless rules for successful mergers. First, begin with a good reason for buying; ask, “Why am I doing this?” Second, shop around. Look at everything. Get a feel for what’s available, what the prices should be like, how good management operates in the industry, and how competitors stack up against one another. Third, understand what the sellers want from the deal. This creates a competitive advantage if a bidding war breaks out. Fourth, take due diligence seriously and make certain that operations people are involved to help answer critical questions about day-to-day management. Finally, remember that closing the deal is not the end—it’s the beginning. Once the deal is completed, the real work begins: running the acquired company.

Like many business tactics, mergers and acquisitions go in and out of favor with analysts and academics. Studies indicate that mergers come in waves, clustered by industry, indicating that a sizable portion of deals in any given decade are driven by changes in the circumstances of an entire industry. The biggest driver of mergers in the 1990s was not technology or the Internet, but deregulation of the telecommunications, broadcasting, and banking industries.

Thinking Inside The Box - by Kirk Cheyfitz - KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T

2006-11-04T15:22:00.000-08:00

Introduction
THE PLANKS THAT MAKE UP THE BOX—SOME THINGS NEVER CHANGE
KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T
UNIFYING THE WHOLE BUSINESS
The People Box
Nothing Lasts Forever
Remarks
Reading Suggestions & CONTENTS
About the Author

KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T

Second only to the new economy in its power to disappoint and mislead, the customer economy rose to erroneous and expensive recognition as yet another “brand new” phenomenon—another sign of relentless technological change in business—in the very late 1990s. It was as if customers had just appeared on the scene as the twentieth century was fading to black.

When all is said and done, there are only two components to any business: revenues and expenses. Revenues cannot be controlled; expenses, generally speaking, can be. Or, said another way, it is much easier for a business to know how it will spend its money, than it is to know how its customers will spend theirs. Often, managers allow themselves to be lulled into the belief that their revenues are going to do well no matter what. They allow expenses to increase in anticipation of projected higher revenues (budgeting for growth), or they let expenses overall grow faster than revenues (investing in the future), or they fail to downsize their operations when sales fall off (preserving the business). It is a manager’s priority to know what can be controlled, and to control it as closely as possible, and to understand what is beyond management control.

To increase revenue means remembering the old slogan that “customers are the boss.” It has never been truer. Successful business owners and managers have always known that the customer, not the CEO, is at the top of every organization chart. No business gets anywhere without knowing, listening to, and talking to its customers. Technology has not changed this. The underlying principles of paying attention to customers are not technological. Rather, they involve the challenges of communicating with other human beings, a traditional process that is an art, and not a science.

In his 2001 book, Good to Great, author Jim Collins found that technology, in fact, was not a significant factor in boosting companies’ performance from good to great. It wasn’t that technology had no role to play in a well-managed company; it was just that human factors were always far more important. “You can give two companies the same technology, but you won’t see the same results. Technology by itself is never a primary cause of either greatness or decline,” Collins concluded.

Customers are the only source of truly meaningful information about a company’s products and services, which products and services need improvement, what future products and services may be needed or desired, and how customers want to be approached, and through which media, to learn about a company’s products. Customer relationship management (CRM) has often been considered the state-of-the-art solution to building and improving relationships with customers. Worldwide, businesses have invested billions of dollars for advanced CRM software and hardware systems and for CRM consultants. Most of these billions, however, have failed to produce results.

What CRM failed to address was the real basics of customer relationships, which are providing products and services that meet customers’ real needs, together with a plan to make each customer contact and each transaction comfortable, easy, and rewarding for the customers. As the author points out, what is important is learning what customers really want, and then giving it to them, and to making sure they have plenty of choices—in what they buy, where they buy, how they buy, and how they pay for it all. Along with making sure customers have plenty of choices, it is also important to address them personally, talk to them honestly, and treat them well every step of the way. Discerning differences among customer groups, along with a plan to exploit those differences for greater profit, are together, the most critical part of customer relationship management.

Maintaining customer loyalty is a further critical component, for without customer loyalty, what does a customer do? They go somewhere else. “The customer is always right,” was first uttered by the now legendary John Wanamaker of Philadelphia in the l870s. This is a statement that is obviously untrue at least some of the time, but it does sums up an understanding of the customer’s supreme position in business. Paying attention to customers and giving them what they want is a critical plank in “the Box,” but it is not the entire “Box.” Business owners and managers also need to pay the right kind of attention to customers. The airline industry is frequently cited as an example. The frequent flier program of most airlines does a good job of recognizing and rewarding good customers with first-class upgrades, shorter lines, and faster baggage handling. But the airlines still deliver—on a day-to-day basis—an exasperatingly uneven level of overall customer service.

Thinking Inside The Box - by Kirk Cheyfitz - THE PLANKS THAT MAKE UP THE BOX—SOME THINGS NEVER CHANGE

2006-11-04T15:19:00.000-08:00

Introduction
THE PLANKS THAT MAKE UP THE BOX—SOME THINGS NEVER CHANGE
KNOWING WHAT CAN BE CONTROLLED AND WHAT CAN’T
UNIFYING THE WHOLE BUSINESS
The People Box
Nothing Lasts Forever
Remarks
Reading Suggestions & CONTENTS
About the Author

THE PLANKS THAT MAKE UP THE BOX—SOME THINGS NEVER CHANGE

While rockets and broadband will revolutionize movement and communications, they will not fundamentally alter the economy or the notions of exchange that underlie the economy.

“When CEOs ask, ‘What’s the secret to venture capital?’ I say, ‘Not running out of money.’ Don’t get cute with capital. Presume that you’ll never raise another dime, and run your business accordingly.”
--Robert H. Lessin

The basic rules for business-building, the rules that form the operating framework that Cheyfitz calls “The Box,” do not change much, not in weeks or months, not even in years, and not significantly over decades or centuries, or even over millennia. These basic rules as outlined by the author are 1) Know the difference between what will change and what will not, and pay attention to the former; 2) The first business of business is making money; 3) If cash is not managed, there will not be anything to manage; 4) It is far better (and more certain) to cut expenses than to pray for sales; 5) Give customers what they want, not what the business wants to give them; 6) Sell all the time; 7) Businesses should follow the example of virtually every big company in history and buy their way to “bigness” (at reasonable prices); 8) When it comes to people, managers can hire smart and get out of the way, or they can run themselves ragged micromanaging; 9) Businesses need to find their real assets (the ones that generate the profits) and exploit them for all they are worth; 10) Remember that the end result is what really matters; 11) Business should always be ready to renew their basic business; and 12) Make a plan to get money out of a business, and keep the plan updated and handy.

The “new economy” of the 1990s (a bit of historical research reveals that supposed “new economies” have surfaced periodically over the course of centuries) was much touted by the press, by Wall Street, and even by Alan Greenspan, to explain what was then viewed as an unprecedented, fundamental change in economic reality. The result of the belief that economics had been fundamentally altered by massive technological growth was the dot-com disaster of the 1990s and, close on its heels, the disastrous collapse of the telecommunications industry in 2000 and 2001.

These disasters occurred because absolutely nothing had changed about the economy; indeed, it cannot change, a lesson that history and social science teaches. Although technology is important, and shapes the way business is conducted at any given time, technology does not fundamentally alter the way economics works. Therefore, it is critical to know which things will change, and which will not—and to know the difference between what is coming next, and what it will always be. This is the essence of the author’s first plank—“the basic Box”—understanding the unchanging nature of the fundamental rules that make business work, while appreciating the constantly changing nature of the factors that influence all businesses. Businesses should, then, focus their efforts on how their customers’ lives are changing and how they can serve their emerging needs with new products and services, delivered using tried-and-true business models.

The primary rule of economic activity is that making a profit is what it is all about—a rule forgotten, and even derided, in the 1990s. The business of business is making money. In the 1990s, in the white-hot frenzy of the “new economy,” many of the new high tech start-ups took the position that while profit was thought to be an important future objective, its necessity in the near-term was not absolutely necessary and that other metrics, such market share or penetration of ‘new markets’ or undercutting competitors, were more important. Fred Smith, the founder of FedEx, undeniably one of the great success stories of twentieth century American business, has always been an advocate of the measurements that all business plans must include: revenue, expenses, projected profits.

One of the more notorious examples of a business that did not follow Smith’s counsel is the ill-fated Pets.com, the Web-based pet supply retailer. Following the conventional wisdom of the day—establish the brand and profits will follow—Pets.com chose the high-cost strategy of heavy ad spending to establish the Pets.com brand across America with its Sock Puppet. The puppet raced around in a delivery van, explaining that Pets.com delivered “because pets can’t drive.” The Sock Puppet was a nationally recognized and loved character, and it did establish a brand personality. While Pets.com was building its brand, however, it was also losing phenomenal amounts of money. In mid-1999, the online retailer was losing money on every sale, without counting other expenses, because it was selling merchandise for about one-third of what it cost to buy the goods, and it had failed to calculate the high shipping costs for delivery of heavy, low-margin items. The company also spent nineteen times its total revenue on marketing. The traditional wisdom that “you can’t lose money on every customer and make it back on volume” is exactly what Pets.com tried to do—with predictable results. As the author notes, Pets.com was not just a failure of execution, it was a failure of thinking—a failure that could only be achieved by ignoring the fundamental idea that profit always matters.

At FedEx, on the other hand, Fred Smith had focused on reaching the necessary critical mass for profitability. He had a disciplined approach; he researched the market for overnight air freight, validated his financial assumptions, and came up with a business plan to achieve profitability. Profits are the product and the progenitor of all corporate creativity, and they have to be achieved as quickly as possible, or the possibility of achieving them goes away forever. By disregarding profit, the author notes, Pets.com took roughly $300 million and turned it into nothing—no jobs, no assets, and no productivity. On the other hand, by executing a profit-focused business plan, Fred Smith took roughly the same amount of capital [adjusted for inflation], and turned it into $16.4 billion in market capitalization and more than 200,000 jobs.

As critical as profit is to a business, it is, theoretically at least, of no concern whatsoever as long as the business has access to an infinite supply of cash. Profit is paramount because it is the sole supply of cash in any business. Thinking inside the box is about sticking to fundamentals, and next to profit, there is nothing more fundamental than cash. Surviving in business is not simply arranging things so that more money comes in than goes out, it’s making sure that the money coming in arrives in the right quantities and at the right times to cover all operating expenses on time.

Cash flow problems can be the result of several different causes: lack of profitability, as well as a profitable company that is growing very fast, or businesses with large investment needs (such as technology or machinery). Also, companies that have borrowed heavily in the past, perhaps at a time when credit was easy to obtain, and that now face big loan payments, are also especially vulnerable to cash shortages. Once a company finds itself in a cash crisis, the number of options are few: borrowing money or selling stock (or finding some new source of capital); speeding up collecting money that’s owed to the company (reducing receivables); slowing down bill payment (increasing payables); postponing spending on capital projects; cutting operating expenses; and selling all nonessential assets. As business history shows—particularly very recent business history—companies can make up stories about profits, but they can’t make up cash. The most famous recent debacle, of course, is Enron. The lesson of Enron, and many before it, according to the author, is “don’t lie (to yourself, at least) about profits and don’t plan on being rescued by new financing, because it might not materialize.”

Thinking Inside The Box - The 12 Timeless Rules for Managing a Successful Business - by Kirk Cheyfitz - Introduction

2006-11-04T15:03:00.000-08:00

Introduction

“Thinking outside the box” may be the most frequently, and freely, dispensed piece of advice in American business circles in the last decade. It is not necessarily bad advice. However, according to journalist and self-taught media entrepreneur Kirk Cheyfitz, many managers and business owners cannot “think outside of the box” because they do not know how to “think within the box,” nor do they truly know what “The Box” is. A look at business past and present reveals the existence of certain unchanging, timeless rules—“The Box.” The corollary to this premise is that managing a business requires neither genius nor constant invention. Rather, good, and therefore successful, business management is largely the result of paying attention to history and to present reality while applying hard work and prudence.

Reinventing Strategy - by Willie Pietersen - About the Author

2006-11-02T12:20:00.000-08:00

Introduction
PART I: THE NEW LEADERSHIP CHALLENGE
PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS
PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH
Remarks
Reading Suggestions & CONTENTS
About the Author

About the Author

Willie Pietersen, who is chairman of the Institute for the Future, advises and serves as a consultant to many global companies, including Sony, Ericsson, Deloitte & Touche, SAP, and the Chubb Corporation. In 1998, he was named Professor of the Practice of Management at the Columbia University Business School. And, between 1974 and 1994, he ran multibillion-dollar divisions of such several major corporations as Unilever, The Seagram Company, and Sterling Winthrop.

For more information, please visit: www.wiley.com

Reinventing Strategy - by Willie Pietersen - Reading Suggestions & CONTENTS

2006-11-02T12:19:00.000-08:00

Introduction
PART I: THE NEW LEADERSHIP CHALLENGE
PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS
PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH
Remarks
Reading Suggestions & CONTENTS
About the Author

Reading Suggestions

Reading Time: 14-16 Hours, 288 Pages in Book

Due to the fact that Reinventing Strategy was published in 2002, there’s a good chance you’re already familiar with it. If so, then you’re probably also aware of the three critical leadership questions the book addresses: (1) What is the environment in which our organization must compete and win? (2) What are those few things our organization must do outstandingly well to win and go on winning in this environment? (3) How will we mobilize our organization to implement these things faster and better than our competitors? In an economic environment that has become increasingly merciless over the past two years, these issues are even more pressing now than they were then.

Thus, we suggest that if even if you’ve already read Reinventing Strategy, these turbulent times represent the perfect time to revisit it as a means of kick-starting the Strategic Learning process you may have put on the back burner two years ago. If this is the case, or if this is your maiden voyage, you will want to read the book from start to finish in the order presented. As Pietersen notes, Strategic Learning is a self-reinforcing cycle that combines learning, strategy, and leadership into one organic process that, in its entirety, offers an effectively innovative way of leading companies. “The key to success [and to realizing its full benefits] is to think of it as a holistic, emergent process.” And, this requires a complete, methodical reading of the work.

If you need to revitalize your Strategic Learning process because it has become stalled (due to lack of attention), or if you merely want to fine-tune particular phases that need a bit of tweaking for better results, you can perhaps get by, reading specific chapters. If this is the approach you take, please take time to read the acknowledgements, foreword, prologue, introduction, and the last chapter, “Creating an Environment for Success” in their entirety. We would also suggest that you read all of the case studies throughout the work (they’re clearly marked). They do an excellent job of illustrating the effectiveness of Pietersen’s methodology in real-life situations, they demonstrate the practical procedures of implementation, and they will alert you to some of the important material you might overlook by skipping and skimming.

With that said, we must emphasize that we don’t recommend this approach. Pietersen is rare find—an articulate writer with the uncommon ability to write with a simplicity that is never simplistic and to distill volumes of conceptual analysis into pithy and compelling one-sentence (and/or paragraph) essentials that bring much needed clarity to critical business issues. Thus, his book deserves (to borrow a concept from noted theologian Marcus J. Borg) to be read again for the first time so as to give your organization and yourself the opportunity to stay ahead of the curve and achieve superior breakthrough performance again and again.

CONTENTS
Chapter 1: The New Playing Field
Chapter 2: The Challenge of Change
Chapter 3: The Search for an Answer
Chapter 4: The Strategic Learning Process
Chapter 5: Winning the Battle for Insight
Chapter 6: Defining Your Focus
Chapter 7: Aligning the Organization
Chapter 8: Transforming the Culture
Chapter 9: Overcoming Resistance to Change
Chapter 10: Implementing and Experimenting
Chapter 11: Strategic Learning as a Path to Personal Growth
Chapter 12: Creating an Environment for Success

Reinventing Strategy - by Willie Pietersen - Remarks

2006-11-02T12:18:00.001-08:00

Introduction
PART I: THE NEW LEADERSHIP CHALLENGE
PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS
PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH
Remarks
Reading Suggestions & CONTENTS
About the Author

Remarks

Pietersen begins Reinventing Strategy heralding new leadership challenges, new rules of competition, new playing fields, new games, and the new economy; nonetheless, the ideas he explores do not venture into any virgin territory. Strategy, culture, leadership, innovation, learning, and change are all familiar topics, endlessly explored in the business (and other) literature to yield an ocean of ideas, both serendipitous and mundane. The author spreads a wide net, gathering in such forward thinkers as Lester Thurow, Arie de Geus, Robert Reich, Clayton Christensen, Charles Handy, Andy Grove, Henry Mintzber, Peter Senge, Charles Darwin, Carly Fiorina, Jay Galbraith, Michael Porter, Edgar Schein, B.F. Skinner, Richard Pascale, Collins and Porras, Peter Drucker, David Nadler, and others of renown. There’s not much, in terms of basic business theory that you won’t recognize.

However, as Pietersen is quick to point out, “our issue here is not what’s new; it’s what’s important.” Thus, he critically examines timeless lessons in light of current challenges, offering his unique perspective on what’s important. The result is, as Bob Johansen (president of the Institute for the Future) notes in his foreword, “a wonderful mix of theory and practice, plus commonsense reasoning that works—for all the right reasons. … [filling] a genuine void between organizational learning and strategy, without the cumbersome jargon of either field.”

This lack of cumbersome jargon is an extremely valuable characteristic of the work. Readers get an “insights-to-action” guide, which delineates a practical, proven methodology that can be used by anyone to create and sustain an adaptive organization. And, it is offered as a distillation and simplification of the essential consequences and implications of a comprehensive range of business theories into a clear and concise hands-on “playbook” that can be used as a constant reference for strengthening the interrelated processes of strategy and leadership.

Reinventing Strategy - by Willie Pietersen - PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH

2006-11-02T12:18:00.000-08:00

Introduction
PART I: THE NEW LEADERSHIP CHALLENGE
PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS
PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH
Remarks
Reading Suggestions & CONTENTS
About the Author

PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH

Not only can Strategic Learning generate ongoing renewal in organizations, but it can also be used as a personal tool to develop more effective leadership. Generating great insights, making difficult choices, creating a clear focus, aligning the organization, inspiring people, leading change, and then repeating this cycle continuously require strong leadership. The Strategic Learning process is designed to help leaders accomplish these tasks but, says Pietersen, how well it works is a function of leadership effectiveness.

Although a good IQ and strong technical skills are important, the author believes they are “entry-level” requirements that are eclipsed in importance at the senior executive level by emotional intelligence (EQ). Referring to the research popularized by such writers as Daniel Goleman (Emotional Intelligence), Pietersen notes that there are four fundamental components of EQ: (1) self-awareness (self-confidence, realistic self-assessment, and a self-deprecating sense of humor), (2) self-management (the ability to control and channel one’s emotions in productive positive ways and being trustworthy, conscientious, adaptable, ready to seize opportunities, and driven to achieve), (3) social awareness (empathetic, organizationally aware, and service oriented), and (4) social skill (adept at finding common ground among diverse groups, orchestrating teams, and maintaining rapport). Seemingly, it is the possession of these characteristics, rather than IQ, that sets brilliant leaders apart from those who are merely good executives.

Fortunately, in contrast to IQ, which is thought to be determined largely by genetics, EQ can be significantly improved if the right tools are applied. Pietersen believes that because learning is at the heart of both strategy creation and leadership development, the Strategic Learning process is that right tool. In the learning phase, the task involves conducting an honest self-appraisal, and obtaining feedback from others, as a means of generating insights about one’s personal strengths/weaknesses, one’s values, and the specific leadership challenges to be met in the business, industry, and role one occupies. This process of self-discovery amounts to a personal situation analysis, which forms the foundation of the next step, focus. Here, the newfound insights about strengths, weaknesses, personal values, and leadership challenges are translated into a set of priorities and action plans for self-improvement.

In order to align personal values and leadership philosophy with the strategic priorities and cultural values of one’s organization, it will be necessary to write a Leadership Credo. The purpose of this document is to articulate “This is what I believe in, and here’s how we are going to win.” Thus, because it defines one’s core principles and theory of success for the business, the Credo is the vehicle for integrating organizational strategy with leadership effectiveness.

Finally, to complete the cycle, the individual must implement his or her action plans for self-improvement, apply the Credo to everyday life and work, and at the same time, continuously repeat the process of self-discovery and learning from observation and experience. The objective is to remain open to new ideas and innovations, while having a process in place to help digest this information in a deliberate, meaningful way.

* * *
Source notes by chapter and a subject index are provided.

Reinventing Strategy - by Willie Pietersen - PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS

2006-11-02T12:16:00.000-08:00

“Thinking hard about the five killer competencies and honestly measuring your company’s current capabilities against them can be a valuable starting point for assessing your organization’s strengths and weaknesses.”

“Positioning is sacrifice. … Trying to be all things to all people is recipe for failure. Instead, pick a place to play where you have a shot at being the best, where it’s possible to know your customers and the market superlatively well.”

“When the culture is counterproductive because it conflicts with the company’s strategy … the company then faces … the need to change an ingrained corporate culture in response to a changed strategy.”

“By continually experimenting, producing ‘mutant strains’ of new products, processes, methods, and strategies, the [adaptive] organization maximizes its chances of developing new businesses that are capable of responding to the next change in the environment.”

Although the specifics of what an enterprise must do to win and go on winning vary from company to company and industry to industry, there are five fundamental competencies that all successful adaptive businesses absolutely must master. First and foremost, every company needs insight—the superior ability to make sense of the changing environment. Second, insights must be translated into an intense focus on the right things. An enterprise must make the most intelligent strategic choices about where and how to deploy its scarce resources in support of its plan for winning. The third and fourth requirements are the ability to align every element of the entire organization behind the company’s strategic focus and to implement strategy quickly. Speed expands the gap between a company and its closest competitors and, at the same time, improves the ability to take advantage of the next environmental shift. However, speed of execution is impossible unless insight, focus, and alignment are in place. The fifth competency—the ability to repeat insight, focus, alignment, and execution ad infinitum—is not aimed at producing specific outputs, but at creating an ongoing cycle of renewal.

