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THE DEATH OF DETROIT www.busmanagement.com
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Q4 2008
Why bankruptcy beats a bailout for America’s failed auto industry PAGE 32 Shai Agassi on an all-electric future PAGE 40 Learning from Toyota PAGE 46
PLUS Disney’s Ed Grier PAGE 52 Making collaboration count PAGE 70 Why project management matters PAGE 90
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THE DEATH OF DETROIT www.busmanagement.com
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Q4 2008
Why bankruptcy beats a bailout for America’s failed auto industry PAGE 32 Shai Agassi on an all-electric future PAGE 40 Learning from Toyota PAGE 46
PLUS Disney’s Ed Grier PAGE 52 Making collaboration count PAGE 70 Why project management matters PAGE 90
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FROM THE EDITOR
7
THE CHANGE IMPERATIVE Failure to respond to shifting market dynamics can prove catastrophic – just ask America’s struggling carmakers.
A
“I was asked how to make the world a better place from an environmental perspective. After serious thought, I realized it all came down to oil” – Shai Agassi, CEO, Better Place (page 40)
“Draw attention to failure because only by drawing attention to the disruption, the difficulty or the problem can we discover what we don’t know” – Steve Spear, Senior Lecturer, MIT (page 46)
“This is the time to focus on innovation, thereby positioning your company to take advantage when the upswing kicks in” – Ram Charan, Author, The Game Changer (page 144)
s Darwin pointed out over 150 years ago, life is all about survival of the fittest. It’s a lesson that could just as easily apply to business management – and one the US auto industry has singularly failed to learn over the past few decades. Fuel efficiency, alternatives to the gasoline engine, labor issues: Detroit has struggled with (in some cases, actively opposed) all three, and has been outthought and out-fought in countless other areas by more competitive foreign rivals. And while I have huge sympathy for all those likely to be affected by the seismic redevelopments happening across the automotive landscape, the fact remains that the markets are not so sentimental. Managing the challenges posed by change – whether it be due to organizational growth, shifting markets, new strategy directions, regulatory challenges, technology improvements or competitive processes – is a business essential, and in this issue of Business Management we look at how companies in a variety of verticals are dealing with change in their respective markets. The results show that while those who ignore the need to evolve within the shifting dynamics of a constantly changing market face almost-certain failure, significant opportunities await those willing to recognize the change imperative as a positive force. But given the extremely high failure rate of change programs (a recent survey of over 1000 corporate directors found that 31 percent of CEOs fired by their boards were removed because they mismanaged change), clearly this is easier said than done. For businesses to be able to embrace transformation, they must first understand what does and doesn’t work within their organization – what it is that needs changing – and be able to trust implicitly the processes that do work. Only by having real visibility across the enterprise can firms achieve this – which is where technology comes in. Project portfolio management solutions are allowing executives to see which projects are delivering the greatest value. Enterprise search and analytics technologies are providing decision-makers with greater insight into the inner workings of their businesses. Next generation data management tools such as deduplication are reducing the clutter. Collaborative computing technologies are enhancing the flow of information between different platforms, departments and even organizations. And social networking and web 2.0 developments are facilitating greater two-way communication between the business and the customer – a valuable resource for any change program. It’s an old cliché: the only constant is change. But clichés only become such because at their heart they reveal an essential truth. Managing change in a rapidly shifting business environment is – and has always been – critical to success. Period.
Ben Thompson Senior Editor
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CONTENTS LEAD FEATURES
9
Q4 2008 www.busmanagement.com
Autocalypse now
32
Why GM’s impending bankruptcy is a sign that Detroit is headed for the scrapheap.
40
Inside the magic kingdom In ensuring day-to-day operations at the world’s first and most iconic theme park run smoothly, Disneyland’s Ed Grier has one of the busiest jobs in America. “It’s multifaceted, very complex, and it never stops,” he explains.
The change agent If you’re taking on the world’s most powerful industries, you’d better have influential friends, financial muscle and a red-hot business model. Shai Agassi has all three. But can he get the world off oil before it’s too late?
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CONTENTS
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MARKETING, HR, COMMUNICATIONS & IT
COLUMNS
47
24 Bob Crompton 28 Robert Wilson 142 Rebecca Goozee
46 Learning from the best MIT’s Steve Spear explains how to innovate faster
60 Marketing in a downturn Why keeping marketing quiet could be disastrous for business
64 Down time When times are tough, it’s time for HR to get going
68 A unified solution Communications gets organized
70 The rise of collaboration and social media
130
Communications remain critical for business; what part is social media playing?
80 Business benefits of UC An investigation into the promise of unified communications
82 A revolution in business Rob Howard explains how social communication is changing business
86 Unified communications myths How to overcome the barriers of unified communication adoption, with Alcatel-Lucent
132
88 Idea management Paul Pluschkell on how innovation is changing
99 Case study 90 PPM to the rescue
Improving IT performance
Why project portfolio management matters
100 Building IT infrastructure 96 Next gen project management “It has become the backbone of communicating progress with management”
ROUNDTABLE DISCUSSIONS
Brad Blake discusses data management, security and IT operations at Boston Medical Center
76 Collaboration and social media 120 Contact center performance management 128 Enterprise search
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CONTENTS
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DATA, SECURITY, PERFORMANCE & SEARCH
68 Rick McConnell, Cisco
76 Whitney Tidmarsh, EMC
ASK THE EXPERT 94 Stephen Sharp, PowerSteering Software 104 Chris Santilli, COPAN Systems 114 Malte Pollmann, Utimaco Software
102 Utilizing data deduplication technology With HP’s Bob Wilson
102 Bob Wilson, HP
116 Jeff Goins, Adaptive
112 Securing the future Nick Selby on where the data security sector is heading
116 Creating an information edge With Adaptive’s Jeff Goins
118 The power of performance management 126 The future of search Business Management takes a look at the fast growing search and discovery market
106 Real-time crime fighting
60
James Onalfo on the IT transformation at the NYPD
108 Data deduplication in depth The key business benefits of data deduplication
110 Redundant data Warwick Sharp discusses the elephant in the document review room
P L AT I N U M S P O N S O R
134 GOLD SPONSORS
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CREDITS BMUS14:nov08 11/11/2008 08:49 Page 14
4-6 April 2009 The Fairmont Mission Inn Sonoma, California Th soonere regis you more y ter, the ou sav e! S ee gpsum for deta mit.com ils
www.n
Chairman/Publisher SPENCER GREEN CEO/Publisher JAMES CRAVEN Director of Projects ADAM BURNS Editorial Director HARLAN DAVIS
Editor BEN THOMPSON Associate Editor REBECCA GOOZEE Deputy Editors NATALIE BRANDWEINER, MATTHEW BUTTELL, FRANCES DAVIES, DIANA MILNE, JULIAN ROGERS, MARIE SHIELDS, HUW THOMAS
Creative Director ANDREW HOBSON Design Directors ZÖE BRAZIL, SARAH WILMOTT Associate Design Directors MICHAEL HALL, CRYSTAL MATHER,
The Next Generation Pharmaceutical Summit is a three-day critical information gathering of Clevel technology executives from the financial services industry. A Controlled, Professional & Focused Environment NGP ’09 is an opportunity to debate, benchmark and learn from other leaders. NGP ’09 is a C-level event reserved for 75 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated technology meetings.
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A Proven Format This inspired and professional format has been used by over 100 CIOs and CTOs as a rewarding platform for discussion and learning. “What stood out was the quality of the speakers chosen to moderate the roundtables. I like working with genuine facilitators who can open people up and keep the discussion moving” Paul Bergamo, VP & CIO Liberty Mutual “There is no expense or effort spared to ensure that everyone has a good experience” Matt Calman, Senior Vice President, Bank of America
JULIA FENTON Director of Business Development RICHARD OWEN Operations Director JASON GREEN Operations Manager CHRISTIAN MORATO
Subscription Enquiries 212 904 0888. www.busmanagement.com General Enquiries info@gdsinternational.com (Please put the magazine name in the subject line) Letters to the Editor letters@gdspublishing.com
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UPFRONT P18 The Five-Minute Executive P20 Top 10: Business Bankruptcies P24 Eye on Business P28 Uncomfort Zone P31 Around the World in 80 days
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AMERICA’S CHANGING FACE Congratulations, Mr Obama, on your election victory. And congratulations to America, too, for grasping this historic opportunity for transformation. 16
www.busmanagement.com
O
n every level, America will be changed by this result – its impact will be so profound that the nation will never be the same. In a sense, the policy changes could be the least of it. It’s more about the way the nation sees itself that will change. And the way outsiders see America. The US has never been so unpopular, so derided, and so dismissed by the outside world as it has in the latter stages of this Bush presidency. America is no longer the power it was; it can still lead, but it is no longer in a position to dictate to
the wider world. Barack Obama clearly understands this. He will be open to the world in a way President Bush never was. And he will show once again the value of the American dream. What his appointment means for businesses is not yet clear; corporate America has traditionally preferred Republicans in the White House. But in an increasingly globalized economy, Mr Obama’s willingness to work with, rather than fight against, the international community can only be a good thing for US business interests in the long term.
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NUMBER CRUNCHING
IT INFRASTRUCTURE GOING GREEN?
$1.6 billion
W
Estimated cost of this year’s Presidential election campaign
538 Total number of electoral college votes
270 364
Total required to win
Total number Obama collected Diary dates... November 4, 2008 Election Day. Voters cast votes for listed presidential candidates but are actually selecting their state’s slate of Electoral College members
ith today’s data centers consuming significant amounts of energy to cool increasing density requirements, responsible thermal management practices have become crucial for survival. To overcome thermal issues and achieve green IT infrastructure results, CPI Passive Cooling Solutions used with the TeraFrame Family of Cabinets, provide innovative techniques to maximize cooling unit efficiency, reduce energy costs up to 40 percent and minimize environmental impact, making them the most efficient choice. From small applications with two kW per cabinet, to large applications with heat densities beyond 20+ kW, CPI Passive Cooling provides advanced thermal control with zero points of failure, thus delivering a Tier IV solution. By isolating hot exhaust air from cool supply air and blocking bypass airflow around equipment, CPI Passive Cooling reduces wasted cooling capacity and maximizes the flow of cool air throughout the cabinet without the need for additional CRAC units, in-row air conditioners or risky liquid cooling solutions. Since no additional power or plumbing is required, construction costs associated with CPI Passive Cooling Solutions are much lower compared to active cooling solutions.
The airflow isolation achieved with CPI Passive Cooling creates a consistent temperature throughout the data center, eliminating the cabinet’s dependency on close proximity perforated access floor tiles for cool air. Since CPI Passive Cooling Solutions utilize 100 percent of the HVAC cool supply air, CRAC unit efficiency is maximized and the data center’s thermostat temperature can be increased, which decreases overallenergyconsumption andoperating costs, while effectively protecting critical equipment. The techniques used by CPI Passive Cooling Solutions were established through collaborations with today’s most forward-thinking companies to solve their own thermal issues. By developing and testing these solutions with industry-leading IT equipment manufacturers, financial institutions and IT management organizations, CPI Passive Cooling Solutions are proven to provide maximum efficiency and solve high-density data center cooling problems.
GORES GROUP IN JOINT VENTURE December 15, 2008 Members of the US Electoral College meet in each state to cast their votes for President and Vice President
January 8, 2009 Electoral votes officially tallied before both Houses of Congress. Members of Congress may object to the certification of a state's electoral votes at this time
January 20, 2009 Inauguration Day
T
he Gores Group has signed a definitive agreement to form a joint venture with Siemens, AG that will combine Siemens Enterprise Communications, Enterasys and SER Solutions, Inc. Combining the three companies will leverage Siemens’powerful distribution capabilities, global reach and extensive customer base. The complementary technologies will unify voice/data/contact center communications and secure wired/wireless networks. Enterasys Secure Networks and Siemens voice solutions have been integrated with each other for over a decade, and the latest
technology collaboration was demonstrated at CeBIT 2008 where Enterasys NAC and the Siemens HiPath real-time IP system showed identity-based and location-based services.The commitment to open-architecture, standardsbased technology is unique in that it integrates with existing multi-vendor environments, aligns networks with business priorities, and delivers long useful technology lifecycles. Enterasys will continue to earn the right to your business. It will compete fairly on value, technology, domain expertise and customer support to maintain the honesty, integrity and respect that you would expect of a world-class company.
You can learn more about the joint venture at www.enterasys.com/company/news
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THE FIVE-MINUTE EXECUTIVE
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Raising the bar Indra Nooyi, CEO of beverage giant PepsiCo, reveals why a business-asusual attitude is no longer enough to drive performance
Because I grew up in India in the 1970s, I have a global perspective. I was always looking at what was happening outside my country, especially in America and Europe, because it was all so exciting.The same intellectual curiosity about the world is ingrained in me to this day. Being raised in a loving family and caring environment taught me a lot. We had rules and structure, but enough freedom to grow. Being in a top management position gives you responsibility to enact the same type of things for your company; to be the kind of company that fosters a nurturing, supportive environment and enables people to grow personally and professionally, but also sets firm expectations that individuals and the company will achieve the very best. Collectively, all of us working together can make a huge impact. We need strong partnerships between business, government and NGOs to make our communities in both the developed and developing world better places to live. In the global marketplace, we take a holistic approach: achieving business and financial success while making a positive imprint on society. We know we won't drive performance with a business-as-usual attitude. Like other companies, we have seen sharply rising costs in energy, cooking oil, grain and other commodities, but we are embracing the challenges of successfully navigating amidst inflation and economic uncertainty.While we are tightening our belts, we are preserving our important growth investments in emerging markets, marketing, R&D and IT. We feel our businesses are less sensitive to this economic downturn. We cater to the simple pleasures of life, and people have to eat and drink to live. Relatively speaking, our products are less sensitive to economic conditions. Our record of performance demonstrates that even during uncertain times, our portfolio, our strategy and our capabilities drive growth. Ourphilosophyoninnovationisprettysimple.You have to innovate to grow. Innovation is even more critical today as we’re undergoing a portfolio transformation to healthier snacks and treats and as we move toward our stated goal of further reducing our water and energy usage. The most important resource we have for innovation is our people. We recognize that to compete and win in the ever-changing global markets, you have to have the best talent available. Companies that win provide the best opportunities for personal and professional growth. By inspiring, challenging and cherishing our associates, we’ve made PepsiCo a company where coming to work means more than just having a job.
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“While we are tightening our belts, we are preserving our important growth investments in emerging markets, marketing, R&D and IT”
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TOP 10
C
20 1
Lehman Brothers (2008) $639 billion in pre-filing assets
2 3 4 5 6 7 8 9
10
Worldcom, Inc. (2002) $104 billion in pre-filing assets Enron Corporation (2001) $66 billion in pre-filing assets Conseco, Inc. (2002) $61 billion in pre-filing assets Pacific Gas & Electric (2001) $36 billion in pre-filing assets Texaco (1987) $35 billion in pre-filing assets Financial Corp. of America (1988) $34 billion in pre-filing assets Refco, Inc. (2005) $33 billion in pre-filing assets IndyMac Bancorp, Inc. (2008) $33 billion in pre-filing assets Global Crossing Ltd (2002) $30 billion in pre-filing assets
BIG BUSINESS BANKRUPTCIES
T
he last few months have seen a number of venerable institutions file for Chapter 11. And while the collapse of Lehman Brothers ranks as the biggest fall from grace in the history of corpo-
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CULTURAL COST OF M&A
rate America (by a considerable distance), the investment banking giant isn’t the first – and certainly won’t be the last – commercial juggernaut to hit the skids. So what are the biggest bankruptcies in Wall Street history?
ultural integration issues in M&A transactions have direct financial implications on deal value, according to the results of Mercer’s Cultural Integration Snapshot Survey. The survey found that more than half of respondents believe cultural integration issues negatively impacted the success of recent M&A transactions. Asked to estimate the financial impact of cultural integration issues, 44 percent of respondents in the survey reported that between $1 million and $5 million was lost or not realized in a significant transaction their organization had recently undertaken, with nearly one-quarter estimating that it was over $5 million. “Cultural integration has a significant impact on the benefits of deals for organizations,” said Elisa Hukins, the leader for cultural integration in Mercer’s M&A global consulting business. “According to several of our clients, the impact of cultural integration can be much greater when the synergies lost, as a result of cultural misalignments over time, are factored in. “Our research confirms that organizations are starting to turn this tide by developing processes, tools and capabilities aimed at reducing the risks and taking advantage of the opportunities presented by organization culture before, during and after a deal closes. Significantly, organizations citing a more positive impact of culture in recent major transactions were those that had invested in implementing structured cultural integration processes and programs from as early as the due diligence phase.” While nearly one-quarter of companies are moving towards developing a more formal cultural integration process, 68 percent still do not regularly use a systematic approach to identify gaps between organizational cultures.
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SaaS ENCRYPTION AVAILABLE FOR FLASH DEVICES
F
lash storage devices may represent your biggest data loss vulnerability. Small and portable, flash devices are ideal for transporting, backing up and sharing business data.These miniature devices are so inexpensive and ubiquitous that employees treat them as disposable and often carry their own. Beachhead Solutions Inc., the leader in delivering SaaS (Softwareas-a-Service) encryption and destruction of at-risk PC data, now extends the same comprehensive data protection long available on PCs to USB flash devices. LDDFLASH gives your business the ability to automatically enforce flash device use and security policy company-wide. Better yet, because LDDFLASH is a subscription-based service, the solution can mitigate risk across your company in a matter of hours. Part of the Lost Data Destruction (LDD) family of data security products, LDDFLASH delivers enforced encryption and destruction of at-risk data to any flash device used to back up or transport valuable business data. Most importantly the rules and restrictions that define flash data storage – if such devices, can be used at all – are determined solely by the business/risk decision-makers, not your users. An add-on subscription service to LDD, LDDFLASH seals the data proliferation and leakage vulnerability associated with USB ports. Rules for if, how and which security measures are to be used are created and managed by your LDD administrator through Beachhead’s secure web-based console and are remotely distributed to your community of PCs. LDDFLASH will immediately begin to enforce your security and flash usage policies. The LDD family of PC data security products gives organizations the control necessary to manage and secure valuable business data at the network’s edge: on PCs and USB flash devices. AllBeachhead products, including LDDFLASH, are unmatched in speedofdeployment,ease of management and data security automation. As a result, LDD products provide immediately Such a little device, such a big data threat recognized value.
DATA SECURITY STUDY Three-quarters of corporate data breaches in the US are down to employee negligence, according to a report by The Ponemon Institute. The study also claims only one percent of data breaches are caused by hackers on the outside.
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71%
Employee negligence
26% Malicious insiders Hackers
1% 2%
Social engineering
ISSUE IN NUM8ERS General Motors announced second-quarter losses of
$15.5 billion earlier this year (p32)
The world’s 700
million cars produce 2.8 billion tons of CO2 annually (p40) The Disneyland Resort supports
Collaborative technologies generated
65,700 $6.3 jobs in Southern California (p52)
billion in 2007 (p70)
The NYPD’s Real-Time Crime Center recieves over
11.5 million emergency calls each year (p106)
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EYE ON BUSINESS
24 W
Behind the boardroom door, with Bob Crompton
ho’s to blame for the recent financial meltdown? There’s certainly no shortage of candidates – at least not according to the chattering classes on the host of blogs and internet forums devoted to discussing the topic ad nauseum. The American public wants heads to roll, and pressure is building to hold top-level executives accountable for a crisis that has crippled the nation’s financial system and will cost taxpayers billions. The cast list of potential villains reads like a who’s who of Wall Street’s finest. We could start with Bear Stearns CEO James Cayne, accused of playing bridge while his firm’s hedge funds collapsed. Or how about Dick Fuld, the legendary head of Lehman Brothers, who’s been painted as a modernday Nero: fiddling while his empire burned? The CEOs of AIG, Fannie Mae and Freddie Mac would probably be in the frame too, along with the various regulators, oversight committees and government officials who all failed to see the rising swell of an economic tsunami on the horizon. There’s plenty of blame to go around, and most Americans will have little sympathy for men who made their fortunes by gambling with other people’s money. Watching CEO perp walks on the nightly news could prove to be a satisfying experience for many. But is this obsession with apportioning blame either healthy or useful? The answer, in short, is no – at least not while those doing the finger-pointing are blind to the fact that we must all take some responsibility for our current predicament. Take the sub-prime lending debacle as an example. If indeed it is possible to trace the current mess back to the sub-prime meltdown, you might be tempted to accuse the housing developers, lenders, brokers, real estate agents and appraisers who ex-
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ploited vulnerabilities in the system for their own gain. After all, they laid the groundwork for the mortgage mess responsible for triggering today's escalating credit crunch, right? Well, partly. But to get a fuller picture of what happened, you need to include all those who benefited from the extended credit and the booming economy – we, the American public. When the good times were rolling, precious few stopped to consider what their newfound affluence was based upon, or what might happen when the bubble burst. We were all too busy upgrading our cars and homes in a reckless pursuit of self-betterment. Okay, we were told that the days of boom and bust had been banished and that house prices could only go up, but even the most cursory evaluation of those mediafriendly sound bites would have revealed a number of worrying holes. Some of us might have even suspected that something wasn’t quite right; however, we were all getting richer, so why rock the boat? We in the media must also accept some culpability. We’ve been riding high on a successful economy for years now, and generated thousands of column inches in praise of the new economy (you could argue that we’re now profiting from its collapse, but we’ll save that argument for another day). There were virtually no voices crying in the wilderness and saying, “Watch out.” For that, we must hold up our hands and vow to be more critical in future. We get the leaders we deserve, and cannot divorce ourselves from the current crisis. Sure, we expect openness and honesty from our civic and business leaders; and yes, we have a right to demand accountability when that trust is breached. But to blame only the leaders to the exclusion of everyone else is to misunderstand the dynamics of this financial crisis. We all got caught up in it; now we’re all paying the price.
Value of US Government’s bank bailout plan
$700 billion
“
None of us ever gets the opportunity to turn back the clock, but with the benefit of hindsight would I have done things differently? Yes, I would have
”
Richard Fuld, former Lehman Brothers CEO
As the crisis in financial markets gathered momentum, Lehman Brothers saw its share price collapse from
$82to<$4
“
This is a moment of truth for many CEO. They need to face reality, ensure that they are highly visible to their troops in a crisis
”
Steve Tappin, author, The Secrets of CEOs
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GET SET FOR TECHNOLOGY BUDGET CRUNCH
T Are Detroit’s auto dinosaurs headed for extinction? Turn to page 32 for more.
echnology vendors are up against the downward trend is not solely due to the a struggle, with growth in IT budcurrent economic climate. It has, in fact, been gets expected to fall in 2009. This evident over the last couple of years. is according to the “Vendors should be wary in “Vendors should assuming that the recent downlatest report by independent be wary in market analyst firm turn in IT budgets is a short-lived assuming that the phenomenon,” says Daniel Datamonitor. The report, Technology Trends: Analyzing recent downturn in Okubo, technology analyst with IT budgets is a Global Enterprise IT Budgets Datamonitor. “For the past coushort-lived 2008, reveals that the majoriple of years enterprises have phenomenon” ty of enterprises globally are been cutting back IT budget inplanning to cut back increases in IT expencreases as they adopt a more cautious view diture. The exception is the healthcare secof the global economy. More recently, the fitor – which, contrary to other verticals, is nancial services market, as seen by the recent planning a significant number of increases collapse of Lehman Brothers, is suffering in IT spend in 2009. The report also points from a crisis in confidence caused by a spate out that contrary to what many may think, of write-downs and concerns over liquidity.”
PUTTING SOCIAL NETWORKING BEHIND THE FIREWALL A recent technology report indicates that social networking in enterprises is inevitable
I
n an environment where time-to-market, accessibility to information and corporate collaboration are keys to success, the legacy top-down management approach has become obsolete. Managers still set overall goals in the organization, but today, free and efficient collaboration, decision making and knowledge transfer among subject-matter experts is essential to remaining competitive. So how do you get there? Put social networking behind the firewall. Community Server Evolution, a proven software platform aimed squarely at the intranet and Enterprise 2.0 markets, delivers a turnkey solution for creating and growing online communities inside the enterprise. Evolution engages and innovates on Microsoft Office SharePoint Server, Active Directory and Exchange Server – making it easy to retain, recall and share your corporate intelligence. The payback you can expect to realize includes:
• The pulse of your organization becoming more visible • Accelerating the way you find resources and expertise • One-click access to fundamental Web 2.0 applications like blogs, wikis, forums and groups • Incorporated day-to-day activities and enhanced workflow • Reduction in emails and the number of meetings • Innovation on display as you recruit Gen Y workers • Becoming part of the conversation instead of just watching it on the sidelines Accelerate user collaboration and information efficiency with Community Server Evolution. It empowers users to generate content, share knowledge and resurface valuable communication in real-time, across boundaries. Isn’t it time you evolved your intranet?
Telligent is a leader in enterprise-proven, secure, scalable and fully supported solutions for online communities and social networks. Clients include: Associated Press, Dell, Electronic Arts, GlaxoSmithKline, Honda, Intel, Microsoft, MSNBC, MySpace.com, NFL and Visa. For more information, visit www.Telligent.com.
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The enterprise social networking market is expected to grow at a rate of
40%
each year over the next five years The enterprise social networking market has already reached
$200million By 2013 the expected revenue for social computing software is
$2 billion 2013 is projected to be “the year of the ubiquitous social networks”
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UNCOMFORT ZONE
28 S
TRAINING BUDGETS SLASHED
...with Robert Wilson Will you freak-out or hunker down?
ometimes motivation is forced upon us. We are thrust into the UnComfort Zone. And, whether we sink or swim depends on how we respond to the situation. How do you react during a crisis? Here are the stories of two men who faced a crisis late in life and how they dealt with it. One was a restaurant owner; the other a janitor. The former went into bankruptcy at an age when most people retire, and the latter was fired from a job he’d had for nearly 20 years. The restaurant owner enjoyed a successful business in a small town at the edge of the Appalachian Mountains. It was a great location along busy US Route 25. And, because he offered the best food and service around, his eatery was jammed from sunup to sundown. Over the course of 26 years, he was honored by the state governor for his recipes; and was praised by famous restaurant critic, Duncan Hines, in his column Adventures in Good Eating. But it wasn’t to last. In 1956, the new super highway bypassed the little town. It’s amazing the difference just a few miles can make. Two years later the restaurant was closed and the property auctioned off to pay creditors. At 64 years old, the restaurant owner was broke. Unable to afford the cost of opening another restaurant closer to the highway, he reviewed his assets. All he had left was his knowledge and the delicious recipes that made his food so popular. So, he got into his car.Town by town, he drove, stopping at every restaurant along the way. He told the owners they would be more successful if they served his secret recipes under his brand name and paid him a royalty.Two years later, in 1960, he had 400 restaurants serving his food. By 1963
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he was making a profit of $300,000 per year. And, in 1964, Colonel Harlan Sanders sold Kentucky Fried Chicken to investors for $2 million, plus a lifetime salary of $75,000 per year. The janitor started his job at St Peter’s Church in London as a teenager. Over the years he married and raised a family and enjoyed a perfectly predictable profession with solid job security. That is until the new vicar came along. When he learned that the janitor could not read, he gave him three months in which to learn. Quite depressed by the news, the man thoughtitmightmakehimfeel betterifhesmokedacigarette. As he walked home, the janitor searched for a tobacco shop. There was usually one on every block, but there were none near the church. He walked block after block without finding one. By the time he reached his house he knew exactly what he was going to do. With his meager savings, he opened a tobacco shop near the church. It was an immediate success. His profits went to open a second, then a third and before long he had thriving tobacco shops all over London.Adecadelater,hemetwithhisbankerabout investing his earnings. The banker gave him some paperstosign.Themanaskedthebankertoreadthe papers to him, explaining that he didn’t know how. Shocked, the banker exclaimed: “You are so successful, just think where you’d be today if you could read!” Albert Edward Foreman smiled and sighed. “I’d be the janitor at St Peter’s Church.” Did you know that in Chinese, the symbol for the word ‘crisis’ is the same symbol used for the word ‘opportunity’? They’re two sides of the same coin. In other words, it’s all a matter of perspective. Will you find the opportunity in your next crisis?
Robert Evans Wilson, Jr is a motivational speaker and humorist. For more information on Robert’s programs, please visit www.jumpstartyourmeeting.com.
In a recent survey of 1200 training professionals conducted by management and leadership training specialists MTD Training, a staggering 61 percent of them stated that their budgets had been reduced or put on hold due to the current economic conditions. However, only 34 percent said that their business priorities had changed to reflect to the current conditions.
BUSINESSES NOT READY A study by non-profit IT association ISACA has revealed that many enterprises are still not adequately prepared for disasters. According to the results, 80 percent of respondents said that their business managers and owners are not fully aware of their responsibilities to maintain the ability to perform critical business functions in the event of a disaster.
CONTACT CENTER TO THRIVE According to Datamonitor, the global market for contact center CRM licenses and services was almost $2 billion in 2007 and investment in CRM solutions in contact centers will increase at a compounded annual growth rate of 10 percent through 2013. Unified agent desktops – solutions that provide a complete view of the customer from one application – are expected to thrive.
EXECUTION INFERIORITY COMPLEX Clear decision rights and effective information flows have the greatest impact on a company’s ability to successfully execute its strategy, concludes a Booz & Company study. However, senior executives more often rely on restructuring an organization when trying to fix lagging performance. Only 37 percent of North American respondents believe their organizations execute well.
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COMPANY INDEX Q4 2008
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Adaptive Inc. 116,117 Alcatel-Lucent 86 Alcoa, Inc. 48 American Express 60 ANI Direct 15, 115 Attivio, Inc. 27, 128 Audi of America 60 Beachhead Solutions 22, 107 Bear Stearns 64 Beckman Coulter 80 Better Place 40 Blogtronix 85 Boston Medical Center 100 Boston University 100 California State University 52 California Travel and Tourism Commission 52 Cape Fear Hospital 99 Centric Solutions 29 Chatsworth Products Inc (CPI) 17, 139 Cisco Systems, Inc IFC, 68 Citadel Rock 87 Compuware 98,99 COPAN Systems 104, 105 Coveo Solutions 55, 128 Daptiv 96, 97, IBC Dialog Coach 63 Disney 52 DMG Consulting 118 EMC 50, 76
Companies in this issue are indexed to the first page of the article in which each is mentioned 120, 125 Enkata 17, 21 Enterasys 12, 110, 111 Equivio 25 ERP Link 120, 123 Exony 35 Financial Times 32 Ford 82 Forrester Research 132 Franklin Covey 70 Gartner 32 General Motors 64 GlaxoSmithKline 64 Goldman Sachs 138 Harvard University 2, 102 HP 68, 69, OBC IBM 70, 126 IDC 11, 120 IEX 57 Igloo Software 60 Interbrand 135 Interpix 64 Lehman Brothers 130 Lonely Planet 96 Macrovision 48 Massachusetts Institute of Technology 141 Meettheboss.com 19, 82 Microsoft 23 MX Logic 30, 74, 76 Netop Solutions A/S
New Hanover Regional Medical Center 99 Novell 8, 38, 76, 79 NYPD 106 Octopz 93 P&G 60, 144 Patricia Seybold Group 70 Pender Memorial Hospital 99 Pixar 52 Planview 95 PowerSteering Software 94 Pratt & Whitney 48 Qtask 72 Quantum Corporation 104, 108, 109 Select International 67 SER Solutions, Inc 17 SHL Group 64 Siemens 4, 17, 43, 80 Southwest Airlines 48 Spigit 88, 89 Starbucks 64, 106 Swift Transportation 132 Telligent 6, 26, 82, 83 Toyota 48 Trend Micro 49 United States Navy 48 Utimaco Software 13, 114 Virgin Group 134 VPI (Voice Print International) 119, 120
IMPROVING UNIFIED COMMUNICATIONS
Netop Solutions A/S, formerly known as Danware A/S, develops and markets software solutions that enable swift, secure and seam-
N
allows them to better serve their customers. etop has announced its new family Netop Live is the technology platform that of unified communications prodmakes that vision a reality by providing compaucts, Netop Live. Netop Live benies with a solution for fast and personal concame a part of the Netop family of tact, among co-workers as well as with software solutions with the company’s June customers and business partners – 2008 acquisition of Medianet Innovation’s, sales organization and Netop Live is the anytime anywhere. technology plat“Using unified communication development division and the execuform that makes internally is already the standard for tion of a worldwide exclusive conthat vision a the majority of today’s businesses. tract with Medianet. However, many face the challenge of Netop Live software products using the technology externally withwere developed for today’s compaout compromising security. With Netop Live, nies and organizations that understand the companies improve the quality of their external value of unified communications. These incommunications, while saving time and money. dustry leaders know that providing a work enNetop Live solutions allow businesses to comvironment where talk, chat, video, data, bine external and internal communication in a documents, email and calendars are integratsecure, remote control environment,” said Kurt ed, secure and easy-to-use makes their emBager, CEO, Netop. ployees more efficient and effective and
reality
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less transfer of screens, sound and data between two or more computers.The company has three business areas, Netop Desktop Management, Netop Education and Netop Live.The core Desktop Management product, Netop Remote Control, enables remote control of one or more computers.The Netop Education business consists of Netop and Vision software solutions for computer-based classroom teaching. Netop Live consists of modern solutions for unified communication and collaboration and includes products like web, video and audio conferencing, secure chat, one button click to talk, desktop and file sharing. Netop has subsidiaries in the US, the UK, Germany, China and Switzerland and the Netop solutions are sold in more than 80 countries. Netop Solutions A/S shares are listed on the Copenhagen Stock Exchange and are part of the SmallCap+ index. For further information, please see www.netop.com
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AROUND THE WORLD IN 80 DAYS Our guide to the last quarter’s events – and their impact on your business.
