Business Picks Mini-book 2011

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Business Picks from Wiley

Offering you the pick of the crop this Autumn!

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Table of Content 2 15

23 33 41 47 52 58 66

72 77 83

Serial Innovators BUY NOW Claudio Feser Extract: Chapter 6 – Long Live Bureaucracy!

Beyond Performance BUY NOW Scott Keller Extract: Chapter 1 – The Big Idea: Performance and Health How BUY NOW Dov Seidman Extract: Chapter 1 – From Land to Information Mondo Agnelli BUY NOW Jennifer Clark Extract: Chapter 1 – The Scattered Pieces What Makes Business Rock BUY NOW Bill Roedy Extract: Chapter 1 – Born in the U.S.A. Dethroning the King BUY NOW Julie MacIntosh Extract: Chapter 1 - The Game Is Afoot What You Need to Know about Business BUY NOW Roger Trapp Extract: Chapter 1 – What is business?

What’s Stopping You? BUY NOW Robert Kelsey Extract: Part One - What is stopping you?

Think and Grow Rich BUY NOW Napoleon Hill Extract: Chapter 1 – The Man Who Thought His Way into Partnership with Thomas A. Edison Managers and Leaders Who Can BUY NOW Ruth Spellman Extract: Chapter 1 – Values and Ethics Twitter for Good BUY NOW Claire Diaz-Ortiz Extract: Chapter 1 – Be a Force for Good The Idea Hunter BUY NOW Andy Boynton Extract: Chapter 1 – Know Your Gig 1

Serial Innovators

Serial Innovators

BUY NOW

Firms That Change the World Claudio Feser 978-1-1181-4992-8 • Hardback • 224 pages November 2011 • £23.99/€28.00/$34.95

Chapter 6 Long Live Bureaucracy!

When Arnold Schwarzenegger took office in 2003 as the new governor of the State of California, the state budget was running a huge deficit. In his state of the state address on June 1, 2004, he identified one of the causes to be the ineffective, slow, and inefficient government system: “The Executive Branch of this government is a mastodon frozen in time and about as responsive. This is not the fault of our public servants but of the system. We have multiple departments with overlapping responsibilities. I say consolidate them. We have boards and commissions that serve no pressing public need. I say abolish them. We have a state purchasing program that is archaic and expensive. I say modernize it.” With a strong Austrian accent, he put forward the essence of his approach as follows: “Every governor proposes moving boxes around to reorganize government. I don’t want to move boxes around; I want to blow them up” (Schwarzenegger 2004).

In the previous three chapters we have reviewed three factors that reduce the ability of individuals to adapt to changing situations: mental biases, lack of (task-specific) self-confidence, and inflexible brain connections. And we have shown how these individual rigidities can adversely affect the ability of organizations to address the challenges they are facing.

Let’s now focus our attention on groups of individuals, on organizations.

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In this chapter, we look at the first of five organizational rigidities: dense organizational structures, or—to use a more popular term—bureaucracy.

In discussions, managers often blame the lack of organizational adaptation and change on bureaucracy.

Dense structures may prevent senior managers from receiving vital information from the front line of the organization. Front-line salespeople may lose business to competitors, which the firm might be able to recapture with a small change to the product. But the information is filtered several times and may never reach the CEO. Also, many CEOs feel that their decisions are slowed down, and sometimes even stalled, by dense structures. Information that would provide guidance gets lost in the organization, much to the CEO’s frustration.

Academics share these perspectives. Dense hierarchies lead to ossification and organizational death (Hannan and Freeman 1977, 1989; Leonard- Barton 1992; Loderer, Neusser, andWaelchli 2009). The advice: Let’s simplify and unlayer, let’s flatten the organization and increase spans of control. In short, bureaucracy is pass´e, let’s blow it up.

This is a very simplistic perspective, and a dangerous one.

While it is clear that dense organizational structures slow down adaptation and change, we need to develop a more nuanced and articulated perspective on hierarchies before we touch them, let alone blow them up. We need to understand why, in the first place, organizations exist, and why they need bureaucracy to function.

Why Organizations Exist In The Nature of the Firm, a highly influential article published in 1937, Ronald Coase, a British economist and now Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School, developed a theory to explain why the economy is made up of a number of firms instead of consisting of independent and self-employed individuals. Given that in a free and efficient market “production could 3

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be carried on without any organization that is, firms at all,” Coase noticed, why do firms emerge? (Coase 1937).

The traditional economic theory of the time suggested that in an efficient market, where those who are best at performing an activity specialize in it and offer their services to others, it would be less expensive to contract products or activities out than to hire people and build organizations.