These “killer” competencies are the crucial skills needed for mobilizing the collective intelligence and creativity of an organization’s individuals and for forging an integrated system of strategy and leadership. Nonetheless, just as companies need to employ systematic research and development to generate technical innovation, they also need a systematic process to drive strategic innovation. Pietersen believes that his Strategic Learning cycle represents this kind of practical process. It links learning (i.e., the development of a set of superior insights), focus, alignment, and execution so that they build on one another and repeat themselves in a continuous cycle of learning and renewal. The first two steps form the basis of a firm’s strategy creation, and the last two form the foundations of strategy implementation. Thus, strategy creation and implementation are integrated into a mutually reinforcing process.

Because an organization needs a systematic way to develop a set of superior insights to use as a foundation for its strategic choices (experience shows that every business breakthrough starts with a unique insight), the Strategic Learning process always begins with a situation analysis that asks and answers penetrating questions about customers, competitors, the firm’s own realities, industry dynamics, and the broader environment. Unlike typical strategic planning, which involves ritualized analyses that tend to reinforce existing mental models, the situation analysis is deliberately designed to employ divergent learning. It begins with the assumption that discontinuous change is the norm, and that a conscious effort to recognize, understand, and respond to this kind of change is a vital precursor to the creation of strategy. Thus, the situation analysis combines market research, analysis, critical thinking, and creative brainstorming in order to provide insights that can be crystallized into concise diagnostic statements, readily understood by everyone in the organization.

Pietersen also notes that there are three “golden rules” for doing an effective situation analysis: (1) Rather than produce a useless survey that burdens the organization with a glut of information, produce a diagnosis that allows one to go beyond the superficial symptoms of a problem and discover root causes and ultimate consequences. (2) Produce a trend rather than a snapshot. “We’re losing millions of dollars” is a snapshot statement that provides only a superficial understanding of the business. However, when trends are mapped, the underlying drivers of the million-dollar loss are revealed. (3) Keep it simple. In a complex world, simplicity is crucial; however, do not confuse simplicity with superficiality. Simplicity is by no means a shortcut—reducing an insight into a clear, concise, and meaningful statement is an extremely difficult task.

The situation analysis is designed to ensure that the most intelligent choices are made (strategy is about making choices), based on superior insights rather than on guesswork, assumptions, or a vision that does not relate to reality. Thus, the second step in the Strategic Learning cycle (defining focus) involves translating these insights into the key strategic choices of the enterprise and into the vision that emerges from these insights. This is a process of convergent learning (as opposed to the divergent learning inherent in the learning phase of the Strategic Learning cycle).

Note that Pietersen recommends making strategic choices before creating a vision. Vision is not something separate, but is best viewed as an extension of a firm’s winning proposition—the aspirational statement of where the winning strategy can take the company in the future. However, winning does not mean being the biggest and the most profitable (there can only be one number one in any industry). Winning means creating greater value for the customer, and superior profits for the company, in the specific area chosen as the target market.

Effectively making choices and defining a winning strategy is a “bridging” process that starts with insights, analyzes the issues they raise, and involves the following elements: (1) consolidating the main points culled from the situation analysis into a single list of the most important findings, (2) listing the major threats and opportunities that these insights uncover, (3) identifying strategic alternatives, and (4) considering the pros and cons of each alternative as the basis for making final choices.

The strategic choices the company finally makes should address three fundamental elements—the customer focus, the winning proposition, and five key priorities. Customer focus defines which customers a firm will and will not serve. It identifies the hierarchy of needs of these customers. And, it defines what products/services the firm will offer. The winning proposition is the core of a company’s strategy and defines what it will do differently or better than the competition to achieve greater value for customers and shareholders. Finally, by defining the most important things the firm will do to achieve its winning proposition, the five key priorities ensure that the company’s key resources are focused on supporting the strategy (any more than five dilutes the message and compromises its effectiveness). Note that focus is the emphasis in all three elements, simply because, every time a company fails to choose, it is indeed choosing to spend a portion of its scarce resources on the wrong things. Thus, the one crucial test of a good strategy is that it indicates what a company will not do, as well as what it will do, to succeed.

The second element of the focus phase involves the formulation of a compelling vision statement—simple, motivating, realistic, and transformative (compelling or motivating incrementalism is not the objective). Like Martin Luther King Jr.’s “I Have a Dream” speech, and President Kennedy’s mandate to land a man on the moon and return him safely to earth, an effective vision describes an aspiration and provides a clear direction to follow.

Defining the winning proposition and the key priorities leads to the third step in the Strategic Learning process—creating alignment behind the new strategy. Essentially, this is about getting the organization to do what it must do, which can be a major challenge for large, complex enterprises with ongoing businesses and complex processes, especially if the strategy requires a major shift in mind-set, skills and practices. Thus, Pietersen offers a highly effective process that involves: (1) developing a clear overarching focus, (2) identifying systemwide gaps and accountabilities proceeding from this focus, (3) aligning the key levers of the business system so that they drive the new strategy, and (4) creating an action plan to overcome resistance to change and inspire individuals to achieve exceptional performance.

The author warns that one of the major sources of failure in strategy implementation is the natural bias of executives toward taking action before having a crystal clear focus that is fully understood by the entire organization. Once this is accomplished, the next big challenge involves operationalizing the strategic priorities so that they can be rapidly translated into results, which is accomplished by looking at each priority and asking, “What performance gaps must be closed in order to achieve this priority?” The answer should be a series of gap statements that define the difference between the current reality and the desired future state for each priority. Thus, the task is to employ effective project management—to apply the right disciplines, measurements, and accountabilities—in order to close the identified gaps.

Nonetheless, without comprehensive alignment, no amount of project management can carry the organization to success. Measures and rewards, structure and process, culture, and people—the key supporting elements of a company’s business system—must directly support the new strategy and directly support each other. Selective interventions, what Pietersen calls the trap of Managing Things in Isolation (MTI), hardly ever work; instead, the key to success lies in orchestrating the right interrelated actions. It is an orchestration that can be effectively carried out using a four-step process that entails: (1) describing each element of the present business system so that its current status is clearly and realistically understood, (2) recapping the new winning proposition and strategic priorities to ensure that each system’s alignment is single-mindedly dedicated to making the strategy work, (3) employing reverse visioning to define each business system needed to support the new strategy, and (4) defining the early actions and next steps to be taken to reach this step successfully.

Of the four levers that must be aligned, culture and people tend to be the most challenging. According to Pietersen, “Culture is a means to an end, a way of solving the problems your organization faces. To serve this purpose effectively, your culture must be in sync with your strategy. … when your strategy changes, your culture needs to change as well.” Nonetheless, attempts to change corporate culture end in failure approximately 80 percent of the time, generally because of six basic assumptions: (1) Culture is vague and mysterious. (2) Culture and strategy are separate and distinct things. (3) Defining values should be the first step in transforming culture. (4) Culture cannot be measured and rewarded. (5) Leaders must communicate what the culture is. (6) Culture is the one constant that never changes.

These assumptions are, however, false. Culture expresses itself through specific, observable everyday behaviors that are as tangible as a company’s cash flow and, thus, must be measured and rewarded. “The golden rule is: What gets measured gets done; what gets rewarded gets done repeatedly.” In addition, the performance of a business organization and the specifics of its culture are interdependent. However, to align culture with performance successfully, a new culture cannot be created in advance of a new strategy. Companies must be clear about how they will win before they can effectively define the values and behaviors that will make winning possible. And, though leaders must consciously and deliberately transmit these values and behaviors to their employees, it is not so much about communicating them as it is about living them. If leaders do not behave in accordance with the culture they profess, it does not matter what they say.

Pietersen believes that demolishing these myths, so that the drivers of success can be harnessed, requires the right starting point. Values must be simple, specific, and directly support strategic priorities, they should be described as behaviors, and should be arrived at through a process of enrollment (i.e., a process of commitment rather than compliance). These behaviors (which the author identifies as characterizing the adaptive organization) include teamwork, risk taking and experimentation, continuous learning, knowledge sharing, and candor and trust. However, without a sustaining process that ensures that the new culture takes root throughout the entire organization, and is continuously enforced, the initiative is not likely to last a week. Thus, it is necessary to align the culture with all the other key levers of the business system and measure and reward the desired behaviors. In addition, the leader must unfailingly set the example by his or her actions.

The creation of an adaptive organization requires that strategy and leadership interact seamlessly. And, great leadership is not only about offering an inspiring vision of the future, and a practical method for getting there, but also the ability to help people overcome their natural opposition to change. Thus, managing large-scale change calls for highly effective people skills. One of the greatest challenges leaders must face is finding ways of motivating people to embrace change at times when the need for change is not apparent—when circumstances naturally seem to call for pride, self-satisfaction, and complacency. In fact, Pietersen has found that, while most companies do well at managing the organizational aspects of change, they usually fail to manage the people aspects of transformation properly. This failure is due to their miscalculation of the amount of resistance they will encounter; the time they will need to shape, sell, and execute change; the resources, support, and sponsorship required; their need to model the change personally; and the fear, uncertainty, and doubt (the FUD factor) that change naturally elicits.

Thus, the author advocates that leaders view change as a simple equation, whose components are: dissatisfaction with the current state (D), a clear vision for change (V), a process for getting it done (P), and the psychological costs (C). In other words, D x V x P > C, which means that dissatisfaction, multiplied by vision, multiplied by process, must be greater than cost. If any one of the multiplicands is zero, the change effort will be unsuccessful, because the product of all three will equal zero. To prevent this, Pietersen offers six “golden rules” for successful change leadership: (1) Create a simple, compelling statement of the case for change. (2) Communicate constantly and honestly throughout the process. (3) Maximize participation. (4) If all else fails, remove those who resist. (5) Generate short-term wins. (6) Set a shining example.

Implementation and experimentation form the final stage of the Strategic Learning cycle and the first step into the next iteration of the process. (As a company repeatedly works its way around the learning cycle, it continues to update its insights, to learn, and to adapt to new conditions.) Implementation of strategy will only be as effective as the effectiveness of the firm’s insight, focus, and alignment. Thus, implementation is part of the continuum of the Strategic Learning cycle, representing both its successful culmination and its source of learning for the next situation analysis.

Agreeing with Paul Saffo (Institute of the Future), who believes today’s discontinuous environment requires a “Ready, fire, steer” approach, Pietersen suggests that experimentation is the most crucial activity involved in implementation. The organization’s strategic direction is developed, implemented, and then repeatedly and continuously modified in response to changes in the environment and in the firm’s own circumstances, and experimentation allows companies to make these adjustments successfully. “The situation analysis is an intellectual voyage of discovery. Experimentation adds to this the dimension of action learning.” Thus, the adaptive organization is ready to experiment, to learn from results, and to adjust its strategy accordingly. It is an approach that liberates thinking so that it does not attach to a fixed set of mental models. It also aids in stamping out the complacent “if-it-ain’t-broke-don’t-fix-it” attitudes that tend to exist in most organizations.

Because the entire objective of experimentation is for the organization to learn its way to success through failure, a mistake-friendly, knowledge-sharing culture is required. However, successful organizations are, by definition, organizations that do things right and, in the process, avoid uncertainty and error in favor of what has worked in the past. Many companies undertake new-business venturing and innovation through acquisition as a means of circumventing this natural tendency and fostering cultures in which constant experimentation is generated. But, Pietersen believes that one of the most powerful techniques for harnessing the power of experiential learning comes from the U.S. Army’s after-action review (AAR).

The AAR is a learning review, conducted immediately after a military engagement (simulated or real), in order to articulate the lessons learned and to identify the Army’s strengths and weaknesses. Thus, as the basis for continuous improvement, the AAR typically focuses on four questions: (1) What was the intent of the engagement? (2) What actually happened? (3) Why did it happen? (4) How can we do better? This highly structured process, designed to ferret out crucial insights from battlefield experiences, can also be a powerful tool in the context of business. Any significant event (e.g., a major new-product launch or market test; the opening of a new manufacturing facility, retail outlet, or website; a corporate reorganization, merger, or spin-off; and/or any crisis [external/internal] or turning point) can potentially produce valuable learning and is, thus, suitable for an AAR exercise.

Lastly, Pietersen notes that Strategic Learning is a 365-days-a-year process, and he warns that in order for organizations to enjoy its full benefits, they cannot let the process lie dormant between “planning seasons.” Instead, they must take deliberate actions to make the method a permanent and active part of the business culture so that the cycle of learning, focus, alignment, and execution, constantly operates to help the business adapt to its ever-changing environment. Thus, if companies wish to make the most of the innovative potential of Strategic Learning, they must: Commit to the lifelong learning of employees and develop their international experiences. Refresh work teams through job rotation. Build heterogeneity into the organization. Institutionalize time for reflection. Benchmark the company against noncompetitors. Turn company conferences into opportunities for learning. And, create a climate of open communication.

Reinventing Strategy - by Willie Pietersen - PART I: THE NEW LEADERSHIP CHALLENGE

2006-11-02T12:15:00.000-08:00

“Knowing what to do is important, but … to win, you must know how to do it. You must be able to move beyond the rhetoric and actually implement your strategy.”

Distinct universal forces—the Internet, globalization, deregulation and privatization, convergence, and disintermediation—are interacting with one another to radically alter the way business is conducted today. Thus, the rules for competition have changed, not only for dot-coms and high-tech enterprises, but companies of every kind are under extraordinary pressure to transform themselves and develop effective responses. In fact, as Pietersen notes, long-term success now depends on the ability to do two seemingly contradictory things simultaneously: (1) improve existing processes and products through continuous incremental change and, (2) invent totally new and better processes/products via discontinuous breakthrough change. Thus, creating the right balance between incremental improvements and radical innovation is key. And, though a shortage of resources is not necessarily fatal, a shortage of imagination can be.

Most breakthrough innovation seems relatively easy to accomplish by individual entrepreneurs such as Ted Turner, Fred Smith or Anita Roddick, but this is generally not the case for large, established firms, weighed down by tradition and bureaucracy. All social institutions, including businesses, adhere to the natural law of birth, growth, maturity, decline, and death. This tendency can be illustrated by the sigmoid curve (S-curve), which teaches two powerful rules: Nothing lasts forever under its original momentum. And, success contains the seeds of its own destruction. When an organization reaches the top of the curve, it becomes complacent, inward looking, political, risk-averse, forgetful of the drivers of initial success, and obsessed with entrenched standards and routines.

According to Pietersen’s findings, the best time for companies to change is while they are still successful, and highly resistant to fixing what “ain’t broke,” rather than when they are beginning to fail. Moreover, this process must be ongoing—there must be a constant push to adapt and innovate so that “anxiety is never assuaged by success.” Given this approach, the S-curve also teaches the importance of riding a series of curves, for products and services no longer represent sustainable advantage. Instead, it is a firm’s organizational capability to constantly renew itself that will allow it to win and go on winning. Thus, the author believes that today’s primary leadership challenge is the creation and maintenance of an adaptive enterprise and that Strategic Learning is at the heart of this kind of successful adaptation.

Reinventing Strategy - Using Strategic Learning to Create & Sustain Breakthrough Performance - by Willie Pietersen - Introduction

2006-11-02T12:14:00.000-08:00

Introduction
PART I: THE NEW LEADERSHIP CHALLENGE
PART II: IMPLEMENTING STRATEGIC LEARNING AS A LEADERSHIP PROCESS
PART III: STRATEGIC LEARNING FOR PERSONAL GROWTH
Remarks
Reading Suggestions & CONTENTS
About the Author

Introduction

According to Pietersen, today’s new leadership challenge is a journey of discovery in which management, particularly in large, established firms, must learn to “think out of the box” and “move out of their comfort zones,” in order to create and lead adaptive organizations that change and innovate continuously. The objective is not learning for learning’s sake, but learning strategically so as “to build an organization that continuously learns new things and [repeatedly] translates them into breakthrough strategies.”

Reinventing Strategy distills the author’s extensive experience, both as a CEO and as a teacher, consultant, and researcher at Columbia Business School, to offer a set of operating principles and a leadership process—Strategic Learning—that has proven effective in enabling business leaders to develop superior insights, transform them into winning strategies, and foster adaptive enterprises. This practical, powerful tool, which has been taught in numerous workshops, Columbia Business School executive programs, and top-performing corporations, is also offered as a valuable framework for personal growth and leadership development.

Building A Knowledge-Driven Organization - by Robert H. Buckman - About the Authors

2006-11-01T13:05:00.000-08:00

Introduction
HOW KNOWLEDGE SHARING BEGAN AT BUCKMAN LABORATORIES
THE ESSENTIAL PRINCIPLES OF KNOWLEDGE SHARING
MAKING THE CHANGE
Remarks
Reading Suggestions & CONTENTS
About the Authors

About the Authors

Robert H. Buckman is Chairman and CEO emeritus of Buckman Laboratories, a chemical company with 1400 associates serving customers in over 80 countries. He is a pioneer in implementing corporate strategy around knowledge sharing, and speaks on knowledge management to audiences around the world. During his years leading Buckman Laboratories, company revenues increased nearly 1000 percent.

For more information, please visit: www.books.mcgraw-hill.com

Building A Knowledge-Driven Organization - by Robert H. Buckman - Reading Suggestions & CONTENTS

2006-11-01T13:03:00.000-08:00

Introduction
HOW KNOWLEDGE SHARING BEGAN AT BUCKMAN LABORATORIES
THE ESSENTIAL PRINCIPLES OF KNOWLEDGE SHARING
MAKING THE CHANGE
Remarks
Reading Suggestions & CONTENTS
About the Authors

Reading Suggestions

Reading Time: 7-8 hours, 300 pages in book

Building A Knowledge-Driven Organization is not organized in a truly chronological or sequential fashion. The author develops his thoughts regarding knowledge sharing across organizations as the book progresses. There are key points that he develops in each of the seventeen chapters, although chapter 17 is in reality a review of the whole book. The author does, however, provide the reader with two summary tools that can reduce reading time.

At the conclusion of each chapter is a subheading, “Where Do You Stand?” in which the ideas presented in that chapter are recapitulated in approximately two to three paragraphs in question format to stimulate readers’ thinking in regard to their own businesses or organizations. This section is followed by a more formal chapter summary. Reading these two sections provides a good one- to three-page summary of the chapter, with the added benefit of relating it, or applying it, to readers’ individual situations. If readers go directly to these concluding sections first, they can decide how much of the chapter they need, or want, to read.

Even though key ideas are developed throughout the book, there are, obviously, chapters devoted primarily to certain topics. For example, chapter 1 describes Buckman Laboratories’ specific experience with becoming a knowledge-driven organization; chapter 10 discusses rewarding employees; chapter 15 discusses providing educational and capacity building opportunities for employees; and chapter 16 makes recommendations for measuring outcomes and specific metrics.

CONTENTS

Chapter 1: The Buckman Labs Journey
Chapter 2: Technology Is the Easy Part: It’s Culture Change That’s Hard
Chapter 3: How to Start Leading a Knowledge-Driven Company
Chapter 4: Knowledge Sharing Bedrock: Building a Foundation of Trust
Chapter 5: Strip Management of Control over Information
Chapter 6: Build or Buy a Knowledge System: Custom-Made and Off-the-Shelf Solutions
Chapter 7: Turning the IT Department into Something New
Chapter 8: Encourage the Flow of Knowledge
Chapter 9: Let Customers Be Your Guide
Chapter 10: Reward Associates for Sharing What They Know
Chapter 11: Build Critical Mass in the Use of Your Knowledge System
Chapter 12: Strategies for Building Communities That Span the World
Chapter 13: Create Virtual Teams
Chapter 14: New Products and Services Based on Knowledge
Chapter 15: Practical Education: Let Your Associates Grow
Chapter 16: Metrics: Outcomes from the Flow of Knowledge
Chapter 17: The Things No One Can Copy: Speculation for the Future

Building A Knowledge-Driven Organization - by Robert H. Buckman - Remarks

2006-11-01T13:02:00.000-08:00

Introduction
HOW KNOWLEDGE SHARING BEGAN AT BUCKMAN LABORATORIES
THE ESSENTIAL PRINCIPLES OF KNOWLEDGE SHARING
MAKING THE CHANGE
Remarks
Reading Suggestions & CONTENTS
About the Authors

Remarks

Today’s marketplace is no longer product-driven, nor is it market-driven; it is knowledge-driven. Companies have to look, as the author points out, for more opportunities with a smaller number of customers. It is important to look for niche markets in which a company can get more value added. It follows, then, that moving toward more complex customer interactions will require mobilization of an organization’s knowledge base, particularly its tacit knowledge (what Buckman describes as “what people hold between their ears and behind their eyeballs”).

The central issue that the author reiterates a number of times (and with good reason) is that building a knowledge-driven organization is not a project. Rather, it is “a complete and open-ended transformation of the organizational model.” It requires an investment, and not simply an investment of money. It has to have support from the top of the organization. “The people in charge have to settle down and live the change, not just provide the resources and recommend it to others.”

Building a knowledge-driven, or knowledge-based organization, is, as the author discusses throughout the book, about redefining the time of equation of work, it is about redefining how work is done. The focus is therefore put on the organization’s needs, and how to meet those needs as rapidly and as efficiently as possible. Buckman does not see a trade-off between speed and quality, saying rather, that it is often “a perception thing.” He believes that “when you build the capacity to move faster and faster as an organization, the quality will rise along with the speed.”