BRAND VALUE TAKES A HIT A recent report indicates that the technology sector has been hit hard by recent events, with the economic downturn wiping $67 billion off the top 100 global brands’ valuation.
W CLIMATE CHANGE
TREATY RATIFIED
INFLATION SLOWS
AUSTRALIA has insisted that climate change is a priority, despite the financial crisis, and predicts a boom in the renewable energy sector.Whatever happens, expect climate change to continue to be a key economic driver in the years ahead. BM impact rating: ***
RUSSIA has formally approved treaties with the Georgian breakaway regions of South Ossetia and Abkhazia.The war in Georgia badly strained Moscow’s relation with the West, which waits on what will happen next. Our prediction? Further friction in 2009. BM impact rating: ****
SOUTH AFRICAN inflation slowed for the first time in 12 months, a sign that price pressures are easing and market liquidity improving. Expect inflation to move lower and the rand to pick up as we head into the New Year. BM impact rating: **
EAST TO THE RESCUE
OIL REFORMS
DESERT CRUNCH
CHINA has indicated it may contribute to a proposed new IMF fund to help poorer governments struggling against the global financial crisis. Is this another sign of the swing in power from West to East? Watch this space. BM impact rating: ****
MEXICO has passed new rules that give the state oil monopoly more leeway in parceling out and financing projects. The move represents big progress for US oil services companies, putting them on a more solid legal footing. Good news. BM impact rating: ***
SAUDI ARABIA and the United Arab Emirates have pumped just under $10 billion into banks to shore up their capital health. Given the Gulf countries’ significant protective cash cushion, however, it’s a little early to predict a collapse just yet. BM impact rating: **
ith the economy hit by commodity price rises, the credit crunch, rising unemployment and tumbling share prices, Brand Finance has revisited the findings from its 2008 report on the 500 most valuable global brands, initially released in March. Since the report’s previous valuation, the Microsoft brand has dropped 12 percent to $39 billion, Google’s brand value fell significantly by 12 percent, while Cisco Systems was hardest hit, losing 15 percent off its brand value. Globally branded businesses Hewlett-Packard redecreased by tained its number eight spot in the values ranking but fell five percent to $32 billion. Given the drop in value of technology brands, a fall of one percent for IBM, to $37 million, represents a robust performance. “The significant drop could be symptomatic of individualsandbusinessesdelayingupgradingsoftware and hardware in the current tough economic climate,”saysDavidHaigh,CEOofBrandFinanceplc. The update also reveals that between January and September, the enterprise value of the 100 most valuable globally branded businesses decreased by 13.3 percent, a drop of US$1.6 trillion. At the same time, the brand value decreased by 4.2 percent, or US$67 billion.
13.3%
CITIGROUP JPMORGAN CHASE WELLS FARGO* BANK OF AMERICA GOLDMAN SACHS MERRILL LYNCH MORGAN STANLEY
PAULSON’S BIG BANK BAILOUT Amount major banks will recieve under the rescue plan (Billions of dollars)
BANK OF NEW YORK STATE STREET 0 Data: Business Week
5
10
15
20
25
*Includes $5 billion for Wachovia
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ANALYSIS
Bankruptcy beckons for America’s embattled automakers as they face a perfect storm of slumping sales, tightening credit markets and changing consumer tastes. These aren’t just tough times for Detroit; this is…
CARMAGED TOUGH TIMES In the next 12 months, US auto sales could sink to levels last seen during the recession of the early 1980s Sales peaked at
17.4 million in 2000 and remained near
17 million for the next five years This year, however,
13.6 million vehicles are expected to be sold, and sales are expected to fall by another
500,000 vehicles in 2009, according to consumer researcher JD Power & Associates
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t’s a big shout, but here it goes: if Barack Obama really wants to make a dramatic economic statement in his first 100 days as the next president of the United States, he could do worse than let the US auto industry fail. It might sound heretical, but hear me out before popping that poison pen letter in the post. First, the bad news. For an industry that once branded itself as ‘the heartbeat of America’, today you’d be hard pushed to find a pulse. GM recently announced a stunning $15.5 billion second-quarter loss, with further substantial losses expected for Q3. Ford’s share price has crashed to a paltry $2.19, a drop of 54 percent since the end of Q2. And Chrysler, under pressure from its private equity owners, is desperate to broker a merger to stabilize its position. If the US auto industry was on the sick list before September’s financial meltdown, it’s now on life support. They should have seen it coming. The product mix in the US, heavily weighted toward increasingly unpopular trucks, pickups and SUVs, is on the wrong side of gas prices. The industry is hamstrung in any efforts to restructure by its crippling labor contracts. And consumer confidence regarding brand quality is at rock bottom. With such long-term issues already threatening to overwhelm them, the last thing Detroit needs right now is a full-blown financial crisis that brings with it tightening capital markets and dealer-shy customers. Take General Motors, for instance. By any meaningful metric, GM is bankrupt already. Its liabilities are greater than its assets, and its equity deficit amounts to a gargantuan -$57 billion. Most tellingly for a company that reportedly needs $11 billion in working capital on hand at all times to remain in business, liquidity is now a real issue: with current cash reserves of around $20 billion and the company spending $1 billion more per month than it brings in, GM could be out of business inside a year. “Without external intervention from consolidation or government assistance, we expect GM to reach its minimum cash position in under 12 months,” confirmed Deutsche Bank auto analyst Rod Lache in a recent briefing. The situation at Ford and Chrysler is not much better, and Wall Street’s economic woes are only likely to pile more pressure on those beleaguered balance sheets. The trouble is, raising more cash has proven nearly impossible in the current climate. GM’s attempts to refinance its headquarters building in downtown Detroit are unlikely to raise enough cash to float the company for long, while the sales of other assets are hampered by the company’s current poor valuation and changing consumer tastes (it has been trying to offload the gas-guzzling Hummer brand for months). Ford was smart enough to put all its assets, down to the iconic blue oval logo, in hock for $23.4 billion just before credit bubble burst, but even so that cash cushion won’t last long given its current burn rate. And with Standard & Poor’s downgrading the firms’ credit ratings further into junk territory, Detroit’s ability to borrow its way out of trouble is limited. “The situation for Detroit is dire,” admits John Casesa, CEO of automotive industry consultancy firm Casesa Shapiro Group. “These companies have run through their equity and have almost no financial cushion left, and all three are at very high risk of failure. They’re all very dependent on North America and they’re all very dependent on large vehicles. I’d say that every day the chances of a recovery are diminishing.”
I DON By Ben Thompson, Senior Editor
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Last chance saloon
WHY BANKRUPTCY BEATS A BAILOUT
Help wanted
All three have insisted that bankruptcy One remaining lifeline for the struggling carmakis “not an option” – but then they would say ers is the prospect of federal assistance. Washington that. No one wants to buy from a firm that has already approved a $25 billion loans package to Many analysts believe Detroit would be might not be around in a few years time, and help auto companies meet new fuel efficiency stanable to work through its problems provided further hits to sales at a time when the mardards, but the recent banking bailout has raised it had the resources available to ride out ket is already experiencing a prolonged perihopes that further funding might be found if the auto the next 18 months. However, the real flaw in having taxpayers bail out the Big Three od of contraction would be disastrous. industry faced failure. “Every bit helps right now, but is that it spares the companies from bankThe problem is that the alternatives are the $25 billion on its own is not sufficient to save ruptcy reorganization – the very process not particularly palatable, either. After a brief these companies,” says Casesa. “They need to conthey need to get their costs and structure in flirtation with Ford, GM is now in advanced tinue successfully restructuring their businesses and line with market realities. Only a bankruptcy court can: merger talks with Chrysler in a move that would adjusting to a radically changed market.That will take see America’s first and third largest carmakers a lot more time, which will require a lot more money.” the burden of pension and health benefits that unite. But George Magliano, an analyst with reThe question is whether the government has the are slated to cost the companies $90 bilsearch firm Global Insights, believes the jury is appetite for further bailouts. After all, Detroit’s problion over the next decade still out on whether a merger would be a good lems have been evident for decades, and the majormove for either firm. “Basically it would be a ity view is that poor decision-making and inefficiency state laws that cost cutting move by General Motors, a way of over the long-term are the chief problems, rather make it difficult and wringing people out of the system and closing than the current economic crisis. “The threat of a fiexpensive for them to pare back a gargantuan dealership network plants,” he says. “I’m sure GM also has some nancial meltdown brings back the specter of the interest in acquiring the Jeep brand, but beyond 1930s here, and nobody wants that,” says Magliano. on members of the United that it’s a difficult sell. They both make a lot of “But I thinkWashington feels that Detroit’s problems Auto Workers pay and big trucks, they both make a lot of big cars, and are of their own making, and therefore, if bankruptbenefit packages comparable to those paid both have major deficiencies on the small car cy were an issue, then so be it.” at the non-unionized companies side, so the synergies that you’d want to see Casesa takes a similar view. “It is one thing to are just not there.” bail out the financial system, which is obviously a Indeed, given that one of the main criticisms of GM in recent years has systemic problem that affects all facets of the economy. It’s a different thing albeen its bloated brand portfolio, adding further (largely non-performing) together to bail out just one sector. And while there’ll be more sympathetic lines to its inventory would be a surprising move. A combined GM-Chrysler ears than there used to be because of the turmoil in the economy, the longwould have too much factory capacity, too many brands and too many term bias is that these companies created their own problems. And I guess if dealers. And while Casesa concedes he is intrigued by the move, he too you bail out the auto industry, who’s next? The airlines? We could have indusremains skeptical. “On paper it looks very interesting because GM would tries queuing round the block for federal handouts.” eliminate an enormous amount of excess capacity in the market, essenIt’s an unedifying spectacle, but the clamor for cash is only going to grow tially by closing down Chrysler’s capacity,” he explains. “It would add Chrysler’s cash reserves of about $10 billion to GM’s balance sheet, which it desperately needs, and it would eliminate a competitor that’s hurting pricing in North America. So on paper, consolidation makes a tremendous amount of sense.” In reality, however, the move faces some significant challenges. “These combinations are extremely difficult to execute,” continues Casesa. “There will be labor opposition. The factory production systems are totally different. And there will have to be a tremendous rationalization in terms of dealer capacity and that’ll cost some money. It’s an extraordinary integration challenge, because even though these companies are small on market cap, they’re very big in terms of people, facilities and complexity. If you look at the track record of these large auto combinations – going back decades – very few have been successful.” And while some estimates suggest the new entity could save more than $5 billion a year by running the two companies as one, it could take years to realize these savings. Renault and Nissan are still completing their consolidation, even though the companies joined in 1999 – and neither The all-electric Chevy Volt may come too faced the combined challenges currently confronting GM and Chrysler. late to save GM Time, of course, is something Detroit does not have.
REDUCE
OVERRIDE IMPOSE
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louder as the economy sinks deeper into recession. Inside the merger negotiations, the growing feeling is that a combined GM-Chrysler entity, while daunting in its complexity, may be the best way to bring federal money into the mix. And in something of a ‘me too’ move, Ford has also ensured it is in the frame for any handouts should they be available, with EVP Mark Fields asking for “a degree of parity”.
The ultimate sacrifice? But here’s where things get interesting – because even with these interventions, the industry’s long-term future is hardly assured. For starters, even if they were to retool and start producing more fuel efficient vehicles, who is going to buy them? The US consumer is strapped for cash and access to credit to buy a new car is almost gone; extremely few consumers buy new cars for cash, anyway.There is a growing feeling that by bailing out Detroit,Washington could just be throwing good money after bad. It’s no use propping up the industry without first propping up the very thing it depends on – the consumer. Analysts are predicting tougher times ahead, too. Jeff Schuster, Executive Director of automotive forecasting for industry analyst JD Power and Associates, predicts that a pronounced recovery is at least 18 months away. “While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse,” he says. “These firms’ CreditWatch placement reflects the rapidly weakening state of most global automotive markets, along with capital market conditions that will remain a serious challenge to liquidity during 2009.” It begs the question: what would happen if Washington let one of the Big Three go under? First of all, it would be far from easy. While the direct impact on the national economy would be relatively modest, it would deal a significant blow to the rust belt states in terms of job losses and retiree benefits cuts. would take over that void in the market,” says Magliano. “It’s not the same as According to the Center for Automotive Research, domestic car companies and when they bailed out Chrysler in the 1980s. The import nameplates are now their suppliers employ some 600,000 line workers; factor in firms that indimaking a lot of vehicles here, and they show a commitment to manufacturing rectly rely on the industry for work, and up to 3.6 million people could be at in the US. It’d be one thing if we were going to import vehicles to make up the risk. Michigan already has the worst unemployment figures in the country. In addition, the taxpayer would be on the hook for billions in retiree beneshortfall, but I don’t think that’s on the cards. If somebody in Detroit did go fits, with the federal government’s pension-guarantee program likely to be bankrupt, someone else would just pick up the pace.” swamped by the addition of hundreds of thousands of retirees. For decades, No such thing as too big to fail Detroit’s Big Three have funded generous programs to take If anything, bankruptcy would do the carmakers care of former workers and surviving spouses; GM alone prosome favors, affording them protection from creditors vides healthcare and pensions to about 480,000 hourly and and allowing them to restructure without the straightsalaried retirees, and has committed to pay out $64.14 billion jacket of prohibitive labor and supplier contracts. As to in pension benefits to US retirees between 2009 and 2017. Number of US the argument that entering into Chapter 11 would hurt Were it to place its pension burden on the government’s auto industry sales and stigmatize that company, one need only look at PensionBenefitGuarantyCorp.(whichended2007witha$14 manufacturing the example set by the airlines a few years back to see billiondeficit), itwouldmore thandouble theagency’s current jobs, including how such a situation would most likely pan out: once one shortfall – a burden that could fall on taxpayers. suppliers firm declares, others would soon follow in order to share But these issues notwithstanding, Casesa believes in the cost savings and leaner operating profile, and prethere is actually an argument for letting at least one of the vent any one company from gaining a competitive adBig Three fail and allowing the market to right itself. “That’s vantage. Sure, it felt odd to fly a bankrupt airline at first, but once practically the stronger argument,” he insists. “If you look back at the Chrysler bailout in the entire industry had followed suit no one gave it a second thought. If GM the early 1980s, with the benefit of 25 years’ hindsight it’s hard to see what were to file, you can bet your bottom dollar that Ford and Chrysler would not was so strategic about that move. It was the smallest of three companies and be far behind. if it had failed, I think maybe it would have had a very motivating effect on Ford Tired brands and unprofitable dealers would disappear and the compaand GM. So my own view is we should let the market work.” nies’ remaining resources could be focused on those products and dealers Magliano agrees. “If one of the Big Three went bankrupt, somebody else
600,000
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AUTOCALYPSE NOW Detroit’s Big Three are all headed for the scrapheap. The question is, when? Chrysler
Robert Nardelli Chrysler
In terms of product sales,Chrysler is the most concentrated in NorthAmerica and the most concentrated in bigger vehicles – the two markets hardest hit by the recent economic turmoil and oil-price spikes.While Chrysler is no longer required to disclose its finances due to the recent takeover by private equity group Cerberus, the deal is widely held to have been a failure and is likely to result in a fire-sale as the new owners look to cut their losses. If the merger with GM goes ahead, expect the firm to be broken up,plants to be shut down and thousands to lose their jobs; if it doesn’t, expect the firm to be broken up, plants to be shut down and thousands to lose their jobs.Tough times indeed.
Cash on hand: $10 billion (estimated) Judgement day: Imminent General Motors
with the greatest strength and staying power. They might even emerge from the experience as efficient, competitive organizations. As Henry Ford once said, “Failure is only the opportunity to begin again more Rick Wagoner GM intelligently.” Finally, any government funding – rather than being poured into prolonging the death throes of an industry in terminal decline – could then be used as seed money for innovative ideas on how to take the industry forward, not merely as sawdust on the oil spills.This could be the start of a new age of American innovation, and a domestic auto industry that offers scope for emerging players with pioneering ideas such as Tesla and Better Place. The future belongs to firms with greener vehicles, cleaner technologies and more efficient solutions. Could this be the end of America’s love affair with Detroit? In 1948, William Faulkner noted that “the Alan Mulally American really loves nothing but his automobile,” Ford and there is little doubt that the story of the US has been the story of the car, plain and simple. But while the American still loves his automobile, that car is just as likely to be made by a Japanese or German company as it is by a domestic firm. “The US car market is dying,” concludes Peter Schiff, President of brokerage firm Euro-Pacific Capital, bluntly. Be brave, Mr President. Let nature run its course.
GM is in real trouble. Stock prices, since peaking near $94 in 2000, have been in freefall for the last few years and plummeted to a barely conceivable 58-year low of $4.65 in October. The company is banking on innovations such as the new Chevy Volt to kickstart sales, but even then an expected due date of 2010 may come too late to save ‘The General’ from going under. After the briefest of talks with Ford, GM is now desperately seeking a union with Chrysler – although insiders believe this will only exacerbate its problems of too many product lines, too many dealers and too much capacity.The deal is purely about GM getting its hands on Chrysler’s cash reserves and increasing the likelihood of federal money being brought into the mix.
Cash on hand: $19 billion Judgement day: Inside six months Ford Motor Co. While GM and Chrysler thrash out their ill-conceived merger, Ford is forging its own path.And while the Dearborn firm may have more cash on hand than its rivals thanks to some canny re-financing shortly before the collapse of the capital markets, the future is just as bleak. Here are some frightening scenarios: if either of its more troubled competitors enter bankruptcy protection, they will automatically reap the benefits of creditor protection and forced union contract renegotiation; if they merge and get federal assistance to help with the restructuring, Ford will essentially be competing against a partnationalized company.Can it compete on those terms? Not likely.Despite its determination to remain free of the stigma of Chapter 11, expect Ford to follow suit and file shortly after.
Cash on hand: $26.8 billion Judgement day: Late-2009
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STRATEGY
The
CHANGE If you’re taking on the world’s most powerful industries, you’d better have influential friends, financial muscle and a red-hot business model. Shai Agassi has all three. But can he get the world off oil before it’s too late? By Ben Thompson
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H
ow do you run an entire country’s transportation network without oil? When Shai Agassi first posed the question in 2006 – along with his idea for a solution – people called him a dreamer. It’s a moniker the Better Place CEO and founder strongly rejects. Sure he thinks big, but there’s nothing fantastical about Agassi’s grand vision. On the contrary, his plans for the future of world transportation are down-to-earth, utilize currently available technology and, most importantly, have received significant backing from the people who matter most: politicians and investors. If anything, his is a pragmatic approach; not so much a re-invention of the wheel as a re-imagining of how to push it. His goal? A world populated by cars with zero emissions. Not just better gas mileage, not just reduced emissions: no emissions, period. “There are 700 million cars in the world today that are producing 2.8 billion tons of carbon dioxide annually,” he explains, in between meetings on a whistle-stop tour of the US promoting the Better Place business model. “Our global economy cannot produce as much oil as we need to continue to grow the economy, let alone support 300 million more cars, which is what we will add in the next five to seven years. We are running out of time on both problems. We’re addressing one of the largest challenges of the 21st century.” Despite its mind-numbing scale, Agassi believes the goal is achievable. For one thing, Better Place already has the capability to build an all-electric car network using proven technology such as lithium-ion batteries. And together with partners from around the world – including automakers, battery manufacturers, energy companies and governments – the company is making rapid progress. Israel has declared its commitment to be oil-free
by 2020. Denmark has reaffirmed its global environmental leadership by committing to a renewable energy-powered electric car network. Australia signed up in October, refuting the suggestion that Agassi’s scheme won’t work on a large scale. And 25 more countries around the world are currently in talks with Better Place about how they can be next. Your business model is unlike anything the automotive industry has ever seen before. When did you have your ‘eureka’ moment? Did the idea for Better Place come to you suddenly or did it evolve over a period of time? The evolution of Better Place was definitely a process. During the World Economic Forum in 2006, I was asked how I would make the world a better place from an environmental perspective. After serious thought, I realized it came down to oil – we have to end the world’s addiction to oil. From there my idea evolved into a whitepaper and when I presented it as what I thought would be a government program to President Shimon Peres of Israel, he asked me why I wasn’t working on this full time. I haven’t looked back. Until the moment I met the President I was merely solving a puzzle – more out of mental curiosity than out of a real belief I could get anything done. At first glance, the move from the software industry to the automotive sector is not an obvious one. What impact did your background at SAP have on the way you approached the issue of getting people off gasoline-powered vehicles and into electric cars? Do you think it has given you a unique perspective on how to address the challenge? This is huge – and one of the most important things I learned during my time at SAP was how to scale and do it globally. We’re trying to end the
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world’s addiction to oil, so we’ve got to be thinking big. There’s also a huge technology element to what we’re doing, so again it is really not as big of a jump as you would think.
How does it work? What does an electric car infrastructure look like? he batteries of a zero-emission vehicle need three things in place in for optimum functionality: charging spots, battery switching stations and software that automates the experience. The charging spots will keep the batteries topped off with power so that they always have 100 miles of driving capacity. They are located where you work, live, shop and dine in parking lots so that an electric car will have the ability to recharge when the software instructs it to top off. For trips longer than 100 miles, battery-switching stations will be available roadside. Stations are completely automated, and the driver’s subscription takes care of everything. The driver pulls in, and the depleted battery is quickly replaced with a fresh one, without anyone having to leave the vehicle. The process takes less time than it does to fill a tank of liquid fuel. Because most electric vehicles will be charging during the evenings while at home, the batteries become distributed storage for clean electricity. In Israel, for example, excess power from the growing solar industry will be stored in the cars’ batteries. Similarly in Denmark, unstored energy from the country’s wind turbines will be utilized. Better Place can help each market identify and develop its own ‘virtual oil fields’ of renewable energy. Due to the open standards-based approach that Better Place has adopted in the development of its batteries, there will be many manufacturers contributing to the pool of available batteries. This will maintain a steady supply and stable prices as more and more nations join us in our efforts to remake transportation as a sustainable service.
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Your approach has been compared to that of the mobile phone industry, where the network operators own the hardware and infrastructure and lease it back to customers. Is this a valid comparison? Yes, our model is very similar to that of the mobile phone industry. We’re the T-Mobile or Vodafone, putting the infrastructure and services in place. Just like the mobile rollout, you have to have the infrastructure in place before you can get the cars on the road. Remember the early days of the cell phone where people were huddled in specific areas where there was coverage? Under our model, drivers subscribe to a monthly plan and pay for miles, not gallons, just as the consumer would pay for minutes and not the device itself. Essentially we are applying mobile phone economics to transportation to redefine the driving experience. We want to make electric cars more affordable than gasoline powered cars. What success have you enjoyed to date – in terms of attracting funding, getting government buy-in, and starting to develop and rollout the infrastructure? What have been the most important steps for you to date? We received $200 million in funding, the largest seed round funding on record, through partners such as Israel Corp., Morgan Stanley, VantagePoint Venture Partners and private investors who have expressed a concern over global climate change and a passion to protect the environment. The last year has been an amazing journey and so much of it centers on the help of Shimon Peres who brought Better Place to Israel in January 2008. In addition to helping us announce Better Place Israel, the Israeli government proposed incentives to encourage consumers to switch from gas cars to electric vehicles. The momentum has continued: we announced Better Place Denmark in March 2008 and most recently we signed agreements with Macquarie Group and AGL Energy in Australia to build infrastructure for electric vehicles in Australia. The goal is to raise AUS$1 billion in an effort to build a zero emission and zero price transportation infrastructure system to reduce their carbon footprint, the highest per capita in the world. Our expectation is that wide-scale electric vehicle adoption will take place in Australia by 2012. I know you have signed an agreement with NissanRenault to build your initial electric vehicles, but do you envisage forming relationships with other carmakers? Carlos Ghosn, the CEO of both Renault and Nissan, has been a tremendous supporter. We have signed agreements with Renault-Nissan in both Israel and Denmark and look forward to working with them on future deployments as well. In addition, we are in active discussions with many of the major automobile manufacturers around the world.
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And what has been the reaction in Detroit to the Better Place model? Just like the mobile phone model, we envision consumers having a wide choice of makes and models – including ones from Detroit, and other auto markets in the world. We are currently in active conversations with 25 other countries around the world as well as most major automobile manufacturers. Is there a place for alternative electric cars (plug-in hybrids, the Chevy Volt and others) as part of the bigger picture here? Is there a way for such vehicles to co-exist alongside the Better Place model? At the end of the day we are not building Better Place for the sake of building a company, or even building a cool car, but with the purpose of ending the world’s addiction to oil. So, of course, every little bit helps and we welcome competition in the market, and believe competition breeds innovation. But in order to really end our addiction to oil, we believe zero emission vehicles present the strongest option. Hybrids? You can buy one today, and they are definitely an improvement over a standard internal combustion engine. But they still need oil. Not as much, but they still need it. They won’t break our addiction to oil, they’ll simply make it last longer. The analogy I use to try and explain it is this. There was this thing called the fax machine to send messages, in between the invention of the phone and email. I look at the hybrid as the fax machine. It serves a purpose, but does not solve the problem.
Critics have suggested that there is a danger that battery technology may evolve at a faster rate than is practical for a company that is likely to require a significant battery inventory. What would you say to this idea? Battery technology has greatly improved over the course of time. Our philosophy is to deploy lithium-ion based batteries that are considered today to be the most advanced in the industry. By separating the battery from the car (which is our model) and making it a component of the infrastructure, we have the flexibility to keep up with the latest technology while maintaining our inventory. This approach allows us to create an ecosystem that uses battery technologies that are currently available, making electric vehicles an immediately viable alternative to fuel-powered cars. The range extension is not inside the car, it’s in the infrastructure – just like it is today with gasoline. We don’t drive around with a second gas tank in order to extend the range of our cars; we use the gas station infrastructure to do that.
“I look at the hybrid as the fax machine. It serves a purpose, but does not solve the problem”
And what about hydrogen fuel cells? All they produce is water vapor… The technology to mass-produce them is years away, and we must begin the transition of our infrastructure now, with today’s technology.
How flexible is the Better Place model to adapting to the pace of technology change? How are you ensuring against obsolescence? One of the biggest challenges when designing an infrastructure like this is making it work for everyone. In order for the electrification of transportation to work on a global level, we need an open, standards-based infrastructure where all electric vehicles, no matter the make or model, will run on the same plug-in. When this is adopted, countries and automobile manufacturers around the world will join in the fight for oil independence. It has only taken around a decade for mobile phones to become ubiquitous. What sort of timescale do you envision for a similar revolution in electric vehicles? How aggressive are you being in setting your goals? Former vice president Al Gore presented an aggressive challenge to the United States government to be completely off of fossil fuel and using re-
THE RISE AND FALL (AND RISE AGAIN) OF THE ELECTRIC CAR
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1891 William Morrison of Des Moines, Iowa builds the first successful electric automobile in the United States
1908 1908 Henry Ford introduces the mass-produced and gasoline-powered Model T
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1970s Concerns about the soaring price of oil (peaking with the Arab Oil Embargo of 1973) result in renewed interests in electric cars
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French president Nicolas Sarkozy and Israel President Shimon Peres listen to Shai Agassi give a demonstration of his zero-emissions vehicle
newable energy by 2018. That’s an ambitious timeline for sure but we believe the electrification of the automobile is inevitable and that a difference can be made now. We know the Earth’s resources are diminishing and that we cannot sustain our current thirst for oil from a resource, economic or environmental standpoint. We know there are obstacles to adoption, but our model is making the transition easier for all drivers with the goal to end oil dependence. To date you have signed agreements to deploy in Israel and Denmark, both relatively small in size and where the average commute is within the 80mile range. However, you’ve also just signed a deal with Australia to trial the system there. What challenges does a country of this size present? Does it differ to that of a small country? And does this give you hope that you can eventually win over larger countries such as the US? We’ve always said the model will work in large and small countries, even when we announced our agreements with Israel and Denmark. Now with
1988 Roger Smith, CEO of GM, agrees to fund research efforts to build a practical consumer electric car (what will become the EV1)
Australia we hope to prove it works in big countries too. Our goal has remained the same and that is to end the world’s addiction to oil and you can’t do that by electrifying only small countries. Our model scales up – Australia is the sixth largest country in the world and is actually the first in the world, per capita, in carbon emissions. Australia is rich with renewable energy technology and has spent a great deal refining its many wind farms, which we can draw from to power the recharge grid. We look for countries that have high population densities and commuter traffic. So for larger countries, for example, Better Place will begin in the dense urban areas and expand out from there. Our model of charging spots and battery exchange stations gives us the flexibility to connect large metropolitan areas by placing exchange stations along the highways that connect these areas. So just like you would pull in for gas, you can pull in and in under three minutes swap out your depleted battery for a fresh one. Finally, what’s next for Better Place? What are you currently working on, and what are your hopes for the next 12-18 months? We are committed to helping Israel move off oil for transportation by 2020. We are equally committed to helping other nations such as Denmark and Australia end their addiction to oil, and my hope is that the Better Place model will be working and you will see mass deployment of electric cars in all of the major countries around the world just 10 years from now. Within the next 18 months to two years, we fully expect the wide-scale deployment of electric vehicles in Israel and Denmark. It is the expectation that Australia will have wide-scale deployment by 2012. n
2006
2006 Tesla Motors introduces the Roadster electric car, promising an energy efficiency equivalent of 135mpg
2008 1997
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2008 Better Place announces the world’s first electric car infrastructure networks are to be built and trialled in Israel, Denmark and Australia
1997 Toyota unveils the first mass-produced gas-electric hybrid car, the Prius, to drivers in Japan; 18,000 units are sold during the first production year
OPERATIONS
Learning from the Why do certain companies always seem so far ahead of the competition? Because, argues MIT’s Steve Spear, author of the new book Chasing the Rabbit, they’ve instilled a culture of constant discovery.
