Daily Updates

Idea 31  -  Loyalty Management consultants devote many long hours, days and months hunting the snark - hoping for a better management idea, an undiscovered causal link between how businesses do what they do and the size of the bottom line. Frederick F. Reichheld and his colleagues at Bain &: Company came up with a winner when they identified close connections between customer retention, growth and profits. They called it 'loyalty' and discovered that, in the best-performing companies, it was intertwined with employee and investor loyalty. Each one reinforced the others. All those loyalty and rewards cards you don't know where to keep, from shops you can't remember visiting? Blame Reichheld. Loyalty programmes are nothing new, but his 1996 book, The Loyalty Effect, made them a competitive must-have as companies scrambled to put his ideas to work and retain their best customers. For those who thought that loyalty had died along with chastity and good manners,...

Idea 30  -  The long tail The Internet changes everything, they used to say in the 1990s. That was just before they discovered that it didn't. But it changes quite a lot of things and one of them - according to the long tail theory - is the ability, over time, to make money out of very small niches. There was a time when the profitable niche was commonplace, but the age of mass production and mass marketing has crowded it out, most notably in consumer markets. Consolidation has produced powerful retailers. They choose to stock only those items that sell in large numbers, and have reduced the variety of their ranges accordingly. Many small producers have fallen by the wayside in the process. This phenomenon has been especially visible in the media and entertainment industries - in book and music publishing and in film production. We live in the world of the bestseller, the blockbuster, the hit. The argument of the long tail is that, in an Internet world, niche pr...

Idea 29  -  The learning organization The world is speeding up, as it gets more wired and as people get more demanding - I want exactly what I want, and I want it now. But I might want something different tomorrow. As markets fragment and change accelerates, business has to keep up or die. That's why the continuous improvement that started on the factory floor is now reflected in the notion of continuous change, company wide. The ability to rethink, continually, your purpose and methods is the most important single source of competitive advantage, says Dutch writer and ex-corporate planner Arie de Geus. But individuals can only change through learning, which makes learning the capital of the future. Hence the evolution of the 'learning organization', which is not entirely the same as one that trains its people well - though it does that too. The organization itself learns and keeps learning, over and above its individuals. MIT lecturer Peter Senge has made much o...

Idea 28  -  Lean Manufacturing It may trade under a rather prosaic title, but 'lean manufacturing' inspires a zeal that is positively revivalist in its fervor. It is Japanese by birth, and utterly Japanese in nature, managing to be complex, relentlessly demanding and, at the same time, elegantly simple. Doing it is not at all easy, but it does boil down to one imperious principle - 'eliminate waste'. Lean, as its adherents call it, is about speed and efficiency, though they would say it was far more complicated than that. While it was formulated in the Japanese automobile industry in the 1930s and 1940s, its acknowledged influences go back at least as far as Henry Ford. It was Ford who first integrated the production process, using interchangeable parts, standardized working and a moving production line. Some say he was the first practitioner of lean. One thing Ford wouldn't do was variety, as it would have slowed down his process. Quite apart from 'a...

Idea 27  -  Leadership There are many intangibles in business, particularly once you leave the production department, but nothing quite as intangible -as leadership. What is that follow-me-through-fire magic that leads the way and lights up the troops? Consultants and academics would love to isolate it, distil it and sell it in bottles, but no one has done that just yet. It hasn't stopped them from trying and some believe that leadership is the next big frontier in management studies. If there is a market in leadership, its price fluctuates. As the 1990s ended, the most admired CEOs had achieved rock star status and their companies' share prices (and their own pay) soared accordingly. The stock market soared too - these were the runaway 1990s - but a contemporary ten-year study showed that the stock of companies seen to have great leaders rose 12 times faster than those thought to lack them. Then stock markets fell, followed by the thudding, shameful collapse of Enr...

Idea 26  -  The knowledge economy As usual, Peter Drucker was on the case before anyone else. In the late 1960s he coined the term 'knowledge economy', predicting that the spread of information would cause major changes in society. What management had to do, he said, was to boost the productivity of 'knowledge work' and the 'knowledge worker'. Academics and statisticians - who want to measure it - have yet to agree on exactly what the knowledge economy is. Some say it is a group of specific industries, such as high-tech manufacturing, computing and telecommunications. Others argue that knowledge permeates all industries. The Organisation for Economic Cooperation and Development (OECD) takes the middle road with a definition that includes high- and medium-tech manufacturing, knowledge-intensive service industries such as finance, insurance and telecoms, followed by business services, education and health. The layperson could do worse than the followi...

Idea 25  -  Japanese management When Richard Pascale and Anthony Athos wrote The Art of Japanese Management, they observed that America's managerial skills were being challenged on three fronts. The first was managerial practice, where doing more of what they already did well was yielding less. The second was a shift in social values that meant people were expecting different things from organizations and from work. And the third? 'The competition is killing us.' That was the point. The year was 1981. Japan's gross national product was the third highest in the world and on track to be the highest inside the next 20 years. Japan is a tiny country, very mountainous, 70% uninhabitable, with the remainder the size of Cuba. Yet with almost no natural resources, it was growing and investing at twice rate of the US. It had overtaken previous international leaders in one industry after another: Germany in cameras, Switzerland (who would have believed it?) in watches, t...

Idea 24  -  Innovation Innovation is back on the corporate to-do list. When the innovative frenzy of the dot.com years came to its abrupt end, big companies stepped back from the new and refocused on the familiar. Now they are cautiously re-emerging from the bunkers. The IT industry shrieks 'innovation' and depends on it for much of its continued livelihood, but new and public commitments to innovate by large firms like General Electric and Procter & Gamble have encouraged other industries back into the lab. Innovation comes in waves, nourished by advances in technology. That was true in 1450, when Johannes Gutenberg invented the printing press. The advent of the personal computer set off a similar wave in the 1970s, ushering in the information age. In the 1980s it was software and, in the 1990s, the Internet and all things digital. The digital revolution continues, but today's urge to innovate also looks inward as firms turn to their own competencies in searc...

Idea 23  -  Globalization All right, so globalization is not, strictly speaking, a management idea. It's a worldwide phenomenon. But such a phenomenon, and so worldwide, that it has forced managers to rethink their markets, their production strategies, their supply chains and their sources of competitive advantage. And if some of them believe that globalization is a one-way street, perhaps they should rethink that too. Like many of the ideas that management has to wrestle which, globalization is not a new one. International trade was in full swing along the Silk Road by the second century BC, and the years leading up the First World War were the high point of internationalism, a frenzy of cross border trade and investment. It's only the fact that national economies turned in on themselves between the two world wars that makes the current phase of internationalism feel like a novelty at all. So managers have had to deal with it before, though not, it's true, on quite...

Idea 22  -  The four P's of marketing As the arm of the business responsible for getting the customer's attention, marketing has generated more than a few tanker loads of snake oil. The four Ps, however, has the virtue of being a simple and sound management idea, still much-used more than 40 years after it was first formulated The idea of the four Ps is rooted in 'the marketing concept'. While marketing is self-evidently not the same as production, nor is it the same as sales. Nearly two and a half centuries ago, Adam Smith observed in The Wealth of Nations that the whole mercantile system had been contrived to serve the needs of producers rather than those of consumers. He had put his finger on the basic idea of marketing - or, in his day, the lack of it. From that time, and before, until the early 20th century, business revolved around production. The 'production concept' meant that producers concentrated on goods that they could make most efficientl...