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Sunday, April 1, 2012 @ 07:04 AM
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RETHINKING THE FUTURE

RETHINKING BUSINESS, PRINCIPLES, COMPETITION, CONTROL & COMPLEXITY, LEADERSHIP, MARKETS AND THE WORLD

EDITED BY ROWAN GIBSON

NICHOLAS BREARLEY PUBLISHING                        1997

 

Front cover

This book is a meeting place of minds. It provides a unique opportunity to gain insights into tomorrow from today’s most highly regarded business thinkers.

Rethinking The Future brings together a list of luminaries that reads like a ‘hall of fame’ –

Charles Handy, Stephen Covey, Michael Porter, C.K. Prahalad, Gary Hamel,

Michael Hammer, Eli Goldratt, Peter Senge, Warren Bennis, John Kotter, Al Ries and Jack Trout, Philip Kotler, John Naisbitt, Lester Thurow and Kevin Kelly.

Their cutting-edge thinking has helped to guide many thousands of corporations through the changing landscape of business.  Now, in a series of original and inspiring contributions, they define the new paradigm that will revolutionize business and society in the 21st Century.

Everywhere we look today, powerful new forces are reshaping the world that we thought we knew. Traditional boundaries between industries, disciplines and countries are rapidly blurring, and the old rules of management no longer make sense in a post-industrial world.

Rethinking The Future is about a world of increasing uncertainty in which the very nature of work, of organizations and of economics is changing. It is about the move away from traditional hierarchies and the democratization of power. It is about giant nation states and corporations giving way to global networks. Tomorrow’s executives will need to understand business at a far more global and synergistic level than ever before, and to feel comfortable leading people who have learned to manage themselves. This is a book for those executives.

The book looks at how organizations can be redesigned to survive and thrive in tomorrow’s hyper-competitive global environment. How they can learn to adapt to change and dramatically improve their performance. And how they should be ‘managed’, if at all.

Rethinking The Future examines the changing role of the leader and the powerful influence of corporate culture. And it probes the universal principles and values that ultimately govern the success of any leader or organization. It also looks at strategies for creating tomorrow’s competitive advantages and tomorrow’s markets, which will be driven by new demographics, new global structures and new technology.

Most importantly of all, the book gives readers a framework for understanding the big picture. It provides a panoramic perspective that puts all the pieces together in a coherent and easily understandable context. In fact, it represents an entire bookshelf condensed between two covers – a business education for the 21st Century. Rethinking The Future is essential reading for anyone concerned with business success beyond the next quarter.

About the editor

Rowan Gibson is an independent business consultant who works in close association with EURO RSCG – Europe’s largest advertising agency network. He spends most of his time creating international marketing strategies and making top management presentations. Born and educated in London, he lives today with his German wife and two sons near Düsseldorf in Germany.

Foreword by Alvin and Heidi Toffler

Not since the dawn of the Industrial Revolution have managers had more to learn (and unlearn) about the art of business leadership. And seldom have they been offered so much diverse and confusing advice. The reason for the current upheaval in management thinking is the arrival on the world scene of a revolutionary new ‘system for creating wealth’. Historians can slice the past into countless slivers. But in terms of transformational change, there have been only a few true turning points in history, each associated with the emergence of a different system for wealth creation.

The invention of agriculture provided the human race with a new way to convert the earth’s resources into wealth, and almost everywhere launched a ‘First Wave’ of change in civilization that gave rise to peasant-centered economies and eventually supplanted hunting and foraging as the primary means of human subsistence.

Similarly, the Industrial Revolution triggered a ‘Second Wave’ of change that gave us a factory-based system for wealth creation. In turn, this led to mass production, the drive for larger and larger markets, and the need for bigger, ever more bureaucratic business organizations. Until very recently, most of what was taught in management texts and in schools of business reflected ‘Second Wave’ thinking.

Based on assumptions of linearity and equilibrium, and heavily quantified, the dominant management paradigm paralleled the mechanistic assumptions of western economics, which, in turn, attempted to parallel Newtonian physics. This multileveled parallelism – the belief that management ‘science’ fitted perfectly with economic ‘science’ and that both were compatible with what was known about physics – made the industrial management paradigm enormously persuasive.

Indeed, all three of these disciplinary ‘layers’ formed parts of an even larger set of epistemological and philosophical ideas which has elsewhere been described as ‘indust-reality’ – reality as perceived through the eyes of people reared in an industrial culture. In short, the dominant business paradigm of the Second Wave era was part of a much larger architecture of thought.

In 1970, we publicly attacked the prevailing paradigm for the first time in our book Future Shock, and suggested that businesses were going to restructure themselves repeatedly and move ‘beyond bureaucracy’; that they would have to reduce hierarchy and take on the character of what we termed ‘ad-hocracy’. At the time, all this sounded sensationalist to many readers. We had a similar experience in 1972, when we delivered a consulting report to AT&T, then the world’s largest privately held corporation, saying that it would have to break itself up. For years, that report was literally kept hidden from the very managers who needed to prepare the firm for the break-up which, in fact, came 12 years later – the biggest and most excruciating corporate break-up in history. And when in 1980, in our book The Third Wave, we coined the term ‘de-massification’ to describe the coming move beyond mass production, mass distribution, mass media and socioeconomic homogeneity, we again were thought by some to be too visionary.

We suspect that many of the contributors to this volume have faced comparable skepticism. The reason is simple: anyone who attacks a dominant paradigm too early can expect to be regarded with suspicion by the reigning intellectual and academic establishment. But paradigms – including management paradigms – are not permanent. And the industrial era management model, especially in the US, is now blowing its bolts and rivets.

Today’s knowledge revolution, having launched a gigantic ‘Third Wave’ of economic, technical and social change, is forcing businesses to operate in radically new, continually shifting ways that stand Second Wave notions on their head. The industrial faith in such things as vertical integration, synergy, economies of scale and hierarchical, command-and-control organization is giving way to a fresh appreciation of outsourcing, minimization of scale, profit centers, networks and other diverse forms of organization. Every shred of industrial-era thinking is now being rescrutinized and brilliantly reformulated.

It is precisely when an old paradigm crumbles and the new one is not yet fixed in place that we get great bursts of creative thinking. This is such a moment, and some of today’s most innovative thinking about management is reflected in these pages.

Of course, as in any collection, some contributions are better than others, some fresher and more pioneering than others. But the overall thrust of this volume is exciting. It offers us a work-in-progress picture of a new business paradigm in the making.

What is still missing from this paradigm is a strong link between emergent Third Wave management thinking and Third Wave economics. One reason for this is a disparity in the relevant rates of change. While business theorists and management consultants like those in this book are exploring many aspects of the new business reality and rapidly reporting their findings, economists, with some notable exceptions, remain imprisoned by their own previous successes, seldom venturing into Third Wave territory.

A good example of the current disparity has to do with knowledge – the primary factor of production in the new system for wealth creation. An increasing amount of work is being done by consulting firms on questions of knowledge management – the assessment of knowledge assets, new approaches to organizational and individual learning, attempts to create a metric for dealing with knowledge. By contrast, mainstream economists, for the most part, ignore or underestimate knowledge as a factor of production.

If ‘thinking outside the box’ has become a buzzword among smart business people and their advisers, economists do so at far greater risk to their reputations in the profession. As a result, Third Wave economics is still in its pre-natal stage, and the intellectual framework that might unify management theory and economics is not yet in place. The task of creating that framework still lies ahead.

What business practitioners – as well as their economists and advisors – will need, however, is an even more comprehensive model of the oncoming Third Wave reality, not just focusing on economics and management issues, but showing how these must respond to social, technological, political, cultural and religious shocks – of which there will be plenty in the years immediately ahead.

Many of these can be anticipated, as can their impact on business, and they need to be taken into account, since a sudden massive swing in any one could wreak as much havoc on a company or industry as could economic change. Unfortunately, these broader issues still lie outside the frame of reference of most business thinkers and economists alike.

Nevertheless, the distinguished contributors to these pages provide important conceptual components out of which the next business paradigm will be built. The chapters teem with provocative, illuminating ideas, good questions, fresh insights and alternative ways of thinking about the competitive/cooperative combat to come. As the Third Wave system for wealth creation spreads, marked by hypercompetition, successive technological revolutions and social dislocation and conflict, it is creating high unpredictability and non-linear conditions. Business leaders and strategists who wish to flourish in so turbulent and revolutionary an environment will ignore this book at their peril.

