Behavior and Leadership Advice from “The Prince” and “The Godfather” Classics

By Ernie A. Cevallos

For books with pathos, dark human behavior, insights on how to gain power, and business leadership lessons there are two classics that are timeless: “The Prince” and “The Godfather”. One was written as a dissertation for the Medici family in 1513, and the other is a classic reference in American film culture that was based on a popular, though not best-selling novel, which went on to become one of the most popular movies of all time. Here is a synopsis of these two meaningful books, and the canny business and leadership advice presented.

The Prince
By Niccolo Machiavelli
1513

Camouflaged as a treatise and counsel for the Medici family, Niccolo Machiavelli offers his wisdom on human behavior, leadership, and an analysis on how to acquire and maintain power. The Prince is considered a blue print for narcissists; the types who excel at taking care of number one. Needless to say, the Machiavellian tactics to gain power are both praised and vilified—and still in use today. Machiavelli bared a fundamental truth that leads to business success: Empathetic concerns and true morality have little value in the day-to-day conduct of successful management and self-aggrandizement.

Some of the advice offered includes pre-emptive murder (well, not that drastic in corporate circles; let’s settle for firings) and destruction of one's enemies and, when necessary, of one's friends. It is better to be cruel than merciful. It is better to break promises if keeping them would be against one’s interests. Leaders should undertake great projects to enhance their reputation. A staff composed of one’s own subjects and allies is by far the most desirable kind.

The Prince is an astute observation on the dark psychology of leadership and ruthless quest for power. The embracing of its tenets has been at the center of virtually all executive success since the beginning of time. What Machiavelli wonderfully did was avail the schemes of the power players to anybody who cared to consider them. A firm grasp of Machiavelli’s beliefs creates an arsenal of tools and behaviors that is at once narcissistic, strategic, brutal, and results driven. It would be prudent to apply the ancient doctrine of caveat emptor here!

The Godfather
By Mario Puzo
1969

For a reference in the art of managing people—subordinates, peers and superiors alike—there is no equal to the Godfather. Don Vito Corleone demonstrated to be an inspirational leader by articulating a vision that greatly improved the financial standard of living experienced by men during the depression times. Most men begged for work and were demeaned in their search for work and the ability to feed their families. During these times there was no worker’s comp, minimum wage, social security, outplacement services, or social network to support people if they lost their jobs.

The vision of the Don released intrinsic motivation and the right behaviors from his people such as the ingrained attitude or oath of Omerta, and unwavering loyalty. In exchange the Don took great care of his people by paying good wages, protecting all family members, providing for the families of those that were sent to jail, using judges to get them off, and planning celebrations when they got out.

Some of the lessons include: Keep one's friends close but one's enemies closer. Building a wall of friends is an important aspect of being a successful man. Making offers that others can’t refuse…Communicate high performance expectations and express confidence in followers ability to achieve them—and never get angry, never make a threat, always reason with people. The novel also depicts the moral and ethical difference between what is personal and what must be done in the line of business. Ignoring the insights of this book or the movie means flirting with turning out like doomed, pathetic Fredo Corleone.

Staving off Commoditization: Practical Ideas to Create Value

By Ernie A. Cevallos

Perfect competition is at one end of the competition spectrum, and one of the basis of the concept is that since firms produce undifferentiated products that any business in such an environment is a “price taker” or a firm that cannot affect the price of a good or service. Looked at another way, such commoditized products or services have many perfect substitutes. In theory, the better the substitutes for a product or service, the more elastic the demand for the product. So, how do your products and services stack up and what can you do to win in a commoditizing environment?

Let's look at things a little closer, perfect competition arises in industries if the minimum efficient scale of a producer or company is insignificant relative to the demand for the good or service. This extreme form of competition leads to commoditization of products and services. As sure as the sun rises in the East everyday, commoditization is a given when four factors of perfect competition exist in an industry:

1. Many firms sell similar products to the market.
   


2. Barriers of entry are low in the industry.
   


3. Competitors have little advantage over each other.
   


4. Sellers and buyers are well informed about prices.

In reality, industries have varying degrees of competition, but it is very easy for commoditization to creep in if a group of competitors have similar products and services, and customers find a way to dissect pricing and judge value to be homogenous. Furthermore, strong global competition, information availability (Internet), outsourcing, and offshoring are business aspects that drive competition and increase customer price sensitivity. The product life-cycle suggests that as product classes mature they become more vulnerable to the forces of commoditization. The distinction nowadays is that the speed from launch to maturity is quicker than ever before.

Should you use commoditization as a reason for not attaining sales or profit goals? No! No! The truth is that even when a product has no value added and quality standards are set by law or the industry, there is still ample opportunity to be able to raise the bar and differentiate around delivery, service, marketing, business process, availability, cost of ownership, relationships, payment terms, web enabled tools, and other imaginative value creation ideas. As the saying goes: "There are no mature products, only mature managers."

But how do you survive if you find yourself in a commoditizing industry characterized by me-too products, overcapacity, and frequent price cuts? How can you make money? You can do a number of things to fight the forces of commoditization:

1. Innovate: A new product that better meets consumer needs; even an upgrade of an existing process, can one-up competitors and force them to invest in matching or exceeding the new specifications.
   


2. Bundle: Increasing the sale by bundling products and services, and offering integrated solutions where your unique capability can appeal to buyers willing to pay a premium for the expertise.
   


3. Segment: Mature markets are large markets that can be divided profitably into multiple segments. Marketers can focus on providing applications expertise for less price-sensitive customer segments for whom the product is still important.
   


4. Price: Complicate your pricing structures so customers can't easily make side-by-side comparisons.
   


5. Quality: Keep on raising the bar of quality on all fronts, and perception of the value provided for your offerings. Continual improvement needs to be at the forefront always.
   


6. Sales force: Compensate your sales force on profit margin, not sales revenues. Volume without profit does not get the job done. You can pay on volume early in the product life cycle but not in maturity.
   


7. Customers: Decide which customers are not profitable and try renegotiating prices with them. If that fails a friendly termination may be a good course of action. You will lose some customers but improve profitability.
   


8. Marketing. A creative marketing campaign aimed at owning the customer’s mind is a sure way to attract value conscious customers.

The bottom line is that even salt the most basic of commodities can be differentiated. However commoditization is approached, it is important to innovate and create uniqueness and a strong value proposition. Peter Drucker said: "In a commodity market, you can only be as good as your dumbest competitor."

Boosting Organizational Performance Through Employee Engagement

By Ernie A. Cevallos

For a business to have sustainable growth, one of the fundamentals that must be right is that of keeping talent for every key role well engaged. For several years now, employee engagement has been a popular issue in corporate circles. It is a concept that has gained the attention of business pundits, research organizations, HR managers, as well as the executive suite. The basic notion is that when employees are engaged, they will be motivated to act in ways that further their organization's interests, and have no reason to leave their jobs for greener pastures.

One of the hallmarks of good management is to attract and keep top talent. In view of that, the typical rewards using carrot and sticks to keep employees engaged is a commonly used approach, but is only a partial measure. To engage employees requires a combination of intrinsic (boss relations, belonging, recognition, personal development, growth, etc.) and extrinsic rewards (salary, incentives, benefits, perks, etc.) that communicate to employees what behavior is desired, and what kind of climate the business wishes to create for its members (Lawler 163-226). Unmistakably, dissatisfaction among employees can lead to high turn-over, perhaps even absenteeism and withholding of work, all of which are detriments to sound organizational performance.

So how does employee engagement factor in the equation? Many studies have been published about the topic by top research firms such as Towers Perrin, Gallup, Corporate Leadership Council and others. It turns out that these studies came up with different key drivers and inferences. Each of the studies used unique definitions, and came up with varied key drivers of engagement. For instance, some studies accentuated the underlying cognitive issues, while others focused on the underlying emotional issues.

Enter The Conference Board, a well recognized non-profit organization known for its essential business intelligence and forward-looking best practices. Recognizing the importance of the topic, The Conference Board published "Employee Engagement, a Review of Current Research and its Implications". This updated (2006) research came up with unifying definitions and key themes that combined the data from all the studies:

1. Trust and integrity: Is the leadership credible and do words match actions?
2. Nature of the job: Is the job relevant and mentally stimulating day-to-day?
3. Line of sight between employee performance and company performance: Is it well understood how individual performance and contributions affect the business?
4. Career growth opportunities: Are there real career path options that create opportunities for advancement and greater responsibility?
5. Pride about the company: How much self-esteem and pride is derived by being affiliated with the company?
6. Coworkers/team members: Is the work environment one that engenders cooperation and team work, and produces a sense of belonging?
7. Employee development: Are there programs to develop skills, and is there an interest to cultivate employee’s talents?
8. Relationship with one's manager: Is there a healthy and professional boss-subordinate relationship?

If you did not notice, the key themes affecting employee engagement lean towards an “intrinsic” nature, or those rewards that come from the nature of the work itself, and have to do with how employees feel about themselves, their work, and their company. Any consideration of rewards in engaging employees must start with the recognition that while rewards, both intrinsic and extrinsic, are important to all people in an organization, not all rewards are equally important to everyone. For example, some rate pay as the most important reward, while others rate it significantly less, and often behind things like security, recognition, opportunity for advancement, and company management. Notably, all studies agreed that the direct relationship with one's manager is the strongest of all drivers.

Presented with this valuable research work, how do you know if you are succeeding? You need a measuring stick to assess the strength of your workplace. The Gallup organization is one of the organizations that delved into the topic, and its research produced a set of 12 questions that determine the characteristics of your workplace (Buckingham et al. 28). If employees can answer each of the questions positively, you are likely to have a workplace where the best want to work and stay:

1. Do I know what is expected of me at work?
2. Do I have the equipment and material I need to do my work right?
3. At work, do I have the opportunity to do what I do best every day?
4. In the last month, have I received recognition or praise for good work?
5. Does my supervisor or someone a work seem to care about me as a person?
6. Is there someone at work who encourages my development?
7. At work, do my opinions seem to count?
8. Does the mission/purpose of my company make me feel my work is important?
9. Are my co-workers committed to doing quality work?
10. Do I have a best friend at work?
11. In the last six months, have I talked to someone about my progress?
12. This last year, have I had opportunities at work to learn and grow?

There is understandable and increasing evidence that high levels of employee engagement strongly correlate to personal, group and business performance in areas such as retention, turnover, productivity, customer service, and loyalty. The reported improvements are no just by small margins. The studies show that highly engaged employees do better than their disengaged counterparts by a whopping 20-28 percentage points! With this kind of upside it makes sense to do what is right in fostering a great workplace, and becoming the consensus employer of choice.

Works Cited

Lawler, Edward. “Reward Systems in Improving Life at Work: Behavioral Science Approaches to Organizational Change. “ Ed. Hackman and Suttle. California: Goodyear Publishing, 1977.

"Employee Engagement, a Review of Current Research and its Implications." 11 Sept. 2006. The Conference Board.
<http://www.conference-board.org/knowledge/knowledgeProd.cfm?id=1238&nav=hr>.

Buckingham et al. First Break All the Rules. New York: Simon & Shuster, 1999.

Innovation & Technology Leadership in the Energy Sector: Issues & Strategies from GE's Jeffrey Immelt

By Ernie A. Cevallos

The topics of energy conservation, green initiatives, global warming, renewable energy, and environmental responsibility are popular today, but not much has changed in terms of governmental policy in the energy sector in a long time. Jeffrey Immelt, Chairman and CEO of GE, explained during a recent MIT School of Engineering lecture that he took a course in 1981 called Energy Policy and the curriculum is exactly the same today in 2007.

This passivity, Immelt explains, is a direct result of a lag between “market signals and time horizons, as well as societal expectation that energy is a God-given right.” It is a fact that the dynamics of the energy market is changing as the cost of energy continues to spiral upward, and the primary sources of hydrocarbons become less secure. The National Academies and other reputable scientific organizations also provide strong evidence on the risk of adverse climate change from global warming caused in part by growing greenhouse-gas (GHG) emissions.

Sensitivity about global warming, energy costs, and concern for the environment is likely to rise after Al Gore and a United Nations science panel received the Nobel Peace Prize this month for their work on the issue. Furthermore, there is growing scientific consensus over the role that manmade greenhouse-gas emissions play in climate change. How much such coveted award to a former US VP influences the removal of political barriers to action remain to be seen.

To address the GHG problem, energy efficiency has emerged as the most prevalent strategy used by FT500 companies (the largest 500 companies globally by market capitalization, as published by the Financial Times) across sectors to reduce their GHG emissions according the latest issue of the Carbon Disclosure Project Report 2007.

This has created opportunities for leading international companies focused on energy efficiency products and services, e.g., Schneider Electric, to provide solutions that help to limit energy consumption and its impact on the environment. An integrated energy management system can save up to 45%, says Ron Zimmer, Executive Director of CABA, a not-for-profit industry association that promotes advanced technologies for the automation of buildings and homes.

Energy Source Options

The choices available to relieve the world’s energy problem disconcert policy makers and executives. Securing new supplies of fossil fuels—is not easy or inexpensive—and present geopolitical issues, while new technologies offering alternative sources of energy come with significant levels of uncertainty. According to John P. Holdren, Professor of Environmental Policy and Director of the Program on Science, Technology, and Public Policy at the John F. Kennedy School of Government at Harvard University there are many issues and unanswered questions with energy sources:

• Coal, Tar Sands, Oil Shale—Not enough atmosphere? This refers to the capacity of the atmosphere to absorb without intolerable consequences the emissions from mobilizing and burning these immense fossil-fuel resources, above all the carbon dioxide.
  
• Biofuels—Not enough land? Growing biofuels must compete for land and water with production of food, fiber, and chemical feedstocks, as well as with the essential environmental service functions of lightly exploited and unexploited ecosystems.
  
• Wind and Hydropower—Not enough acceptable sites? Wind and hydro are most economical in places where the respective resources are highly concentrated and near load centers; not only do costs tend to go up as increasing scale of use drives society to less attractive sites, but many of the best sites are prized for other purposes and may be placed off limits by politics.
  
• Solar Photovoltaics—Not enough money? Despite decades of remarkable progress in cost reduction, solar photovoltaic arrays remain several times more expensive than fossil-fueled, nuclear, and wind electricity generation for grid-connected applications. How much cheaper photovoltaics can get—and how much costlier their competition might get—remain unclear.
  
• Nuclear Fission—Too unforgiving? Nuclear fission is unforgiving of error in design and operation of reactors, reprocessing plants, fuel-fabrication facilities, and waste transport and disposal—and unforgiving of malice by those who would attack the facilities for economic and public-health impact or divert the technology and materials for making nuclear weapons.
  
• Nuclear Fusion—Too difficult? After more than 50 years of effort and the expenditure of perhaps 30 billion current U.S. dollars in fusion R&D worldwide, the best-performing devices aimed at harnessing for power production the process that powers the stars and hydrogen bombs still require more energy to run than they produce.
  
• Hydrogen—Only an energy carrier, not a source. Chemically unbound hydrogen does not exist in significant quantities on Earth, and extracting it from the forms in which it is most abundantly found—water and hydrocarbons—costs more energy than chemical reactions of the resulting hydrogen can yield.
  
