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100. On Target
America's most interesting retailer has not been Walmart
or even Costco, but Target.
The former companies have been wonderful purchasing, supply chain machines but
haven't been real contributors to the communities in which they are based. Target
has positioned "itself as a branded designer chain ... priced for the
masses." It is growing but trying to combine "class" and
"mass," offering products with a bit of design to them. As such, it
educates the eye of the American consumer. See Economist,
May 5, 2001, p. 57.
99. Power Knowledge
See "Building Dynamic Knowledge Assets" by Ikujiro Nonaka in The
Focus, the online magazine of Egon Zehnder
International. In effect, the article says companies have to have a strong
ideological structure--a common way of understanding things--if employees are to collect
and share knowledge effectively. Nonaka uses Honda
and GE as examples. Honda focuses on creating
products worthy of solving society's needs, GE on out-competing every competitor in its
field of play. Knowledge, then, is gathered and organized to achieve very specific
ends.
98. Biz School Top Dogs
We were surprised by this ranking in the Wall
Street Journal (April 30, 2001, p. R5). Dartmouth (#1), Carnegie Mellon (#2), and Yale University (#3). Not Harvard (#8), Duke (#44), or Stanford (#45). This is a
ranking based on a survey of corporate recruiters, who were asked to rate institutions
according to twenty-seven attributes. Incidentally, the rankings are more
conventional when the recruiters were asked for their personal favorites. Oh, how
the mighty are falling.
97. The Chinese Credit Card
See Outlook Journal at www.accenture.com.
It's an interview with Lechun Lee, Vice President at Visa
International. Five years ago there were less than 10 million cards, as of
today there are 100 million, and by 2002 there will probably be 200 million.
"The Chinese can be very creative.... [They] don't have checks, they have
nothing but cash. Cards are going ... [to become] the day-to-day payment
tool." Leaping past Western society, the Chinese are moving directly to
cellular phones (instead of land-line phones), microwave ovens (instead of old-fashioned
stoves), and credit cards (instead of checks). Needless to say, they are skipping
the old ways because Chinese trained in the West have seen a better way.
96. A Simpler Way to Pay
We have struggled, and not unsuccessfully, with pay schemes for professional
service firms for years. Nevertheless, we were utterly fascinated with a recent
treatise by Egon Zehnder, founder of the world's premier executive search firms. See
"A Simpler Pay," Harvard Business Review, April 2001, pp. 53-61.
The firm was founded only in 1964, but it has made tremendous strides. "In
addition to base salaries, the firm gives partners equal shares of the profit and another
set of profit shares that are adjusted only for length of tenure as partner. There
is no formal procedure for tracking performance of country offices, let alone
individuals." The annual turnover of partners is "only 2%," while the
industry averages 30%. The article also describes how the firm charges differently
for its services than others. The Zehnder way is particularly interesting because it
promotes longevity and extreme collaboration, prerequisites for successful cross-border
enterprisee.
95. Turning British Airways Around
A year ago, British Airways was under
water--a bad place for an airline to be, of course. Out went CEO Bob Ayling, a sign
of the way that, increasingly, restive boards are dealing with trouble. In came Rod
Eddington, an Australian who had taught nuclear physics at Oxford. But he had also
put in a lot of time at Cathay Pacific and turned around Ansett. Basically, he has
scrapped a lot of BA's losers. The problem is still, of course, that he probably
does not have a strategy to restore growth, the over-riding problem of business in the new
millenium. Nevertheless, by implementing, essentially, his predecessor's strategy,
he gets high marks for top-flight execution. See The Economist, April 7, 2001, p. 71.
94. Agility Update
This occasional newsletter comes from the folks at Executive
Interim Management, a European firm now in the United Sates and several other
countries that provides short-term chief executives to companies that are working on
long-term solutions. To get on the list, email Ms. Julie Barnes at Jbarnes@eimus.com.
93. Cut-Rate Telephone
David Schaeffer's Cogent
Communications has one product and one price--100 megabytes per second for $1,000 a
month, way under the other local exchange carriers. He cuts out equipment and huge
expense by only carrying data (i.e. voice costs a lot) and by dispensing with complicated
billing methods. Schaeffer fights low prices with lower prices and has raised a huge
slug of capital, because sophisticated companies see that he's on to something. See
"Cogent or Crazy?" Forbes, April 2,
2001, p. 129.
92. New Merchandise
Here and there, banks are learning that they must now add "revenues"
rather than just cut costs. For instance, banks in Europe and Asia are dressing up
their branch offices--sometimes opening an office shop in the same space, turning some
offices into franchises to encourage managers to become entrepreneurs, and sharing space
with other financial service organizations to get more revenues out of the same
footage. See "Beautifying Branches," Economist, March 24, 2001, p. 89.
Gradually, you can expect more and more industries to hunt for revenues instead of looking
for ways to shrink.
91. Factory Check
Any multinational that has a cost structure worth talking about is outsourcing
its manufacturing to China, India, Thailand, Mexico, etc. The problem is to make
sure that the goods will be good, arrive on time, not the product of slave labor, and not
create an environmental wasteland. William E.