Monday, March 26, 2012 @ 04:03 AM
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HARVARD BUSINESS REVIEW

ON WHAT MAKES A LEADER

HARVARD BUSINESS SCHOOL PRESS           1998/2001

 

Back cover

The latest thinking in the field of leadership is collected in this volume. Featuring cutting-edge articles from some of the most renowned names in leadership, this collection is a must have for CEOs and top level managers. This volume also pays special attention to leadership succession issues.

Contents

v  What Makes a Leader? (Daniel Goleman)

v  Narcissistic Leaders: The Incredible Pros, the Inevitable Cons (Michael Maccoby)

v  Leadership That Gets Results (Daniel Goleman)

v  Getting the Attention You Need (Thomas H. Davenport and John C. Beck)

v  The Successor’s Dilemma (Dan Ciampa and Michael Watkins)

v  The Rise and Fall of the J. Peterman Company (John Peterman)

v  Why Should Anyone Be Led by You (Robert Goffee and Gareth Jones)

v  Leading Through Rough Times: An Interview with Novell’s Eric Schmidt (Bronwyn Fryer)

The Harvard Business Review Paperback Series

The series is designed to bring today’s managers and professionals the fundamental information they need to stay competitive in a fast-moving world. From the preeminent thinkers whose work has defined an entire field to the rising stars who will redefine the way we think about business, here are the leading minds and landmark ideas that have established the Harvard Business Review as required reading for ambitious businesspeople in organizations around the globe.

 

Other books in the series

Harvard Business Review Interviews with CEOs

Harvard Business Review on Brand Management

Harvard Business Review on Breakthrough Thinking

Harvard Business Review on Business and the Environment

Harvard Business Review on the Business Value of IT

Harvard Business Review in Change

Harvard Business Review on Corporate Governance

Harvard Business Review on Corporate Strategy

Harvard Business Review on Crisis Management

Harvard Business Review on Decision Making

Harvard Business Review on Effective Communication

Harvard Business Review on Entrepreneurship

Harvard Business Review on Finding and Keeping the Best People

Harvard Business Review on Innovation

Harvard Business Review on Knowledge Management

Harvard Business Review on Leadership

Harvard Business Review on Managing High-Tech Industries

Harvard Business Review on Managing People

Harvard Business Review on Managing Uncertainty

Harvard Business Review Managing the Value Chain

Harvard Business Review on Measuring Corporate Performance

Harvard Business Review on Mergers and Acquisitions

Harvard Business Review on Negotiation and Conflict Resolution

Harvard Business Review on Nonprofits

Harvard Business Review on Organizational Learning

Harvard Business Review on Strategies for Growth

Harvard Business Review on Turnarounds

Harvard Business Review on Work and Life Balance

Friday, March 16, 2012 @ 05:03 AM
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RESPONSIBLE RESTRUCTURING

CREATIVE AND PROFITABLE ALTERNATIVES TO LAYOFFS

WAYNE F. CASCIO

BERRETT-KOEHLER PUBLISHERS                2002

 

Back cover

DOWNSIZING IS NOT THE ANSWER

RESPONSIBLE RESTRUCTURING IS

Research proves that companies that downsize are not more profitable than those that don’t. Wayne Cascio shows that it makes good business sense to restructure responsibly to avoid downsizing and instead regard employees as assets to be developed rather than as costs to be cut.

Cascio explodes thirteen common myths about downsizing, detailing its negative impact on profitability, productivity, quality, and on the morale, commitment, and even health of survivors. He illustrates his points with real-world examples of successful approaches to responsible restructuring by such firms as Charles Schwab, Motorola, Southwest Airlines, and many others.

Responsible Restructuring provides specific, step-by-step advice on what to do and what not to do when developing and implementing a restructuring strategy that, unlike layoffs, will leave your organization stronger and better able to face the challenges ahead.

“At last, a clear and cogent business case for not laying off large numbers of employees when profits go down. Wayne Cascio blends vivid case examples and careful financial analysis to show why downsizing may be counter-productive, even when economic times are tough. A must-read for any executive who wants to be prepared to cope with tough times.”

Joanne Martin, Merrill Professor of Organizational Behavior,

Graduate School of Business, Stanford University

“Knowledge businesses depend on the engagement of their people to innovate and grow. Cascio makes the point, with compelling evidence, that the responsible management of restructuring can sustain, if not enhance, this level of engagement. Clearly, the more common practice of far less responsible behavior can have a devastating impact on the future of the enterprise. This book provides the needed guidance to know the difference and to take an informed path.”

Debra Engel, former Senior Vice President,

Corporate Services, 3Com

Responsible Restructuring is a thoughtful, responsible, and necessary outline for management at all levels of corporate America. Professor Cascio has, with a short, but powerful book, issued a common-sense blueprint for restructuring in today’s rapidly changing business world.”

Eugene K. Anthony,

Retired U.S. Administrative Law Judge

Front cover

Wayne Cascio draws on the results of an 18-year study of S&P 500 firms to show that firms that restructure through downsizing are not more profitable than those that don’t, and often end up hurting themselves in the long run. Responsible Restructuring proves that it makes good business sense to restructure responsibly, treating employees as assets to be developed, so that they can be in a better position to help the organization achieve its goals. Cascio uses real-life examples from companies such as Compaq, Cisco, Reflexite, and others to illustrate successful approaches to responsible restructuring. Practical tips and step-by-step advice show readers how to develop a responsible plan for restructuring, and how to implement it effectively to make their organizations stronger while positioning them to face the challenges of the future.

“For business, the ‘bottom line’ is usually economic. But as Wayne Cascio shows, it is the human bottom line that is critical for achieving economic goals. Filled with sharp insights and clear guidelines, this book is a must-read for anyone concerned about the future well-being of the work-place.”

Christina Maslach, Ph. D.,

Professor of Psychology and Vice Provost,

University of California, Berkeley

About the author

Wayne F. Cascio has written extensively about employment downsizing and restructuring, and has consulted with a wide variety of firms on six continents. He is past chair of the Human Resources Division of the Academy of Management, past president of the Society for Industrial and Organizational Psychology, and is currently a professor of management at the University of Colorado-Denver.

Preface

This book is about changing manager’s perceptions of employees from costs to be cut to assets to be developed. Almost two million American jobs were lost in 2001. In many cases, these job losses represented conscious decisions by managers to reduce the size of their workforces through layoffs or selling off unprofitable assets. In others, it almost surely was the result of “slash-and-burn” tactics that simply copied what competitors were doing.

Yet not all companies follow these approaches. This book highlights creative and profitable alternatives that some companies take in their approaches to restructuring and cutting costs. Those approaches are termed “responsible restructuring.” The book shows that, especially in knowledge-based organizations, cutting people can often be disastrous, except as a last resort.

Consider this fact. Over the long term, any effort to develop an organization will encounter economic swings both up and down, as well as changes in markets, customers, products, services, and technology. I have found that “preventive planning” is a key difference between organizations that can deal with such changes in a systematic, orderly way, versus those that resort to knee-jerk reactions in order to respond swiftly (often through mass layoffs). Companies like Reflexite and Southwest Airlines (described in Chapters 5 and 6, respectively) are good examples of preventive planners. Each has built a plan for restructuring into the overall economic plan for its business.

  • This book builds on the seminal publication I did in 1995 for the United States Department of Labor, entitled Guide to Responsible Restructuring.

What became obvious to me was that companies differed in terms of how they viewed their employees:

Employees as costs to be cut. These are the downsizers. They constantly ask themselves, “What is the minimum number of employees we need to run this company? What is the irreducible core number of employees the business requires?”

Employees as assets to be developed. These are the responsible restructurers. They constantly ask themselves, “How can we change the way we do business, so that we can use the people we currently have more effectively?”

The downsizers see employees as commodities – like microchips or lightbulbs, interchangeable, substitutable, and disposable, if necessary. In contrast, responsible restructurers see employees as sources of innovation and renewal. They see in employees the potential to grow their businesses. Chapter 1 highlights these differences, puts the issue of restructuring into broad perspective, and examines the consequences of treating employees poorly versus the payoffs from treating them well.

Chapter 2 presents the results of an analysis of the financial consequences of alternative restructuring strategies used by 500 firms (Standard & Poor’s 500, or the S&P 500) from 1982 to 2000. The S&P 500 is one of the most widely used benchmarks of the performance of U.S. equities. The study addressed two questions: “Are firms that downsize more profitable than those that don’t, or more profitable than other firms in their own industries, in the year of the downsizing, as well as up to two years later?” and “Over the same time period, are stockholders better off investing in a portfolio of companies that downsize, as opposed to investing in companies that don’t?” The answer to both questions is no. This is why it is reasonable to question the efficacy of downsizing as the preferred approach to restructuring, and to examine alternative approaches.