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here’s an old joke about a man caught in a flood. With the waters rising, he climbs up onto his roof and prays for God to save him. After a while, someone comes by on a raft and says, “Get on. I’ll get you out of here.” The man replies: “It’s okay. God is going to save me, I’ll wait.” But the water keeps rising, and pretty soon he has to scramble up on top of the chimney. A second guy in a motorboat comes by and offers to help him, but the man gives the same response: “God will come to my rescue. He will answer my prayers.” Yet an hour later, the waters are up to his chest. A helicopter flies overhead and a rope ladder comes down. “Grab hold and climb up!” shouts the pilot over the noise of the rotors. “I’ll lift you to safety!” Incredibly, the man shakes his head. “God will not forsake me,” he says calmly. “He will not let me drown.” So the helicopter flies off. Before long, the man does indeed drown. When he gets to heaven, he confronts God over his failure to act. “How could you let me drown?” he asks. “I was waiting for you to help me. I prayed and I prayed. Where were you?” God looks at the man and sighs with exasperation. “I sent you two boats and a helicopter,” he says, shaking his head. “What more do you want me to do?” Steve Spear laughs as he tells the story, but he does have a serious point to make. “Sometimes you’ve got to help yourself,” he smiles. “It’s
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like the US car companies going cap-in-hand to Washington, looking for assistance. They’ve known for decades that if they can’t keep up with Toyota, they can’t win. They had that lesson on fuel efficiency, they had that lesson on product reliability, they had that lesson on costs. They’ve known this since the 1970s, and they’ve had ample opportunity to benchmark, partner with, and otherwise learn from Toyota. Yet here you have them in 2008, going to Washington with a tin cup claiming crisis relief, as if a hurricane suddenly hit them. It’s mind-boggling.” A senior lecturer at MIT, Spear has spent his career studying highperforming companies and working out what makes them tick. Unsurprisingly, Detroit’s automakers do not figure amongst his long list of case studies; Toyota, on the other hand, is a perfect example of what Spear has termed ‘high-velocity organizations’ – firms that outpace the competition despite operating on what is ostensibly a level-playing field. “Toyota’s time from start to finish on the design of new models is about half to two-thirds the time of its rivals,” he explains. “Not just the American Big Three, but other companies as well. Once a car is designed, they’re much faster to get a factory to the point that it can switch from one model to the next. The ramp-up is faster and then their time through the factory is faster, too. Velocity is key to the creation of value. “Southwest as another example. Part of what makes Southwest
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CASe StuDY Pratt and Whitney has been the leader in the gas turbine business since the early 1950s. As the company entered the new millennium, however, it faced a number of issues. Programs overran. There were technical and scheduling issues. There was variation from program-to-program. And the firm had difficulty successfully injecting technology into its products. “We needed to change the way we did business,” says Paul Adams, Senior Vice President of Engineering. “We had to move away from designing jet engines and training our engineers based on the tribal knowledge of a small subset of employees, and we had to introduce some rigor into the process we used to introduce new technology – and thus risk – into our projects.” As a response to this need, the company developed its engineering standard work (ESW) approach. “This involves what we call standard work and technology readiness,” explains Adams. “Standard work is the definition of the process of how we design engines in areas where we know how to execute that design with a very high level of certainty; technology readiness is the process we use to develop new technologies in order to learn how to incorporate them into a product. So standard work is how to do the stuff we know how to do; technology readiness is how to do the stuff we don’t know how to do.” The company developed six elements of standard work. “We control the process, we control the tools, we control the design criteria, we make outperform its competitors is its ability to do the basic routine work of running an airline quickly and efficiently: turning planes around at the gate, preventative maintenance, scheduled maintenance and that kind of thing. They’re flying the same fleet and hiring from the same labor pool, but they’re squeezing out an extra couple of flights per day, per plane and crew, and that flips them from a breakeven or loss-making position to profitable.” Spear argues that what makes these companies so successful is their ability to learn and react to complex problems. “They start with the same degree of ignorance and uncertainty about the work they undertake as anybody else,” he says. “It’s not like they have a head start or are innately smarter. But what they’ve done is establish mechanisms so that when they start their work, their ability to learn – and replace ignorance with useful knowl- edge, and then deploy that knowledge so it’s useful systemically – is much greater. They do it at a much higher rate, with much greater duration, over a much broader range of application than anybody else. That’s where the real velocity comes from. It’s the velocity in which they, as an organization, can learn and put what they learn to good use.” And while many firms have tried to benchmark and copy the success of these high-velocity organizations (just look at the popularity of just-in-time production systems and lean manufacturing, both taken from the Toyota model), Spear believes that most are missing the point. “What everyone else seems to have focused on is imitating where these high performers are today,” he says. “What they’ve not learned to do, or realized that they even have to do, is copy the process by which they got
sure we look back at history, and then we make sure that the individuals who do the work are actually qualified to be able to do it. And we created an automated system to track and manage this.” The approach has been tremendously successful in terms of both decreasing costs and speeding up development cycles. “We used to overrun on a typical project; now we execute programs on schedule within about five percent of our planned cost. We’ve also managed to reduce the time it takes to train engineers – from 7-12 years using tribal knowledge to five years or less under the new system – because now we have a basis to teach them exactly how to do the work.” ESW also allows the company to be much more focused in its approach to discovering new ideas. “Engineers are very creative people and they like to innovate,” says Adams. “The downside of that is that if left untouched the process can become very uncontrolled, and could result in us taking more risk into programs than is necessary.” The new system allows Pratt & Whitney to pick the innovations that have the highest systems-level payoff, and to concentrate resources on a smaller number of technologies – providing a much higher probability that those technologies deliver what they promise. Because of the success of Pratt & Whitney, other divisions of parent company UTC are now adopting a standard work-type process. “We’re taking out duplication of effort, we’re taking out many of the risks, we’re doing all those things that would typically slow down project development and applying our organizational knowledge to better effect. There’s no way that we would ever go back,” concludes Adams.
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Toyota’s Hybrid X concept car
there. Really, what sets Toyota apart from its competitors is not what the factory looks like today. It’s how they discovered what the factory (and the products it makes) should look like today, and how they’re discovering what it should look like tomorrow.” To illustrate his point, Spear uses another analogy – that of running a marathon. “Most people are happy just to finish,” he says. “However, if you really want to stay in touch with the leaders in order to compete for first place, you have to be in contention at each of the mile markers as well. The leaders get to all those places faster too, not just the finish line, and by the time everyone else reaches those points the best have moved on and already refocused their sights on the next target. That’s what you see with companies like Toyota.” It’s an important lesson. Detroit will make the argument that their quality is now close to (and occasionally better than) Toyota’s. The problem is that Toyota was competing on quality long ago, and on quality plus workplace efficiency soon after that. “Essentially, it’s true that the Detroit Three have closed the gap on quality, and to a certain extent on efficiency, but at this point that is not a source of competitive advantage; it’s a necessity just to compete. You can’t sell a crummy car anymore. You can’t sell a car that’s grossly overpriced because the market is just too competitive. That’s necessary but completely insufficient.” What is needed now is also product variety, so that when customers change their purchase patterns – for example, when they go from big to small, from luxury to regular and economy – car companies have the velocity and the agility to respond to those needs. “When people walk in, you’ve got to have a very broad product portfolio so that they can pick and choose,” says Spear. “Again, everyone gets to those mile markers, but what’s really important is how quickly you get there.” The key, once again, is learning. “Most of us learn through trial and error,” argues Spear. “So what you need to do, if you’re truly trying to create a Toyota-like organization, is teach a group of people who are engaged in very difficult work – highly integrated, highly orchestrated and highly harmonized – how to do that so collectively they’re learning.” That means incorporating all the layers connecting the shop floor to the production manager, the plant manager, the company president, right up to the top of the organization. “If we can teach them how to discover collectively, they can generate products, services, processes and systems that fit their own context. What we have to do is make sure that we create a good learning environment in the first place.”
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It’s a model that has proved successful at a number of industry leading organizations across industry verticals, from Toyota to aluminum producer Alcoa, from Southwest to engine-maker Pratt & Whitney, from the US Navy’s Nuclear Reactor Program to some of the country’s leading hospitals. In each case, success has been driven by a culture of self-discovery. “Draw attention to failure because only by drawing attention to the disruption, the difficulty or the problem can we discover what we don’t know,” says Spear. “And only by discovering what we don’t know can we convert that into an opportunity for improvement.” Such a journey becomes particularly important in a period of economic uncertainty. The need for organizations to focus on execution, identify what’s not working for them and their customers, and have the posture, the structure and the dynamics to cope with very rapid improvement, innovation and adaptation, is imperative. “The stakes are much higher and the slack is much less,” he says. “As both the technical systems and the organizations that deliver the technology get more complex, the need to be able to discover good solutions as opposed to just designing good solutions has gone up. Very few companies have caught up with that reality, so there’s still ample opportunity for most organizations to catch up.” Even Detroit? “What’s the alternative?” replies Spear. “If they learn these lessons, at least they have a chance of survival – maybe starting on smaller base from which to grow, but at least they have some chance. If they don’t learn them, they’re going to get clobbered.” n
Full throttle How do you become a high-velocity organization? Steve Spear explains… 1. Master the skills: “You’ll only get better if you master the capabilities for discovery that characterize the high-velocity organizations. Learning in small increments can have a profound multiplicative effect.” 2. Define parameters: “Be ambitious in terms of the organizational levels that are involved, but make sure you define an area in which you’re learning (the laboratory, the model line) that is fairly tightly bounded.” 3. Make it important: “We learn best about things for which we’re motivated to learn. If you pick an auxiliary function that is not considered core to organizational success, no one is going to care – no matter how good you get it.” 4. Don’t skimp on time: “Make the investment in repeatedly seeing and solving problems, even the little ones – because it’s through the frequency of trial and error, the frequency of practice, that you’re going to improve.” 5. Get C-level buy-in: “Senior leadership must be involved. This is about learning to improve collectively. If leadership isn’t involved, it sends a signal that they’re not really concerned with increasing the ability of the organization to create value.”
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LEAD FEATURE
In ensuring day-to-day operations at the world’s first and most iconic theme park run smoothly, Disneyland’s Ed Grier has one of the busiest jobs in America. “It’s multi-faceted, very complex, and it never stops,” he explains in this exclusive interview with Business Management’s Ben Thompson.
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t is July 2007, Ed Grier’s first week in Anaheim, and he’s in the park doing the rounds – meeting staff, greeting guests, seeing how things operate and generally getting a feel for the place. He’s only been on the job a couple of days, having just flown in from Disney’s Tokyo resort to take up the role of President at the flagship California attraction; the jetlag has only just worn off, but having a visible presence in the park is part and parcel of his new role and senior management is expected to interact with staff and guests on a regular basis. Even so, he didn’t expect to be this visible. “Hello Mr Grier,” beams the little old lady in front of him. “Welcome to Southern California.” Grier grins, remembering the incident. “She was so knowledgeable about the park, about the history, about current developments,” he recalls. “I, on the other hand, was just amazed that a guest would even know who I was, let alone recognize me amongst all the thousands of other people there in the park and after only a few days in the role.” In the land of the mouse, it’s clear that the big cheese has an extremely high profile. He shouldn’t have been so surprised. As the number one theme park destination in the western United States – and the second most popular in the world – the Disneyland Resort contributes over $3.6 billion in third-party annual economic impact to Southern California and supports around 65,700 jobs. Disney has spurred decades of development in Anaheim, transforming it from what one local resident describes as “just a town on the way to the beach” into one of America’s most popular tourist destinations, and it’s unlikely the city would have baseball and hockey teams today were it not for Disney. “Tourism is a significant business in California,” explains Caroline Beteta, Executive Director of the California Travel and Tourism Commission. “In addition to representing California’s reputation for fun and one-of-a-kind experiences, the Disneyland Resort
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also creates tens of thousands of jobs and generates billions of dollars for our economy.” And while most of the gains have been related to tourism and sports, the profile Disney gave Anaheim likely helped in landing other businesses, too.The location of the resort has proved pivotal to the area’s economy, and with almost 15 million visitors each year generating around $225 million in taxes for Southern California it’s no wonder that the arrival of a new face to the Disneyland corner office is a big deal for local residents.
The business of fun “The Disneyland Resort is a vital component of California’s nearly $80 billion tourism market,” explains Cynthia King, Director of the Center for Entertainment and Tourism at California State University, Fullerton. “There aren’t many other players that create the kind of resort atmosphere they do.” Managing the 430-acre site is certainly a nance is really helpful; understanding opermassive operational challenge. Home to two ations is essential to running the resort; and theme parks, three hotels and a shopping, dinThere is more to Disneyland than a knowledge of the marketing aspects of ing and entertainment district known as meets the eye what we do here is hugely important, too. Downtown Disney, the park also has its own • Disneyland is home to more than 40 Most importantly, though, you need to have monorail and administrative center. “It’s rides and attractions a sense of fun.” analogous to running a small city – and not It’s not something you’d typically assoso small of a city when you think about what • The Pirates of the Caribbean ride ciate with a CPA, but marrying imagination happens here,” laughs Grier. “It operates 24 features 119 animatronic characters with a results-oriented business ethos has hours a day, and we have over 20,000 cast • There are 350 miles of fiber optic been key to the success of Disney’s manmembers that work at the resort. Add in the cable used in Fantasyland alone agement over the years, and Grier is no difthousands of visitors that come through our ferent. It takes hard work as well as gates every day and it makes the day-to-day • The Disneyland Monorail stretches operations very complex.” inspiration to maintain that sense of magic 2.5 miles and is a nine-minute A 27-year Disney veteran with experithat Disneyland is famous for. “We have a roundtrip ence of running operations on three contitremendous heritage here, but at the same • More than 400 items are collected by nents, Grier has now been in his current role for time we always need to be looking forward Lost and Found each day just over two years. Previous responsibilities to the future,” he explains. “So while we try included a stint at Disneyland Paris as part of to stay very consistent with what we deliver • On an average day, park guests an expatriate marketing team assigned to into our guests, over time the park evolves generate more than 30 tons of trash; crease awareness of the resort throughout and I think that’s one of the things we really Disneyland recycles four million Europe, and most recently a spell in charge of focus on – how to evolve the parks and pounds of cardboard, paper and Walt Disney Attractions Japan, where he overmake sure they’re relevant to our guests other materials annually saw operations for the Tokyo Disney Resort. today and tomorrow.” • The park serves four million He’s certainly come a long way since joining the burgers, three million fry orders and Harnessing creativity company in 1981 as an auditor at the Florida lomore than one million gallons of Of course, being able to draw upon the cation, but maintains that all of his previous soda each year huge well of creative talent across the Disney roles – whether they’ve been in finance, marbrand is a tremendous asset in this regard. keting or operations – have provided important “We may take a hit movie, for example, and lessons in what it takes to run a multibillioncreate a great stage show or attraction for the dollar theme park. resort. Disney’s all about telling stories, so if we can tell the right story we’ve “It’s maybe been an unusual route to the top, but I think each one of no doubt that our designers – Imagineers, as we call them – can find a way to those experiences has really prepared me for this job because I need to make sure we bring the story to life.” have a huge grasp of multiple disciplines,” he explains. “A grounding in fi-
BEHIND THE SCENES
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One example is the recently opened Toy Story Mania! attraction. Based on Pixar’s Toy Story characters, the ride is one of the most technologically sophisticated attractions yet developed by Walt Disney Imagineering, costing an estimated $80 million to design and build. In it, park guests wear 3D glasses aboard spinning vehicles that travel through virtual environments based on classic carnival games. “It was a great example of how we took a successful element from elsewhere in the brand and said: ‘How can we tell this story in the context of the resort? How can we use new technology to make sure our guests are immersed in great storytelling, in a ride that’s very repeatable because it’s different every time you go on it?’ I think anytime we have a great story to tell, we use new technology to tell the story in a very entertaining and immersive way.” Another example of this is the resort’s repurposing of its 1959 submarine ride attraction. Closed since 1998 due to maintenance issues, the ride was overhauled and re-imagined as the Finding Nemo Submarine Voyage. “Creativity really drives this company, from the movies division, consumer products, music, it doesn’t matter. We can tap in to that inventiveness and turn it into something new and valuable for our guests. So I think that’s one of the big strengths of the company: the synergy between all the different divisions, and the fact that we have a brand behind us that is powered by the value of great ideas.” In 2007, Disney announced a multi-year, billion-dollar expansion program for the Anaheim resort. In addition to adding 250 more rooms to the property’s Grand Californian hotel, the expansion will bring more of Walt
Disney into Disney’s California Adventure, celebrating the hope and optimism of California that attracted Walt to this land of opportunity in the 1920s. It will set the stage for the unfolding story of Walt that will permeate the park, while other highlights include an amazing Little Mermaid attraction, a groundbreaking, signature night-time water and light spectacular and new viewing area for 9000, and the addition of the 12-acre Cars Land inspired by the hit Disney/Pixar animated film. Extensive landscaping, new
“The most rewarding thing for me is that everything we do here makes a visible difference to the resort. I can look out my window and see the impact”
retail outlets and dining venues will create an even richer environment throughout the park in ways that reinforce guests’ connection with Walt. “We want our guests to have that same emotional connection with Disney’s California Adventure that they have with the Disneyland park,” says Grier. “It’s a great park right now, with some of the highest-rated attractions in all our parks – the Tower of Terror, Soaring Over California, The Aladdin Show and of course Toy Story Mania! – but we want to expand it and maintain our status as the premier resort destination in Southern California. It’s about making the resort as a whole a multi-day experience. So over the next several months, we’ll be going through THE MOUSE THAT ROARED the planning and construction process, the sequence of opening up new shows and attractions, and that’s gonna keep me pretty When it comes to amusement parks, Disney reigns supreme – as last year’s busy for the next few years.”
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EVERLAND
7,200,000
The heart of the park
Yongin, South Korea
8,713,000 UNIVERSAL STUDIOS JAPAN
Osaka, Japan
9,510,000 Lake Buena Vista, Florida
HOLLYWOOD STUDIOS
9,600,000 ANIMAL KINGDOM
Lake Buena Vista, Florida
10,930,000 EPCOT
Lake Buena Vista, Florida
12,000,000 Marne-la-Vallée, France
DISNEYLAND PARIS
12,413,000 Tokyo, Japan
TOKYO DISNEYSEA
13,906,000 Tokyo, Japan
TOKYO DISNEYLAND
14,870,000 DISNEYLAND
Anaheim, California
MAGIC KINGDOM 56
Lake Buena Vista, Florida
17,060,000
attendance figures prove. In the world’s top 10 most popular parks, Disney attractions occupy the top eight slots.
Grier admits to getting up at around 5am every day in order to squeeze in a session at the gym – often accompanied by his sons, who he says “push me pretty hard” – before heading to the office in plenty of time for when the day’s guests arrive. It’s a pretty grueling schedule, made up of meetings with direct reports on the operations team, overseeing marketing strategy decisions, planning for the future – and of course, those all-important park walks. “I try to spend time out in the parks as much as I can, talking to our cast and guests,” he insists. “It’s really valuable. So much of what we do here is based on how our guests experience the resort, so spending time in the parks and talking to our cast members firsthand gives me a great insight into what happens in our resort and how well we’re doing.” For one thing, some of those employees have been working at the park since the day it opened in 1955. “We have cast members that have worked here for more than 50 years, and they take tremendous pride in what they do,” he confirms. “Harnessing their knowledge is vital to the ongoing success of the park – they understand where we’ve been, and they have valuable insights and experience. So they have a lot to offer.” As a result, making time to actually sit down with cast members from across the resort to get
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Creating the right atmosphere is important. Once you enter one of our parks it takes you to a different time and place
And it’s not just the customer-facing employees that make a difference to the way the park is run. In addition to his early starts, Grier often stays behind after the park has closed to the public in order to interact with and get feedback from what Disney calls ‘the third shift’ – the army of workers who come in after dark to carry out essential maintenance work and ensure the resort is ready for new guests the following day. “The parks are beautiful even when the guests are in it, but it’s a special place when you’re there at night with the third shift team. They do a tremendous job, and they’re really the unsung heroes because they’re gone by the time the sun comes up and the guests are starting into the park.” This, says Grier, is where much of the essential work that goes into maintaining a world-class resort takes place – from the clean-up operation to the disposal of waste, from the painting of the façade to the upkeep of the décor – and includes vital safety checks and maintenance work for the multitude of rides and attractions. “They have a No. of employees nightly checklist of things to do, and there is a at the Disneyland huge amount of information they keep track of Resort an idea of what they’re thinking – on ways to enhance the visiin making sure that things are done correctly,” tor experience, on how to improve operations or how to do he says. “We’re making a statement to the things more efficiently – is vital. “Anything they want to bring guests, and to ourselves, too, that our parks are up they can bring up in those meetings. And surprisingly, beautiful, that our parks are well maintained, they’re very honest. They tell me what they think, because that’s the atand that creating the right atmosphere is important. Once you enter one mosphere I like to provide. I try to be very approachable, so they can tell of our parks it takes you to a different time and place, and that’s what me what’s on their mind; it’s hugely beneficial.” it’s all about.
20,000
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CREATIVE IMPERATIVES Disney is known as the Magic Kingdom, yet behind the fairytale story are sound business principles and a meticulous attention to detail. Bruce Jones, Program Director at Disney Institute, explains what companies can learn from Disney’s success.
“It is a huge responsibility to make sure we maintain our heritage,” he continues. “Disneyland is such a vital part of the local community – more so, I think, than any of the other parks – and also holds a special place in the hearts of anyone who has been here to visit. And it’s the only park that Walt Disney actually walked in, so it’s a huge responsibility, one that I cherish.”
Rewarding work Indeed, it is significant that at the heart of a business so embedded in the local community lies its most important asset: people. Of the 65,700 jobs supported by the resort, 20,000 are direct resort employees, 3800 are thirdparty employees at the resort and 41,900 are employed directly or indirectly by Anaheim Resort Area businesses.The resort generates over $1 billion in annual employee wages and vendor payments, including more than $500 million in annual payroll for jobs at the resort and $430 million in annual payroll for jobs with third-party hotels and retailers. Cast members volunteer thousands of hours every year for the local community. And city planners work hand-in-hand with senior management to ensure the resort expands in a socially, environmentally and economically beneficial fashion. For Grier, this sense of collaboration, of being part of a community, is what makes his role so special. “I can look out my window and see Space Mountain, It’s a Small World, the parade floats, Tower of Terror and the Matterhorn,” he concludes. “It is enormously rewarding for me to know that everything we do – the recruiting, the training, the marketing, the service, the design and development – makes a visible difference to the resort. Whether we’re building a new attraction that the guests are gonna love, reducing the time spent in lines through our FastPass system or enhancing the range of services on offer, it gives me a huge sense of pride to see the impact of the decisions that we collectively make. It takes a lot of hard work from our entire cast to get to this level of excellence, so that’s extremely satisfying.”
One of the things we talk a lot about is being accessible, being approachable, walking the parks, and working with and talking with the cast members, because we know that the behavior of the leader in the organization will influence the behavior of the cast members and their ability and willingness to deliver exceptional guest service. For example, during peak periods, we take leaders from support areas such as payroll or marketing and sales, and actually place them in frontline positions in the resort. In that way, the cast members come to see leaders as people that are there to help; they understand what it’s like to work on the front line and what the guest experience is, and from a leadership perspective, there’s no way that leader can then go back into the executive boardroom and make decisions without understanding the impact on the frontline. People management is not just a function of the HR department; everyone has responsibility for the culture of the organization. And what we’ve found over the years is that organizations are much more similar than they are different, and it’s the people that provide the competitive advantage. And this training element is where Disney Institute can help. At Disney Institute, we want the participants in our programs to be able to walk away and translate what they have learned into their own organizations. It’s a combination of showing them how Disney does what we do, examining those practices, understanding the underlying principles that make it an effective business strategy and then giving them tools to apply these best practices in their own environment, and we have seen that results in success time and time again. And I think that’s where the rubber meets the road for us. We don’t just talk philosophies and theory; we talk about what we actually do in our own environment. The organization that has the most creative and collaborative culture is going to be the organization that not only survives but thrives in the 21st century, and I think we’ve got the evidence here at Disney.
Bruce Jones
power of your brand. There are several reasons for this. Firstly, bigger brands attract repeat purchase, therefore by increasing market share a brand will benefit as the economy rebounds. Also, a new product launch may have greater impact during tough times as competitors hold back, allowing brands more coverage in a less crowded marketplace. In addition to this, media costs tend to lower and advertisers should be able to get more for their investment.
Risk
Marketing in a
downturn
With a recession looming, budgets are being slashed in order to buckle down for the stormy times ahead. But while reducing spend can boost quarterly figures, keeping quiet could be disastrous for business. By Rebecca Goozee
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he knee-jerk reaction to recession is to trim budgets. And as executives evaluate expenses, one department always comes under fire: marketing, and in particular, brand building. As the financial climate worsens, a number of blue chip companies have announced plans to cut marketing costs, including Coca-Cola and Visa. But while some companies hunker down, it could be the perfect opportunity for others to steal a march on the competition and secure a larger market share. From observations in previous recessions, we know that consumers rein in their spending – and anticipating reduced sales, business leaders cut back on costs too. However, there is much evidence to suggest that
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reducing marketing spend during recession leaves your brand in a less competitive position when the economy brightens. An analysis of the Profit Impact of Marketing Strategies (PIMS) database, presented at a March 2008 conference, provides the latest evidence that the best strategy in relation to long-term ROI is to increase marketing expenditure during economic slowdown. The findings can be explained simply, through the relationship between share of market and share of voice: the higher your share of the voice, the more likely your brand is to grow its market share in the following year. So it seems that by increasing marketing investment at a time when competitors are reducing theirs, you could substantially increase the
Learning from past history, overall ad spending falls as investors look to cut costs and increase short-term revenue, as seen in 1991 and 2001, for example. But it seems that this time around, marketers have caught on to buying ads on the cheap and grabbing a larger market share. So, what should companies be doing – upping ad spend or keeping a tight rein on their finances? Jez Frampton, CEO of Interbrand, maintains that most companies have recognized the proven fact that brands that maintain investment fare better in the long-term. “Brands reduce risk and volatility because they are the basis of trust between companies and all their audiences, from customers to staff, to suppliers to investors,” he says. “Brands protect price premiums, defend the perception of value for money, encourage and reward choice, ultimately building value for their owners, so anyone who backs off now does so at great risk.” Frampton goes on to explain that he expects the FMCG industry to continue spending, particularly companies like P&G, who he says have a deep knowledge of the effects of marketing and brand building and a strong insight into the value of brands in defending market position and share. “We would also point to the fact that Christmas is just around the corner, and for retailers the holiday period is make or break every year. So expect spending, but on the same levels as last year? Who knows,” he shrugs. Brands are about the reduction of risk, explains Frampton. If you track the volatility of brand value prices and share prices of companies who heavily rely on brands (such as Google and Apple) and compare them with other companies, they have much lower risk factors attached to them. “In the current cli-
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Scott Keogh
“Consumers in the luxury market have confidence in active, visible brands, rather than unknowns” mate you want to reduce risk, so consequently it’s not the time to cut in terms of maintaining or building your brand,” says Frampton. “It’s actually the time to get on with it.”
opportunity However, despite many successful ad campaigns launching during times of economic slowdown, such as BMW’s ‘Ultimate Driving Machine’ campaign and slogan in 1974, consumers can become unpredictable as they look to cut back, particularly amid today’s tight credit market and falling house prices. It seems many factors will determine whether spending in a downturn will work. Scott Keogh is one executive who won’t be cutting back. As CMO of Audi of America, Keogh explains that the reason behind this decision is that the Audi brand has established momentum over the last few years. “We had record sales last year, and if you look at the indicators about awareness, image, opinion and consideration of the Audi brand, our point of view is when you have this momentum and your brand is on a roll, it’s a mistake to lay off, disappear for a few years and then try to build that momentum again,” says Keogh.
Keogh also believes that consumers buy confidence, and consumers in America in particular become confident in a brand when they see it, whether it is through cars on the street or the ads on television. “Consumers in the luxury market have confidence in active, visible brands, rather than unknowns,” states Keogh. “They don’t buy unknowns and that’s why marketing is important – because it makes you known.” For Audi in particular, Keogh believes it is important to keep in the public eye. He explains that in the current financial situation, consumers are cutting back, looking at everything from the purchase of their morning latte, to the school their children are in, to the house they live in, and reassessing their choices. “The
banking on bRanding Robert Passikoff shares his thoughts on customer loyalty in the current financial market.
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he Federal Reserve, in an attempt to prevent the Wall Street crisis from eroding the foundations of two premier financial institutions – Goldman Sachs and Morgan Stanley – have agreed to allow the investment companies to convert to traditional bank holding companies. At a time of tremendous financial upheaval, the move places the companies under the supervision of national bank regulators and subjects them to new capital requirements. But over and above government oversight, it creates a new consumer loyalty paradigm under which the new ‘banks’ will have to operate. Based on assessments from our Customer Loyalty Engagement Index, banks are generally seen to be undifferentiated. For the bank brands we track, products and services, customer service, even fees, are generally ubiquitous. There are, of course, minor differences between them, and we can rank them on an overall basis. But if you’ve paid any attention to bank advertising over the past two or three years you will have noted that it has generally dealt with how many ATMs they have or how they’ve been able to cut 3.8 seconds from the average transaction, not, we think you will agree, massively leverage product differences or extraordinary added-value. Because of the structure of our assessments, we can not only identify the overall drivers of loyalty and engagement for a category, but can ‘drill down’ into those drivers to examine the individual attributes, benefits and values, that form the components of each driver. Given the current climate in the financial category, we thought it would be interesting to see how the banks we track rank on consumer trust. The results – different from their overall rankings – were as follows: 1. Bank of America 2. JPMorgan Chase 3. Bank of New York
4. Wells Fargo 5. PNC Bank
Shakespeare didn’t cover the financial markets, but he did write some excellent advice, “Love all, trust a few. Do wrong to none.” We’ll see.
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Top brands
Marcy Shinder
“While today’s economy may be challenging, we remain dedicated to supporting small businesses” ties we’re being given now that are coming in at less cost. If you stay aggressive at these times, then you can snap up opportunities that will last your brand for five, six years, maybe even a decade, which we find very opportunistic.” Through the increase in opportunities, companies are getting more bang for their buck, and Keogh is employing two opportunities to make sure that Audi get the most out of their advertising investments. Historically, Audi in the US has been the great unknown, explains
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Who made it big and who dropped in Interbrand’s top 100 brands? The winners: Brand: Google Apple Amazon The losers: Merrill Lynch Gap Morgan Stanley
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luxury car market is ruled by BMW, Mercedes and Lexus,” says Keogh. “While they dominate share, volume and network presence, the best time to break this rule is when there is reassessment out there and customers hit the reset button and look for alternatives. And that’s the opportunity that we see right now, and we want to keep that momentum going.” Keogh sees tough times as an opportunity to get ahead of the competition who are cutting back on budgets. From a practical point of view, the advertising marketplace has more opportunities available then ever. “Big sponsorships that haven’t been historically available for decades are now available, such as the Oscars for example. And there are a number of opportuni-
Change since 2007 43% 24% 19%
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-21% -20% -16%
Brand value in 2008 (billions) 25.6 13.7 6.4
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11.4 4.4 8.7
Keogh, and what he plans to do is make the brand the great known. As a result, he has intentionally purchased big. “We purchased the Super Bowl this year, the Oscars, the Olympics – we don’t want to make the brand this quirky, unknown, just-in-the-know brand, we want to make it popular. As such, the current market is working well for us as we can actually get some good pricing now on these broader platforms.” Secondly, Keogh is focusing on purchase confirmation. “When someone buys an Audi we want them to have that confirmation factor, that they feel like they made the right decision. We offer them driving experiences, or the ability to go to Le Mans to see the race team, because this tells the owner you belong to a great brand that’s on the rise and that they made the right decision,” says Keogh.