In Buckman’s philosophy, the Community of One concept described earlier becomes the new organizational model for business. Businesses become organized around “issue-driven” communities, i.e., groups that are designed to take action on a particular, pressing issue, a problem that needs immediate attention, or an opportunity that will disappear if it is not seized upon. This process inevitably redefines the organization’s structure as a network rather than the traditional hierarchy. He makes the point that issue-driven communities are not the same as what are often called “communities of practice,” a term introduced in the early 1990s by Etienne Wenger and Jean Lave. “I prefer to differentiate between the two, however, because of the significant difference in the sense of urgency and the diverse population required to create the dynamic character I regard as the essential feature of an Issue-Driven Community.” Communities of Practice, at least in Buckman’s view, function more as groups with similar interests (for example, the researchers in a company, the marketing staff, the R&D staff) who take longer, slower looks at developments in their field.

Following Buckman’s model for a knowledge-driven organization, command-and-control management is gone forever. Therefore, what the author recommends is really quite revolutionary, changing the traditional hierarchical, vertical, command-and-control management structure to a networked, horizontal structure, which he concedes, near the close of the book, is not necessarily an option for every organization.

Building A Knowledge-Driven Organization - by Robert H. Buckman - MAKING THE CHANGE

2006-11-01T13:01:00.000-08:00

You need to encourage change in the direction that you want to go. Culture change cannot be demanded; it can only be encouraged by opening the windows of opportunity for change. Just be sure the new direction is tied in with your strategy, so that you do not have your people chasing something that will not take them—or you—in the direction you want to go.

If you want the kind of productivity that comes from knowledge sharing backed by the wholehearted and willing support of all your associates, you have to set things up so the effort is personally valuable to them. And then you have to keep building the system so that the effort becomes more and more valuable as time passes.

The best way to solve your problems is to focus on your business opportunities—on what your customers want. Let the organizational model flow to where you have what you need to meet the needs of the customers as you go into the future.

How does an organization make the change to a networked organization built around the flow of information and knowledge? By getting people to assume responsibility for making things happen. The first requisite is to develop the culture of knowledge sharing within the organization to the point where the response to the customer becomes automatic, without any central command structure to compel people to take action. The second requisite is to develop online learning so that it can be delivered over the organizational network to anybody in the organization, wherever and whenever it is needed. The third requisite is to put all this together so that employees will have the confidence—and the authority—to give customers whatever they need.

As Buckman discovered, technology is the easy part; the hard part is the culture change that has to take place within an organization. In terms of technology, the author recommends choosing software and hardware that will provide a communication infrastructure 24/7, on both the server and the individual side because knowledge-based work takes place anytime, anywhere, especially in a global organization. The system should be “people-centric,” so that it is easy to use, and people will use it. Knowledge becomes an organizational resource. For example, at Buckman Laboratories, the IT department was revamped into the KT department, a move which was aligned with the company’s strategy not to simply store and secure information, but to leverage the collective knowledge of the entire organization to serve Buckman Laboratories’ customers. In this way, the company gained a competitive edge that was both sustainable and global. “The basic ability to handle information and knowledge is changing for the better every day. To take advantage of these improvements, it is essential to push the development of knowledge systems that will help redefine the time equation of work.”

In understanding how to create culture change, it is important to differentiate between knowledge management and knowledge sharing. Knowledge management is a process of organizing what is already known. According to Buckman, “dynamics of a company don’t change when it organizes specific knowledge.” Knowledge sharing, on the other hand, is “engaging people and arousing their interest and trust, making them willing to move their knowledge across the organization to where it was needed, when it was needed.” To accomplish this, the company has to build a culture of trust. People have to trust the information they receive, and they have to have a high degree of trust in each other.

By getting involved with each other, people grow more comfortable in the building of relationships across time and space. Through socialization, they begin building the trust that allows the dialogue to move to the next level by sharing more substantive discussions. One of the means by which Buckman Laboratories built trust virtually was through employee access to an electronic break room, which the author sees as comparable to building morale and a company culture in much the same way as Industrial Age firms did with employee cafeterias and company picnics.

Organizations have to make work across time and space possible. It has to be made desirable for people, and it has to be safe, which means that computer systems have to be based on the realities of “distributed use.” In establishing a knowledge-driven organization, one of the benefits will be what the author describes as a break-up of internal competition, with a resulting advantage in cooperation. “When people share what they know, as opposed to simply passing along the output of what they do, their whole outlook toward work changes radically.”

Knowledge-driven work takes place in virtual open space meetings, which are on-going discussions of customer needs, and solutions, that flow back and forth around the world. Virtual open space meetings operate on four basic principles: 1) Whenever it starts is the right time; 2) Whoever comes into the group (discussion) is right for the group (i.e., in helping to solve the problem or provide the solution); 3) Whatever happens is the only thing that could have happened; and 4) When it’s over, it’s over.

In addition to spontaneous virtual open space meetings, there are times, Buckman acknowledges, when certain projects will have a definite beginning and end, or assignments will require a group of employees with specific expertise. In these instances, there is a need to create virtual teams to carry out these projects. These are teams that are formed by management to accomplish specific tasks, and to accomplish their goals in the shortest amount of time possible. Therefore, the teams need to operate within established protocols for interaction. Virtual teams are much like traditional face-to-face teams. Virtual team members, however, may be quite geographically dispersed, and rely on technology as their means of communication and interaction. Many organizations will find themselves with “part virtual teams.” The author gives these kinds of teams astronomical designations. There are, for example, “planets,” team members who share a physical location, while the other members—“moons”—are located in dispersed geographical locations.

Rewards for employees, particularly for those who adopt the new way of working early and use it well and often, are almost inherent. People derive—so the author believes—an intrinsic sense of reward from being able to help others, which then stimulates a desire to be helpful. And, in virtual communities, the opportunities for helping—and being helped—are multiplied many times over when compared with traditional face-to-face interactions. Further involving employees in the process of feedback and continuous improvement of the system sends a message to employees that they are important, and that their opinions matter. Buckman even recommends that those who do the best job of knowledge sharing be upgraded to the latest hardware and software more quickly than those who might be hesitant to get involved in knowledge sharing. And, of course, pay does still matter. Those who do the best job of knowledge sharing should have pay increases tied to their actions that benefit the whole organization, and not to their position on the organizational chart.

Knowledge sharing only takes an organization so far by making it more efficient and effective. The next question is how does new knowledge come into an organization? Institutional learning expert and MIT professor Peter Senge has outlined three ways: research, practice, and capacity building. Although the first two are important and necessary, the author focuses here on capacity building, “setting things up so your people keep growing, by giving them both informal and formal opportunities to learn new things.” The goal of any business is to continue to grow, to increase its competitive edge which means considering what its knowledge base should be five, ten, fifteen, or twenty years going forward. Building employees’ competencies and strengths is crucial. The same technology that permits knowledge sharing across an organization also makes education possible across time and space, and at a fraction of the cost of traditional classroom-based education.

Buckman Laboratories developed its own e-learning department, which it calls The Learning Center. The Center promotes company-wide globalization efforts, productivity improvement programs, and process improvement programs. It serves as a change agent, and as a source of leadership development to produce what Buckman calls “internal management bench strength.” It also focuses on individual skill development and on managing the process of career development in the company. Finally, it helps employees learn to work efficiently with customers and suppliers. The Buckman Learning Center uses a blended approach to education. Coursework may be face-to-face, online synchronous, online asynchronous, or self-paced. The most important element is “the seamless transition among the different forms to achieve the best transfer of knowledge to the student.”

People will not, however, willingly share their knowledge with others if their workplace culture does not support learning, cooperation, and openness. In most instances, the culture change will take place in three phases, or cycles. The first cycle is marked, usually, by incredulity rooted in a fear of the proposed change. The second cycle involves realization that the change is not going to go away, that it is for real. Finally, in the third phase, employees begin to accept, and to commit to, the new way(s) of doing things.

For Buckman, the “ultimate payoff of the change to a knowledge-sharing organization is that you learn to react to your customers’ needs as they feel them—perhaps even before they feel them—cementing your relationships and enhancing your income at the earliest possible moment.” This is what, Buckman believes, redefines value added to customers and achieves competitive advantage. However, it is necessary to have measures of customer effectiveness that track what customers want, and a measurement of knowledge sharing that tracks what it is contributing to the organization’s success. The focus should be on outcomes rather than on processes. One important metric is focused speed. Is the company reaching conclusions, and therefore solutions, faster than the competition? Another important metric is innovation. How much distance is the company putting between itself and the competition? “Whether you are dealing with a product or a service, the need is the same: to measure innovation as part of the outcome that is generated. And the best place to measure the outcome is as it is accepted and paid for by the customer.”

Peter Drucker has pointed out that knowledge work is the key to economic growth now and in the future. Neither resources nor capital can create an ongoing competitive edge in the face of superior knowledge. Organizations have to know what they want, and they have to know if their actions are producing what they want. People must be able to concentrate on results that promote the organization’s overall purpose—without being distracted by approvals and procedures. Companies must, says the author, “be organized for constant change. The company must be organized for innovation. Innovation is essential to survival in a fast-changing world. That means we have to work on the assumption that perpetual destruction of existing approaches is the norm.”

***
References and a subject index are provided.

Building A Knowledge-Driven Organization - by Robert H. Buckman - THE ESSENTIAL PRINCIPLES OF KNOWLEDGE SHARING

2006-11-01T12:59:00.000-08:00

People who see a need should not have to wait until management makes up its mind to do something. For today’s volatile markets, success and even survival demand an organic organization capable of responding instantly when conditions demand it.

Bob Buckman discovered that an organization positioned for the future has to be organized around knowledge—creating, sharing, capturing, and then applying it—rather than around structures or processes. The six essential principles for successful knowledge sharing are the following: 1) Focus on the most critical need of the organization, with the organization’s systems supporting its strategy; 2) Build trust by emphasizing fundamental virtues rather than values; 3) Share knowledge and best practices; 4) Solve customer problems rapidly; 5) Allow employees to solve the problems they encounter without interference from management; and 6) Inject customer feedback into the new product development process.

The critical need of most organizations is to generate cash flow on the front line with the customer. What the company must do to meet this need becomes the basis for the organization’s strategy. A company must know the kind of value it intends to provide and to whom. “Intellectual capital is meaningless without the old-fashioned objectives of serving customers and beating competitors.” Strategy, then, needs to be linked to measurable improvements in performance. “The point of a knowledge-based strategy is not to save the world; it’s to make money.” With that being said, here is a key paradox: “Knowledge for knowledge’s sake lacks performance discipline, but efforts to engineer knowledge in some cold, bloodless way subverts the human dimensions of learning. The trick is to balance the ‘hard’ with the ‘soft’—tapping the knowledge locked in people’s experience.” To do this, an organization must organize its systems, and its efforts, around the flow of information and knowledge to satisfy its most critical needs, rather than focusing on where people happen to be geographically. The organization has to have a “people-centric” system that builds trust among the participants.

Knowledge sharing in the business environment requires “a level of trust not far removed from what most of us feel with our immediate family and close friends.” This kind of trust, however, represents an ongoing challenge in a global organization. To build this kind of trust, people must focus on what they believe, both individually and collectively. Several key elements must be present for such a culture of trust to exist in an organization. First, the employees must trust the organization. Second, the author has found four “kinds of behavior” or “dispositions” that he believes are almost universal: justice (acting honestly and fairly, keeping promises); temperance (acting with self-discipline, avoiding overt self-service); prudence (displaying practical wisdom and the ability to choose well in any situation); and fortitude (showing strength of mind and character and having the courage to persevere in the face of adversity). Corporate culture—any corporate culture—must reflect these four basic virtues. Third, the company’s statement of values must govern decisions at all times, and at all levels of the company.

Knowledge has no commercial value unless it moves across an organization and results in new actions. “Today, it’s essential to reverse the desire to hoard knowledge so as to achieve power.” With this premise as a guiding philosophy, the most powerful individuals become those recognized as sources of knowledge. To accomplish this, according to Buckman, it is necessary for an organization to build values into the organization that are consistent with the values of the people. Buckman Laboratories, for example, provides as much job security as possible for its employees. It has a no-layoff policy, and has maintained it in good economic times and bad for more than 50 years.

Another element is the quality of the day-to-day relationship between the company and its people. Buckman Laboratories demonstrated its confidence in its employees by handing out laptop computers and by encouraging people to use them on their own time, and for their own purposes. The company also opens as many windows of opportunity as possible for its employees to grow to be the best they can be professionally. It does this by establishing a culture of continual learning, and by encouraging the development of personal and professional skills and knowledge at the company’s expense. Trust, in the Buckman Laboratories experience, has turned out to be a self-fulfilling prophecy.

In solving problems, organizations have to be able to tap into the best that they have to offer, with the challenge being to locate the best information—the knowledge—that the organization has. In today’s business environment, customers who have millions of dollars at stake while waiting for a solution to a problem, will go to the organization that is the first to come up with a workable solution. To succeed today, employees have to be able to “think on the spot,” and be able to get the information they need to make decisions.

At Buckman Laboratories, the author discovered, the fastest way to get a solution to a customer’s problem was to empower the employee who saw the need for it. The employee on the spot—on the front line—is the one with the greatest interest in providing the solution. Meeting customers’ needs not only improves employees’ reputation with customers, it also increases the quality of employees’ future interaction with customers, improves employees’ job satisfaction. As a result, employee income tends to increase as well. By giving employees the freedom to solve customer problems, employees can control, usually in a positive manner, the outcome.

One of the biggest challenges managers will face, particularly middle managers, in the implementation of open systems of communication, is “the attack they perceive on their power base. People in management, particularly in middle management, develop a lot of their power and prestige by controlling the flow of information and knowledge to and from people.” To implement open communication in a networked model of knowledge sharing, the traditional power base of the organization has to be redefined from one of controlling the flow of information and knowledge to one of helping the people around them succeed.

Customers are truly the experts on what they want and need, and are willing to buy. An important secondary benefit of knowledge sharing throughout the organization is that the needs of the customer become known throughout the organization. This knowledge of customers’ needs allows the company to create or produce product or service innovations needed to meet customers’ future needs. It is a company’s responsiveness to customer needs, and its ability to innovate to meet those needs quickly that determines its ability to improve the value added for the customer. “The only innovations that matter are the ones the customer is willing to pay for.”

Building relationships of trust and continuity with customers is what makes this possible. The proportion of people in the organization working on customer relationships relative to the total organization determines the company’s momentum in the market. The quality of the people that an organization can bring to its customer relationships determines the level at which it can operate in these relationships. Therefore, the higher the quality of the individuals involved, the higher the quality of the knowledge brought to bear on any problem the customer presents, a process Buckman Laboratories calls being “effectively engaged on the front line.” The author describes the core of this concept as “the Community of One,” which means that “people need the capacity to function independently, and to hook up with anyone else as needed.” In a knowledge-driven organization, speed of response—and ultimately, of innovation—is critical to a company’s ability to differentiate itself from the competition.

Building A Knowledge-Driven Organization - by Robert H. Buckman - HOW KNOWLEDGE SHARING BEGAN AT BUCKMAN LABORATORIES

2006-11-01T12:56:00.000-08:00

The ability to apply our collective knowledge across time and space has allowed us to compete globally with rivals many times our size, and it may well be what has kept us in business as the market changed around us.

Communications is human nature; knowledge sharing is human nurture.
--Alison Tucker, Buckman Laboratories

When the author found himself running the family’s company in the early 1980s, following the deaths of his father and brother, he found that lack of information and knowledge seemed to be at the root of the company’s major problems. He was strongly influenced by Scandinavian Airlines’ former chairman, Jan Carlzon, whose operating philosophy was that “an individual without information cannot take responsibility; an individual who is given information cannot help but take responsibility,” and he began implementing this philosophy at Buckman Laboratories as the company’s game plan for the future.

What was becoming clear to Buckman was that every time the organization added a new operating company in another country, it improved customer service in that country, but it made it harder to move knowledge and experience across the organization. Buckman Laboratories’ team of experts could not move around the world fast enough to meet customers’ rapidly changing needs, and it became clear that they could not have people travel more. It had become a physical impossibility to meet customers’ needs solely with face-to-face meetings.

As a result, as the company began experimenting with the technology available at that time to transfer knowledge, Buckman began to understand the characteristics of a knowledge-sharing system, which he summarizes as follows: 1) Reduce the number of transmissions to one so as to achieve the least distortion of the knowledge being transferred; 2) Give everyone access to the knowledge; 3) Let everyone enter knowledge; 4) Make sure the system works whenever and wherever anyone wants to use it; 5) Make the system easy to use; and 6) Allow communication in any language.

In 1992, Buckman Laboratories created a new department, called Knowledge Transfer (KT), consolidating information services, telecommunications, and the company library. By bringing these departments together as one, and having the head of that department report directly to the CEO, the lines of authority were simplified, and knowledge sharing became easier. KT’s mission was to respond to global knowledge needs by planning and managing the resources necessary to rapidly disseminate Buckman Laboratories’ collective industry, technical, and market knowledge. It provided easy, and rapid, access to the company’s global knowledge bases and the sharing of best practices with all Buckman affiliates. In 1994, the company introduced “K’Netix, The Buckman Knowledge Network,” as the umbrella under which different programs and systems were housed. It now covers electronic forums, online libraries, a knowledge base, email, Internet and World Wide Web access, the company’s Intranet, project-tracking systems, customer relationship management systems, groupware, bulletin boards, and virtual conference rooms. This approach to communication enabled Buckman Laboratories to become a knowledge-drive organization.

The increasing interaction Buckman Laboratories experienced among its affiliates worldwide serves to illustrate two key concepts (or benefits) of a knowledge-driven organization: an increased span of communication and an increased span of influence for all employees. Online interactions, made possible by technology, eliminate physical distance as a factor in communication, and at the same time, reduce social distance, making issues such as positional power, age, ethnic and gender differences easier to set aside. An increased span of influence, then, follows naturally. “If anyone can talk to anyone, what matters is who listens—and why. Influence—power—accumulates around the people who make the most sense, and the whole social structure begins to slide into new patterns.” Buckman Laboratories has thrived, according to the author, because all employees—or associates, as they are called—have the same opportunity to expand their span of influence.

The networked organization Buckman developed became even more powerful than he originally imagined because it allowed for the redefinition of the time equation of work (the widely shared assumptions in any group about how long a task, or group of tasks, should take). “Instead of days and weeks, we now could do things in hours or at most in a few days.” Buckman Laboratories became a totally transformed organization. “It began with a technological network, evolved into business networks, and then transformed again into a fully networked way of life.”

Building A Knowledge-Driven Organization - by Robert H. Buckman - Introduction

2006-11-01T12:55:00.000-08:00

Introduction
HOW KNOWLEDGE SHARING BEGAN AT BUCKMAN LABORATORIES
THE ESSENTIAL PRINCIPLES OF KNOWLEDGE SHARING
MAKING THE CHANGE
Remarks
Reading Suggestions & CONTENTS
About the Authors

Introduction

For Buckman Laboratories, an international specialty chemical company, the knowledge and the solutions that the company offered its customers was limited, for the most part, to that of the employee working directly with the customer. The same is true, by and large, for most companies. At Buckman Laboratories, however, over the years, the company’s CEO, Bob Buckman, came to realize that his company could increase the power it brought to bear for customers if it could focus more than just one mind on solving customers’ problems. Buckman recognized that encouraging people to share knowledge about customer problems as they arose would allow the company to come up with better solutions more quickly, thereby meeting customers’ needs more quickly—and more profitably. For Buckman, that meant learning to move knowledge around the organization to the place it was needed in time for it be useful. Moving knowledge around an organization—across time and space—would require not just the technological capability to move and share information. It would require a corporate culture that encouraged knowledge sharing.

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - About the Authors

2006-10-30T03:56:00.000-08:00

Introduction
PART I: OFFSHORE OUTSOURCING—AN OVERVIEW
PART II: OFFSHORE OUTSOURCING—THE BUSINESS PROCESS LANDSCAPE
PART III: OFFSHORE OUTSOURCING—STRATEGY AND EXECUTION
Remarks
Reading Suggestions & CONTENTS
About the Authors

About the Authors

Marcia Robinson, who is president of E-Business Strategies, has consulting experience in the area of customer relationship management, and has worked extensively in call center management, IT outsourcing, and service process reengineering. She also coauthored E-Business: Roadmap for Success, M-Business: The Race to Mobility, and Services Blueprint: Roadmap for Execution.

Ravi Kalakota, PhD, is the CEO of E-Business Strategies. He also coauthored the classic Frontiers of Electronic Commerce as well as Services Blueprint: Roadmap for Execution and the bestselling E-Business: Roadmap for Success.

For more information, please visit:www.mirvarpress.com

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - Reading Suggestions & CONTENTS

2006-10-30T03:55:00.000-08:00

Introduction
PART I: OFFSHORE OUTSOURCING—AN OVERVIEW
PART II: OFFSHORE OUTSOURCING—THE BUSINESS PROCESS LANDSCAPE
PART III: OFFSHORE OUTSOURCING—STRATEGY AND EXECUTION
Remarks
Reading Suggestions & CONTENTS
About the Authors

Reading Suggestions

Reading Time: 20-22 Hours, 318 Pages in Book

Robinson and Kalakota note that they have attempted to structure the book so that whether you’re a novice, already fully engaged in offshore projects, or somewhere in between, you can easily find information that pertains to your particular situation. Thus, you can read Offshore Outsourcing in its entirety, or you can concentrate on specific sections (there are three), depending upon your need and level of knowledge. Reading guidelines can be found in “The Organization of This Book” (p. v).