Chapter 3 explodes 13 myths about employment downsizing and presents the actual facts, based on systematic research. The myths address issues such as the profitability and productivity effects of employment downsizing; its effects on quality as well as on the morale, workload, and commitment of survivors; the security of jobs at firms that are doing well; and the health consequences of layoffs.

Chapter 4 presents the case for restructuring and the introduction of “high-performance work practices.” The latter include practices such as skills training and continuous learning, information sharing, employee participation in the design and implementation of work processes, flattened organizational structures, labor-management partnerships, compensation linked to employee skills and organizational performance, and customer satisfaction – as defined by customers. The chapter presents compelling evidence to support the conclusion that high-performance work practices have important, meaningful effects on a firm’s financial and nonfinancial performance indicators and that the most effective employment relationships are those in which open-ended inducements provided by employees are balanced by open-ended contributions from employees.

Chapter 5 presents 10 alternative approaches to responsible restructuring, using as illustrations Charles Schwab & Co., Compaq Computer, Cisco, Accenture, Motorola, Reflexite, Intel, Minnesota Mining and Manufacturing Company (3M), ChevronTexaco, Acxiom, Sage Software, Louisiana-Pacific Corporation, Philips Electronics Singapore, and Procter & Gamble. The chapter describes the specific practices these firms use to demonstrate their commitment to their people as assets to be developed rather than as costs to be cut. Even when cuts are necessary, firms such as these use practices that promote goodwill and loyalty, both among those who leave as well as among those who stay.

Chapter 6 highlights a small group of firms, public as well as private, large as well as small, that have implemented no-layoff policies, and it describes specific employment and business practices at three no-layoff companies: Lincoln Electric, SAS Institute, and Southwest Airlines. The chapter emphasizes that there is virtue in the stability of employment and that there is a no-layoff payoff.

Chapter 7 is a capstone chapter that illustrates what to do – and what not to do – when restructuring responsibly. It points out common mistakes that companies make when restructuring, along with advice on how to avoid those mistakes. It is a step-by-step guide to responsible restructuring that builds on all of the research and practical experiences presented elsewhere in the book.

Wayne F. Cascio

Golden, Colorado

June, 2002

Monday, March 5, 2012 @ 04:03 AM
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THINK AGAIN

WHY GOOD LEADERS MAKE BAD DECISIONS

AND

HOW TO KEEP IT FROM HAPPENING TO YOU

SYDNEY FINKELSTEIN, JO WHITEHEAD, ANDREW CAMPBELL

HARVARD BUSINESS PRESS     2008

 

Front cover

We’ve all watched smart, experienced leaders make flawed – even catastrophic decisions. Some keep believing they have made the right choice, even when the disastrous consequences are staring them in the face. What is the root cause of these failures? How can the risks be reduced? And how can you be sure that you’re making the right decisions?

In this fascinating and instructive book, Sydney Finkelstein, Jo Whitehead, and Andrew Campbell – each a distinguished expert on strategy and decision making in corporations – show how the usually beneficial processes of the human mind can become traps: experience and emotion can distort our judgment, even while we’re striving for objectivity, and we fail to spot errors in our thinking.

Think Again provides a new model to help make better decisions. With vivid stories ranging across industries and disciplines, the authors deconstruct bad decisions and identify the forces that have produced them. They go on to show you how to recognize the conditions – red flags – under which good decision making is most likely to falter, and offer a way of selecting safeguards that reduce the risk and ensure better outcomes.

There is no guarantee for perfect decisions. But with Think Again, you can understand the hurdles between you and success, counterbalance their effects, and make better decisions – every day.

 

Introduction

Decision making lies at the heart of our personal and professional lives. Every day we make decisions. Some are small, domestic, and innocuous. Others are more important – decisions that affect people’s lives, livelihoods, and well-being. Inevitably, we make mistakes along the way. We are only human – even when we are at work. Indeed, the daunting reality is that enormously important decisions made by intelligent, responsible people with the best information and intentions sometimes go wrong.

Good leaders make bad decisions. Even great leaders can make bad decisions.

President Kennedy is famous for his blunder over the Bay of Pigs. President Hoover failed to inflate the economy after the great crash of 1929. Margaret Thatcher, the British prime minister, championed a “poll tax” that contributed to her being ousted by her own party. Paul Wolfowitz, the former U.S. deputy secretary of defense, was asked to resign as president of the World Bank because of a pay settlement related to his partner, who also worked at the bank.

And it’s not just politicians and public servants who get it wrong; business leaders, too, are prone to misjudgment. Juergen Schrempp, CEO of Daimler-Benz, led the merger of Chrysler and Daimler-Benz against internal opposition. Nearly ten years later, Daimler was forced to virtually give Chrysler away in a private equity deal. Lee Kun Hee, CEO of Samsung, pushed his company into a disastrous investment in automobiles. As losses mounted, he was forced to sell the car division for a tenth of the billions he had invested. An Wang, founder of the electronics company Wang, insisted on a proprietary operating system for his company’s personal computer, even after it was clear that the IBM PC would become the industry standard. The company is now history.

Whether the decision is a personal one, as in the case of Wolfowitz, or of global importance, as in the case of the U.S. government reaction to the financial crisis in the late 1920s, mistakes happen. But why do good leaders make bad decisions? And how can we reduce the risk of its happening to us?

 

The decisive heart

To find out, we traveled to the heart of decision making in organizations of all shapes and sizes throughout the world. Each of the authors brought his particular perspective to the problem. As one of the world’s leading researchers into corporate strategy, for example, Andrew has been privy to some of the most important decisions made in some of the world’s biggest companies. While, in his research – captured in his best-selling book, Why Smart Executives Fail – Sydney has examined the intricacies of failure. Finally, from his doctoral research on decision making and his years with The Boston Consulting Group, Jo has a unique combination of intellectual rigor and practical experience. What linked all our work and brought us together was a fascination with not just why bad decisions are made, but also what can be done to mitigate the dangers.

This unique combination of backgrounds and perspectives has been supplemented by our joint research. We began by assembling a database of decisions that went wrong. Let’s be clear: we were not looking for decisions that simply turned out badly. We were looking for decisions that were flawed at the time they were made. This is an important point. It isn’t that with twenty-twenty hindsight we identified these decisions as flawed. We sought out decisions in which any clearheaded analysis at the time would have concluded that it was the wrong decision.

Of course, many bad outcomes are due to bad luck or to taking calculated risks. In the business and political worlds in particular, sensible decisions based on considered thinking can turn out badly thanks to the unavoidable risks involved. Sometimes people are just unlucky.

As you can imagine, trying to distinguish between flawed decisions and calculated risks that turned out badly is not easy. For each, we made an assessment. Given the information available at the time, did we think that a reasonably competent person would have made the same decision?

We also looked for dissenting views in the decision-making process. The existence of contrary views is not proof that a decision is wrong. Many decisions have contrary views. But if there were no contrary views at the time, we excluded the decision from our rapidly expanding collection.

We quickly found there are an awful lot of bad decisions out there! Indeed, in unfamiliar circumstances, such as businesses entering new markets or politicians coping with new challenges, flawed decisions abound. We did not find it hard to identify 83 of them (appendix I lists the entire data base of decisions we studied).

We are not claiming that we have a unique ability to spot flawed decisions. Indeed, some of the decisions we examine may be considered by others as wise choices that turned out badly. Fortunately, our argument does not depend on whether our examples are correctly categorized. Our understanding of why flawed decisions are so common comes from the work that has been done by neuroscientists and decision scientists to understand how the brain works when faced with a set of circumstances that require a decision.

Flaws of the jungle

So what did we find in our quest to understand why capable people make errors of judgment? The answers were simpler and more powerful than we were expecting.

Two factors are at play in a flawed decision: an individual or a group of individuals who have made an error of judgment, and a decision process that fails to correct the error. Both have to be present to produce a bad decision. This was an important realization. A bad decision starts with at least one influential person making an error of judgment. But normally, the decision process will save the day: facts will be brought to the table that challenge flawed thinking, or other people with different views will influence the outcome. So the second factor that contributes to a bad decision is the way the decision is managed: for whatever reason, as the decision is being reached, the erroneous views are not exposed and corrected.