Strategy Marcy Shinder is Vice President of Brand Marketing and Strategy at American Express OPEN, a team dedicated to the success of small business owners and their companies. Being committed to small business owners, Shinder is required to provide them with the resources and tools they need to survive and thrive in uncertain times. “While today’s economy may be challenging, we remain dedicated to supporting small businesses and, in fact, recognize the even greater role they play in fuelling our economy,” says Shinder. Shinder believes that in today’s uncertain economic climate, relevance has become the most essential marketing strategy because it builds customer loyalty. American Express OPEN’s customer loyalty strategy is rooted in the concept of giving small business owners
the resources critical to business growth and helping them become resilient in the face of challenges. “We’re hearing, now more than ever, that our customers are seeking advice about what they can do differently to survive and thrive in a challenging economy,” says Shinder. “They want quick access to relevant, actionable information that can help solve problems.” Shinder plans to continue investing in marketing, despite the challenges of a cashstrapped market. She explains that American Express will continue to invest in projects that are proven successes and provide the opportunity for customer insights and reactions in order to be able to refine and improve them. “OPEN Forum is a great example of a highly successful initiative that is evolving in 2008,” says Shinder. “In addition to the OPEN Forum Economy section, the site has been re-launched with a new design and new resources, including video segments. Card members can post advice and insights on the site so that other small business owners can learn from them – one message that has come through loud and clear from them is, ‘let’s learn from each other so that we can avoid making the same mistakes’.” So it seems that more companies have caught on to increasing market share by upping advertising and marketing spend in tough times, but many factors determine whether spending in a downturn will work, and there are no concrete rules of thumb. Except one – don’t gamble. It’s imperative to know what you are investing your marketing dollars in and why. Companies who see marketing as an investment rather than an expense will make it through the tough times ahead. n
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What are the main challenges of managing staff in a downturn? Are layoffs inevitable? What about recruitment? Is a downturn actually a great time to hire proven-results players from an expanded pool of jobseekers? Business Management’s Matt Buttell investigates. ecession, economic slowdown, inflation, credit crunch, market uncertainty. These are all words we have become accustomed to hearing on a daily basis, and fear surrounding the global economy is growing ever more potent. Over the last 12 months, some of the most seemingly untouchable and prolific players on Wall Street have witnessed a complete meltdown. While the US government is stepping in with a $700 million program to bail out the banks, it’s no longer just the financial sector that is being affected. The crunch has permeated outside the boundaries of Wall Street, and Washington faces a long battle if it is ever to successfully re-imagine the American Dream. Indeed, the collapse of such blue chip giants as Bear Stearns and Lehman Brothers, and the public castigation of those firms’ CEOs, was a blunt reminder to organizations and C-suites across the economy about their people management responsibilities – it doesn’t matter what the economy is doing, as a senior executive you are still responsible for creating growth and managing your staff. In other words, regardless of the market conditions, companies still need to hire, still need to manage their talent and still need to fill positions. A tough economy is certainly no excuse for a lack of performance, but during these tumultuous times, concentrating on innovation, change and growth is surely easier said than done. Otherwise, wouldn’t all companies be doing this already, instead of downsizing and making cutbacks? “It is very challenging to tell people they’re going to lose their jobs because we can’t continue to do the things the way we used to and are having to redesign our organization,” says Moncef Slaoui, Chairman of R&D at GlaxoSmithKline (GSK), who recently announced a number of job cuts within the R&D area. “It’s a very difficult message. It definitely
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impacts the morale of the organization and the motivation of both those employees that are losing their jobs and those that are staying and watching the process unfold. It’s one of the greatest challenges of changing an organization.” The challenge really lies in the sad fact that, for many people, losing their role during a tough economy isn’t necessarily because they have failed individually. As Sloaui points out, it is an enterprisewide element of failure (or at least limited success), that drives companies to make these changes. As any CEO will know, tough decisions like cutbacks happen because leadership needs to focus on long-term success: “You’re making these changes now so that you’re stronger in three or four years,” says Sloaui, adding: “If you don’t make them now, you simply won’t be left standing when there’s havoc in your industry.” There is certainly no easy answer, and to face employees knowing you have to let them go must be difficult for even the most hardened executive. An anonymous source at hereisthecity.com wrote: “I wanted them to retain some dignity, especially as they would all be told to leave the building after being advised that they were being let go,” before concluding: “It was only after the deed was done that I went to the ladies room to compose myself. I locked myself in a cubicle and silently cried. I felt terrible for what I had done – even though it was my job. All in all, I’d had better days.” And, as Sloaui points out: “It’s hard to relate it to an individual who may be losing his or her job today, but it’s something that, after deep reflection, we just have to do.” With these issues now affecting companies across all sectors, the danger is that organizations could be getting things very wrong when it comes to tackling redundancies and redeployment. John Bateson, Chief Executive of global talent assessment firm SHL Group, says that companies who have become well-versed at using assessment tools and techniques for recruitment need to apply the same rigor when looking at these issues. “Too often it is easy to look to historic data about an individual’s performance, or even adopt the highly inappropriate ‘last in, first out’ approach,” he says. “The first option is not based on future potential and could mean that the company fails to have the right people in the right roles for future growth; the latter could easily land a company in court as they risk flouting equality laws.” He raises several important issues that many executives across the economy are facing. For example, Edith Cooper, Global Head of Human Capital Management at Goldman Sachs, says: “There are always challenges that present themselves, regardless of the market
circumstances. Our job in HR is to make sure we have the right people in the right seats, and that’s particularly true during challenging times.” In terms of laying people off and redeploying employees throughout an organization, Bateson agrees with Cooper. “It is an extremely unsettling time for staff when their company faces downsizing, so to be able to demonstrate objective reasons for letting some people go and redeploying others is vital,” he explains. “It’s not just a matter of ticking the legal boxes, it’s about being a responsible employer and ensuring that staff who exit the company go with dignity, a clear understanding of why they do not suit the new structure and the knowledge of where their strengths lie – which will be invaluable when meeting with potential future employers.” Concentrating on the deluge of job losses and the economic crisis certainly paints a drab picture of the market, and John Challenger, CEO of outplacement consulting firm Challenger, Gray & Christmas, agrees: “Without doubt, it is a bleak time in the job market. Unemployment is growing and there are 2.2 million more people unemployed in the US today than there were a year ago,” he says. Having said that, Challenger is also keen to point out that there is potential to put a positive spin on this growing labor pool. “Companies have their pick of who they want to a much greater degree than they did during the expansion period,” he notes. He goes on to say that in many places, where a lot of people are flooding into the market at the same time, from the same industry, companies can try to select the best and the brightest. While Challenger’s outlook may be one-sided – jobseekers who enter the labor pool at the same time from the same industry don’t always see these benefits, as there are fewer jobs and more candidates – it does make sense. “That’s what happens in an economy, isn’t it?” he says. “As it shifts, different sectors hold sway.” Think back to either the automotive industry in the 1960s and 1970s, or housing in the 1990s, or technology and banking in this last decade and it’s a paradigm of Challenger’s point. “The economy shifts, and talent flows where it’s most in demand,” he adds. “The top talent always flows to where the most successful companies are that can pay the top dollar.” Perhaps then, the answer to our economy’s latest conundrum is ‘re-skilling’. It’s certainly not just a simple case of all these financial services executives, for example, being snapped up by other finan-
“Our job in HR is to make sure we have the right people in the right seats, and that’s particularly true during challenging times” Edith Cooper
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“It is very challenging to tell people they’re going to lose their jobs because we can’t continue to do the things the way we used to” Moncef Slaoui cial services companies. There could be a greater degree of fluidity between industries with transferable skills, and a focus on re-skilling for those with more specialized abilities. “There are certain skills that are less portable or transferable to other industries than those in the technology, sales, relationship management, HR and marketing areas,” says Challenger. “There are certain types of skill sets that are very transferable and can move from industry to industry, and there are certain ones where you get very specialized in an industry, and to move may require more re-skilling.” Because of this, training, development and learning are likely to become crucial as companies bring in new people, especially those who come from different work cultures or different industries. “It’s about creating an inviting place to work,” concludes Challenger. “For some people, that means challenging work, new assignments, meaningful jobs, strong work cultures, organizations of people that trust each other; some people look for great bosses and gurus to go to work for, people that they can learn from and grow underneath; others look for good work/life balance and companies that recognize the issues people have in managing their lives; other people want education, learning and access to tuition reimbursement programs.” The list is extensive, but it is fair to say, all are issues familiar to those working within the HR space. It has been bandied about the industry that human resources needs to step up and play more of an operational role within its orga-
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nization for some time; it now seems this downturn in the economy could be the window of opportunity that allows HR professionals to do just this. Goldman Sachs, for example, one of Wall Street’s lesser casualties of the crunch, is truly driven by its people. As Cooper says: “We are who we are because of the people that we have here and the culture that those people support. Our culture is one of working with and prioritizing our clients’ interests, making sure that we have a great pipeline of talent coming up and reflecting the diversity of the businesses and the markets and the cultures that we work in.” She adds: “There’s a lot of excitement around human capital management here, and as we continue to focus on it, we will be able to support the firm’s effort for continuing growth around the world.” No one can predict for how long Cooper’s word, for example, will hold true. After all, recession, economic slowdown, infl ation, credit crunch and market uncertainty are all words that we will continue to hear day-to-day for the foreseeable future; but the time has come for executives to realize that while there are all sorts of ways they can make themselves attractive to new applicants, we need to recognize the true value in our people. One thing is certain: human resources and human capital management are going to be huge for companies, not just in financial services, but across the economy.
TOUGH LOVE Times are tough. And when times are tough, it’s time for HR to get going. Here are six things HR needs to do in this economic downturn. 1. Talk to the people running operations. That’s where the money is. 2. Take a deep look at your performance management system. Are you getting the real behaviors that you want, or is it a matter of who goes to the most meetings wins? 3. Ask not what your company can do for HR, but what HR can do for your company. How can HR contribute to the bottom line? 4. Fell the deadwood. If you have people in your organization who needed to go when times were good, that goes double now. 5. Let employees know what you know. People need reassurances when they’re appropriate, but they also need the truth. 6. Pay lots of attention to your top talent. Not every company is in a downturn, and top talent wants to be with winners. Pay attention to them now or else start preparing their departure packets.
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EXECUTIVE INTERVIEW
A unified solution for communications Recently, Business Management sat down with Rick McConnell from Cisco and Bruce Morse from IBM, to get an understanding of how they are working together to transform the workspace of the future. Why are IBM and Cisco partnering in unified communications? Rick McConnell. Customers are embracing unified communications as a way to accelerate decisions, gain productivity and strengthen competitive advantage. A unified communications solution spans a broad set of technologies, capabilities and investments such as presence, voice, video, data and mobility. Through our partnership we hope to enhance and simplify communication and collaboration by providing advanced solutions that let customers take advantage of existing and future investments in Cisco and Lotus solutions. This increases the value and offers a richer user experience that organizations can expect from using our technologies together.
and IBM customers will benefit from reduced complexity and cost for unified communications due to the significant effort we’ve made to develop, integrate, test and support these solutions. BM. We are combining Cisco’s Unified Communications and networking experience with IBM’s Unified Communications & Collaboration (UC2) and integration expertise to provide users with a superior experience for unified communications and collaboration. We offer businesses compatibility between IBM and Cisco products using the open standards based plug-in model for Lotus Sametime that allow for more rapid delivery of functionality, thus helping reducing risk. In addition, our joint partners and services professionals can leverage the Lotus Sametime programming model to develop a larger set of applications and solutions customized to a specific customer environment that offers additional business value to customers.
Rick McConnell
Bruce Morise. A key finding of IBM’s 2008 Global CEO study was that the majority of CEOs surveyed are focused on adapting their business models to better manage change. As organizations move to more collaborative business models we found our customers looking to us to provide solutions that better combine the voice, video and data capabilities required to run their business and adapt to change quickly. Through our partnership, we can also bring the services, skills and expertise that are critical to helping organizations manage change and plan a unified communications deployment across a broad spectrum of technologies. IBM offers these skills through our Converged Communications Services practice with deep expertise not only in the IBM and Cisco products but in planning, managing and implementing unified communications solutions. What are the benefits of Cisco and IBM collaborating to deliver a product integration roadmap? RM. The current and planned solutions in the product roadmap provide our customers with a robust and integrated user experience across the Cisco and Lotus unified communications product portfolios. The integrated product offerings combine IBM Lotus Sametime, IBM Lotus Notes and multiple Cisco Unified Communications products to deliver a complete unified communications solution that unify voice, data, video, messaging and mobility technologies into a single, flexible solution. Cisco
What are some examples of joint integrations that are having an impact on businesses today? RM. We have a number of joint customers ranging from the large enterprise to the small business that are realizing the benefits of these integrated solutions. The functionality between Cisco and IBM offer immediate benefits by enabling workers to use familiar Lotus applications to access communications capabilities inherent in the Cisco Unified Communications system. Lotus Sametime users can easily place voice or video calls and initiate integrated voice, video and web collaboration sessions from their contact list and instant messaging sessions. You can also see when someone is on the phone and access and manage voicemail directly from the Lotus Sametime client. These capabilities help save time, increase productivity and speed decision making by streamlining communications and enhancing collaboration. IBM Lotus Notes users are able to access, play and delete voice messages directly from their email client. Notes users are also able to accelerate collaboration by setting up and attending voice, video and web conferences from their IBM Lotus Notes calendar.
Bruce Morse
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COMMUNICATION FOCUS
The rise of collaboration and social media Enterprise communications continue to evolve at a rapid pace, remaining critical for competitive differentiation â&#x20AC;&#x201C; those who communicate more effectively are undoubtedly more successful. What part are collaboration and social networking playing within the changing field of communications? Rebecca Goozee investigates. 70
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s the full impact of the credit crunch begins to affect the business and professional lives of millions of people around the world, we are forced to look at new and innovative ways to survive. Economic circumstances are now forcing people to connect with business contacts, partners and collaborators â&#x20AC;&#x201C; along with potential employers, staff and customers â&#x20AC;&#x201C; in new and innovative ways. Collaboration is expanding, unified communications (UC) are enabling speedier decisions and improving processes internally, and enterprise social networking is opening up new avenues for success externally. Enter the next generation of collaboration and communication: robust, interoperable, server-based tools, integrating mobile technology to provide any-
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Enterprise social networks time, anywhere access to critical information, increasing productivity and reducing costs. Connectivity has become crucial to business success as people want and need access to information anywhere and any time. As organizations look to lower expenses and increase efficiency, communications and collaboration have become vital elements for business success. It is imperative for companies to enhance their ability to locate people at the right time, through the appropriate communications medium.
Next generation communications According to a recent IDC report, collaborative applications were in great demand in 2007, generating $6.3 billion in worldwide revenue. Mark Levitt, IDC’s Lead Strategist and Researcher for Collaborative Applications, believes that the main driver for growth in collaborative applications is workers continuing to find ways to be more productive. “Organizations recognize that providing real-time instant messaging and online meeting tools for a broader portion of the workforce is necessary for promoting cohesive teams and reducing travel costs,” says Levitt. Businesses seeking to improve their connectivity are increasingly turning to UC and Software-as-a-Service (SaaS), which make tools easier to use. Switching between standalone tools wastes time and mental energy that today’s workers cannot afford. “UC provides a set of complementary tools that users can move between quickly and easily,” explains Levitt. “SaaS enables teams to start using a new application without having to go through the formal, often timeconsuming process of involving IT staff.” Levitt also points out that SaaS enables IT departments to provide tools to a limited number of workers whose needs do not justify the long-term investment of on-premises infrastructure. Companies are utilizing Web 2.0 tools and technologies in order to improve both internal collaboration between users, systems and departments; and external collaboration with suppliers, partners and customers. Levitt believes that these technologies have empowered users and teams to identify and customize the tools they need to get their work done. “Following the lesson that they learned with instant messaging, individuals now feel they can achieve without necessarily involving IT,” says Levitt. “With ease of use, connectivity and sharing treated as priorities, Web 2.0 tools remove barriers that can make it difficult for people, especially when separated by an organizational boundary, to work together toward a common objective, which may include developing a better product or strengthening the relationship between a customer and a supplier.” UC and many other Web 2.0 tools focus on the activities of people creating and sharing content, rather than on creating and storing data that can be accessed after, proving that human interaction is key for innovation. Finding people with the right information and expertise, whether they are located inside or outside the organization, is viewed by a growing percentage of companies as the key to successfully navigating the marketplace. “By improving the chances of knowing what products and services customers want, go-to market partners can help refine and deliver the goods to the customers,” says Levitt.
Businesses should consider the following guidelines when auditing and analyzing their own networks: n Do not separate ‘social’ networking from ‘professional’ networking. Attempts to control employees’ use of social networking software in the office may end up damaging the organization in the long run by depleting its network capital n There should be value placed on networks with people outside the firm. Too often, it is only senior staff who are encouraged to build relationships with people outside the organization. The power of horizontal networks across organizational boundaries is clear, and growing n Keep in touch with employees who have left the organization. The temptation during a difficult economic climate is to hunker down; but this risks cutting off flows of network capital. Companies should consider how to keep former employees in the network n Do not police networks, but consider how they operate and what could be improved. This should be a first step towards collective conversations about the ‘rules of the game’ when it comes to operating within networks Source: Orange
Social networking As collaboration technologies improve, companies are becoming increasingly efficient internally, but how are they communicating externally? The trend seems to be towards enterprise social networking, and according to analysts Gartner, social software is hot right now, and is only going to get more so, particularly in the face of a down economy. Jeffrey Mann, Vice President of Research for Gartner’s Collaboration and Social Software Group, believes that company and brand awareness, as well as customer engagement and management is needed even more so in a down economy. As advertising and marketing budgets are being slashed, many businesses are forced to get creative through their sales and marketing efforts. Social media is being embraced as a new network to connect with consumers, and many companies are set to benefit from the positive affects of social media. There are a number of benefits to becoming more consumer-focused. Firstly, engaging and interacting with your customer allows for a clear line of sight and a deep understanding of what your customer needs and wants. This is beneficial because it means you can adapt your products as needs change and this typically translates to higher customer satisfaction and brand loyalty. Secondly, brands benefit because they are engaging with the community, whether mining conversations and looking to gain customer insight or actively soliciting direct input through polls, surveys or one-to-one questions. Matthew Lees, Vice President of the Patricia Seybold Group, believes that engaging with consumers is key in figuring out how they want to do business and how you can make it easier to do so. “Customers want to purchase your products and make smart choices. This isn’t about the products or the services themselves, it’s a way of doing business, and we think that there’s a lot of valuable information out there that organizations should tune in to, listen and act upon.”
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Beyond a customer focus, social media is important in providing a support network for consumers. Lees believes that as organizations become more customer-centric, social networks provide an additional support channel and allow for an engagement with the community. “There are benefits to the brand and image by being seen as more customer-friendly, open and transparent,” says Levitt. While companies are understandably wary about a high level of openness and concerned about possible ramifications starting up on the internet, Levitt explains that although concerns are justified, negligence occurs with much less frequency than people would expect to happen. “It’s a justifiable concern but customers are already having conversations with friends or colleagues, so if there are problems or issues then people are already aware of them,” says Lees. Being aware of these conversations can actually be an upside, because you may be able to identify potential problems ahead of time as opposed to being in the dark about them. There’s clearly much more to enterprise social networking than simply instigating a forum, writing a blog and inviting comments and feedback on the basis of that. What factors do firms need to consider in order to truly harness the potential of these types of media and interactions? Lees believes that the first crucial step is recognizing social media as bigger picture way of doing business, rather than a quick fix gimmick. “While there is no magic in social media, the key difference is the scale on which you can reach people, potentially in their hundreds, thousands or even millions,” claims Lees. “You need to harness that for your benefit and that starts with a willingness to take it seriously.” When making a commitment to social media, it’s crucial to understand that if you want customers to be open with you, you need to be
Enhancing productivity Unified communication and collaboration solutions enable more efficient collaboration with employees, suppliers, customers and business partners. By enabling communications infrastructure, mobile devices, desktop and applications to work together, users can communicate with anyone at any time. The benefits of a unified communication and collaboration solution include:
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Improved communications: such as instant messaging and email
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Seamless user experience: with converged voice, data and video services
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Productivity boost: more efficient message management mean mobile workers can save almost an hour a day
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Cost reduction: voice and web conferencing minimize travel costs services
Achieving business goals Social media technologies such as blogs, wikis, podcasts, video, social networks and online communities are increasingly being leveraged by companies to: n n n n n n
Build brand visibility and equity Gain insight into customers Promote products and services Influence communities Increase website traffic and leads Drive product innovation
Source: WebGuild
open with them. Earlier this year Starbucks launched My Starbucks Idea, a website that allows customers to make suggestions, discuss and vote on them. But while Lees highlights the importance of listening and participating, he maintains that it is vital to act on what you hear from your customers. “If you don’t do anything with the submitted ideas, and you are only doing it to seem like you’re interested, then you will turn people off long term,” says Lees. “Taking action on what you’re observing from the community is absolutely crucial.” One of the advantages of leveraging the scale of an open community is not just in generating ideas but also to have the community rank those ideas and help you prioritize them. It is possible to reduce a lot of workload and not only hear the ideas but understand the most important issues from the point of the consumer. Lees is keen to highlight that as well as ideas, some communities allow you to upload software code, story ideas or photographs.
Future potential What does the future hold for social media? We will certainly see increased adoption of social media as tools, both internally and externally focused, says Lees. “What’s interesting is the overlap we are seeing and expect to see more of between the internal and external.” It is certainly a positive sign that although these tools are being built to support internal collaboration and increased productivity primarily, they also have components to allow external users to be able to communicate, collaborate and access information as required. “Anything that makes it easier to engage and connect with customers is a good thing from our perspective,” says Lees. Lees also believes that much increased adoption is based on the younger generation and will continue to be. “Companies are hiring the best and the brightest, who are graduating from college using wireless technologies, and when they start work they get a slower computer and have limited access. These are the people pushing for more openness and also have an increased expectation that you will help connect them with other people like them,” he explains. “And if you don’t help them to connect with people through social media tools, ratings and reviews then they will go to someone who will.” n
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The importance of collaboration What are the main drivers behind collaborative application growth? And how can these technologies help companies prepare for and navigate the current financial downturn? Business Management asked a panel of experts for their opinions. tHE PANEL
Whitney Tidmarsh, VP of Marketing, Content Management and Archiving Division, EMC
Kent Madsen, Chief Technology Officer at Netop
According to a recent IDC report, collaborative applications were in great demand in 2007, generating $6.3 billion in worldwide revenue. What were the main drivers behind this market growth? Whitney Tidmarsh. Organizations are continually looking for new ways to be more efficient, deliver new products and services to market faster and be more competitive. These are business behaviors that have existed since time began but until recently, the technology that was available for use has been limited to services such as email, file sharing and content management services. Combined with the growth of globalization and widely dispersed talent, and restrictions in travel spend, technology is needed more than ever to enable global collaboration.
“In a more competitive global economy, companies have to innovate more quickly, produce more effectively and deliver value more concretely than ever before” Recent modernization and evolution of technology has made this a new world digitally. As users see new ways to collaborate and share information with friends and relatives, they also see ways that the same technology can be leveraged to advantage in the workplace. So we find ourselves at a period of confluence where new, flexible,
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Kent Erikson, SVP and General Manager for Workgroup Solutions, Novell
browser-based tools such as wikis, blogs and team workspaces are available to address those traditional business needs to do things faster and more efficiently. To add additional incentive, this is now even more critical to organizations faced with financial belt-tightening in the face of new global economic challenges. Kent Erikson. The convergence of business, technical and economic trends has driven the adoption of new collaboration systems in a flat world. Businesses increasingly rely on networked teams to produce their knowledge products: designs, plans, forecasts, analyses, marketing materials and more. Networked teams also cross organizational boundaries, with members coming from different departments and companies. This sort of mass collaboration requires a robust set of complementary collaborative tools. In technology, faster and more affordable network connections make it possible for people to work together and collaborate. New kinds of software have emerged in this networked world as well. Concepts from consumer social networking tools are making their way into the enterprise, thus driving rapid innovation in collaboration technology. And in a more competitive global economy, companies have to innovate more quickly, produce more effectively and deliver value more concretely than ever before. Collaboration – the way users create, share, discuss and manage information – is key to this process.
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Kent Madsen. In today’s global economy there is an increasing importance of horizontal, collaborative relationships between employees, customers and business partners on a global scale. CEO’s have increasingly realized that the ability to communicate and collaborate with people inside and outside the business is becoming a key business differentiator in a fast growing global business environment. Secondly, we have seen multiple proprietary multimedia applications converging into standardized suites that work seamlessly with enterprise applications, that support requirements for ‘online’ and ‘real-time’ business processes and increase employee productivity. The new generation of internet-centric employees, is putting immense pressure on their organizations through the utilization of applications like Messenger, AOL, Yahoo and Skype as part of their native collaborative behavior to overcome a number of challenges. This individual deployment of rogue or unauthorized stand-alone products have increasingly become a major security problem for many organizations and forced responsible IT managers to deliver secure collaboration tools that are in line with newly formed IT communication strategies.
“As users see new ways to collaborate and share information with friends and relatives, they also see ways that the same technology can be leveraged to advantage in the workplace” In what ways are companies utilizing Web 2.0 tools and technologies to improve both internal collaboration between users, systems and departments, and external collaboration with suppliers, partners and customers? WT. Web 2.0 tools by themselves can provide a valuable way of quickly sharing and creating information. But when used alone, they only solve half of the problem. Companies can obtain the optimum benefit by utilizing these creative tools within an infrastructure that provides a secure, self-managed team workspace model. In this way, all the important tools and data are in one place, there is one location from which to co-ordinate all aspects of a team project and everything is securely managed in a way that addresses an IT departments needs for information governance. These team or community workspaces are flexible enough to allow project co-ordinators to self-administer, lessening the burden on IT. They can be used in a mix of both internally and externally facing modes to meet a wide variety of business needs that involve any combination of employees, partners, suppliers and customers. KM. Web 2.0 technology is a business paradigm shift that will transform the global economy. Web 2.0 technology will eliminate previous barriers for communications and will enable true global collaboration. We see B2C consultancy, where business models are based on Web 2.0 technology to support direct collaboration from the web. We see service organizations having the ability to offer their services exclusively on the web, where all data, voice and video is provided
from a single transparent interface – basically making the consultant present at anytime that is convenient for the consumer. We see B2B collaboration, where long-distance business partners from different continents collaborate on supply-chain requirements and agreements, to meet common business needs. KE. Many of our customers have implemented company-wide collaborative forums to help employees share knowledge. These are also called communities of practice, and they're all about turning knowhow into savings. If someone in North America has learned how to fix a braking problem on earth-moving equipment, for example, everyone around the world can benefit from that knowledge. Our customers are also using workspaces – both within and across organizations – to manage projects more effectively. Workspaces provide a single place to store work in progress, team calendars and action lists. They also deliver Web 2.0 tools that facilitate team productivity. Blogs, for example, facilitate reports on project status and – combined with RSS readers – provide an excellent way for project sponsors to track progress. And wikis improve information sharing within and between teams while reducing document production and email volume. Deployed within a single department or across multiple organizations, shared workspaces make it much easier to collaborate throughout the value chain. As these new Web 2.0 tools are introduced within an organization, what problems and issues typically arise and how would you recommend avoiding them in order to have the most successful implementation? WT. For any organization, a ramification of using these new tools is that they bring their own unique challenges. The most common problem is the proliferation of information silos that these tools can create. So, when considering the implementation of Web 2.0 tools, the first is to think long-term – what is my environment going to look like over time? Then think about the types of departments and individuals that you want to roll this out to. Consider security, the need for retention policies and define those up-front before you roll the tool out to end users. Perhaps most important is a model for organizing and securing information meaningfully. A red flag for a lot of companies is the inability to search for, find and discover information. The EMC solution for distribution of Web 2.0 services is to ensure that companies have the infrastructure to manage and support these new tools while managing the content created with them – all in an environment that can support a company’s security and intellectual property protection requirements. These Web 2.0 tools then enhance the ability to reach out to partners, suppliers and customers easily and therefore become more productive and competitive. KE. Organizations need to decide how they want to manage increased collaboration and networked teams. How much of it do they want, how do they want to control it, and how can they ensure security without stifling the results? We've seen our customers thinking through their policies for these new forms of collaboration and leveraging identity management technologies to produce the results they want.
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It's also important to think about user adoption. How does an organization help users evolve their current work practices to more effective ones? The answer is usually that once you get critical information in these new tools, even the most conservative users make the change in order to access it. Finally, the best long-term way to ensure successful implementation of collaboration tools is to participate directly in the development process. Open architectures that invite the contributions of a broad community of partners and customers not only produce the most rapid innovation; they ensure that the best ideas are implemented and shared by all.
for information. It also helps reduce IT spend on over-lapping systems and the help desk support required to keep users running smoothly. Once in place, a modern information sharing and content management system provides an ideal way for teams to quickly come together, ideate over new project details and quickly bring new products and services to market at a speed and with a co-ordination that would have been unthinkable in the days when companies were using e mail as their primary means of collaboration.
“With secure internal and external unified communication systems it is possible to reliably, confidently and cost effectively share all resources within and outside an organization in ways that were not previously possible”
KM. Company security and compliance is a major concern with Web 2.0 technology. Whether it is blogging, chat or collaboration, many of the more traditional control functions implemented by organizations are easily circumnavigated. In the past companies placed quite stringent controls on official lines of communication, before it was passed along to the recipient or outside world. But, with Web 2.0 tools the ability to control and KE. Current economic conditions create uncertainty, but managers manage the flow of information can become more problematic. The in every economic climate know that they need to keep an eye on need for revised communication and security strategies must be emtheir markets and find ways to do more with less. Next generation phasized to avoid these types of scenarios, collaboration tools provide a way for where company confidential information companies to do this by increasing innoFast facts and other compliance requirements are vation while lowering costs. With these more at risk. tools, people can collaborate more and A recent study by Coleman Parkes Another major factor that must be travel less. Teams can tap into talent Research revealed the following data: addressed is the behavioral changes wherever it is. Self-managing teams • More than 75 percent of required to adopt new leapfrogging can flatten organizations and reduce companies worldwide admit that technology. It is essential to understand overhead. And communities of practice social networking will come into and implement transformation projects can share best practices and reduce the the business undetected if not – which are clearly anchored at top-level number of costly mistakes. proactively managed management. If management doesn’t use Today, new metaphors for collabora• Only 18 percent of respondents the tool themselves the organization will tion are helping organizations take the currently have any kind of strategy in not use it. next quantum leap. Leveraging these new, place to integrate these technologies more productive ways to work together is within the company for employees And given the current economic climate, even more important in challenging times • 58 percent of companies agree that how can such technologies and a greater than it is when conditions are flush. senior managers do not understand the focus on facilitating information-sharing potential that social networking offers help companies prepare for – and sucKM. The current economic climate is both for employees and customers cessfully navigate – the downturn? driving most companies to reduce costs, • Two-thirds of companies see WT. Every company is being asked to be increase efficiencies and maintain sales, improved customer satisfaction more resourceful and this is never truer all at the same time. The downturn in the from the adoption of social media than in the IT department of most organieconomic climate mandates the use of and 64 percent report an improved zations today. Smart companies use ecomore efficient business tools including reputation in the marketplace nomic downturns to invest in the business Web 2.0. – to retool, automate processes, remove With secure internal and external unnecessary costs from the company, and get ready to be one step unified communication systems it is possible to reliably, confidently ahead of the competition when the market turns around again. One and cost effectively share all resources within and outside an orgaimportant way for organizations to be more efficient with their own nization in ways that were not previously possible. Benefits include resources is to consolidate disparate tools and the information reposilower travel costs and lost time due to reductions in physical travel tories they interact with. This helps reduce the issues discussed previwith an anytime, anywhere presence through the internet as well ously that organizations typically face when important information is as an increased level with the integration of voice, video, chat and scattered, such as duplicative effort and wasted time spent searching desktop screen collaboration in real time. n
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CASE STUDY
Business benefits An investigation into the promise of unified communications.