• Ocean Energy—Too costly and too disruptive? Harnessing tides by damming estuaries is both costly and highly disruptive environmentally. Turbines in tidal straits and devices for harnessing wave energy must be both inexpensive and robust in the hostile marine environment; the needed combination may be unattainable.
  
• Improving Energy-End-Use Efficiency—Not enough education? Increasing the efficiency with which energy is converted into the goods and services that people want—comfort, mobility, lighting, air-conditioning, the powering of industrial processes, and so on—is equivalent to an energy source, because kilowatt-hours or gallons of fuel saved in one application can be used for another.

What Has Changed?

In view that governmental policy has been at a stand still—and alternative sources of energy have inherent challenges, Immelt offered his view on what changed in the last 25 years to assess market opportunities better:

• Demand for energy is on the rise with globalization moving towards full throttle, e.g., China, India, et cetera.
  
• Standard of living will increase 100 fold in most developing countries in the next 50 years, fueling further demand.
  
• Environmental thinking is now mainstream and is no longer a left wing agenda.
  
• Pricing of energy will continue to rise and stay high.
  
• In 1980, 80% of oil and gas supply was controlled by the big oil companies. Today, 80% of the oil and gas supply is controlled by national companies.
  
• Supply of hydrocarbons is still plentiful, but much less secure and difficult to obtain.
  
• Hundreds of energy and environmental bills in the US and Europe are pending legislative approval.
  
• Investment horizon is different now and companies can make money.
  
• Now is the time for technology and innovation to pay off great dividends.

So, given the changing and dynamic world we live in, what does the investment horizon look like for the energy sector today? Immelt believes that green = green ($), that the economics are compelling, and that it is wise for companies to be ahead of inevitable regulation.

Despite the inherent challenges with energy sources, Immelt is confident that GE’s vast investment in new energy ventures can produce attractive returns for many decades. GE is focused on innovation and driving cost out of technologies to make them marketable. For example, take 30%-50% out of the cost of coal gasification, or take silicon cost out of solar panels. To that end, GE is looking for opportunities to partner with companies big and small for R&D, manufacturing, and distribution opportunities.

Five Growth Strategies

To establish a leadership position in the market, GE will bet broadly on different technologies and fuel sources, rather than focusing on a few options. “For GE, we view energy as a green light special,” says Immelt, and “our strategy is to be big in big markets.” Therefore, GE one of the largest energy infrastructure players hopes to capitalize on new opportunities through a five-point strategic agenda.

1. Leverage technical breadth: Bet broadly in different energy sources. Improvement of hydrocarbon technologies and energy conservation are key opportunities.
   
2. Build a renewable portfolio: GE invested so far $900 million in wind, solar, biomass, and other technologies in the last 5 years. This investment bought a $7 billion revenue stream in 2007 dollars. The strategy entails low cost, high reliability, and profitable technologies.
   
3. Invest and achieve commercialization: Having established a broad technical base, Immelt imagines a “footprint that goes everyplace in the world,” so GE can achieve scale and commercialize rapidly. In addition, make two big bets and bring them to the market, e.g., coal gasification/sequestration, next generation nuclear power.
   
4. Partnerships and acquisitions: Partnering with innovative smaller companies dealing with adjacencies, and doing acquisitions to augment the portfolio.
   
5. Ecomagination or investing in the environment: Imagining and building innovative solutions that help customers meet environmental challenges and improve their operating performance, while also benefiting the company and the world.

If Immelt were the king in charge of making policy, he would authorize “progressive policies” to help the economy. These include achieving energy security by pursuing a mix of fuels, and creating jobs in this sector to stimulate growth. The government must also back risky commercial ventures (such as new nuclear plants) in case society changes its mind.

Ultimately, says Immelt, “Think big! There is no sin in making money by solving societal problems.” Energy is a pillar of successful and competitive societies, and the time seems to be right for GE and other innovative companies to become part of the energy solution while creating wealth for their shareholders.

Related Forbes article: Solar Stocks too Hot to Handle for Now

Quality Management Methodologies/Standards Compatibility: A Basis for Continual Improvement and Excellence

By Ernie A. Cevallos

The notion that quality management is about minimizing defects, especially in production, is an outdated view of what it is and how to improve it. This aspect has long been an entry-level requirement in competition, but is no longer enough from a customer's perspective. Customers expect buying experiences to be flawless. They evaluate quality based on the total value of the offer.

There are different ways of applying quality management methodologies. The nature of an organization and particular challenges it faces will determine how to implement them. Undoubtedly, many organizations find it beneficial to set up quality management systems and make use of mega-tools to improve levels of performance relating to growth, quality, customer satisfaction, efficiency, safety, reliability, and economic costs. Let’s take a 30,000-foot view of the major approaches used in the corporate landscape today:

• Lean—Business methodology that emphasizes the elimination of all non-value added activities concentrating on speed, efficiency, and the elimination of waste.

• Six Sigma—Organization wide methodology focused on achieving breakthrough improvement and bottom line growth by deploying trained teams of champions and black/green belts to work on selected business improvement issues.

• ISO 9001—International quality management system standard based on a process approach that strives to control and improve organizational results.

• Benchmarking—Mega-tool focused on understanding best practices and applying them to realize business improvements.

• Malcolm Baldrige National Quality Award (MBNQA)—Business Management system criteria stressing leadership and self scrutiny. Established by Congress and administered by the National Institute of Standards and Technology (NIST). US President presents 3 awards every year.

• Quality Function Deployment (QFD)—Mega-tool focused on customers and the creation of quality products and services they want.

• Total Quality Management (TQM)—Quality management philosophy embracing principles such as employee involvement, continuous improvement at all levels, customer focus, and statistical process control aimed at improving quality.

All these methodologies and standards are complementary and synergistic in some form. For example, let’s analyze some key points on how the Six Sigma methodology relates to the ISO 9001 quality management system standard:

Six Sigma Approach	ISO 9001 Clause
Six Sigma starts at the top on two levels: Managerial and Technical.	5.1 Management commitment.
Deployment of leaders (green/black belts) trained in statistical tools and quality management.	6.0 Resource management 6.2.2 Competence awareness and training.
Use of statistical/quality management tools to measure variation and effectiveness of processes.	8.2 Monitoring and measurement.
Intelligent use of factual data to uncover root causes and solve business problems	8.4 Analysis of data.
Voice of Customer (VOC) tools drive business processes that create value and meet/exceed customer requirements.	5.2 Customer focus 8.2.1 Customer satisfaction.
Organization wide approach used to achieve significant bottom line and process improvements.	8.5.1 Continual improvement

Let’s go a little further and see how the eight quality management principles that are the foundation of the ISO International Standards align with Six Sigma:

1. Customer Focus: Six Sigma shows how to align the organization through customer focused measures of performance.

2. Leadership: Senior leaders sponsor the training of business leaders, and collaborate on projects through active involvement.

3. Involvement of People: Six Sigma projects are designed to involve all stakeholders, and have deep appreciation for human capital.

4. Process Approach: Six Sigma tools map and analyze the business processes in order to improve them.

5. System Approach: Six Sigma projects recognize the interdependence of processes and people in a well run organization.

6. Continual Improvement: Six Sigma organizations understand what Andy Grove (former Intel CEO) meant by “Only the Paranoid Survive”.

7. Factual Approach to Decision Making: Six Sigma is a fact and data driven methodology for business and process improvement.

8. Mutually Beneficial Supplier Relationships: Six Sigma sees customers and suppliers as a connected system, each with needs that must be satisfied.

Bringing order to an undisciplined organization through the application of quality management methodologies creates the foundation on which to build a process/systems approach, and continual improvement culture. To that end, many organizations are successfully combining methodologies to guide performance excellence. In the above analysis a foundation on ISO 9001 provides discipline and management organizational structure on which to apply more in depth tools such as Six Sigma, which augments the management system quite well. As the quality management arena evolves a variety of approaches and philosophies continue to thrive:

• The 14 Principles of the Toyota Way is a management philosophy used by the Toyota Corporation that includes the Toyota Production System. The primary concept is to base management decisions on a "philosophical sense of purpose" and think long term, to have a process for solving problems, to add value to the organization by developing its people, and to recognize the merit that continuously solving the root cause of problems promotes organizational learning.

• TRIZ is a system for analyzing tough problems and developing solutions. Its roots are not associated with the American or Japanese evolution of quality methodologies. It was developed in communist Russia and the name is an acronym for a phrase meaning “theory of inventive problem solving.”

• Achieving Competitive Excellence (ACE) is the corporate “operating system” or program for process and quality improvement of United Technology Corp. Seeing how successful GE had been with Six Sigma, UTC decided to organize its quality efforts in early 1990, and integrated a set of tools and philosophies into a highly successful program that has yielded 5-7% annual productivity improvements.

A systems approach integrating world-class processes usually leads to the development of unique core competencies and sustainable competitive advantages. The adoption and proper execution of a quality management model(s) is a significant strategic decision for any organization aiming to be best of breed in their industry. Where you begin often depends on what your organization needs now.

One of your Greatest Leader Assets is your Ego: Are you an Egomaniac?

The work of Good to Great best seller author Jim Collins—whose research suggested that great performing companies had leaders with two unique traits: 1) fierce personal resolve and 2) extreme personal humility—inspired authors Steven Smith and David Marcum to conduct several years of research into the ego vs. humility topic. The result is their new book called “Egonomics”.

Marketing legend Guy Kawasaki poses eleven questions to author Steven Smith on the role that ego plays in the business of leading. Why is ego necessary to succeed in business, sports, or any worthwhile endeavor? Why is ego a liability and often interferes with the success we pursue? The reality is that ego is one of our greatest assets, but it is also a debilitating and expensive liability. Needless to say that is what makes this subject interesting reading for anyone with ambitions to have long-term success.

Applying the drive of ego with the equanimity of humility is a powerful combination that can help in making the leap from good or mediocre to great leadership. It is about the strength of humility balancing the power of ego. Enjoy Guy’s interview!

read more digg story

Learn from World-Class Universities and Get Smarter for Free

The Creative Commons movement founder director Hal Abelson is also credited with influencing the creation of the OpenCourseWare concept, which grants the free use of university materials online to the general population. OpenCourseWare began in 2001 as an initiative of the Massachusetts Institute of Technology (MIT) to offer an innovative and more democratic way to share knowledge with the world. The goal was to have all 1,800 courses, from undergraduate and graduate-level materials, freely available online by 2007.

In 2005, MIT OpenCourseWare and other leading learning institutions formed the OpenCourseWare Consortium, which seeks to extend the reach and impact of learning opportunities, foster new OpenCourseWares, and develop sustainable models for course publication. Currently the idea has grown to be a collaboration of more than 100 participating organizations. Other universities that have joined so far include Harvard, Johns Hopkins, and Tufts University, among many others.

OpenCourseWare is growing rapidly, and the site attracts over 1.2 million visitors per month from all over the world. Approximately over half are self-learners, a lot of them at companies, and many are people who just want to expand their knowledge about particular subjects. Understandably, OpenCourseWare doesn't offer access to professors, or awards you a degree, but it provides many of the other benefits available to paying students. Participating universities post all course materials online from syllabuses to reading materials and exams. In some cases even video Web casts of lectures are available. OpenCourseWare materials are licensed under the Creative Commons Attribution-NonCommercial-ShareAlike license.

A challenge to learn something new is a worthwhile endeavor that can make any of us better. Knowledge is power and filling critical knowledge gaps can be a rewarding experience and pay off in spades. If you have been looking for an opportunity to sharpen the ax and upgrade some of your professional skills for free, now is a good time to pay a visit to the OpenCourseWare Consortium site.

Related article: Internet Opens Elite Colleges to All

What Really Matters in the Mechanics of Execution: Creating a Culture with a Sense of Urgency

By Ernie A. Cevallos

Business leaders are often asked the question “What keeps you up at night?” The more direct and better question should be “What are the most urgent things you need to accomplish? Nothing should keep you up at night if you have a clear conscience, are in good health, and get some exercise. What should keep you up every waking minute is a great sense of urgency to accomplish your main objectives, and what you promised others you would do. Unquestionably, a most important trait of effective leadership is an unshakable, incessant, and ever-burning sense of urgency—and the associated need for speed, focus, and coordination.

To illustrate the point, the recent world track and field championship in Osaka, Japan produced memorable moments for both the US male and female relay team runners. The sense of urgency to win gold was in total alignment with their actions that converted powerful strides, perfect hand-offs of the baton, and drive to beat the clock into flawless execution. Sounds like execution is easy in the sports and business arena, I suggest it is not! If execution were simple in the business world, why do so many businesses fail to deliver? If physicians had the same success rate as executives, the medical schools would have been shut down long ago.

Effective managers are rediscovering that business is about having a well developed sense of urgency and execution focus across the organization. We have all been reminded that it's not enough to get the order, you have to deliver it; that having a good product or service does you no good if you can't market it well; and that uninspired employees lacking a sense of urgency will not allow a business to achieve its goals. Needless to say making companies work is serious stuff, and a pivotal aspect of growth is the mechanics of execution. Management has always been and continues to be among the most complex, risky, and uncertain of all human endeavors. Indeed, how could anyone have ever thought otherwise?

How do you tame the business beast? Process is the Clark Kent of business management—seemingly mild and modest but actually incredibly powerful. Without a good process to communicate expectations, enroll employees to commit, monitor the progress, provide feedback, make adjustments as necessary, and make accountability part of the culture things can decay into a spiral of missed goals and deadlines. Process is the way in which the abstract goal of execution and putting customers first gets turned into its practical consequences. Process is the tool that empowers a leader to manage all the activities and behaviors that must work together to achieve a common goal.

Without rigorous attention to creating a sense of urgency and execution focus, achieving even minimally acceptable performance—much less anything better—is difficult. A business cannot consistently deliver the performance levels that it is capable of, or meet the demands of customers when leadership fails to address this fundamental aspect of managing a business.

Finally, processes are not ends in themselves. They have a purpose that transcends and shapes all their constituent activities. We don’t enroll employees to a future vision, monitor business metrics, provide feedback, or create a sense of urgency to keep ourselves busy; we do it to create the expected result. A good process is a prerequisite for repeatability, and to cultivate a culture with the right mind set and behaviors. Leading by example and helping to instill a culture with a sense of urgency and insatiable execution focus is win-win proposition for all.

Productivity and Leadership Insights from George David, CEO and Chairman of United Technologies

By Ernie A. Cevallos

What brought about the transformational change and growth that United Technologies (UTX) has experienced under the leadership watch of George David? Since 1992 the Company has produced total shareholder returns of 338%, international revenue grew from 25% to 60%, market capitalization grew from $6B to over $72B, operating income margin grew from 5% to 14%, and EPS grew over 105% in the last five years.

In a recent speech as a guest of the MIT Dean’s Innovative Leader Series, George provided insights and shared how the company has been able to sustain productivity improvements between 5-7% per year. He remarked that “there is no force more powerful in business than productivity, and it is the reason why UTX and the stock market in general have done so well…”

Some clear examples of world class productivity improvement at UTX include:

• The Carrier business unit production of air conditioning units grew from 3 million to 11 million in the last 12 years with a workforce increase of only 9%.
  