As a result, we began to focus our research on how our brains make decisions. Part 1 describes how the brain has been wonderfully designed for decision making – but also how it can be tricked into false judgments.

Part 2 describes the four conditions under which flawed thinking is most likely to happen. We call these red flag conditions because they provide a warning that when these conditions exist, even an experienced decision maker may get it wrong. Complex decisions, involving interpretation and judgment, are difficult to get right. You need debate – but how do you know when you or the other party is arguing from a biased position? You need consensus – but how do you know when your consensus is really groupthink? What is needed is a diagnostic for knowing when the risk of being wrong is at its highest – when the decision makers need to step back and “think again.” Our red flag conditions are a simple, but not simplistic tool to help decision makers to know when to pause for breath – when you need to take special steps to make sure that a decision does not go off the rails.

Part 3 describes what you can do about it. Unlike other writers in this increasingly popular field we believe that it is impractical for us to correct our own mental processes. The brain’s way of working makes this solution particularly difficult. Hence, when there are red flag conditions, we recommend safeguards that are external to the individual. We describe four types of safeguard; each helps to strengthen the decision process, so that the influence of distorted thinking is diluted or challenged.

  • Safeguards reduce the risk that red flag conditions will lead to a bad decision.
  • Safeguards need to be chosen not only with an understanding of the red flag conditions but also with knowledge of the people and the organization, as well as a healthy skepticism of too much bureaucracy.
  • Our red flags and safeguards framework not only helps defend against bad decisions, it also helps cut back on bureaucracy.
  • For decisions where there are no red flags, the decision process can be fast and simple.
  • For decisions with red flags, leaders can design appropriate safeguards that are more likely to be effective and less likely to demotivate or dehumanize the managers involved.
  • We are not recommending more process but more targeted process. In chapter 10 we give guidance on how to do this.
  • Further advice and ideas can be found on our Web site, www.thinkagain-book.com.

If we have one ambition for the book, it is to legitimize more discussion about red flag conditions and to energize people everywhere to feel comfortable raising issues of decision process design. The simple questions “Are there any red flags here?” and “Have we got a good process for this decisions?” should be as common as “What decision are we trying to make?” or “Who is making this decision?”

It won’t guarantee you never make a bad decision again – what book could? – but it will enable you to better understand why decisions go wrong, and help protect yourself and your colleagues from the inevitable errors of judgment you will make.

 

PART ONE: HOW YOUR BRAIN MAKES DECISIONS

Chapter One: In the Eye of the Storm

Chapter Two: Pattern Recognition

Chapter Three: Emotional Tagging

Chapter Four: One Plan at a Time

 

PART TWO: WHY DECISIONS GO WRONG

Chapter Five: Misleading Experiences

Chapter Six: Misleading Prejudgments

Chapter Seven: Inappropriate Self-Interest

Chapter Eight: Inappropriate Attachments

 

PART THREE: RED FLAGS AND SAFEGUARDS

Chapter Nine: Reducing Risks with Safeguards

Chapter Ten: Selecting Safeguards

Chapter Eleven: Leaders Make Good Decisions

 

APPENDIX I: Database of Cases

APPENDIX II: Database of safeguards

Notes

Index

About the Authors

Sunday, February 19, 2012 @ 04:02 PM
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MANAGEMENT CHALLENGES FOR THE 21ST CENTURY

PETER F. DRUCKER

HARPERBUSINESS                       1999

 

Back cover

“This is not a book of PREDICTIONS, not a book about the FUTURE. The challenges and issues discussed in it are already with us in every one of the developed countries and in most of the emerging ones (e.g., Korea or Turkey). They can already be identified, discussed, analyzed and prescribed for. Some people, someplace are already working on them. But so far very few organizations do, and very few executives. Those who do work on these challenges today, and thus prepare themselves and their institutions for the new challenges, will be the leaders and dominate tomorrow. Those who wait until these challenges have indeed become ‘hot’ issues are likely to fall behind, perhaps never to recover.

This book is thus a Call for Action”

From the Introduction

Front cover

New and revolutionary ideas and perspectives on the central management issues of tomorrow by “the most important management thinker of our time” (Warren Bennis).

In his first major new book since Post-Capitalist Society Peter F. Drucker discusses the new paradigms of management – how they have changed and will continue to change our basic assumptions about the practices and principles of management. Drucker analyzes the new realities of strategy, shows how to be a leader in periods of change, and explains “the New Information Revolution,” discussing the information an executive needsand the information an executive owes. He also examines knowledge worker productivity, and shows that changes in the basic attitude of individuals and organizations as well as structural changes in work itself are needed for increased productivity. Finally Drucker addresses the ultimate challenge of managing yourself while still meeting the demands on the individual during a longer working life and in an ever-changing workplace.

Incisive, challenging, and mind-stretching, Drucker’s new book is forward-looking and forward-thinking. It combines the broad knowledge, wide practical experience, profound insight, sharp analysis, and enlightened common sense that are the essence of Drucker’s writings, which are continuing international bestsellers and “landmarks of the managerial profession” (Harvard Business Review).

About the author

Peter F. Drucker was born in 1909 in Vienna and was educated there and in England. He earned his doctorate in public and international law while working as a newspaper reporter in Frankfurt, Germany, and afterward worked as an economist for an international bank in London. In 1937 he came to the United States and two years later published his first book, The End of Economic Man. Drucker’s management books and analyses of economics and society are widely read and respected throughout the world, with editions in more than 20 languages. He has also written a lively autobiography, two novels, and several volumes of essays. A frequent contributor to various magazines and journals over the years, Drucker is also an editorial columnist for the Wall Street Journal.

Drucker has had a distinguished career as a teacher, first as a professor of politics and philosophy at Bennington College, then for more than 20 years as a professor of management at the Graduate School of New York University. Since 1971he has been the Clark Professor of Social Sciences at Claremont Graduate School in California.

Drucker has four children and six grandchildren and lives with his wife in Claremont, California.

Introduction: Tomorrow’s “Hot” Issues

Where, readers may ask, is the discussion of COMPETITIVE STRATEGY, of LEADERSHIP, of CREATVITY, of TEAMWORK, of TECHNOLOGY in a book on MANAGEMENT CHALLENGES? Where are the “HOT” ISSUES OF TODAY? But this is the very reason why they are not in this book. It deals exclusively with TOMORROW’S “Hot” Issues – the crucial, central, life-and-death issues that are certain to be the major challenges of tomorrow.

CERTAIN? Yes. For this is not a book of PREDICTIONS, not a book about the FUTURE. The challenges and issues discussed in it are already with us in every one of the developed countries and in most of the emerging ones (e.g., Korea or Turkey). They can already be identified, discussed, analyzed and prescribed for. Some people, someplace are already working on them. But so far very few organizations do, and very few executives. Those who do work on these challenges today, and thus prepare themselves and their institutions for the new challenges, will be the leaders and dominate tomorrow. Those who wait until these challenges have indeed become “hot” issues are likely to fall behind, perhaps never to recover.

This book is thus a Call for Action

These challenges are not arising out of today. THEY ARE DIFFERENT. In most cases they are at odds and incompatible with what is accepted and successful today. We live in a period of PROFOUND TRANSITION – and the changes are more radical perhaps than even those that ushered in the “Second Industrial Revolution” of the middle of the 19th century, or the structural changes triggered by the Great Depression and the Second World War. READING this book will upset and disturb a good many people, as WRITING it disturbed me. For in many cases – for example, in the challenges inherent in the DISAPPEARING BIRTHRATE in the developed countries, or in the challenges to the individual, and to the employing organization, discussed in the final chapter on MANAGING ONESELF – the new realities and their demands require a REVERSAL of policies that have worked well for the last century and, even more, a change in the MINDSET of organizations as well as of individuals.

This is a MANAGEMENT BOOK. It intentionally leaves out BUSINESS CHALLENGES – even very important ones such as the question of whether the Euro will displace the U.S. dollar as the world’s key currency, or what will SUCCEED the 19th century’s most successful economic inventions, the commercial bank and the investment bank. It intentionally does not concern itself with ECONOMICS – even though the basic MANAGEMENT changes (e.g., the emergence of knowledge as the economy’s key resource) will certainly necessitate radically new economic theory and equally radically new economic policy. This book does not concern itself with politics – not even with such crucial questions as whether Russia can and will recover as a political, military and economic power. It sticks with MANAGEMENT ISSUES.

