BUSINESS ERA

Business history is littered with the corpses of companies that were hailed and deeply admired, not just by ephemeral stock markets and their acolytes, but by highly experienced and intelligent management gurus. Enron is only the latest sorry example of a phenomenon that will undoubtedly recur: the new boys muscling into an established industry with new methods which achieve unparalleled growth and miracles of profitability that far exceed the going rates.

There are always two possible explanations. Either the sitting managements have become too conservative, too hidebound and so slow in reacting to opportunity that it is allowed to pass by. In other words, the firms have become too bad to be good. Or else the miracles and their makers are too good to be true. The new men and methods are not as successful as they seem, and the new order of profitability is partly achieved by doubtful accounting devices, or even worse financial juggling. Enron's collapse seems to have resulted from both exercises in false creativity.

Yet of the two possible explanations, the first is nearly always the most popular. Vested interests rapidly close ranks around the new heroes - loved by the investment bankers, the stock analysts, the media, the deliriously happy investors, the equally delirious option holders. Nobody wants to hear unpalatable truths even when the lies are transparent. Take the case of a company named Atlantic Computers. It was in the then large-scale business of leasing IBM mainframes to corporates. Its profits, even by the standards of a rich industry, were staggering - and its rivals couldn't understand this competitive edge.

IMPRUDENT ACCOUNTING

They bought the same machines, presumably on much the same terms, from the same supplier and leased them to the same types of customer at much the same rates, using funds borrowed at the same cost. Yet rival managers who pointed out these indisputable facts were ignored as jealous fools: they were simply being outmanaged by a more efficient and enterprising competitor. When Atlantic duly collapsed, its backers discovered the horrible truth: that non-existent profits had been created by imprudent accounting for the residual value of its leased computers.

As so often in management, you face conflicting truths in such cases. Any manager in any business must be aware of these collisions of different kinds of realities, the paradoxes of success and failure...

1. Managers get locked into internal norms ('the way we do things round here') and external norms (the way this industry works).
2. Both sets of norms decay in relevance and effectiveness over time, but loyalty to them intensifies - and stultifies innovation, experiment and responsiveness.
3. Counter-productive conservatism results in unthinking denial, which blinds management to needed change and competitive dangers.
4. Establishment thinking gives new entrants a great initial advantage, but they swiftly develop their own internal and external norms.
5. The norms include intense belief in their innate superiority over all competitors and a general 'we have nothing to learn' complex.
6. When the unbroken run of success runs into the all but inevitable stumble, the ex-newcomers succumb to their own brand of counter-productive conservatism; here, too, unthinking denial blinds management to needed change and dangerous practices.

If the worst comes to the worst (as it often does), the practices become even more hazardous, as the management increasingly invents rather than makes profits. The follies are blatant, but the underlying problem is a hard nut to crack, even for truthful and wise managers. How do you balance leadership of an established market with subversive ideas and radical change? How do you preserve the disruptive dynamics of growth when you are enjoying all the comforts of guaranteed markets? How can you have an organisation that is both self-confident and self-critical?

INTERNAL VICTORIES: TOTAL QUALITY MANAGEMENT (TQM)

To use an analogy from the Trojan Wars, you have to follow Hector, but listen to Cassandra. That's one of the great strengths (but pervasive difficulties) of Total Quality Management (TQM). The Total Quality Management (TQM) organisation rates victories over its own incompetence as equal to wins over the competition. Cassandra identifies the internal enemies, and Hector defeats them by brisk and well-planned action. This is the old one-two beloved of boxers. It should be just as much adored by managers. After all, $1 million added to profits by eliminating waste is worth the same as $1 million made by selling more.

The internal victories are usually much easier to make, and the opportunities are never-ending. The Total Quality Management (TQM) principle that everything can always and for ever be improved can be verified every hour of every day. Become your own Cassandra. Pick an activity at random, and see if you get a result like this, taken from the real life of a famous multi-national company:

1. You ring the switchboard and ask to speak to an upper-middle manager.
2. The operator asks if he is expecting the call. You fib, and say 'Yes'.
3. The operator says she will connect you with the man's PA, but is unable to do so, and suggests you call back later.
4. You ask if you can leave a message, but are told firmly that voicemail is only for the use of the employees.
5. You ask for the man's e-mail address, but are told even more firmly that company policy forbids the release of such information.

TOO BAD TO BE TRUE?
Too bad to be true? What fuddy-duddy corporation could go to such bizarre lengths to prevent people - no doubt, including customers - from contacting its employees? The fuddy-duddy is Microsoft. That is almost unbelievable, but only 'almost'. Companies often sin most where they most profess virtue. Bill Gates may eulogise his 'Digital Nervous System' that links all parts of the business in a real-time network, but the self-praise diverges painfully from the reality.

The pain is primarily felt by the frustrated outsider. It could become acute for the business itself if the malfunction, as it probably does, springs from an inward-looking, self-sustaining bureaucratic culture and a disregard for customers and other external constituents of Microsoft's business.

The most interesting questions, though, are whether the senior executives in companies are aware of such self-defeating policies; and, if not, why not? In most cases, higher-ups don't know what gratuitous errors are being committed, even in head office. Even if faults come to their ears (or eyes), they may not act to remove the defect and reform the systemic failure which always underlies the fault.

For example, even when Marks & Spencer was riding high as Britain's, and even the world's, most admired retail chain, it had some obvious failings. These included window-dressing that year after year fell blatantly short of the best standards. I mentioned this serious defect once to a Very Important Person (since departed). 'Yes,' he replied, 'our windows are awful.' I couldn't help wondering why so highly paid and assertive a manager had let the wound fester. How many phone calls would (or should) have been needed to get the vital window displays right? Two or three?

The driving and driven Simon Marks, the true founder of the company, would roam the business like an avenging angel, seeking out corporate sin. Whether it was a plethora of forms (which he famously once consigned to the bonfire), fresh food kept over the weekend, or shortage of stock on the counters, nothing was too small (or big) to escape his attention. It's TQM philosophy again: search the fertile fields of folly and wisely take the ample opportunities for changing expensive slackness into profitable efficiency.

PLANNED ACTION
You dare not omit any product, component, process or service from this never-ending scrutiny, followed by planned action. All too often, however, the zeal for reform stops a good way below the top of the organisation. Actually, that's where it should begin. When I studied 20 outfits which claimed to have adopted Total Quality Management (TQM), the true successes (a minority, be it noted) had all begun their conversion by trying out the principles and practices on the top echelon. And this literally total involvement had lasted ever since.

The logic is unanswerable. How can top managers expect their subordinates to embrace any discipline that is shunned at the summit? More important still, how can performance throughout the organisation improve if its senior management is bringing poor processes to bear on the key functions of judgment and supervision which affect everything else?

Of all those functions, the decisive one is decision itself. Half of all decisions fail. That's the estimate made by Paul C. Nutt, a professor at Fisher College of Business in Ohio State University. His claim results from 20 years of research into what helps decisions to succeed and what turns them into debacles. The latter are merely conspicuous examples of a disease which has a far wider spread. As Nutt writes in Business Strategy Review, 'a debacle is merely a botched decision that gets a public airing'. Many more failed decisions die unmourned - and unnoticed by the outside world.

Every industry and every organisation can offer plenty of examples to prove Nutt's point. He cites the Millennium Dome on which Britain wasted £955 million in public money and got in return a failed visitor attraction and an unusable, unsaleable building. Then there's Eurodisney, whose cost soared from $2.5 billion to $4.4 billion, and whose launch was blighted by excessive prices and ludicrously high expectations for revenue. Nutt uses the Disney saga to illustrate 'three generic mistakes which characterise many of the failed decisions in my research':

1. Making premature commitments
2. Spending money on the wrong things
3. Using failure-prone decision-making processes

It's evident that the three mistakes are really one. If your decision-making processes are effective, they will prevent premature commitment and limit spending to the right means and ends. Yet Butt believes that 'two-thirds of decisions use failure-prone practices'. One of those feeble methods is to ignore practices altogether - without even thinking of subjecting the reasons for success or failure to systematic analysis. As Nutt wisely writes, people 'spend very little of their time thinking about how to make a decision'. This is a classic and common symptom of the failure mentioned above: knowing what should be done (like improving M&S's windows), but not actually doing it.