• Otis Elevator experienced a threefold increase in the number of elevator installations, and associated maintenance service agreements doubled in the last 12 years with a workforce increase of only 25%.
  

• At Pratt and Whitney airplane turbines were built in batches in dirty plants in the 1990s. Today sequential manufacturing reminiscent of mass production days has been replaced by lean manufacturing where work is done in spotless plants in single cells. This eliminates hand offs, inventory between adjacent steps, and quality inspection is moved upstream instead of inefficient end of line processes.
  

• In 1968 Mean Time between Failures (MTBF) for 747 aircraft turbines was 2,500 hours at Pratt and Whitney. Airplanes flew an average of 5,000 hours a year, so the planes were designed with four engines. Today MTBF for a 777 turbine is 170,000 hours, and the planes are designed with two turbines only. MTBF went from 6 months to 34 years. Yes, you read it right!
  

• In the area of energy consumption, UTX has more than doubled in size in the last nine years, yet its energy use is 18% less.

At the core of the productivity transformation is UTX’s operating system known as Achieve Competitive Excellence (ACE). The main thrust of ACE is built around the belief that every person should be involved with continuous improvement, from top executives down to the most junior of workers. It is also required that managers lead by example and that everyone is committed to the ACE philosophy. Part of the ACE operation system is a philosophy that concentrates not only on process improvement but places equal emphasis on the human element. Such methodology appears to be a customized version of TQM, ISO 9001, and Lean Six Sigma that has apparently worked exceptionally well for UTX.

George offered a strong opinion on how to solve the Global Warming crisis and dependence on Middle East oil. He commented that energy conservation is the best near term solution, since promising technologies like the hydrogen economy are two or three decades away. Capturing energy that goes up the stack of central power plants, and implementing proven energy management measures can have significant near term impact on the carbon footprint of all commercial, industrial, and residential applications.

In the area of leadership George stressed that he won’t be writing a book any time soon, but had figured out what works after thirty years plus of practice. Here are some of his leadership beliefs:

• If you have more ambition than energy you are doomed.
  

• Relentless constancy of purpose is fundamental (quoting Deming).
  

• Education is a force that changes lives and makes people better.
  

• Bring solutions with your problems to your leaders.
  

• Work downward not upward. Give your leader the courtesy to judge your work without your help.
  

• Principled people are predictable. Unprincipled people are unpredictable.
  

• Intergalactic forces are at work. Belief that circumstances and luck do play a role sometimes, and that he was the beneficiary of such forces in his career.

In building an excellent brand the market and customers notice what is great about the products and services offered. Typically customers won’t give you and edge on pricing, but they will give you a last look. United Technologies under George David has received and unfair share of last looks and the Company projects operating income margins to grow from the current 14% to 18% or better in the next few years. Is it time to buy some UTX stock on a momentum strategy?

Related Article: Curious Cat Management Improvement Blog

Run with the Bulls without Getting Trampled...

By Ernie A. Cevallos

Most of us spend over fifty percent of our waking hours trying to win in the race of work and climbing the career ladder without being knocked down by events, misguided people, or poor choices. In similar manner, we all know the fate of unskilled runners of the San Fermin Festival in Pamplona, Spain. In his new book “Run with the Bulls without Getting Trampled: The Qualities You Need to Stay Out of Harm’s Way and Thrive at Work”, corporate psychologist Tim Irwin, Ph.D., applies the “running with the bulls” metaphor to parallel what unprepared individuals face, and offers sage advice that will help to steer clear of any 1,400 pound corporate charging bull.

Our lives at work are full of challenges, opportunities, and yes, dangers. The bulls in the metaphor are representative of ill-fated strategies, poor processes, narcissistic leaders, misguided initiatives, hyper competitive peers, over-inflated expectations, economic circumstances, etc.—which are part of organizational life. Viewing corporate organizational realities as unfair or singling us out is naïve and unwise. In today’s fast paced corporate environment the race is won by working skillfully—and it comes down to demonstrating human virtues such as thoughtful commitment, authentic character, and exceptional competence.

The bulls in Pamplona are not out to gore anyone on purpose, but they are territorial and aggressive. They are indifferent to people unless you cross their path. It is in their DNA to charge anyone encroaching on their space. Irwin’s insight as a corporate psychologist for Fortune 100 companies offers that the game gets especially dangerous when we think the organizational bulls are after us. We need to know that like the Pamplona bulls, the corporate bulls are not unfair, they are indifferent as well. Our energies should not be focused on defensiveness or victim mentality; we need to believe that directing our energy towards meaningful ends is the best way to avoid being trampled.

A life of significance requires focus, intentionality, effort, and forethought. Complacency and the associated passivity that ensues can keep us from being thoughtful about where we are going in life and what we need to accomplish. Given an unfavorable situation we need rely on our values, and clear facts about the circumstances to decide what is best for us and our families. Life is the consequence of the choices we make. Furthermore, in life “you are almost always better off making a move—going on the offense rather than simply staying on the defense”. Inactivity and timidity are certainly the enemies of high performance.

Irwin’s work is based on thousands of executive interviews he has conducted during his career as a corporate psychologist. His work asserts that competence or our ability to perform effectively is a product of skills and seven (CSF) Critical Success Factors. “Skills get us in the race. CSFs help us win it.” What we learn in universities and on the job are hard skills instead of the success factors that are needed to win. The good news is that these seven CSfs can be developed: 1) Self Management, 2) Relationship Management, 3) Forethought, 4) Dependability, 5) Resourcefulness, 6) Ability to learn, and 7) Ability to Change. The seven CSfs are found on line at Run with the Bulls without Getting Trampled.

In summary Irwin provides a workable set of success criteria that is validated by research and practical experience. We are urged to be proactive, continually evaluate ourselves, and measure our choices against the success factors.

Work Cited

Irwin, Tim. Run with the Bulls without Getting Trampled: The Qualities you Need to Stay Out of Harm's Way and Thrive at Work. Nashville: Nelson Business, 2006.

Stay Hungry. Stay Foolish, Jobs says

Steve Jobs, CEO of Apple Computer and Pixar Animation Studios is a greatly admired contemporary leader that continues to enjoy tremendous success. His company's stock grew over 100% in the last year alone. A great way to understand the man, learn where he came from, and appreciate what he believes in is to listen to his 2005 Stanford University Commencement address. He gives account of his rags to richness story, bout with cancer, setbacks (being fired from the company he founded), and gives us the insight to find what you love in order to be successful.

Benefits of Critical and Skeptical Thinking

Healthy skepticism, questioning your underlying assumptions and introducing doubt, can be helpful. There are many traps that can cloud our choices and decision making ability. Become an effective critic, glean the best information available, and know what information you need to be proven right or wrong.

read more | digg story

The Universal Maxim

Take a look at YouTube video featuring self-help guru and motivator Brian Tracy. Good inspirational content accompanied by equally good music and quotes...

The video touches on the Universal Law or Maxim based on Emmanuel Kant's philosophy. He is regarded as one of the most influential thinkers of Europe and the last major philosopher of the Enlightenment. A brief interpretation on the maxim as used in the video is to "conduct your life as though everything your were to do will become a maxim." Enjoy!

Decision Traps: Barriers to Better Decision Making

By Ernie A. Cevallos

At every step of decision making misperceptions based on incorrect input, biases, lack of information, and other traps can corrupt the choices we make. We are particularly vulnerable to traps involving uncertainty because most of us are not good at judging chances. Complex and important decisions are the most prone to distortion because they tend to have many assumptions, estimates, and influence by misaligned parties.

Research has shown that overtime we develop unconscious routines to cope with the inherent intricacy in most decision making. These thinking patterns known as heuristics can help us in many situations. We are nimble at judging distance, time, weight, and volume. For example, in judging distance our minds rely on a heuristic that associate clearness with closeness. The better the visibility of an object, the closer it must be.

These thinking routines are not fool proof, however. Flaws are inherent in the way we think, and some heuristics like clarity get distorted as misperceptions. Others muddle our thinking as biases and irrational preferences. The danger with these traps is that they are invisible to most of us.

1. "Over Relying on First Impressions—the Anchoring Trap" (Hammond et al. 191-193)
   
   In weighing a decision, we tend to accept initial information as factual. First impressions, estimates, ideas, or data tend to anchor ensuing thoughts. How would you answer the following questions?
   
   Is the population of Brazil greater than 30 million?
   What is your best estimate of the population of Brazil?
   
   The number mentioned in the first question always influences the second question. Studies have proven that changing the first question to a larger number influences the answer to the second question to be much larger. This demonstrates the anchoring trap, and how polls or surveys can be manipulated by spin doctors and negotiators.
   
   

2. Maintaining the Old Ways—the Status Quo Trap" (Hammond et al. 193-195)
   
   Most decision makers have a strong bias towards choices that maintain the status quo. There is a great deal of experiments that prove this magnetic attraction to the status quo. The pull of the status quo is even stronger when there are multiple choices. Choosing amongst too many options creates uncertainty and fear, and it is much easier to stay with the status quo.



3. "Protecting Past Decisions—the Sunk Costs Trap" (Hammond et al. 195-198)
   
   Most of us realize that sunk costs are irrelevant to new decisions; however, we seem to hang on to earlier choices leading us to bad decisions. Why do we protect past decisions? Sometimes is careless choices, other times is conscious unwillingness to admit mistakes. Admitting that a decision was a mistake can have dire consequences sometimes, so it is safer to some to protect earlier choices. This obviously proliferates the problem in the long-run.




4. "Seeing What You Want to See—the Confirming Evidence Trap" (Hammond et al. 198-200)
   
   There are a couple of forces at work here. First, we all have a tendency to subconsciously decide what we want to do before we figure out why we want to do it. Second, our tendency to be motivated by things we like than by things we dislike. Consequently, we are attracted to decisions that confirm our natural leanings, alikeness, and preferences. For example, we tend to hire after our own image.

5. "Posing the Wrong Question—the Framing Trap" (Hammond et al. 200-204)
   
   Psychologists have shown that when the same question is framed two different ways that people choose differently. Each framing makes different options more salient and the focus of the problem is misguided. If you frame a problem inadequately, it is difficult to make a good decision.

6. "Being Too Sure of Yourself—the Over Confidence Trap" (Hammond et al. 204-206)
   
   Setting too narrow a range of possibilities, and uninformed decisions lead to anchoring, overconfidence, and inaccurate decisions. Counting on a sale to close because the customer accepted to play golf; yet, ignoring the fundamentals of value creation and alignment with customer needs is a recipe for disappointment.

7. "Focusing on Dramatic Events—the Recallability Trap" (Hammond et al. 206-208)
   
   Anything that distorts your ability to recall events in a balanced way will distort your assessments. Dramatic events in your life in the form of actual or witnessed experiences will cause you to assign a higher probability of that event happening.

8. "Neglecting Relevant Information—the Base-Rate Trap" (Hammond et al. 208-209)
   
   When asked a hypothetical question about Dave being a librarian or a salesman, if his personality type is introverted, most people conclude that Dave is a librarian. The problem with this choice is that salesmen outnumber librarians 100 to 1 in the US. The base rate is only 1% that Dave will be a librarian.

9. "Slanting Probabilities and Estimates—the Pygmalion Trap" (Hammond et al. 209-210)
   
   In business the cascading nature of this trap can add up to missed estimates and short careers. For example, line managers are asked to turn in their forecasts. However, after the estimates cascade through a couple of layers of management the numbers are unreasonably increased to drive high performance. Not surprisingly, the estimates are missed and many folks become unhappy with the performance.

10. "Seeing Patterns Where None Exist—the Outguessing Randomness Trap" (Hammond et al. 211-212)
    
    We all have a tendency to imagine winning patterns. For example, greed and fear lead investors to bet the farm on an apparent hot company. Only to see it fizzle because the industry group was not hot, the earnings growth was weak, and the multiple was too high.

11. "Going Mystical—the Surprised-by-Surprises Trap" (Hammond et al. 212-213)
    
    People sometimes believe themselves to be so good or lucky because they have had successes. In business or life we should not be impressed by these accomplishments. Just because your business unit made plan because of circumstances and good work in a given year or quarter does not guarantee that to happen in succession. The surprise-by-surprises trap crops up from a failure to give reality its due. Surviving success is most important.

These traps that lead to poor choices and bad decision making are the anathema of breakthrough performance and a successful life. An important element in quality management circles and Six Sigma is “Fact Based Decision Making”. There is also a saying among SS practitioners “In God I trust all others bring me data.” Whenever possible it is wise to base your decisions on facts. The best protection against all traps is awareness, obtaining reliable information or data input, weighing options, watching for spin doctors, and consciousness about the consequences of bad choices.

Work Cited

Hammond, et al. Smart Choices: A Practical Guide to Making Better Decisions. Boston: Harvard Business School Press, 1999.

A Contrarian Leadership Guide: Insights for Success at Work and Home

By Ernie A. Cevallos

One of the most respected and sought after executive coaches is Marshall Goldsmith. His primary insight is that “good manners is good management”. Now you may ask yourself, why would impressive and successful executives need help with manners and behavioral issues? After all they most likely acted out consciously or unconsciously Stephen Coveys’ “Seven Habits of Highly Successful People” to get to the position they hold. But don’t be misled by the aura of success or turn your back on the human condition and its foibles.

The advice that Marshall offers is contrarian to the good habits advice offered by other experts, and is built around the bad habits that can derail talented executives and most of us from a successful path. A recent and prominent example of improper behavior at work involves the CEO of Whole Food Market, John Mackey, who got caught posting disparaging comments anonymously on financial bulletin boards that may cost him his job. This incident is tied to one of the bad habits that Marshall advises we must avoid. Winning too much: Marshall points out that our hypercompetitive culture to beat others causes every other behavioral problem, and leads rational men to do irrational things.

Most advice coming from the self-help experts typically deal with the good things that we need to do as opposed to trying to fix the flaws. For example the best seller “Now, Discover your Strengths” from the Gallup organization is about identifying and applying your strengths because you are only good at some things, and you should not waste your time tying to improve your weaknesses. This approach underestimates the human potential, oversimplifies the capacity of most people, and is misapplied in some corporate circles.

If you were to participate in a Gallup 2 day seminar to discover your strengths. At the end of the session, you would walk away with a certificate and five identified strengths to focus on. Intuitively you may think of Tiger Woods and golf. Just because Tiger is good at some aspects of the game such as approach or chip shots does not mean that he forgets about driving, putting, or pitch shots. You need to be balanced and well-rounded to win in sports and business, and improving or neutralizing your weaknesses is a win-win proposition for all. There is much good in knowing and playing to your strengths. At the same time there is much to be missed if we don't know our major weaknesses and ignore them.

The logic of Marshall’s coaching is centered on the behaviors that hold us back. The key to success lies in the ability to work well with everyone and inspire others. The higher up you go the more of a role model you need to be because living company values is aspirational. Equally important, a leader that engenders collaboration spirit and energizes employees creates great value for the enterprise. Managing knowledge workers who know more than you requires solid people skills, and there is no room for bad manners if you want to succeed in the long-run.