There are good reasons for this. The issues this book discusses, the new social, demographic and economic REALITIES, are not issues that GOVERNMENT can successfully deal with. They are issues that will have profound impact on politics; but they are not political issues. They are not issues the Free Market can deal with. They are also not issues of ECONOMIC THEORY or even of ECONOMIC POLICY. They are issues that only MANAGEMENT and the INDIVIDUAL knowledge worker, professional or executive can tackle and resolve. They are surely going to be debated in the domestic politics of every developed and every emerging country. But their resolution will have to take place within the individual organization and will have to be worked out by the individual organization’s MANAGEMENT – and by every single individual knowledge worker (and especially by every single executive) within the organization.

A great many of these organizations will, of course, be businesses. And a great many of the individual knowledge workers affected by these challenges will be employees of business or working with business. Yet this is a MANAGEMENT book rather than a BUSINESS management book. The challenges it presents affect ALL organizations of today’s society. In fact, some of them will affect nonbusinesses even more, if only because a good many nonbusiness organizations – the university, for instance, or the hospital, let alone the government agency – are more rigid and less flexible than businesses are, and far more deeply rooted in the concepts, the assumptions, the policies of yesterday or even, as are universities, in the assumptions of the day before yesterday (i.e., of the 19th century).

How to use this book? I suggest you read a chapter at a time – they are long chapters. And then first ask: “What do these issues, these challenges MEAN for our organization and for me as a knowledge worker, a professional, an executive?” once you have thought this through, ask: “What ACTION should our organization and I, the individual knowledge worker and/or executive, take to make the challenges of this chapter into OPPORTUNITIES for our organization and me?”

AND THEN GO TO WORK!

Peter F. Drucker

Claremont, California

New Year’s Day 1999

 

Chapter 1: Management’s New Paradigms

Chapter 2: Strategy – The New Certainties

Chapter 3: The Change Leader

Chapter 4: Information Challenges

Chapter 5: Knowledge-Worker Productivity

Chapter 6: Managing Oneself

Acknowledgements

Index 

Tuesday, February 14, 2012 @ 04:02 AM
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BEYOND THE FAMILIAR

LONG-TERM GROWTH THROUGH CUSTOMER FOCUS AND INNOVATION

PATRICK BARWISE AND SEÁN MEEHAN

JOSSEY-BASS www.josseybass.com         2012

PART 2

 

Chapter One: What Every CEO Wants

Every CEO wants sustained, profitable, organic growth. Even firms that grow mainly by acquisition – with its high failure rate – usually need to show that they can increase value through top-line growth of the combined business as well as through cost-cutting. Organic growth therefore lies at the heart of long-term shareholder value creation for almost all businesses.

We all know of companies like Procter & Gamble, Apple, Canon, IBM, Infosys, BestBuy, Oticon and Zara that seem to achieve this kind of profitable organic growth year after year. They go from strength to strength, from success to success. How do they do it?

Each has a different strategy and business model, but ultimately, they all succeed because they do a few obvious, fundamental things well, and they do them over and over again. Firms that achieve sustained, profitable organic growth have an open organization at their core. They exploit the critical advantages this brings to achieve four key imperatives:

v  Offer and communicate a clear, relevant customer promise.

v  Build customer trust and brand equity by reliably delivering that promise

v  Drive the market by continuously improving the promise, while still reliably delivering it

v  Get further ahead by occasionally innovating beyond the familiar

Although these ideas are familiar to everyone, putting them into practice is extremely difficult, which is why so few firms manage to deliver lasting organic growth. To hit the sweet spot, you need to get all of this right and in balance, as illustrated in the framework for this book (Figure 1.1).

Applying this framework requires firms to overcome a number of challenges. They must be more adept than their competitors at keeping in touch with customers’ needs – much easier to say than to do. They must overcome the tensions between the pressure for short-term profits (especially through cost-cutting) and the need to build long-term customer and shareholder value. They must tackle organizational arrogance, complacency, denial, boredom, and the tendency to get distracted by what’s new and exciting instead of what’s important. Worst of all – especially with today’s higher unemployment – they must reduce the corrosive, unacknowledged influence of fear, or at least deference, within the organization which prevents the open communication required to enable customer-focused improvement and innovation.

To introduce the issues, we first look at the twists and turns that have characterized the global market for mobile phone handsets since it came of age in the 1990s. There are many lessons to be drawn from the contrasting approaches and performance of Motorola and Nokia up to the launch of the Apple iPhone in 1997. Since then, the further lesson is how Nokia’s winning formula has, so far, fallen short in the new market conditions created by Apple and now Google. This case shows how achieving organic growth is a never-ending challenge. No-one knows which firm will enjoy most success over the coming years, but the winners will be those that successfully drive the market through relentless customer focus combined with innovation beyond the familiar.

Global Mobile Phone Handsets: How Nokia toppled Motorola only to lose its way

In April 1994, Fortune quoted a vice president of research at consulting firm AT Kearney as saying, ‘Motorola is the best-managed company in the world. Nobody else is even close’. Fortune described Motorola as a leader in innovation, total quality management (TQM), business process engineering, training, teamwork, and empowerment, and praised its ‘…candid internal debate that remains rare in corporate America’. In a shaky financial market, Motorola’s stock was trading at an all-time high, driven by record sales and profits.

Motorola’s flagship business was its market-leading cell phone division, with a global market share in 1994 of 45%, more than twice the 20% share of its closest competitor, Finland’s Nokia. But by 2000, all this had changed. Nokia was the clear market leader with a global share of 31%, while Motorola’s had collapsed to just 15%. Since then, Motorola’s problem-ridden handset business has suffered numerous losses, redundancies, new leaders, and strategy re-launches. There was a false dawn in 2004-6, driven by the success of the attractive RAZR phone, but by Q2 2010 Motorola’s market share had fallen to an all-time low of 2.8%, well behind Samsung’s 20.1%, LG’s 9%, and RIM and Sony Ericsson’s 3.4% each. Nokia, despite its poor performance in the high-growth smart phone segment, remained clear market leader with a 34.2% global market share.

How did a market leader described as the ‘best-managed company in the world’ stumble so badly, not just once, but again and again, while an obscure Finnish company left it for dust? While Nokia now faces serious challenges, which we’ll discuss, it achieved market leadership by being consistently better managed than Motorola for over 15 years.

Contrasting growth strategies

‘Offer and communicate a clear, relevant customer promise’

‘Build customer trust and brand equity by reliably delivering on that promise’

‘Drive the market by continuously improving on that promise, while still reliably delivering it’

‘Get further ahead by occasionally innovating beyond the familiar’

‘Put an open organization at the core’

After the iPhone: has Nokia lost it?

Three recurrent themes

In addition to the five elements of the framework, there are three other themes which recur throughout the book:

v  Brand equity and customer experience

v  Customer focus and insights

v  Continuous improvement versus ‘heroic’ breakthrough innovation

Brand equity and customer experience

Customer focus and insights

Continuous improvement versus ‘heroic’ breakthrough innovation

Conclusion: The structure of the book and five killer questions

The other main chapters cover the five elements in the framework one by one:

v  Your promise to the customer (Chapter 2)

v  Delivering today’s promise better and better every day (Chapter 3)

v  Driving the market by relentlessly improving the promise (Chapter 4)

v  Innovating beyond the familiar (Chapter 5)

v  Opening up: what leaders must do (Chapter 6)

To conclude this chapter, we offer five killer questions which every leader should ask. Each corresponds to one of the five elements in the framework and we’ll return to it as part of the relevant chapter. Of course, for each element, there are many other questions you could and should ask, but these five should help you see the potential for improvement, and where the biggest opportunities are likely to be:

Can your middle managers accurately describe your customer promise?

Can all members of your senior executive team name the three things that most undermine trust among your existing customers?

Is your brand really the best option for customers? Will it continue to be next month and next year?

Have you embraced any novel ideas that have produced significant innovations beyond the familiar during the past year?

Have front-line staff asked you any uncomfortable questions or suggested any important improvements to your offering during the last three months?

If you believe the answer to all five questions is yes, there are two possibilities. One is that you’re right, in which case the prospects for your company are brilliant and you don’t have much to learn from this book. Alternatively, you’re mistaken, in which case you’re also unlikely to learn much from the book unless you do something technically easy but emotionally difficult, which is to gather objective evidence on each question.

For instance, you may think that your middle managers can accurately describe your customer promise (and they probably think so too) but have you asked them? Are their answers concise, consistent, convincing, and correct? If so, bravo! – your organization is in the small, excellent minority on this dimension. If, more likely, the honest answer is no, you’ve already identified an area for improvement. The same applies for all five elements of the framework.