PARTICIPATIVE POWER
Nutt cites participation. Nearly everyone involved in the 400 decisions studied was aware of the importance of real participation - early involvement by those who will implement or be affected by the decision; yet 'participation is rarely used'. Participative power is a key factor in Total Quality Management (TQM). It is also one of the practices that avoid Nutt's seven decision-making vices:

(1) not taking charge by reconciling claims;
(2) failing to appreciate barriers to action;
(3) ambiguous aims;
(4) limited search and no innovation;
(5) misusing evaluations;
(6) ignoring ethical questions;
(7) failing to learn.

Best practice demands seven virtuous steps:

1. Network with and involve stakeholders so you know their concerns and requirements.
2. Participate with employees to show that you care about their needs and value their inputs.
3. Set objectives - think clearly about what results are required and feasible, and let everybody know the expectations.
4. Use enquiry and innovative thought to increase the number of options on the table.
5. Evaluate every option, comparing degrees of risk and value of benefits.
6. Audit the options to get a solid idea of the environmental and ethical implications.
7. Look for and remove 'perverse incentives' and encourage people to speak out frankly about their critical views.

Success in management and success in sports have the same roots. In business as in games, players must master two critical aspects: the techniques (including those of strategy and tactics) - and themselves. Self-mastery, making the best of your abilities, is the foundation of achievement in both fields. But there are also clear and important analogies in the approaches taken by winning managers and winners in sports to an equally vital matter: working with and through others to achieve success.

Yet the analogy between management and games has seldom been stressed. Far more often, writers have sought management lessons in warfare. Many books have dipped into military history, going as far back as the Middle Ages of Japan, to discover the secrets of business success. In highly competitive markets, strategists and tacticians can learn much useful lore (like never attack the enemy head-on unless you have at least a three-to-one advantage). But the ability to compete at all rests on qualities and attributes that are even clearer (because of the greater focus) in sport than they are in war.

The vital qualities and attributes can be summed up in one word: leadership. Obviously, and as everybody knows, that's crucial for sporting achivement. Once again, though, the sports analogy is far less commonly used. When John Kennedy entertained a group of business men in the White House early in his presidency, one told him bluntly that the United States needed a 'man on horseback'. But Kennedy rightly shot him down with a burst of spontaneous eloquence. Leadership in time of peace, even of cold war, is not properly exercised by riding roughshod over opposition.

Even better-informed people persist in identifying great leadership with military models. When William Rees-Mogg was berating John Major for lack of leadership in The Times, the heroes with which the luckless Premier was lashed were Roosevelt, Churchill and De Gaulle - all victors in the Second World War: though the military contribution of de Gaulle, the only certified soldier, was small, while his civilian contribution to France was huge.

Roosevelt, too, only achieved military leadership because of his prior success in arresting America's civilian slide into to slump and despair. Of the trio, only Churchill depends largely on wartime achievements for his Titanic reputation. The adjective is significant. These men (like their vile contemporaries, Hitler and Stalin) were Titans. But if leadership depended on Supermen, most of the world would be leaderless - anyway, Titans who, like Hitler, lead their followers to destruction, are grotesque failures: who wants to join the Charge of the Light Brigade?

'What makes a great leader?' thus has a simple answer, as any sacked football manager knows: success. That needn't require the man-on-horseback quality of charisma, the aura that generates worship in lesser creatures. Charisma counts only because it reinforces the leader's ability to generate support for successful action. Successes in sport clearly demonstrate that this leadership ability is founded on five strengths that are inward . These personal strengths - vision, self-belief, results focus, courage, integrity - are those that people must develop to close the gap between their potential and their achievement.

These five strengths, while vital, are not enough. They achieve their effect through teamwork, visibility, communicating, attention, commitment . These five outward processes, common to all organisations, but badly executed in most, enable everybody to maximise their contribution to closing that same gap: between what the organisation could achieve, and what it actually manages. Note that the need for these qualities and attributes is general: all managers, at all levels, like all players in all sports, will succeed more the more they develop these assets.

Because he is literally above all, the ultimate leader needs these ten strengths and processes above all. They lie behind the charisma of the flamboyant leader - in war, politics, business or sport. But provided the leader can deploy the ten, image becomes far less important. Alf Ramsay, who led England to World Cup victory, had the charisma of a quartermaster-sergeant. Churchill virtually defined charisma, English style, but was out-led in peace (so the historical consensus holds) by Clement Attlee. The latter's small size, dry manner and crisp style suggested a pedagogue rather than a leader of men - and of powerful, obstinate men like Ernest Bevin, at that.

Excessive charisma, anyway, can have the reverse effect: the Light Brigade rides again, right ino the Russian guns. The late, unlamentable Robert Maxwell is a horrible example, charisma oozing from every pore as he bankrupted his businesses and pillaged his pensioners. He is merely an extreme and extremely obnoxious example of the Great Leader disease. Maxwell is alleged to have observed that boards should always contain an odd number of directors, and three was too many.

The sentiment, inimical to true leadership, is secretly shared by many would-be horseback-riders. The identification of leadership with total power, supreme authority and horsemen goes back deep into the fog of history. Early rulers were either warriors (like Charlemagne) or served by warriors (like Elizabeth 1). Tribal chiefs (and feudal ones) maintained their positions by fighting - as many dominant males must still fight to maintain their places in the animal kingdom. So the identification of leaders with commanders is easily understood.

That identification set up a leadership model that has outlived its value. The peerless, supreme commander stood at the apex of the hierarchical pyramid, served by loyal staff, laying down the strategy which sub-commanders converted into tactics. To this day, in the standard Western model, the chief executive (and the Minister) occupies the same exalted position. His word is law, and his decision (or indecision) is final. The same used to be true of captains in sport, notably in primeval cricket, where the captain, sometimes a very moderate performer, was the leader of the amateur 'gentlemen' and the best batsman or bowler in England a mere 'player'.

What worked, more or less, in simple times and situations bears no useful relation to the complex institutions of the modern world. The leadership which (if you believe his critics) John Major fails to exercise would, if Major rose to the necessary level, contain little of Churchill, Roosevelt, or de Gaulle. Reducing unacceptable unemployment and raising the living standards of the underclass poses technocratic challenges of the highest order - but none of the Titans would have relished that kind of challenge.

Yet Titans do display, writ super-large, characteristics which all successful leaders share. First, they know absolutely what they want to achieve. Second, they maintain absolute concentration on that aim through all vicissitudes. Thus Serge Diaghilev, through a life of messy entanglements and crackpot finances, never lost sight of his determination to create the world's greatest ballets - no matter what devious twists and turns he (as opposed to his dancers) performed.

That is the third common characteristic of great leaders. They are apt to believe that the end justifies the means: they deploy the attributes, in Isaiah Berlin's famous phrase, of both the Lion and the Fox. Unfortunately, this carelessness about means is shared with the sociopaths who have disfigured human history, from Genghis Khan to Pol Pot. What's the difference?

It lies in a fourth characteristic. Great leadership expresses the will of the led, and leaves them better for its contribution. Nobody in the Geoff Cooke's Rugby squad initially shared the convictions which led him to turn upside-down the organisation of the team and the game in England. But his main purpose, to raise the side's performance to the world's best levels, was undeniably the popular will, both among the team and its supporters. Not that alll Cooke's moves were popular with all those affected - but courting popularity is not part of the leadership deal.

Sir George Solti led the Covent Garden orchestra from the pits (you might say) to the heights. He did not, in the process, win his players' love. You can't generalise about leadership styles. The martinet, as in the rough and tough, General Patton model of the American football manager, can be sharply effective; but not necessarily more telling than the encouraging leader who is 'compassionate, versatile, sweet-natured, courageous and temperate'.

That description of Field-Marshal Alexander, 'a highly competent supreme commander', comes from Norman Dixon's brilliant 'On the Psychology of Military Incompetence'. Dixon argues that 'afflictions of the ego' underlie authoritarianism, which is the disease of psychological misfits and born blunderers. In contrast, splendid warrior-leaders are psychologically whole, warm-hearted and even (see Napoleon) intensely amorous.