Coase pointed out, however, that there are a series of transaction costs when buying services and activities in the market. When a service or an activity is sourced from the market, significant costs are incurred above and beyond the cost of the service or activity. There are search costs involved, negotiation costs, legal costs of setting up a contract, monitoring costs (are the contractual obligations being fulfilled?), and enforcement costs. Coase suggested that firms emerge when organizations try to avoid these transaction costs. They produce services and products in-house.

There is, however, a natural limit to what can be provided or produced in-house. Coase noticed that increasing overhead costs, increasing complexity, and an increasing probability that an overloaded CEO will err in allocating resources effectively and efficiently set a natural limit to how large a firm can become. He called this “decreasing returns to the entrepreneur function.” Coase argued that the optimum size of a firm is reached when the sum of the transaction costs (which decrease with the size of a firm) and of the complexity costs (which increase with the size of the firm) is lowest. Coase received the Nobel Prize for Economics in 1991.

Chaos or Bureaucracy Now that we understand why firms exist, why do they need bureaucracy— that is, organizational structures?

Let’s start with an illustration.

Let’s assume that a firm has 20 senior managers. Let’s also assume that the organization wants to align all of its 4

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senior members on one decision. In the extreme case, without any hierarchy, everyone would have to meet everyone else, and that would require [n * (n – 1)]/2, meetings, that is, 190 meetings. This would take forever.

But in a hierarchical organization things happen much more quickly and easily. Assume that the firm is organized into three layers: one CEO, three divisional heads, and five or six departments per division. It would take just four meetings to get everyone aligned: three divisional meetings, and one meeting of the divisional heads with the CEO. Things become even worse if more people are involved in the decision making process. Let’s assume that the organization has 100 senior managers. With no hierarchy it would need 4,950 meetings to align everyone on a given decision!

This might take several months. In contrast, if we assume four layers only (and a team size at the bottom of five to six employees) it would need only 19 meetings to get everyone aligned.

The alternative to hierarchy is chaos. In network theory, hierarchy reduces the density of connections and allows networks to grow in size and to function effectively, which is also why even with computers (where meetings happen in fractions of seconds) networks are organized hierarchically (Beinhocker 2006).

Organizational structures are how firms organize their work. Hierarchies allow firms to organize the work of thousands of people, while maintaining coherence and implementing a strategy effectively. Organizational structures may be rigid and hard to change, but they allow firms to get complex tasks—tasks for which the work of a few individuals does not suffice—done. Organizational structures thus enable firms to grow to very considerable size.

A Matter of Interdependencies Now that we have saved the hierarchy from being blown up, let’s study it more closely. Why is it that some firms develop more dense hierarchies and some less? Why do some 5

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firms work with four organizational layers and others need eight to perform, even though they may have a similar number of employees?

Scott Page, the director of the Center for the Study of Complex Systems at the University of Michigan, believes that the depth of organizational structures depends on the complexity of the strategy that a firm is trying to implement.

He believes that if the strategy can be easily broken down into parallel tasks, and not much coordination between the tasks is needed, then the organization will be relatively flat.

An advertising agency typically has a very flat structure. Its projects are usually for different customers, they can be carried out in parallel, and require very little coordination (maybe some common firm policies), and hence almost no hierarchy.

On the other hand, if the strategy cannot be easily broken up into parallel tasks, and there are many interdependencies between tasks, requiring significant coordination, then organizations will tend to be narrow and deep. Car manufacturers typically have very dense organizational structures. The activities of the various units—from market research, product design, manufacturing of components, sourcing of components, marketing, dealer management, sales, and so on—can be done only partly in parallel. Also, the activities of the various units are highly interdependent and significant coordination is required (what if the different pieces don’t fit together when the car is finally assembled?).

Page’s explanation helps us understand why firms in different industries tend to have different organizational charts and models (Page 1996; Beinhocker 2006).

Large and Complex Modern Organizations Individuals involved in software design know the issue of growth and density of interactions: a software program, once designed with a simple structure, grows and becomes more complex as time goes by, as the programmer adds overlays and additional algorithms for the program to solve additional 6

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tasks and requirements posed by the user. As a consequence of increased density of interactions, however, the program becomes slow and inefficient, much to the frustration of the user.

The analogy helps us understand the malaise of many of today’s large organizational models.

As a result of industry consolidation, international expansion, and diversification over the past few decades, firms have become considerably larger, more global, and more complex.

In Chapter 2, we looked at the top 50 U.S. firms. In 1960, their combined revenues amounted to $103 billion, or nearly $2.1 billion per company. Fifty years later, in 2010, the combined revenues of the top 50 U.S. firms amounted to $5.1 trillion, or $102 billion per company.

To manage their business in different countries in various geographic regions, several large firms have introduced regional and subregional structures. Also, wishing to ensure the implementation of global policies and to capture economies of scale globally, many firms have strengthened their functional secondary axes, such as information technology, procurement, human resources, and finance. Many have also introduced central marketing, customer-segment, or sales channel functions to foster the exchange of best practices between countries and regions.

