Daily Updates

Idea 41  -  Strategic alliances 'It's partner or perish', declared Xerox CEO Anne Mulcahy. She was announcing yet another in the chain of strategic alliances that her company has built, to powerful effect, over many years, starting with Fuji of Japan in 1960. It may have sounded like roll-of-the-drums hyperbole, but in today's fast-moving markets - and particularly in the high-tech arena where Xerox competes - it was no more than a reasonable observation. Managers and shareholders want their businesses to grow, though not always for the same reasons. Growth comes from building share in existing markets or expanding into new ones, and there is more than one way of doing either. The conventional options have always been either to build growth, or to buy it. Companies can grow organically, the hard, backbreaking way. The (deceptively) easy alternative is go out and acquire a competitor or a business in the chosen new market. The trouble with acquisition is that ...

Idea 40  -  Stakeholders It is the fate of some words to evolve rapidly through enlightening to hot, overused and, finally, very irritating, and 'stakeholder' has become one of them. It is sprinkled over reports and jammed into mission statements, as if use alone were enough to prove concern. Worse, politicians have got hold of it. In their mouths, it seems to refer to the population at large, which makes them sound caring without meaning very much. All this is a pity because its original concept represents a radical shift in the way the corporation views, or should view itself. The stakeholder idea began its march with R. Edward Freeman's 1984 book Strategic Management: A Stakeholders Approach. Freeman held that commercial firms would be much more effectively managed at a strategic level if the concerns of various stakeholders were taken into account. In other words, there would be long-term benefit for shareholders. He said later that the word 'stakeh...

Idea  39 - Six Sigma Martial arts mixes with the Greek alphabet and a US electronics maker in a defects control discipline that has won many thousands of corporate converts - Six Sigma. It was designed to reduce. Defects and shorten cycle times, something it does very effectively, but today its sponsors are promoting it as a fully integrated management system. Six Sigma was developed in the 1980s by electronics and communications firm Motorola. It was part of that company's response to devastating competition from foreign - read 'Japanese' - manufacturers. Sales were taking a hammering and there was a rising tide of complaints from the field sales force about warranty claims. As Motorola tells the story, the senior sales vice president looked the chief executive in the eye and said: 'Our quality stinks.' The two of them agreed on a goal of tenfold quality improvement over the next ten years. The job of making that happen fell to Bill Smith, an enginee...

Idea  38 - Scientific management Is management and art or a science? The debate is not new, nor is it over. In recent times, the 'art' lobby has been making up some lost ground, but it was 19th-century engineer Frederick Winslow Taylor who first cast management as a science. Peter Drucker, the management guru's management guru, says Taylor deserves a place alongside Darwin and Freud in the making of the modern world. Taylor believed that production was subject to universal laws that were independent of human judgment. It was the task of scientific management to uncover these laws, to discover the 'one best way' of doing things. It might be the best way of shoveling coal, of securing a bolt or of ensuring quality control. Taylor is largely forgotten outside business schools these days. When his memory surfaces, it's often for the worst of reasons. He was the first to break work down into small pieces, measure them and put them back together so they opera...

Idea  37 - Project management There are more lawyers, accountants and business school graduates in top management these days, and fewer engineers. The engineer as business manager is in eclipse, along with the shrinking weight of manufacturing in developed economies. Yet there is much that managers can and do learn from the down-and-dirty business of project management, in planning complex projects and forcing them through to conclusion. A project is very different to a process. A process carries out the same function again and again to yield a product or a service. A project is a one- off undertaking, with a clear beginning and end, usually aimed at creating some useful change or adding value - typically to build a new plant or create a new product. The skills needed to complete a project successfully are not those required to manage a process, and so project management has evolved as a discipline of its own. Projects bring together resources such as people, money a...

Idea  36 - Outsourcing In 2003, Procter &: Gamble caused a few jaws to drop by outsourcing its IT functions to Hewlett-Packard, its human resources department to IBM and its facilities management to Jones Lang LaSalle. It reasoned that specialists in each process would be able to beef up efficiency and service. Not only has it not been disappointed, but it has been pleasantly surprised at the scale of the improvement. So far, the exercise has been a classic example of why management reaches for outsourcing. Not all outsourcing fits that description, by any means. Many who have tried it say it is very difficult to pull off, and the failure rate remains high - anything from 40-70%, depending on whom you ask. A series of very visible outsourcing calamities at big companies like Dell and Lehman Brothers (which re-insourced helpdesks) and JP Morgan (which clawed back its IT functions) raised doubts over whether the practice had a future at all. Certain British government ...

Idea  35 - Organizational excellence Many esoteric works on management never make it past the campus gates. Others can influence the way companies are organized and run, though they usually have to filter their way through the consultancy profession first. A limited number of management books deliver an idea that's gripping enough to be read by senior management itself, drinking directly from the source. But only one has single-handedly created a whole new industry - In Search of Excellence, by McKinsey consultants Tom Peters and Robert Waterman. You could say that the book created two new industries: the mass business book industry and the Tom Peters industry. It appeared like a torch of hope to a benighted corporate America that felt it had lost its way in the dark. Battered by competition from the most unlikely source, in markets they had dominated proudly only a few years before, American managers reached for Peters and Waterman like a cartoon man-en-knees-in-desert ...

Idea 34  -  Mergers and acquisitions The hostile takeover is about as exhilarating as it gets up at head office. It's the chief executive suite as campaign tent, complete with hurrying advisers, councils-of-war and swift- changing tactics. For leaders who favor the military style, this is as close as it gets to being a real general - the plan, the strike, the capitulation and the prize. Sadly for them, the hostile bid is becoming less fashionable, but acquisition remains a perfectly reasonable, if usually less dramatic, strategic option for companies of all kinds. Mergers and acquisitions - 'M&A' in investment-banker speak - attract more public attention than anything a big company does except, perhaps, firing half the workforce or going bust. Typically, they happen when one company acquires all the assets and liabilities of another. Is there a difference between a merger and an acquisition? Not very often. A true merger is a marriage of equals in which sh...

Idea 33  -  Market segmentation There's much blog-talk of the death of the mass market these days. In which case, it has been a long time a-dying. The mass media, cardiograms of the mass market, have been losing viewers and readers since the 1970s - at least in the US, where the mass market was invented. It's true, none the less, that a proliferation of new media has forced the pace of its decline in recent years. And the zoom factor of market segmentation, the opposite of mass marketing, has been closing in on individual consumers with the persistence of a spy satellite. The mass market was created by American companies like Sears Roebuck, DuPont and General Electric, hand in hand with the march of the railroads and the telegraph. It grew rapidly between the 1880s and the 1920s. Mass marketing, on the other hand, only got into its stride from 1920 onwards with the spread of 'sound-receiving devices' - the radio. Television arrived shortly before the Second! ...

Idea 32  -  Management by objectives Management by objectives is such a classic principle that many who couldn't care less about business will still recognize the phrase. It was introduced to the language by that most enduring of classic business thinkers, Peter Drucker, in his milestone 1954 work, The Practice of Management. Management by objectives (MBO) is about making sure that you can see the wood for the trees. Drucker noticed that managers could get stuck in what he called an 'activity trap', getting so wrapped up in their daily tasks that they overlooked the reasons why they were doing them. MBO calls for a focus, not on activities, but on results. Which is why it's sometimes called management by results. Drucker tells us that setting objectives is the first of the five essential operations for managers. (The others are to organize, to motivate and communicate, to measure and, finally, to develop people - including themselves.) One of the keys to MB...