If you decide to read the entire work (an approach we recommend), be forewarned that you will find a lot of repetition. Because each chapter is organized to stand alone, basic foundational material is carried over repeatedly and often cross-referenced. However, this reiteration is done in the most unobtrusive way possible so as not to impede your forward momentum. Moreover, the inclusion of formerly explored material is always relevant in that it rarely fails to provide new channels of action and/or understanding.

If you decide to read portions of the book only, we suggest that you definitely include the preface and “Final Thoughts on Offshore Outsourcing” (chapter 12), preferably as a unit, and before you read anything else. As a means of broadening your knowledge base, you should also try to examine as many of the case studies as possible. They are clearly identified and start in chapter 3. Finally, Robinson and Kalakota have compiled two very useful guides that are a must. In chapters 10 and 11, respectively, you will find a guide to the top offshore vendors for different business processes and one for the top eight offshore and nearshore countries that discusses the competitive advantages and challenges of each. If these two chapters are not included in your reading plans, we recommend that you at least note these guides for future reference, should the need arise.

CONTENTS

PART 1: WHY OFFSHORE OUTSOURCING?
Chapter 1: Offshore Outsourcing—the Next Wave
Chapter 2: Offshore Outsourcing Business Models
Chapter 3: The Business Process Offshoring Landscape

PART 2: OFFSHORE OUTSOURCING BEST PRACTICES
Chapter 4: Information Technology Offshore Outsourcing
Chapter 5: Customer Care Offshore Outsourcing
Chapter 6: Finance and Accounting Offshore Outsourcing
Chapter 7: Human Resources Offshore Outsourcing
Chapter 8: Transaction Processing Offshore Outsourcing

PART 3: OFFSHORING STRATEGY CREATION AND EXECUTION
Chapter 9: Creating Your Offshore Strategy
Chapter 10: The Vendor Decision
Chapter 11: The Location Decision
Chapter 12: Final Thoughts on Offshore Outsourcing

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - Remarks

2006-10-30T03:54:00.000-08:00

Introduction
PART I: OFFSHORE OUTSOURCING—AN OVERVIEW
PART II: OFFSHORE OUTSOURCING—THE BUSINESS PROCESS LANDSCAPE
PART III: OFFSHORE OUTSOURCING—STRATEGY AND EXECUTION
Remarks
Reading Suggestions & CONTENTS
About the Authors

Remarks

Offshore outsourcing is today’s hot topic. As Robinson and Kalakota note, it is “… an unstoppable mega-trend. … profoundly affecting the competitive capabilities and hence the labor structures of all multinational corporations.” In its wake, continuing wage deflation is overloading an economy already burdened with high levels of consumer debt. More and more workers are being displaced. And, federal and state governments are hard-pressed to come up with any foolproof solutions to make the problem disappear.

Though the authors raise these issues, they make no attempt to explore or analyze them, fully or in passing, for that is not their purpose. Rather, they offer Offshore Outsourcing as a comprehensive guide to the practical application of this trend across all industries. Their premise is that offshoring is not a temporary management fad—that despite the present and future challenges it is imposing on the U.S. workforce, it is a long-term development that has emerged as both a strategic and a tactical tool for meeting new business realities. And, though this tool is hardly new (companies have been offshoring manufacturing for many years and reaping significant cost and productivity improvements), the offshoring of business processes is still in its infancy. Thus, there is still much uncharted territory, and this territory is full of new rules, tools, and business models.

Robinson and Kalakota present a clear and detailed schematic that delineates these rules, tools, and models, superbly filling in the blanks left by the many general and oversimplified discussions currently available. Their approach, based on extensive research, focuses on helping CEOs and senior management understand the specific skills and management practices required to integrate individual projects, as well as large-scale offshoring activities into a company’s overall strategy. Thus, customizable guidelines take into account unique business needs and different levels of readiness for change, and sort out the many business models available for offshore outsourcing. They detail how to make offshoring work in yet untapped areas of administrative, customer-care, and transactional processing. In addition to showing how to reduce costs, they also illustrate how to achieve a balance between managing people and improving performance. And, they shed light on the dangers that can derail an offshore initiative in the assessment of ROI and risk. Throughout, an impressive array of best-practice case studies demonstrates how to apply offshoring to diverse processes and tasks so as to maximize every aspect of the initiative.

Essentially, the book is organized to emphasize and explore three critical points for companies that (to their peril), lack a comprehensive understanding of the core concepts and practices behind offshore outsourcing (i.e., companies that may still view outsourcing as “a short-term fix for saving money and ‘getting rid’ of some noncore functions”): (1) Offshoring is becoming a “need-to-have” competency. (2) It is a tactical business decision with long-term implications. (3) It is no longer an unproven model. Thus, the book drives home the reality that offshoring projects are complicated processes that deserve serious consideration and a disciplined approach. With the consideration and approach Offshore Outsourcing provides, CEOs and senior management can arm themselves with the right tools to quickly lower operating costs, improve customer service, and generate sustainable growth.

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - PART III: OFFSHORE OUTSOURCING—STRATEGY AND...

2006-10-30T03:53:00.000-08:00

“We anticipate that by utilizing automation and standardization, the transaction processing market will eventually become more specialized based on industry-specific knowledge. … Transaction processing, one of the leading success stories of offshore outsourcing, is definitely here to stay.”

“Offshore outsourcing can save time and money, but only if companies do it right. … Firms that jump on the offshore outsourcing bandwagon without paying attention to external planning... will struggle with their offshore projects.”

According to Robinson and Kalakota, the outcome of an offshore outsourcing project depends on two critical factors—the strategy selected and the discipline with which the strategy is implemented. Because a “let’s do something quickly mentality” is a recipe for disaster, the authors recommend a seven-step methodology for success that includes: (1) analyzing offshoring goals and setting strategy, (2) creating an offshore delivery model, (3) negotiating an offshore contract, (4) designing service level agreements, (5) managing the transition, (6) managing the relationship for maximum value, and (7) measuring performance improvement.

The first step in any offshoring initiative involves a definition of the objective, scope, and time frame of the project. Companies must determine why they are using this approach and what they hope to accomplish. They must analyze current costs and prioritize areas of functions that could be a match for outsourcing. For each opportunity, objectives, as well as hoped for benefits, must be clearly stated. They must decide what improvements are needed (and why) and how offshoring will affect operations and customers. And, beginning with the end state in mind, companies must determine what capabilities are required for aligning offshore operations with the business strategy.

Keeping the firm’s culture, customers, and employees in mind, management must determine what processes to send offshore, selecting them based on savings potential, labor attributes, interdependencies, and regulatory constraints. And, because it is impossible to improve the unknown, a gap analysis is needed as a means of defining current costs, quality metrics, and procedures for those processes deemed probable candidates for offshoring, At this point, the scope of the process can be defined so as to establish an appropriate baseline, outlining the current service delivery costs, service levels, and benchmarks, and serving as a guideline for the desired outcome. Finally, a well-researched financial model, which includes a cost-benefit analysis and clearly stated assumption, must also be developed.

In the second step, it must be decided which of the available business and delivery models can be employed to meet the stated objectives. Robinson and Kalakota note that the decision essentially comes down to building an operation (insourced or captive centers), buying into an existing operation (joint venture), or creating a sourcing relationship (outsource to a third party). As previously noted, each has its unique advantages, disadvantages, and challenges, depending upon a company’s objectives, experience with offshoring, and the type of processes tagged for outsourcing. Another critical factor is, of course, location. Because every location has a certain risk profile, each should be evaluated based on distance, time-zone differences, cultural differences, language barriers, quality of suppliers, legal framework, and geopolitical stability. In order to limit their exposure to any of these risks, many businesses take a multivendor, multisite, multicountry approach.

The final factor in the business model decision is the choice of vendor, which can be a tricky endeavor, given the relative infancy of the offshore industry. Thus, because the authors believe that the key to success is maintaining discipline throughout the decision process, they offer a useful vendor sourcing methodology that begins with identifying what type of vendor fits the needs of the proposed offshoring venture. The choice of either a transaction provider, a process provider, or a full-service provider is dependent upon how deep and broad management would like the relationship to be—whether it wants to offshore one well-defined task, several processes, or a total end-to-end process, and whether or not it is looking to reengineer any of its functions.

The next phase focuses on vendor selection. This procedure which, when well-organized, can take from six months to a year, involves: (1) identifying offshoring requirements and finding vendors that match those requirements; (2) preparing a request for information (RFI) questionnaire and sending it to selected vendors; (3) conducting an extensive evaluation of the returned RFIs to eliminate those that do not meet requirements; (4) selecting vendors for the request for proposal (RFP) process; (5) preparing an RFP that will facilitate assessment of each vendors performance, style, experience, people resources, process capabilities, and technology infrastructure; (6) evaluating responses so as to validate or invalidate information supplied about processes, financials, and the vendor’s record with its recent clients; (7) selecting the top vendor and visit the offshore facility to assess the company, people, processes, technology and infrastructure further; (8) performing a pilot project to assess project management and quality of work; and (9) finalizing the decision. The authors note that this entire procedure must begin with the critical first step of forming a core team that will participate in evaluating vendor responses and in negotiating the contract.

Once a vendor has been selected, contract negotiations begin, with the objective of creating a framework that specifies the general, financial, and legal aspects of the relationship, clearly defining all services and costs so that both parties have the same expectations. The master contract should reflect the company’s strategic view and critical goals, as well as the goals of the vendor. Thus, it should be flexible in time and scope so as to accommodate new risks and technologies. And, it should clearly define payment terms; document procedures for reporting and resolving conflict; spell out the duration of the contract and the terms under which it will expire or be renewed; define the scope and objective of the services to be provided, including a time line and deliverables; and detail performance measurements. The goal of the financial framework phase of contract negotiations is to ensure that the contract addresses approved cost parameters; thus, pricing, price stability, and hidden costs need to be discussed and agreed upon. Finally, the contract must address the critical legal issues: warranties, liability, confidentiality, protection of trade secrets and intellectual property, the security and privacy of data, local regulations, the possible failure of the vendor to perform agreed upon duties, and terminating the relationship.

Designing the service level agreement (SLA) is the next step. When well-designed, it describes the start and end dates for the service, defines the level of performance the vendor promises to deliver, the company’s rights if the vendor should fall short, the roles and responsibilities of both parties, the schedule for reviewing performance, and the documentation to be used in measuring the service.

Once the contract is signed, the real work begins; thus, smooth transition management (i.e., “the detailed, desk-level knowledge transfer and documentation of all relevant tasks, technologies, workflows, and functions”) is the next issue. Robinson and Kalakota note that the transition period is perhaps the most difficult stage of an offshoring project (taking from three months to a year) and involves such critical factors as knowledge transfer between organizations, communication management, and employee management (i.e, communicating who is to be redeployed, transferred, and/or let go, as well as why, how, and when).

In the midst of managing the transition, companies must also begin the sixth step of managing the relationship for maximum value. This is about more than monitoring the contractual obligations. It also involves an ongoing alignment of processes, projects, and goals with business requirements; making tactical decisions on program costs, project priorities and milestones, expected ROI, and risk management; and at the operational level, handling the day-to-day management of offshore projects to ensure that processes are running smoothly. This step establishes the framework for governing offshore outsourcing and overcomes the common misconception that once vendors are chosen and the transition is complete, the initiative will run on automatic pilot.

Because a disciplined, continuous improvement program is required for long-term success, measuring performance improvement (the seventh step) is an ongoing and critical responsibility. This phase of the offshoring project consists of the communication, monitoring (using well-defined audit controls), and reporting of SLA metrics, as well as continuous learning, via benchmarking and making changes as problems are discovered. At this point, a well-defined offshore outsourcing model should have emerged, along with a learning framework for ensuring that the overall strategy improves continuously.

* * *
Endnotes by chapter and a subject index are provided.

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - PART II: OFFSHORE OUTSOURCING—THE BUSINESS...

2006-10-30T03:50:00.000-08:00

“Offshore outsourcing has come a long way in a short time. Corporations largely understand traditional IT outsourcing and are beginning to get comfortable with more complex process outsourcing.”

“Thanks to the relentless pressure to cut costs, reduce capital outlays, and maximize operational efficiencies, we expect the demand for F&A offshoring to exceed that of many other processes for the foreseeable future.”

Robinson and Kalakota note that, according to Richard Swanson, director of BPO Services at Patni Computer Systems, “The services that are working best offshore are those that are labor intensive, well structured, repeatable, nonproprietary, and low risk to the business.” These services generally fall into seven broad categories: (1) information technology (IT), (2) customer care, (3) finance and accounting (F&A), (4) human resources (HR), (6) supply-chain management, and (7) manufacturing. The first five categories are the ones most widely outsourced, thus, they are the ones on which the authors focus their discussion.

Back in the mid-1980s, IT (hardware and software) companies were the first to move into the offshore sector, using offshore labor for low-end, lost-cost work, such as language localization, device and printer drivers, and motherboard production. Today, with the promise of better quality, cheaper resources, and faster development, more and more IT organizations are taking an increasing array of processes offshore. According to the authors, more than 200 of the Fortune 500 currently send some of their IT work to India. Of all the industries involved, however, the information-intensive financial services industry leads the business world in IT offshoring. And, it is expected that this offshore component will increase considerably over the next three years because the cost savings are just too compelling to ignore.

Presently, the range of possible IT processes that can be effectively offshored includes: (1) application development and maintenance—new feature and new application development, old release maintenance, and packaged application customization; (2) quality assurance—application and compatibility testing, regression analysis and bug testing, and test suite building; (3) IT support services—help desk support, problem resolution, remote diagnostics, documentation support, and application maintenance; (4) implementation services—product lifestyle management, consulting services, prototype development, technology evaluation, and application testing; (5) new product engineering—product applications, implementation services, version management, professional services, and documentation.

Multifunctional customer-service contact centers handle a wealth of scenarios from product ordering to processing email, resolving billing complaints, and chatting with customers online. Thus, these centers represent a $650 billion industry, employing 4 million people in the U.S. alone. Companies in many industries, including financial services, travel, retail, telecom, and media are racing to develop and implement an offshore strategy, for while the function is critical, the location is not.

Robinson and Kalakota have found that companies implement offshore customer care strategies for four primary reasons. First, of course, is cost. The average bundled costs for a U.S. call center agent are estimated to be approximately $34 per hour. In India, however, a call center can hire a new graduate, with a four-year degree, and with English and technical skills, for about $12 per hour. Flexibility is the second reason. Offshore providers can handle large volumes of incoming customer requests (voice and data) at peak times. Moreover, savings are a factor here as well, for staffing at peak times translates directly to costs. Quality is third. In many offshore locations, a highly educated labor force is readily available and a powerful advantage in improving overall service quality. Finally, one of the major challenges of contact centers is high turnover—bringing a new agent up to speed can take four to twelve weeks of costly training. Thus, better employee retention is the fourth reason for offshoring customer care.

Given these objectives, this BPO category offers a plethora of processes ripe for outsourcing: (1) support—customer service, billing query resolution, order taking, account activation, new customer registration, and complaints; (2) marketing—outbound and inbound email, telemarketing, surveys and poling, marketing campaign management, and customer win-back; (3) sales—inbound and outbound sales, Web chat and callback, and co-browsing processes; (4) technical support (often the first customer care process to go offshore)—data verification, application support, address updates, help desk, and problem resolution; (5) customer analytics—probability analysis, quality auditing, reporting, and complaint analysis.

Robinson and Kalakota note that because recording and reviewing every financial transaction is an enormous, time-consuming task, CFOs and managers have begun to outsource those financial activities they have identified as noncore. Cost, talent, availability, and technology are the drivers of this trend. Companies with performance metrics in place to measure their gains report significant savings from offshoring F&A (the cost ratio for an Indian accounting professional and a U.S. professional is 1:10). Another motive can be found in the fact that accounting talent is often in short supply in developed regions. Countries such as India, however, have an abundant supply of accountants, who obtain significant hands-on experience before becoming CPAs or CFAs; thus, they understand thoroughly the basics of financial management and GAAP accounting. In addition, the offshore F&A operating model can reposition the F&A support organization so that companies can move controllers from the purely transaction-centric processes and allow them to work actively with line managers to improve cash flow and profitability. Thus, outsourcing F&A is often part of an overall restructuring program to improve the quality of accounting operations.

The final driver of F&A offshoring is technology, or investment in single companywide software platforms. Such products as SAP R/3, Oracle, and PeopleSoft have helped in the reengineering of F&A processes, and this reengineering has led to more consolidated, streamlined workflows and the next phase of cost reductions.

Within the F&A process category, the authors have found that many subcategories can potentially be offshored. These include: (1) transaction processing—accounts payable and receivable, travel and expense reimbursement, payroll, and credit management; (2) general accounting—fixed asset accounting, general ledger, account reconciliations, and bookkeeping; (3) financial management—financial analysis, management and cost accounting, budgets and forecasts, capital planning, and cash management; (4) financial reporting—financial statements, consolidations/eliminations, variance analysis, statutory/external reporting, external audit support, and quarterly/annual reporting; and (5) tax processing—internal audit, unemployment, quarterly tax, federal tax returns, foreign exchange, and payroll taxes.

Robinson and Kalakota report that according to Fortune magazine’s Global 500 list for 2002, “Large corporations employed more than 47 million people, and the median number of employees for these corporations was approximately 63,000, in multiple locations and countries.” Obviously, an employee base of this magnitude presents enormous complexities for the human resources function: First, the function covers a large range of processes, from recruitment and retirement, to basic transactions and workforce development. Second, multiple HR groups exist for different business units. And, third, corporations lack central information repositories or integrated HR technology infrastructures. Simplifying this complex organizational structure and lowering the cost of providing employee services are the primary drivers of HR outsourcing.

As with other processes, HR contains many categories that can be offshored: (1) Compensation services—payroll, time and attendance, stock options, and payroll taxes; (2) benefits management—health benefits, 401(K), retirement plans, leave tracking, vacation schedules, and benefits termination; (3) employee relations—employee development, employee communication, record management, training administration, labor management, and learning solutions; (4) workforce management—selection, recruiting, relocations, performance review, and employee termination.

The final BPO considered is transaction processing. Organizations, in such industries as credit card, insurance, mortgage, retail banking, and telecommunications, face the tedious task of processing countless transactions (e.g., data entry of paper documents; processing of credit card applications, transfers, or payments; account reconciliation and records management; legal and medical transcription; document processing; and order processing). This critical, but time-consuming, task results in the need to generate, manage, and document data in an organized, accessible manner, forcing organizations to devote resources to activities that may not be core.

Thus, as an increasing number of companies seek to focus on their core business, improve service levels, and reduce implementation costs, offshore transaction processing is growing. Because this “low-level work” has few barriers to entry, and because better IT and communication infrastructures have enabled this work, many vendors specializing in this category are springing up in India, China, the Philippines, Malaysia, and Mexico.

The most popular types of transactions being handed off to these offshore vendors include: (1) mortgage processing—application processing, direct sales, credit scoring and approval, title verification, insurance tax, escrow processing, early collections calling, most of the customer service center functions, part of loan-service setup, post-closing documentation, manual payoff processing, account balancing, statement printing, and refinancing; (2) insurance claims processing—electronic information capture, information verification, eligibility determination, and reporting; (3) medical transcription—transcribing medical records from an audio format to a hard copy or electronic format; (4) content management—the processing of paper and electronic documents (newspapers, magazines, or journals) into searchable catalogs and archives.

Finally, for each of the five BPO categories, Robinson and Kalakota emphasize the importance of determining the scope of the project (i.e., determining what processes—should be retained and which processes should be sent offshore). Typically, if a process is a central contributor to the organization’s success—is a core competence—then that process probably is not a strong candidate for offshoring. However, managers must take care to not confuse core with critical. Critical functions can be outsourced as long as the right planning, oversight, and training are in place. Moreover, the authors note that more and more companies are pushing the boundaries in this regard. In F&A, for example, pioneers such as GE are moving beyond basic accounting transactions (a “commodity” process) and beginning to include budgeting, forecasting, strategy, and policy (i.e., the core “thinking” processes) in their offshore strategies.

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - PART I: OFFSHORE OUTSOURCING—AN OVERVIEW

2006-10-30T03:49:00.000-08:00

“Strategic and often gut-wrenching changes are taking place in corporations as offshore outsourcing becomes a viable alternative. Smart companies realize that if they don’t keep hunting for breakthrough cost innovations, some other organization will.”

“A crucial issue … is selecting the appropriate business model. Offshore business processes have a variety of organizational forms. … [And] the distribution of activities … may vary from one project to another depending on the effort involved, speed of execution, level of interaction, and the cultural and time zone differences.”

Because of continuous cost pressures on U.S. and European firms, offshore outsourcing, which Robinson and Kalakota define as “the delegation of administrative, engineering, research, development, or technical support processes to a third-party vendor in a lower-cost location,” is slowly but surely becoming an entrenched part of modern management. Transactions costs associated with finding vendors, sending work overseas, and monitoring this work are steadily plummeting, driven by: rapid declines in the expenses associated with communications and computing; dramatic improvements in Internet reliability and functionality: an increase in available offshore suppliers with better capabilities: an increase in high-quality onshore suppliers offering offshore services; better access to low cost, high quality workers, especially for labor-intensive tasks; and an offshoring business model that has been proven by such successful pioneers as GE and American Express.

The authors note that the Global 1000 (i.e., the big manufacturing multinationals) have been implementing offshore outsourcing for two decades, seeing rising productivity as a result and also realizing that the same advantages could be garnered from offshoring business-process outsourcing (BPO). Thus, the cost advantages realized by the Global 1000 have put tremendous pressure on competitors and suppliers, causing offshore outsourcing to surface rapidly as both a strategic and a tactical method of meeting new business demands. A successful strategy typically moves through the three broad phases of offshore entry, offshore development, and offshore integration. However, because most firms presently find themselves at the entry phase, Robinson and Kalakota focus their discussion on issues relevant to that stage. Those issues are concerned with determining the business model, selecting the location, defining expected results, and establishing a presence.