They also (see Napoleon again, de Gaulle and the underrated Eisenhower) convert ably into peacetime leaders. That's partly because of the military system described above. The general lays down his strategy, and then goes peacefully to sleep (like General Montgomery before El Alamein or Norman Schwarzkopf in Desert Storm), confident that the army is superbly trained and armed and that all subordinates know their tasks and will carry them out.

In sports and business alike, effective delegation is indispensable to modern leadership, in which objectives must be agreed and shared. The leader musters all available resources of brainpower, knowledge and experience to come up with a feasible game plan. Leadership further entails ensuring that a plan is turned into action by combined operations. Finally, the leader must monitor the results - and instigate further action if the plan needs modifying: or if U-turns need turning (without making them a habit).

This quartet of steps demands something else: the ability to form teams and sustain a high level of morale and achievement. None of this can be managed on horseback. The leader has to be on foot, moving among the organisation's members, and interacting with them. Shakespeare's 'little touch of Harry in the night' before Agincourt has never outlived its usefulness - as Montgomery showed to famous effect when taking command of a demoralised Eighth Army.

His takeover speech to his officers has passed into legend as a crisp 400-word summation of great leadership. The credo started with two-way trust, teamwork and the 'culture' created by the boss ('one of the first duties', snapped Monty, 'is to create what I call atmosphere'). The objective (smash Rommel) was sharp and sharply communicated with absolute self-confidence. The confident leader gives his people the confidence and tools needed to finish the job - and absolutely insists on high performance.

But he also walks a couple of tightropes: between discipline (which binds the led together) and the human touch (which enlists their hearts): and between the out-and-out urge to outdistance all competitors, and the rational intellect which keeps the competitive drive under control. The crashes of men on horseback (or bankers' backs) like Alan Bond and Maxwell show many examples of overweening ambition: 'the deal too far'.

That's one great problem with great leadership. Even in more enlightened circles, the feeling is that excellent achievement can only result if a single person takes charge with clear and total authority: which means that it can easily be abused. The principle is further weakened in the West by insistence that said person must also be the most senior (which generally means the oldest) - an insistence that has dwindled away in sports for the good and sufficient reason that great captaincy requires experience, and playing careers end too early for players to start their on-the-job learning late.

Neither age nor long service have anything to do with ability to lead in the modern sense: identifying the need, mobilising the power to identify the solution, effecting and controlling the execution. The mysterious East, which has caused the transparent West so much economic pain, has never shared this faith in peerless leadership - despite the ferocious military traditions of shoguns and sumurai.

Behind the warriors lay a different tradition, summed up by the constitution promulgated in 604 by Shotoku Tiashi. Among 14 injunctions, 'all the nobles, greater and lesser' were told to 'be at their posts from the early morning and go home late' and in 'important affairs', never to 'act alone on the basis of your own judgment, but discuss the matter first with several others'. All this fits in perfectly with our concept of the inward strengths and outward processes.

The modern Japanese leader is still just as industrious, still practices on the basis of consensus, and still exists to serve the organisation: it's not the other way round. If the leader's weaknesses endanger the long-term interests of the corporation, he is swiftly despatched: preferably before lasting damage has been done, and not afterwards (as in the recent enforced departures of the bosses of General Motors and IBM).

Both these failed leaders followed in Titanic footsteps taken between the wars, when one man could mentally embrace an entire corporation. Those days are gone for ever. Making these stumbling businesses pick up their feet and run demands new collegiate forms of leadership: and replacing old with new over such vast organisations is a fiendishly difficult task, with only one factor in its favour. When you inherit a shambles, you have a license to cure.

That's why, so often, the great sports side - like Wigan in Rugby League - rises from the ashes of failure. The cure will demand another attribute of leadership: stubborn persistence in a winning cause. By definition, great leaders never give up. Like Mao on the Long March, they may retreat - but only to fight (and win) another day. The invincible determination is essential in sustaining morale among your followers when there's precious little food for encouragement. Indeed, great leaders deliberately use adversity as a springboard to success.

When Ian McGeechan's British Lions were savaged by Australia, the outcome was a stunning win in the Second Test and the series. Similarly, ICI's first-ever quarterly loss, for instance, was used by Sir John Harvey-Jones as his leverage to jack up the entire group and raise its sights to another first-ever: the first billion-pound profit made by a British industrial company. Analyse the Harvey-Jones achievement and you find a programme that bears a close resemblance to Monty's maxims - which isn't surprising, for leadership knows no boundaries. It can be exercised in any profession: and by any personality.

Those who believe that leaders are born, not made, will wrongly challenge that statement. True, there are natural leadership qualities, dependent on genes and early life-experience, that elevate gifted personalities above the pack. But that doesn't end the story. Those with lesser gifts can achieve greater results if they systematically and intelligently obey clear-cut rules - which start with taking clear charge and unifying the group, team, company, or institution behind clear and agreed objectives.

Be ready to challenge and reexamine anything and everything in the process of clarifying ends and means, and determining which are right. Don't take any longer over that process than you need. Be prepared for instant changes in plan, people and anything else that wants changing, because circumstances will change. 'Never fail to reward merit', to quote a great Japanese business leader, Seisei Kato of Toyota, 'but never let a fault go unremarked' - or uncorrected. And make sure that everybody knows exactly what's happening, why, and what their role is - and help everybody to contribute to the full.

Not one of the leadership techniques is inborn, and all are easily grasped. Using them to achieve well-chosen objects is what ultimately makes a great leader, or a leader great. That is a matter of choice rather than birth. But while many leaders are chosen, few choose to learn the lessons of leadership. That is why so few are great: but it's also why anybody can aspire to rise towards greatness - and maybe achieve it.

Source:thinkmanagers

People are the key to organisational success, and also the cause of corporate failure. This contradiction sets real problems for top managements. They want their companies (meaning the employees within them) to behave according to plan and requirements and march forward to success. Much time, money and energy are spent on trying to drive or lead people in the required direction. Yet all too often the subjects of this ambitious attention respond sluggishly or not at all.

You can see the phenomenon plainly in privatised State industries or government agencies that have been hived off into the quasi-private sector. A significant proportion of the employees stick to the habits of the civil servants they once were. However much money pours in from a privatised monopoly, the ex-officials are not motivated by the profits, which in effect finance unchanged ways of thought and action (or inaction). Their conduct is determined by other factors. These forces should not be strange to the senior managers who are upset by resistance to change: top people themselves are by no means immune to the same pressures. Try this ten-point questionnaire. Do you?...

1. React emotionally when you first receive any information.
2. Avoid risk when you feel relatively secure.
3. Fight fiercely when threatened.
4. Show more self-confidence than you feel.
5. Make snap judgments about people, situations and experiences.
6. Gossip - using the grapevine.
7. Compete for status and its symbols.
8. Dwell on your successes.
9. Feel more comfortable in smaller groups.
10. Seek hierarchical superiority.

That's a very accurate word-picture of the boss archetype: emotional, risk-averse, bridling under criticism, concealing insecurity under bravado, fast to judgment, status and success-conscious, tending to surround himself with a small inner circle or clique, and very conscious of his role at the summit of the hierarchy. But if you believe the evolutionary psychologists, these characteristics are also those of the typical person (especially males). A fascinating article in the Harvard Business Review argues that evolution has imprinted these features on human personality in general; along with other genetic inheritances which are specific to the individual, they cannot be erased.

EVOLUTIONARY PATTERNS
That sounds like bad news for the innumerable practitioners who make their livings from various techniques designed to change individual behaviour and whole corporate cultures. It sounds like equally bad news for the managers who employ the consultants. Not only may their training and development efforts be misplaced, but the evolutionary behaviour patterns, as described in the HBR by London Business School professor Nigel Nicholson, are inimical to the ideal of the modern company. This model has the following characteristics:

1. Fact-based pragmatism.
2. Entrepreneurial risk-taking.
3. Collegiate, collaborative, non-combative relationships.
4. Detailed analysis before judgment.
5. Totally open communication.
6. Objective assessment of results.
7. Recognition for achievement, not status.
8. Flat, non-hierarchical structure.