We now turn to the first of these, how to offer and communicate a clear, relevant customer promise.

Monday, February 13, 2012 @ 12:02 AM
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DEVELOPING A PLAN FOR THE PLANET

A BUSINESS PLAN FOR SUSTAINABLE LIVING

IAN CHAMBERS & JOHN HUMBLE

GOWER        2011

The Green Economics and Sustainable Growth Series

PART 8

Chapter 3: Executive Brief No. 2: Climate Change (Cont)

The role of Government, Business and people

BUSINESS

Why is it important that business takes an active part in addressing Climate Change? There are three key reasons: Contribution; Innovation and finance; Cost savings and efficiency….

 

THE ARROW APPROACH

There are a range of options which can be used to address the challenge of Climate Change for business. These opportunities for moving towards non-carbon-based energy supplies can be best summarised using what can be called the ‘ARROW’ strategies. However, before these strategies are deployed, it is essential to review the current status of the business with a Carbon Footprint Audit. This identifies strengths and weaknesses, opportunities and threats in relation to Climate Change and related issues for each business. From this the priorities for attention can be identified and the following approaches implemented using the ARROW framework: Avoid; Reduce; Replace; Offset, Watch and adjust….

A greener world using information and communications technology (ICT)

 

PEOPLE

In the UK household usage contributes to an estimated 30% of national energy consumption. It is therefore important to look at the strategies that people, particularly in the top 20 countries, can use to reduce their personal carbon footprints. The table below outlines average UK household usage: …

Focus

A quick review of the following table shows that a major difference can be made by focusing on the key areas which can make the most impact – electricity supplies, air travel and car transportation. Addressing these three key areas could contribute to a target reduction of over 50% over the next 10 years in a typical UK household. If every household in the UK undertook this challenge, the impact on greenhouse gas emissions in the UK could be quite significant. So let’s look at some ways this could be achieved: Renewable energy supplier; Reduce or offset air travel; Reduce car emissions ….

These three strategies alone, some of which can be implemented immediately, and some of which can be phased in over time, would bring the total effective emissions reduction to over 50% by 2020 per household – well above the EU target of 20% in a similar period.

Further reductions

Solar-powered clothes drying

Greenhouse reabsorption

Climatexhange – an Oxfordshire partnership

 

Chapter 4: Executive Brief No. 3: Energy Supplies

Chapter 5: Executive Brief No. 4: Water and Food Supplies

Chapter 6: Executive Brief No. 5: Planet Sustainability and Biodiversity

Chapter 7: Executive Brief No. 6: Extreme Poverty

Chapter 8: Executive Brief No. 7: Global Health

Chapter 9: Executive Brief No. 8: Universal Education

Chapter 10: Executive Brief No. 9: Conflict and Peace

Chapter 11: Executive Brief No. 10: Financing a Sustainable World

Chapter 12: Executive Brief No. 11: The Challenge of Interconnectivity – The Perfect Storm or the Perfect Opportunity?

PART III: DEVELOPING A PLAN FOR THE PLANET

 

PART IV: MANAGING A PLAN FOR THE PLANET

 

PART V: DELIVERING A PLAN FOR THE PLANET

 

Chapter 25: Delivering Our Plan for the Planet

Epilogue

The global economic downturn has exposed the extent to which markets and societies are increasingly interconnected and interdependent. We the participants of the B4E (Business for the Environment), recognise that the economic, environmental and social challenges and risks we face demand a new level of leadership and cooperation.

We are confident that by exercising such leadership, restoring trust and by working together we have the opportunity to put our global economy, our markets and lifestyles and security, and, ultimately our planet on a sustainable path.

The Green Imperative, B4E Summit, Paris (2009)

The financial crisis and economic downturn have dominated the thoughts and action of leaders of all international and national governments and businesses.

At first sight this is negative news for the focus and investment in dealing urgently with the global challenges.

Global setbacks … and future opportunities in the age of green economics.

Governments facing pressures to maintain the living standards of citizens and aware of the political risks of increasing taxes may well delay or reduce their promised payments to help those in poverty. Businesses fighting for their survival may reduce their commitments to greenhouse emissions and downgrade their efforts in corporate social responsibility.

Our view is that governments will temporarily fail to fully honour their pledges at a time when crucial decisions which influence the survival of life on this planet in the long term have to be made now. When the immediate panic and crises reduce, as they will, the realisation that these challenges are not an optional extra but are of fundamental importance will return.

For example, there is no escaping the enormous economic challenge of transforming the world’s energy source to zero carbon systems and reducing gashouse emissions. The Obama administration is dedicating over $150 billion in green infrastructure investments over the next ten years. Short-term problems can not disguise the huge future opportunities. Ban Ki-moon, UN Secretary General, puts this in historic perspective: ‘We have experienced great economic transformations throughout history: the industrial revolution, the technology revolution, and the era of globalisation. We are now on the threshold of another – the age of green economics.’

The challenge of the world’s poor

World Bank President, Robert Zoellick, insists that global finance leaders ‘must look beyond the financial rescue to the human rescue… poor countries are already facing a triple hit as the financial challenges continue to spread and many are at a tipping point … the poorest can not be asked to pay the biggest price.’

In 2009, the emergency arising from the financial crisis could force an additional 55 million people in the developing world into poverty – on less than $1.25 a day. The number of chronically hungry is expected to climb to over a billion, reversing the recent gains in fighting malnutrition. Net private capital flows to developing countries are already in sharp decline. Remittances are down about 8%.

Therefore it is imperative for wealthy nations to respond decisively to this crisis, as well as dealing with their own issues.

Business commitment to sustainability

The good news is that progressive businesses will not reduce their commitment to sustainability. They understand that failure to respond to the challenges which surround sustainability will injure their long-term profitability. Moreover, they see increasing opportunities as the unstoppable move to the green revolution creates the need for new products and services and forces a rethink of present practices. These often produce savings and increased efficiencies. Corporate social responsibility and all it stands for is now deeply embedded into the core strategies of many successful businesses.

The driving force for continued investment and commitments may be more economic than moral: but it will be there.

In good times and bad times the sustainability issue has to be well managed. As George Kell, Executive Director of the UN Global Compact puts it, ‘Restoring confidence and trust in markets will require a shift to long-term sustainability. And corporate responsibility must be an instrument towards this end.’ This comment increasingly reflects mainstream business thinking.

‘Sustainability will remain critical to our business even during an economic downturn,’ says Ian Cheshire, Group Chief Executive at Kingfisher. ‘As a major international retailer we have a responsibility to tackle issues such as Climate Change and work towards a more sustainable future.’

Jan Babiak, Global Climate Change and Sustainability Leader at Ernst and Young says that companies should realise that there are substantial savings to be made from cutting down on the wasteful use of energy and economising with other materials.

Francis Sullivan, Deputy Head of Corporate Sustainability at HSBC says, ‘Managing risk and promoting business opportunity is critical and, in the context of sustainability issues, is as important today as it was before the current challenges in the financial markets surfaced.’

Charities and NGOs

What of the millions of individuals who regularly and generously contribute to the work of charities and other organizations and who are researching and working in a vast range of areas related to sustainability? As personal incomes are reduced by the impact of recession there is already some fallout in spite of the fact that donations are a small proportion of personal income. This funding problem coincides with a greater demand for help from the charities. Their response must be to improve their management effectiveness and focus their reduced capability on the key issues which give maximum leverage and benefit.

The opportunity

A potential criticism of a Plan for the Planet is that it is to idealistic. To have any hope of being achieved it requires a massive, global, coordinated and shared strategy and action plan. Although it is urgent and failure to act will damage the lives of everyone on earth, such a concept and approach is a great idea but is it ‘an impossible dream’?

The global response to the worst economic and financial crisis since the Great Depression has demonstrated what is possible when world leaders acknowledge a common threat. What has resulted has been unprecedented national and international coordination, transparent information and rapid responses to the urgency.

This is encouraging proof that when a global threat is understood and acknowledged by the world’s government, business and community leaders, urgent and constructive actions can be quickly put in place and globally coordinated.

The short and long-term threats of the combined ten global challenges are clearly greater than the financial crisis alone.

We have the opportunity to work urgently together to continue to develop and implement this Plan for the Planet to build a sustainable world for this generation, and all of those to come.  