Every business model has two dimensions—ownership (or relationship structure) and geographic location of the work. And, within each dimension, varied and complex configurations are available. For example, three different general relationship arrangements exist for outsourcing engagements: pure contract offshore outsourcing (buy or third-party), joint ventures (partnership agreements), or fully owned captive subsidiaries (build it or insource).

Pure outsourcing is a make-versus-buy decision. With it, a company relinquishes control of a function to an external service provider in a foreign country, who takes over the function and does much of the work, using cheaper offshore labor. It is an approach that can lead to three different models. The first is selective outsourcing in which companies only send out a small subset of their business process activities. The second is transitional outsourcing, which occurs when a company temporarily hands over a function to a third-party vendor, but brings it back in-house later. With the third, total outsourcing, external vendors take over the business process and do whatever the original organization was doing, but for 20-30 percent less. In each case, the chief advantages include limited operational risk, a potential for cost savings, and rapid execution.

In a joint venture (JV), two or more companies pool their combined resources (thus, sharing expenses and workload) to create a new entity that implements a specific business project for a set period of time. However, as a business evolves, companies discover that it is better to build their own subsidiaries (i.e., captive offshore subsidiaries or foreign subsidiaries) to complete all the BPO work. This ownership model provides lower prices on a long-term basis, and provides more control and flexibility.

In terms of work location, there are three choices: onsite outsourcing, offsite outsourcing, and nearshore or offshore outsourcing. The onsite location model mandates that the third-party vendor utilize its own workforce to carry out all processes, from information gathering to implementation, at the client’s premises. Because this approach gives the client a greater degree of control, it is suitable for projects that are mission-critical, location sensitive, and that require constant attention. The offsite model is dependent upon the service provider having an office onshore so that, even if work is done offsite, it is still in the same country as the client. Thus, the offsite center may be used to provide support to an onsite team as a means of ensuring timely, quality service.

With nearshore or offshore outsourcing, the project-related activity is done at the vendor’s premises (For U.S.-based companies, nearshore is Canada or Mexico, while offshore would be such counties as India or the Philippines.), and offshore team members interact with the client via telephone, fax or email. This is model is high-risk (because of the communications problems inherent in the approach) and, thus, best suited for situations in which the project plan is well-defined and the development team has a clear understanding of client requirements.

From each combination of location and ownership structure, distinct business models and/or delivery mechanisms can be created in which the relationship between the client and provider is uniquely and appropriately structured for different levels of organizational maturity and complexity. These different structures include: the internal delivery (department-based) model; offsite onshore shared services; offshore captive shared services; cosourcing; offshore development centers; staff augmentation, contracting, or temporary, services; pure IT or BPO; and first-generation offshore outsourcing. In addition (as customer needs evolve), second-generation business models are emerging that tend to be more sophisticated and to span multiple models of the first generation. These combination models include the global delivery or blended outsourcing approach, hybrid delivery, the global shared services center, build-operate-transfer (BOT), and offshore multi-outsourcing (implemented by large global vendors, midsize and large offshore vendors, large multinationals, risk-averse corporations, and experienced multinationals, respectively).

In addition to understanding and choosing the right business model/mechanism, managers must also pay attention to the underlying revenue model. Robinson and Kalakota note that offshore outsourcing comes in two flavors: piecemeal task-oriented or comprehensive process-oriented. Whereas task-oriented BPO contracts tend to gravitate towards time and material (T&M) billing and fixed price, process-oriented contracts range from cost-plus to the more ambiguous examples.

T&M billing is the simplest pricing model and an attractive option when the scope, specification, and implementation plans of a project are difficult to define at the outset. Its challenge lies in adhering to very strict project management and reporting practices—any lax in oversight can make this approach very expensive.

The fixed-price (or fixed-time) option is suitable for customers with clear requirements and project schedules. Under this model, the customer pays a previously negotiated price, linked to well-defined deliverables, for the completed project. Moreover, changes in scope are subject to a predefined, fixed hourly rate, and must follow a prearranged change-request procedure. Thus, customers with clear requirements and project schedules are attracted to this approach because of the upfront commitment to a fixed time and because the risk is shared if cost or time overruns occur.

The cost-plus revenue model is typically used in combination with BOT, for complex, multiyear, multi-element arrangements, or with the dedicated development center (an extension of a company’s software engineering facility). These contracts, principally structured on a fee-for-service basis, stipulate that the vendor receives a fee that is no greater than the client’s historical operating costs. After vendors have recovered their costs, or achieved a negotiated minimum cost reduction, they may be required to share further savings with the client. Thus, the cost-plus revenue model is popular among large companies that seek long-term gains from their offshoring initiatives.

Because the goal of outsourcing is to help clients become more effective in their business operations, vendors that enter multiyear contracts favor risk-reward (or gain-sharing) performance-based models that tie payments to business performance. This approach is also known as value pricing, or “pay as you save,” in that the vendor builds first and is paid as savings materialize. Of course, the drawbacks are that revenue recognition becomes a critical accounting issue for the vendor.

Offshore Outsourcing - Business Models, ROI and Best Practices - by Marcia Robinson and Ravi Kalakota - Introduction

2006-10-30T03:47:00.000-08:00

Introduction
PART I: OFFSHORE OUTSOURCING—AN OVERVIEW
PART II: OFFSHORE OUTSOURCING—THE BUSINESS PROCESS LANDSCAPE
PART III: OFFSHORE OUTSOURCING—STRATEGY AND EXECUTION
Remarks
Reading Suggestions & CONTENTS
About the Authors

Introduction

According to Robinson and Kalakota, most large corporations have cut costs as much as possible, using traditional methods. Understanding the “more for less” battle in which they are engaged, these firms realize that driving more costs out of operations means going offshore (i.e., migrating part or all of their value chains to low-cost locations). Offshore Outsourcing introduces CEOs and senior managers to the creation and implementation of offshore strategies that can be used effectively to create more focused, streamline, and competitive organizations.

Drawing on the experiences of GE, American Express, Dell, BellSouth, Delta Airlines, British Airways, and others, the authors provide a thorough overview of the offshoring landscape and define key concepts and trends. They provide a detailed analysis of the many different business processes available for offshoring, along with case studies that illustrate implementation challenges and the ROI that results from resolving them. And, they offer a how-to handbook that details the steps involved in creating and implementing clear, focused offshore strategies.

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - About the Author

2006-10-30T00:17:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

About the Author

Saj-Nicole A. Joni, Ph.D., is the founder of Cambridge International Group, Ltd., a high-level advisory services firm. She is widely regarded as one of the leading third-opinion advisers to executives around the world. She has more than twenty-five years of experience as a senior executive and adviser in global corporations and has served as an adviser in industries as varied as finance, high tech, energy, and health care. She lives in Cambridge, Massachusetts.

For more information, please visit:www.thethirdopinion.com

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - Reading Suggestions & CONTENTS

2006-10-30T00:14:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

Reading Suggestions

Reading Time: 5-6 hours, 211 pages in book

Together, the introduction and chapter 1 provide the background to Joni’s work as well as an overview of the entire book. Joni’s introduction is worth reading because it gives the reader a preview of the book’s direction. Chapter 2 provides an overview of the three Habits, with chapters 3, 4, and 5 being devoted to each of the Habits individually. Chapter 6 reviews the life cycle of inner circles, while chapters 7, 8, and 9 review each of the key stages, or levels, in a leadership career: early leader, key leader, and senior leader.

Reading the entire book (and many will be able to read the book in one sitting) is the best way to see the full, cumulative development of Joni’s concept. If, however, readers want a quicker method, we recommend they read through chapter 6 and then turn to Appendix II, which contains summary questions (taken from chapters 7, 8, and 9) for early, key, and senior leaders presented in bullet point form.

CONTENTS

Chapter 1: The Essence of Outside Insight
Chapter 2: The Three Habits
Chapter 3: Habit of Mind
Chapter 4: Habit of Relationship
Chapter 5: Habit of Focus
Chapter 6: The Life Cycle of Your Inner Circle
Chapter 7: Early Leaders
Chapter 8: Key Leaders
Chapter 9: Senior Leaders
Chapter 10: Conclusion: Greater Than Gold
Followed by two appendices

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - Remarks

2006-10-30T00:13:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

Remarks

In The Third Opinion, the author provides an insight into successful leadership that many leaders—perhaps even unconsciously—seek. Most successful leaders, regardless of industry, do not rise through the leadership ranks without, at some juncture, reaching for a third opinion, without asking for outside insight. However, most do not do it routinely, or as part of an integrated business practice or plan. What Joni offers is a method of leadership development that intimately incorporates using outside insight that is systematic, seamless, encompassing, not industry-specific, and which can begin at any time in a leader’s career, even at a senior level.

It is important, however, to distinguish the different roles played by advisers and thinking partners. The two terms are not interchangeable. Advisers are more commonly used throughout the corporate world, experts who engage in expert thinking with leaders. Thinking partners, on the other hand, have a broader role to play; they combine expert thinking within the broader realm of exponential thinking. It is truly the thinking partner who provides the third opinion. “As you think about it, you will notice that there are people who may be superb advisory resources who are not as talented in the thinking partner realm. To cultivate the right leadership inner circle for you, you will want to hone your ability to make this distinction.”

It is also important to note the distinction between thinking partners and executive coaches. Joni uses an analogy from the biological world to explain the relationship: an executive coach is one species within the genus of thinking partner. Executive coaches are, typically, a specialized group with expertise in interpersonal dynamics, communications, and organizational development, and most top executive coaches work with leaders on issues within these areas. Executive coaches also tend to work in the area of personal leadership (the philosophical and psychological aspects of leadership) rather than in results-driven strategy. Joni summarizes the distinction between executive coaches and thinking partner well when she asks readers, “Would you turn to a psychologist when what you really need is a Jack Welch?”

There are no set formulas. How leaders develop and calls upon their networks will reflect their own style and unique leadership. Perhaps it is this intangible quality that may present a challenge in creating an inner circle for many leaders not currently utilizing outside insight. The questions that Joni provides (which are as specific as possible while remaining applicable to all types of businesses and industries) for readers’ consideration will, however, are an aid in establishing leadership circles.

A circle is an appropriate metaphor to describe how to use outside insight for superior results. Beginning with the development of exponential thinking, a coil-like spiral develops to include Habit of Mind, which is linked to Habit of Relationship, which is then linked to Habit of Focus. Joni has observed that, “An underlying characteristic of exponential thinking is that insight shifts occur when problems are reframed and then explored at a higher level of context and complexity,” an observation that builds upon Donald Schön and Chris Argyris’ 1970s concept of “double loop learning.” In today’s world, “we are faced with multiple levels of potentially interdependent ‘double loops.’ Economics forms a loop with geopolitical realities. Markets loop with structural realignment, with discontinuities in science and technology, and with regulatory and oversight changes. Work-force issues loop with breakthroughs in communication infrastructure . . . Every leader faces these kind of interdependent loops. The successful ones know how to embrace them and find the connection.”

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP

2006-10-30T00:12:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP

The cumulative effect of developing your leadership circles grows over the lifetime of your career. Don’t wait until you are facing a crisis to start searching for confidants.

The issues of leadership, as well as the ways in which thinking partnerships are established, change over the leadership life cycle. All leaders, even very young ones, have some form of advisory network, though it may not be systematic. It may happen by accident, or as a result of basic networking. As leaders develop their skill, a more systematic advisory network begins to take shape as leaders begin to understand what they already have in place, and how that network is serving them.

Early leaders, as defined by the author, are those who are mastering the basics of their job responsibilities, understanding the dynamics of their organizations, and demonstrating their capabilities to lead business groups or units in delivering results, and who are managing approximately 20 to 50 people. Early leaders have two primary objectives: developing a few key advisory relationships to generate a third opinion on a regular basis, and laying the groundwork for their long-term leadership circles. In addition to seeking the expertise of others, in developing these key advisory relationships, early leaders will also be developing their capacity to think exponentially and to accelerate their professional development from the lessons of others. The early leader level is also the time to begin developing listening skills, and to listen and learn from others. Early leaders should ask themselves, “What is an effective way to listen and ask questions that might create a useful interchange of ideas?”

This is the time for building a base of relationships, and for cultivating a wide network of contacts both inside and outside the organization. It is also a time, according to Joni, to experiment with breadth by interacting with a broad a base of people in ways that are relevant to leaders’ challenges—and results. Early leaders must build a set of skills to use outside thinking. At this stage of their careers, the risks of advice and counsel from others are relatively low. Early leaders can begin by seeking out a few people on some specific issues. Joni suggests that early leaders explore what approach to thinking partners works for them, and to notice how they “calibrate and filter the insights and opinions of others.”

A critical objective at the beginning of building and using an advisory network is learning how to get results from insights. “Knowing what to do with what you learn is the difference between an academic exercise and truly powering up your leadership capacity,” Joni says. Moving from being someone who has lots of good ideas to someone who uses innovative ideas and solutions to get results is often the biggest factor in how quickly an early leader will move to being a key leader. The Star of Complexity Map is an excellent tool to help early leaders assess their opportunities as well as their needs. The Map can help early leaders invest in relationships that will support their current work, and create opportunities to build for the future.

Key leaders are those who lead strategic business units or divisions, manage multiple groups, and often have responsibility for P&L, for financial operations, and for metrics. As leaders transition from being early leaders to being key leaders, their choice of thinking partners becomes, in Joni’s opinion, a defining choice of their leadership. Key leaders build the four kinds of thinking partner conversations—visionary, sounding board, big picture, and expertise in inquiry—into the very fabric of their leadership. Key leaders must turn their full attention to developing their complete Habit of Mind. Joni cautions key leaders against relying too heavily on patterns of success from the early leader level. These patterns can limit, or even inhibit, success at the key leader level. “This is the point where you make fundamental choices about how much time you’ll devote to exploring new ideas. Or how much you will rely on inside information that can be tainted with filters and bias. Or how persistent you will be when making distinctions between urgent and important agendas.”

As key leaders develop their Habit of Mind, they come to understand that there has to be an appropriate creative tension between internal and external lines of sight; they understand that external resources do not replace internal capabilities, but instead support, and even spur, internal inquiry. It is at the key leader stage that the distinctions between inner circles and working circles become important. A move to the key leader level changes relationships, therefore key leaders must begin to put together an inner circle (both internal and external) that is focused on the most important areas of exponential inquiry, with whom the leader can share the highest levels of structural trust, as well as high personal and expertise trust. Most key leaders will find that their inner circles are composed of both formal and informal advisers, both retained and reciprocal advisers, and advisers that are both visible and invisible.

The goal of a key leader is to cultivate outside insight that can then be translated into results created and realized by teams of people. To accomplish this, key leaders create opportunities for interaction between their action teams and their thinking partners. There are two critical factors in building the connection between thinking partners and the rest of the organization: shaping and empowering the thinking partner in relation to the organization, and providing the thinking partner with the ability to work across the organization without being drawn into organizational dynamics. “The position of thinking partner is one of standing ‘next to,’ as opposed to getting more involved and standing ‘within’.” Finally, key leaders need to focus explicitly on inquiry and non-urgent important issues. They must make room for thinking time. Joni recommends reviewing the Star of Complexity Map regularly, and using it to identify gaps.

Moving into the ranks of senior leadership brings a new level of leadership challenges. Because senior leaders are often more isolated (the result of protection by executives and staff from the intense scrutiny of the public eye), they have a greater need than ever for their advisory networks. Senior leaders are charged with developing a cadre of people who are capable of thinking about long-term positioning and legacy. All senior leaders face legacy issues. These issues require them to think beyond their business to the impact of their ideas and actions on the people in their organizations, the future of their company, and the effects on communities. With senior leadership, leaders come full circle so that “the Habits of Mind, Relationship, and Focus of successful leaders drive the creation of powerful advisory networks, which in turn sustain these successful leaders in their quest to create extraordinary value and realize their full potential and that of their organizations.”

The life of a leader’s inner circle is, Joni says, ultimately about human relationships, how leaders develop and exercise their fullest capacities when they are pushed and guided by other great people. The legendary David Ogilivy has expressed this concept well: “If leaders surround themselves with people bigger than they are, we will have a company of giants; if leaders surround themselves with people smaller than they are, we will have a company of midgets.”

***
Endnotes by chapter and a subject index are provided.

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - HABIT OF FOCUS

2006-10-30T00:11:00.001-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

HABIT OF FOCUS

All leaders must master the Habit of Focus, which uses the Habit of Mind and the Habit of Relationship, to function effectively in their chaotic, high-pressure environment, while still making progress on the big-picture, long-term issues that need a leader’s attention. “Your sustained focus on the non-urgent important issues defines the core of your leadership. It is what ultimately differentiates your unique contributions and your ability to deliver value no one else can.” This means that leaders must devote what may be their most precious resource—their unscheduled time—to the important issues, the ones that hold the potential to yield the highest returns over time.

To begin developing a Habit of Focus, leaders “frame” their agendas. “Strategically framing issues—setting context, time frame, scope, and viewpoint—is work that is among the cornerstones of leadership.” Framing is inherently exponential. How leaders frame guides what they see. Beyond framing specific issues, leaders need to have a clear sense of what their overall leadership challenges look like.

Joni’s technique for accomplishing this is a graphical tool called The Star of Complexity Map, a technique that supports and guides the Habit of Focus. The Map enables leaders to take an integrated look at all the intersecting opportunities, challenges, and responsibilities they face—the entire leadership mandate—and looks at where leaders are supported or limited by expertise, exponential thinking, line of sight, and structural trust. “This allows you to see where you have strong and weak second opinions, and where getting the third opinion is most important,” according to Joni, who has used the Map with some of the world’s top executives. Using the Map, critical business issues, such as strategic positioning, revenue, profitability/cost structure, corporate investments/metrics, synergy with other business units, etc., are placed on a vector along a baseline of inherent business characteristics such as time frame, span, interdependence, stability, criticality, and rate of change, to get a comprehensive overview of the issues.

The Map can also be viewed through three “lenses.” “By sharpening the focus on different aspects of the star in aggregate, the lenses give a useful view of the issues in relation to resources and present knowledge.” A map can be generated by what is seen through each of the lenses: one for the leader (expertise, exponential thinking, time, and emotional energy), one for the internal team (expertise, exponential thinking, and structural trust), and one for the external network (expertise, exponential thinking, and structural trust). “The purpose of mapping structural trust is to reflect on the question of with whom, and on what topics, you are able to have full disclosure and confidential conversations, and where there are limitations and constraints.”

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - HABIT OF RELATIONSHIP

2006-10-30T00:11:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

HABIT OF RELATIONSHIP

The absence of high structural trust relationships is a critical hole in your leadership team.

The hardest part of leadership is to keep sustained focus on what is essential, not just what is urgent.

Leaders need to understand how they work with team members and with thinking partners—Habit of Relationship—to ensure that they undertake the right kind of thinking—Habit of Mind. Knowing oneself is the starting point. The next step is to build relationships that will support and sustain leadership—with trust. “Trust,” says Joni, “is an issue that leaders must regularly revisit. It is perhaps the central question of leadership, because leaders must work through others to achieve their goals.”

Early in their career, leaders need people that they can trust personally, i.e., that they feel comfortable talking with, and have confidence in, knowing that these people can do, and will do, their jobs well. The second kind of trust, and one that is needed particularly as managers advance into mid-level leadership roles, is expertise trust, i.e., trust in expert subject matter advice. As leaders rise through the ranks, they come to understand the degree to which they trust the expertise—the knowledge—of people with whom they work, regardless of the level of personal trust involved.

The third kind of trust is structural trust. Having structural trust in someone means having no doubt that the people that are chosen as thinking partners do not have, and will not have, competing agendas. As leaders progress up the ladder of corporate responsibility, their relationships with people, including those with whom they have shared personal and expertise trust, changes. In most companies, early in a leader’s career, there is little reason to be concerned with structural trust, but as Joni points out, as leaders advance into higher positions, people, for a myriad of purposes and reasons (to support their own goals, interests, etc.), will want to influence the leader’s thinking. Building a strong leadership circle means developing the ability to seek, and attract, people of high personal, expertise, and structural trust. A key idea that Joni elaborates in this regard is that while leaders can, and should, work with people with whom they share a medium level of structural trust, in their inner circle they must have some people with whom they share the highest levels of structural trust, as well as high personal and expertise trust.

Regardless of their industry, leaders find themselves involved in, and balancing, three categories of relationships: action vs. inquiry, internal vs. external, and working vs. inner circle. To create balanced, and ultimately powerful leadership, leaders must have action teams (those who carry out the day-to-day operations) as well as inquiry teams (those who help the leader think beyond the day-to-day operations, that think with them about direction, focus, and sustained growth). Many of the same people will populate both teams to drive results and performance. Leaders must also build internal and external relationships, both of which are required to truly think exponentially. “You can’t do the whole job without regularly thinking about unfiltered information . . . without vetting key ideas with people not invested in the perspective of your organization,” according to Joni. Developing a varied group of business and personal contacts will help leaders fill their inquiry teams.