All bad habits boil down to two things: information and emotion. For example, broadcasting strong opinions about colleagues is not smart. Too much information and disclosure driven by emotion is a bad mixture. The information may be honest, but it is not necessary in a professional environment.

The essence of Marshall’s work in his new best seller “What Got You Here Won’t Get you There” is his detailed and candid discussion about the twenty habits that interfere with your success. Habits such as telling the world how smart you are all the time, winning too much, making destructive comments, not listening, punishing the messenger, disclosing too much when angry, failing to express gratitude, and passing the buck are some of the behavioral ills that will not help any of us be successful. In summary, the work of Marshall Goldsmith has no therapeutic gimmicks, but it provides a leadership guide that will help immensely and can be used at home, the workplace, and our personal lives.

The Man in the Arena: The Biggest Failure Is not Trying...

By Ernie A. Cevallos

A person dealing with challenges that require leadership, skill, persistance, and courage is referred to as "The Man in the Arena." The phrase is a tribute to most of humanity and doers of deeds who in the pursuit of goals know victory and defeat as well. The famous passage comes from a speech given by Teddy Roosevelt at the Sorbonne in Paris, France on April 23, 1910. The speech was published in his book "Citizenship in a Republic."

The achievement of any worthwhile goal requires discipline, execution, and fortitude. Daring to be great is a desirable mindset in 2007 as it was in 1910, and will be decades from now. Clearly, great words do become everlasting and stand the test of time well. The 97 year old speech became memorable over the years for the virtue of the message. The biggest failure is timidity and not trying! The below excerpt is just as applicable today as it was then:

"It is not the critic who counts, not the man who points out how the strong man stumbled, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena; whose face is marred by the dust and sweat and blood; who strives valiantly; who errs and comes short again and again; who knows the great enthusiasms, the great devotions and spends himself in a worthy cause; who at the best, knows in the end the triumph of high achievement, and who, at worst, if he fails, at least fails while daring greatly; so that his place shall never be with those cold and timid souls who know neither victory or defeat."

THEODORE ROOSEVELT
(Paris Sorbonne,1910)

Warren Buffet on Succession Planning

By Ernie A. Cevallos

The record clearly indicates Warren Buffet is a businessman extraordinaire who continues to enjoy a long and exceptional career. Apparently his success has not been all about the money, given his personality and humility. As the 76 year old magnate ages he has come to terms with his mortality, and the challenge of a succession plan to replace him from the helm of Berkshire Hathaway. Such an endeavor did not go unnoticed and a New York Times column partially titled "The Apprentice: Omaha Edition," described Buffett as having Donald Trump like tendencies, and was critical of the "Apprentice" like approach to select a successor.

The Times' writer struggled with Buffett’s idea of allowing a few selected leaders to play with several billion dollars to see how they do. The selection trial is to determine who is a worthy successor, and the measure of such competency test is short-term financial management performance. One immediately thinks that the selection process would put too much emphasis on near-term behavior rather than long-term value creation.

Being a fan of Warren Buffet and being objective about what he is trying to accomplish, my money is with him and his plan to pick a new CEO. One thing that sticks out is that assumptions were made or ignored about the qualifications required to get to participate in the trial. I bet the few finalist have strong leadership and financial performance records, so the comparison to flash in the pan Mutual Fund industry performers is not accurate. While it’s possible that the Times used “the Donald” analogy in part as headline-grabbing hyperbole, Buffett is actually showing a clear pattern of situational leadership and logical decision making. He has spent his entire 40+ years career engaged in assessing investment risks and returns, and making judgments not just about investments, but about the talents of smart people that work for him. Rather than just hiring the traditional way through networking, resumes, interviews, and references, he will get a chance to observe the finalists in action before a final selection is made. No doubt, he is applying insight, perspective, and ultimately, investments to judge his potential successors.

To appreciate Warren's thinking, business savvy, and insight it is worth taking some time to read through his illustrious annual letters to shareholders. There are 30 years of them, readily available online. They are inimitable for their consistency of tone, message, and even personality. They express who he is, what he cares about, and what he hopes for. Once you get an appreciation for this remarkable man, the last thing you would be concerned about from Warren is careless or short-term decision making about a successor. With such legacy of greatness to behold, it makes me wonder what people will say about our own collections of “shareholder letters” or their equivalents. Will our legacies demonstrate that we invested our own time with an eye toward the long-term? What can possibly beat that?

Thoughts on Leadership

By Ernie A. Cevallos

Leadership and managerial ability are not about mystical skills or pure personality traits that only a chosen few were born with. Leadership is different from management, but it does not mean that leadership is superior or a substitute of management skills. Rather, leadership and management are two complementary competencies, and both are necessary for the success of any enterprise. Leadership complements management; it does not replace it.

Today, modern corporate organizations face compound pressures driven by competition, talent finding and retention, globalization, financial expectations, technology innovation, energy trends, diverse workforces, environmental sustainability, corporate responsibility, the proliferation of the Internet, etc. The bottom line is that maintaining the status-quo or doing marginally better is not a formula for success. Change management and adaptation is ever more necessary to be able to set direction, to identify priorities, to manage complexity, and to deliver exceptional results.

John Kotter, Konosuke Matshushita Professor of Leadership at Harvard maintains that “Most US corporations are over managed and under led.” In essence, today’s managerial jobs require management and leadership skills with varying degrees of focus. The higher we go on the corporate ladder, the greater the demand for leadership ability. Thus, the increasingly fast changing environment we face requires more leadership from more people. To cope with these forces good mastery of leadership and management skills is essential in order to marshal and manage any organization effectively. Hence, the great need to institutionalize leadership development. “Institutionalizing a leadership centered culture—where the business rewards people who successfully develop leaders—is the ultimate act of leadership” (Kotter 51-65).

Leadership Differs from Management

Webster’s Third New International Dictionary defines leader as “a person who by force of example or qualities of leadership plays a directing role, wields commanding influence, or has a following in any sphere of activity.” The strength of leadership comes from the enrolment of minds to a common cause or vision, and the release of intrinsic motivation to achieve extraordinary results. It is a fact that anyone in an organization can be a leader within certain boundaries, whether or not that individual is formally identified as such. Indeed, informal leaders are extremely important to the effectiveness of all organizations and usually rise to greater prominence in time.

Allen Scherr and Michael Jensen (2-4) offered in their recent Barbados Group Working Paper that “a leader is an ordinary human being with both a commitment to deliver a result—whose realization would be remarkable and visionary given the current circumstances—and the integrity to execute on this commitment to accomplish the desired results.” One key idea of this definition is that “integrity" in the sense of leadership includes honoring your word—and that means either keeping your word or acknowledging that one will not be keeping it, and cleaning up any mess that causes for those who were counting on that word being kept” (Erhard et al. 36).

Kotter defines management as being about coping with complexity, planning and budgeting, organizing and staffing, controlling and problem solving. To this end, he asserted that management involves setting targets and goals, establishing detailed plans for reaching goals, allocating resources, establishing organizational structure, delegating authority and responsibility, monitoring results vs. plan, identifying deviations from plan, and planning and organizing solutions (51-65, 1999). Consequently, what great managers have in common is an appreciation of their strengths as well as an understanding of their limitations. Being aware that performance hinges on how well they figure out the pressures and priorities of their particular job, they find a course that works for them. According to Sternberg "finding this individual path to success is the hallmark of managerial intelligence" (314-315).

Management is fundamentally about minimizing risk and maximizing adherence to plan and predictability. In comparison, leadership copes with the unknown, the dreams, and the vision that generates breakthrough performance. Accordingly, what one person views as possible may be a pipe dream to another. The subject of leadership is one where the results to be produced are accompanied by greater risk and uncertainty than what is normally considered to be acceptable in the realm of management. A scholarly gem of the Renaissance was Machiavelli’s The Prince (1513/1962). Machiavelli’s thesis is as good today as it was in 1513. It declared that “there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.”

Obviously, both leadership and management are vital for a well-functioning organization. It is critical to emphasize and understand Kotter’s incisive conclusion about the tensions between leadership and management: “. . . even more fundamentally, leadership and management differ in terms of their primary function. The first can produce useful change, the second can create orderly results which keep something working efficiently. This does not mean that management is never associated with change; in tandem with effective leadership, it can help produce a more orderly change process. Nor does this mean that leadership is never associated with order; to the contrary, in tandem with effective management, an effective leadership process can help produce the changes necessary to bring a chaotic situation under control” (Kotter 7). This conflict can be useful; however, it is not a trivial exercise. Proper balance is essential for both short-term and long-term success of any business.

Leadership is about being comfortable with change, and understanding that the status quo works against progress in most cases. Every quarter and every month, there is change—things are in constant motion. While others may not be aware of this, leaders assume it. In knowing that change is inevitable, the true leader seeks positive change for a purpose and for the better. Kotter defines leadership as consisting of the following three elements: 1) establishing direction, 2) aligning people, and 3) motivating and inspiring them. This is a great definition but the paper of Allan Scherr and Michael Jensen, adds further insight into the domain of leadership by agreeing with Kotter’s work but adding two more elements: “Communicating Breakdowns, and Managing Breakdowns” (Scherr, Jensen 4).

Legendary leader, Jack Welch remarked in a WSJ editorial (2004) that after 30 years of leading he knows what leaders look like and act like. His process assesses four essential traits (each one starting with an E, a nice coincidence): 1) great positive Energy, 2) ability to Energize others, 3) Edge or the courage to make tough yes-or-no decisions, and 4) Execution follow through to get the job done. He concluded his assessment with an observation about integrity and general intelligence as necessary attributes to complete the profile of a strong leader type.

As we gather, there is no shortage of leadership definitions. The many dimensions into which leadership has been cast can make the subject ambiguous. Nevertheless, there is adequate similarity among definitions to find common ground. Leadership has been conceived as the exercise of influence, as a function of personality, as a mode of persuasion, as particular behaviors, as a means to achieve future visions, as an approach to induce commitment, as a creative mind set, as an achievement instrument, and as a mixture of such conceptions.

Situational Theories of Leadership

The inability of researchers to recognize conclusively all the dimensions of leadership resulted in the development of four popular situational theories of leadership. These theories propose that the most effective leadership style depends upon situational variables, especially the characteristics of the group and the nature of the task.

Hersey and Blanchard developed a “Situational Leadership” model that harmonized different combinations of task behavior and relationship behavior with the maturity of the followers. Depending on the readiness of the subordinates, the appropriate leadership style is first telling; then selling; then participating; and finally, for highly mature followers, delegating (Vecchio 334-350).

The most extensively researched situational leadership theory is Fred Fiedler's “Contingency Theory” of leadership. Fiedler used the LPC scale to measure the leader’s orientation toward either the task or the person. The most appropriate leadership style was then determined by assessing three situational variables: whether the relationships between the leader and the members were good or poor, whether the task was structured or unstructured, and whether the power position of the leader was strong or weak. When these three situational variables created an extremely favorable or extremely unfavorable situation, the most effective leadership style was a task-oriented (low LPC) leader. However, a leader with a high concern for interpersonal relationships (high LPC) was more effective in situations where there were intermediate levels of favorableness (Ayman et al. 351-377).

The “Path Goal” model is another situational leadership theory. This theory is derived from expectancy theory and suggests that effective leaders must clarify the goal paths and increase the goal attractiveness for followers. Four distinct leadership styles are proposed in the model: directive, supportive achievement-oriented and participative leadership styles. The most appropriate style depends upon two types of situational factors: the characteristics of the follower and the characteristics of the environment. Three of the most important follower characteristics include the locus of control, authoritarianism, and personal abilities. The three environmental factors include the nature of the task, the formal authority system within the organization, and the group norms and dynamics (House et al. 259-273).

Vroom and Yetton’s “Normative Decision-Making” model is also a situational leadership theory since it identifies the appropriate styles leaders should use in making decisions. The three leadership styles include autocratic decision making, consultative decision making, and group decision making. The decision titles determining which style is most appropriate include such questions as whether the leader has adequate information to make the decision alone, whether the subordinates will accept the goals of the organization, whether subordinates will accept the decision if they do not participate in making it, and whether the decision will produce a controversial solution (Vroom 278).

Although most of the literature on leadership emphasizes the influence of the leader on the group, the influence of the group upon the leader should not be overlooked. The relationship between the leader and the group implies a reciprocal influence. Groups have the capacity to influence the behavior of their leaders by responding selectively to specific leader behaviors. The influence of a leader can also be constrained by several external factors, such as organizational policies, group norms, and individual skills and abilities. Other variables have been found to neutralize or substitute for the influence of a leader, such as the skills and abilities of followers and the nature of the task itself.

Managing Breakdowns for Breakthrough Performance

It is difficult to predict with certainty that the attainment of future visions will occur without the occurrence of some setbacks. Breakdowns are situations where the team realizes that the current plan won’t work. Contrary to the general belief of people, breakdowns can be turned into the driving force behind breakthroughs. This concept is well captured with the saying: “necessity is the mother of invention”. Breakdowns are opportunities for a truly committed team to find alternate solutions; this only happens by identifying the problem and working on it as a team. Expanding on the breakdown notion, there are two essential elements to every breakdown: 1) the commitment and 2) the recognition and acknowledgment that, given the current course and speed, the commitment will not be realized.

First, if there is no commitment there will never be a breakdown; because in the absence of any commitment, whatever happens is acceptable. So, when there is no buy-in and commitment is unclear or vague, the existence of a breakdown will lack urgency, and may not even be visible to some or all of the people involved. Second, to the degree that one can accurately predict the outcome of the present course, breakdowns will be identified earlier, and thereby increase the likelihood that the issues will be resolved. On the other hand, to the extent we cannot see that the forecast of the present approach is failure, no breakdown will be noticed or, if it is, it will likely be too late to overcome the obstacles (Scherr, Allen 13-14).

The act of managing and communicating the existence of breakdowns helps to expedite the timely finding of new solutions and breakthroughs. If everyone is committed to the same overall vision, then a breakdown in another area that will prevent the overall vision from being realized is a breakdown for all. When a committed and motivated team faces a breakdown, they re-create their commitment instead of giving up. Renewing the commitment shifts people’s point-of-view and often allows them to see opportunities and solutions that were not previously visible.

The quality movement offers methodologies (e.g., Lean Six Sigma, ISO 9001, TQM, CMMI, ACE, etc.) to help with the identification of some type of breakdowns by checking what is not broken and finding ways to drive continual improvement. Bringing in a fresh perspective to observe what is “business-as-usual” can help to spot breakdowns, which may have been invisible otherwise.

Expectations + Commitment is the Dialect of Successful Leadership

Expectations and commitment play a central role in the effectiveness of leadership. It is known that leaders who expect more typically get more (e.g., Likert, 1961, 1967; McGregor 1960). By inviting each relevant individual to make a personal commitment to the realization of the vision, a leader is in practice working towards a self-fulfilling prophesy. The main implication of creating the Pygmalion effect by expecting committed players to excel is to drive high performance.

Eden (184) points out that “a leader who wants to be a more positive Pygmalion should point out to the subordinates that they have much untapped potential, and in general get them to believe that they can achieve more.” Business schools teach many variation of this theme to develop leadership skills, i.e., Expectation and Self-efficacy Training, Immunizing against the Golem Effect, Avoiding Negative Stereotypes, Clearing the Record, Setting Challenging Goals and Objectives, etc.