 

Monday, February 13, 2012 @ 12:02 AM
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GOOD TO GREEN

MANAGING BUSINESS RISKS AND OPPORTUNITIES IN THE AGE OF ENVIRONMENTAL AWARENESS

JOHN-DAVID PHYPER AND PAUL MACLEAN

WILEY          2009

PART 2

 

Introduction

The environment has finally been given a seat at the boardroom table. Even companies that were once notorious for their exploitation of the environment are joining the discussion, as they try to cope with the depth and speed of the upheaval environmental issues are having on their business. Some business leaders are coming to terms with this new reality through the following acts:

Humility – as they stand in front of shareholders at the annual general meeting and explain that the strategy of blissfully ignoring hazardous ingredients and the threat of climate change is hurting their profitability, and

Generosity – as their companies pay significant fines to environmental regulatory agencies or settlements to plaintiffs in class-action lawsuits over product recalls, both of which could have been avoided by adopting more robust programs to protect the environment and by ensuring that products did not contain hazardous materials.

Many companies are caught in a tidal wave of green issues – climate change, alternative energy, scarcity of resources (e.g., looming water shortages) and the explosion of information on the Internet (raising awareness of hazardous materials in consumer products, as well as corporate injustice anywhere in the world). This green wave will force companies to reassess how they do business, by re-evaluating the life cycle of their products and the effectiveness of their supply chains.

Discussion around boardrooms on environmental issues is no longer defined by words like “nice to do” and “early adopters.” Instead, one hears the terms “business critical,” “crossing the chasm” and “creating competitive advantage” – all giving rise to a new lexicon that is being used at the executive level to identify and exploit opportunities where others see threats.

This green wave will also create a “green rush” that will have a substantial impact on both the economy and the environment in the long term. As with the gold rush of the late 19th century, some individuals will prosper significantly while others will not for a variety of reasons – inadequate market information, lack of business acumen, timing, access to capital and uncertainty in oil prices. However, unlike the original gold rush, this boom should actually improve environmental conditions, rather than degrade them further. Organizations that fail to consider environmental issues in their business model may find themselves victims of the inevitable bust that awaits those who miss out. The key drivers for change include

v  Increased public awareness of environmental issues (e.g., global warming, species extinctions, carcinogens, endocrine disruptors) has significantly impacted consumer spending and retention

v  Growth in the quantity, complexity and enforcement of legislation related to the protection of consumers, workers and the environment around the world

v  An increase in the amount of market-based instruments put forward by governments around the globe to reduce emissions and promote alternative energy

v  Expansion of U.S. disclosure requirements to include environmental costs and liabilities under the Sarbanes-Oxley legislation

v  Forecasted water shortages in many parts of the globe

v  The drive to reduce supply chain costs associated with environmental mismanagement (the Wal-Mart effect)

v  Increased environmental disclosure requirements from the investment and insurance communities and negative response (i.e., decreased valuation or increased premiums) if environmental, social and governance factors are neglected

v  Dramatic impacts to the bottom line resulting from the impairment of corporate brand via consumer, worker or environmental issues

v  Forecasted increase in petroleum prices, which will reinforce activities related to renewable energy and energy-efficient transportation

v  Elevated security concerns related to the movement and storage of hazardous materials as well as reliance on foreign oil, especially reserves controlled by national oil companies

v  improved employee satisfaction and retention following implementation of sustainable development (SD) programs

Industry visionaries have emerged to guide their companies, their sector and, in some cases, industry in general, towards principles of SD and corporate social responsibility (CSR), both of which are discussed in more detail in chapter 1. Key principles that these visionaries have in common are the need to innovate and invest in activities that will provide a strong triple bottom line (TBL) – people, planet and profit. These leaders are turning challenges (such as additional expenditures, process inefficiencies) into opportunities (new products/services) for innovation and success throughout their companies’ value chain. They are thinking out of the box and in doing so increasing revenue, reducing expenditures and risk, and creating strong brands. They are decoupling the concepts of “increased production” and “increased environmental impact.”

  • This book doe not define the impact or the moral reasons to change – we have left this for other authorities.
  • Nor does it address the cosmetic activities to be green such as purchasing carbon offsets.
  • What it does provide is evidence that a green rush is occurring.
  • The key difference between this wave and previous green waves – 1970s/1980s controls on emissions/discharges from heavy industry and 1990s adoption of management systems (ISO/CSR) standards – is that, this time around, environmental issues are being included in key strategic, tactical and operational planning and decisions.

 

Changing concerns

The creation of a product, whether for industrial or consumer use, by its very nature will impact the environment. The extent of the impact can vary significantly depending upon the raw materials, process being utilized, emission control technology, end-of-life practices and the sensitivity of the receiving environment.

  • As companies overcame the hurdle of “significant local impact,” they began to pay attention to the cumulative effect of industrial activity on a global scale.
  • The focus has shifted from local to global impact – not just related to the transmigration of contaminants and global warming, but also to the quality of goods shipped from developing countries (e.g. concern over lead-based paints on toys shipped from China) to North America and Europe, and the environmental conditions of the manufacturing facilities.

 

Changing management of environmental issues

In the 1990s, Paul Hawken wrote two ground-breaking books on business and the environment. In preparation for our book, we revisited these topics to gauge their continued relevance to today’s business environment.

His work Ecology of Commerce: A Declaration of Sustainability, published in 1994, was a milestone that promoted the concept that businesses must “re-imagine” and “re-invent” themselves as cyclical operations, i.e., from “cradle to cradle.” Hawken advised three broad approaches: observe the waste-equals-food (raw products) principle of nature, change from a carbon to a hydrogen-/sunshine-based economy, and create systems that support restorative behavior. Hawken also posed a key question – who will lead the next industrial revolution, as the first one is not working?

Natural Capitalism: Creating the Next Industrial Revolution, published in 1999, has been described as the first book to explore the lucrative opportunities for businesses in an era of approaching environmental limits. Natural Capitalism describes a future in which business and environmental interests increasingly overlap, and in which businesses can better satisfy their customers’ needs, increase profits and help solve environmental problems all at the same time. The four interlinked principles of natural capitalism are

  1. Shifting from the traditional economic focus on productivity per unit of labor to productivity per unit of natural resources use
  2. Building production systems that mimic nature (for example, an agricultural production system that recycles wastes, as nature does, rather than discarding them)
  3. Transitioning from a goods-producing, “owning things” economy to a “service and flow” economy
  4. Investing in activities that protect or restore ecosystems

The evolution of industrial stewardship of environmental impacts can generally be described as follows, with forward-thinking companies ahead of these timelines (see also figure III):……

Follow the money trail

Government activities

Consumer demand

Increasing demand for alternative energy/water purification

Greening of the boardroom

Guiding Principles

The following nine guiding principles should be considered the mantra of companies wanting to minimize environmental impact and maximize revenue:

  1. Integrate the environment in all business decisions.
  2. Seek the truth.
  3. Eliminate waste throughout the product life cycle.
  4. Treat stakeholders as you would want to be treated.
  5. Eliminate hazardous chemicals.
  6. Switch away from high-carbon energy sources.
  7. Promote cultures of innovation.
  8. Leverage new technologies/disruptions.
  9. Don’t forget basic principles.

Integrate the environment into all business decisions

Seek the truth

Eliminate waste throughout the product life cycle

Treat stakeholders as you would want to be treated

Eliminate hazardous chemicals

Switch away from high-carbon energy sources

Promote cultures of innovation

Don’t forget basic business principles

Key Websites

Related Reading

 

Chapter 1: Executing a Green Strategic Plan

Chapter 2: (Mis)Management Systems

Chapter 3: “Green” or Just “Good” Design

Chapter 4: Green Marketing: Moving Green Products to the Mainstream

Chapter 5: Supply Chain Drivers

Chapter 6: What Are the Alternatives to Petroleum?

Chapter 7: Emissions Trading

Chapter 8: Managing Human Resources to Nurture a Culture of Innovation

Chapter 9: Road Map for the Future

Bibliography

Appendix A: Examples of Eco-Design and Green Procurement Legislation/Policy

Appendix B: List of Acronyms

Index

Thursday, February 9, 2012 @ 09:02 AM
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BEYOND THE FAMILIAR

LONG-TERM GROWTH THROUGH CUSTOMER FOCUS AND INNOVATION

PATRICK BARWISE AND SEÁN MEEHAN

JOSSEY-BASS www.josseybass.com         2012

PART 1

Front cover

Beyond The Familiar offers a practical framework to help companies achieve long-term organic profit growth. It focuses on actionable customer insights flowing freely through the business and ultimately leading to consistently great customer solutions and experiences and a strong brand.