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ith more than 10,000 employees and annual worldwide sales exceeding $2.5 billion, Beckman Coulter is a leading global manufacturer of biomedical testing instrument systems and related products for automating laboratory processes. With more than 70 locations and over 35 legacy phone systems worldwide, Beckman Coulter had a significant business communications problem. “We had no common dialing plan, no networked voicemail and no communications standards,” says Steve Campbell, Director of Networked Services, Beckman Coulter. “When our staff traveled among company office locations, they often had a lot of trouble figuring out how to dial out and access voicemail. With all the different dialing plans we had, it was also difficult just to contact people at remote offices.” In addition, existing phone systems were showing their age, with some more than 20 years old. “We knew the time was coming when they would not be supportable,” says Campbell. Their legacy system was not exactly the optimum infrastructure for promoting easy collaboration and quick decision-making. Beckman Coulter was also looking for a communications system with robust disaster recovery capabilities, enabling call center agents to vacate the premises in the event of a disaster but still be able to handle customer calls at an alternate location. “Our large Miami call center, which is located in the heart of hurricane country, employs many of our key call center agents who have years of experience working in the laboratory,” says Campbell. “They are highly
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qualified, and their interactions with customers are critical to the business.” At first the company planned to replace just a few of its dispersed phone systems, perhaps with one or two based on IP. “We knew that ultimately we’d make the move to Voiceover IP (VoIP) to simplify the integration of voice with other collaborative applications and to improve first call resolution and customer service at our call centers,” says Campbell. “But we wanted to hold off on what we considered ‘bleeding edge’ technology and stay mostly mainstream at first.”
“The entire communications system is standardized and the decision making is all centralized” It soon became clear, however, that a complete communications overhaul, replacing multiple local phone systems with a single advanced global solution was the right answer to existing communications issues. After considering several alternatives, Beckman Coulter chose the Siemens HiPath 4000 system with an OpenScape Xpressions application. The HiPath 4000 system is an IP convergence platform built over a distributed architecture that works just as effectively with
legacy TDM communications infrastructures as it does with the latest IP-based communications solutions. “We wanted to be able to hedge our bets at first, starting with perhaps half of the staff using IP phones but leaving essential areas such as plant security, warehouses and executive offices on legacy handsets until we became more confident supporting the new technology,” says Campbell. The HiPath 4000 allows Beckman Coulter to have a single, company-wide phone system and dialing plan while transitioning to IP handsets at its own pace, with the ability to do so quickly in remaining departments with legacy phones, when the time comes. As with previous Siemens phone systems used by Beckman Coulter, the HiPath 4000 system offers scalability, security and resiliency not easily matched in the industry. OpenScape Xpressions is a unified messaging application that combines voice, fax and email messages on a Windows server. “We especially liked Xpressions’ ability to send voicemail messages over email, which can be a real time saver for the traveling employee,” says Campbell.
Taking the TIGER by the tail Transitioning a plethora of different legacy systems to a single global communications platform would be a tremendous undertaking, but with significant consultative help from Siemens, the installation went smoothly. “Siemens was with us throughout the entire process – from answering our initial product and VoIP questions, through architecture and
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of UC design, installation and creation of the six-digit dialing plan,” says Campbell. “They worked with us shoulder to shoulder as if they were part of the Beckman Coulter team, and had as much ownership and passion about getting everything right as we did. In my experience, they were the best vendor I ever worked with.” Siemens also helped Beckman Coulter devise a comprehensive marketing plan to get its users excited about and trained on the new phone system. Dubbed TIGER (Telecommunications Infrastructure Global Equipment Rebuild), the effort included a colorful brochure with the face of a tiger extolling the systems benefits, and little rubber tigers with the Beckman Coulter corporate logo, not to mention a TIGER information website and an extensive staff training program. “TIGER was very successful in creating excitement and anticipation about the new system,” says Campbell.
Extensive benefits The TIGER project went live in January 2005, and business communications have seen tremendous improvement ever since. “All of the communications barriers you typically have with different phone systems disappeared,” says Campbell. “No matter where you are in the company today, you have the same phone handset and can reach anyone anywhere in the world with six-digit dialing. It’s now much easier for traveling staff to communicate and collaborate from remote offices. This has really improved productivity.” The inherent flexibility of IP telephony also made it much easier for Beckman Coulter’s remote mobile road warriors to communicate. “If a traveling Beckman executive is in a hotel in Japan without a
compatible cell phone, he no longer has to struggle to figure out how to navigate Japanese phones. Instead, he simply connects to the office PBX with his laptop over the company virtual private network (VPN), using Siemens’ optiClient 130 soft phone, and can make and receive calls as if he’s sitting at his office desk,” adds Campbell. In the event of a disaster, it would be easy for users to connect over the VPN from home or to bring up IP phones quickly at other alternate locations and receive calls as if they were at the office. And when Beckman Coulter completely revamped its customer relationship management system, the virtualization capabilities of IP communications let them expand their help desk with agents in multiple cities, all driven off the Siemens HiPath 4000 in Miami. The new phone system has also reduced communications electricity and management costs significantly. “We reduced our PBX footprint, and the new systems are much more energy efficient than what we had before,” Campbell says. “We were really pleasantly surprised at the money we saved on electricity alone.” Now, Beckman Coulter manages all of its systems from IT departments in Miami and its corporate headquarters in Fullerton, California, rather than having to have a dedicated support person at each site. “The entire com-
munications system is standardized and the decision making is all centralized,” Campbell says. “We no longer have to figure out what each site is up to or what the peculiarities of each system are. And we don’t have to support multiple service contracts, just one. Since it’s a global contract, we’ve even been able to negotiate significant discounts.” Perhaps most importantly, Beckman Coulter now has a first-class, future-proof communications infrastructure poised to take advantage of the business benefits of unified communications. Recently, the company embarked on a new project, dubbed Sabertooth, which will create two global virtual call centers hosted in the US. “We’ll be able to extend a sophisticated call center environment to countries where we may not have had the business to justify the investment in the past,” says Campbell. Once Sabertooth is in place, message routing through Xpressions will all be six-digit as well. Beckman Coulter also intends to take advantage of presence and other unified communications capabilities to enhance collaboration, speed up decision making and respond more quickly and effectively to customer needs. “I have to give Siemens a great deal of credit,” says Campbell. “They never focused simply on technology but always on the business benefits their solutions would bring to us specifically.”
THE SEVEN PRINCIPLES OF OPEN COMMUNICATION Unified communication. Unification of all relevant business communications, both real time and non-real time, into a simple, seamless experience. IT-based communications. Complete openness across the entire information and communications ecosystem. Fixed mobile convenience. Combining the best of both the wired and wireless worlds into a single converged user experience. Business process integration. Strong productivity gains through a deep embedding of real time communications into mission-critical business processes. Rich user experience. Intuitive, human-centric access to information and communication as needed, allowing people to share information as easily as natural languages enhance personal performance. Business continuity and integrity. Carrier-class redundancy, resiliency, reliability, security, and scalability to ensure the success of virtualised communications. Open service delivery. Allows customers to choose from a wide variety of open communications access methods.
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EXECUTIVE INTERVIEW
A revolution in business Rob Howard, CEO and Founder of Telligent, explains how social communication is changing the landscape of business. Consumer applications such as Facebook and MySpace have revolutionized the way users interact with each other over the web. What benefits can such Web 2.0 tools bring to the world of business? Rob Howard. Competitive businesses are constantly searching for new ways to increase efficiency. That’s where Web 2.0 comes in. With Web 2.0 tools, an organization can increase efficiency in real-time communication, simplified collaboration, conversation archiving, expert discovery through social networking and more. The realization of the use of Web 2.0 within the enterprise has even been granted its own moniker: Enterprise 2.0. Enterprise 2.0 describes how forward-thinking companies are using tools such as wikis, blogs and web discussion systems to capture corporate intelligence and then build communities around areas of expertise. These communities then facilitate faster information sharing, which ultimately makes the
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organization more competitive. For example, we work with a leading auto manufacturer that uses our platform to address supply-chain problems. When problems arise, an expert community exists – along with an archive of past problems – that can help address the issue quickly and efficiently. Prior to applying these technologies, it could have taken days to find the experts or the knowledge required to resolve the problem. The way people work together is changing and communication is happening in real-time at a much faster pace. What tools are emerging to help advance teamwork and interaction between employers, employees and customers in a global landscape? RH. The tools have always been there. What has changed is now these tools are being put together as integrated suites. Example:
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search solutions have matured to the point where it is now possible to quickly find the right information. A common tool such as email is now being completely integrated into community solutions so that group conversations can be archived, shared, reused and most importantly re-discovered. Other tools such as blogs are enabling a vast amount of organizational knowledge to be shared and reused. At one Fortune 100 company I recently met with, they started an internal corporate blog server and now have over 14,000 posts from throughout the organization. We’re also seeing a proliferation of video publishing as another way of documenting and sharing best practices.
intimately with this topic. There are also a number of organizations, such as ours, that routinely meet with companies and advise them on strategy for how to execute an Enterprise 2.0 solution. The worst mistake you can make is to take the cavalier attitude that if you build it, they will come. Unfortunately and too often, this is not the case. Each organization has its own unique culture, and understanding the culture is key to deploying a successful Enterprise 2.0 solution. What do you see as the Holy Grail for enterprise social networks? How do you think they will revolutionize the way companies operate? And how long do you think it will be before such technologies are ubiquitous within an enterprise setting? RH. My vision – and what I consider the ‘Holy Grail’ – is to see a completely integrated set of collaboration and communication tools that are device independent. We aren’t very far away from this integrated world of VoIP, video communication, etc., being integrated into the current Enterprise 2.0 toolset. With the slowing economy, more distributed workforces and flattening of the business markets, the demand for wholly integrated enterprise systems is finally on the horizon. This will do for business what all big revolutions do for business: enable great companies to gain a competitive advantage through increased efficiencies. n
“My vision – and what I consider the ‘Holy Grail’ – is to see a completely integrated set of collaboration and communication tools that are device independent”
And how will such tools integrate with existing enterprise applications and systems? RH. Integration with existing enterprise applications is critical to adoption. Some of the key integration areas start with identity and profile management, typically within a system such as a Microsoft Active Directory or Sun LDAP. It’s within these enterprise directory systems that most organizations keep track of manager/direct report relationships, user profile details such as location, as well as policy information. We’ve found that by integrating single sign-on with these systems, customers can simply use their same corporate identity to login as well as maintain and update their profile information, which has been very popular. Beyond identity and profile management integration, we’ve found that Microsoft SharePoint and Microsoft Exchange have also been very successful integration points for the platform. In the future, we’re evaluating integration with other systems such as LinkedIn and SalesForce.com, too.
The key for any so-called Enterprise 2.0 or social networking provider looking to gain business customers is adoption. What challenges does this present – both technologically and culturally? RH. The largest challenge for any organization adopting an Enterprise 2.0 solution is simply overcoming the FUD – fear, uncertainty and doubt – associated with these solutions. The technological hurdles are often easy to overcome, but the culture hurdles are much more difficult. The most common cultural barrier to overcome is fear – individuals unfamiliar with how Enterprise 2.0 solutions work are typically afraid of a variety of ‘what if’ situations. Most of these fears are unwarranted and are comparable to the worries of a person running into a packed theatre shouting, ‘fire!’ It simply doesn’t happen. What recommendations do you have for any business looking to rollout an enterprise social computing implementation? RH. If you are in a position to make such a decision, take the time to read books like Wikinomics, Groundswell and others that deal more
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The future of social networks Charlene Li, Vice President and Principal Analyst for Forrester Research, projects 2008-2009 to be the era of data portability and 2013 to be the timing of the ubiquitous social networks. In order to keep pace with technology, she recommends that brands: • Create linkages between services based on individually-controlled identity federation • Compete on creating the most compelling social experience, not social graph lock-in • Develop social applications that have meaning • Integrate social networks into existing activities (both customer-facing and behind the firewall) • Design business models that reflect the value created by people’s social networks
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INDUSTRY INSIGHT
Unified communications myths Peter Anderholm explains the common UC myths and how to overcome the barriers to adoption.
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nified communications represent a step forward in the day of the life of the corporate knowledge worker. Knowing when and how to contact the people you need saves time, reduces dependence on expensive third-party services and enables you to think about the things that matter most. UC – presence-aware instant messaging coupled with telephones and real-time media – offers a way to do more with less and represents a change in the way knowledge workers do their jobs. The $45 billion market promise of UC has attracted investment from telecommunications stalwarts and desktop software giants, but myths overstated and perpetuated by industry analysts and media create barriers to widespread adoption.
Myth 1: UC is too hard to define, let alone deploy
Peter Anderholm is Director of Product Line Management for Alcatel-Lucent Unified Communications and Collaboration Suites.
What is UC? Can I leverage my current equipment? Is UC another headache waiting to happen? Are the promised savings real? These questions force IT decision makers into analysis paralysis – afraid of buying the wrong solution and being left with a technology boat anchor. The truth: the definition doesn’t matter. The UC toolset saves time and money, increasing employee productivity and innovation while reducing ongoing expenses. The UC toolset can complement existing telephone equipment and IT infrastructure and be phased in over time. This is not an all or nothing, now or never set of applications. There are products that bridge old and new, enabling focus on the UC applications that offer a hard ROI such as audio conferencing, web collaboration and mobility. These applications immediately increase shareholder value, clearing the path for applications offering softer ROI, such as IM and unified messaging. Once properly setup, UC applications require little more daily support than an email server.
Myth 2: UC is replacing dial-tone Well-known desktop software publishers, armed with million dollar marketing campaigns and unparalleled means of distribution, have injected doubt and uncertainty into the market. Their mes-
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sage causes CIOs to pause, effectively minimizing widespread deployment until they build the telephony feature set required for everyday use. IM is a convenient, effective way of communicating, and presence is an absolute requirement, but these do not replace dial-tone. Most business continues to be conducted over the phone, and while the software publishers produce featurerich business software, 100 years of telephony experience cannot be supplanted overnight. IT decision makers should trust and rely on their experience and look for tightly integrated solutions that offer the best of both worlds, telecommunications and desktop software. IT decision makers should work with the business stakeholders to identify and deploy a UC solution that supports the core business.
Myth 3: Cost models for UC are too complex
Premises-based, hosted, managed services, pay as you go, operating expense versus capital expense – the myriad of purchasing alternatives again forces decision makers into analysis paralysis. The key to overcoming this barrier is to focus on a first win that will achieve results. Due diligence is important, but some basics should remain in focus. Owning your UC platform means not having to pay for audio and web conferencing services, and corporate assets remain secure and private within your network. The ROI breakeven point is typically realized in months, and the savings can be applied to other facilities that improve productivity. Regardless of the delivery method, saving money and ensuring privacy and security remain the top priorities. Buy what you need for day-to-day use and use your service provider for large-scale, ad-hoc events. Small businesses benefit from flexible pricing and deployment options thus enjoying the same productivity gains as large companies. Unified communications (UC) offers great tools that make knowledge workers more productive while saving companies money. Having been in the market for several years, it has been my experience that UC applications are stable and easy to manage and use. Focusing on hard ROI as a starting point and taking a phased approach can be the best strategy to ensure success. n
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INDUSTRY INSIGHT
Idea management
Paul Pluschkell, CEO and Founder of Spigit, explains how idea management is changing innovation in business.
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he speed and scale of customer conversations are redirecting entire markets. The need for every employee to reach their customers has never been more critical to a company’s success. Consumers no longer make purchasing decisions based upon a company’s product information or a sales person’s pitch; instead they rely on a community of connected friends, online reviews and a plethora of real time information including price, features and benefits that are available all day and night on any device. Too often firms don’t take the steps required to innovate because they want to protect their existing current offerings and do not have the right tools to engage their customers. Companies seal their fate by doing just enough to get by. Fear of changing the status quo can be paralyzing, but if you are not moving forward and innovating in today’s challenging economic environment, it’s catastrophic and can lead to extinction.
Transparency Equally important is a firm’s willingness to embrace transparency. Too many employees are not connected directly to their customers or coworkers. Companies need to embrace new technologies that connect employees, customers and partners to increase productivity and improve brand loyalty. So how can organizations avoid complacency and turn fear into a catalyst for innovation? There are an increasing number of tools that help us stay connected with one another in our social relationships, while at the same time enhance our ability to immediately share
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experiences, thoughts and ideas. In comparison, most organizations are extremely inefficient at sharing ideas, experiences and knowledge between their employees and customers, leaving this extensive knowledge base totally untapped. An organization’s employees and customers are an extremely important resource for innovation, and learning how to leverage their knowledge and expertise can reap huge rewards for everyone involved.
Social Networks Enterprise social software provides the incentive and structure for automating the innovation pipeline on a large scale. Call it ‘workflow for the collective imagination’. Unlike first and second generation social software tools, idea management platforms are comprehensive, blending the best ele-
with a reputation rating created for all facets of the idea-management process. Finally, idea management platforms transform corporate reward systems by introducing micro-rewards. Normally, corporate reward systems can only track an employee’s contribution over a period of time, or in the service of large projects. Tracking, evaluating and rewarding individual contributions becomes impossible for a large company. As a result, employees don’t see a hard return on their ‘small’ but valuable effort. With idea management platforms, organizations can reward for each contribution to the company. Post a better blog, and see a correspondingly better reward. Add a more insightful comment, earn more cash. Tying reward to contribution turns idea generation from an abstract process into a concrete value with a tangible payoff.
Insight and feedback In short, the enterprise of the future will need to incorporate idea management tools to gain insight and feedback from their customers, employees and partners. These tools should strike a balance of driving bottom line growth and improving customer loyalty. Customer and partner needs are constantly changing and companies need to innovate faster than ever. More importantly, with hundreds, thousands and potentially millions of conversations, how do you filter through the noise to find meaningful suggestions without getting bogged down in an expensive
“The enterprise of the future will need to incorporate idea management tools to gain insight and feedback” Paul Pluschkell ments of wikis, blogs, predictive markets and surveys into a unified platform. Underlying algorithms allow idea management platforms to automatically rank user contributions based on their value to the organization – not solely on popular opinion. Those same algorithms automatically identify the most important contributors, feeding that information back into the evaluation of new ideas. Think Google’s PageRank for innovation, but now
and time-consuming evaluation process? IdeaSpigit is the social productivity software solution for companies looking to capitalize on feedback outside of their organization from customers and partners. IdeaSpigit’s combination of brainstorming, social networks, Wall Street, your favorite blogs, market economics, election politics and academic reviewed journals is going to change the way we innovate in the enterprise. n
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PROJECT FOCUS
PPM
TO THE RESCUE Analysis by Boston-based AMR Research Inc. shows that up to 15 percent of a company’s IT projects are not strategic to the business. But in an economy that is slowing, CIOs need to look at their resource allocation more wisely.
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uring the past 12 months, more than half of the inquiries from AMR Research’s customers were related to portfolio management – an approach that seeks to get the highest possible return on IT investments while mitigating risk. It’s not hard to see why project management software has become so popular amongst resource-strapped
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CIOs. The explosive growth in business applications and supporting infrastructure over the last few years has meant the demand for IT projects at most companies exceeds the IT department’s ability to make them happen. The trend toward multivendor sourcing and increasing M&A activity adds further complexity. “When you think about how IT organizations have managed their investments his-
torically, a lot of it is based on a first-in, firstout approach,” explains Dennis Gaughan, Senior Analyst at AMR. “Projects tended to be collected serially from the siloed constituencies IT serves then prioritized based on whoever screamed the loudest or had the most political clout – not on which project was expected to deliver the most tangible benefits to the business.”
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So how do you turn those shouting matches into a more disciplined and focused approach? The first step is an assessment of the portfolio of IT projects at your company and how well those projects map to overall business goals. “Once IT and the business have thrashed out the criteria for deciding project priority, CIOs soon start looking for software that can help automate the process,” says Gaughan. The most effective of these software solutions provide insight into every step
pense tracking, transparency allows things to be done more effectively and more cheaply.” Beyond that, he has been focused on recognizing best practices both within and outside of the organization in order to effectively benchmark processes. Part of Abbattista’s role is involved with the enterprise portfolio management team, and it is these people that collect together plans, strategies and work from across the organization. This team is involved in looking at the returns on IT investment and identifying the
“At the broadest level, understanding how your portfolio is performing and understanding where to focus next, is an important concept” – Anthony Abbattista of the project, helping prioritize projects, allocate employees, monitor projects in realtime, measure the ROI when the project is done and deliver all that information to the business in language they can understand. That solution is product portfolio management, or PPM. Much like managing an investment portfolio, making trade offs and aligning the portfolio with your personal strategy, a project portfolio performs in exactly the same way. It looks at particular projects and aligns them, making sure that IT is working on the right things at the right time, such that they are delivering according to the strategy of the business.
Transparency Anthony Abbattista, VP of Technology Solutions at Allstate Insurance, has been aligning technology with organizational goals for the past six years. He believes that good IT governance helps create synergy across an organization because technology crosses departmental and organizational boundaries, and there is an opportunity for gaining more insight into the workings of different departments and units. “Creating transparency in IT governance means having a richer business dialogue,” he says. For Abbattista, the critical component of good IT governance has been transparency. “Whether it’s good time reporting or good ex-
projects that are performing well. “They help us to challenge our own story and make sure that the different pieces that we’re working on tie together and make sense. We often use this as the basis to carry out our highest level dialogue with the business.” One way that Abbattista has been addressing the issue of IT governance has been through PPM. He explains that Allstate has taken a simple approach by dividing the running of the business into several portfolios, such as core work and pure innovation. “It’s helped us at a strategic level in the business because we understand what expectations around the project are, how deep we are going to go and so on,” he explains. “At the broadest level, understanding how your portfolio is performing and understanding where to focus next, is an important concept. We’ve been trying to take these concepts into the largest part of our business which is about overall capital allocation, essentially looking at how you decide between a new building, a new data center or call center and how that compares to the next technology project you are thinking about. “We’ve been looking at applying it across the entire organization, incorporating all the projects and all the possible initiatives, rather than focusing on every nickel and dime.” While Abbattista has been involved in creating good IT governance at Allstate for some
time now, he believes that more broadly we are in the process of seeing a change in mindset as governance becomes something that can really help deliver business value to the organization enterprise-wide. “It’s taken a lot of work but we’ve undoubtedly turned a corner,” he says.
Implementing value Mykolas Rambus is CIO at Forbes and when he took on the role a little over 12 months ago, the company had little insight into how the IT organization was performing in terms of delivering projects that were meeting business needs and doing so on time, on budget and to specification. Rambus wanted visibility into what different project teams were working on at particular times, whether they were hitting their budgets and schedules and what returns they were getting. Choosing the right PPM vendor was essential? “We didn’t want to go through a long or complicated implementation, so software as a service (SaaS) quickly became our model of choice,” he says. “Then we looked at various companies and their attunement towards awareness of IT specific issues – did they know the IT space well? Did their tools reflect the knowledge of IT?” Rambus turned to Innotas, an on-demand PPM solution. “We provide our products as a service over the web, and this allows our clients, such as Forbes, not to have to worry about the burden of hardware or training, but be able to get up to speed and use the product quickly and easily, such that they get the value faster,” says Keith Carlson, CEO of Innotas. Carlson, who joined Innotas in 2006, has seen great traction in the SMB space and is increasingly seeing Global 1000 companies adopting the solution too. “Rather than starting from the top, they’ll tend to start at a group or a division level and then have it expand into other areas, because the product is so easy to implement,” says Carlson. Rambus sees the biggest benefit of the PPM implementation as the reorganization of his project portfolio. “We are now looking at our IT project portfolio as an investment portfolio, and as a result, in the last year or so, we have really flipped our portfolio on its head, putting the vast majority of our effort into things that are creating value for the organization,” he says.
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“They are either assisting other business units in growing their top line, or we’re saving actual dollars as a result of the solutions we’re deploying.” Rambus has found that the PPM solution has helped in articulating the Forbes portfolio at any given moment, ensuring that the organization can focus on pointing in the right direction to maximize value to Forbes Media overall. “It’s been a wake up call to the organization – having visibility in a way that can be articulated to any given executive, to understand the value that’s there, and then focus on driving maximum value out of your IT investments, has been extremely effective, and changed the dialogue that IT is having with the rest of the organization in terms of delivering value to their units.”
about what you are trying to accomplish, and although I would say that PPM has evolved over time, it is imperative that you identify your end goals.” Secondly, Rambus identified and defined a methodology. The third focus was to figure out how well tuned and trained the team was and then, as necessary, reallocate resources to make sure the best people were in the best roles for the implementation. The fourth area was enforcement. “Asking people to follow a new methodology and track information in a new system requires that there be somelevelofenforcement.Andsoitwaskeyforme, as the executive, to be able to look and see how the system is being updated, and how robust the information being entered is,” explains Rambus.
“It’s been a wake up call to the organization – having visibility in a way that can be articulated to any given executive, to understand the value that’s there” – Mykolas Rambus Challenges Implementing a new IT system invariably throws up challenges of its own. Carlson explains that Innotas advocates a crawl, walk, run approach, which allows for a particular unit to focus on implementing the approach before rolling it out across other business units, which reduces the amount of challenges that are brought up. Carlson also notes that Innotas has been built into a set of proven best practice processes for IT governance. In terms of how the program was implemented at Forbes, Rambus explains that he was focused on four areas, to make sure that the process was as smooth as possible. “We were on a short time scale and wanted to begin crawling and walking soon thereafter,” he says. Firstly, Rambus determined upfront what the core goals were associated with the initiative and a standard way of delivering projects, so that other goals could also be met. He believes that this is the key recommendation for anyone looking to undertake a similar implementation: “You should be clear upfront
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Given the prospect of an economic downturn, there is much negative press about the way that various industries are doing, and Rambus believes that a PPM implementation could really impact operations and the bottom line. “Many companies that are finding themselves at the front of the economic downturn are looking at IT for ways to reduce their cost structure,” he says. “And there is no better time than now to be focusing on portfolio management. In addition to the reallocation of our portfolio, our volume and demands from our internal customers for us to deliver more, create value and save money has gone up almost threefold in the last year.”
FIVE FEATURES OF PPM PROJECT MANAGEMENT Establishing individual project guidelines
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PORTFOLIO MANAGEMENT Looking at all projects as an overall portfolio
RESOURCE MANAGEMENT Being able to manage your people so they are being the most efficient they can be PIPELINE MANAGEMENT Not just looking at the project you are currently on but the whole pipeline, so you can figure out how to fit them in FINANCIAL MANAGEMENT Collecting time and expense associated with the work efforts on the project
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ASK THE EXPERT
Focusing on PPM Project portfolio management promises to help customers juggle competing investment priorities, reduce IT failures and improve alignment between technology and their business. By Stephen Sharp
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hen done well, Project Portfolio Management (PPM) empowers organizations with the governance, end-to-end visibility and control over the entire portfolio management process that’s necessary to effectively implement strategy and accelerate business results. PPM improves alignment by providing a means for prioritizing potential investments, to ensure the organization is working on the highest value activities that reflect corporate strategy. This proactively helps reduce failures, by weeding out unfeasible and non-strategic efforts before they consume resources. The quality of execution is greatly enhanced when the most qualified resources are assigned and when project management tools are provided to improve efficiency and effectiveness. Underlying all of the above is the dimension of reporting and analytics, to measure progress, track financial benefits realization and take corrective action when required.
Achieving desired outcomes We believe a ‘top-down’ approach – initially focused on rationalizing the processes for investment prioritization and selection – delivers the biggest and quickest results. It also builds organizational momentum because of that success. The most common mistake we see is organizations that try to roll out PPM starting with resource and time tracking. This is not only harder to do well, because it requires managing the work of lots of people at a very granular level, but is also more tactical than strategic in nature. Ensuring you are focused on the right things to begin with is of far more value than the wrong projects executed to perfection.
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Challenges A key challenge for all PPM software vendors is managing the balance between capability, complexity and cost. An endto-end PPM system has to provide a lot of functionality, which puts it at risk of being a) expensive, b) difficult to deploy and support, and c) cumbersome for end users. We address this by delivering an on-demand, enterprise-capable product that is also highly configurable. It provides a customer with just the capabilities they need now, yet can easily adapt as requirements change. And as a Software as a Service (SaaS) application, it deploys quickly and requires lower upfront and ongoing costs than installed solutions.
Future adoption We see an increased adoption of PPM as a business discipline across the entire enterprise. While PPM ‘grew up’ in specialized functional pockets like IT, it has expanded into areas like innovation, merger integration, business improvement, cost reduction and many other project-intensive
“The most common mistake we see is organizations that try to roll out PPM starting with resource and time tracking”
initiatives that benefit from investment rationalization and improved execution. Not only has enterprise PPM adoption increased, but the SaaS model has soared in popularity with organizations of all sizes, including large companies. Compared to installed software, SaaS PPM solutions are typically lower cost and offer faster speed to value, at lower risk. That really resonates in this economic climate, and it should increase PPM adoption by organizations previously intimidated by the cost, complexity and failure of traditional PPM systems. n
Stephen Sharp is Chairman and CEO of PowerSteering Software, a leading provider of on-demand enterprise project and portfolio management (PPM) solutions.
Case study Boots, the largest drugstore chain in the UK, had outsourced the bulk of its IT operations to three different vendors. While meant to free internal staff for more strategic work, the company quickly realized it was a major challenge to keep track of what the outsourcers were working on. With PowerSteering, Boots can easily see how these outsourced providers are performing against SLAs and ultimately what business value those relationships are delivering. The system was deployed in less than six weeks and has since scaled to over 800 users. Interestingly, Boots had initially selected an installed PPM solution, but turned to PowerSteering after it became obvious how complicated the rollout of the other product would be.
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CASE STUDY
Next generation project management Business Management investigates the impact of next generation project management on today’s business.
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n 2006, TV Guide Interactive was using MS Project for project scheduling purposes, which didn’t cover their reporting needs. It didn’t facilitate a streamlined way of managing resource requests or prioritizing schedules. “The problem we had with MS Project is that although we had scheduling capabilities, there wasn’t a quick and easy way to pull reports or gain immediate insight into the progress of projects,” explains Kris Reynolds, Director, Project Management. To manage resource requests, emails would be sent out or people would make phone calls and often times there were small projects that took less than 20 hours to complete. They decided to establish a formal PMO and after four months, realized that they needed a tool to help facilitate project schedules and streamline processes.
Daptiv created the Greenhouse, a new experience that makes users part of Daptiv’s innovation and product development processes. The Greenhouse is featured on the Daptiv website and is where customers have the opportunity to collectively decide which new product features/enhancements are most important to them. Users submit product ideas, vote or comment on existing ideas and get insight into which ideas have been implemented into the product. The purpose of the Greenhouse is to create a simple and direct product feedback vehicle while also giving the community better insight into our product roadmap.
and when company reviews take place, management is able to review the project requests and prioritize them based on the capacity of needed resources and the alignment of current company strategy. In that regard, product management is able to have their voice heard and ensure that the right projects are getting funded, worked and reported on.