Organizational models originally based on simple vertical structures—a relic of Taylorism and of the industrial age—have become more complex as matrix overlays have been added to accommodate secondary management axes (sometimes several). These overlays also serve as ad hoc constructs such as study groups and innovation committees.

Cross-unit product boards have also been added to the model (Bryan and Joyce 2005).

Many large firms have developed very dense and deep organizational structures with extensive interdependencies.

The organizational chart of some global organizations looks like a network, and as a result, people spend endless time in meetings, on the phone, and emailing each other to align and 7

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to coordinate. The amount of time spent on internal coordination is enormous.

Similar to the software user, many leaders and employees of today’s large organizations are frustrated. Their organizations have become inwardly orientated, lack innovation, and are slow in adapting to changes in the market.

Building Tomorrow’s Global Organization In recent years, the matter of organizational simplification has received much attention (Ashkenas 2007; Heywood, Spungin, and Turnbull 2007; Bryan and Joyce 2005).

Organizational design matters a lot. If an organization is designed as a complex, multilayered matrix with several units depending on one another, it will develop a deep, dense hierarchy and will be very slow to react to changes in the environment. If the same organization can be designed to implement the same strategies equally effectively with a simpler business unit or functional organization, it will be faster and more adaptive.

Three key principles govern the creation of an effective and adaptive organization.

First, objectives and scope of organization need to be prioritized thoughtfully. John Maeda, a graphic designer and visual artist, and the E. Rudge and Nancy Allen Professor of Media Arts and Sciences at the Massachusetts Institute of Technology Media Lab, believes that the simplest way to achieve simplicity is through the thoughtful reduction of functionalities (Maeda 2006). He is obviously not referring to firms, but to consumer electronics devices, but we can apply his rule of simplicity to business in three ways: prioritizing organizational objectives, clarifying scope, and using skunk works.

1. Prioritizing organizational objectives. Firms sometimes want to achieve too many objectives with an organizational structure. For large, diversified global firms, achieving accountability, ensuring entrepreneurial 8

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freedom, enabling growth, capturing economies of scale and skills, and transferring best practices all at once is hard. A thoughtful prioritization of the organization’s objectives is needed and should answer questions such as “What will be the main value drivers in the next five years?” “What do we want to change in terms of business focus in the next five years?” A thoughtful prioritization includes first and foremost the decision on the dominant axes of management—functional, product, customer, or geography. It also includes the prioritization of objectives at a secondary level. For example, once, in search of opportunities to capture economies of scale, I discussed with the CEO of a large, diversified firm the creation of shared regional services centers for specific corporate functions such as finance and human resources. “I understand the savings opportunities, but for the next few years clear accountability for results will produce more bottom-line results, and is therefore more important to me. I do not want to jeopardize that.

The shared regional function will have to wait,” was the CEO’s answer. An example of the thoughtful reduction of objectives in practice.

2. Clarifying scope. Many organizations create organizational complexities by scope creep, or proliferation: launching new lines of business, constantly tweaking package designs, expanding the product range, and increasing the number of items in stock are just some examples.

Making choices and setting priorities in terms of scope (for example, business portfolio strategy, product portfolio strategy, stock strategy) should be an early consideration in any organizational redesign (Ashkenas 2007).

3. Using skunk works. Organizations can keep parts of the business separate using so-called skunk works (a close cousin of clarifying scope). A reorganization is not always feasible; firms sometimes need to react fast and do not have the time to redesign the way people work and interact in the firm. The solution then is to use 9

Serial Innovators

skunk works to create completely autonomous units and to separate them from the rest of the organization. This gives them the autonomy to react quickly and seize opportunities as they arise. Nespresso, for example, was initially developed outside of Nestle. Apple’s Macintosh computer was developed by “a small autonomous team with a pirate flag flying from the mast of a separate building” (Beinhocker 2006).

Second, the number of interdependencies needs to be reduced by creating self-managed performance cells complemented by knowledge networks. Let’s look at these two separately: first, self-managed performance cells.

Self-managed performance cells are smaller autonomous units, or notional companies. One of the first applications of this concept was the reorganization of General Motors (GM)

by Alfred Sloan, its long-standing president and chairman. In the 1950s, he reorganized GM into five divisions, effectively five independent car companies, each with its own brand and its own profit and loss statement. This allowed GM to grow and—at the time—to become the world’s largest corporation (Beinhocker 2006).

This concept has since been applied in many companies and industries, as they have reorganized into some form of business unit structure. In the past decade—and inspired by firms such as IBM and Procter & Gamble—several companies have started to apply the concept of the notional company to other areas as well, creating global manufacturing companies and global business support function (GBS) companies, specialized firms providing shared back-office services such as accounting, payroll services, and infrastructure services.