Culture of an organization is closely involved in the realization of expectations and self-fulfilling prophecies. Schein (189-190) has researched how culture impacts the effectiveness of an organization. In his own words, “productivity is a cultural phenomenon par excellence, both at the small-work-group level and at the level of the total organization.” To this end, myth making is a promising way of molding organizational culture. Managing myths is a worthy cause for those influencing the culture “…the unique and essential function of leadership is the manipulation of culture” (Schein 317).

Think about the encouraging self-fulfilling prophecy aroused by the wide spread belief that “Nothing is impossible” or that “Will is the measure of power” compared to the Golem effect that comes from myths such as “Our products lack quality” or that “We operate on Murphy’s law and the Peter Principle”. Therefore, symbolic expressions of a high achievement culture are important in the enhancement of expectations.

Business as usual is often the enemy of breakthrough performance and effective leadership. When things are very bad, the need for change is pushed in our faces. When a situation is unbearable, it seems that taking action is the right thing to do, and most are willing to work hard at it. However, when things are good, well hey, everything is fine. The problem with business as usual is that it leads to complacency and mediocrity, and over time such lack of leadership can be costly and detrimental to the organization. Napoleon offered his opinion about the importance of leadership in his famous quip that he would rather have an army of rabbits led by a lion than an army of lions led by a rabbit. Much like in professional sports the need for performance in today's competitive environment dictates the notion of doing it now or it is not for long.

Related link: The Leadership Epidemic

Works Cited

Kotter, John. On What Leaders Really Do. Boston: Harvard Business School Press, 1999.

Erhard et al. “Integrity: A positive model that incorporates the normative phenomena of morality, ethics, and legality”. Negotiations, Organizations and Markets (NOM) Working Paper No. 06-11; and Barbados Group Working Paper No. 03-06. SSRN, 2007.

Kotter, John. A Force For Change: How Leadership Differs From Management. New York: The Free Press, 1990.

Scherr, Allen, Michael Jensen. “A new Model for Leadership.” Negotiations, Organizations and Markets (NOM) Working Paper No. 06-10; and Barbados Group Working Paper No. 02-06. SSRN, 2006.

Ayman et al. “The Contingency Model of Leadership Effectiveness: Its Level of Analysis.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

Vecchio, Robert. “Situational Leadership Theory: An Examination of a Prescriptive Theory.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

House et al. “Path Goal Theory of Leadership.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

Vroom, Victor. “Can Leaders Learn to Lead.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

Sternberg, Robert. “Managerial Intelligence: Why IQ Isn’t Enough.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

Eden, Dov. “Leadership and Expectations: Pygmalion Effects and other Self-Fulfilling Prophecies in Organizations.” Leadership. Ed. Robert P. Vecchio. Indiana: University of Notre dame Press, 2002.

Schein, E. H. Organizational Culture and Leadership. San Francisco: Jossey-Bass, 1985.

Jack Welch. “Four E’s (a Jolly Good Fellow).” Onlinewsj.com 23 January 2004.
<http://online.wsj.com/PA2VJBNA4R/snippet/SB107481763013709619-search.html/>.

Recipe for Sustainable Business Greatness

By Ernie A. Cevallos

Sample 1,435 good companies. Evaluate their performance over 40 years. Distill it to eleven great companies


THE GOOD TO GREAT COMPANIES:
Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo

Whatever happened to would be good companies such as Burroughs, Enron, Businessland, MCI, Bethlehem Steel, Daewoo, Arthur Andersen, DeLorean Motor Co., Olympia and York, countless dotcoms, etc. Reading through the list gives you an appreciation for how once proud and good business can become obsolete and doomed to extinction if not led and managed properly. We should not despair, the good news is that although we lose companies with alarming frequency, there are new and old firms that adapt well, and find ways to invent competitive and sustainable positions in their markets. What do those companies do right?

With that background in mind, Jim Collins investigated what made great companies great and how they maintained greatness over time in his earlier best seller, Built to Last. However, there was one issue that bothered him—great companies had always been great, while the bulk of good companies remained just good. That set the stage for him to research what plain good companies could do to achieve greatness, and to turn long-term mediocrity into sustainable success by writing another best seller, Good to Great.

The research team formed by Collins established strict performance metrics, and identified a group of 11 elite companies that migrated from good to great and sustained that level of performance for at least 15 years. The research based work of Good to Great reveals what good companies do to drive themselves to greatness. Collins and his team of researchers created these good-to-great metrics:

1. Companies had to have experienced 15-year cumulative stock returns that were at or below the general stock market, punctuated by a transition point, then cumulative returns at least three times the market over the next fifteen years


2. Each company had to demonstrate the good-to-great pattern independent of its industry


3. Each company had to demonstrate a pattern of results.


4. Each company was compared to other similar companies that either never made the good-to-great leap (or made it but did not sustain it), in order to determine what distinguished the good-to-great company from all others

When the dust cleared and the good-to-great companies were identified, the author and his researchers found distinct patterns of behavior in those who led each company and the people who followed them—patterns that concerned disciplined people, thought and action.

Level 5 Leadership

One of the most surprising results of the research was in the discovery of the type of leadership required to turn a good company into a great one. One might think that high-profile leaders with big personalities and celebrity status lead such companies. Yet, Collins found that those leaders who seek and thrive in the spotlight do not exude what can be termed "Level 5 Leadership" behaviors (The term Level 5 refers to the highest level in a hierarchy of executive capabilities). Leaders of this type—those who combine extreme personal humility with intense professional willpower—shun the attention of celebrity, channeling their ambition toward the goal of building a great company. He also found that good-to-great leaders understand three simple truths:

1. If you begin with the "who," rather than the "what," you can more easily adapt to a changing world


2. If you have the right people on the bus, the problem of how to motivate and manage people largely goes away


3. If you have the wrong people, it doesn't matter whether you discover the right direction - you still won't have a great company

Confront the Brutal Facts

All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality. Every good-to-great company confronted difficult times along the way to greatness, of one sort of another—Gillette and the takeover battles, Nucor and imports, Wells Fargo and deregulation. Collins found that when a company starts with an honest and diligent effort to determine the truth of its situation, the right decisions often become self-evident. One of the primary tasks in taking a company from good to great is to create a culture wherein people have a tremendous opportunity to be heard and, ultimately, for the truth to be likewise heard. Collins writes that, to create a culture of discipline, successful leaders:

1. Build a culture around the idea of freedom and responsibility, within a framework


2. Fill the company's culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities


3. Do not confuse a culture of discipline with a tyrannical discipline

Technology Accelerators

Collins also found that good-to-great organizations think differently than mediocre organizations about technology and technological change. They avoid the fads and bandwagons that typically arise from new technology, instead becoming pioneers in the application of carefully selected technologies. Leaders of good-to-great companies respond with thoughtfulness and creativity, driven by a compulsion to turn unrealized potential into results. They act in terms of what they want to create, and how to improve their companies, relative to an absolute standard of excellence.

The Hedgehog Concept” (Simplicity Within the Three Circles)

Focus on one simple, unifying concept, everything else is irrelevant. Isaiah Berlin divided people into two groups, foxes and hedgehogs. Everyday the fox, despite his cunning, fails to make prey out of the hedgehog. The hedgehog goes about his daily business, and when the fox comes along, he simply rolls up into a spiked ball. Foxes pursue many ends at the same time, and see the world in all its complexity, so they are scattered rather than focused on one simple organizing idea or principle.

Hedgehogs simplify a complex world into a single basic organizing principle that unifies or guides its daily life. Everything else outside this basic concept is irrelevant and not worth wasting energy on. The essence of profound insight is simplicity. Hedgehogs see what is essential, and ignore the rest. Those who built good-to-great companies were in varying degrees, hedgehogs. Comparison companies behaved like foxes, never clarifying a single concept, tending to be scattered, diffused, and inconsistent.

The Walgreens breakthrough strategy could be stated in one line: “The best, most convenient drugstores, with high profit per customer visit.” This hedgehog concept guided their decisions to gradually move all stores to corner lots for multiple exits and entries for customers, thereby increasing their convenience. Drive-through pharmacies were created along with one-hour photo developing services and tight clustering of up to nine stores within a one-mile radius(Something like Starbucks Coffee, a shop on almost every corner).

Kroger built its Hedgehog concept around the superstore idea. Kimberly-Clark focused on paper-based consumer products, selling off its paper mills. Good-to-great companies founded strategies on a deep understanding of 3 key circles. Good-to-great companies translated understanding into a simple crystal clear concept that guided all efforts and decision-making.

THE HEDGEHOG CONCEPT IS A SIMPLE, CRYSTALLINE CONCEPT THAT FLOWS FROM THE DEEP UNDERSTANDING ABOUT THE INTERSECTION OF THE FOLLOWING THREE CIRCLES:

1. What you can be the best in the world, realistically, and you cannot be the best in the world
   
2. What drives your economic engine
   
3. What you are deeply passionate about
   
4. To achieve greatness, the three circles need to intersect.
   

The Flywheel and the Doom Loop

Similar to pushing a massive flywheel laid horizontally on its axle, with every push the wheel turns one rotation. It goes faster and faster, gaining momentum until the accumulated overall effort over time, pushing consistently in one direction, carries the speed into a breakthrough momentum, moving by itself. This is how the good-to-great companies process of transformation is best described. There was no defining action, innovation, launch event, clever tagline or miracle moment. The breakthrough came from an overall accumulation of consistent effort over time. Under the right conditions, problems of motivation and alignment simply melt away.

Collins writes that good-to-great companies had no name for their transformations; there was no launch event, no tag line, no programmatic feel whatsoever. Collins explains that each company went through a quiet, deliberate process of figuring out what needed to be done to create the best future results, then simply took those steps, one by one over time, until it hit breakthrough moments.

WHY ACHIEVE GREATNESS?

If you’re doing something you care deeply about and if you believe in it, it’s impossible to imagine not trying to make it great. If you have to ask ‘why should we try to make it great?’ Then you’re probably in the wrong line of work. Being on a team committed to greatness will give you the ultimate satisfaction of knowing that your short time here on earth was well spent, and that it mattered.

The laboratory link below is a resource for exploring key ideas found in the writings of Jim Collins. and putting the ideas to work.

http://www.jimcollins.com/lab/index.html

Flat World Business Rules

By Ernie A. Cevallos


“The Six Sigma master was once the undisputed authority in management. But Fortune is finding that today's smart CEOs are following a different set of rules.” A recent article in Fortune blasted out the news that Jack Welch's rules for running a successful business have gone out, and the poor guy has only been out of the corner office for five (5) years. How time flies. Yet in the offices of corporate America, the momentum of the old rules is strong. Many business leaders are following playbooks that apparently have been distorted by progress and time.

If you didn't see the piece, the list was kind of interesting:

New Rules vs. Old Rules

1 Agile is best; being big can bite you. Big dogs own the street.
2 Find a niche, create something new. Be No. 1 or No. 2 in your market.
3 The customer is king. Shareholders rule.
4 Look out, not in. Be lean and mean.
5 Hire passionate people. Rank your players; go with the A's.
6 Hire a courageous CEO. Hire a charismatic CEO.
7 Admire my soul. Admire my might.

As much as I, along with the rest of the universe, admire the results of what GE accomplished during Jack's tenure, it does not necessarily follow that his leadership "rules" are the be all and end all. Because of Jack's personality and style he is often looked at as a benchmark when it comes to leadership. This is understandable, but as we all know there are lots of other companies that have done extremely well with leadership styles that were very different from Jack's. There are also plenty of examples of ones that have failed with leaders whose styles and rules were like Jack's. I guess that is why they call it "situational leadership."

Jack Welch advocated lean and mean, and lowest cost–and corporate America got out its ax. Welch liked to rank players and weed out the non-performers–and HR departments turned henchmen. Everybody joined the bandwagon including academics, consulting firms, and leaders looking for answers to sustain growth and impress Wall Street. According to Harvard Business School's Rakesh Khurana, this is the legacy of the Old Rules. Managing to create shareholder value became managed earnings, and managing quarter to quarter to please the Street. "That meant a disinvestment in the future," says Khurana, author of "Searching for a Corporate Savior."

The new challenge is about adaptability, agility, inventiveness and, of course, great people. We witnessed how Apple’s innovation with the iPod made the company take off, and how Dell transformed an industry by upending Compaq, IBM, and Hewlett-Packard. Google is the ultimate answer and advertising machine, and nobody imagined that Internet business model till Larry Page and Sergey Brin made it happen, and created a company with a market cap of $114 billion in a short 5 years.

So, I don't know if it's the fact that the "rules" of leadership have really changed and the old ones don't work anymore–or if it is simply that we have "new rules" driven by paradigm shifts such as globalization, the Internet, recognition of human capital, and technology breakthroughs. Whatever it was, things changed, and there are seven old rules with apparent limitations–and seven replacements that point toward a new model for success.

Why Google Rocks?

By Ernie A. Cevallos

Management à la Google

Worldwide best seller business writer of “Competing for the Future” and strategy and management professor extraordinaire, Gary Hamel, just offered his observations about the greatness of Google in a WSJ opinion article. Will it fizzle before it realizes all its growth potential? Has it realized the promise of its business model as its stock soared to over $425/share and its market cap reached $126B, and settle into maturity much like Dell, Microsoft, and many others?

Well, hardly because the innovativeness of this unique company is for real, given an ingrained culture of constant dissatisfaction with the status-quo since its inception in 1998. One of the components of their corporate philosophy “Great Just isn’t Good Enough” is ultimately a driving force behind the world’s best search engine. With that in mind, in our better, cheaper and faster world, it requires great vision and rapid adaptation to change in order to score consistently on the growth metric, which is one of the most important measurements of a management team effectiveness. Mr. Hamel points out clearly that “What the laggards have failed to grasp is that what matters most today is not a company’s competitive advantage at a point in time, but its evolutionary advantage over time. Google gets this”.

Google’s innovative management approach represents a unique advantage that in today’s fast pace helps to guard against the threats or risk factors, which undermine the evolutionary potential of a company:

• Evolutionary risk factor #1: A narrow or orthodox business definition that limits the scope of innovation. Google's response: An expansive sense of purpose



• Evolutionary risk factor #2: A hierarchical organization that over-weights the views of those who have a stake in perpetuating the status quo. Google's response: An organization that is flat, transparent, and non-hierarchical



• Evolutionary risk factor #3: A tendency to overinvest in "what is" at the expense of "what could be." Google's response: A company-wide rule that allows developers to devote 20% of their time to any project they choose



• Evolutionary risk factor #4: Creeping mediocrity. Google's response: Keep the bozos out and reward people who make a difference

Will Google grow unweedable corporate weed, and commit the mistakes that uninspired laggards have made. The market is not betting that to be the case anytime soon. Mr. Hamel commented “…But that's not the way I'd bet. Google seems to have grasped the new century's most important business lesson: The capacity to evolve is the most important advantage of all.”

