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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

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