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Idea 21  -  The five process of competition The four Ps, the seven Ss’ - management thought is often packaged in this mnemonic, slightly gaudy way. There's a whiff of Barnum & Bailey, cheap gimmickry designed to catch the crowd's attention. Today's most successful management thinkers are certainly in the entertainment business, complete with public appearances, book signings and, if they touch the right button, large cheques. Don't get the wrong idea about the five forces, however. The phrase and the ideas it represents come from the most serious, rigorous management thinker of them all, and one who is not tempted by the spirit of vaudeville - Michael Porter. The five forces playa central part in Porter's theories of sustainable competitive advantage. He stakes out his ground by saying there can be only three generic strategies for competitive advantage You make something more cheaply than anyone else and become the lowest cost producer. Or you make

Idea 20  -  Experience curve The experience curve says that the more you do something, the less it costs to do it. And that has important implications if you have chosen to build your market share by having lower costs than your competitors - a cost advantage strategy. Experience curve theory is not the same as economies of scale, though scale can contribute to it. Its true ancestor is the learning curve. T.P. Wright, who studied the US aircraft industry, first devised the theory of the learning curve in the 1930s. He observed that every time cumulative aircraft production doubled - that's the total number made over time - the man-hours required to make each one fell by a constant percentage (10-15% according to his study). That percentage may change from industry to industry, ranging up to around 30%, but in most it remains fairly constant. Let's say it's 10%. If, after making 1,000 units of a particular product, each unit takes one hour to produce, when cumu

Idea 19  -  Entrepreneurship Entrepreneurs fizz with ideas. They take chances. They're driven, energetic, nimble and inspiring. Big business is - well, it's big. Its first instinct is to protect itself, so it's careful and conservative. It's slow to respond and quick to squelch daring ideas. How do you ignite the spirit of the entrepreneur inside something like that? It's not easy, but there is an answer: 'corporate entrepreneurship'. Joseph Schumpeter extolled the virtues of entrepreneurs back in 1911. The most compelling reason for large companies to become more entrepreneurial is to spot opportunities in their own markets before anyone else does. The big boys can tell many horror stories about what happens when they don't pay attention. One of the grisliest concerned Johnson & Johnson, which once enjoyed over 90% market share in metal stents (a tube that keeps clogged arteries open). When a competitor got approval for a next-generation d

Idea 18  -  Empowerment The history of modern business practice began with 'scientific management', which wanted the very opposite of empowerment. Until then, each skilled workman had done his job in his own idiosyncratic fashion. Scientific management's Frederick W. Taylor insisted that they drop all that and carry out the task in the 'one best way', which had been measured and timed to perfection. Empowerment just wasn't in it for Taylor, though he did introduce one small vent for self-expression - the suggestion box. The history of empowerment in the workplace has, in a way, simply been a journey back to the status quo ante. Its history is not lengthy. In 1977, when Rosabeth Moss Kanter wrote Men and Women of the Corporation, a study of power and the role of women in a large organization, there still didn't seem to be much of it about. The book was in the vanguard of a movement to give employees some discretion over their work (a reasonable defi

Idea 17  -  The 80:20 principle Businesses, like life, become so much easier to manage with a few basic principles you can rely on. Management theorists spend much time trying to pin them down, to formulate them in such a way that they will work again and again. But once you move away from the factory floor, where the laws of physics and statistics prevail, things become far less predictable. So it is with some relief that managers can turn to the '80:20 principle', knowing that it is almost entirely dependable. The 80:20 principle says that 20% of causes invariably produce 80% of the results, so 80% of what you achieve is due to 20% of the work you put in - and vice versa. It's that simple, but the implications, are many and various, for management and, so evangelists insist, for living itself. It began life as the Pareto principle, uncovered by Italian economist and sociologist Vilfredo Pareto in 1897. Studying the patterns of wealth in England, he realised

Idea 16  -  Diversification Web overlords Amazon and Google have grown so fast that they arrived at the 'what next?' moment rather more quickly than most companies. Speed is uncommonly integral to the industry they inhabit but when it comes to sustaining growth, they have the same strategic options as anyone else: expand or diversify, build or buy. Amazon, the retailer, now wants to sell online storage and computing power. Google, the search engine, is squaring up to Microsoft with its own office software package. Can they pull it off? Diversification, the route both are now taking, is never the safe option. Diversification is a classic growth strategy, and every successful company will consider it, at the very least, at some point in its evolution. In its pure form - new product, new market - it is the riskiest of the four growth options in Ansoff's product-market matrix, advocated and deplored with equal passion. Diversification strategy set off an early US merg

Idea 15  -  Decentralization As the largest maker of automobiles for as long as most of us can remember, General Motors looms very large in the world of manufacturing, even if its number one ranking today is less than secure. It also looms large in the world of management ideas, having been a touchstone for the concept of the modern corporation for more than half a century. What GM did in the first half of the 20th century still reverberates in management practice, and its most influential corporate innovation was decentralization. Management has much to thank GM for - it gave them Peter Drucker for a start. Under the leadership of Alfred P. Sloan, GM reinvented both itself and organizational structure; though it was Drucker who analysed what had been done and reflected upon it for the benefit of others in Concept of the Corporation. Later, Sloan wrote about it too, in My Years with General Motors, famously described by Microsoft's Bill Gates as 'probably the best book

Idea 14  -  Customer relationship management Some ideas continue to command respect among hardened management theorists years after they first appeared, and some provoke snorts of derision. Customer relationship management or CRM - around which an entire industry has been erected - gets more than its fair share of snorts. We all experience CRM, the bad side of it, every time we get stuck in touch-tone hell, with a recorded voice asking us to 'please select one of the following options' - for the fifth time. Yet the underlying idea is perfectly logical- concentrate on your customers, learn about their needs and behaviour, use what you learn to improve the relationship and, ultimately, sell them more of what it is you're selling them. Technology Big firms have used technology to do much of this, to capture and store customer information, to analyse it and to automate their sales and support teams. CRM has become very closely identified with technology as a result

Idea 13  -  Costs of complexity The customer rules. If businesses have learnt anything in the last 50 years, it's to stay laser-focused on the customers and their needs. Give them innovation, give them choice, right? Well, up to a point. Some of those businesses have twigged that rich novelty and variety leads to complexity, and that complexity costs. Keep it simple. This is not a new idea. Its most famous advocate, though not its first, was the English Franciscan friar, William of Occam. 'Occam's razor' said, essentially, that the simplest solution was usually the best, and that was in the 14th century. Sadly, Occam is silent on the profit implications of his principle. Rather more recently, however, consultants Bain & Company found that the 'lowest complexity' companies grew revenues nearly twice as fast as their peers, among the group of 75 it studied across a dozen different industries. It added that revenue growth appeared far more closely linke

Idea 12  - Corporate Strategy Strategy is as old as war which, if you look in a dictionary, still crops up before business in any definition. 'The art of war' neatly sums up its military application, but management writers' definitions are seldom as short. Gerry Johnson and Kevan Scholes, in their Exploring Corporate Strategy, offer: 'Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations.' Michael Porter is more succinct, and comes from a different angle: 'Strategy has to do with what will make you unique', he told an audience at the Wharton School recently. However you define it, strategy wasn't a deliberate preoccupation of managers for many years. They thought and planned, and some tried to be different, but that was just part of running