For the whole opinion article, please follow link:

http://online.wsj.com/article/SB114601763677436091.html?mod=opinion_main_commentaries

Peter Drucker's Legacy Includes Simple Advice: It's All About the People

By Ernie A. Cevallos

Peter Drucker understood the value of people in the business equation a long time ago. In his last best seller book author Jim Collins deliberates on what could merely good companies do to become great. One of the no brainer findings had to do with the importance of people. Surprise, surprise?

It is evident that one of the primary objectives in making a company great is to get the right people for the task(s), and create a culture with self-disciplined team players who are willing to go to extreme lengths to fulfill their responsibilities. This truth about business is not revolutionary or new, besides Drucker and now Collins, the late W. Edwards Deming had also been preaching it with passion a long time ago. Why don’t we have more great companies with sustained growth and innovation? Well, that is the job of those of us in leadership roles; that is a fundamental that has to be right. At the end of the day huge value is created by getting the people truth right!




The following classic eulogy to one of the greatest business thinkers was published by Scott Thurm and Joann S. Lublin, staff reporters of The Wall Street Journal last November 14, 2005.

___________________________________________________


Peter Drucker was the most influential management thinker of the past century. But his most crucial insights were about workers. Mr. Drucker, who died Friday at age 95, was among the first to see the limits of large industrial organizations and their authoritarian hierarchies. Long before the Internet, before even the first computer chips, he foresaw the arrival of "knowledge workers" motivated by personal pride as much as by fear and a paycheck. Harnessing their talents, he argued, required a new approach to management.

He dispensed this advice in simple prose in 39 books over a remarkable 60-year career, and in probing conversations with scores of executives. Along the way, he developed a loyal following among many of the world's most-famous corporate chieftains, and became the model of the modern management guru, a craft he plied far more modestly than many of his successors.

While Mr. Drucker's eclectic interests ran from European history to Japanese art, his management teachings centered on ways to make workers more effective. David A. Jones, co-founder and retired chairman and chief executive of Humana Inc., a Louisville, Ky., health insurer, recalls the core of Mr. Drucker's advice this way: "Successful enterprises create the conditions to allow their employees to do their best work." Mr. Drucker offered plenty of other lessons, of course. He believed organizations should articulate a clear purpose, with specific, measurable goals; he developed the concept of "management by objective," to keep managers in step with those goals; he encouraged managers to ask unspoken questions and consider ignored issues.

His interests weren't limited to profit-seeking corporations. Mr. Drucker viewed nonprofit organizations as social linchpins, and devoted entire books to management of these groups. "He had the anthropologist's insight into this strange tribe [of managers] that had these formal rituals and strange practices," says Michael Useem, a professor at the University of Pennsylvania's Wharton School, and an author of several books on management and leadership. "Peter Drucker was able to see behind them, and also see what could be changed and made for the better." Mr. Drucker contributed much to the modern cult of the chief executive. Yet as an emigrant from Nazi Europe, he retained a lifelong distrust of charismatic leaders. "He was skeptical of hero worship," says John Alexander, president of the Center for Creative Leadership in Greensboro, N.C. "He saw management as an activity rather than a heroic venture."

Mr. Drucker's varied interests led him to predictions that gave him a reputation of a visionary in some circles. Warren Bennis, a University of Southern California business professor and author of more than two dozen books about leadership and related subjects, recalls Mr. Drucker warning him 15 years ago about coming social disruptions because of shrinking populations in Western Europe. In 1987, when Japan's roaring economy was the envy of the world, Mr. Drucker saw trouble ahead. "The pillar of their success -- lifetime employment -- is becoming an almost insurmountable barrier to flexibility," he said. Skeptics, and there were few, who studied his record said that Mr. Drucker was wrong as often as he was right, and had a penchant for twisting anecdotes in the retelling. But that did little to shake the faith of several generations of CEOs. Mr. Drucker's impact was so profound that most of them still remember the first time they read, or met, him.

For Humana's Mr. Jones, it was in 1974, when his colleague Wendell Cherry bought one of Mr. Drucker's books at an airport to help pass the time of a flight delay. "Wendell called me and said, 'Some guy wrote a book about us," Mr. Jones recalls. The two finished the book, "Management, Tasks, Responsibilities, Practices," in a weekend, then called Mr. Drucker on Monday morning. A few weeks later, the pair flew to Mr. Drucker's home in Claremont, Calif. There, Mr. Jones quickly learned the cornerstone of Mr. Drucker's style: "He never really answered questions. He always asked them." Still, Mr. Jones was sufficiently impressed that he repeated the pilgrimage annually for more than a decade. He recalls two preachings: That profit is a requirement for a company, but should not be a goal in itself; and that productivity and quality are effectively the same thing. "A day or two spent with Peter was the most valuable way I could spend my time," Mr. Jones says.

Dan W. Lufkin, co-founder of the Wall Street investment firm Donaldson Lufkin & Jenrette, encountered Mr. Drucker's unusual style during their first meeting, in the early 1960s, just as DLJ was just getting off the ground. Mr. Drucker, who spoke with an Austrian accent, initially seemed "formal and authoritarian," Mr. Lufkin recalls. "I asked him if he thought we should sell a certain product or do a certain strategy, but all he said was 'I don't know' to every question I posed," he recalls. "So finally I asked, what am I hiring you for?” Mr. Lufkin says. In response, Mr. Drucker said, "I'm not going to give you any answers, because there are always many different ways to approach problems, but I'm going to give you the questions you should ask." Mr. Lufkin says. "So we started talking in great length and depth about who we were and what we wanted to do -- and I can't tell you how important he was to the development of the firm.”

For Andrew Grove, the retired chairman and chief executive of Intel Corp., the Peter Drucker moment came in the late 1970s, when he ran across a book that Mr. Drucker had published about a decade earlier. The book included a chapter on the multiple roles of a CEO: the public face of the company, a strategist and an operational manager. Mr. Grove says the descriptions echoed the way that he and two other Intel co-founders, Robert Noyce and Gordon Moore, had unconsciously divided the duties at the top of the semiconductor maker: Mr. Noyce as the public face, Mr. Moore as "a man of thought," and Mr. Grove as "a man of action." Mr. Grove says he ran to a copy machine and distributed copies of the chapter to Messrs. Noyce and Moore. At the time, Mr. Grove says, he was a "young manager, very skeptical about management gurus and consultants. Nonetheless, he says Mr. Drucker's writings "spoke to me. He was so impressed that Mr. Grove drove an hour from Intel's Silicon Valley offices to San Francisco to watch that era's motivational video -- a three-hour movie of Mr. Drucker speaking about management.

Mr. Grove singles out two of Mr. Drucker's precepts that have stuck with him: That managers should never promote an employee on the basis of his or her potential, but based only on performance; and that managers should make a decision no later than you need it, but as late as possible, because you always have more information. Mr. Drucker's lessons still resonate with a younger generation of managers. Mike Zafirovski, 51, who begins work tomorrow as chief executive of Nortel Networks Corp., never met Mr. Drucker, but says the author had a "huge influence" on him. Reading Mr. Drucker's books, Mr. Zafirovski says he was persuaded by the argument that companies should "treat employees like their most valuable resources, including pushing decision making to the lowest levels."

TQM, ISO 9000, Six Sigma: Do Process Management Programs Discourage Innovation?

By Ernie A. Cevallos

A Knowledge@Wharton article based on joint research with the Harvard Business School says now may be the time to re-evaluate the corporate efficacy of process management and tailor them to the right applications. Studies show that misapplied process management can hinder companies and dull innovation. "In the appropriate setting, process management activities can help companies improve efficiency, but the risk is that you misapply these programs, in particular in areas where people are supposed to be innovative," notes Mary Benner–management professor at Wharton.

Process management methodologies focused on continuous improvement such as TQM (the work of Dr. Deming), surfaced in the 1980s in the US after the Japanese adopted it successfully. In 1960 the Emperor of Japan awarded Dr. Deming the Second Order Medal of the Sacred Treasure for his help in transforming Japanese industry. Six Sigma started at Motorola and became popular in the mid-1990s due to GE’s visible efforts. The basic premise is to improve quality to only three defects per million through systematic in processes improvement, and careful statistical measurement of outcomes.

Six Sigma is similar to TQM in its focus on techniques for solving problems and using statistical methods to improve processes. But whereas TQM emphasizes employee involvement organization-wide, the Six Sigma approach is to train experts (known as green belts and black belts) who work on solving important problems while they teach others in the company. The publicized success of GE after Jack Welch adopted Six Sigma (to which he devotes a chapter of his book "Winning"), more than a quarter of the FORTUNE 200 followed suit. Yet not all firms were able to find the same magic.

In fact, of 58 large companies that have announced Six Sigma programs, 91 percent have trailed the S&P 500 since, according to an analysis by Charles Holland of consulting firm Qualpro http://www.qualproinc.com/ . Critics say that one of the chief problems of Six Sigma is that it is narrowly designed to fix an existing process, allowing little room for new ideas or an entirely different approach. All that talent–all those best and brightest–were devoted to, say, driving defects down to 3.4 per million and not on coming up with new products or disruptive technologies.

An inward-looking culture can leave firms vulnerable in a business world that is changing at a breakneck pace–whether it's Craigslist stealing classified ads from local newspapers or VoIP threatening to make phone calls virtually free. Innovation is "a meta-stable entity," says Vishva Dixit, Vice President for research of Genentech, who oversees 800 scientists at a company that has created some of the most revolutionary anticancer drugs on the market. "Nothing will kill it faster than trying to manage it, predict it, and put it on a timeline."

No business can afford to focus its energies on its own navel in that environment. "Getting outside is everything," says GE's Immelt (who still deploys Six Sigma). From the day he took over as CEO, he says, he knew the company would need to be "much more forward-facing in the future than we ever were in the past." He explains: "It's not about change. It's about sudden, abrupt, and uncontrollable change. If you're not externally focused in this world, you can really lose your edge."

Follow link for entire article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1321

Customer Value Propositions and Persuasion Effectiveness

By Ernie A. Cevallos

What is wrong with value propositions?

In today’s competitive environment creating and delivering winning value propositions is a fundamental expectation in the race to win more business and out perform rivals. It is evident that properly constructed and communicated value propositions make a powerful argument, and align the solution fit with the needs and buying criteria of customers. The goal is to persuade the customer by irrefutable proof that the value proposition represents a win-win business transaction.

A common problem that challenges the effectiveness of value propositions is that there are different interpretations of how to create and deliver value propositions. It’s common to see value propositions constructed by listing benefits that communicate canned information about products and services. Smart sales folks sometimes default to this method since it requires the least amount of research time, and it feels safe to recite all the apparent benefits of the offering(s). However, the time saving feature is also a major weakness due to the haphazard communication of features and benefits that are “me too claims”, or don’t mean much to the customer.

Another wrong step to avoid is to make claims that are difficult to measure, exaggerated, or not specific to how the customer measures value. Buyers are sophisticated and credibility can be lost by exaggeration, or inaccuracy of presented information. Moreover, false confidence on apparent early good customer bonds lead talented players to say (and believe), “I play golf with my customers and I will get their business.” All said and done, relationships and personal charm are part of the equation in persuading customers to buy from a company, but a relationship by itself is an incomplete, and weak at best, value proposition. Customers have budgets to meet, committees to uphold decisions, incentives to be earned by saving money, and stakeholders that expect the bottom line to grow. The buyer who likes a seller enough to jeopardize the bottom line is rare.

It’s all about the ethos, the pathos, and the logos

Generic value propositions that can produce “money savings”, provide better “lifecycle costs”, or improve “operational costs” are in play by all competitors. When everybody is making the same “me too claims”, what is a customer to think? As often as not, claims are made that cannot be backed up with facts, or not enough work is done to determine tangible benefits. In view of this, high performance sales organizations should go to great lengths to insure that the value is distinctive, measurable, and addresses the identified needs. Customers in most organizations are sophisticated and can read through Bullsh-t and platitudes indeed.

Harry Frankfurt, professor emeritus in the philosophy department at Princeton University, wasn't bullsh-tting when he wrote an essay titled "On Bullsh-t." The work, which was recently published in book form under the same title, defines bullsh-t and addresses its prevalence in American society. Frankfurt, a moral philosopher, foregoes unnecessary material in the introduction and bluntly writes "One of the most salient features of our culture is that there is so much bullsh-t”.1 "Bullsh-t shows the indifference to distinction between true and false," Frankfurt said. "A liar deliberately says what is false, but someone who bullsh-ts does so to suit his purpose." For example, a marketer is less concerned with the truth about their product and more concerned about selling it, he explained. "Bullsh-t becomes an instrument for pursuing personal goals”.2

Keeping professor’s Frankfurt writing in mind, Aristotle proposed a long time ago that persuasion is clearly a sort of demonstration, since we are fully persuaded when we consider a thing to have been demonstrated. Considering the modes of persuasion furnished by the spoken word there are three kinds: The first kind depends on the personal character of the individual [ethos]; the second on putting the audience into a certain frame of mind [pathos]; the third on the proof, or apparent proof, provided by the words of the speech itself or message [logos].3 Now the punch line, there is great risk to personal credibility or ethos when bullsh-tting or making inaccurate claims. Once credibility or ethos is lost there is no chance to construct effective pathos or logos, and development of a successful persuasive message becomes an impossible task.

Potential customers must see tangible evidence of the value they will get as compared to the next best alternative. This makes decision making a predictable process that is a win-win scenario for both parties. Everything being equal, a good relationship can help break the stalemate because people do buy from those they like. It’s the job of smart performer(s) to set up the stage with enough advantages in order to craft a winning value proposition. No short cuts can be taken in the race to win the business and favor of customers.

Notes:

1 Young, Ellen. “Philosophy prof pens book on bull” Online posting. 16 February 2005. The Daily Princetonian. 8 March 2006. http://www.dailyprincetonian.com/archives/2005/02/16/news/12033.shtml

2 Young, Online Posting

3 Americanrhetoric.com. Selected moments from Aristotle’s rhetoric. 16 March 2006. http://www.americanrhetoric.com/aristotleonrhetoric.htm

Knowledge Driven Organizations Significantly Outperform their Rivals

By Ernie A. Cevallos

While conversing with an experienced sales manager, I wanted to learn if the resources being invested on a particular customer to develop an opportunity was justified. Was it more efficient to work on other projects that competed for resources, or was it better to continue investing in this project? This manager's response was "Let's stay the course for sure". In this example, the manager had figured out a labyrinth of issues including people, compelling event, solution fit, procurement processes, cultural compatibility, how the customer perceived value, and most importantly a convincing value proposition that was co-authored under the sponsorship of the customer. Did it work? Yes, the efforts of this knowledge worker produced a $15M sale.

This real life situation offers a window into one of the modern workplace's most vexing problems, the issue of knowledge management. The manager and his team had deciphered how to win this major contract and accumulated a series of advantages over the competition. But what will happen when he moves to a different job or goes to a competitor? Will productivity decline until his replacement becomes skilled?

We are all "knowledge workers" now. However, few organizations have become adept at disseminating knowledge among employees. Business gurus have offered many potential solutions. Most involve technology, such as asking employees to submit written comments of expertise to a database that other employees can tap. But few of these efforts have produced big payoffs. Last year, when consulting firm Bain & Co. asked 960 executives about the effectiveness of 25 management tools, knowledge management ranked near the bottom.