Prioritization TV Guide Interactive’s project management office uses Daptiv Advanced Report builder for regular reporting purposes, specific to project
“It was a low cost, quick, on-demand solution, resource allocation and capacity planning was more robust and it was cost-effective”
Solution TV Guide Interactive considered Microsoft Project Server and other project management and collaboration vendors but Daptiv was chosen; it was a low cost, quick, on-demand solution, resource allocation and capacity planning was more robust and it was cost-effective. “Other vendors are not easy to use and too expensive,” says Reynolds. “Also, doing a homegrown solution wasn’t an option because IT didn’t have the time to build a tool.” Daptiv Support is also a quick phone call or email away if TV Guide Interactive has any questions regarding product functionality. “Daptiv support has been good,” says Reynolds. “Response turn around time has also been good when we have any requests or need help.” TV Guide Interactive has been active in sending emails for product suggestions on a regular basis in the past.
“I think that the Greenhouse is a good step forward. Before, it was difficult to know if our product suggestions were going to be implemented, but the Greenhouse really helps with this; we can see if our suggestions are a high priority among other customers and which ideas are being put into production.”
Visibility TV Guide Interactive’s product management group often submits a product feature deployment request, for example: ‘We’d like a feature trial by Q3’. Included with this initial request is the project scope for the other groups within the company to review and work on. The request is then pushed through the funnel
requests and the progress of active projects. “The project managers are very pleased with Advanced Report Builder,” says Reynolds. “It has become the backbone of communicating progress with management.”
Value Macrovision purchased TV Guide toward the end of 2007 and at that time, Macrovision’s project management group didn’t have collaborative business software such as Daptiv PPM to manage projects. Kris Reynolds and other groups within TV Guide are advocating the use of Daptiv PPM throughout the Macrovision divisions. “Already, Macrovision’s data solutions group is on board and they want to implement Daptiv PPM because they’ve seen how simple, robust and cost effective it is. I’m pushing to have Daptiv PPM chosen as the single solution for the entire company. The Daptiv solution has proven itself to us,” says Reynolds. TV Guide Interactive is responsible for the Interactive Program Guide or IPG application that is accessed when clicking on the guide button for digital cable remotes.
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CASE STUDY
Improving IT performance Avery Cloud has transformed the IT department at New Hanover Health Network into a productive system with better performance, high customer satisfaction and less political debacles. Business Management examines just how he did it.
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very Cloud, PhD is the Vice President and CIO of New Hanover Health Network, the ninth largest hospital organization in North Carolina. This public, nonprofit healthcare system encompasses three general hospitals: New Hanover Regional Medical Center, Cape Fear Hospital in Wilmington and Pender Memorial Hospital in Burgaw. When Cloud joined New Hanover, the IT organization faced a multitude of constraints, resulting in resource conflicts, poor communication, difficulties in project planning and management as well as a number of other operational deficiencies. These problems stemmed from three hospitals using different techniques and different sets of IT process management tools, all from different vendors. “If we’re going to affect the cost of healthcare, we have to automate. And if we’re going to enjoy process improvement, we need to figure out different ways to move information that provide better service to our patients,” states Cloud. What he planned was, “to automate IT to function as a business.” That required the tools, reporting and controls to ensure IT functions in line with healthcare needs.
survey management, Cloud and his team integrated critical processes and performance metrics and established a more effective routing process of service tickets from end users to the appropriate IT group. “One of the greatest benefits of Changepoint is eliminating inefficient and ineffective ways of gathering, processing and delivering information,” states Cloud. “It’s pretty exciting that I now can interactively measure client satisfaction. Through Changepoint, I can discover how well my organization is performing.” Before New Hanover reorganized its IT department, it turned to Changepoint to evaluate projected projects, current projects and performance issues. “Changepoint helped us discover the skill sets we were lacking and what processes produced less rework,” he says. “We made intelligent decisions on how to reorganize our department and, in doing so, generate a much higher level of productivity, efficiency and effectiveness.”
Results
Today, New Hanover’s IT department starts each day with Changepoint at the helm. IT technicians have a single location to check their Solution task lists, assess any service tickets and review client satisfaction Cloud knew he could do one of two things: implement a separate surveys. Managers gain a central place to assign and manage projsolution to handle each deficiency or find one solution to fix them all. ects, communicate with their project teams, review staffing needs and He and his team began reviewing several vendors and their tools, but generate new ideas. For Cloud, Changepoint provides the means of only one solution fit the ideal model Cloud envisioned. “Changepoint making a positive impact on IT – and the business. He can clearly see stood alone in its ability to integrate all the various functions of an IT where and how IT resources and dollars are used and what advantage organization,” he says. “With a product or risks they bring to the business like that, we can achieve a whole lot more of New Hanover Health Network. “It’s pretty exciting that I now can interactively efficiency and effectiveness.” Unlike “To really measure the benefits measure client satisfaction. I can discover how other solutions, Changepoint combines of our investment in Changepoint, well my organization is performing” the three key disciplines of portfolio and you have to measure the benefits of investment planning, project portfolio a changed process. We have more management and application portfolio management into one soluproductivity from our staff. We have higher customer satisfaction. We tion. This unique combination gave the IT team at New Hanover the have an environment where things don’t fall through the cracks. We insight they needed to eliminate deficiencies and support the overall have better performance and less political debacles. And that all adds goals of quality care and controlled costs. to my organization’s credibility,” he says. “I can’t think of a CIO in the Since implementing Changepoint, New Hanover eliminated world who doesn’t think those things are very important. We’re very disparate systems and the time it took to generate reports. While happy with Changepoint and the way it brings real data and true meaChangepoint standardized the reporting functionality, workflow and surements of performance to the decision-making process.” n
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Building IT infrastructure BM speaks to Brad Blake, Director of IT at Boston Medical Center, about data management, security and IT operations at the hospital. oston Medical Center is a private, not-for-profit, academic medical center with a focus on communitybased care and prides itself on never turning away a patient. In order to provide a consistently accessible health service the hospital’s employees need a reliable and wide range of IT applications to give patients the best possible care. “We’ve been working diligently for the past few years to computerize the majority of both our clinical and operational processes,” explains Brad Blake, Director of IT. “The push to automation has allowed us to improve on existing processes and provide better patient care, as well as allowed us to decrease operating costs.” As Director of IT, Blake has responsibility for Boston Medical Center’s entire IT and telephony infrastructure and as such is re-
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sponsible for overall operations, security, new projects and driving technical strategy. With this comes a huge challenge: to ensure that the entire infrastructure meets the clinicians demand. “We have an extremely bright and talented pool of clinicians here at the hospital and they are constantly coming up with new ideas.” Meeting with the clinicians and vetting these new ideas is an important role, and Blake ensures that everyone in the IT department is included in this. “Since we are the main teaching hospital for Boston University School of Medicine we have to be on the cutting edge because we train the doctors of tomorrow,” he says. “Balancing the drive for new solutions and technologies, while ensuring a stable and robust environment has been the key to our success.” Blake goes on to explain that as a best of breed shop he purchases the best products to meet the needs of the end users. It is
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because of this practice that Boston Medical Center uses several systems from a variety of vendors. “This allows for the sharing of information across most of our systems so that the data is where it needs to be in order for clinicians to efficiently and effectively access it without having to log out and log in to other applications.”
Clinicians would find that patients would walk in to their appointment with a USB drive or CDROM that contained their health information, and whether it was a CatScan, MRI or X-ray, it was imperative that end users had access to this information. “Personally, I had an MRI this past year and when I walked out of my doctor’s office he handed me a CDROM that had my entire MRI on it so that I could bring that back to my primary physician,” says Blake. “It is this type of workflow that now has us investigating secure, encrypted and fingerprint USB drives to ensure we have some level of protection if someone were to lose their USB drive.”
Data management Blake and his team are currently managing over 300TB across the enterprise, utilizing a variety of EMC storage platforms. “We have built a robust storage infrastructure based around information lifecycle management, which is built on the simple fact that the older the data gets the less relevant it is,” says Blake. This infrastructure allows Blake to take advantage of four levels of storage. These levels range from the high-end and fastest Symmetrix SAN, all the way through to the EMC Centerra platform that allows him to take advantage of ‘write once read many’ technologies to manage ever-growing data retention costs. “Being in a hospital we have several regulatory requirements to keep hospital data for specified time ranges. This solution has allowed us to stay on top of regulations while driving down the cost of storing data.”
Future focus The IT department at Boston Medical Center is continually focused on finding solutions that will add value, reduce costs and reduce complexity in the environment. Blake explains that he is currently looking at several initiatives to implement in the coming years, which may bring together some of the more disparate systems onto common platforms: “The clinicians need for access to critical patient data is always at the forefront of anything the IT department produces.” By continuing to refine business continuity plans, increasing uptime of systems by introducing high availability solutions to existing systems and working with vendors to minimize the downtime required for upgrades and enhancements to the systems, Blake hopes to continually improve IT infrastructure at Boston Medical Center. “We will persist in implementing wireless solutions to meet the ever growing demands of our mobile workforce and will always have a sharp focus on security across everything we do,” concludes Blake. n
“We will persist in implementing wireless solutions to meet the ever growing demands of our mobile workforce” Brad Blake
Going wireless There is a continued trend across the healthcare industry to push towards a more mobile workforce and ensure end users are well informed on the topics they need information on. It’s all about getting the right information to the right person at the right time. “We have been fielding a lot more calls for people looking to connect their personal devices to our wireless network,” explains Blake. “One solution we provide is free public internet access – this allows our end users or patients and visitors to access the internet, but keeps this traffic separate from our internal wireless network.” Blake goes on to say that technologies such as the iPhone and Blackberry are penetrating the market more and more and that the use cases that both clinicians and vendors come up with are “extraordinary”. “I still believe that the vendors have a long way to go to penetrate this market, which will require the re-development of their applications geared towards tablets or handhelds.”
Security When USB drives first started penetrating the consumer market, Blake was concerned about data loss and took measures to block USB drives from being used. He quickly learned that the use of this technology was prevalent, not only in his hospital, but in most others.
WHAT THE ANALYSTS SAY In Forrester’s Global Information Management Services Forecast: 2007 to 2012 report, Tim Sheedy, states that business intelligence services dominate a $7.3 billion market. The report says that information management solutions are moving to the center of IT strategies as a way of driving IT and business alignment and delivering real and visible value to the business. The global information services market will grow from $7.9 billion to $10.9 billion in 2012 with BI and business performance solutions dominating the spend, although the information strategy segment will see the fastest growth throughout the forecast period.
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EXECUTIVE INTERVIEW
Utilizing data deduplication technology HP’s Bob Wilson explains why deduplication is creating a significant buzz and shares his thoughts on the exciting future of this emerging technology in an exclusive interview with Business Management. Emerging technologies like deduplication are creating a significant buzz in areas such as disk-based backup, what are the main trends and challenges that make deduplication of interest to customers? Bob Wilson. A key trend that is challenging customers is data explosion. By 2010, there will be a six-fold increase in the world’s information. Look at the Web 2.0 space, it has more than 150 million users and they are growing by roughly a quarter million a day and they are all creating data. Organizations are facing severe challenges just storing the data they have today, so imagine how much more difficult and expensive storing six times more data will be in just a few short years. That’s why deduplication is of interest to customers – it is a very simple technique for eliminating redundancy in much of the data being stored today. A deduplication system eliminates redundant data, significantly reducing the amount of storage capac-
Every method has pluses and minuses. There is no one right solution that fits everyone’s needs. As a result, you have to choose a solution with a deduplication technology that best suits your needs. First, where does data deduplication occur? A source-based approach results in less data being sent across the network for backup, potentially shortening backup windows. A target-based approach is well suited for a virtual tape device and therefore can augment tape backup and speed up data retrieval processes. Next, when does deduplication happen? In target-based implementations, data can either be backed up first, then deduplicated (post-process), or deduplication can be executed during the backup process (inline). Each method has pros and cons: Post-process deduplication may result in a faster backup, but inline can be replicated immediately after a backup concludes.
“Organizations are facing severe challenges just storing the data they have today, so imagine how much more difficult and expensive storing six times more data will be in just a few short years” ity needed to keep that data. Deduplication technology looks at data on a sub-file or block level and attempts to determine if it has seen the data before. If it hasn’t, it stores it. If it has seen it before, it ensures that it is stored only once, and all other references to that data are merely pointers. What are the different types of deduplication? BW. There are different methods to deduplicate data. The easiest way to describe it is by discussion of where, when and how it’s done.
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Finally, how is deduplication achieved? Object-level differencing products reduce data by storing only the changes that occur between multiple revisions of a file, while hash-based deduplication products locate global redundancies that may occur between all of the files within a backup repository. While vendors of byte-level differential products claim their content awareness makes them more efficient with their deduplication processes, hash-based deduplication vendors believe their contentagnostic approach allows them to use their technology outside the core backup market.
Where do the different types of deduplication work best? BW. Large enterprises have issues meeting backup windows, so any deduplication technology that could slow down the backup process is of no use to them and just as important ,any deduplication technology that slows down restore times is not welcome either. Many large customers back up hundreds of terabytes per night, and their backup solution with deduplication needs to scale up to these capacities without degrading performance. Fragmenting the approach by having to use several smaller deduplication stores would also make the whole backup process harder to manage. Midsize customers are concerned about backup windows as well but to a lesser degree. Smaller organizations or remote offices generally need an easy approach – a dedicated appliance that is self-contained – at a reasonable cost. These types of environments do not need a system that is infinitely scalable or the associated price for scalable capacity and performance. They need a single engine approach that can work transparently in any of their environments. These different priorities are what led HP to develop two distinct approaches to data deduplication. HP Accelerated Deduplication technology is designed for large enterprise data centers. It is the technology HP has chosen for the HP StorageWorks Virtual Library Systems. Accelerated Deduplication utilizes object-level differencing technology with a design centered on performance and scalability and delivers fastest possible backup performance. It leverages post-processing technology to process data deduplication as backup jobs complete, deduplicating previous backups whilst other backups are still completing. HP Accelerated Deduplication technology also delivers fastest restore from recently backed up data, and offers highly scalable deduplication performance.
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tape libraries using deduplication, there is a labor saving from no failed backup jobs, or bad tapes and less tape handling. Can you outline some of the common mistakes or pitfalls that customers should be aware of as they implement virtual tape libraries with deduplication? BW. Probably the biggest one is comparing technologies based numbers being quoted for deduplication ratios delivered by products in the industry. It turns out that the ratio you will actually get is mostly dependent on a few things: the type of data, your backup policy, how frequently data changes and how you measure the ratio. For example, PACs are ‘picture archiving and communication systems,’ a
Top five The top five reasons why enterprises are using deduplication technology: 1. Storage savings 2. Improved IT productivity 3. Improved recovery times 4. Replication bandwidth savings 5. Reduction of facility requirements
HP Dynamic Deduplication is designed for customers with smaller IT environments. It is the technology that HP uses in the HP StorageWorks D2D Backup System. HP Dynamic Deduplication utilizes hash-based chunking technology with its main design center around compatibility and cost. Independence from backup applications, systems with built-in data deduplication and flexible replication options for increased investment protection are other benefits of HP Dynamic Deduplication. Where is deduplication used today? BW. Most vendors are deploying deduplication technology in disk-based backup systems. There has been some effective use of deduplication in NAS file servers, but usually the duplication takes place only at the
file level. In an environment where files are being constantly updated and saved this kind of deduplication is less effective since even if only a small part of a file changes the whole file must be saved. Whereas with block level deduplication even a small change in a file doesn’t require the whole file to be saved but only the portion of the file that changed. What are the top three reasons why enterprises are utilizing deduplication technology? BW. The most obvious benefit is that you are spending less money for storage capacity because you are storing less data, so there’s a cost-efficiency that customers achieve. Another benefit is that more data can now be kept available and online in a virtual tape library with deduplication. Instead of only keeping a week’s worth of backups on the virtual tape library and relying on tapes for older data, you can keep several months of backup data on your virtual tape library, making it easier to restore older data. Anyone who has had to bring tapes back from an archive to restore an older file knows exactly what I’m talking about here. The last benefit I’d highlight is easier management that will help lower the total cost of ownership. With virtual
type of data used in X-rays and medical imaging. These have very little duplicate data. At the other end of the spectrum, databases contain a lot of redundant data, their structure means that there will be many records with empty fields or the same data in the same fields. For larger enterprises you also want to make sure the deduplication technology is a fully integral part of your disk-based backup systems and that the deduplication engine performance can scale as the capacity of your systems scale. There are some disk-based systems that use bolt-on deduplication engines that are very inefficient at scaling as capacity and performance demands increase. Where do you see deduplication heading in the next six to 12 months? BW. Deduplication can automate the disaster recovery process by providing the ability to perform low-bandwidth site-to-site replication at a lower cost. Because deduplication knows which data has changed at a block or byte level, replication becomes more intelligent and transfers only the changed data as opposed to the complete data set. This saves time and replication bandwidth and is one of the most attractive propositions that deduplication offers. Customers who do not use disk-based replication across sites today will embrace low-bandwidth replication, as it enables better disaster tolerance without the need and operational costs associated with transporting data off-site on physical tape. n Bob Wilson is Vice President of HP’s Storage Platforms Division
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asK thE EXPErt
The challenge of filebased data storage File-based growth requires a radically different approach.
Chris Santilli
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anaging the cost and complexity of file-based data growth is one of the top five most difficult issues facing Global 5000 companies today. The growth and proliferation of file servers and Network Attached Storage (NAS) solutions have dramatically improved the performance of file system access but have created other problems around management and back up. Traditional NAS and server platforms are optimized and designed for transactional file serving performance and not for scalable long-term data storage. So, what are we storing that’s causing us the biggest problems? With skyrocketing growth rates forecast, a CXO needs to understand what their data centers are being asked to store and why. There are two primary categories of data: dynamic and persistent.
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Dynamic data is fluid and changes regularly, today’s activity on your bank account would be a good example, whereas persistent data doesn’t change, it is static. A copy of your bank statement from June 2007 is a good example of static data – your bank will still need to keep a copy and have online access to it, however the data is persistent and the likelihood of needing to access it is very low. Most dynamic data turns persistent within 30 days. It’s this huge amount of persistent data that is most often stored unnecessarily on expensive fast spinning, hot disk arrays, that is the heart of the problem.
Archiving File system archiving has been rapidly emerging as one of the primary functions that customers need to implement. According to SNIA, the average amount of persistent files on storage systems is approximately 80 percent. This means that 80 percent of files can be moved to a storage platform that is less expensive and easier to manage. The challenge has been identifying the data to move and having the right platform to ensure reliable long-term storage of digital file assets. COPAN Systems have partnered with Quantum to enable the efficient long-term storage of file-based persistent data. COPAN Systems’ purpose-built persistent
data platform incorporates scale, density, protection and fast data recovery. Quantum StorNext data management software enables customers to store file data across multiple storage infrastructure types, yet file systems appear as normal, directly accessible by archive applications. COPAN Systems’ Enterprise MAID (Massive Array of Idle Disks) technology is purpose-built to hold large stores of persistent data (up to 896TBs in a single frame with a footprint of less than 1m2). It operates on the principle that, for long-term storage, a systems’ disks don’t need to be kept constantly spinning. Instead, a maximum of 25 percent of the drives are powered at any one time, the rest are simply turned off. And the results are simple, if the disks are not spinning, they are not using power or generating heat – this means they do not need to be cooled. If the disks are not spinning, then they are not vibrating which means they can be packed tightly together and offer considerable savings in footprint through this increased density. And because the disks spend less time ‘working’, their drive life increases by up to six times and they experience less downtime. This increased reliability, of course, means better data protection. There’s also the added benefit of having to ‘provision’ significantly less power and cooling infrastructure than the 100 percent spinning disk arrays require. COPAN provides industry leading density, scalability and reliability for persistent data. Combining this with Quantum StorNext, you have the industry’s first complete file archive solution designed to handle your persistent file management, both today and in the future. n
Chris Santilli is CTO at COPAN Systems. He brings 18 years of storage system design experience from DEC, StorageTek and Compaq Computers. He has led engineering teams in architecting, development and delivery, beginning with diagnostics and controllers for 14-inch Winchester drives, as well as the first host-based RAID, the first controller-based RAID product at DEC, and comprehensive SAN management software.
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DATA MANAGEMENT FOCUS
Real-time crime fighting BM speaks to Commissioner James Onalfo about how he has transformed IT for the NYPD.
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ames Onalfo become CIO of the NYPD in 2003 when he was approached by Commissioner Raymond Kelly and Mayor Michael Bloomberg for the position. Despite being retired Onalfo accepted the role to overhaul the entire IT infrastructure, which had not seen investment in 15 years. Onalfo was well suited to run the complex IT operations of the NYPD after years of serving as a corporate IT executive, and has since transformed business processes at the police department. One of Onalfo’s most significant accomplishments was the development of the real time crime center. “Prior to the real time crime center, we had billions of pieces of information stored within outdated databases, which were extremely difficult to mine and awkward to access,” says Onalfo. “We started building a crime data warehouse by pulling together information and after a year and a half were able to announce and introduce the real time crime center.” Now, when detectives get to the scene of a crime, they can look at what might have happened there in the past 24 hours in a 100-yard radius that may have precipitated the particular crime. “Through a combination of effective processes, speedy information and key detective work we are able to apprehend criminals incredibly quickly,” says Onalfo.
New technologies The center has taken advantage of new technologies allowing detectives to solve their crimes much faster, which has been a major enhancement. Within data mining for example, there are a number of tools available, such as what Onalfo calls the “super finder”. “If we are looking for a detective we can put a query together on everything about them and pull all that information back in minutes, which we couldn’t do in the past,” he says. Over 20 years of data is now available online today through the real time crime center, available to every officer and fleet detective across the city. Every 911 call is streamed over to the center, and with 11.5 million emergency calls every year that adds up to a huge amount of data. “By making all the information available online, we’ve been able to take away the grunt work from the detectives so that they can focus on the work that they know how to do best, which is hard-nosed detective work,’ says Onalfo.
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New technologies As well as strategy and operations changes, Onalfo has implemented many new technologies to the NYPD, including: License plate readers: “This is where we can identify a stolen car by reading the license plate with a computer tool that is installed on a police car. A phenomenal technology.” Hot spot database updates: “In each patrol car is a heavy duty database and within 100 yards of a precinct it is possible to automatically update the databases because it is a hot spot, much like you would find in Starbucks.”
And Onalfo hasn’t stopped there; in addition to the real time crime center he has also overhauled all the NYPD precincts. By putting together new, modern networks there are major connections in place throughout the city and the precincts themselves have also become “smarter”. “Prior to the renovation maybe five to 10 people could be online in a precinct at one time,” explains Onalfo, “but now everybody can go online. By standardizing all of our tools we have seen productivity shoot up.” And it is due to this growth the NYPD is about to go through a third generation of upgrades.
Support Onalfo is keen to point to out that it would not have been possible to transform the NYP without the top down support from Commissioner Kelly. “He has been an innovator of many, many programs within the police department and instrumental in supporting and approving the programs that we’ve put forth,” says Onalfo. “And I have to give him an enormous amount of credit for the progress we made here at the NYPD.” n
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EXECUTIVE INSIGHT
Data deduplication in depth Data deduplication is currently one of the hottest topics in data protection. Business Management asks Janae Lee, VP of Corporate and Product Marketing at Quantum Corporation, about the key business benefits of data deduplication.
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ata deduplication is all about DR protection is provided by periodically using efficiency. It allows customers ‘tapes in trucks’ – creating removable media to dramatically reduce – by 90 and moving it offsite. This creates administrapercent or more – the stortion, logistics and data security issues, parage and network bandwidth ticularly for smaller sites with limited IT staff. needed to take backups, store Deduplicated replication means users can keep them on disk, and move the data offsite. Data local copies for restores and create daily remote deduplication makes disk-based backup and copies for DR without having to move anything. WAN-based replication (for disaster recovery) So they get more reliable protection with lower affordable. The result is faster backups, more administrative hassle and cost. data available for fast, reliable restore, lower administrative costs and more secure disaster Key developments recovery options. Deduplication is in the process of extending its Whenever a new data storage technology range and integrating with other data proteccomes along, companies considering deduplition technologies. Most deduplication systems cation are wary of losing data that’s falsely were initially designed to suit either midrange “Data deduplication deemed duplicative. For example, when RAID or enterprise environments – we are now seeing makes disk-based was new, people would ask: “You’re writing my the first products that use the same technolbackup and WAN-based data in stripes across different disks? Are you ogy for both large and small systems, providing sure I’ll be able to read it?” Any new data protecend-to-end solutions. This trend will accelerreplication (for disaster tion technology that doesn’t improve on data inate. This is also true for integration with tape, recovery) affordable” tegrity doesn’t get adopted, and deduplication which is important because users will continue is no exception. Data in any commercial quality to leverage the economic, power and cooling deduplication system has improvements in data advantages of removable media for medium integrity when compared to standard data stored in a RAID system. to long-term retention, reserving disk for data that needs frequent The foundational patent on variable-length block data deduplication restores. We have deduplication systems that can automatically create was issued in 1999 (Quantum holds that patent), solutions have been tape today, but there is literally only one backup package with hooks in the market for several years and there are thousands of end-users to manage that process. Soon, we expect to see many more applicaapplying the technology. If an end-user is concerned, they should ask tions integrate tape creation and replication management. Likewise their prospective vendors how they protect data integrity. we will see more software tools offered to let users manage all those Data deduplication also makes it practical to use standard WANs connected resources from a single interface. – even lower bandwidth WANs – to copy backup data between sites. As VP of Corporate and Product Marketing at Quantum Corporation, Janae Lee oversees all outbound That is a really profound and far-reaching change. Today, most endcustomer and partner relationship marketing, product line management across Quantum’s disk, users have isolated disk or tape backup systems in many locations. software and tape portfolios and corporate marketing functions.
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De-anxiety Everywhere you turn there’s talk about data de-duplication. And it can be frustrating trying to figure out exactly what your company needs. That’s where Quantum comes in. We help reduce the stress by offering comprehensive backup and recovery solutions like our DXi-Series, which provides de-duplication and replication options to fit your specific needs. Combine that with tape and encryption for secure long-term retention and you’ve got the reassurance you need to actually relax a little. Which is definitely a good thing.
Find out what Quantum can do for you. Get a free de-duplication white paper at www.quantum.com/busmag
© 2008 Quantum Corporation. All rights reserved.
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INDUSTRY INSIGHT
Redundant data Warwick Sharp discusses the elephant in the document review room.
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or e-discovery vendors, deduping is standard practice, so what’s new about managing ‘redundant’ data? The volume of duplicate documents in litigation discovery is dwarfed by the number of ‘near-duplicates’ – substantially similar versions that differ by a few words or paragraphs. Near-duplicates and email threads are a huge source of inefficiency in litigation processes, especially reviews. In many cases, document review now costs more than preparing the entire rest of the case. Reviewing redundant email messages and near-duplicate documents is a huge component of that cost. Near-duplicates and emails are the proverbial elephant in the document review room. First time users tend to be very surprised by the volumes of redundant data discovered. Redundant data in near-duplicates and email threads typically accounts for 30 to 50 percent of the materials to be reviewed – on top of the exact duplicates. The potential for cost savings is huge.
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Suppressing data
‘pivot’ document within each set of nearduplicates that you should read first. If the pivot document is clearly irrelevant to your review, you can skip the remainder of the near-duplicate set, since the other documents differ by just a few words. But what about the danger of overlooking critical documents? While a near-duplicate might have a small word change that could be crucial to the entire case, by identifying the redundant data, we expose the unique data. This actually reduces the risk of missing important documents. For example, you might review the pivot and decide that it’s an important document. So, you’ll need to review each of its near-duplicates. But you don’t need to read every version in full. Having read the pivot, you can simply use a redline tool to highlight the differences vis-à-vis the pivot. By zooming in on the unique information in each document, you have a much better chance of finding what you’re looking for. The challenge with emails is to reconstruct the email thread structures, with all the subconversations and side conversations that
Our approach is to expose and highlight the unique data. For example, let’s assume we’ve discovered a group of near-duplicate documents. Equivio software suggests a
are typical in email chains. Once you have the thread structure in place, the reviewer can just focus on the last message in each thread. From the software point of view, the trick is analyzing
the content to verify that the last message does in fact contain all the previous messages in the thread. In the Enron data, for example, there are 517,000 emails. We found 205,000 emails that contained all the other emails. In other words, you could read 40 percent of the emails to cover 100 percent of the data. Bottom line: less information lets you make faster, better decisions. The key players that benefit are the corporate litigants. By using the near-duplicate and email thread groupings, corporations consistently see a reduction in litigation review costs of 30 to 50 percent. By allowing bulk handling of very similar documents, both litigants and their outside counsel can be more confident in privilege logs and in representations they make in court about the documents.
Driving adoption Corporations are driving the industry to think outside the box of traditional document review. In Equivio’s experience, when corporations see the cost savings at stake here with this technology, they tend to take a very proactive stance in making it a requirement for their outside counsel and e-discovery service providers.
Warwick Sharp is Vice President, Marketing and Business Development at Equivio. Sharp is one of the founders of Equivio, a provider of software for managing data redundancy, and a top 10 vendor in e-discovery. Sharp was previously Vice President of Marketing at Amdocs, the world leader in telecom billing systems.
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DATA SECURITY FOCUS
SECURING
THE FUTURE
Nick Selby, Research Director for the 451 Group, reveals where the data security sector is heading.
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ick Selby, believes that the biggest point of pain for CIOs is identity management and access control. “By looking at identity and access management as a multi-outlet power strip and products that give it context, like web application firewalls and database transaction monitoring products, it is easy to see that the NICK SELBY real challenge for identity and access management vendors is that as well as giving the who, they need to give the what, why, when and how of transactions between computers,” he says. Selby goes on to say that identity and access management will continue to be a hot topic for the next two to three years. “Companies that are able to provide products that give the ability to manage identities more effectively and at a more detailed level than what currently exists will find they have a pretty brisk take up.” However, it’s not just identity management and access control that cause headaches for CIOs, corporate governance and compliance remain very much on the front burner for most senior executives. Selby believes that the real problem that executives face is that deployment of governance and compliance technologies is a reactive and not proactive process, which by its very nature is more expensive. He goes on to explain that both small and large enterprises can
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be seen buying products that are designed to address a specific, for example, auditing or compliance requirement. This leads to poorly thought out deployments and money repeatedly spent to solve the same problems. “Where CIOs must head over the coming three years, is to a situation where they are looking horizontally across their entire enterprise, and looking to legal for advice about industry and regulatory requirements, before finding a matrix of all the rules to which they must be compliant, and finding products that meet the vast majority of those,” says Selby. “Until that happens we will see a lot of money being spent on shortterm solutions, tactically driven as opposed to strategically.”
Investment A recent survey of IT directors in Computer Weekly revealed that most believed current levels of security investment to be inadequate. Selby believes that while much time is spent tying security to specific business processes as specifically as possible, risk is going sky high. “The typical XY axis of security spend versus risk is out of the window when you take into account an increasingly mobile workforce and increased reliance on outsourced application development to untrustworthy third parties,” he says. There is no real way to look at the XY axis so that you can find the ideal point of security spend versus risk, continues Selby, but what it
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is possible to start seeing is a greater understanding of security as an enabler as soon as security is tied to income. “You don’t want to hear that something isn’t possible from your security people. What you do want to hear is, if we were able to deploy X, then Y would become more lucrative. Enabling business processes is something that both security and business sides of the organization can understand.”