Leaders’ working circles are made up of the people with whom they are in regular contact in the course of business; leaders’ inner circles will be developed over time as they rise through the ranks. The need for an inner circle comes into focus as leaders assume responsibility for large or broad corporate divisions, with responsibility over people who themselves have significant managerial responsibilities. Once leaders arrive at senior levels, the distinctions between working circles and inner circles become even more distinct. The most personal part of a leader’s advisory network will be the external inquiry inner circle team members—the part over which a leader has the most choice—and it will be the group that provides “uniquely powerful perspectives, freedom, trust, and wisdom. You turn to these people for your important third opinions.” This group of thinking partners is committed to, and capable of, acting without conflict of interests or divided loyalties. They are a leader’s peers (peers meaning those with an equivalent range of experience, ability, and judgment). “The external inquiry inner circle allows you to think the unthinkable in complete confidence, without fear of inadvertently setting events, and an avalanche of reactions, in motion before you are ready.”

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - HABIT OF MIND

2006-10-30T00:10:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

HABIT OF MIND

Today’s leaders must master, and then incorporate, a new level of thinking: exponential thinking. Exponential thinking allows a leader to see all sides of a complex issue. It is a way of thinking that looks for interrelationships, that explores assumptions, and asks questions that will, ultimately, reveal the full and true potential of a situation. Today’s leaders must not only think exponentially themselves, they must also develop, and lead, teams of people that think exponentially as well. Habit of Mind has three facets: 1) mastery of three levels of thinking (application, expert, and exponential thinking); 2) curiosity and self-knowledge; and 3) the ability to spot great talent for a leader’s inquiry team.

In application thinking, leaders use familiar, well-understood methods to generate results, a process with which virtually all managers are familiar. Along with application thinking, leaders also make use of expert thinking—understanding and expertise in specific fields of knowledge—when they are faced with issues, or challenges, that are new, or unique, and that do not appear to be easily solved by more familiar methods or processes. To round out their thinking, leaders will also need to think exponentially, to see all sides of complex issues. Inherent in the concept of exponential thinking is the need to engage with others who will bring different perspectives, and who can help leaders explore issues that may be presently outside of their awareness and understanding. In exponential thinking, leaders and their thinking partners are exploring interdependencies, understanding multiple perspectives, and validating assumptions. What occurs as a result of exponential thinking, according to Joni, is that “problems are reframed and then explored at a higher level of complexity.”

What does it take for leaders to think exponentially? It requires, first, an understanding of their “mental models.” These mental models include assumptions about how their business works, and beyond that, their more fundamental assumptions about the world, and their place in it. Karen Otazo, in Executive Coaching, points out that “we unconsciously filter the world through our own paradigms or worldviews and believe that what we see is the only reality.” A key part, then, of exponential thinking is uncovering and examining assumptions and how they affect thinking. A number of tools, or strategies, exist today to help uncover assumptions about business: a structured approach like Six Sigma, or on a broader scale, the Ladder of Inference developed by Chris Argyris, or the recent work of Charles Hampden-Turner designed to help leaders understand cross-cultural assumptions. Additionally, exponential thinking requires developing an ability to discern patterns, particularly the ability to recognize when a new element does not fit into existing patterns, but is significant enough to form the beginning of a new pattern.

Leaders who are exponential thinkers consider their mental models, patterns, and assumptions, and use them to develop a portfolio of scenarios for the future. As they are developing these capabilities to think exponentially, leaders should also consider how they obtain their information, who their sources are, and who their sources’ sources are. Particularly in large companies, as leaders become more senior, they often become more isolated. The information that comes to them is increasingly filtered, so that it is easy to lose sight of any perspective except that of their own team. Leaders need to, therefore, understand the limits of their lines of sight, and to develop relationships with others that will give them a portfolio of lines of sight. Likewise, the higher leaders progress through the ranks, the more it is their role to take that organization where it has not gone before. In doing that, leaders must be able to think in what Joni calls “the gray space, in that land where things are not clear and delineated, but rather, fuzzy and unpredictable.” In those “gray zones,” leaders are charged with discovering new realities, and making decisions that require using judgment in the face of many unknowns. Thinking partners can help leaders explore the “gray space” and help them build a portfolio of options for the future.

To lead in today’s business world, leaders need curiosity and self-knowledge. They must be open and inquisitive, aware of context, and of the convergence of circumstances that create opportunities, as well as challenges for their businesses. They understand underlying principles, and understand when these principles apply—or don’t apply. “While able to acknowledge success, they are as deeply interested in what didn’t work as they are in what did. They regularly inquire into their own ignorance, looking for their blind spots, and always work to push the boundaries of their knowledge.”

To develop Habit of Mind, it is also important for leaders to understand their managerial style. Understanding managerial style allows leaders to complement their own style with others in their inner circle to achieve the best possible results. It will also help leaders understand when they need to ask for a third opinion. Although it is important for leaders to be aware of their styles, strengths, and capabilities, it is just as important for them to develop the ability to evaluate others’ strengths, weaknesses, preferences, and biases. “Much has been written about the need for this skill when building great action teams. But it is just as important in building a leadership circle,” says Joni. Finally, to develop your own Habit of Mind, it is important to understand how other leaders, especially great leaders, develop themselves and their thinking.

Book Review: The Third Opinion - by Saj-Nicole A. Joni, Ph.D. - LEADERSHIP HAS CHANGED

2006-10-30T00:08:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

LEADERSHIP HAS CHANGED

The risks to the organization—and the career—of the individual leader who is determined to go it alone are greater than ever. It is not enough to have a brilliant team of direct reports. Leadership in the modern era demands external thinking partners in addition to a top-notch internal team.

What makes it possible for the leaders you admire most to continue to grow—no matter how famous they are, or how insightful, or how often right?

In the twenty-first century, the requirements for successful leadership, according to Joni, have changed. Today, leaders face issues of previously unimagined complexity, uncertainty, and sensitivity, issues that require careful thinking and judgment, yet at lightning speed. The world operates in real time, or almost real time, with technology providing near-instant feedback. Similarly, technological and scientific innovations are occurring at an unprecedented rate. In their turn, these innovations foster disruptive change that transforms business in ways that are rarely predictable.

Globalization is now the norm in almost every industry, which means there is a much greater interdependence of products, services, and economies. Along with the geopolitical implications of globalization, there is also an increased amount of information to absorb in an increasingly networked world. In addition to new opportunities, globalization also brings with it new competition, as well as more mergers and acquisitions. Rapid change and globalization also bring with them new issues of trust—on all levels, personal, intraorganizational, and external—when companies face both cooperation and competition in the same environment. “The competitive landscape is continually being redrawn with temporary advantage shifting to a new competitor each time someone discovers how to exploit a new level of complexity in the offering.” Finally, in the wake of 9/11, the threat of terrorism and the resulting security concerns present issues that did not exist a decade ago.

Leaders find more complexity sooner, and more often, than leaders in the past. They will need to lead in areas in which they are not necessarily expert. And, leaders are regularly, as opposed to only rarely or occasionally, confronted with issues that are highly sensitive. Leaders, therefore, must have expert input and a “safe place to ask hard questions where they do not have to constantly filter for spin, self-interest, and other agendas.” Leadership, therefore, demands not only an excellent internal team, but external thinking partners as well. In this redefined world of business success, she poses two important questions that every business leader must ask: “What kind of leader do you have to be to deliver results and succeed today? What kind of team do you have to assemble to work with you in this new era?”

Working at many levels across diverse industries, Joni has observed that a few talented leaders know how to assemble their advisory network and incorporate it into their leadership team as a powerful and well-utilized resource. However, many promising leaders have not yet developed this resource. To accomplish this, they must develop three habits—the Habit of Mind, Relationship, and Focus—which will build a leadership circle and enable the leader, regardless of his or her level of leadership, to lead with the benefits of outside insight.

As leaders develop their three Habits, the conversations they will have with their thinking partners will fall, generally, into four categories. First, there will be visionary conversations, in which different possible futures are discussed, as well as how to use that insight in present situations. In these conversations, trends, such as micro- and macroeconomics, global and political realities, and scientific and technological innovations, and their effects may be discussed. Second, sounding board conversations will be of great value. In these conversations, leaders and their thinking partners can ask “what if?” by taking a new look at strategy or at supposedly implicit assumptions. Potential actions and decisions can be explored, as well as doubts that may have arisen in a leader’s mind. Third, thinking partners can help leaders with “big picture” conversations, by looking at everything that is happening, and making sure that the organization’s direction is aligned with all the various, and complex, elements that will be part of its actions and processes. Finally, thinking partners can help leaders engage in what Joni calls “expertise in inquiry” conversations. In these conversations, leaders and their thinking partners go a step beyond developing or deepening specific knowledge bases to developing fundamental models and new ways of thinking about the general business terrain.

Book Review: The Third Opinion - How Successful Leaders Use Outside Insight to Create Superior Results - by Saj-Nicole A. Joni, Ph.D. - Introduction

2006-10-30T00:07:00.000-08:00

Introduction
LEADERSHIP HAS CHANGED
HABIT OF MIND
HABIT OF RELATIONSHIP
HABIT OF FOCUS
HOW INNER CIRCLE RELATIONSHIPS PROGRESS THROUGH THE STAGES OF LEADERSHIP
Remarks
Reading Suggestions & CONTENTS
About the Author

Introduction

What does it take to be a successful leader today? Besides the more obvious answers—commitment, intelligence, compassion, curiosity, and courage—there is one that is less obvious—the wisdom of others. Working with a circle of thinkers and advisers enables leaders to reach, and to sustain, peak performance. Such an advisory network offers more than just industry expertise; it assures a range and diversity of opinion, and the objectivity of an external perspective. Objectivity can only come as a result of a special kind of trust—structural trust. Those who provide that invaluable “third opinion” must have no need to advance their own self-interest.

From her own experience over more than twenty-five years as an adviser and thinking partner to business leaders around the globe, Saj-Nicole Joni, in order to fully understand the dynamics of leadership, and the role played by advisory networks, undertook a three-year research project in which she interviewed hundreds of executives and their thinking partners and advisers, to understand these issues in depth. That research project led to two major insights that form the core of The Third Opinion. First, leadership today requires three habits: Habit of Mind, Habit of Relationship, and Habit of Focus. Second, development of these habits can begin at any time in a leader’s career.

Book Review: 21 Leaders for the 21st Century - Reading Suggestions & CONTENTS

2006-10-27T05:24:00.000-07:00

Introduction
PART I: THE SEVEN-DIMENSIONAL MODEL OF CULTURAL DIFFERENCES
PART II: TRANSCULTURAL COMPETENCE THROUGH 21 RECONCILIATIONS
Remarks
Reading Suggestions & CONTENTS

Reading Suggestions

Reading time: 33-35 hours 507 Pages in Book

Essentially, 21 Leaders for the 21st Century has several layers that you will need to peel back in order to grasp how each facet of their exposition interacts with other facets to form the whole “metatheory of leadership.” In order to accomplish this in the most effective manner, we recommend that you start with pages 439-442 of chapter 22, which does an excellent job of placing the foreword, the introduction, and chapters 1 and 2 (which you should read next) in an easily assimilated context. Then go back and read pages 443-470, for an overview of the practical examples of the theory and premise presented in the foreword, introduction, and the first two chapters. At this point, you will be able to decide which of the case studies, chapters 3 through 21, you wish to examine more closely.

An alternative approach, if you are only interested in how particular business leaders and their companies operate in the context of reconciliation theory, and have little interest in the authors’ analysis of this theory, read the overview of chapters 3 through 21 that appears on pages 10 through 12. This will provide you with enough information to make an informed reading choice.

CONTENTS

Introduction to the Metatheory of Leadership
Chapter 1: Transcultural Competence, Part I
Chapter 2: Transcultural Competence, Part II
Chapter 3: A New Vision of Capitalism
Chapter 4: Creating a Hyperculture
Chapter 5: Remedy for a Turnaround
Chapter 6: Recapturing the True Mission
Chapter 7: The Balance Between Market and Product
Chapter 8: Private Enterprise, Public Service
Chapter 9: Leading One Life
Chapter 10: Pioneering the New Organization
Chapter 11: The Internet as an Environment for Business Ecosystems
Chapter 12: Global Brand, Local Touch
Chapter 13: Weathering the Storm
Chapter 14: Toward a New Spirit
Chapter 15: Change Within Continuity
Chapter 16: The Challenge of Renewal
Chapter 17: Keeping Close to the Customer
Chapter 18: Managing the Internalization Process
Chapter 19: Innovating the Corporate Dynasty
Chapter 20: Leading Through Transformation
Chapter 21: Keeping the Family in Business or Keeping the Business in the Family
Chapter 22: Transcultural Competence Through 21 Reconciliations

Book Review: 21 Leaders for the 21st Century - Remarks

2006-10-27T05:23:00.000-07:00

Introduction
PART I: THE SEVEN-DIMENSIONAL MODEL OF CULTURAL DIFFERENCES
PART II: TRANSCULTURAL COMPETENCE THROUGH 21 RECONCILIATIONS
Remarks
Reading Suggestions & CONTENTS

Remarks

The aim of Trompenaars and Hampden-Turner is to make the practice of leadership tangible by showing how 21 world-class leaders actually behave in reconciling the dilemmas facing their companies. Thus, they eschew models that rely on leadership traits and “situational” models, which they believe are largely reactive and lacking in dimension. Instead, they derive their model deductively, approaching their sample with a mental model of reconciliation dilemma theory already in place, with the objective of collecting evidence that would extend that theory. Through this approach, they discovered that it is possible to make the distinctions that are necessary to leadership and still integrate them into a practical whole. And, from the evidence of this integration, they conclude that value is not “added” by corporations, but that values are combined. Thus, it is possible to make complex business issues “user-friendly,” which the authors believe is what effective leadership is all about.

Thus, 21 Leaders for the 21st Century demonstrates, in comprehensive detail, the power to be garnered from synergizing values. It helps leaders to become aware of the major business dilemmas hiding in transcultural environments. It helps them to see how dilemma resolution is a crucial strategic ingredient and to utilize it as a catalyst for action. It illustrates the art of achieving one value through another in a “virtuous circle” (i.e., the process of through-through thinking). And, it shows leaders how transnational entrepreneurs effectively take a stand between contrasting values. The result is a practical framework for the recognition, respect, and reconciliation of cultural difference that reveals the competitive advantage of managing diverse diversities, as well as the neglected fields of values and ethics.

Book Review: 21 Leaders for the 21st Century - PART II: TRANSCULTURAL COMPETENCE THROUGH 21 RECONCILIATIONS

2006-10-27T05:22:00.000-07:00

“It is not global at the cost of local or vice versa. … The main success criteria are how to improve local activities through global Learning and how to apply locally what has been developed globally.”

“If we ask which has priority—which value must logically come first—there is no doubt that motivating employees to satisfy customers precedes increasing returns and paying profits to shareholders.”

“Despite far greater emphasis on ascription or achievement in certain cultures, the two usually develop together. It is … a question of where a cycle starts. The international leader surfs the crest of this dilemma.”

According to Trompenaars and Hampden-Turner, genuine leadership challenges the status quo, and this process induces dilemmas. In their research of sample leaders, the authors found that there are 21 stereotypical dilemmas that can be categorized as derivatives of each of the seven dimensions. The following examples are presented to demonstrate how reconciliation of these dilemmas constitutes effective value-generating leadership.

Of the many examples of the universalism-versusparticularism dilemma affecting the leaders, the authors found that the dominant one is the global-local dichotomy in which the primary questions is: Should there be one standardized approach, or should a local, particular method be tried? The answer lies in having a truly global reach, but with national sources of major influence. Seeing the need to implement more universalistic elements into Acer Computer’s strategy, Stan Shih designed the “global brand, local touch” strategy. He established Acer as a global brand name, with a good reputation, in combination with local assembly, local shareholders, local management, local identity, and local autonomy in marketing and distribution.

Another example deals with Rahmi Koç’s effort to utilize global learning to gain local market share for The Koç Group, one of Turkey’s largest conglomerates. Koç has developed joint partnerships, with such corporations as Ford and Fiat, so that his company can learn about their thinking, strategy, manufacturing techniques, and market intelligence—the main thrust being to improve local activities through global learning. The Koç Group also joins the giants in exporting so that it too can grow into a truly global player.

A second dilemma found in the area of universalism (rules) versus particularism (exceptions) is how to reconcile speed with continuous improvement. Jim Morgan, CEO of Applied Materials has accomplished that by designing organizational processes that pounce on mistakes and correct them quickly in order to accelerate learning. In these processes, what was acceptable last month is reclassified as unacceptable this month. Thus, every error is an opportunity to improve, and people are empowered to monitor themselves and rethink their work.

With regards to individualism versus communitarianism, Trompenaars and Hampden-Turner believe that effective leaders understand that individualism finds its fulfillment in service to the group and that group goals are of value to individuals only if they are allowed to participate in the process of developing these values. The authors define this reconciliation, which integrates individual creativity into teamwork, as co-opetition.

Understanding that the major challenge is not in finding enough individuals to generate good ideas, but in the business system that must translate those ideas into viable products and services, LEGO’s Christian Majgaard creates teams whose members have diverse values and abilities. He believes that this approach creates the potential for devising solutions that benefit from the kind of dissimilar viewpoints and novel inputs that dispel skepticism. His reconciliation is to make the goal, as well as the process of creating new shared realities, so exciting that diverse team members overcome their differences and “realize a unity of diversities that make the solution far more viable.”

Richard Branson of Virgin is also excellent at this type of reconciliation. He seems to have special talent for creating public sympathy for the wronged individual (“David”) confronting the collectivized assailant (“Goliath”). By taking on the likes of Coca-Cola, PepsiCo, the giant clearing banks, the pension industry, the U.S. gambling industry, 95 percent of British Airway’s British-originated airline traffic, Britain’s motor-car cartel, and the closed system of movie distribution, Branson has personalized Virgin, turning it into the underdog individual that comes to the rescue of the consuming public.

Gérard Mestrallet, president of Suez Lyonnaise des Eaux (SLDE), presents another valuable lesson in reconciling the individual versus the community. Through his efforts, the company has captured 52 percent of foreign-owned water and treatment systems by combining the energies released by privatization with social responsibility. After a 20-25 year overhaul, SLDE returns, to the served community, full ownership of its own municipal infrastructure.

Trompenaars and Hampden-Turner’s research shows that though the dilemma of specificity versus diffusion is very difficult to reconcile, this form of reconciliation is one of the most rewarding. Dell Computer is a prime example. Michael Dell’s dilemma was how to reconcile a broad spectrum of customers with deep, personalized customer relationships. Having entered the computer industry late, he had to do something that would differentiate him from the competition, and one of the things he decided to do was to bypass distributors and sell directly to customers. This model of direct selling received a boost from the Internet, which allowed the company to understand each customer’s problems in specific detail and, at the same time, serve a diffuse array of needs and consumers.

David Komansky of Merrill Lynch also faces a major dilemma in the arena of serving the entire spectrum of Internet users, while simultaneously digging deeply into their specific problems. He has reconciled that dilemma by integrating high tech with high touch. As customers are increasingly inundated by the deluge of numbers that the Internet gives them access to, the more they need help in interpreting them. Komansky uses the Internet to give better personal service (via high tech) to its high-touch customers and, at the same time, uses the Net to identify those high-tech customers to whom it makes good business sense to offer high touch.

Another excellent example of the reconciliation of specificity and diffusion is Kees Storm, of AEGON, the large Dutch insurance company. In his opinion, it is foolish to extol shareholder value above the rights and responsibilities of stakeholders. He views the needs of all stakeholders as being so interdependent that it is impossible to emphasize any single set without damaging the entire system and “precipitating a regressive spiral.” Thus, using stock options that give each interested employee a stake in shareholder profits, he motivates employees to satisfy customers, which results in higher sales and profits for shareholders who, in turn, reinvest in AEGON.

Trompenaars and Hampden-Turner found that their leaders all “either had passion as the context in which their reason made sense or had reason as their context in which their passion became meaningful.” In the case of Club Med, its prodigious growth had put a strain on its management structure. It had become incapable of keeping track of costs or logistics, and it had also fallen prey to chronic underinvestment. However, Philippe Bourguigon’s insistence that the aesthetic experience of a vacation start to make sense in the real world rescued the company. Although he ensures that every Club Med vacation is still a unique, personal dream come true, he also makes certain that the elements that go into that vacation are standardized, globalized, and systemized, and that they are also generated in high volumes and at low cost. He has discovered that it is possible to create fresh vacations out of standardized inputs, and that it is the combination of elements that is unique, not the elements themselves.

Hugo Levecke, president of ABN AMRO Lease Holding, provides an example of how to change an emotional entrepreneurial setting into a neutral, rationalized one. At one time, most of the division’s growth had been created by innovative entrepreneurs; however, as the business matured and became more international in scope, a need developed for more interdependence between the division’s units, but one that would not destroy the hearts of the people. Thus, Levecke focused on improving the quality of internal communications and establishing a rapid exchange of knowledge at all levels of the organization. To this end, he developed a companywide scoreboard for recording initiatives and results. In addition, he introduced periodic meetings, where teams of directors, or the specialists reporting to them, exchanged experiences resulting from the initiatives being attempted by a business unit. The division’s sense of entrepreneurialism has survived because each director has an intelligent audience to admire and critique each initiative.

Anders Knutsen’s feat was his ability to create a balance between market and product. When he assumed the leadership of Bang and Olufsen (B&O)—the Danish audiovisual company—the firm’s tradition of immaculate design and engineering was so perfect that fewer and fewer people could afford it. Thus, he launched “Break- Point az,” a plan to restore harmony between the feelings of customers and the excellence of design and technology without compromising either. Knutsen also extended “Idealand,” a nonlocal initiative in which engineers, music lovers, designers, and other experts, both within R&D and outside the company, could engage in dialogue that would stimulate and balance ideas.