It gives specific advice and examples on how to:

v  Offer and communicate a clear, relevant customer promise

v  Build customer trust by reliably delivering that promise

v  Drive the market continuously improving the offer, while still reliably delivering it

v  Get further ahead by occasionally innovating beyond the familiar

v  Support all this with an open organizational culture

If you’re looking for valid, practical guidance on how to achieve long term organic profit growth, it’s in your hands.

Preface

Persistent growth is elusive. According to one estimate, during the 15-year period 1990-2004, only 24% of 6000 large public companies sustained profitable growth over any five consecutive years, only 5% over any ten consecutive years, and just 1% over the full 15 years. Even the best companies lose the ability to generate long-term growth from time to time, in some cases irrecoverably. General Motors lost it in the 1970s, IBM in the 1980s, Motorola in the early 1990s, and Procter and Gamble in the late 1990s. GM and Motorola still haven’t recovered.

Long-term growth results from driving the top line organically or through acquisitions, combined with good cost management. Beyond the Familiar focuses on organic growth, but also covers how to prioritize resource allocations and cost reduction. Many of the reasons why sustained profit growth is so hard to achieve are organizational: poor framing, fear, vested interests, complacency, and denial. In our research we have again and again seen how these block the free flow and discussion of the market information and the ideas that power customer-focused execution and innovation and, ultimately, long-term growth.

Open organization is, therefore, at the heart of our framework. It is the underlying imperative for firms aiming for long-term organic growth. It enables them to achieve the other four imperatives that directly drive revenue and profit:

v  Offer and communicate a clear, relevant customer promise

v  Build customer trust and brand equity by reliably delivering that promise

v  Drive the market by continuously improving the promise, while still reliably delivering it

v  Get further ahead by occasionally innovating beyond the familiar

For long-term success, you can’t pick and choose from these imperatives. For instance, in the short-term, innovating beyond the familiar is risky and may be optional, but in the long-term, failure to do so is riskier still and can even lead to extinction. At the same time, even a famously innovative company like Apple also needs to put a lot of unglamorous ‘grunt work’ into execution and incremental improvements, most of which never reaches the headlines. It is this hidden foundation that enables Apple and other long-term growth exemplars to innovate successfully ‘beyond the familiar’.

Understanding customers’ varying and evolving needs and preferences better than the competition is a recurrent theme of this book. Seeing the world through customers’ eyes provides an unfamiliar, fresh and sometimes uncomfortable perspective that enables you to focus on what’s actually most relevant to the market, rather than on what you just assume is most relevant.

In our earlier book Simply Better: Winning and Keeping Customers by Delivering What Matters Most, we looked at ‘differentiation that matters’, that is, differentiation through the eyes of the customer. We argued that, despite marketers’ obsession with uniqueness, what most customers want are products and services that just work, rather than offering unique features and benefits.

We build on this here by showing what managers need to do to ensure that valid, actionable customer insights are not only generated (from a wide range of sources, not just formal market research) but then reach those with the power to act on them and that they then do so. We see growth as an outcome, a consequence, of promising and consistently delivering better and better customer solutions and experiences. Further, we see this process as building a valuable long-term asset, the company’s reputation in customers’ minds (brand equity), which is then the platform  for further growth.

To illustrate the framework, we have used a wide range of real-world cases of companies that have beaten the odds with sustained organic growth. Our examples aim to show the universality of the framework: they cover the spectrum from start up to mid cap and blue chip. Both new and established markets, both B2B and B2C companies, and both products and services.

In summary, Beyond the Familiar offers a practical framework to help executives master the challenge of achieving long-term organic growth by building strong brands based on actionable customer insights flowing freely through the business and ultimately leading to consistently great customer solutions and experiences.

This is an optimistic book. It offers no single bullet but, true to its message, it has a clear customer promise – a strong one: If you read this book and really apply the recommendations, you’ll load the dice in favour of your business’s likelihood of delivering long-term, market driving organic profit growth.

Chapter One: What Every CEO Wants

Every CEO wants sustained, profitable, organic growth. Even firms that grow mainly by acquisition – with its high failure rate – usually need to show that they can increase value through top-line growth of the combined business as well as through cost-cutting. Organic growth therefore lies at the heart of long-term shareholder value creation for almost all businesses.

Tuesday, February 7, 2012 @ 04:02 AM
posted by admin

GOOD TO GREEN

MANAGING BUSINESS RISKS AND OPPORTUNITIES IN THE AGE OF ENVIRONMENTAL AWARENESS

JOHN-DAVID PHYPER AND PAUL MACLEAN

WILEY          2009

PART 1

 

Preface

On a sunny day in the spring of 2008, several months before the cataclysmic economic events that will be remembered for decades, we discussed how corporate environmental management had evolved during our twenty years working in the field, and what lay ahead. We reflected on the many hundreds of projects in which we helped companies to implement environmental management systems (EMSs), to understand sustainable development (SD) and to address corporate social responsibility (CRS) concerns.

  • There are a few key attributes that distinguish “good” companies from truly “green” companies.
  • We noted that companies that demonstrate leadership through sustained action on global environmental challenges and achieve business success in the process also succeed in overcoming two problematic trends that continue to plague the rest of the pack.
  • The first is “cosmetic environmentalism” whereby companies focus on easy to do activities that provide an aesthetic fix.

The second issue: environmental management is typically fragmented in “silos” of activity – often focusing on SD initiatives, CRS reporting obligations or, more recently, climate change – contributing to further weakening of the approach. Activity in a particular silo may extend from the shop floor to upper management, but an absence of communication and exchange across key functions prevents companies from realizing the true value of management’s efforts.

This unfortunately common situation has often left a number of important questions unanswered. Among these are the following:

v  Why are companies not assessing the impact of environmental issues on their business models?

v  Who has overall responsibility for environmental issues at a company and do they have the authority to make real changes?

v  Why do departments that own a business function (e.g., product management, manufacturing, procurement, logistics) not have full ownership/accountability for environmental issues pertinent to their activities?

v  What obstacles are hindering companies’ shift from a “repair/refine” model for their products to a “redesign/rethink” approach that allows them to capitalize on business opportunities?

v  Why are companies not proactively assessing what hazardous chemicals may be in their products and thus pose harm to company’s brand (not based upon scientific peer review, but the court of public opinion, with the Internet elevating awareness)?

v  What is stopping companies from addressing the environmental/product issues associated with their complex web of suppliers, instead of allowing a “chain of uncertainty” to continue?

v  What criteria are companies using to invest in clean technology initiatives? Many clean technologies require long-term subsidies to compete, lack scalability (i.e., declining costs over time) and are solutions to “side issues.”

v  Why have so few companies automated compliance and risk management activities through their IT systems?

Our goal is to guide managers and executives in making informed business decisions on the management of risks and opportunities related to environmental issues. As IT is now business-critical for companies, we also discuss how environmental issues must be incorporated into IT systems to facilitate compliance and proper risk management. We deliberately avoid describing the impact of humans on the environment, nor do we discuss how to implement standard, well-known environmental programs such as the ISO 14001 EMS standard. There are plenty of good books on these topics.

  • While we drafted the manuscript, dramatic economic and political events were unfolding – the petroleum price spike of $140 per barrel and subsequent crash to $40 per barrel; the failure of the financial system leading to global recession; and the election of a Democratic president in the United States who supports action to mitigate climate change and promote a green economy.

Fortunately for us, they reinforced our basic premise that a shift has begun in which leading companies are starting to focus on business risk and opportunities related to environmental issues and in doing so, they

v  Assign ownership and accountability to the individuals/groups that manage key business functions and break down the EMS/SD/CSR silos

v  Redesign and rethink products to ensure the elimination of hazardous ingredients, optimization of energy efficiency and reduction of emissions, while boosting revenue

v  Seek out mismanagement (inefficiencies leading to elevated energy use, emissions, waste, etc.) in the supply chain to improve the bottom line and prevent environment impact of operations

v  Identify new business opportunities in both clean technology (clean water, renewable energy) as well as product life cycle management (PLM)

No longer are environmental issues viewed exclusively as a cost of doing business but now are seen as opportunities for revenue generation and cost reduction, and in some cases are seen as a way to create new business models with less reliance on carbon energy sources and as a shift from owning things to a service economy. It is important, however, to realize that these changes do not happen overnight and that for real revolutionary change to occur, we need to invest alternative energies and products that strive to be sustainable, are superior to what they are replacing and have a trajectory that allows them to be cheaper within a short period of time.

Introduction