Protection Data protection is and continues to be a huge focus for companies throughout North America and worldwide, but despite this many businesses are not doing enough to defend themselves. Selby believes this is down to a lack of understanding of where data comes from and where data is stored in organizations. This is then followed by a lack of desire on the part of the C-level or IP employees to staunch the flow of sensitive data out of the organization. The 451 Group recently did a survey of 391 IP security professionals and found that around 23 percent had taken measures to classify the data that resides in their networks. The problem is that if you have not classified where your data comes from or what kind of data you have, you can’t protect it, except by encrypting everything. “The first step in data protection is understanding where your data comes from and where it lives. The second step is to understand why it is there. And finally, begin to classify, in as few buckets as possible, what kind of data you have. For example, is it public, internal, sensitive, regulated or non-disclosure,” says Selby. By making these determinations about the data, you can, in the future, make policy decisions about how the data can be used and what data can or cannot leave the building. However, until you make those first fundamental steps, any data protection initiative will likely be hopeless. It is the same first step for protecting sensitive data, claims Selby. By doing a basic analysis of where the data comes from it is possible to move on to the second step of looking internally and making yourself aware of how your data is moving internally. “If you follow the data you’ll see whether or not it’s a legitimate flow or whether, for example, it’s data flow that has popped up in response to a poorly deployed security deployment,” explains Selby. “Once you have an idea of how your traffic is moving, the next step would be towards data classification, and finally, to policy management and controlling what data goes out.”
Future focus Selby believes that over the next 12 to 18 months virtualization security and eco-efficient IT will have the biggest impact on the sector. “You can’t start to reap some of the benefits of power saving and virtualization without dealing with virtual server and virtual endpoint sprawl,” predicts Selby. He believes that virtual network intrusion and threat detection is particularly exciting, as is the securing of visual endpoints by looking between hardware and the hypervisor, as well as within the virtual instance itself. Going back to identity and access management, Selby is keen to highlight that the sector should see some exciting developments. “Once you understand the context and begin to deal more with the problem of persona, the possibilities become very interesting.” n
Case study In an interview with Business Management, Fred Vignes, Director of IT Security at Zoo Atlanta, explains how the implementation of a new IT security system has impacted on and improved operations at the zoo. Around 12 months ago, you implemented a new IT security system at Zoo Atlanta, can you outline the benefits of the new system? Fred Vignes. This new system has added a whole new layer of security for us. Having these new devices on our side enables me to sleep better at night. Basically, we implemented a pair of high availability firewalls and a mail security device as well as some monitoring software. Having the pair of firewalls has enabled us to have a fallback device. Previously, if we lost one device we would have had to reset up our IP address and delivery system, so having a failover device pretty much ensures that we constantly have that firewall protection up. How has the system improved user productivity? FV. It has significantly improved operations and productivity. The spam filters have allowed the zoo to keep moving and employees are not worrying about having to deal with viruses. The mail security device for example, means that 95 percent of the email that comes into the zoo is pre-cleaned, which means we aren’t wasting time looking at spam. You have employed a lot of wireless technology, however, wireless technologies often present more potential vulnerabilities, how are you protecting against these? FV. We have a multi-layered approach, but the firewall and the mail security device are certainly at the forefront of the access to the zoo. These technologies are intelligent in that they do not work against a set of virus definitions but seek patterns and protect us against suspicious patterns before they’re ever even identified. What are your focus areas over the next six to 12 months? Are there any particular areas you are looking at improving? FV. I plan to make more use of the site protector management tools because it will enable me to manage all of the various devices and have a bird’s eye view of what’s going on in terms of IT security at the zoo.
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ASK THE EXPERT
The importance of
data encryption Malte Pollmann explains why encryption has a vital part to play within data security.
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dvances in modern computing technology, ranging from faster processors to expanded memory to new storage devices, have brought certain applications into mainstream use. For example, non-linear digital video editing has become practical on a large scale since compression algorithms, system microprocessors and graphics processors have advanced enough to cope with the massive volumes of video data involved. Similarly, data encryption has been available for a number of decades, but practical applications have been largely restricted to high-end systems in the banking, military and scientific sectors. In recent years, these restricted uses have been overcome by the greater availability of desktop and notebook computers that compare favorably to supercomputers of years past. Currently, state-ofthe-art techniques capitalize on the features in business and personal computer systems and deliver the data security benefits of encryption to everyday users. Modern systems can routinely encrypt and decrypt data in the background using 128-bit (or larger) keys and advanced algorithms while causing minimal, nearly imperceptible effects on performance. Problems that limited the usefulness of past-generation encryption tools have been largely overcome by enhanced application designs, improved deployment processes, better maintenance tools, more efficient algorithms and standards-based architectures that simplify integration of encryption solutions with network infrastructures. With these advances, encryption has become integral to today’s business processes, providing an effective means of ensuring the privacy of information exchanged among partners, customers, staff members or other parties. Encryption has been embraced in a variety of areas where the sensitivity of data
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being transferred is extremely important. This includes the banking industry (particularly automated kiosks and teller machines), business transactions conducted over the internet, email communications where privacy is essential and mobile telephone technology. Despite the advances in encryption techniques and vastly improved computer capabilities, many of the fallacies and outdated understandings about encryption persist. Sometimes these myths are even being perpetuated in popular technology publications where some authors and editorial staff fail to do their research thoroughly. This paper examines the common myths that exist about data encryption and discusses the most recent techniques and changes in computing environments that have elevated encryption as a data security tool and enabled practical everyday use of this valuable technology. While the implementations differ and the tools vary widely, the fundamentals of encryption are strikingly similar for most appli-
Three ways to encrypt Encryption can be applied to data in any of the three following conditions:
Data in use: Where information is being actively used in the form of an electronic payment, document management activity or e-card personalization.
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cations. Companies collaborate more freely and more often with partners and suppliers, responding to supply chains that now stretch across the world. Web-based business processes and e-commerce have combined to create a much more open IT infrastructure and corresponding protections must be put in the place to counteract possible network vulnerabilities. The ubiquitous portable computing devices in use by employees often contain sensitive data that must be shielded from prying eyes in the event of loss or theft of the device. Strong encryption provides a powerful mechanism that can be applied to many parts of an organization’s data security practices, offering effective, continuous protection of data. This protection can encompass a range of uses, from end-point devices in the field to the core of the central servers where vital information resides.
Malte Pollmann joined Utimaco in 2005 as business unit manager and later VP Products responsible for all SafeGuard products.
Data at rest: Here information is stored on desktop or notebook computers, handheld computing devices, network storage devices or servers.
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Data in motion: In this case information is being exchanged as a part of email communication, e-business transactions or removable media being transported from one location to another.
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INDUSTRY INSIGHT
CREATING AN INFORMATION EDGE Jeff Goins, President and CEO of Adaptive Inc, explains the importance of effectively managing critical information and demanding collaboration between business and technology.
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hether you are the leader of a Global 2000 enterprise, a local government or a small business, certain truths prevail. Stiff competition emerges from unanticipated quarters. New global markets form and traditional markets shrink. Delivering value to customers often means harnessing completely new resources and processes. And there’s likely to be more regulation over how you conduct your business, not less. Companies that thrive continuously re-align business teams to evolving strategies. They keep everyone on the same page by delivering critical information to ever-broader audiences. Effectively managing and governing that delivery demands new approaches and collaboration between business and technology.
Bridging the communication divide “Suddenly, IT departments everywhere have been charged by the CEO, CFO and audit committee with making the company compliant, because many of the laws carry personal liability penalties for officers and directors of corporations,” says Tony Noblett, Microsoft Corporation. “Governing corporate data may be slightly easier than governing nations... It’s challenging to create data governance processes that cross multiple departments and business units to protect data, meet business goals and comply with regulations such as Sarbanes-Oxley,” says David Newman, Gartner. Adaptive solutions meet this challenge by bringing the voices of business and technology together, uniting subject matter experts with the business users who rely upon them. Together they communicate, collaborate and network their expertise to transform data into information and define the appropriate governance of critical assets and processes. By serving business needs today they also lay the foundation for consolidating and simplifying information management over time.
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SOLUTIONS Adaptive solutions allow a quick deploy of exciting services for all types of users: Collaborate across a network of experts: • Locate and leverage subject matter experts • Define a vocabulary for how you do business and why • Contribute personal knowledge for reuse by others • Highlight peer recognition for contributions and excellence • Exchange best practices and common solutions • Raise awareness and communicate successes Create step-by-step wizards and guides: • Respond to data governance issues and track outcomes • Contribute a new business glossary entry • Report the current state of critical data quality • Identify potential source data for a new report
Adaptive streamlines collaboration between business and technology, merging complimentary perspectives into a single view for today, and a common vision for the future.
Deliver value early and often Adaptive customers benefit from a foundation of mature technology to begin immediately delivering clear business value. Based on over a decade of continual advances and adhering closely to industry standards, our
Provide rich graphical interaction: • Map high-level concepts like classifications to actual data objects • Leverage familiar images and concepts to create rich navigation maps • Display exactly how data moves from one place to another • Represent the past, present and future state of information management Automate workflow and change management: • Allow users to contribute expertise freely and visibly • Automate peer reviews and official publication processes • Define processes tailored to your information culture • Collaborate on updating and managing information • Facilitate reuse, and manage change over different scenarios and timescales
solutions ensure the highest degree of interoperability across a broad range of activities. Adaptive delivers the most comprehensive solution available for organizing, managing and governing complex data and information environments today while steadily improving them for tomorrow. Raise the quality of your information management through advanced capabilities in collaboration, networking in-house experts and step-by-step wizards and guides, combined with rich graphical visualization and automated workflow and change management.
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ANALYST VIEWPOINT
The power of
performance management In an exclusive interview with BM, Donna Fluss explains why contact center performance management can help achieve organizational goals and increase revenue.
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erformance management has been infiltrating the contact center market for a couple of years now. By the end of 2007 penetration stood at 7.8 percent, which was a substantial jump from the prior year’s rate of 1.47 percent. Donna Fluss, Founder and President of DMG Consulting, explains that the penetration of contact center performance management (CCPM) has been relatively small due to a misunderstanding of the application within the market. “One of the deliverables of CCPM is sophisticated reports; however, managers believe that they already have reports for each of the 25 to 40 applications they have, so why do they need CCPM? And the answer is that CCPM provides one version of the truth,“ says Fluss. As the complexity of contact centers go up, management adds on additional responsibilities, explains Fluss, and organizations will gradually turn to CCPM in order to verify their performance through a single report. “Much of the success with CCPM is when you have a manager coming in from a different operating area who has previously used CCPM,” says Fluss. “Familiarity with the benefits of performance management is one of the most important drivers.”
zation, and if you see benefits as higher than other systems, you will win in terms of which investments get made,” she explains. Fluss goes on to say that performance management has two different objectives. The first works at a strategic level and helps align the goals of the contact center with the goals of the enterprise. “While this may sound simple, in my experience only around 30 percent of senior call center people will know their enterprise goals, so how can the contact center be viewed as an enterprise distributor if it doesn’t know the enterprise goals?”. Second, from a tactical perspective the key performance indicators help capture and report how well contact centers deliver their objectives. Without doubt, CCPM is a way of increasing visibility into operations and allows an increase in productivity and therefore profitability. With the economy in the state it is, surely such a solution can benefit the bottom line for companies in this difficult market? While Fluss agrees that it can, she also suggests that when organizations are under siege, IT investment is frozen, with the exception for anything that will fail without repair.
Business benefits
Success
Fluss claims that in order to implement CCPM into an organization it is important to relate it to quantifiable benefits, namely cost reduction, sales increase and customer retention. “You need to dig deep to find out the classifiable benefits for an individual organi-
Fluss believes that successfully implementing a CCPM approach can be extremely simple. However, it is important to understand that there are two things that generally get missed in implementation, she says. “First, when you have put in a new application, you
have an opportunity to modify procedures and process; and second, if you don’t retrain your staff you’re going to fail.” The real responsibility is on management to bring every individual onboard, and get them to buy in, review and enhance the key performance indicators and goals, and then train employees to use the information. “CCPM is critical because it provides management, and all levels of staff, from agents to senior executives, with the information to be able to evaluate the performance. You can’t manage what you can’t measure and that is why CCPM is a powerful tool, because it gives you the ability to measure and track it.” n
Action There are two categories in performance management for the contact center: Real time: This is where the operating area receives information as it is happening Historical/classical: This is where information is received on a next-day basis In both cases the solutions are intended to be action-orientated; it is simply a question of which actions can be taken based on the information that you are receiving.
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ROUNDTABLE DISCUSSION
The potential of performance management Business Management asks a panel of experts for their opinions on the increasing emergence and growing potential of contact center performance management. Recent years have seen increased interest in using real-time information to improve customer satisfaction, improve communication between departments and make the call center a more productive place. What challenges does this raise from a management perspective? Patrick Botz. Rapid consolidation of contact center operations involves the growing complexity of contact center technology and an increasingly dispersed workforce. This calls for a more integrated approach to managing workforce THE PANEL performance and technology. In response to external and internal pressures, organizations are Patrick Botz, Global continuously updating their operational and Director of Marketing, VPI workflow processes. These dynamic environ(Voice Print International) ments require more sophisticated contact cenWhile these strategies can be used to adRex Dorricott, CEO, Exony ter performance management (CCPM) solutions dress a particular issue, they all have negative Ron Hildebrandt, that can easily adjust to new business processside effects elsewhere. The challenge for reales and integrate to telephony, call recording, time performance management is to provide Co-Founder, Enkata quality monitoring, workforce management, decisions support to enable the best changes Debbie May, President, IEX eLearning and business systems with minimal and strategies to be made. In reality, the issue IT involvement or professional services. is difficult to solve with real-time reporting proAlso, since the purpose of real-time information is to empower manvided by the contact center platforms. Performance management must proagers and agents to rapidly adjust performance, it is crucial to develop a plan duce real-time analytics with a broad business overlay, trending and that addresses exactly what, when and how much information is granted to predictions to provide effective decision support. each employee. This information must also be delivered in the right context to ensure a positive impact on performance. Measuring and tracking metRon Hildebrandt. Real-time information, while holding promise to improve rics that are not properly aligned with corporate objectives or overloading the customer experience, poses some basic challenges for managing employees with information can have an adverse affect on performance. agents. An agent’s access to real-time recommendations, context-related tips and experts, changes both the goals of a call and how an agent’s perRex Dorricott. Real-time performance optimization enables a contact center formance should be assessed. Standard measures such as average hanto tune its operation to accommodate the current demands placed on it. The dle time become far less relevant to rate a call’s success where an agent objective is to maximize the customer experience and value returned from the was recommended to provide a personalized interaction and ask a few contact while keeping the delivery cost down. Tuning the current operation qualification questions, up-sell a customer and instant message a colmay involve changing strategies such as agent allocation between services, league for help. New metrics, such as first call resolution, sales per hour rate of overflow to outsourcers, overtime and reshaping the logical service and CSAT scores, which measure a call’s outcome, not speed, more accupath to further encourage self service options or enable a call-back strategy. rately measure a call’s success. Management priorities and systems must
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TOP 5 The top five advantages of performance management in the contact center are: 1. 2. 3. 4.
Simplified, streamlined reporting Increased productivity Reduced operating costs Improved customer and employee experiences 5. Competitive differentiation through improved service levels
solution keeps an audit trail of all changes and resultant outcomes, promoting the basis for effective score-carding and analysis. Given the ability to not only quantify performance, but also empower the enterprise with the capability to effect change in performance, CCPM promotes both the notion of optimal use of resources and the culture of the enterprise to be more competitive.
be adjusted to ensure that agents are properly developed, rated and rewarded in this dynamic, customer centric context. Debbie May. Contact center managers need visibility into service level and team performance in order to identify and address issues to positively impact business performance in a timely manner. Understanding the critical metrics or KPIs and getting data aggregated, analyzed and presented in a meaningful way is a key challenge. This has historically been a time-consuming and cumbersome process. From a leadership perspective, when you look at implementing a solution that closely monitors and measures individual performance, it needs to be done in a manner that is interpreted to be positive from the agents’ perspective. The idea is not to convey a ‘big brother’ approach, but rather to empower employees to self-manage and improve their performance with a positive attitude. It’s a delicate balance. How can a CCPM solution help address some of these issues? What other business benefits does it offer? RD. CCPM provides controlled access to the contact center that is appropriate to the individual user’s accountability and responsibility. This allows for safe access to the single view of the truth, encapsulating the business goals and objectives, but tailored to supporting the decision-making responsibility of the individual user. Additionally, a performance management
RH. CCPM provides the mechanism to accurately measure an agent’s performance, taking into account the dynamic context and goals of a real-time adjusted call flow. For example, if an agent is recommended to ask probing questions and cross-sell a customer, a CCPM system would adjust the goals for that call by raising the handle time target, adding sales per call and tracking first contact resolution. In addition, the call reason is a critical factor in assessing handle time, CSAT, sales rate, etc. CCPM systems must account for call reason to accurately assess an agent’s performance. The result is that each call, based on its individual context, will be assessed to ensure that agent goals, development plans and incentives are tightly aligned with real-time directives. Without CCPM tracking an agent’s performance against a new set of dynamic goals, agent KPI performance would bear little relevance to actual performance. DM. A quality CCPM product provides visibility and reporting to the right people at the right time. Executives can see the entire operation for overall performance, but can drill down for specific analysis and trends to determine if a performance problem is system-wide, a manager problem or isolated to an individual agent issue. Managers can find and fix performance gaps on their team through dashboards and scorecards, and employees can manage their own performance through scorecards. From the agent perspective, this levels the playing field in the sense that a CCPM system brings fairness into the equation because everyone is held to the same standards. From a man-
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Patrick Botz “CCPM solutions are helping organizations gain a competitive advantage in today’s demanding economy – many are realizing that the risk of change is being eclipsed by the risk of doing nothing”
Rex Dorricott “A performance management solution keeps an audit trail of all changes and resultant outcomes, promoting the basis for effective score-carding and analysis”
agement point of view, a CCPM solution makes decision-making much easier, because they are reviewing fresh data from multiple areas in the center. Looking at this from a process perspective, automated reports and analysis provide an environment for consistent staff management processes; that is, managers can spend more time coaching instead of analyzing data. As a result, the frequency and regularity of coaching is improved. Ultimately, a quality solution will drive improved customer service and lower agent attrition. When you see real results like that, the ROI is incredible. PB. Advanced CCPM solutions are helping organizations gain a competitive advantage in today’s demanding economy – many are realizing that the risk of change is being eclipsed by the risk of doing nothing. An effective CCPM solution does more than provide management with consolidated reporting and a dashboard of metrics. CCPM solutions help align people, processes and technologies in contact centers in order to maximize performance results. When implemented properly with an integrated training strategy, it empowers executives, managers and agents to proactively identify and eliminate performance gaps – improving customer experience, retention and profitability, while enabling organizations to achieve enterprise and departmental objectives. Real-time distribution of information can also be invaluable for a multisite, distributed organization that employs a combination of on-site and remote contact center employees, to assure consistent performance with respect to accuracy, compliance and customer experience. CCPM and integrated eLearning solutions also help dramatically boost remote employee morale and retention by creating a positive virtual team environment. Many IT implementations stall due to poor planning and a lack of understanding of the issues involved. Do you have a roadmap for successfully implementing a CCPM program? And can you recommend any best practices that will help companies get the maximum returns from their investment? RH. Successful CCPM projects are challenging given three risk factors: data integration, goal alignment and process change. Enkata’s Rapid
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Deployment Methodology was developed to address these three risk factors and deliver repeatable customer success. For data integration, a critical aspect of Enkata’s success roadmap is that Enkata offers its software on demand. Therefore, we are able to provide our customers with lower cost and more predictable deployments. The other two risk factors, goal alignment and process change, highlight that CCPM is more than just an IT project, it is first and foremost a change in management process. As such, Enkata’s methodology assigns 30 percent of the project timeline to map contact center goals to agent goals under different contexts, to create automated call reasons, to map out new coaching goals and processes, and to ensure that incentives are clearly tied to new performance expectations. By treating CCPM projects as change management projects and not just IT projects, we have been able to get the right executive sponsorship and organizational commitment to long-term success.
DM. To maximize your ROI, make sure you are involving all the stakeholders by establishing a cross-departmental team that includes one or more people from each department impacted by the CCPM technology. This includes contact center management, analysts, forecasting and scheduling staff, IT, training, quality assurance, human resources and contact center agents. Once the team is in place, the group should clearly define what it expects to achieve by deploying a CCPM system. Once expectations are set, examine current business processes to see if changes are required. Knowing what the center wants up front will help gain buy-in from internal stakeholders and define measurable goals. Since data is collected from multiple systems, the implementation process should clearly document what data will be collected from each system and how that data will be used to calculate objectives and KPIs on dashboards, scorecards and reports. This documentation is critical to ensure that the system is installed and configured correctly to meet your needs. Finally, make sure reasonable goals are set for the initial deployment and the users are comfortable with how they will be evaluated once the system is up and running. PB. We recommend first defining specific short-term and long-term strategic and tactical objectives – the clearer the better. Next, focus initially on short-term objectives to create a baseline. For example, capitalize on the opportunity to contribute to campaign management with unprecedented relevance and speed. Then, prior to implementation, define and collect baseline levels of important real-time KPIs for each level of employee. Shortly after implementation, compare your results to what you were getting before. This comparison will help you more easily communicate and sell the capabilities of your new application and the significance of the contact center as a major source of business and performance intelligence throughout the organization. While rapid ROI is typically recognized, it’s hugely beneficial to embrace an ‘adapt and learn’ process mentality. Think of performance man-
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agement as a journey in improving operational performance and building valuable intelligence, one that requires the continuous use of results to refine and improve real-time reporting, analysis and training. RD. Successful roll-out of CCPM has two key steps. The first step is to ensure a true return on the implementation is understood and the second step increases overall tool adoption. With the first step, ensuring the implementation provides a successful return, it is important to consider all the costs and the best way to address them – and gain the end user ‘buy-in’. It is equally important to gather effective requirements and produce a deployment strategy that understands the business, how it works and the roles people play in making things happen. The second step can significantly improve adoption by first delivering a clean interface that presents relevant functionality in a highly useable manner then, secondly, deploying a system with integration points in to the other essential business tools, such as quality management or workforce management systems. How do you see this market developing over the next few years? What will be the key drivers, and are there any potential hurdles on the horizon? DM. CCPM is definitely an emerging and growing market. In fact, it might surprise some people that the penetration of CCPM solutions in contact centers is still quite low, but as contact center leaders continue to understand the value and ROI of these products, adoption will continue to increase. For instance, to make the most of the people in a contact center, you have to have the tools to provide good overall performance results for each agent, supervisor, manager and analyst. Because of this, CCPM will change from a ‘nice-to-have’ application to a ‘must-have’ application in the contact center. The main hurdle for a vendor is the ability to build an effective business case and to communicate the benefits of a commercial software package over custom reports and scorecards developed in-house. If a vendor has a sound business case with a quality product to back it up, the decision to adopt a CCPM solution becomes a lot easier. PB. We expect to see growth in demand for CCPM software solutions in the coming years, for a variety of reasons. Contact centers face a variety of challenges as they search for ways to lower overheads while maintaining high quality standards. As agents disperse from the call center, organizations must find effective ways to manage their remote workers or risk inconsistencies that can result in dissatisfied customers and costly attrition. Under these circumstances, contact center management becomes a rather challenging undertaking without timely, consolidated reporting and the ability to effectively manage agent development, retention and everyday performance across all locations, while maintaining a coherent company image with respect to customer experience.
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Also, today’s customers behave in ways that demand the increased control of customer service – many of them are highly knowledgeable, more demanding and less loyal, ready to defect based on perceived value. Under today’s challenging economic circumstances, quick access to information on issues of customer-facing employee groups is critical. RD. A number of factors will change over the next few years. Firstly, as the ‘millennials’ begin to have disposable income, the need to adopt media other than voice will increase significantly, bringing a different set of performance management issues. Secondly, the enterprise goal of improving competitiveness will force the blurring of the boundary between the front and back office. Increasingly, customer interactions will be transferred to ‘occasional agents’ who are subject matter experts. This approach is becoming technically achievable for the first time as enterprises adopt a unified communications strategy. This will bring its own challenges of measuring and motivating the right behavior of these new agents together with the optimization of the strategies that deliver the calls to them. RH. Companies are aggressively moving to get the most out of their customer contacts to optimize not only long-term loyalty, but short-term revenue. This new partnership between the contact center and marketing will bring a wave of investments to deliver targeted, personalized customer interactions. New ways to assess call context, such as automated call reasoning and new metrics, such as first call resolution, will be required to successfully manage this transition. In addition, the new demands on agents to be both marketing and service agents will require corresponding changes and advancements in management tools, including CCPM, training and hiring practices to ensure that this vision becomes an operational reality. n
Ron Hildebrandt “By treating CCPM projects as change management projects and not just IT projects, we have been able to get the right executive sponsorship and organizational commitment to long-term success”
Debbie May “The idea is to empower employees to self-manage and improve their performance with a positive attitude. It’s a delicate balance”
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ANALYST VIEWPOINT
The search and discovery software market grew to $1.8 billion in 2007 at a growth rate of 28 percent, outpacing the software market as a whole. Sue Feldman believes that it will continue to do so in 2008, despite a slowing economy. Business Management looks at what is driving this increase.
The future of search T
he value of search as a true enterprise platform has been touted for years, yet remarkably few organizations have seriously embraced the opportunity, until now. Sue Feldman, Research Vice President for IDC, believes that this is because IT has gotten used to implementing transactionbased applications. “It is only recently that enterprises have begun to understand that they have a valuable resource in their unstructured information,” says Feldman. The main driver for adoption has been that understanding has started to spread. “Those of us who have been in this field for many years have always looked at the technologies we deal with as being completely different from database technologies,” explains Feldman. “However, there hasn’t been much headway up until the last couple of years.” Feldman goes on to explain that
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what has changed is that compliance and risk management have brought this awareness beyond IT and up to the boardroom. Organizations realized that they needed a greater degree of control and insight into their unstructured data, and best practices have evolved extremely quickly over the past couple of years so that they have become better compliant with regulations. “We are wallowing in a sea of information,” says Feldman. “The company information has to be pinned down and managed better and if that doesn’t happen then companies are severely at risk for not complying with regulations and putting themselves in jeopardy.”
Growth Given the sensitive nature of the data involved it seems the market can only get
bigger. In 2007, the sector grew 28 percent and according to Feldman’s Worldwide Search and Discovery Technologies Forecast, 2007-2012 report, the market is predicted to grow 12 percent year on year to a total of almost $3.2 billion by 2012. While Feldman believes that the software market as a whole is going to grow by around four to five percent, she claims the search and discovery market is interesting for a couple of reasons. Firstly, because it is a new foundational technology that Feldman likens to the “beginning of the database era.” And secondly, that the technology is important in a number of ways, which makes people spend on it when they wouldn’t spend on other things. “Email looms as a real threat to organizations because it is so poorly managed and yet so vital to how information workers glue together all of their applications today. But it
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Search and discovery forecast is also a tremendous opportunity to become a valuable source of information about the current business of the organization,” explains Feldman.
Technology Knitting together all these disparate technology systems, repositories and databases is hugely challenging, but a number of technologies are being built into this in order to unify access to information and pull data and related content together in one place. Feldman cites a number of technologies that are allowing organizations to use their data to converge search and discovery with business intelligence. “I can’t emphasize enough the importance of pulling together both data and content into one single access point, and that interface is going to become increasingly important because that’s what determines the efficiency with which people can accomplish their tasks,” she says. Feldman predicts that in the long-term technologies will be able to understand language in some way. “We will see that technology will understand the importance of a question, or engage in a conversation with the user, much like two humans might in which you would ask a question and remove the ambiguity of that question,” says Feldman. “That’s where I think that interfaces and interaction design are going to change radically.” While personalized, contextualized results for all knowledge workers will be produced, Feldman is keen to highlight that it is the conversations themselves that are key. “We want answers and we want a conversation to get us those answers.” In this respect, it is more about the journey than the destination. While it will be a gradual evolution
The search and discovery market in 2007, and in the first half of 2008, continues to outpace the software market as a whole. While the pure play search software market continues to consolidate, with mergers and acquisitions still rampant, search technologies have also begun to penetrate traditional data-centric enterprise and consumer applications such as CRM, recommendation engines or ad matching. IDC believes that: n The search market will continue to fragment into three tiers: OEM,
solutions and platforms, with solutions that address a specific task or problem growing at a faster rate than the other two market segments n Text analytics vendors as a whole will continue to see even faster growth
than the search market. Hot areas include sentiment extraction, eDiscovery, geo-location and language modules n Although this market has continued its rapid growth in the first half of
2008, economic indicators for IT spending are bleak. For that reason, IDC expects slower growth in the search market, with no more than 17 percent growth forecast for 2008 and 12 percent for 2009. This is down from the 28 percent growth we saw in 2007 n As search and text analytics become technology features in larger
software applications, we can expect the current spate of technology-driven mergers and acquisitions to continue. At the same time, new search and discovery technologies vendors continue to emerge, broadening choices and adding to market confusion Worldwide Search and Discovery Technologies Forecast, 2007-2012, IDC
returns just a list of documents. The standard today is already indicated answers and clusters of topics related to those answers, so that you can drill down,” says Feldman.
Future trends Feldman also believes that there is a trend towards hybrid applications in which you see search, workflow, collaboration, sort domain or industry knowledge incorporated into a single work environment that is
“In the next five to 10 years there will be such a difference in how we are able to interact with computers that we will look back at this decade as being the Stone Age” towards conversational search, it has started already. Feldman believes that looking at the latest crop of web search engines is a good indicator of what is going to happen as consumer adoption feeds enterprise adoption and vice versa. “None of what I would consider to be this generation of search engines
geared towards a particular task. “Search is becoming a component of this in order to find information within the natural workflow of a person’s day. This is what we are going to start seeing in the future and the conversational systems are a piece of that,” explains Feldman.
Hybrid applications are already underway and Feldman believes that the Lexis Nexis InterAction is a good example in which it is possible to see an environment that was created to support marketing officers in large legal firms. “EMC has spent months studying how information workers work to create environments that include collaboration search and workflow and you are going to see more and more of these,” says Feldman. The search and discovery market continues to grow, incorporating increasing amounts of technology. Companies are becoming increasingly dependant on organizing, finding and using information, as well as doing it quickly and thoroughly. Feldman believes that as technology develops the market will undergo huge changes. “I would bet that in the next five to 10 years there will be such a difference in how we are able to interact with computers that we will look back at this decade as being the Stone Age,” she says. n
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HEAD TO HEAD
Business Management asks Andrew McKay, General Manager and Senior Vice President, Attivio, Inc., and Laurent Simoneau, President and CEO, Coveo, about the value, potential and future of enterprise search.