Trompenaars and Hampden-Turner and note that the difference in achieved status versus ascribed status generates dilemmas when partners have different ideas about how people move up the organizational ladder. This dilemma has been a fundamental issue for Stuart Beckwith, founding entrepreneur and managing director of the BCIF group of companies. His organization provides small or family-run businesses with business training, consulting, and recruitment services. Recognizing the importance of “planning to let go,” Beckwith uses his “status” to ensure that his customers have succession plans in place and that their businesses will not be dependent on the founder’s personal presence. He also recognizes the need for BCIF, also a family-run business, to change. He has broken it up into a number of components, each of which focuses on a number of core business competencies, and has given his children the opportunity to drive new ventures. In this way, he has reconciled the tension between the “aging” founder and “young” successors.

Another example of reconciliation between achievement and ascription is the nonprofit status of British United Provident Association (BUPA), the U.K.’s largest private health insurer and provider. Instead of having a yield of 25 percent profit to shareholders and having to compete with Internet stocks on the AEX, Val Gooding, BUPA’s CEO, decided to make enough return to care for the old and the frail. She believes that caring about the people she serves, and ascribing status to them from the outset, is a prerequisite for success. For this reason, BUPA has no shareholders, demanding their cut, but is a provident association, residing in between for-profit and nonprofit status.

Gordon Billage is now CEO of Clifford-Thames (Holdings), Ltd., a growing printing and communications company. However, when he was the managing director of the company’s founding division, he used this ascribed status to reposition the firm to become a support-services enterprise, driven by technology data management and the delivery of information across a variety of media.

According to Trompenaars and Hampden-Turner, with dilemmas deriving from internal versus external control, the major issue is to connect the internally controlled culture of technology push with the externally controlled world of market pull in order to achieve a culture of inventiveness. The push of technology needs to help companies decide what markets they want to be pulled by, and the pull of the market needs to help them know what technology to push. The organization’s success depends on this integration.

Tim Morris, founding entrepreneur and managing director of MMP Business Management, has made this reconciliation the core of his success. MMP provides backoffice services to a diverse range of businesses; thus, one of the primary dilemmas Morris helps his clients reconcile is the need for control of key business processes and the need to let things go in order to be able to focus on key business. Morris moderates the control “freaks” (who think their simplistic administrative systems give them power), by constantly informing them of the variables beyond their control, which cannot be changed or stopped, but that can be responded to and used to their advantage. And, he moderates those entrepreneurs who want to leave everything for “lesser beings” to handle by giving them access to innovative Microsoft Office products that let them know how much cash they have, what payments are due in the near future, and who their debtors are.

Inner-directed, technologically minded Royal Dutch Shell Group had done its homework, costing out all the options of disposal of Brent Spar, an obsolete oil storage and loading buoy in the North Sea, and calculating them from multiple perspectives, including the environmental impact. Even the British government had endorsed the disposal, in a deep undersea trench, as being the best alternative for all stakeholders. However, when Greenpeace wrongly accused Shell of leaving 4000 tons of oil sludge and sediment in the core of the spar, Sir Mark Moody-Stuart, chairman of the company’s Committee of Managing Directors (CMD), was forced to stop the initiative. Although he believed, and still believes, that Shell’s approach to disposing of Brent Spar was technically correct, he understood that Shell must withdraw from that solution. He reasons that, “I learned that one can be absolutely right technically but that real decisions must take account of [outside] personalities, agendas, emotions, beliefs, symbols, and appearances.”

When Sergei Kiriyenko, former prime minister of the Russian Federation became president of NORSI Oil, he understood that Russian people both yearn for and dread change. He knew that the inner-directed younger generation, motivated by success, would create black markets and Mafia-type environments if they were not restrained, and that the outer-directed older generation would wait for some directive from above to save them. Thus, he achieved reconciliation by abolishing the company: “There is no company or edict coming to save you—only what you yourself create.” This forced everyone to negotiate new and better agreements that would allow them to avoid loss, make a profit, and survive.

In their research, Trompenaars and Hampden-Turner found that the reconciliation of the various aspects of time is crucial. Keeping the traditional products that made a company’s name can jeopardize the creation of new products. And, organizing time sequentially makes a company efficient but not very effective. Long-term and short-term thinking must be integrated on a higher level.

Karel Vuursteen of Heineken, approached the dilemma of past and future needs of product development exceptionally well. He needed to integrate Heineken’s tradition of stability with the future needs of the company, and he needed to integrate the traditions of the Heineken product with the need for innovation in the area of specialty beers, which are now jeopardizing the established names in the industry. Thus, Vuursteen embarked on two forms of relatively safe innovation: Process innovation searches for new and better means of creating the same result, and product innovation allows new drinks to be created from scratch without involving or risking Heineken’s premium product.

By sponsoring empowered teams, Martin Gillo, AMD’s (Advanced Micro Devices) vice president of human resources in Europe, created reconciliation of the extremes between the need for the sponsor to be responsible and the need for the team to have the time and freedom to be creative. When AMD, the large U.S. microchip maker, decided to build a mega-factory (the Fab) in the Dresden region of what was once East Germany, Gillo realized that trying to import and impose the company’s American culture on Dresden would be a mistake. Thus, he has done everything possible to preserve and develop “natural groups” that have learned and experimented together. As a result, these groups have grown in their ability to innovate, and this ability has made a big difference in increasing the Fab’s yield.

* * *
References by chapter and a subject index are provided.

Book Review: 21 Leaders for the 21st Century - PART I: THE SEVEN-DIMENSIONAL MODEL OF CULTURAL DIFFERENCES

2006-10-27T05:18:00.000-07:00

“ ‘Universal’ rules inevitably encounter exceptions, but if we celebrate the exceptional, we can better revise and improve [the universal].”

“The diffuse and spontaneous flow of ideas that characterize complex, adaptive teams reaches the heights of excellence and quality only if carefully monitored and corrected by specific feedback.”

“[Sequential and synchronous views] can be integrated, as occurs when by synchronizing processes just in time, you ‘shorten the racecourse’ by way of parallel processing. … We called this flexible manufacturing or, in a market context, ‘pull strategy.’ ”

According to Trompenaars and Hampden-Turner, business has reached such a level of complexity that issuing directives is rarely effective today. Instead, leaders must “manage culture” by reconciling opposing values and then letting the culture run the organization. Thus, good leadership can be defined as the ability to resolve value dilemmas in such a way that contrasting objectives are reconciled and turned into a single system that learns from its own activities. The authors believe that leaders who recognize, respect, and reconcile value differences are more successful than leaders who do not. This “transcultural competence” represents “through-through thinking,” which goes beyond either-or thinking and, even, and-and thinking to synthesize seemingly opposed values into a coherent process.

In their research of successful leaders worldwide, Trompenaars and Hampden-Turner found seven major dimensions of differences, each with contrasting “value poles,” that best account for the major differences between national cultures. These dimensions are: universalism versus particularism, individualism versus communitarianism, specificity versus diffusion, neutrality versus affect, achievement versus ascription, inner-direction versus outer-direction, and sequentialism versus synchronicity. It is the authors’ premise that when these dimensions are polarized, dramatic, and sometimes, tragic, contrasts result. However, when they are integrated and synergized, transcultural competence is achieved.

With universalism and particularlism, the contrast is between the desire to make, discover, and enforce widely applicable rules, whether they are the rules of science, law, morality, or industrial standards, and the desire to be exceptional, unique, and unprecedented. The U.S., Finland, Canada, Denmark, and the U.K. rank high in this desire. In contrast, South Korea, China, Japan, Singapore, and France are all relatively particularistic. However, effective leaders know that these values are complementary and that the secret of creating wealth lies, not in making rules, nor in making the exception, but in integrating the two. This integration involves noting the exceptions and revising the rules, accordingly, so as to improve these rules and developing exceptional abilities by noting the highest standards and exceeding them. Trompenaars and Hampden-Turner found that “the capacity to reconcile rules and exceptions [correlates] positively and consistently with the capacity to reconcile several other dilemmas crucial to leadership and cultural effectiveness.”

With individualism (widely advocated in Canada, the U.S., Denmark, Switzerland, the Netherlands, Australia, and the U.K.), personal fulfillment, enrichment, expression, and self-development are exalted. With communitarianism, favored in India, Japan, Mexico, China, France, Brazil, and Singapore, the benefits accrue to the group, community, or corporation. In their extremes, both views hide the reality. For example, though Americans are individualists, they tend to create more groups for more reasons than most other societies. And, despite the fact that the main objective of these groups may be to advance personal interests, these personal interests have important group expressions. Thus, transculturally competent people understand that “individualism versus communitarianism” is a false dichotomy, and that wealth-generating solutions lie in the interactions between the values of the individual and the group. Good leadership nurtures individuals so that they serve groups in a process of “collaborative competing.” Accordingly, the authors found that the most effective jobs are those that allow everybody to work independently and give individual credit to the best team player, and those where neither too much individual creativity nor excessive “groupthink” is the norm.

Business cultures that prefer specificity, such as in the U.S. and the Netherlands, emphasize things, facts, “hard” numbers, and analysis. Cultures, such as Japan’s and Singapore’s are more diffuse, preferring relations, patterns, configurations, connectedness, synthesis, and “soft” processes. However, highly effective organizations develop ingenious ways to synergize both approaches. Trompenaars and Hampden-Turner found that the most effective work environments are those in which colleagues know each other personally and use this knowledge to improve job performance, as well as those in which coworkers respect each other’s work and are, therefore, able to offer each other help in private matters. It is the optimum situation in which specific and diffuse sources of knowledge are combined in either order: by commencing from a diffuse orientation and accommodating the specific, or by commencing from a specific orientation and accommodating the diffuse.

In the neutral-versus-affective dimension, emotions are either inhibited or expressed. However, the authors note that this dimension has more subtleties and variations than the others. There is strong disagreement concerning what one should be neutral or affective about. For example, Americans tend to be moderately affective, despite their Puritan origins, and will show enthusiasm for products, visions, missions, and projects. However, they are less expressive with each other. They approve of positive emotion, but not necessarily of negative emotion such as anger or grief. They will talk about how they feel in vague “therapeutic” terms, but will rarely show how they feel by actually exploding in anger or dissolving in tears. The British may use humor to relax an audience; however, Germans and the Swiss may view this approach as frivolous. And, the Japanese and Koreans will get drunk together as a means of revealing a desire for intimacy, while Germans prefer to express feelings of intimacy by baring their souls and sharing their philosophies of life.

Wise leaders make the greatest possible use of emotional range by operating in two contrasting realms. They use calculated reasoning, which can require that emotions be temporarily suppressed, and they use a “wisdom of the heart,” which understands that emotional expression can heal, inspire, enthuse, and comfort. The authors have found that the most valuable pathways to integration in this dimension are to think first and then let out the emotions at the right time, and to feel first and then think seriously about how to express this feeling to the best effect.

With achievement and ascription, the contrast is between being esteemed because of one’s success and track record, or being esteemed because of one’s potential, as it is measured by one’s age, family, education, etc. Immigrant nations (e.g., the U.S., Canada, New Zealand, and Australia) tend to have strong preferences for achievement, as do Norway, France, Sweden, Ireland, and the U.K. Japan, Korea, Hong Kong, Taiwan, China, and Singapore are among the countries whose cultures ascribe status. However, they are not against achievement, they merely approach it differently.

Trompenaars and Hampden-Turner note that individuals from these different societies are often at odds when they first meet. When, for example, Americans first visit East Asia with a product or proposal, they automatically “put their cards on the table,” and talk achievement—the deal, the costs, the opportunity, the profits, etc. This is extremely offensive to cultures that ascribe status, for they seek first to know who people are, who they are related to and connected with, what their backgrounds are, and whether they are gracious, polite, and hospitable. Many hours or days may be spent on this kind of small talk as a means of establishing trust. However, these differences are just a matter of priorities. Americans believe that once they decide to do business with someone, and a deal is imminent, it then makes sense to get to know the person, deepen the relationship, and check references. In contrast, East Asian executives will only turn to business after a personal relationship has been established. Each accidentally offends the other by not understanding this sequence and by not recognizing that ascribing status and achieving status are complementary. The authors’ research confirms this, for they found that when people are trusted highly respected, heightened productivity and achievement emerge.

With control and effective direction from within, versus control and effective direction from without, the question involves whether it is virtuous to be one’s own person or to respond to one’s environment. Americans, with their tendency to plan and then make those plans work, to rely on ability rather than luck, and to prescribe taking control of one’s life, are joined in this strong preference for inner directions by Norwegians, New Zealanders, Canadians, Australians, and the French.

The authors note that no concept better reflects the grip of inner directedness on the American business imagination than inner-directed strategy (strategy designed at the top of the organization), but that this predilection presents a problem. Top managers are usually the farthest from those on the front line who must implement the strategy and farthest from the customer. In contrast, East Asian executives believe it is prestigious to be outer-directed. They listen while subordinates initiate hundreds of suggestions and strategies. This, however, is not to say that outerdirection is better, but that top management can create grand strategies out of the initiatives that emerge from the grass roots. The transculturally competent leaders Trompenaars and Hampden-Turner have studied integrate outer direction with inner direction. They do what Mintzberg calls crafting strategy—they carefully appraise the strategies that emerge from outside their immediate scope and weave them into a designed, inner-directed synthesis.

Time is perceived as a “race,” with passing increments (the sequential view), or as a “dance,” with circular iterations (the synchronous view). Whereas managers in America, Brazil, Ireland, Italy, and the Philippines take a sequential approach to time, managers in Japan, China, Hong Kong, Korea, Singapore, Sweden, and France take a mostly synchronous approach. The authors note that synchronous cultures have a logic of their own that typically makes their participants run late and then overstay their welcome in order to compensate for their tardiness: Synchronous people dislike waiting in line for service and would rather form into seemingly ineffective, time-consuming jostling crowds. They tend to interrupt the work of others and are easily distracted themselves, doing several things at once—another time-consuming practice. They “give time” to people they consider important, and if there is an ample amount of these important people, that causes more delay. Top people are given more scope to synchronize their face-to-face engagements, which means their subordinates must wait for them to arrive. And, synchronization is often symbolized by time-eating bowing, nodding, or exclamations of assent, as if everyone were on the same wavelength.

In contrast, people in sequential cultures respond to an “inner clock” rather to the individual. They hurry from one place to the next, never stopping to interact. They are so immersed in their work that they ignore people. They seem to want to stand in front or behind, but never side by side with others. They refuse to abandon their plans in the face of unexpected meetings. And, they are impatient with politeness. Because of these differences, each culture commonly views the other as being “rude.”

Although sequential time and motion studies have made valuable contributions to the efficiency of mass production, pure sequentialism dehumanizes the work force and its goals are short term. By the same token, though synchronous just-in-time and parallel processing have also affected mass production beneficially, pure synchronicity seems haphazard, inefficient, episodic, and lacking in purpose. Thus, transculturally competent leaders reconcile sequentialism with synchronicity in order to obtain the advantages of both, without the limitations of either—each corrects for the potential excesses of the other. The fast sequencing of industrial processes saves considerable time, but doing these processes in parallel and synchronizing them saves even more time. This, say the authors, is what modern manufacturing, as well as reducing time to market, is about: “ever faster sequences with ever finer synchronization.”

Book Review: 21 Leaders for the 21st Century - How Innovative Leaders Manage in the Digital Age - Introduction

2006-10-27T05:13:00.000-07:00

Introduction
PART I: THE SEVEN-DIMENSIONAL MODEL OF CULTURAL DIFFERENCES
PART II: TRANSCULTURAL COMPETENCE THROUGH 21 RECONCILIATIONS
Remarks
Reading Suggestions & CONTENTS

Introduction
According to Trompenaars and Hampden-Turner, because business cultures around the globe can be so different as to be diametrically opposed, a different managerial-leadership process is needed. This process must be driven by the kind of thinking that reconciles seemingly opposing values in a way that allows them to integrate objectives and deliver results that create wealth. Through their extensive research and close partnering with client companies, the authors have identified this new, overarching process as transcultural competence.

21 Leaders for the 21st Century presents a practical operational framework that shows how outstanding leaders manage knowledge effectively by reconciling the major value dilemmas, arising from cultural differences, that organizations must resolve when faced with the need to integrate people and systems. At the core of this framework are 21 case studies that provide a roadmap for learning from successful transculturally competent leadership behaviors.

Book Review: Put the Moose on the Table - Lessons in Leadership from a CEO’s Journey Through Business and Life - by Randall Tobias with Todd Tobias

2006-10-27T05:04:00.000-07:00

Introduction

Some problems are like having a moose in the room; the more one tries to ignore it, the more of an issue it becomes. Thus, the best thing to do is to confront it—to put the moose on the table—and look for a solution in dealing with it effectively. This is just one of the lessons on leadership Tobias learned during his tenure at AT&T, at Eli Lilly and Company, and as a member of various corporate boards. In Put the Moose on the Table, he recounts his journey through life and the vicissitudes of corporate leadership in late 20th century America and explores the compelling lessons he learned along the way about the challenge and hope of unprecedented and continuous change.

PART I: INDELIBLE SMALL-TOWN LESSONS IN LEADERSHIP

“Leadership is a mysterious quality, hard to define, but maybe we always know it when we see it … even as kids. … I credit my mother’s early influence for any particular skills I might have for listening to, learning from, and encouraging and respecting others.”

“My involvement in extracurricular activities had at least as much to do with the development of the skills that helped me become a corporate leader as the lessons I learned in the classroom. And I don’t think the importance of having those skills will diminish anytime soon.”

Tobias was born in the small town of Remington, Indiana during the 1940s. In this “Marcus Welby” time and place, he learned the lessons that have stood him in good stead throughout his life. He learned that a commitment made is a commitment kept; that nothing is more important than integrity; and that family and community are responsibilities to be taken seriously. Growing up, he had some extraordinary mentors who also taught him how to relate to people and get the best out of them by treating them with dignity and respect. However, the person who had the most lasting influence on his personal and professional development was his mother.

Mrs. Tobias, who taught sixth grade at Remington’s elementary school, exchanged classes with the fifth-grade teacher in order to avoid any appearances of nepotism when her son was ready to enter that grade. Thus, one of the earliest lessons he learned was the importance of avoiding the slightest appearance of any conflict of interest—even if it means undergoing a great deal of personal inconvenience. Tobias also gained his first respect and appreciation for working women from seeing the sacrifices his mother made in order to balance her work and home life. However, it was her attitude toward learning that made the greatest impression. Mrs. Tobias stressed the importance of being sensitive to, and respectful of, everyone—neighbors, friends, coworkers, and even strangers. Her belief that “Everyone has something to teach, so keep your ears open” showed Tobias that leadership is as much about listening, building relationships, and providing encouragement, as it is about communicating one’s own ideas.

From his father, he learned to “take the job seriously, but never yourself. And, at the end of the day, always make time to separate the two.” Moreover, as the son of a farmer, the elder Tobias understood that many of the bank’s customers could not leave their farms during banking hours to conduct their business. So, whenever anyone needed his professional help, he made himself available in the evenings, setting up “shop” on his back porch and giving his son a key lesson about the value of trying to do whatever the customer needs.

Tobias’s first money-making venture came at the age of 10, when he began mowing lawns and learning the importance of taking responsibility for completing any assignment he agreed to take on. As he got older, he occasionally took on other odd jobs, one of which was as a corn detasseler for a farm that produced hybrid seed. It was a back-breaking occupation that taught him to appreciate some of the challenges people face when working in repetitious manufacturing operations.

Nonetheless, his first “real” job came at age 14, when he began working as a grocery clerk and learning some of the essential aspects of running a business, such as inventory control and marketing. It was also his first experience in customer relations—in dealing directly with customers and learning how to handle the disgruntled ones with finesse. The management style Tobias acquired here was, to a large extent, the one he carried to AT&T and Eli Lilly and Company.

Beginning with the summer before his freshman year in high school, and continuing through the summer following his junior year in college, Tobias worked at a summer camp, performing every task imaginable—potato peeler, swimming instructor, plumber, bedspring repairman, campfire ukulele player/singer, and pancake chef. Thus, he got his first experience in having to deal with broad, ambiguous responsibilities. Job descriptions did not matter; everyone was required to do what was necessary—sometimes at a moment’s notice, despite having no prior experience.

In 1960, Tobias entered college at Indiana University, having no firm notion of what career he wanted to pursue. Almost immediately, however, he became involved in the school’s many extracurricular activities, including: pledging a fraternity, becoming subcommittee chairman of the IU Fall Carnival (a major campus event), winning a seat in the Student Senate, being elected president of the senior class of 1964, and cohosting a student-run program that aired on two local radio stations. These activities allowed him to gain his first taste of what it would be like to be a business executive. (Although both law and broadcasting had been intriguing possibilities, he was ultimately attracted to the School of Business, where he majored in marketing and advertising.) In every instance, he was required to accept new challenges, manage multiple activities at the same time, lead people with competing and often conflicting ideas, and cope with responsibilities in areas where he had little prior knowledge or expertise to guide his actions and decisions.

Because Tobias participated in the university’s ROTC program, he was commissioned as a second lieutenant in the field artillery branch of the U.S. Army when he graduated from IU in June 1964. However, before reporting for duty at Fort Sill, Oklahoma in October, he joined the Initial Management Development Program (IMDP), a unique initiative instituted by AT&T’s Indiana Bell subsidiary. Those chosen for this program were seniors who had demonstrated “significant peer-supported leadership outside the classroom and had done so while performing well in the classroom.” The idea was that if an individual had emerged as a leader as team captain, class president, dorm leader, fraternity president, etc., he would likely emerge as a leader in AT&T.