The only point on which the two lists agree is the virtue of smallness. The model modern company also seeks to avoid having large concentrations of people. If you believe Robin Dunbar, professor of psychology at Liverpool University, this preference harks back all the way to primitive life on the Savannah Plain. The larger the animal's brain, Dunbar found, the larger the size of the group. The brain limits the size of the biggest group that a human being can handle to 150.

So Europe's most-admired company, ABB, averaging only 50 people at its 1,500 units round the world, is following atavistic patterns as well as modern theories of visibility, autonomy and control. That's one of Nicholson's two supporting examples: the other, Richard Branson's Virgin, is much less convincing. Virgin is a loose, entrepreneurial grouping with a patchy record of success. The example really fits better with Nicholson's suggestion that the 150 limit explains 'the persistent strength of small to midsize family businesses throughout history.'

THE WOBBLY MODEL
Size apart, if the evolutionary psychologists are right, and natural selection 'hardwires' the ten characteristics into people's behaviour at work, the modern model of management looks decidedly wobbly. The more effective model - in terms of fitting natural behaviour patterns - would be closer to the boss archetype. Emotion is a strong force in the culture; the management seeks to control rather than take risks; reacts fiercely to criticism or attack of any kind (especially assaults by competitors); exaggerates its strengths and underplays its weaknesses; leaps to conclusions; fragments into small, often warring or non-cooperative groups; and is highly political, with much emphasis on status and hierarchy.

Is this traditional mode successful? In their book The Profit Zone (Wiley), Boston consultants Adrian Slywotsky and David Morrison have an unusually strong set of case studies. The subjects are 'reinventors' who have effected real change. They include Jack Welch of General Electric: Nicholas Hayek of Swatch watch fame: Robert Goizueta of Coca-Cola: Charles Schwab, the financial services maverick: Andrew Grove of Intel: Michael Eisner of Walt Disney: ABB's virtual founder, Percy Barnevik: and Bill Gates of Microsoft. The octet have in common the fact that they have 'created' enormous corporate and personal wealth. Yet none has 'reinvented' the company in modern management mode.

The reinvention that really counted, as the book makes clear, was of the business, rather than the culture. The leaders radically changed the 'business design' in ways that generated 'profit-protecting power'. The highest power is derived through applying the most effective 'strategic control point'. You couldn't ask for a more convincing example than the way in which Microsoft 'owns the standard'. So long as the MS/DOS operating system is the heart of the personal computer, Microsoft has a dominant platform on which to build a series of quasi-monopolies.

The authors rank the strength of this control even higher than 'managing the value chain', which they attribute to Coke and Intel - though the latter surely comes very close to owning the standard as well. Coke also uses a 'string of superdominant positions' to consolidate its expansion worldwide, working through huge 'anchor bottlers' which it effectively controls. Only one other 'strategic control point' is ranked as 'high' in the book - that's 'own the customer relationship', which is cited as the key to GE's success. Welch supposedly occupies this control point by managing in the spirit of three simple Profit Zone questions:

1. Who are the most profitable customers?
2. Within that group, which customers have the highest profit growth potential?
3. What mix and level of investments are needed to meet those customers' needs efficiently and enable profit growth to occur?

The authors are right in the claims they make for this approach. Profitability analysis almost invariably shows that a small proportion of customers account for the bulk of profits, offset by a significant number who contribute only losses. The analysis shows where to raise prices, where to provide the most intensive service, where to seek new business and drop old, and how to develop profitable business for the future - with everything focused on the customer.

OFFERING SOLUTIONS
The GE customer strategy was to stop selling products and to offer solutions. That is very far from being a revolutionary approach. It's one of the very first lessons of salesmanship. The difference is that in practice salespeople tend to ignore the lesson and push products. The evolutionary psychologist wouldn't be at all surprised. Trying to sell a top manager a broad solution to his business problems takes salespeople out of the zone of security and into that of risk. Even if they start at the higher level, they quickly revert to the safety of selling products - often unconsciously.

Welch dealt with the matter very effectively. He didn't try to change the sales staff. He handed the customer responsibility to the men running the business units, giving them the new title of 'president and CEO' and sending them out to discuss the needs of customer CEOs. In other words, you don't try to get the leopard to change its spots: you change the leopard. That's a key conclusion confirmed by the work of evolutionary psychology - new people are more likely to adopt new ways than those whose behaviour patterns have been developed within the company or within specific roles.

But was behavioural change crucial for any of the successes of the Awesome Octet? The people inside their companies did behave differently from those in less successful competitors. But that was because the 'reinvented' business design forced different patterns of conduct on people within the system. At ABB, for example, Barnevik broke the company down into profit centres (of which there are now 5,000) and held all their heads responsible for their own profit or loss. The units, all in direct contact with local customers, concentrated on specific equipment - turbines, say. Other machinery needed to fill the customer need is supplied from other specialised members of the ABB global network. The system was changed, not the personalities.

At Swatch, an especially fascinating story, Hayek applied a consultant's skills to a very sick patient, the Swiss watch industry. The digital technology pioneered by the Swiss had proved a devastating weapon in the hands of the Japanese, who flooded the market with cheap, reliable watches. SMH, the company which Hayek created out of the two Swiss watch-making associations, couldn't hope to beat Citizen and Seiko on labour costs - but, anyway, these were not critical. Redesign was. By methods like cutting the components in a plastic watch from 155 to 51 and automating assembly, Hayek had a platform for a differentiated strategy: 'high quality, low cost, provocation and joy of life'.

The resulting lifestyle watches sold 100 million copies from 1983 to 1992 and another 100 million in the next four years - a stunning hit. But the Swatch revolution, which introduced a wholly original concept into a market full of eager, untapped customers, was the foundation of Hayek's success, not its full secret. The astonishing fact is that a third of SMH's sales and 60% of its operating income derive from 'A Class' watches like Blancpain and Omega, selling at upwards of Sfr.1000 - ten times the top price of a 'C Class' watch. The huge volume of Swatch output underpins a traditional Swiss luxury business.

BORN BUSINESSMEN

Hayek is described as 'a charismatic, irascible businessman and a highly unconventional thinker.' In many respects, he fits the template of the typical boss recorded earlier: and so, in all probability, do other members of the Awesome Octet. The difference between them and lesser successes wasn't created by escapes from inherited personality, but by the use of personal characteristics in the service of better, stronger ideas. Schwab's use of technology to offer investment customers better, cheaper service, and Eisner's realisation that the Disney franchise could generate multiple sources of profit, fit the same pattern as those of the other Six - the pattern of the born businessman.

These are all people who proved able to look at an existing business situation, see how it could be dramatically changed to their advantage, and execute the new concept well and swiftly. But these abilities transcend business. They are qualities of leadership, which also figures in Nicholson's psychological hardwiring - though in a somewhat puzzling way. Humans are hardwired 'to lead in different ways or not to be leaders at all.' All that tells you is that 'leaders are born, not made': more precisely, that the 'desire to lead' matters more than any other leadership attribute. 'A propensity for authoritative behaviour', for example, may sometimes be useful, sometimes not, but isn't a necessity.

Rather, adaptability and flexibility are required to suit the leadership style to the situation. Evolutionary psychology reinforces the notion that successful management is about compromise. The importance of trade-offs - Gates giving away his browser, say, losing money to protect his other profits - is familiar territory. But effective management of people also involves accepting that you cannot achieve the ideal in all circumstances. The model of modern management needs modification in the following ways:

1. Act on fact-based pragmatism, but encourage people to feel emotional and openly express their emotions.
2. Encourage risk-taking by setting entrepreneurial and challenging targets, while being reasonably tolerant of failure.
3. Expect and facilitate aggressive debate, but insist on fully collaborative execution of agreed plans.
4. Establish systems that force objective analysis on those involved.
5. Have open communication, but include the grapevine in the process.
6. Base all promotion and reward on objective assessment of results, but celebrate success and award 'medals' at every opportunity.
7. Find ways of recognising achievement that also enhance status.
8. Forget the idea of a flat, three-tier structure, but don't use the hierarchy for management purposes.
9. Check constantly to ensure that everybody belongs to a small group with which they identify, but which operates within a collegiate framework.
10. Use the fixed groups and the temporary teams to provide opportunities for leadership.