Managers keep trying because the concept of sharing knowledge remains as captivating as it is elusive. Despite their discontent with the results, the executives surveyed by Bain actually increased their use of knowledge-management systems last year. According to Most Admired Knowledge Enterprises (MAKE) Read Knowledge Library, knowledge driven organizations significantly outperform their rivals. The list of companies commanding the vanguard in this category include Raytheon, Toyota, Dell, General Electric, and Google. The following metrics illustrate this point well:

- One of the clearest metrics to demonstrate this fact is Total Return to Shareholders (TRS). For the ten-year period 1994-2004, the TRS for the publicly-traded 2005 Global MAKE Winners was 22.3% - nearly double that of the Fortune 500 company median.

- Profits as a percentage of revenues (Return on Revenues) for the publicly traded 2005 Global MAKE Winners was 10.8% - compared to the Global Fortune 500 company median of 4.3%.

- The 2005 Global MAKE Winners also rank high in brand value with 13 out of the top 100 global brands. These 13 brands are valued at US $293.6 billion.

True Value Creation and your Customers

By Ernie A. Cevallos

This paper is based on personal experience with the larger or major sale, and insights from the research conducted by Huthwaite. Major sales are more complex, take longer to develop, and typically involve many decision makers and influencers. Knowing how to navigate these waters and creating value is key to the success of any sales force. Indeed, the customer decides if the value is real or not. Customers have different notions of value, which are based on their particular circumstances, culture, procurement policies, leadership style of decision makers, business objectives, and ROI expectations. Different customers even in the same industry have varying degrees of value notions.

Communicating VS Creating Value

Sales forces have justified their existence by communicating the value of their products and services. If a sales rep communicated product/service information and functionality to customers, the conventional thinking deemed those actions as value creation in the selling process, because the customer was educated and learned how they could benefit by using a particular solution or service. The problem with this feature approach of communicating value is caused by the decline in differentiation between products and services. With prevalent commoditization in many industries (let me pick in particular on the building automation industry), the communicated benefits matter much less to customers. Value migrates from the solution to the price and a competitive procurement process.

So, sales forces must go beyond communicating the value of features a company or solution provides, and finding ways to create new value by thinking outside the box. To create value companies need to find ways to increase the ability to deliver “well differentiated benefits”. The problem is that a great deal of value propositions presented are canned, and unique benefits that translate into great value are uncommon. To this end, it is not enough that sales leadership commit themselves to a value creation agenda. They must know what it is that they are committed to - that is, what they must do. These obligations cannot be delegated, and action is required. Some ideas on how to work smart and establish a true value creation agenda include:

• Target and engage customers early in the sales cycle to be able to influence the outcome, and not be reactive to opportunities at the 11th hour


• Train sales force on problem solving skills and proper selling approach to diagnose problems and needs well


• Institute account management disciplines for high potential and high penetration customers


• Find ways to reduce cost though Six Sigma initiatives that include the entire value chain, and not just the supply chain


• Implement “Lean Enterprise” initiatives to further reduce costs and translate those saving into competitive advantage, or new sources of gross margin


• Web enable progress, and value reports to communicate the implementation of solutions/services


• Invest time and resources on face-time spent with customers to build better bonds


• Apply Gaps Model of Quality to services marketing initiatives to further differentiate services
  
• Train leadership on common and special cause variation to gain knowledge on value creation and the removal of high performance barriers

Matching Strategy to Customers

Having a proper model for customer segmentation vis-à-vis value creation is essential, so that resource allocation is not an impediment to selling efforts. Huthwaite makes a compelling case for how value migrates depending on the customer. So, who are transactional, consultative, and enterprise customers? That is the known unknown that even well trained and talented sales forces and managers have to figure out. How many times have you seen a heavy investment in selling effort turn out to be a losing proposition? This can be the result of misplaced attention on trying to persuade a customer with very clear ideas on a transaction, where the value is low cost and no more. Time must be taken to understand how the customer defines value, and how to generate new insights by diagnosing problems and needs. The answer at times is to walk away by recognizing that you can't be everthing to all customers, and using limited time and company resources to work on higher probability projects.

Interestingly, a failure mode of sales organizations is not recognizing that different approaches to selling are needed for different customers. The research by Huthwaite points out that when there is a value perception misfit no amount of selling skill, clever strategy, or well-crafted value proposition can bridge the gap between what a customer wants and what a supplier has to offer. In today’s environment customers demand more value than ever, so it’s imperative that a sales force must align its values with those of the customer. Sales forces must learn to further segment customers according to the way they perceive and define value.

Traditionally sales forces have survived well by dividing customers by geography, size, vertical market, or specific products and services. However, as the world of sales continues to evolve the advantages of classifying sales efforts under the headings of transactional, consultative, and enterprise is not an option anymore if you want to win more sales. A sales force that creates new value by addressing accurately how a customer measures value, or brings a new consultative element of knowledge that can help a customer improve their business metrics will be in a better position to win against a less sophisticated competitor. Unless the approach to creating value corresponds with the needs and value perception of customers, selling efforts will continue to languish in sales organizations lacking leadership to get with the times.

The Five Deadly Business Sins

Books on management are published by the hundreds each year, but for your money you can skip a great deal of these publications and simply re-read Peter F. Drucker, who will always be the Shakespere of the genre. The past few years have seen the downfall of one once-dominant business after another: General Motors, Sears and IBM, to name just a few. In every case the main cause has been at least one of the five deadly business sins, which undoubtedly will harm the mightiest business. Take a look and see how your business is doing?

By PETER F. DRUCKER
(This list originally appeared in the Wall Street Journal on Oct. 21, 1993)

• The first and easily the most common sin is the worship of high profit margins and of “premium pricing”
  
  The prime example of what this leads to is the near-collapse of Xerox in the 1970s. Having invented the copier -- and few products in industrial history have had greater success faster -- Xerox soon began to add feature after feature to the machine, each priced to yield the maximum profit margin and each driving up the machine's price. Xerox profits soared and so did the stock price. But the vast majority of consumers who need only a simple machine became increasingly ready to buy from a competitor. And when Japan's Canon brought out such a machine it immediately took over the U.S. market -- Xerox barely survived.
  
  GM's troubles -- and those of the entire U.S. automobile industry -- are, in large measure, also the result of the fixation on profit margin. By 1970, the Volkswagen Beetle had taken almost 10% of the American market, showing there was U.S. demand for a small and fuel-efficient car. A few years later, after the first "oil crisis," that market had become very large and was growing fast. Yet the U.S. auto makers were quite content for many years to leave it to the Japanese, as small-car profit margins appeared to be so much lower than those for big cars.
  
  This soon turned out to be a delusion -- it usually is. GM, Chrysler and Ford increasingly had to subsidize their big-car buyers with discounts, rebates, cash bonuses. In the end, the Big Three probably gave away more in subsidies than it would have cost them to develop a competitive (and profitable) small car.
  
  The lesson: The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits. Total profit is profit margin multiplied by turnover. Maximum profit is thus obtained by the profit margin that yields the largest total profit flow, and that is usually the profit margin that produces optimum market standing.

• Closely related to this first sin is the second one: mispricing a new product by charging "what the market will bear"
  
  This, too, creates risk-free opportunity for the competition. It is the wrong policy even if the product has patent protection. Given enough incentive, a potential competitor will find a way around the strongest patent.
  
  The Japanese have the world's fax-machine market today because the Americans who invented the machine, developed it and first produced it charged what the market would bear -- the highest price they could get. The Japanese, however, priced the machine in the U.S. two or three years down the learning curve -- a good 40% lower. They had the market virtually overnight; only one small U.S. fax-machine manufacturer, which makes a specialty product in tiny quantities, survives.
  
  By contrast, DuPont has remained the world's largest producer of synthetic fibers because, in the mid-1940s, it offered its new and patented nylon on the world market for the price at which it would have to be sold five years hence to maintain itself against competition. This was some two-fifths lower than the price DuPont could then have gotten from the manufacturers of women's hosiery and underwear.
  
  DuPont's move delayed competition by five or six years. But it also immediately created a market for nylon that nobody at the company had even thought about (for example, in automobile tires), and this market soon became both bigger and more profitable than the women's wear market could ever have been. This strategy thus produced a much larger total profit for DuPont than charging what the traffic would bear could have done. And DuPont kept the markets when the competitors did appear, after five or six years.

• The third deadly sin is cost-driven pricing
  
  The only thing that works is price-driven costing. Most American and practically all European companies arrive at their prices by adding up costs and then putting a profit margin on top. And then, as soon as they have introduced the product, they have to start cutting the price, have to redesign the product at enormous expense, have to take losses -- and, often, have to drop a perfectly good product because it is priced incorrectly. Their argument? "We have to recover our costs and make a profit."
  
  This is true but irrelevant: Customers do not see it as their job to ensure manufacturers a profit. The only sound way to price is to start out with what the market is willing to pay -- and thus, it must be assumed, what the competition will charge and design to that price specification. Cost-driven pricing is the reason there is no American consumer-electronics industry anymore. It had the technology and the products. But it operated on cost-led pricing -- and the Japanese practiced price-led costing. Cost-led pricing also nearly destroyed the U.S. machine-tool industry and gave the Japanese, who again used price-led costing, their leadership in the world market. The U.S. industry's recent (and still quite modest) comeback is the result of the U.S. industry's finally having switched to price-led costing.
  
  If Toyota and Nissan succeed in pushing the German luxury auto makers out of the U.S. market, it will be the result of their using price-led costing. To be sure, to start out with price and then whittle down costs is more work initially. But in the end it is much less work than to start out wrong and then spend loss-making years bringing costs into line -- let alone far cheaper than losing a market.

• The fourth of the deadly business sins is slaughtering tomorrow's opportunity on the altar of yesterday
  
  It is what derailed IBM. IBM's downfall was paradoxically caused by unique success: IBM's catching up, almost overnight, when Apple brought out the first PC in the mid-1970s. This feat actually contradicts everything everybody now says about the company's "stodginess" and its "bureaucracy." But then when IBM had gained leadership in the new PC market, it subordinated this new and growing business to the old cash cow, the mainframe computer.
  
  Top management practically forbade the PC people to sell to potential mainframe customers. This did not help the mainframe business -- it never does. But it stunted the PC business. All it did was create sales for the IBM "clones" and thereby guarantee that IBM would not reap the fruits of its achievement.
  
  This is actually the second time that IBM has committed this sin. Forty years ago, when IBM first had a computer, top management decreed that it must not be offered where it might interfere with the possible sale of punch cards, then the company's cash cow. Then, the company was saved by the Justice Department's bringing an antitrust suit against IBM's domination of the punch-card market, which forced management to abandon the cards -- and saved the fledgling computer. The second time providence did not come to IBM's rescue, however.

• The last of the deadly sins is feeding problems and starving opportunities
  
  For many years I have been asking new clients to tell me who their best-performing people are. And then I ask: "What are they assigned to?" Almost without exception, the performers are assigned to problems -- to the old business that is sinking faster than had been forecast; to the old product that is being outflanked by a competitor's new offering; to the old technology -- e.g., analog switches, when the market has already switched to digital. Then I ask: "And who takes care of the opportunities?" Almost invariably, the opportunities are left to fend for themselves.
  
  All one can get by "problem-solving" is damage-containment. Only opportunities produce results and growth. And opportunities are actually every bit as difficult and demanding as problems are. First draw up a list of the opportunities facing the business and make sure that each is adequately staffed (and adequately supported). Only then should you draw up a list of the problems and worry about staffing them.
  
  I suspect that Sears has been doing the opposite -- starving the opportunities and feeding the problems -- in its retail business these past few years. This is also, I suspect, what is being done by the major European companies that have steadily been losing ground on the world market (e.g., Siemens in Germany). The right thing to do has been demonstrated by GE, with its policy to get rid of all businesses -- even profitable ones -- that do not offer long-range growth and the opportunity for the company to be number one or number two world-wide. And then GE places its best-performing people in the opportunity businesses, and pushes and pushes.
  
  Everything I have been saying in this article has been known for generations. Everything has been amply proved by decades of experience. There is thus no excuse for managements to indulge in the five deadly sins. They are temptations that must be resisted.

What is the Purpose of Dr. Deming's Theory of Management?

By ERNIE A. CEVALLOS
(This document was submitted to Professor Howard Gitlow of the University of Miami as a term-paper for MAS 610 Statistical Analysis for Decision Making Process -- Paper has been edited for shortened Blog publication)

Background

After World War II American industry returned to the peacetime production of consumer goods, for which there was unparalleled demand and no competition. Untouched by war, the industrial heartland produced cars, washing machines, vacuum cleaners, mixers, lawnmowers, refrigerators, furniture, carpet, and all the goods for the growing postwar suburbs inhabited by a generation of prosperous Americans.

The American corporation had fulfilled the promise of ‘scientific management,’ formulated by an influential industrial engineer named Frederick Winslow Taylor more than three decades earlier. Taylor had held that human performance could be defined and controlled through work standards and rules. He advocated the use of time and motion studies to break jobs down into simple, separate steps to be performed repeatedly without deviation by different workers. Minimizing complexity would maximize efficiency, although it was as bad to overperform as it was to underperform on a Taylor-style system.

Scientific management evolved during a period of mass immigration, when the workplace was being flooded with unskilled, uneducated workers, and it was an efficient way to employ them in large numbers. This was also a period of labor strife, and Taylor believed that his system would reduce conflict and eliminate arbitrary uses of power because so little discretion would be left to either workers or supervisors. Hence the evolution of the rule-bound, top-heavy American corporate management structure.

Quality in these postwar years took a backseat to production. Quality control came to mean end-of-the-line inspection. If there were defects and rework, there would be profit enough to cover them. Although some quality control lingered for a time, particularly in defense industries, for the most part the techniques taught by Dr. Deming were regarded as time consuming and unnecessary, and they faded from use. By 1949, Dr. Deming says mournfully, “there was nothing not even smoke.” This setback only served to strengthen Dr. Deming’s conviction, as he considered what had gone awry.

Purpose of Dr. Deming’s Theory of Management

As a statistician, Dr. Deming’s lifelong mission had been to seek sources of improvement. World War II had quickened the pace of quality technology, but as World War II ended, progress in quality control began to wane. Many companies saw it as a wartime effort and felt that it was no longer needed in a booming market. Given the failure of statistical methods for quality control to endure, he figured out what might have caused the failure and how to avoid it in the future. He gradually concluded that what was needed was a bedrock philosophy of management, with which statistical methods were consistent. He was ready with new principles to teach when the Japanese called him in 1950 to aid in the reconstruction of their country.

The aim of Dr. Deming’s theory of management also known as, ‘System of Profound Knowledge,‘ challenges leaders to embrace a new paradigm based on the following three major points:

1. Foster an environment to allow all people to experience ‘joy in their work’ and pride in the outcome
2. Optimize the system of interdependent stakeholders so that everybody wins. Avoid optimizing one stakeholder group’s welfare at the expense of another stakeholder
3. Improve and innovate the condition of society

The purpose of the new paradigm transformation is to ‘unleash the power of human resource contained in intrinsic motivation,’ and to foster an environment of full cooperation between people, departments, companies, governments, and countries to achieve win-win scenarios through process improvement, team work, and innovation.