Finding solutions The value of search as a true enterprise platform has been touted for years, yet few organizations have seriously embraced the opportunity. Is this a technology issue, a problem with awareness of the benefits or a lack of understanding regarding how best to go about an implementation project? Andrew McKay. Three reasons. The first is, organizations not knowing where all the unstructured content lies in the enterprise and which of it has any value. Content management systems are easy to create and generally departmental. As such, there is little central control and many stake-holders are involved. In contrast, business intelligence systems are tightly and centrally managed by technical necessity, so enterprise-wide investments are a more natural fit. Second, enterprise search tries to sell solutions but delivers technology. Business owners are tired of hearing ‘we can do it’, which leads to costly implementation projects. Search as a platform is important, but in today’s economic climate, it must first demonstrate it can deliver solutions easily and efficiently. Third, search is simply not enough. True insight resides in the integration of structured and unstructured content; bridge technologies do not work. Until this happens, search will always be the ‘poor cousin’ of business intelligence. Laurent Simoneau. First of all, you have to recognize that this is a technology that’s still in its relative infancy. To date, the perceived market leaders have been seen as complex and costly, and the platform players lack some important functionalities because they have concentrated on the infrastructure play at the expense of addressing specific business pains. So, the typical current responses to enterprise-wide RFPs have either been too general, because no one is really able to cover everything perfectly and in a timely fashion, or too limited in terms of performance, scalability and/or functionality to be considered for complex projects. Added to that, the requirements – gathering, design
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and deployment factors frequently make an enterprise acquisition so complex that they slow down or kill the whole project. The ability to analyze unstructured data is a key – both in terms of meeting compliance targets and gaining a competitive advantage. What are the benefits of a converged enterprise search/business intelligence solution in this regard? AM. The cost of non-compliance does not care about structure, and less than full coverage means increased exposure. But full coverage is expensive because it requires two incompatible technologies – one each for search and business intelligence – even though the rules and processing are the same. Convergence brings technical simplicity and consistency: there is one integrated implementation. Convergence also brings deeper insight into customers and markets through integrated analysis. Consider the request, ‘Give me all the articles that are favorable about my top 10 selling products.’ Search can solve one half of this request; business intelligence the other. But neither discipline easily solves both. Now imagine adding your call center, CRM and web analytics data. Integrating call center transcriptions, customer history and order data provides a more personalized, responsive service. Integrating web analytics, sales data and market intelligence helps create intelligent product bundles that increase average order value.
“The cost of non-compliance does not care about structure, and less than full coverage means increased exposure” Andrew McKay
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“Not only is content scattered across multiple systems, but users now also need to access this content from multiple devices” Laurent Simoneau
LS. The first thing to recognize is that, while the content ecosystem has all sorts of data, end users don’t know or care how data is stored – they just need to get as complete a picture as possible, as easily as possible. So the first and foremost benefit of a converged solution is giving them exactly this in a just-in-time fashion. These 360-degree views require structured and unstructured content scattered across multiple, heterogeneous systems: CRM, ERP, email exchange server, financial systems, intranets, etc. With unbiased search technology that is designed to handle all of the various kinds of data, users can get complete information when they need it; for example, through the kind of hybrid query that Coveo can execute: search emails for customers that are related to product X and have more than Y dollars in the pipeline.
of access to mobile-enable dozens of different applications in a seamless, secure and simple fashion. Coveo enterprise search products have built-in mobile interfaces that provide exactly these kinds of capabilities. With the rise of Web 2.0 tools and technologies, content creation, management and analysis is easier and more accessible than ever before. What impact is this having on the enterprise search market, and how do you see the market evolving over the next 12-18 months? AM. The rise of Web 2.0 tools will accelerate the proliferation of content, demanding more from search technologies. We will see more collaborative data, owned by specialized groups rather than individuals, adding greater understanding of context and leading to further specialization of search requirements. The line between intranet and internet will disappear (other than for privacy) as enterprises depend more on the web and the growing migration to SaaS for critical information. The search and business intelligence markets will begin their merge as they both become more operational in real-time. Deep analysis will become even more important and continue its push towards better predictive capabilities.
LS. The classic intranet and CMS ecosystem is now complemented by In your opinion, what are the most exciting developments/capabilities enterprise blogs and wikis. Because these new repositories have a currently being integrated into the enterprise search function? different structure and a different set of meta data, enterprise search AM. There are several incremental advancements in linguistics and text technologies need to add more granularity to the social relevancy algomining, and although they are interesting academically, they do little rithms, provide new ways of navigating through the results, and treat to address the problems that plague enterprise search today. Most content from behind the firewall and in the cloud as a unified resource. studies show that half of enterprise search users are dissatisfied with Because the content is organized more and more around persons and their implementations. More dramatic improvements are called for. users, it makes sense to navigate through dynamic expertise networks, Two innovations worth noting are SQL and workflow. To truly inbuilt from the context of a search query. tegrate structured and unstructured content, the search engine must treat structured data with the same flexibility VALUE OF ENTERPRISE SEARCH as business intelligence. This means allowing on-the-fly ad hoc querying, which really means supporting SQL, notably JOINs. The key value for enterprise search is productivity gains To be more relevant to the enterprise, search must get for employees: in front of business decisions before they happen. Providing alerts and low-latency index updates are important, A recent Accenture survey of 1000 middle managers but interacting with business processes requires managfound they spend as long as two hours a day searching for ing sequences of events. This is accomplished through a information and that more than half the information they find workflow engine.
during searching is useless.
LS. In a word, mobility. Not only is content scattered across multiple systems, but users now also need to access this content from multiple devices. Consider traveling executives who require an instant, 360-degree view of the customer that they’re about to meet. Their devices are Blackberry or Windows and they must access the CRM, the sales intranet, the support database and their mailboxes to find the right information. Enterprise search engine technology already provides an unbiased layer on top of multiple enterprise repositories. Beyond that, the search interface is the single point
The Butler Group claims as much as 10 percent of a company’s salary costs are wasted through ineffective search. According to IDC, the amount of information created and copied in 2010 will surge more than sixfold to 988 exabytes (988 billion gigabytes), representing a compound annual growth rate of 57 percent.
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DOWNTIME
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Making time for downtime
With a full on recession looming, business leaders can be excused for wanting to escape the boardroom. Business Management takes a look at three of the top golf courses in the country, giving you the perfect excuse for some well-deserved downtime. Pinehurst
LEADER BECOMES LEARNER Here’s a look at what’s possible on a 30-day golf sabbatical:
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Week 1: • Swing analysis at the golf academy • Fitted for top-of-the-line clubs • Fireside chat with golf writers • Playing lesson from a pro
• Play a round of golf a day, including one with the Director of Golf Week 3: • Fly in a friend or spouse for the weekend • Learn how to read greens like a pro • Perfect your swing with Eric Alpenfels or Kelly Mitchem • Design a fairway or cut a hole
Week 2: • Two-hour intense session at the shortgame school • Spend time at the indoor putting classroom to analyze your stroke • Sit down with a sports psychologist
Week 4: • $1000 shopping session with the retail team • Polish up with a final video swing anlysis • Fit in a round with Pinehurst’s execs and mayor, with Willie McRae on your bag
Nestled among the Sandhills of North Carolina, the Pinehurst golf resort is an inviting venue full of southern hospitality, elegant accommodation and eight pristine world-class golf courses. The star of the show is Donald Ross’ Number Two, the most historic course in the US, and the only one ever to host two majors plus the Ryder Cup. Add in the legendary history and the beautiful backdrop, and you have one of the ultimate luxury resorts in the US. And for those with a little more time on their hands, why not indulge your love of golf with a Pinehurst Sabbatical. This unique experience, offered both in the Spring and in the Fall, is designed for passionate golfers to enhance all aspects of the game. Over 10 or 30 days, the sabbatical includes world-class golf instruction, mental game exercises with a renowned sports psychologist, personal training sessions and lessons on how to read greens. Also included are two spa services a week to ease sore muscles, a personal therapist and personal service co-ordinator to keep you in tip-top condition. “The question is not why we’d put together such a program,” says Don Padgett, President of Pinehurst, “But why we haven’t done it yet? If such a program exists it should exist at Pinehurst.”
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Kiawah Island Developed on a barrier island off South Carolina and 21 miles from Charleston, Kiawah Island Golf Resort, lies along 10 miles of one of Americaâ&#x20AC;&#x2122;s top beaches, and is bordered by the Atlantic Ocean. Besides the luxury hotel with first-class spa and fine dining, there are five championship courses, designed by the likes of Jack Nicklaus, Tom Fazio and Gary Player. The Ocean Course is a 7296-yard, par 72 layout, reminiscent of the great courses of Scotland, stretching from a ribbon of pristine sand dunes along three miles of the Atlantic Ocean to the extreme eastern end of the island.
Destination Kohler This Midwestern resort couples one of the best assortments of courses with five-star lodging, dining and amenities. Of the four championship courses, all designed by the legendary Pete Dye, the highlight is undeniably the Straits course at Whistling Straits, thought to be one of the best in the world. Straits was home to the 2004 PGA championships and offers an open, rugged, windswept terrain sculpted along two miles of Lake Michigan shoreline, with breathtaking views across the lake. Also part of Destination Kohler and melded into a river basin, is the River Course at Blackwolf Run, considered to be one of the most challenging and scenic destinations in North America.
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Leadership
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Leading the way through the economic crisis Effective leadership training can drastically improve performance, increase productivity and boost results. But, in an economic downturn, is it a necessary outlay or a frivolous expense? Business Mangement investigates.
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any organizations are keen to increase the effectiveness of leadership in order to significantly improve productivity, customer and employee loyalty and increase their bottom line results. Bill Bennett, President of the Organizational Solutions Business at FranklinCovey believes that most companies want to be great. “FranklinCovey has spent the last several years studying and working to define greatness,” he says. “And specifically the key inputs to greatness, of which leadership is one essential element.” Bennett goes on to explain that all of FranklinCovey’s solutions and processes are based on key universal principles that are then customized to the specific needs of their clients. “We find that leaders and organizations leave with something they can immediately apply and utilize continuously throughout their careers that is also memorable, inspiring and self-directing. A leader will walk away from their training knowing how to implement these principles and how to improve upon themselves repeatedly as they face new opportunities and challenges.”
Objectives Sue Dathe-Douglass, one of FranklinCovey’s Leadership Consultants who also teaches their leadership course, ‘Great
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Leaders, Great Teams, Great Results,’ explains that the workshop is about the need for great leaders to develop the mindset, skill set and tool set necessary to engage and unleash the highest talents and capabilities of people against the organization’s most important priorities,” she says. So what does the workshop itself involve? DatheDouglass is keen to stress that the workshop can be run in multiple ways, although it is usually held over three concurrent days. Many organizations find it more effective to break it into four-hour modules over an extended period of time. A typical timeline starts on day one by learning about the four imperatives of leadership: inspiring trust, clarifying purpose, aligning systems and unleashing talent. On the first afternoon clients address the first imperative, “This segment deals with how a client deals in getting things done – is it through personal influence and credibility, or simply because you are boss,” explains Dathe-Douglass. The second morning looks at clarifying purpose under the basic premise that if a clear and compelling purpose exists, people will volunteer their best efforts. “In today’s workplace, whole person leadership demands that leaders help link what they do to a real purpose that the organization serves,” says Dathe-Douglass. “It’s all about engaging them to volunteer their very best versus establishing and enforcing rules.” This is followed in the afternoon by imperative three, aligning systems. Day three starts with a focus on unleashing talent followed by the final afternoon concentrating on action planning. Dathe-Douglass stresses that, “everything that they experience and work on in the workshop is designed to be replicated over and over again in order to deal with the change
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The five key outcome of the FranklinCovey leadership program are:
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A vision of what it means to be a great leader and a renewed desire to get there.
A radically new paradigm or mindset for leading in the knowledge worker age.
A powerful framework for solving chronic leadership problems.
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A practical set of skills and tools that the leader can begin using right away.
A specific process and database action plan to get them started and provide support.
that they will encounter within their leadership role, whether it be two weeks or two years later. The expectation from the start is that everything they are learning and doing they can apply tomorrow, but even more importantly as new challenges come along, it equips them to take on anything and everything with confidence.”
Benefits Richard Stocking, an Executive Vice President at Swift Transportation is just one of FranklinCovey’s clients who has walked away happy. As the largest truckload fleet in the US, Stocking recognized that tough times were ahead over the next few years and wanted to identify goals in operations, sales and safety arenas. “We really had to work on ourselves and react to the changing market,” says Stocking. And so he turned to FranklinCovey, but what did Stocking get out of the course? “The main benefit is that we are focused on our goals. We had goals in the past but we were all trying to
reach them in a different way, and this course has unified our group. Clarity of purpose and trust has increased so much that we are able to work through our goals at a much more rapid rate.”
Tough times There is no doubt that leadership training is an extremely effective tool, but, in the current financial situation, as budgets tighten and projects are slashed are companies still willing to spend on leadership training? Adam Merrill, FranklinCovey’s Director of Innovations, explains that despite the tough times he has seen clients that are even more committed to leadership because they recognize that it is the most important challenge that can be overcome. “We have to lead ourselves out of this situation and get people engaged in the most important areas,” says Merrill. “One of the tools we use examines a company’s economic model which assists them in taking the actions necessary to improve business results. You want everybody in the company thinking this way. You need to deal with the real business issues.” Bennett agrees and compares what’s happening now to the economic downturn of 2001. “Then, we saw a wholesale decline in training and we were all adversely impacted. This time, however, there is more divergence. Although the economic news is worse, and we are finding that some companies cutting back, and interestingly enough, a substantial portion are stepping up their leadership training investments to proactively sustain performance, both short and long-term.” As a company that is in the midst of the economic crisis, Stocking is keen to highlight how fortunate he feels to have implemented the principles of the FranklinCovey leadership course at Swift Transportation. “Now that the economy is suffering, we have elevated ourselves to a certain degree. We have unleashed the talent of our people, which has been tremendously beneficial in these tough times. We have improved and aligned processes, which has cut a great deal of bureaucracy out of our system and sped it up, meaning we are able to do more with less. Bottom line, it’s all about effective leadership, and the ability to completely engage and unleash your talent. This investment pays huge dividends.” n To find out more please visit www.franklincovey.com
Four core imperatives
Unleash talent
Inspire trust
Align systems
Clarify purpose
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in my own words
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Dealing with a crisis
You can’t protect yourself against the unexpected – but you can take control of your internal business risks. It’s how you deal with them that matters, argues Virgin Group CEO Richard Branson.
don’t think a chairman need fall on his sword if someone messes up in the company. Chairmen must learn from the incident and try to make sure that particular mistakes are never repeated. An apology on behalf of the company – perhaps in a public forum, sometimes in person to the individual who has been messed up – is an appropriate starting point. I know business books that say you should never admit to failure, but I would not tolerate such an attitude among my people. I see nothing wrong with admitting a genuine mistake. An entrepreneur has to make the tough calls. Some say it requires a ruthless streak. I don’t agree. I don’t think I’m ruthless, although I have been portrayed that way by a few people who don’t really know me and have never met me. There are some things in my business life that I regret – and I have made mistakes about people.
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One of my faults is that I have often been so focused on a business project that I have been unable to appreciate what was going on in someone’s life right in front of my nose. I’ve tried to learn from this, taking extra time to listen. Actually, I think it is counterproductive to be ruthless. You’ve got to treat people as you would treat yourself, or better. Let’s be clear about the manager’s responsibilities here. There’s an idea abroad that people no longer resign when they should. To hear some people spin it, you would think that resignation is the only effective action the manager of a troubled company can take. This is patent rubbish. And for the record, there never was a time in history when talented people resigned over trifles, or out of some notion of honor. It’s a myth. If something catastrophic happens to a company, and the chairman actually appointed that person who caused the
failure of the business, then the chairman certainly needs to consider his or her position. If a major bank does not have the security systems in place to protect itself from a rogue trader, and that trader does immense damage to the company, then, yes, the chairman or the chief executive should probably consider resigning their position. They are ultimately responsible. In most other cases, managers should stay where they are and sort their messes out. It’s what they are paid for, after all. Most importantly, someone should apologize for the mess happening in the first place. If someone else is better than you at dealing with it, then for goodness’ sake delegate it. And equally for goodness’ sake, don’t jump down their throats if they fail. n From Business Stripped Bare: Adventures of a Global Entrepreneur by Richard Branson, published by Virgin Books in October 2008. Reprinted with kind permission.
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ENTREPRENEURSHIP
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The road less traveled When Tony Wheeler arrived in Sydney with just 27 cents to his name back in 1972, it seemed an unlikely launching pad for one of the world’s best-loved brands.
he New York Daily News once referred to Tony and Maureen Wheeler as “specialists in guiding weird folks to weird places.” It’s testament to the success of their Lonely Planet guidebooks that such a description now seems anachronistic. Thanks to their relentless spirit of adventure and 30 years of travel publishing, they’ve inspired generations of weirdos (and plenty of not-so-weirdos) to widen their horizons, making the world a much smaller place in the process. “Even at the very beginning, there was a feeling that people liked what we were doing,” explains Wheeler. “We had this sense right from the very first book that there was a demand for it.” Establishing a reputation for boldly going where few have gone before, Lonely Planet started out as an adventure. In the early 1970s, Wheeler – along with his wife Maureen – set out on a year-long trip around the world, with the intention of getting the travel bug out of their systems. Their route took them from London across Europe, through the Middle East and across Asia, following the old ‘hippie trail’ down to Australia.
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On arrival in Sydney, and with only a few cents between them, the Wheeler’s decided to self-publish their account of the trip, initially in order to fund their airfare home. The quirky guide, Across Asia on the Cheap, soon sold out and was quickly followed by what became the backpackers’ bible, South-East Asia on a Shoestring. Their success led the Wheelers to abandon their plans to return home in favor of further travel and more writing; venturing off the well-trodden paths of the established travel books, the guides catered to a new generation of independent, budget-conscious travelers long before the advent of mass tourism. Wheeler modestly claims that they were the beneficiaries of a cultural shift. “It was definitely the right time to do it,” he says. “People’s travel horizons were getting wider, and the baby boomers were starting to travel more. They were going further than previous generations had done. Jumbo jets were coming in, so the price of travel was going down, and it was the right time to jump on a trend. I guess we just didn’t appreciate what a big trend we were jumping onto.” His honesty typifies the laid back approach to the business taken by the couple in the early days. “We weren’t very businessminded about it,” he admits. “We never sat down and thought, ‘There’s Project A, and there’s Project B, and Project B would be more profitable.’ If Project A was more interesting, we always did that instead.” If anything, Wheeler believes that this actually contributed to the burgeoning reputation of the fledgling enterprise. “We were always the company who went out to the most weird and wonderful places. That definitely helped us in those early days.” He insists those early days were extremely hard work, despite the fact that he was living out his dream job. “In the very early days we did everything,” he says. “We had to learn the business from the ground up, every element of it, and our main problem was the same as it is for a lot of small businesses: survival. In essence we
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faced the same things that anybody developing a small business faces – finding the right people, having enough money to keep going, scaling up. You have sleepless nights, and you lose some hair thinking about it.” The key was just getting the books out in the marketplace; not only did the husband and wife team research and write the books themselves, provide the photographs, draw the maps and prepare the documents for print, they also liaised with the printers, pitched the bookshops and hustled the distributors to negotiate the best deals. Wheeler recalls traipsing around Australia and New Zealand with a bag full of guides that he used to sell direct to the booksellers. “It was pretty backbreaking work, at first,” he laughs. “It took about three or four years before it was really off and running. It wasn’t like the dotcom boom, where businesses would start on day one with nothing and then by day two had grown to $100 million turnover. It was a long climb – and it wasn’t even steady, it was pretty up and down.” Slowly, the business did grow. And as international travel became more popular, so too did Lonely Planet. Despite its organic growth path, Wheeler can still pinpoint the moment when he realized he and Maureen had a success on their hands. “A big part of it was just seeing the books out there – going to different places and seeing the books on the shelves, in bookshops, and seeing people using them,” he says. “This one time, I was in India and noticed the locals using our India book. I remember thinking, wow, when even the local population uses your books, that’s a sign things are working well. That book was a landmark for us. It was bigger, better, more expensive and sold better than anything we’d done before, and it helped us take a step up to a larger size.” Since then, the business has gone from strength to strength. The company now publishes over 500 titles in eight languages with annual sales of more than six million books, and has been so successful that the Wheelers recently sold a 75 percent stake in the business to BBC Worldwide for an undisclosed (but significant) sum. “It was time for a change, and a deal with the BBC just seemed as close to perfection as we could ask for,” he says. “They are a company with a very good reputation and existing capabilities that played to our strengths, and we were able to offer them some things that they didn’t have. So it was a good combination.” Like most start-ups, the Lonely Planet story is one of developments, experiments, trial and error – a process Wheeler maintains has been good for both him and the company as a whole. “I think if you start small, and you learn from the ground up, you do have more of a feel for it,” he explains. “I love the fact that Bill Gates still likes to write computer code. He started that business because he was a computer nerd, and in some respects, he still is. And you know, that’s a good thing. I’d be disappointed if we had people running Lonely Planet who weren’t enthusiastic travelers; anybody coming for a job here has to love travel. You can’t be a good editor of guidebooks if you haven’t been anywhere.” For Wheeler, this is the most important part of running a business – making sure you do something you enjoy. “If you’re doing what you love doing, it communicates itself to your customers and the other people you’re working with,” he says with a smile. “And even if you’re not making money, you’re having a good time.”
POSTCARDS FROM THE EDGE What is your favorite hotel? I rarely stay in hotels twice, and that’s just sort of a guidebook thing. Once you’ve been to a place, you want to try something different next time you go back there. I tend to go back to different places, if I can. Do you have a favorite destination? If there’s a place I’ve been back to most often it’s probably Nepal, because I like walking. Most of all, I live for variety – I like being in modern, civilized cities; and on the other hand, I like traveling to the weird and wonderful places in the back of beyond. What is the most awe-inspiring place you’ve been to? Probably Antarctica. It’s the drama of the place. Everything is either black or white or blue. It doesn’t have the full palette of colors we see elsewhere in the world. Antarctica has always struck me as a very dramatic place. Where would you most like to revisit? Probably somewhere in Europe. I think Europe does sort of pull you back. Places like Italy – the history, the architecture, the food and the style of life – it all appeals. Is there anywhere still on the to-do list? There’re still far too many places on my to-do list. I’ve never been up over the Karakorum Highway, the road that runs up over the Himalayas from Pakistan to China. There are lots of places in China I’ve never been to. And I’ve never been to Alaska. There is still a lot to see.
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Leadership lessons
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Where have all the leaders gone? Businesses across all industry sectors are facing tough times as the current financial crisis deepens. Business Management’s Tom Benson asks: does this require a different approach to leadership?
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he word ‘crisis’ implies a certain kind of immediacy. The attack on the World Trade Center is an extreme example of this, where from one moment to the next, the world changed. We needed and wanted a certain kind of crisis leadership at that point, and we got it. Within days we knew who the enemy was and had a focus for our response: Osama Bin Laden and al-Qaeda. This financial crisis is different. Firstly, it has been has been relatively slow to unfold. The drama has taken place over a period of weeks, months even, and the effect has been a feeling of steadily increasing unease rather than instant shock. Secondly, there is no one person to blame, as such; even where there are obvious fall guys – the head of Wachovia, the head of Lehman Brothers, the head of AIG, all of the people being questioned before Congress – the finger-pointing is too simple to be taken seriously. This is a problem of many hands. Unfortunately, just as there are no single bad guys, there are no easy-to-pinpoint good guys. “There is such a level of complexity here that one scarcely knows where to turn for leadership,” suggests Barbara Kellerman of Harvard University’s John F. Kennedy School of Government. “If you’d asked me a month back, I might have suggested that Hank Paulson was a good example of a leader for tough times. But when Congress didn’t approve his bailout plan the first time around, his clout seemed almost palpably to diminish. It didn’t make him suddenly a bad leader; it means the momentum of the situation, combined with the complexity of it, makes it very difficult to pinpoint a single leader.” Another problem has been the enfeebled position of the US president at the time the crisis began. “Every time he took to the airwaves, it had virtually no impact,” continues Kellerman. “Nobody, in effect, was listening. Had there been more effective presidential leadership, things would not have unraveled as fast as they did. It’ll be interesting to see what happens when the new president takes office, and the role he plays in calming fears. We’re beginning to sense a level of fear and panic, both in the markets and on the street, and I can only quote FDR in that there’s nothing to fear but fear itself. I think the first task at hand is to calm people’s nerves and to try to reduce that level of panic.” In other words, from the highest office down we now require a different approach to leadership – and we can all play a part. “This is a systemic issue so I hate to train the lens only on those at the top, as if they are somehow single-handedly responsible
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Henry ‘Hank’ Paulson
“Hank Paulson was a good example of a leader for tough times. But when Congress didn’t approve his bailout plan his clout seemed to diminish” for what happens,” argues Kellerman. “For instance, I think activists of various kinds – shareholder activists, for example – have a real role to play in how we emerge from this. The media also has a significant say in how events and situations unfold.” And as to what CEOs can do, successfully managing through tough times calls for a greater degree of balance – both personally and professionally. On a personal level, this means looking at simple things such as maintaining a good work-life balance, getting enough sleep, staying reasonably healthy and not losing your cool; on a professional basis, it means going back to one of the tried and tested fundamentals of what constitutes good leadership. “This situation is so complicated, and the experts seem to be so few and far between, that it would seem to me a very good moment for bringing in a kind of collective leadership – or at least a leadership that utilizes multifaceted advisors with different points of view,” says Kellerman. “You need to make sure that you hear all the various arguments before making any major decisions.” Executives need to be highly informed, have access to all kinds of information, and implement a collaborative leadership structure that both reaches down into their own organization, and also out to leaders at different organizations across industry verticals and in various geographic locations. Opinions need to be diverse, as opposed to single-minded. And mavericks and alternate thinkers should be celebrated, not marginalized. n
www.busmanagement.com
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IN REVIEW Leading the leader Executive self-help guides are nothing new but perhaps the best of this quarter’s business book releases offer some innovative ideas? The Secrets of CEOs 150 Global Chief Executives Lift the Lid on Business, Life and Leadership, by Steve Tappin and Andrew Cave In this fascinating, authoritative book, 150 of the world’s top chief executives share their advice for getting to the top, and, once there, how to be successful leader and still have a happy life. The book reveals frank discussions with some of the West’s most influential CEOs and incorporates radical and thought-provoking comments from the heads of new corporate champions of India, leading companies in China and Russia as well as US corporate giants. BM says: The Secrets of CEOs contains a wealth of strategies that individuals and organizations alike can use to encourage a new standard of leadership. It could well be an essential guidebook for those wanting to know what it is really like to be a CEO – and the health warning that should come with the job.
Total Leadership Be a Better Leader, Have a Richer Life, by Stewart Friedman The more you strive to win at work, the more you have to sacrifice performance and satisfaction in the other dimensions. Not according to Wharton professor Stewart Friedman. His Total Leadership program has shown that success at work is actually enhanced if you embrace a fulfilling personal life too. Friedman explains leadership can – and must – be learned by offering step-by-step instructions, engaging examples and hands-on tools in order to achieve higher levels of performance in all areas of life. BM says: Applying a new method of thinking, Friedman offers a completely different guidebook to becoming a better leader. Total Leadership suggests both an innovative and sustainable model for leadership that can benefit every facet of life.
The Game-Changer How Every Leader Can Drive Everyday Innovation, by A.G. Lafley and Ram Charan Co-author A.G. Lafley is Chairman and CEO of Proctor & Gamble, a company that has tripled its profits in the past seven years. In this 336-page book he and Ram Charan guide you though how the likes of P&G, Nokia and Lego have become today’s game changers. This book claims to help you redefine your leadership, whether you are running a company or in your first management job; and is packed with thoughtful insight and tidbits on how and why certain strategies employed by multinationals have succeeded or failed. BM says: The sections devoted to P&G’s organic revenue growth offer a fantastic insight into how the company has outstripped its rivals. The book also demonstrates how an innovation curve should be an achievable goal, not just wishful thinking.
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www.busmanagement.com
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A
Goozee column Tough times After a 21-month, billion-dollar election campaign, Barack Obama is set to become the 44th president of the US. But will Obama be good for the economy?
s Barack Obama prepares to take the reins as president of the US, the country is teetering on the brink of a recession after a Wall Street meltdown. With jobs disappearing and inflation eating into pay packets, the question on everyone’s lips is about the impact Obama will have on business. Obama has been calling for an overhaul of Wall Street regulations for months, saying that the subprime housing crisis and subsequent problems stemmed in part from a lack of transparency and accountability in the financial system. Obama singled out credit ratings companies as in need of closer scrutiny, and has said that he doesn’t favor the ‘blank check’ approch for failing firms. If Obama acts on his tough talk then he faces a battle against banks, investment firms and insurance companies in his fight to regulate financial services. But how can someone who has accepted so much money from Wall Street, including $690,000 from Goldman Sachs, be expected to crack down on it? Well, he has suggested a number of proposals to ease the growing strains, including exempting seniors from having to make withdrawals from retirement savings, and offering a tax credit to businesses for every new hire they make in the US, rather than overseas. And small businesses have undoubtedly been looking forward to Obama coming to power and are keen to feel the
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affects of his proposition to temporarily reduce or suspend the fees the Small Business Administration charges banks to participate in its flagship small business loan guarantee program. By spurring more lending to small business, Obama hopes to keep them on a more even keel. As well as the meltdown on Wall Street, Obama has seen the housing market quickly unravel over the course of his campaign and now faces a huge challenge in making sure prices don’t slide further, and in bailing out troubled borrowers. He has called for a change to the bankruptcy law in order to encourage lenders to modify more loans for anxious borrowers rather than risk the loan being rewritten by a judge. However, it is possible that the changes could cause a rise in interest rates as mortgage investors price in the risk of new loan terms. Obama’s plans to increase spending and taxes have generated plenty of heated opposition from business and taxpayer advocates, particularly because he wants to roll back Bush tax cuts that benefit many of the people running big American companies. Obama argues that American businesses need government help to stay globally competitive and improve the economy, and while it remains to be seen whether he will succeed in his mission, I for one am looking forward to the future with Obama in charge. n
www.busmanagement.com
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Final word Everyday innovation
Fortune has called him “the most influential consultant alive” and he’s one of the world’s most sought after business advisers. Here, Ram Charan outlines why establishing a culture of innovation is essential to surviving the downturn.
Everyday innovation is so important. If you look at processes through the lens of innovation, you look at the external landscape differently. And when you look at the landscape differently, you look at market opportunities differently. Consider the iPod: it changed the game for music, for consumer electronics, and has spawned a number of new industries. Innovation can be a game changer. It will give you ideas and new ways to position. But it has to become a day-in, day-out part of your decision-making. If you build it into the central nervous system of your business, you will see huge results. It will enable you to search for new core competencies and competitive advantages. And this is how you sustain top line growth, this is how you get better pricing, and this is how you get better markets. It becomes a way of life. Innovation is basically about connecting ideas. If you ask AG Lafley, if you ask Steve Jobs, they will tell you that it’s connecting ideas from diverse places in order to create new ideas. You start with what your company’s goals are, what you expect from people, and your strategies, and then look at how innovation can influence this. You look at what portion of the budget is going into projects that are actually creating or executing new ideas, something the consumer will prefer. You revisit your strategies and talent through constant reviews. And by doing this regularly in a rhythmic fashion, you will create a culture of innovation. Make sure the consumer is the boss. Most of the decisions and innovations at P&G, if not all, are made
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on the basis that the consumer is the boss. Another key lesson is the need to review innovation projects. There have to be milestones. There has to be discipline. And that is a major lesson. A third is that people learn that if they don’t innovate, they cannot be promoted – which provides great motivation for people to embrace and nurture a culture of innovation. Leadership is mostly just learning how to be outside-oriented. Most leaders learn how to interact with the consumer, most learn how to design a team for innovation projects. Those are the kinds of things leaders really drive. How to work in cross-functional teams and live with the customers simultane-
ously to create new categories, new opportunities, new spaces, however – those are huge things going forward for senior leadership. In any economic downturn, your competitors will get weak. However, that will change one day. It may take a year, it may take longer – it doesn’t matter. This is the time to focus on innovation, thereby positioning your company to take advantage when the upswing kicks in. You can change the game. But this is the time you’ve been waiting for, when the competition is not as strong. You have to make it count. n Ram Charan’s latest book The Game Changer – published by Crown Business and co-authored with Procter & Gamble CEO AG Lafley – is available now.
www.busmanagement.com
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