In October, Tobias reported to Fort Sill, along with a hundred or so other young officers. They had all attended ROTC classes for four years, where they studied military history, law, and courtesy; leadership; and many other subjects. And, they had spent six week on active duty (i.e., boot camp) during the summer preceding their senior year. After basic training, some were sent to other military installations in the U.S.; some were sent to units in Europe and other places around the world; and some were sent to Vietnam. Tobias was assigned to duty as an instructor in Fort Sill’s Communications and Electronics Department.

Again, it was an experience that later served him well in his business career. For almost two years, he taught officers who often outranked him and had more practical experience than he. But, it was this trial by fire that allowed him, when he became a corporate executive, to be comfortable testifying before Congress, addressing security analysts, presiding over annual stockholder meetings, and generally communicating with audiences, whether friendly, hostile, large, small, formal, or informal. In September 1966, Tobias accepted a job as the Indiana Bell Telephone Company manager in Lebanon, Indiana.

PART II: CORPORATE AMERICA—LEADERSHIP LESSONS APPLIED

“The more I think about leadership, the more I realize that leaders are not necessarily born—they are made. I think experiences are extremely important in shaping a leader.”

“When one is in the midst of enormous change and all of the ground rules are being thrown out the door, it’s absolutely essential to ask—and to answer: What businesses are we really in?”

“As I define it, communications is ... the sum of all the activities that demonstrate, through words and actions, what a leader—indeed, what a business—really is about.”

“In my experience, the thin line separating the winners from the losers is often determined by how well an organization chooses and structures jobs for its people in a way that is consistent with its plans for tomorrow, not yesterday.”

By 1977, Tobias’s career had taken him to the public relations department at Indiana Bell’s headquarters in Indianapolis. But, in the spring of that year, he received an opportunity that he could not have anticipated in his wildest dreams—he was being transferred to Illinois Bell in Chicago, as general manager for the North Suburban area. A transfer of someone at Tobias’s level within the Bell System, from one operating subsidiary to another, meant he was on the fast track for career advancement and that his performance was being watched by those at the very top of the parent company. With this new assignment, Tobias was to be given responsibility for all aspects of telephone service in a geographic area and would run an integrated business in which managers, engineers, salespeople, operators, service reps, and maintenance and repair crews all reported to him.

This job far exceeded the best-case career plans he could have laid out for himself when he graduated college. In fact, he had not arrived at this point as the result of any detailed career-planning strategy, but by doing the best he could every day and letting his performance speak for itself. He believes that individuals must have the ability to consistently deliver results and the opportunities to demonstrate that ability, especially at those rare, unexpected, and often unrecognized moments when career-altering opportunities present themselves. When people find themselves in the spotlight at center stage, they must be prepared to perform. And, they must also be prepared to perform at every opportunity, because they never know when a performance will determine the trajectory of their careers.

Tobias also believes that in addition to seizing opportunities, all aspiring managers can enhance their leadership skills if they focus on developing the capabilities and characteristics that are most likely to help them succeed. He says, of course, there is no magic formula, only predictors that are important and reasonably dependable indicators of leadership capacity, no matter the business or industry. And, though he does not believe that identifying leadership talent is as simple and straightforward as creating a list of attributes, he has, nonetheless, developed an ever-evolving list of indicators of future leadership potential. Tobias notes that far too many leaders refuse to communicate the attributes they believe are necessary for rising to the top and, in doing so, essentially turn these attributes into a “hierarchy of secrets.” From his perspective, this approach makes no sense in that no strategic purpose is served by preserving an air of mystery around the very characteristics needed to fill the most important positions in a company.

Thus, he delineates the following attributes as prerequisites for leadership: (1) inspires confidence, trust, and consistently displays the highest ethical standards; (2) communicates effectively, internally and externally; (3) consistently achieves superior results and produces results through others; (4) pursues continuous learning and fosters a learning environment; (5) produces other leaders; (6) develops cross-functional knowledge and versatility; (7) embraces change and seeks to use it advantageously; (8) constantly seeks innovative ideas—particularly in unlikely places; (9) builds internal and external alliances to further corporate goals; (10) balances the short term with the long term by focusing on both; (11) embraces ambiguity; (12) practices and encourages thoughtful risk taking; (13) champions cultural diversity; and (14) leaves indelible “footprints.”

Although it is important to communicate the specific qualities needed to assume positions of leadership, it is also necessary to be a role model who leads by example. One such role model for Tobias was Charles L. Brown, the AT&T chairman and CEO, who oversaw the breakup of the Bell System. Tobias believes that when Brown asked AT&T’s board to accept the terms of the divestiture settlement worked out with the Justice Department, it represented the most significant single decision in the company’s history. Thus, with this move, Brown demonstrated the key qualities of an effective change agent: He built a consensus to support a decision he realized had to be made. He effectively communicated that vision to the company, the media, and the shareholders. And, he acted quickly and decisively.

Although much has been written about that decision and its far-reaching legal, political, and economic implications, something else occurred on that day that provided a lesson in leadership that Tobias still carries with him. Tobias, who had recently been promoted to the position of corporate vice president, was sitting outside the boardroom, nervously waiting to make his first appearance before AT&T’s board with a presentation on marketing. In the midst of the intense drama unfolding behind closed doors, Brown took the time to pause and write Tobias a note, apologizing for keeping him waiting and asking him to postpone his presentation until such time as he (Brown) could give it his full attention.

Tobias framed this note, which has hung it in a place of prominence in every office he has occupied since that date. An assistant could have been sent to usher Tobias away or, given the circumstances, Tobias’s presentation could have easily been forgotten. Thus, Brown’s “instinctive unconscious gesture of leadership” made an indelible impression about the importance of treating subordinates with the same respect one shows board members. Subsequently, as the level of stress began to grow concerning the divestiture, it was not lost on Tobias that fewer and fewer notes found their way down through the ranks. “And a company whose success was once driven by the loyalty of its people began to pay a very dear price.”

When Theodore Vail became AT&T’s legendary leader, he encapsulated his vision for the enterprise in six words: “One system. One policy. Universal service.” Over the ensuing decades, these six words allowed generations of AT&T employees, at all levels, to know where the company was headed and how it would get there. This vision shaped a philosophy, which shaped a culture and defined the terms of the company’s relationship with its employees and customers. However, the decision to accept the Justice Department’s divestiture proposal “did not reflect a change in philosophy, but a change in circumstances.” And, because no new, coherent, clearly defined companywide vision emerged for the future of the business, decisions at the new AT&T were often implemented for an industry that no longer existed.

Reflecting back on this period, Tobias says the key lesson is that “Without a shared vision that is compelling and truly embraced with passion, it’s nearly impossible for any organization to succeed.” Moreover, acceptance of this vision depends on the leader’s ability to build a consensus, gain buy-in, and articulate the vision with a passion that translates into credibility. Most importantly, the people must be able to see and believe that their leader is the ultimate “father,” who truly owns the vision (IBM’s Lou Gerstner, GE’s Jack Welch, and Microsoft’s Bill Gates are perfect examples of this kind of father-owner). Thanks to this lesson, when Tobias accepted the challenge of leading Eli Lilly and Company through its period of massive change, he had something important to offer.

On June 25 1993, Eli Lilly and Company shocked Wall Street and its rank and file by announcing that President and CEO Vaughn Bryson was resigning and that AT&T Vice Chairman Randall Tobias (who was also an outside director on Lilly’s board) was to become the company’s new chairman, president, and CEO. Speculation was that the “telephone guy” was being hired to lay off large numbers of employees in the same manner as AT&T had done, and given the absence of information to the contrary, this theory seemed to be quite logical. The board’s terse press release, announcing Bryson’s retirement due to differences with the board over management philosophy, was carefully worded to say nothing. But, this “nothing” spoke volumes to Lilly’s employees, who appreciated Bryson for his attempts to overhaul the corporate culture, remove outdated bureaucratic processes, and encourage more open communication between management and the rank and file.

As far as the employees were concerned, differences over “management philosophy” simply meant that the board did not like Bryson’s attempts to make the company more open, and that Tobias was an AT&T “hatchet man,” hired to reinstall a command-and-control approach and to institute cost-cutting in the form of layoffs. From the board’s perspective, however, culture was not at issue; their concern stemmed from the absence of a clearly articulated and compelling vision for Lilly’s future, and the absence of a sound plan to stem the slide in the company’s stock price.

Nonetheless, the day after the big announcement, a major crisis struck. The National Institutes of Health (NIH) notified Lilly that one of the patients involved in the company’s clinical trials of the potential product, FIAU, needed to be hospitalized because of profound kidney failure. Immediately, Lilly and NIH agreed to stop the trials, and the other 14 patients were told to stop their medication and report to NIH as soon as possible. By Monday morning, however, several of these patients showed early signs of serious liver toxicity. Although Tobias had planned to make an orderly transition from his AT&T responsibilities, he realized that as Lilly’s new leader he had to address this issue immediately and in person.

He understood from experience that he did not have all the right answers, so it was incumbent upon him to ask the right questions and to set the right tone. At the Monday morning meeting of Lilly executives and department heads, Tobias stated that, though he wanted to understand the potential legal and financial ramifications of the situation, the patients and their well-being were first and foremost the top priority and the driver of all subsequent decisions. He explained further the need for Lilly to communicate its desire to help in any way possible, not only because it was the company’s responsibility but also because it was the right thing to do. This theme—success in a changing environment begins and ends with a company’s commitment to treating everyone it touches with respect—was one Tobias continued to emphasize until he retired in 1998.

Seen in retrospect, the stance Tobias took that day engendered the trust of all involved, for in that instant, he moved the company past the trap of taking the easy way out by establishing boundaries based on values and proper priorities. Everyone also saw that he was not going to micromanage them, but was going to give them the lead in doing what needed to be done, within the boundaries established.

This initial meeting with the company’s senior leadership also served as a strong foundation on which to being a new policy of open and honest dialogue. For some time, Lilly’s communications policy had been one of “No comment,” concerning products, employees, and many other issues of interest to the media and public. Tobias realized, however, that analysts, local citizens, journalists, and thousands of employees and shareholders wanted to know what was going on behind the closed doors of the executive conference room. Thus, he quickly determined that his second major responsibility as CEO (after the FIAU crisis) was communication.

Nonetheless, he realized that the real challenge was not only communicating, but also integrating what he said and wrote with the way he behaved. He believes that communications must be defined as including all forms of a corporation’s behaviors toward all of its stakeholders so that it becomes another form of silo-busting, fiefdom-destroying cross-functional teamwork. Moreover, effective communication (i.e., communication that changes behavior) is more than simply delivering well-thought out statements; where, how and, above all, when, these statements are delivered, is also crucial. If bad news does not improve with age, then lack of news to those who need it is even worse. Essentially it is about meeting expectations, doing the right things right, leading by example, and making oneself credible.

Although a strong values-based foundation was already in place when Tobias arrived at Lilly, he knew that keeping these values so that they would be vibrant drivers of the way business was conducted required ongoing attention. Because the world was changing dramatically, and the pressure was on to produce (and to perhaps cut corners), he believed nothing would be more important to Lilly’s future success than nurturing well-defined, strongly emphasized values. From his perspective, Enron, WorldCom, Arthur Andersen, et al., happened because values and culture were seen as “soft” issues separate from the “business.” Moreover, he thinks that new laws and regulations will not effectively address this issue—the solution can only be found in “clearly articulated expectations of behavior, and accountability when those expectations are not met.”

Thus, during his first few weeks, Tobias became focused on the need for a new standard beyond an ethically grounded sense of right and wrong. The values of “people, integrity, and excellence” were already so much a part of the company’s culture that instead of changing them, Tobias helped Lilly to redefine them and specify what these words were to mean in the current context. In that way, the company was able to express how its past values would continue to guide the way business was done.

Tobias also spent a great deal of time talking about the relationship of Lilly’s core values to the company’s financial success, for he believed that truly living those values would have a major impact on the successful implementation of the company’s business strategy. A new understanding of Lilly’s commitment to its people and, just as importantly, their reciprocal commitment to the company, had to be established. Although it was important to foster a culture in which employees would continue to be valued for all they had contributed and achieved in the past, the expectation also needed to be established that everyone would be measured and rewarded for what they were contributing in the present.

In its history, the company had never had a massive layoff in the U.S., and though Tobias did not see any need for involuntary job cuts in the near future, he emphasized that market success would be the real determination of the company’s stability and growth or lack thereof. Thus, he noted that any bond of reciprocity begins with the premise that in times of continuous change, there can be no guarantee of job security. Accordingly, Lilly employees have since become more responsible for their work lives, for managing their own performance, upgrading their skills, and planning their careers. Management’s part of the bargain is the provision of mentoring, career resources, and training opportunities. It is also management’s responsibility to update the personnel policies and programs that were created in an era when all families resembled the Ozzie and Harriet Nelson prototype. Thus, Lilly has initiated a wide array of work-life programs (initiatives that represent a decided competitive advantage), in order to address the reality that 82 percent of its employees now live under a different model: single people with no children, single parents, unmarried couples, dual wage earners with children and without, multigenerational families, same-sex couples, etc.

Tobias’s experience had taught him that “no matter how many important issues demand attention, everyone on the management team, without guidance to the contrary, will invariably gravitate toward the highest-profile issues. And the rest of the field will be vacant.” Because this “law” was very much at work at Lilly when he arrived, he identified six priorities: (1) getting the company under control operationally; (2) beginning with employees and the financial community, restoring stakeholder confidence in the company, its leadership, and its future; (3) moving quickly to increase shareholder value; (4) making important strategic choices; (5) rekindling and refocusing core values; and (6) strengthening and deepening the company’s leadership capabilities, throughout the business, for the present and future.

Number four, which addressed the important question of what business the company was really in, was seen as the key priority. Thus, by focusing on that issue, the company was able to make a number of decisions about Lilly’s future course. For example, the company would focus primarily on human pharmaceuticals. It would exit the medical devices business in a way that would unlock the potential shareholder value not being realized and also garner some cash to invest in the pharmaceutical business. And, the R&D efforts driving the pharmaceutical business, would focus on selected therapeutic areas that possess three essential characteristics: (1) disease categories with significant unmet medical needs; (2) categories where Lilly’s research capabilities were already capable of effectively addressing unmet medical needs; and (3) categories where the likely profit margins were attractive. In addition to these initiatives, the company also decided to develop or enhance capabilities what would be critical to its future success and to focus more strongly on building its businesses in global markets.

At AT&T, Tobias participated in a culture in which everyone was expected to conform to practices that had been “written for nearly every aspect of the business and codified in rows and rows of black binders which lined office walls.” Tobias found this same aversion to risk taking at Lilly, for over the years, the company had developed a culture in which reward was given for not failing rather than for successfully achieving. However, he understood that if he encouraged risk taking (in those parts of the business that do not have an impact on the safety and well-being of patients), Lilly would make mistakes, but the ultimate measure would be the net impact on the creation of shareholder value from everything implemented. He believes that when companies make decisions and things go wrong, not only must they evaluate the end result, but must also evaluate what they knew, when they knew it, and if they made the decision at the optimum time. They must also assess if the risk of deciding and being wrong was outweighed by the likelihood and benefits of being right. Part of being a leader is making intuitive judgments, taking informed risks, and understanding that sometimes those are the best tools available.

Tobias notes that often in the corporate world, succession planning seems not to get the attention it deserves. He found that this was clearly the reality at AT&T and Lilly. In fact, the reason he was in the role of chairman, president, and CEO at Lilly was the direct result of the company’s failed leadership selection, development, and transition process. Determined not to let this happen again, he immediately set out to develop and implement a comprehensive succession-planning process for the senior leadership and, particularly, for managing CEO succession. He believes that succession planning and implementation comprise one of the most important responsibilities of any CEO. And, to do it well sometimes require putting the ongoing well-being of the corporation above personal considerations.

Thus, on December 15, 1997, after being at Lilly’s helm for four years, Tobias announced his intention to retire, effective December 31, 1998. Of course, the question was asked as to why he would want to step down while things were going so well and the company’s future looked so promising. Equally as puzzling was the fact that he was relinquishing power and prestige at the relatively young age of 56. His answer was that the goals he had outlined when he assumed leadership of the company had been accomplished: Lilly had reached the point of being viewed as a leader in the industry on a number of fronts. Its financial performance reflected that leadership. The company had made substantial progress in the quality of its senior leadership, its core capabilities, the ability to plan and shape its future, in its progress in identifying and developing future leaders, in revitalizing its values, in recognizing diversity throughout the organization, and in recognizing the need to balance work and family. The time of departure not only suited his own objectives, but also fit well into the company’s rhythm of continued progress. And last, but not least, Tobias was mindful of Peter Lynch’s sentiment, “Nobody on his deathbed ever said, ‘I wish I’d spent more time at the office!’ ”

* * *
A bibliography and a subject index are provided.

Remarks

Put the Moose on the Table is a “journal” of the leadership lessons and experiences Tobias has garnered during a time of unprecedented change and challenge in American business. It explains how his responses to the reality of continuous change (“The fascinating thing about the current business environment is not simply that everything is constantly new but that everything is constantly renewing.”) have played a major role in determining his future and the future of the companies with which he’s been involved. But, most importantly, the book details how the character and values Tobias developed in his youth, have not only withstood the unrelenting pressure of change, but have also been strengthened in the process.

Indeed, the book’s subtitle, “Lessons in Leadership from a CEO’s Journey Through Business and Life,” essentially captures the core of Tobias’s message—that leadership is a journey of challenge and promise, is heart work, is about learning and leaving a legacy and, most importantly, it’s about (to borrow a concept from Stephen R. Covey) being “principle-centered.” Thus, this exegesis on leadership exposes no new groundbreaking idea. If you are looking for some lesson that has never been revealed, but that promises to change the heart and soul of corporate America, send the economy into stratospheric abundance, and bring milk, honey, and peace to the land, you won’t find it here. No! You will find much better than that, for Tobias reminds executives, managers, and all other stakeholders of the fundamentals of doing good business—fundamentals that obviously need to be revisited from time to time.

Like Robert Fulghum’s All I Really Need to Know I Learned in Kindergarten, Put the Moose on the Table reiterates those simple, but requisite “Golden Rules” for living and working that professionals have known all along, but have perhaps forgotten to practice. However, the added value is that these timeless truths are seen through the prism of Tobias’s personal experiences, uniquely formed by the influences of his parents, education, early job assignments, extracurricular college activities, mentors, and early successes and failures. The paths Tobias takes to reach destination leadership provide as much insight, or more, than the destination itself. (Of course, as the author’s journey aptly demonstrates, leadership is not so much a destination as it is an ever-evolving state of being.” As the author’s son, Todd, notes “It’s not so much what my dad accomplished in the business world that impresses … but the way he did it.” Leadership is not readily defined, but through Tobias’s serendipitous perspective, you will know it when you see it.

As for the book’s eccentric title, Tobias has borrowed the term from David A. Nadler (Champions of Change), who borrowed it from Dennis Perkins (Leading at the Edge). Essentially, the term is an exhortation to stop ignoring the beastly issue stinking up the boardroom and address it openly and honestly before it runs completely amok. Tobias has put his moose on the table by openly examining his journey through life and corporate change. It is a journey in which he continuously strove to transform change into a competitive advantage, while always trying to do the right thing.

Reading Suggestions

Reading Time: 14-16 Hours, 295 Pages in Book

Put the Moose on the Table is essentially three books. The first 259 pages combine vignettes of Tobias’s autobiography with vignettes of the business histories of AT&T and Eli Lilly and Company. Tobias shows a great deal of compassion toward his readers by not subjecting them to full-blown, detailed accounts of every minute aspect of events and personalities of his corporate and personal lives. He keeps his focus the essential lessons (i.e., the moose) that he intends for his audience to embrace. Thus, the book is a painless, quick, and riveting read.

The last 14 pages of the main text provides a leadership “manual” that lists all Tobias’s edification on leading, vision, change, risk taking, communication, career development, organizational structure, succession planning, and other important instruction. In this section, the author has culled all the lessons discussed in the biographies, categorized them, and listed them in one convenient reference.

Because the book is so structured, you have several options in how you read it. You can skip to the “Tobias’s Lessons in Leadership” section for a summary of what the author has learned and practiced during his business career. You can pick and choose among the 10 chapters that comprise the autobiography/business history. Each chapter provides a snapshot of a particular time or event, and more or less stands alones. However, the title does not always give you any useful idea as to the specific contents of that chapter.

The last approach, and the one we highly recommend, is to read the book in its entirety and in the order presented. To do otherwise will prevent you from understanding the leadership lessons in the context of Tobias’s unique experiences and mind-set. For example: You will miss the personal and business significance of his first wife’s suicide; his unique perspective on employee loyalty, the “soft” issues of leadership, and the promise of life-long employment; and what a high-school marching band and dressing like Vanna White have to do with good business. It is these small details that make Tobias’s journey through business and life so full of engaging ideas that you may might take away and apply to your own professional circumstances.

CONTENTS

Chapter 1: Prescription for Disaster
Chapter 2: The Ghost Ship
Chapter 3: The Opposite of Wine
Chapter 4: Small Town, Big Lessons
Chapter 5: A Complete Education
Chapter 6: The Hierarchy of Secrets
Chapter 7: Bond Traders
Chapter 8: Focusing the Boxes
Chapter 9: Risky Business
Chapter 10: When It’s Time to Go
Epilogue
Tobias’s Lessons in Leadership

About the Authors

Randall Tobias was chairman and CEO of Eli Lilly and Company from 1993 until his retirement at the end of 1998, when he was named chairman emeritus. Before joining Lilly, he was vice chairman at AT&T during the years following the company’s government-ordered breakup in 1984. Presently, Tobias serves on the boards of a number of major corporations and foundations.
Todd Tobias is president and editorial director of Table Moose Media and founder of Indy Men’s Magazine.
For more information, please visit:iupress.indiana.edu