STULTIFYING PROCEDURES

The resulting organisation will be somewhat messy; but perfect order, while beautiful to behold, isn't well suited to chaotic markets. In fact, large integrated holding companies, which require bureaucracy to keep their many activities under central control, are not well attuned to constant change. Stultifying procedures are always appearing, even as others are being eradicated. That's why Nicholson's HBR article concludes by singing the praises of Ricardo Semler and his Brazilian company, Semco. Thinking Managers has previously recounted Semler's heretical abolition of normal corporate forms in ways (like having employees rate their bosses twice a year) that, claims Nicholson, have 'created something close to what evolutionary psychology sees as our ancestral archetype.'

Semco, however, is small and privately owned. Slywotsky and Morrison have a much larger example of organisational eccentricity - Thermo Electron, which has £3.6 billion of sales and gave investors a total return of 27% per annum over the decade to 1997. The brainwave of its boss, George Hatsopoulos, was to see that the company was outgrowing its strengths, in areas ranging from incentivising employees to the vital business of customer relationships. So he decided to grow by a kind of shrinking. The company would 'spin out' its businesses, starting with the best, raising capital by offering new equity to the stock market, but permanently holding its own shares in the subsidiaries.

Thermo Electron has thus become a tribe of tribes, which should be more comfortable for the Stone Age instincts of the members. So experiment with organisational designs built round small, interlocking groups. Be radical in changing the business design to move into higher profit zones with greater strategic control. Suit organisational and business designs and leadership style to the situation, not the other way round. Establish systems that fit the people, but guide their conduct towards the chosen ends - which are ultimately chosen, never forget, by the customer.

Source:thinkmanagers

The evidence of a management revolution is accumulating day by day. Companies are reshaping everything, from their portfolios to their payment systems, as they seek to develop the speed, focus, collaboration and responsiveness that modern markets demand.

Change management, in fact, is becoming synonymous with management itself. But you can scarcely apply radical change to a process without affecting its parts. Since the constituents of management are individual managers, it follows that a new kind of manager is required to enable the revolution to succeed.

That's an uncomfortable reality for the old kind, who by definition constitute the great majority of practising managers. A somewhat sad account in the Wall Street Journal tells of a 54-year old middle manager whose career, as he knows, has peaked; who has already experienced one lay-off and another near miss; who now drives himself long and hard to keep up with younger colleagues; who has changed specialism three times in 15 years - from production management to marketing, to purchasing, to finance; and who, despite all that effort and flexibility, earns the same as in 1989.

What hasn't basically changed is his work. As he has always done, he administers a small group of people, 'making revenue projections and supervising expenses in the sales division and resolving disputes over compensation.' That sounds neither very exciting, nor creative - yet this is no stuck-in-the-mud old-line business, but a software company, the third high-tech employer for this stalwart. He is an electronic paper-pusher, whose vast e-mail load (128 messages waiting in the morning, 150 more each day) has simply replaced hard copy.

No sign of management revolution there. Nor is one visible in this letter from a Californian executive, who had won the contract to supply equipment to a high-tech plant. The equipment was time-critical, but the management process wasn't: the contract was held up nearly three weeks after the signature date. Why? One corporate entity had placed the contract, but the plant was 'operated by a second company, negotiated for by a third separate company, which apparently does purchasing, and paid for by a fourth company, which apparently issues checks.'

PREDICTABLE CONFUSION
The disgruntled supplier, Kenneth W. Harris, observed: 'None of the people in any of these companies had ever spoken to each other. The confusion was predictable.' Once again, the old administrative Adam survives even in areas of the highest technology - and of apparent success. The purchaser is IBM, whose chief executive, Lou Gerstner, has been widely praised for restoring the corporation to profit and reforming the outdated management that explained its previous historic fall from grace. Moreover, the plant is a 'chip fab', operating in the same conditions that have generated, at Intel, one of the most famous expositions of the new management.

Nor has IBM lagged in this hothouse of technology, according to an article in the Harvard Business Review (May-June 1997). It cites IBM and Intel as the only two US microprocessor manufacturers which 'dramatically increased' their performance: as opposed to the rest, which 'continued to lag and tried unsuccessfully to compensate for inferior process technology with more aggressive chip designs.' The intriguing point in this study, however, is that the two Harvard Business School authors (Marco Iansiti and Jonathan West) attribute the superior process technology to better management process: an improvement which illustrates the essence of the management revolution.

The pre-revolutionary method of managing research and development was hierarchical and compartmentalised. Laboratories were isolated from the rest of the company so that they could concentrate undisturbed on making scientific breakthroughs (like the original invention of the transistor at Bell Laboratories, the AT&T centre). The researchers passed down their favoured new technology to the developers. When the development team had done its best (or worst) for the new product or process, the manufacturing organisation finally got its hands on the technology.

This management model still applies in most companies - no doubt, the electronic paper-pusher described above is part of just such a system. A strategic or operational decision starts at the top and slowly works its way down through an organisation whose human components make no contribution until the message arrives - and who either don't communicate at all (like the four IBM companies also mentioned earlier), or do so with difficulty, argument, and variable success.

RADICAL NEW MODEL
According to the two Harvard authors: 'The US companies that prevailed in the computer industry in the 1990s abandoned the traditional R&D model and created a radically new one.' The new model is not hierarchical and is based on integration rather than isolation. To start with, the in-house researchers were no longer the sole source of new ideas: universities, consortia and other companies (mostly suppliers) were brought into the act. Instead of the traditional situation - an invention looking for an application - the ideas were tightly focused on creating 'new generations of major products and processes.'

In a critically important move, integration was no longer left to separate units to achieve. Now 'tightly knit teams of expert integrators' were given overall responsibility for the entire project. These people, all possessing 'extensive backgrounds in research, development and manufacture', had a clear set of tasks:

1. To develop a product concept that (a) satisfied the customer need: and (b) was capable of efficient and fast manufacture.

2. By working closely with developers, to hand over a perfect product and production process to the manufacturing arm.

3. To coordinate the parallel development of components by in-house teams and outside suppliers.

4. In all the above, to make full use of their considerable freedom and large resources to range widely over the field of technological choice.

Note the further parallels with the general management revolution. First, the new method looks at the entire business system, rather than the company, taking in outside expertise and suppliers, and looking outwards to the customer. Second, the widening use of project teams has probably been the management revolution's most prominent aspect. But a team is only as powerful as its powers allow. The criteria used for the US micro-electronics comeback have to be applied generally:

1. Does the team have genuine independence and adequate resources?

2. Has the broad task been clearly defined, and is the team free, within that broad definition, to choose the best options for meeting the mandate?

3. Will the team work in close harmony with the internal and external units involved in the project?

4. Is the team working backwards from customer needs - and forwards to achieving perfect product or service performance?

Observe the absence of financial targets or criteria. The task for any team must always be to achieve the solution that will optimise the monetary value of the project and thus of the company as a whole. But that's an outcome and a necessary condition, not an objective. The problem is that financial measures are relatively clear and simply described, and can be applied to all activities in any business. That makes the money yardstick attractive, but doesn't focus the firm.

The new kind of manager is more interested in the new search for meaningful non-financial scoring - as in the efforts of Britain's new Foundation for Performance Measurement. It quotes the Royal Society of Arts to the effect that: 'Of the eleven companies that topped the Management Today profitability league between 1979 and 1989, four collapsed and two have been acquired. Companies which rely solely on financial measures are exposing their shareholders to unnecessary risk.'