The system of profound knowledge is a fitting theory for leadership in any culture or business. In some circles people think incorrectly of Total Quality Management with industrial connotations. For example, in the health care arena the customer is the patient, and production could be equated to the quality of patient care. Indeed many of the concepts which are espoused by TQM relate to interpersonal interaction as much as they do to other more production oriented criteria.

Therefore the key dimensions of TQM can be identified as: team development, statistical quality control, process management, assessment of customer’s needs, fact-based decision making, continuous quality improvement, and benchmarking. Applying this management theory requires a focus to the new kind of world of interdependence that we are in now. The prevailing paradigm in the Western world is not based on any holistic or comprehensive theory; it is just the cumulative result of assorted reactive experiences and methods:

• Reward and punishment are the most important motivators
• Winners and losers are necessary in most interactions between people
• Results are achieved by focusing on productivity, rather than quality
• Superiors are your most important customers
• Competition is a necessary aspect of personal and organizational life
• Management by objectives (MBO)

Managers basing their leadership in the above listed paradigms will be lost in the new economic age. Such leaders need to open their minds and change to be able to learn the new paradigms of Total Quality Management (TQM).

Assumptions of Dr. Deming’s Theory of Management

Dr. Deming’s theory of management is based on four assumptions:

1. Management's function is to optimize the whole system, not just your components

E.g., Western-style management: Reward-punishment performance appraisal systems optimize components of the system.

E.g., Deming-style management: A better way is to evaluate an individual long-term virtue, to know if they are in the system or out of the system, and to understand the performance issues as special or common cause. According to statistical research by Deming, Ishikawa, and Juran over 80% of problems are related to common cause or system problems of the organization.

2. Cooperation works better that competition

E.g., Western-style management: Internal competition to recognize the top 10% sales people in an organization creates a system where 90% of the population is labeled substandard performers or worse yet losers for those on the bottom half.
E.g., Deming-style management: In any distribution curve, 50% of the population is going to be below average, and only 10% are going to be top performers. It does not make sense to grow an organization of malcontents because nobody wants to labeled a loser. If the system is stable and has good hiring policies in place, a better way to manage is to have a goal to shift the distribution curve to the right by continuous improvement and removing common causes of variation. All employees in the system should be recognized for the accomplishments of the enterprise, rather than just the top 10%.

3. Manage using both a process and results orientation, not only a results orientation

E.g., Western-style management: Asking to sell 30% more (by a MBO goal) without understanding the process that allows that goal to be attained, or providing a process for goal attainment, creates a fail syndrome (demanding unreasonable greater results has the opposite effect that contradict the Pygmalion effect).

E.g., Deming-style management: A better way is to analyze historical performance using statistics. Then basing sales growth goals within +/- 3 standard deviations from the mean, where 99% of the sample population is predicted to attain the goal, and shifting the curve to the right by improving the sales process. If a stable system is pushed beyond its limits, the system typically breaks down.

4. People are motivated by a mix of intrinsic and extrinsic motivation

E.g., Western-style management: Recognizing people solely through extrinsic motivation by giving plaques, letters of commendation, bonuses, and pats in the back to motivate employees.
E.g., Deming-style management: A better way is for management to combine extrinsic and intrinsic motivation to increase quality and pride in the work. Intrinsic motivation is the enthusiasm and positive stimulation an individual experiences from the sheer joy of an endeavor. Management can release intrinsic motivation by creating a culture that encourages employee involvement in using process improvement tools such as the Deming wheel (SDSA and PDSA) to innovate and improve quality.

Each of these assumptions are directly associated with the interrelationships between people. They all revolve around a key concept, receptivity of the management style by those who are not only managing but those who are being managed. The implementation of management philosophies obviously revolves around employee motivation, and not all employees are either easily motivated or receptive to management styles that differ from those to which they have been accustomed.

What motivates an individual, therefore, is at the center of Total Quality Management philosophy. Motivational theory in itself has a long history of both direct and indirect applicability to many aspects of management in general and to Total Quality Management in particular. Indeed, the importance of teamwork in the organizational atmosphere cannot be underestimated. Before employees can effectively interact as a team, however, they must be able to function independently in an efficient and productive manner.

Such independence revolves around numerous factors, some of which were learned in childhood and some of which can be instilled in the professional environment. An important part of this independence is being able to relate to one's peers and to turn criticism and resistance, which exists from some peers, into a positive factor in influencing team performance.

Leaders applying the Deming-style management need to be experts at molding independent workers and teams. A high performing team is to some degree the product of the individual player's personalities, personalities that had roots as far back as childhood. Deming’s teachings recognize that an individual's qualities or lack of them could be refined in the professional workplace. Lastly, Deming has influenced my thinking in a variety of ways. What stands out is the wisdom behind the value of teamwork, process improvement, individual versus systemic issues, and the pervasive power of continuous improvement.

Blog Linking here: Curious Cat Management Improvement Library

Deming's 14 Points & System of Profound Knowledge

Deming's 14 Points
(Excerpted from Chapter Two of OUT OF THE CRISIS by W. Edwards Deming).

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership. The aim of supervision should be to help people, and machines and gadgets to do a better job. Supervision of management is in need of overhaul as well as supervision of workers.
8. Drive out fear, so that everyone may work effectively for the company
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, to foresee problems of production and in use that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
a. Eliminate work standards (quotas) on the factory floor. Substitute leadership.
b. Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.
12. Remove barriers that rob the hourly worker of his right to joy of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
a. Remove barriers that rob people in management and in engineering of their right to joy of workmanship. This means abolishment of the annual merit rating and of management by objective
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.

Deming's System of Profound Knowledge
(Excerpted from Chapter 4 of The New Economics, second edition by W. Edwards Deming).

The prevailing style of management must undergo transformation. The transformation requires a view from outside. The aim of this chapter is to provide an outside view, a lens that is called a system of profound knowledge. It provides a map of theory by which to understand the organizations that we work in.

The first step is transformation of the individual. This transformation is discontinuous. It comes from understanding of the system of profound knowledge. The individual, transformed, will perceive new meaning to his life, to events, to numbers, to interactions between people. Once the individual understands the system of profound knowledge, he will apply its principles in every kind of relationship with other people. He will have a basis for judgment of his own decisions and for transformation of the organizations that he belongs. The individual, once transformed, will:

1. Set an example


2. Be a good listener, but will not compromise


3. Continually teach other people


4. Help people to pull away from their current practice and beliefs and move into the new philosophy without a feeling of guilt about the past

The layout of profound knowledge appears here in four parts, all related to each other:

1. Appreciation for a system


2. Knowledge about variation


3. Theory of knowledge


4. Psychology

One need not be eminent in any part nor in all four parts in order to understand it and to apply it. The 14 points for management in industry, education, and government follow naturally as application of this outside knowledge, for transformation from the present style of Western management to one of optimization. The various segments of the system of profound knowledge proposed here can not be separated. They interact with each other. Thus, knowledge of psychology is incomplete without knowledge of variation.

A manager of people needs to understand that all people are different. This is not ranking people. He needs to understand that the performance of anyone is governed largely by the system that he works in, the responsibility of management. A psychologist that possesses even a crude understanding of variation as can be gleaned from the experiment with the Red Beads (Ch. 7) could no longer participate in refinement of a plan for ranking people.

Further illustrations of entwinement of psychology and use of the theory of variation (statistical theory) are boundless. For example, the number of defective items that an inspector finds depends on the size of the work load presented to him (documented by Harold F. Dodge in the Bell Telephone Laboratories around 1926). An inspector, careful not to penalize anybody unjustly, may pass an item that is just outside the borderline Out of the Crisis, p. 266). The inspector in the illustration on page 265 of the same book, to save the jobs of 300 people, held the proportion of defective items below 10 per cent. She was in fear for their jobs. A teacher, not wishing to penalize anyone unjustly, will pass a pupil that is barely below the requirement for a passing grade. Fear invites wrong figures.

Bearers of bad news fare badly. To keep his job, anyone may present to his boss only good news. A committee appointed by the President of a company will report what the President wishes to hear. Would they dare report otherwise? An individual may inadvertently seek to cast a halo about himself. He may report to an interviewer in a study of readership that he reads the New York Times, when actually he reads tabloids. Statistical calculations and predictions based on warped figures may lead to confusion, frustration, and wrong decisions. Accounting-based measures of performance drive employees to achieve targets of sales, revenue, and costs, by manipulation of processes, and by flattery or delusive promises to cajole a customer into purchase of what he does not need (adapted from the book by H. Thomas Johnson, Relevance Regained, The Free Press, 1992).

A leader of transformation needs to learn the psychology of individuals, the psychology of a group, the psychology of society, and the psychology of change. Some understanding of variation, including appreciation of a stable system, and some understanding of special causes and common causes of variation, are essential for management of a system, including management of people (Chs. 6 -10).

Managing the Power of You as a Brand -- The Most Important Project You Will Ever Undertake!

By Ernie A. Cevallos

Fortune 500 firms appreciate the importance of brands. Today, in the age of Globalization where digitization, virtualization, and automation of almost everything is possible you have to manage brand You more than ever to survive in this competitive global environment. Is brand You representative of Google, American Express, Oprah Winfrey, or are you symbolic of Yugo car, Firestone tires, Hugo Rafael Chavez? As you know, brands stand for something, and it can go the full spectrum from great to mediocre to bad. What do you stand for?

The time is right to take a lesson from the successful brands, a lesson that is true for anyone who is interested in what it takes to stand out and prosper in the workforce. Regardless of age, position, or the business we happen to be in, all of us need to appreciate the importance of branding. We are CEOs of our own lives. To succeed in business today, our most important job is to be chief marketer for the brand called You. Management of brand You is the most important project you will ever undertake. Tom Peters popularized the subject about 9 years ago, which brought this personal marketing success strategy to front headlines.

The upside of things is that everyone has a chance to attain greatness. You have a chance to learn, improve, and acquire skills. Every individual has a chance to be a winning brand, but only if you want to invest time in developing, and executing a branding plan. It is not too hard, it requires commitment, and it is very essential to success! So, how do we turn ourselves from ordinary brands into winning brands?

What is your Pitch?

You know the cliché “don't sell the steak, sell the sizzle.” It is also a principle that every corporate brand understands clearly. No matter how impressive your talents, no matter how great your principles and mission statement, you still have to market the heck out of your brand -- to customers, bosses, and your network of associates. For most branding campaigns, the first step is visibility. If you're Microsoft, Ebay, or Coca Cola that usually means an avalanche of TV and print ads designed to deliver a winning message that creates a positive image and awareness. In managing brand You, you have the same need for visibility, but zero budget to buy it. So, how do you turn yourself from an ordinary Joe into a great brand? Here are some basic branding ideas to consider:

• Cultivate people -- become a master networker or a connector of the sort described in the “Tipping Point”. Connectors know a great deal of people and cultivate acquaintances. The social power of this network can provide invaluable access to new ideas and creation of new opportunities. Your network of friends, colleagues, and clients is the most important marketing vehicle you have; what they say about you and your contributions is what will ultimately gauge the value of your brand
• Think about great gigs -- sign up for an extra project inside your organization, just to introduce yourself to new colleagues and showcase your skills -- or work on new ones. If you can get them singing your praises, they will help spread the word about what a remarkable contributor you are
• Master something -- competence in many skills is important, but it is not enough. The act is finding the stuff you love and getting so damn good at it that you become an indispensable asset to the organization
• Focus on results -- brand You is about execution and delivery of results. An uncompromising attitude to do whatever is necessary to deliver results is crucial. This test of character will leave no doubt that you are committed to success and no less
• Personal visibility -- everything you do, and everything you choose not to do, conveys the value and character of the brand. Everything from the way you communicate, to the way you dress, to the way you conduct business in a meeting is all part of the larger message you are sending about your brand
• Loyalty matters -- loyalty really matters in business and relationships. But it is not blind loyalty to the company. It is loyalty to your colleagues, loyalty to your team, loyalty to your boss, loyalty to your project, loyalty to your customers, and loyalty to yourself. I see it as a much deeper sense of loyalty than mindless loyalty to the Company Z logo

What's the Real Power of You?

If you want to grow your brand, it is recognized by experts that you have got to understand your own power base. In fact, power for the most part is a misunderstood term and a misused capability. What kind of power? It is not ladder climbing power, as in who is best at securing the top job. It is not who has got the biggest corner office by four square inches, or who has got the fanciest title. It is indeed influence power!

It is being known for making the most significant contribution in your particular area. It is reputational power. If you were a leader, you would measure it by the number of people you successfully developed. If you were a sales rep, you would be measure it by the number of decision makers who view you as a trusted advisor and award business to your firm. Getting and using power intelligently is an essential skill for growing your brand. One of the things that attract us to certain brands is the power they project. As a consumer, you want to associate with brands whose powerful presence creates a halo effect that rubs off on you.

Regardless of what you do and who you are, you have got four things to measure in order to track your success. First, you have to be a great teammate and a supportive colleague. Second, you have to be an exceptional expert at something that has real value. Third, you have to be a visionary. Fourth, you have to be a remarkable business person – you have got to be obsessed with great outcomes, and excellence.

Most important, remember that power is largely a matter of perception. If you want people to see you as a powerful brand, act like a credible leader. When you are thinking like brand You, you don't need permission to be a leader. The fact is you are a leader. You are leading You!

You are in charge of your brand. There are many paths to success. And there is no one right way to create the brand called You. Except this: “If you always do what you always did, you will always get what you always got”.

Purpose and Goals in Our Lives - Where Do We Want to Go?

There are many aspects of our lives that require making choices and determining how we invest our time and energy. If we waste the opportunity to organize our limited time and energy resources, we will never experience the happiness and rewards that are within our reach.

Setting goals present a dilemma because we are committing to something that may not be reasonable tomorrow. We may feel that the exclusivity of attention may distract us from other opportunities. We may find ourselves moving in a direction that is not what we envisioned earlier. The good thing is that when we engage in goal setting, we always begin to see things that may not have been evident in a status quo environment. New perspectives and insights will help us, in a iterative process, to set the right goals and make adjustments that take us much further along the path of success.

The point to take notice here is that there are great opportunities to be uncovered and capitalized, but can't be accessed while we sit still, or just go with the flow of everyday occurrences and events. It is only when we are committed, and apply our energy and time to the pursuit of goals that we put ourselves in the best position to attain what was not possible.

To shed light on the issue from another angle, too many people are paralyzed by unattainable goals and artificial expectations. They feel like failures when they are really a great success. In the same vein, there are people who sacrifice everything to reach goals of wealth and power. A great many of us wonder if sustained success is even possible? The answer is yes, if the goals are realistic and attainable. It is the responsibility of those in power and in leadership roles to assess the standards and to take responsibility for setting achievable expectations. Goals that are specific, hard but realistic, accepted by the person(s), linked to feedback and reward, and set in a participative manner have a high correlation to improved performance.

We do need to give ouselves the empowering structure of regular goal setting and goal renewal to keep us on a success path.