Connor and Associates Ltd. in Hong Kong is is a buying agent for a host of department
stores and catalog firms, among other things. Started in Tokyo by a military
intelligence specialist and trade specialist from MacArthur's staff in 1949, the company
has been based in Hong Kong since 1985. Even bigger is Hong Kong-listed Li and Fung Ltd. See "The Global
Factory Cop," Forbes, March 19, 2001,
pp. 92-94. We are predicting, however, that the more sophisticated Asian producers
will place their own marketing teams in the U.S. to establish closer supply-chain
relationships with their U.S. customers.
90. United Grain Growers
Public since 1993, United Grain Growers (Toronto
Exchange: UGG) has had to identify all its corporate risks as a result of recommendations
in the 1994 Dey Report from the Toronto Stock Exchange. It uncovered 47 in
all, from fluctuations in grain volume to environmental hazards. Working with broker Willis Corroon and Swiss
Re, it developed a risk-management package to deal with all of them. By dealing
with all of them at once, it reduced its insurance costs, no longer insuring
piecemeal. More importantly, it hedged against variable volumes in the grain
markets. And, by smoothing earnings, it has been able to take on more debt.
Some of the thinking that lies behind this approach is
summed up by Swiss Re's Prakash Shimpi in Integrating
Corporate Risk Management. Remarkably, or so Shimpi claims, only a small
percentage of major U.S. companies looks at risk comprehensively and relates it
successfully to containing the cost of capital.
89. The Privacy Business
Many articles we read are all about how we our losing our privacy. Indeed we are--at
every turn. But what's interesting is that this massive problem is creating massive
opportunities. Smart software companies are climbing into the privacy arena.
Smart companies in general are developing privacy policies to control how they deal with
and protect all their constituencies. See "The Reinvention of Privacy," The Atlantic Monthly, March 2001, pp.
27-39. Soon companies will be using privacy protection as a selling point about
themselves.
88. Burberry Bravo
Just a short while ago, Burberry seemed dead.
But currently (1991 through 2001) sales are set to almost double, and profits are up five
or six times. Ms. Rose Marie Bravo, once of Saks Fifth Avenue, revised Burberry's
distribution, added a snappy designer named Roberto Menichetti, and broadened the product
range. Now she has to conquer Europe and America, with sales coming from Great
Britain, Spain, and Japan. She's one a band of Americans, notes The Economist, set to shake up British
enterprise, such as Marjorie Scardino at Pearson, Tom Glocer at Rueters, and Bob Kylie at
the British Underground. Of course, then there was Ian MacGregor of British Steel
and Sir Colin Marshall (half American perhaps because of his training at Avis) of British
Air. See "Stretching the Plaid," Economist, Feb. 3, 2001, p. 68.
87. The Global Me
This book by G. Pascal Zachary says "hybrids" make the world go round.
Two-, three-, and even four-culture people make nations and companies prosper, says the
author. This argument relates to our own proposition that (a) the real links between
nations are being created at the cultural level and (b) global individuals shaped
by several cultures have become the vehicles for creating such fusion. Increasingly,
we feel, agile companies will be recruiting this type of individual.
86. Marine Compounds
Zeltia SA, a chemical and pharmaceutical company
trying to be a pharmaceutical star, has ramped its share price 200%-plus for three
straight years by focusing on marine organisms, applying for 620 patents, and developing
several interesting approaches to cancer. See "Spain's Zeltia Sees Its Future
in the Sea," Wall Street Journal, Feb. 6,
p. B15C. What's remarkable is that now Zeltia is raising capital easily, even with
the limitations of Spanish and European capital markets.
85. 3,000 Restaurants Abroad
The Thai government's Global Thai Restaurants Co. will open 3,000 restaurants abroad over
the next five years, with 1,000 in the U.S. alone. This is fueling a surge in the
Thai food industry--and in Thai tourism. Increasingly, we suspect countries will be
using cultural tactics to connect their economies to the rest of the globe--in a
value-added way. See "Thai Food for the World?," Wall Street Journal, Feb. 6, 2001, pp. B1 and B4.
84. Toyota Health Care
In Pittsburgh and Boston, doctors and policy-makers are looking for a way to
"disrupt" medical care. One leader in this is Dr. John Kenagy, once head
of a Seattle hospital, who realizes (a) that a lot of non-essential work has to be
eliminated from the healthcare system and (b) that new technology can treat some major
complaints simply and inexpensively before they rage out of control. Another
innovator is Paul O'Neill, now Treasury Secretary, who was sponsoring change in Pittsburgh
as head of Alcoa. Some ferment is coming now from the Center for the Integration of
Medical Innovation Technology. In general, the thought is if there can be"lean
manufacturing," then there can also be "lean healthcare," borrowing from
the Toyota manufacturing system. See "The Man Who Would Save Healthcare," Forbes,
December 11, 2000, p. 180-86.