MEASURING PERFORMANCE
So what does the new manager look at instead? The Foundation heard from Tony Mehew of Glaxo Wellcome how his company seeks to focus an annual £1.2 billion of R&D expenditure by twice-yearly reviews - conducted (see above) by a team. It includes, following the same practice as the semiconductor integrators, cross-functional members: research scientists, commercial people and financial executives (of whom Mehew, the group controller, is one). They score all projects on the basis of six drivers:

1. Strength of [scientific] rationale. Most important at the early stages of a project.

2. Total unmet need: 'Will people be able to use the product, and will they pay for it?'

3. Strength of value proposition. 'Will the product stand up in an economic sense?' The question is not only whether people will buy it, but also whether it has economic value in another way [for example, reducing the period of hospitalisation and reducing overall health costs].

4. [R&D] feasibility: 'Will [the compound] do what we say it's going to do? Can we make it work?'

5. Net present value - to be worked out later on, when more accurate figures on cost and sales are available.

6. Strategic fit. 'Is it in [therapeutic] areas in which the company already has a presence?'

The square brackets are mine: omit the words within, and you have a clear guide to assessment of any project in any business. It's important that the financial calculations only begin when the work is sufficiently advanced for the sums to be worth the expenditure of computer time. Often, old-style management takes seriously figures that are pure fiction - like the five-year forecast, full of detailed numbers, that one company tabled recently to support a proposed takeover with a five-year earn-out for the vendor proprietors. The deal would have failed at least five of the six Glaxo tests.

MBM (managing by money) falls foul, not only of commonsense (as in that instance), but of this statement about the 'new business era': 'formerly cherished views of how to lead a business are suddenly obsolete - perhaps even dangerous'. The quotation comes from John Wareham, promoting a course which he labels the 'One-Day MBA'. That sounds like a very tall order, but Wareham has a clear and accurate understanding of how the new kind of manager and management differ from the old. As he says, in a new environment in which quality is taken for granted, 'you cannot win merely by seeking to compete.'

Rather, 'your fate hinges on your ability to stay ahead of fast-breaking changes.' That being so, 'you must apply state-of-the-art thinking and a sometimes counter-intuitive intellectual model.' Wareham argues further that there's only one way to resolve a top manager's problems - 'to adopt a radically new approach to your business, your people and your goals.' These wise but challenging words were supposedly uttered to the chief executive of a major US company who found the solutions too radical for problems that he thought less serious than Wareham did: 'Just twelve weeks later he was fired.'

RADICAL RESPONSE
The anecdote makes two valuable points. First, the demand for a new management and a new kind of manager arises from radical changes in the economy and the environment which call for radical response. Second, failure to provide that response places the manager at risk. That's a powerful paradox. The main cause of resistance to radical change is reluctance to take risks. Yet giving way to that reluctance exposes managers to what may be even greater personal vulnerability. That places them in a trap: damned, perhaps, if they change, and very possibly damned if they don't.

Not surprisingly, the consequence is widespread insecurity. According to one economist, James Annable, that's no bad thing. He argues that management insecurity is 'transforming the way American corporations operate, especially the way employees and vendors are managed.' His interpretation of events is that: 'Globalisation, deregulation, the threat of corporate takeovers and the rise in shareholder activisim have dramatically changed the comfort level.' Most executives are now 'convinced that their jobs depend on taking aggressive action to increase earnings and push up stock prices.'

The actions Annable mainly has in mind consist of eliminating employees ('often higher-wage managers and professional workers') by outsourcing, improved efficiency, discontinuation of product lines and the use of temporary workers: in other words, downsizing. He gives the process utmost credit for the surge in US corporate earnings, which has set a new postwar record. But what about creativity and the opening of new markets? What about building a new kind of company, based not on insecurity, but on shared values and vision - as the gurus recommend? What about Wareham's profile of the risk-taking thinker?

There's a heavy price to pay for putting a premium on cost-cutting rather than creative, adventurous thought. For instance, according to the Wall Street Journal, 'American food companies are starving for new ideas'. Launches of new food products by these firms, once the great global innovators, dropped by a fifth in 1996. The reason was obvious: the mega-mergers of the 1980s pushed down the number of food researchers, so food patents filed by US companies started to lag behind those of foreign companies. The mighty Coca-Cola has generated enormous stock market wealth over a period lacking any major innovations: the last one, Diet Coke, dates back to 1982.

FEARFUL MANAGEMENT
None of this would surprise the gurus who have been arguing with increasing urgency for a great shift in emphasis from downsizing and cost-cutting to creativity and new growth. They would also argue that fear is inimical to both those processes, and generally makes for bad, old-style management. That view is apparently contradicted by Intel's chief executive, Andrew Grove. In his book, Only the Paranoid Survive, he praises fear as a driving force behind management. But his 'fear' is the very opposite of insecurity. His new kind of manager hates to lose and is fearfully alert to every threat - but has the total security needed to take the actions and risks that repel threats and win victories.

The competitive, combative manager in the Grove portrait, 'passionately dedicated to winning in the marketplace', though, seems incompatible with the findings of research among 400 managers by Arthur Andersen and the Batey Research and Information Centre of Singapore. Compared to Eastern managers, those from the West were more open, direct and confrontational, favoured databases and statistics and resisted intuition, were more productivity-oriented than people-oriented, and put greater emphasis on short-term profits; in a word, they are old-style.

In other respects (for example, being supposedly more flexible and creative), the West appeared in a more modern light: but the picture is still markedly different from that of the ideal manager, as seen by the 400. Test yourself against this paragon. Are you...

1. Offering full support and motivation to staff?
2. Able to anticipate future trends and changes?
3. Able to identify and recruit talented people?
4. Willing to give subordinates wider responsibilities?
5. Using resources efficiently to meet sales/profit targets?

Interestingly, the only difference between the Asian and Western ideals is that the Asians replace 'Willing to give subordinates wider responsibilities' with 'A role model for co-managers and subordinates.' Otherwise, the research confirms that, just as goods and services are becoming global, so is the perceived requirement for a new kind of manager. The problem remains that of the gap between requirement and reality. That gap will never be closed by the old variety of manager. But the formula for breeding, nurturing and exploiting the new kind is clear - and that is the only way in which the new management can work.

Source:thinkmanagers

The paradox of great small businesses is that they soon cease to be small. Winning and satisfying customers rapidly takes them into a bigger league. But there's a way to resolve the paradox: 'Getting big by staying small.'

That's among the innumerable slogans of a business called De Mar: another is 'Not the biggest but the best.' You aim to preserve the virtues of smallness while growing large - and this company is living proof that professional management pays handsomely anywhere: even plumbing.

The boss, Larry Harmon, used the familiar weaknesses of that trade as his springboard. By focusing on customer complaints (high and erratic prices, delays, bad work, mess, etc.), Harmon devised a formula that earned De Mar a leading role in the Video Arts film, 'Service with Soul', starring American guru Tom Peters.

Once a mega-company consultant, Peters now seeks heroes among small firms (which makes commercial sense for him - there are so many more of them). Any big business might emulate De Mar's basic offering: standard by-the-book prices; round-the-clock, seven-day, same-day service; one-year guarantee. Prices apart, too, many British plumbers would claim to offer all, or most, of the recipe.

But few exploit small virtues company so vigorously. It isn't just that Harmon knows all his people personally. That's true of any modest-sized business. His attitude to the staff makes the vital difference. They're not plumbers, not even technicians, but smartly uniformed 'customer service advisers'.

Their pay depends in part, moreover, on points earned from customer satisfaction. Any management guru would applaud this practice. Fitting rewards to business objectives is the surest way of achieving the latter. Separating the two, by the same token, is an excellent way of missing targets - paying salesmen commission on turnover, say, when the object is profits.

Harmon argues that it's his own job to 'get the phone to ring'. He has a full-scale marketing programme, which means spending real money on TV commercials and tele-marketing (3,000 calls a week). It's the role of the 'advisers', acting as what he calls businessmen with 'a rolling franchise', to satisfy and thus retain the ringing customers.

The 'rolling franchise' refers to vans, loudly painted and covered with promotional messages, that are mobile ads on the Californian highways. Here, as elsewhere, Harmon doesn't miss a single professional trick. The combination of pro management and small company virtues has taken De Mar from a mere $4,000 a week in 1985 to $70,000 - and rising.

The business exemplifies several of the policies recommended in this column, including heavy emphasis on training (2% of turnover) and sustained effort to create a Unique Selling Proposition. Look at the 20-odd pages of indistinguishable ads for plumbers in the Yellow Pages, and you'll see why uniqueness must pay.

The Yellow Pages are a very different world from California, true. Are there elements of Harmon's formula that wouldn't translate into British practice? The evangelistic aspects, with 6 am assemblies yelling 'Amen' to Harmon's invocations, might go down badly, but everything else would work the same way: elevating a business out of the rut and into riches.

The most important ingredient is treating both staff and customers with respect. You can't have one without the other. What people are called may seem insignificant. But Harmon's use of 'advisers' serves the same purpose as the late Sam Walton's insistence on calling WalMart's shop assistants (and everybody else in the stores) 'associates'.

What's important is the attitude which the dignified name implies. Walton, in the discount chain he built into the world's biggest retailers, would fly himself from store to store on personal visits. He would talk mostly, not to the managers, but to the people who staffed the departments

Like De Mar's plumber-advisers with their vans, Walton's associates were encouraged to regard their departments like franchises, as businesses which they ran themselves. Harmon gets his team to study examples of the best in customer service from operations like Disneyland - and that, too, boosts people's morale and their performance.

The Peters video should stimulate big ideas in any smaller business. The biggest single cause of failure is thinking small - and it's the easiest fault to cure.

Source:thinkmanagers

These days, all major companies are striving, sometimes desperately, to achieve something which comes much easier to smaller firms - excellence of customer service. Not that such excellence is easy for customers to find: everywhere, lip-service is more common than superb service.

That's an extremely valuable truth. If everybody else is falling well below customers' expectations, you can achieve business breakthroughs by merely satisfying them - while delighting the customers (by exceeding those expectations) can make your fortune, even your fame.

There's a delicatessen on Mission Street, San Francisco, which is now known world-wide, simply because Tom Peters, the inconoclastic management guru, uses it as a supreme example of what he calls 'service with soul'. He also praises an Italian restaurant for the self-same soulfulness: and catering is, very obviously, a business where service can make all the difference.

That is assuredly the case with Bettys and Taylors of Harrogate. The company won last year's Customer First Award for sales between £1 million and £10 million, thanks to five tea-shops: in Harrogate, Ilkley, Northallerton and York, where two cafés, respectively Bettys and Taylors, are a mere sixty yards apart - reflecting the merger which created the present company.

Managing director Jonathan Wild comes from the Bettys side, founded by his great-uncle in 1919. Keen rivals in tea-shops, they had different core businesses: Bettys, says Wild, was 'a bakery at heart', while Taylors imported tea and coffee. When Taylors ran out of family, the union created a 'very self-sufficient business'.

That history provided one important ingredient of the service recipe: time. Excellence doesn't hinge on slick systems. You should have those, anyway, but they won't do the trick without the right approach: 'the spirit of service and the desire to please.' Trying to develop that culture at speed will fail - 'you can't do it overnight.'

By the same token, seekers after service can never relax. It's a long-haul process. But certain elements are needed immediately, starting with 'rigorous training on and off the job, especially of front-of-house staff'. The job - waiting, for example - must be treated as a profession; mastery of the basics and product knowledge are sine qua nons.

Dealing with people is itself a professional skill. The ability to put yourself in other people's shoes is the essential foundation, and caring is the prime objective. Customers will quickly notice 'if you don't really care, and don't get pleasure from serving them'. That won't happen unless the staff themselves get caring treatment.

Bettys and Taylors puts 'a lot of effort' into looking after its staff, whose turnover is 'so low that we don't even bother to measure it.' People are organised into small teams, none larger than a dozen and some numbering only three: the average is seven, each with a team leader. Wild thinks of the teams as 'families' within the family business.

Team leaders come under a departmental manager, who in turn reports to a general manager. The next level up is that of the directors, including Wild and his wife. That's five layers, which doesn't quite fit today's fashionable emphasis on 'flat, flat, flat' structures: but that's a result of Wild's strong preference for 'small work groups with a leader who has time for you.'

Making time for people inside the company is another key to excellence of service. Wild insists on his management being 'very, very accessible.' New recruits, for example, have an induction day, which starts and ends by meeting with Wild: in between they tour the entire business and play customer for lunch in one of the cafés.

That's a 'soft' element, as opposed to the 'hard' issues of portion control, equipment, lay-out, etc. When service aces explain their success, soft elements predominate in their formulas, which makes it tempting to think that having fun (on which Tom Peters is ardent) and caring are all that matters. They do matter enormously, but the hard issues are also critical.

As Wild says, you won't succeed without meticulous 'attention to detail' and insistence that everything is 'just right'. That won't work, either, if you think that detail is the business of the staff. 'It starts with the proprietor and the management.'

One advantage of the family business is that its inheritors literally know what they are doing. They don't have to decide from scratch what business they are in. Even so, turning the inheritance into a goldmine may require exactly the same talent needed to break new ground - imaginative awareness of the trends.

Thus, Howard Hodgson's coup wasn't buying his father's funeral business for a snip price of £14,000 in 1975. The success sprang from seeing that applying efficient business methods to Hodgson & Sons, and then to a series of acquisitions, would create an undertaking, you might say, of major size and significance.

The £6.5 million which Hodgson pocketed from finally selling his shares to the French was the reward for what two well-known academics, C.K.Prahalad and Gary Hamel, call 'reinventing' your industry and 'regenerating strategy'. That means taking an entirely different approach to the industry and to the way in which you manage your business.

You can achieve success by reinvention, or regeneration, or the two combined. Moreover, you can accomplish the twain either by coming from the inside, like Hodgson, or the outside, like former university don David Landau. The latter's business is classified advertising. The reinventing idea was to publish a magazine that sold copies, but published the small ads for free.

Purely as a spectator, I was in on the ground floor of this enterprise. It was explained to me by Landau's partner Dominic Gill, a friend who was then an excellent music critic on the Financial Times. A music critic? Naturally, I didn't take the plan as seriously as I should have done: today Loot has a £12 million turnover in London alone, a decade after starting up.

In a sense, Landau and Gill were reinventing the wheel: similar titles existed in other countries - Landau's inspiration came from seeing the Italian equivalent on a trip to Milan. If you haven't got a family business as base, imitation may well be the sincerest way of making money: Ray Kroc, for example, stumbled across his fortune by enjoying his meal at a hamburger joint named McDonald's.

The Loot pioneers had the intelligence to see that the classified ads business could be stood on its head. Earlier breakthroughs had been made by 'controlled circulation'. The publisher gave the magazine away free to all interested parties: accountants, say. Magazines like Accountancy Age then attracted large revenues for paying recruitment advertisers wanting to reach the total market.

Selling enough copies of Loot , though, meant finding enough people willing to place free ads. That chicken-and-egg problem almost sank the infant venture, but the enterprise won through, largely because Landau and Gill were riding a trend - in markets as diverse as secondhand PCs and singles seeking dates, advertising needs were booming.

To repeat, whether you're transforming a family business, or transporting somebody else's idea, or beginning from scratch, spotting the key trends is essential. In fact, one Faith Popcorn spotted that trend-spotting itself is just such a trend and proceeded to reinvent market research. Her company, BrainReserve, pooled expertise from many fields to forecast what consumers would buy years ahead.

The Popcorn Report lists ten mega-trends. 'Cocooning' (1) means people retreating into their homes for many things that are traditionally done outside: e.g, home shopping. 'Fantasy adventure' (2) can be enjoyed at home or outside; e.g, virtual reality arcades. Then there are 'small indulgences' (3), which are part of Body Shop's formula.

'Egonomics' (4) is the growing rage in marketing - fitting the product to the individual customer's wants: e.g, Mongolian restaurants where you select your own ingredients and sauces for fast hotplate cooking. 'Cashing out' (5) is what teleworkers do when they quit the office for home: e.g: multiple-use PCs for the domestic purchaser.

Popcorn's last five trends are 'downaging' (the refusal of people to get old), 'staying alive' (the health kick), 'the vigilante consumer' (environmentally sound products), '99 lives' (fast everything, not just food) and 'save our society' (anything from charities to recycling). All ten trends are already making money for reinventors and regenerators. To join them, understand the trend, look at what established firms are doing - and don't do likewise.