83. Systems Convergence
Warren Buffett's General Re will sell a controlling interest in General Re Securities
Holdings to ex-JP Morgan and Goldman Sachs types. "The venture is based on the
partners' confidence in the convergence of insurance and banking," with an increasing
need for derivatives protection forbanking institutions. This is yet further
evidence of the high-risk exposure of all enterprises and the need to discover new
insularities. See Financial Times, February 5, 2001, p. 1.
82. No Longer a Roller Coaster?
Virginia Postrel, in the New York Times
(January 25, 2001, p. C2) captures a seismic change in the economy that once again
demonstrates how the Old Economy has renewed itself. Drawing on an article by
Margaret M. McConnell of the New York Federal Reserve Bank and Gabriel Perez Quiros of the
European Central Bank, she discovers much less quarter-to-quarter economic volatility in
the United States beginning in the first quarter of 1984. The hero here is the
durable goods sector as powered by just-in-time inventories and manufacturing as well as
much closer relationships with suppliers and customers. This may explain, in a way,
the Fed's recent speedy rate cuts, even with mixed signals from the economy. Even
slight downturns in the economy now may mean more than the big drops of old.
81. Customer-Conscious Chine Gallery Promotion
Zafar and Anwer Islam of Hong Kong buy rugs and furniture from remote regions of China and
are at pains to brag about their restoration techniques. A couple of things command
our attention in their 2001 calendar that just reached us. It includes a short
section on "Caring for Antiques," the kind of consumer help modern merchandisers
must begin to provide. That it even includes a table listing the public holidays in
11 countries where its clientele is located makes this little shop a gallant help to its
international customers. See www.chinegallery.com.
Telephone: 852-2543-0023. Fax: 852-2840-4770.
80. Quality vs. Risk Exposure
How do you manage when the roof may fall in at any moment? That's the question which
former mining CEO Gerold R. Spindler answers in "Managing Uncertainty: Lessons from
the Underground," Quality Progress, January 2001, pp. 83-87. The
"premise here is that if TQM applied to management process can control variability,
then TQM applied to a management process can help control uncertainty." See www.asq.org.
79. South Korea Tops Turmoil
See GEM chart on p. 60 of The Economist
(January 13, 2001). Some 9% of workers in South Korea are employed in new jobs
(businesses less than 42 months old). The U.S. is second, in the 4-5% range,
followed by Brazil, Norway, Australia, and India. Oddly enough, the collapse and
disintegration in the financial sector has loosed entrepreneurs and induced labor
flexibility in South Korea. The Economist notes the same problem now
plaguing the U.S.--a lack of enough experienced managers to staff the New Economy.
We would suspect that the Korean economy and government must suffer one more big squeeze
before the "entrepreneurial fresh air" saluted by The Economist really
transforms the Peninsula.
78. Risk Management Front and Center
"Risk Managers Cover Enterprise Exposure," Global Finance, January,
2001, pp. 72-73. Apparently "corporate governance guidelines" of Canadian
regulatory agencies "require corporations to have a program in place to identify and
manage risks." The article notes the increasing pressure from shareholders and
governments for risk management and the increasingly sophisticated software tools for
dealing with risk. Risk has become too important a topic to leave to the insurance
carriers, especially as the capital and insurance markets converge. Risk will be, we
predict, the primary obsession of business in 2001. We will be dealing with more
than brown-outs in California and earthquakes in India. Not the least of the risks
is human breakdown. In his new book, The Future of
Success, Robert Reich suggests that the Internet is a boom to consumers, but it's
wreaking havoc in the life of the nation, with all the populace caught on a treadmill
where there is no time for personal renewal.
77. U.S. Ranks 12th on Globalization
See USA Today, January 8, 2001, p.
6A. Per the A.T. Kearney/Foreign Policy Magazine Globalization Index (boy,
that's a mouthful, and forget about trying to navigate its clunky website).
"Not surprisingly, the nations most plugged into the rest of the world tend to be
smaller countries that need goods, services, and investment from outside their
borders." Singapore is number one. As we have said, the "countries
at the margin" are becoming __ influentials globally, at least since the end of the
Cold War. The economy, governmental, and agility issue is how to get linked to these
countries.
76. Getting Baptized on the Charles River
Previously we have remarked that time and place have much to do with innovation and
excellence. Trends come from London; 1-way tolls and birth control made their way
from the West Coast; great pianists come from the borders of Poland. Now we learn
about Swiss House (officially “Swiss House for Advanced Research and Education”
in order to be properly ponderous enough for the Swiss) in Cambridge, Massachusetts. An outpost of the Swiss Government, which is
supposed to send some entrepreneurial viagra to the Swiss cantons back from
adventurous Cambridge. See “Coming to America to Learn a Secret:
Boldness,” The New York Times, December 10, 2000, Business, p. 4.
All this reminds me of a canny French investment analyst who said, “The Swiss are
always late. If you go with them, you are doing what you should have done
yesterday.” Perhaps Cambridge is not the right place to seek renewal, since it
seems, mainly, to be a flowery graveyard for failed politicians. Nonetheless, we
must congratulate the Swiss for trying, even if the fountain of youth is definitely not in
Massachusetts. There is nothing wrong with trying to go where it is happening.
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