Source:thinkingmanagers

Nothing makes more money than a great new product idea. Notoriously, big companies spend enormously in the search for wonderful innovations, but are rarely rewarded. Small firms, though, often come up with the big breakthroughs, from personal computers to Poppops.

What, you might well ask, are Poppops? You won't ask if you're a popcorn addict and like to make the delicacy in your own kitchen, using the microwave. Nor is this a little niche product - Golden Valley Microwave Foods, Inc. sells some 1.2 billion units a year, with plenty of them in Britain, at 69p a pop.

In the beginning, however, there were no sales and no units: only a bright idea. How do you find such inspirations? Above all, you keep your eyes and ears open. Brilliant innovations can spring from anywhere on earth - and even from outer space.

American space technology gave the innovator of the Poppop, Jim Watkins, his marvellous notion. The piece of technology concerned would in theory enable you to put frozen corn in a packet made of thin metallic sheet which would swiftly rise to the necessary very high temperature. Watkins only needed to make it work in practice.

But that's the hard bit - much harder than the original inspiration. Art Fry, the father of Post-It notes, for instance, stumbled on the idea in church, wondering how he could mark the hymns more effectively. It took the Post-It enthusiasts four more years of battling - often against opposition in their own company, 3M - before they had a winner.

The vital adhesive, what's more, had been around for five years longer. Inside a big company, though, you have one big advantage: money. Watkins lacked this vital ingredient, but made up for the shortage by dogged readiness to go to the brink, if not beyond. He was almost beyond when a friend advanced $100,000 to finance a last-ditch, make-or-break attempt. It did the trick.

The first trick, however, is never the last. If at first you do succeed, try, try again. Innovation means 'to introduce as something new.' What happens after the introduction determines the limits of success. Post-It pads were saved, after a depressing introduction into test markets, only when two committed pioneers went back to one of the markets with a marketing idea almost as innovative as the product.

They went from door to door, giving away the pads in banks and offices - sampling of a kind 3M had never tried. Once people used the product, they loved it. Watkins had the same response when he finally cracked the supermarkets: people loved his DIY popcorn. But he, too, didn't stop innovating. The first product was called Act One: the beginning, not the end..

Act Two developed the technology so the corn didn't have to be frozen: the next Act - a demetallised package. But the gold in Golden Valley no longer belongs to Watkins: richer by $200 million or so, he became a top executive in ConAgra, the huge conglomerate which bought his company.

Like the Poppops product, innovation has several acts. One is the idea. Two, financing. Three, the development of a practical product or service. Four, marketing. Five, further development. The sixth act is cashing in - but note that the best idea in the world won't develop or sell itself.

The effort required may intimidate people with less natural bolshiness than Fry or Watkins. Fry was always being told what 'couldn't be done' in the manufacture of Post-It pads. On one occasion, he simply did it himself, putting a machine in his own basement and then handing the proven process over to the 3M engineers.

Small innovators don't have resident experts, other then themselves and their partners. But one lesson of Poppops and Post-Its is the same - small, committed groups of people are the best way to innovate. Within his tiny, over-stretched resources, Watkins was forced to be ingenious, and to do the most with the least.

A long, hard road probably lies ahead even if you plan for the five stages of innovation. The road will be longer and harder without planning - and the goal may keep on receding. So don't count your chickens before they're cashed.

Source:thinkingmanagers

THOUGHTS

So whose role is it to look for new ideas? There is a meeting. At the head of the table is the chief executive. ‘I think we need some really new ideas. We are a powerful and effective organisation. But I do not believe we are making anything like the best use of our existing assets. Where do we get some new ideas?’ This is what the chief executive says. Around the table the listeners are each thinking their own thoughts.

…’Here we go again. This is the usual routine lip-service to creativity. It is enough to make the right noises. Nothing else needs to be done.’

…’You do not need to go looking for new ideas. They just turn up. Perhaps you follow a competitor with a “me-too”. Let other people take the risk of developing the market.’

…’Things are going smoothly. Why risk disrupting things with an uncertain new idea? Maintenance and problem-solving are enough so long as they continue to be profitable.’

…’This creativity and innovation thing is a fashion. Evolution is a gradual process, not a matter of new ideas.’

…’We do not need new ideas. We need to listen to our customers and do what they tell us to do. That should be enough.’

…’Why be the first with a new idea? Let others develop the ideas first and then we just follow on. There is no macho need to be first.’

…’He can make noise about a new idea, but if someone came along with a new idea he would be too scared to devote resources to it.’

…’We have heard this one so many times before’.

…’If you want new ideas then employ more geniuses - and listen to them.’

…’New ideas are fine for a small start-up company but risky for a large company. Anyway, a new idea will not really make much difference to the bottom line of a big company.’

…’So we want new ideas. Where will we get them?’

It was St. Augustine who was supposed to have said: ‘Please God, make me chaste, but not yet.’ In the same way many executives would say: ‘We really do need new ideas - but not just now.’ So there is a finance department, a legal department, a marketing department, a public relations department, a production department, a human resource department. But where is the ideas department?

VALUE DESIGN

The first step is to appreciate that the R&D department is not the same as an ideas department. You could ask the R&D department to come up with a glue which is immensely strong, but which could be reversed in a simple way - perhaps with radio frequency. Such a concept is a value concept. How the concept is put into practice is an R&D task. Value design and traditional R&D do have to be separated conceptually. They are not the same thing at all. In the case of particular individuals, the two may overlap, but this depends on the individual, not on the structure.

The truth is that most organisations do not have anyone whose business it is to consider the possibility of new ideas. In one of my books I talk about the importance of a ‘Concept R&D Department’. Such a department would deal in value concepts. The department would pin-point needs, opportunities, market development, etc. The department would seek to generate its own ideas or could obtain them from outside sources.

Corporations have suppliers. Corporations do not pretend to provide all the material they need in-house. Car makers buy steel. They also buy electrical fittings and tyres. Should ideas be treated so very differently? Because ideas only need brains for their production, there is a belief that having some brains around will produce all the ideas that are needed. Unfortunately this is not so. Creativity and value sensitivity are skills that need to be developed. As with any skill, some people are better than others.

SERIOUS

Seven key questions need answer. First, what does your organisation do about new ideas? What is the history of innovation in your organisation? Where have the new ideas come from? What efforts are made to secure a steady supply of new ideas? How are they assessed? Whose specific role is it to look for and to look after new ideas? What is the attitude to new ideas?

Ideas need to be treated as seriously as finance and raw materials. As an exercise, an organisation should appoint a senior executive as an ‘ideas manager’ for a month. This person would be given the task of determining how he or she would run an ‘ideas department’ if there were to be such a thing. It is their direct attention to ideas that is important. Once ideas come to be treated seriously, the need for them and their potential value become apparent. What also becomes apparent is that the usual way of just waiting for ideas to happen is not that efficient. Where else in business do you just wait for things to happen?

CHOICE

Ideas are not easy to assess. Ideas may be before their time. The market may not be ready for certain ideas. The value of an idea may not be perceived by the customers. The technical feasibility of an idea may prove more difficult and costly than first imagined.

There are many uncertainties and risks attached to new ideas. Many fail. Yet the history of any industry is a history of ideas and innovation. The market leaders are often those who came up with the next step forward.

If choosing the right ideas is a difficult task, then is this task made easier by having only a few new ideas – or by having many new ideas to choose from? It might seem easier to choose if there are only a few ideas. But if there are many ideas, you will more easily find an idea that fits your search profile. If none of the ideas are exactly right, then choice is very difficult. If an idea fits the search profile, then decision is easy.

ACTION

What does your organisation do about new ideas?

What is the history of innovation in your organisation?

Where have the new ideas come from?

What efforts are made to secure a steady supply of new ideas?

How are new ideas assessed?

Whose specific role is it to look for and to look after new ideas?

What is the attitude to new ideas?

Perhaps a survey could give some broad answers to these questions. You can analyse the past but you have to design the future.

Source:.thinkingmanagers