These notional manufacturing and service companies interact with business units as they would with third parties, selling services on a contractual basis (remember Coase’s theory).

Nor does the concept stop at the level of business units, or notional manufacturing and service companies. It can be applied much lower down the organizational hierarchy. Inspired 10

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by the kaizen concept at Toyota, many firms are creating more autonomous, self-managed teams in a large variety of functions. We nowadays often find them in functions such as sales, manufacturing, or back-office operations. These teams are often referred to as lean teams.

An extreme but illustrative example of this is Whole Foods, an American firm founded in 1980 in Austin, Texas, which is now the world’s leader in natural and organic foods, with more than 270 grocery stores in North America and the United Kingdom. The entire firm is organized as a set of selfmanaged teams. The teams are empowered to hire, fire, and allocate bonuses within their membership. Everyone is a key decision maker, so everyone has access to all key business data. Information is shared so widely that the SEC considers all 36,000 employees as insiders for stock trading purposes!

Whatever the level at which performance cells are being set up, they share three characteristics: They are guided by performance metrics, they have the autonomy to organize themselves, and they have periodical learning cycles.

1. Performancemetrics. Depending on the specific objectives and activities of the cells, these metrics may vary.

For a business unit, there would be a scorecard, including a profit and loss statement. For lean sales or customer management teams, the metrics might include cross-selling rates, revenues, or service quality. In lean manufacturing teams, they might include default rates, scrap rates, or unit costs. When the performance metrics measure outcomes that relate directly to the desired behaviour (not, for example, like the stock price, which depends on multiple factors unrelated to personal or team performance), they can form the basis for the monetary reward system for the cells and their members.

2. Autonomy to organize themselves. Performance cells have the ability to continuously improve the outcome or results. This means that they are delegated the 11

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responsibility for decisions on those resources that are most pertinent for achieving the objectives. A division, for example, may be allowed to organize its regional structure differently from another division. There is a significant amount of literature suggesting that autonomy or participative management should be limited and focused on the organization of the work of the cells (self-management), as opposed to cells setting their own targets and organizing their work (which we would call self-directed teams). Several studies suggest that cells that self-set their targets record higher levels of employee satisfaction, but not of performance, at least at the level of teams (Bandura 1997).

3. Learning cycles. Third, performance cells have periodic reflection cycles, periods of learning when new challenges are discussed, when ruthless transparency and debate is promoted (a dense information environment being used to address the mental biases of over optimism and loss aversion), when elephants in the room are named, and when problems are jointly solved. Here, too, the solutions vary depending on the level at which performance cells are formed. In the case of a company or a large business unit, the reflection and learning cycle may be longer and take place in the context of quarterly or monthly performance review meetings. For smaller units such as lean teams, learning cycles may be shorter and occur on a daily basis. Though the term performance review may suggest otherwise, the sessions are better used to reflect and learn collectively.

Regardless of whether the targets are quarterly, monthly, weekly, or daily, and are met or not met, the questions should be: “What happened in the past months that we did not expect? Has our environment changed, and why? Why did we not succeed as planned? What can we learn from this? What should we do differently next time? What new challenges may we face?” They should not be: “What did you do wrong? Why did you not make the target?” At Toyota, anyone on the production line 12

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can suggest improvements to the production process.

Courageous conversations require far less courage there because critical ideas have become normalized, whereas that is far less the case on production lines in other companies (Heifetz, Grashow, and Linsky 2009).

Self-managed performance cells can be complemented by formal knowledge networks, which are better than hierarchy and structure at ensuring knowledge creation, management, and dissemination. People with common interests—such as similar work (supply chain managers, for example) or the same clientele (such as private-client advisers)—naturally form social networks.

Companies can capture the value of networks by investing in them and formalizing them, for example, by defining network owners and making them responsible for building knowledge and capabilities, or by providing a shared infrastructure for knowledge codification and sharing.

By capturing new insights from the different independent, self-managed units and teams, and by accessing external sources of innovation, networks generate knowledge, which is then made accessible to the organization Industry practices in investment banks, or industry or functional practices in consulting firms exemplify such networks (Bryan and Joyce 2005, 2007).

Third, the organization needs to build on standards. In network theory, large networks can be created only by building on a standard, such as the HTML standard in the Internet or the GSM standard in mobile telephony. Standardization decreases the level of ambiguity, increases predictability, and allows networks to function more effectively.

In our context, standardization means using replicable models for self managed performance cells (such as a standard country organization), standardized job descriptions, standardized job profiles, standardized approaches for key processes (the way customer research is done at Procter & Gamble is highly standardized, for example), and so forth.

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Corporate functions such as finance, human resources, information technology, or sourcing play an important role in developing and enforcing standards, such as corporate policies, standardized functional job profiles and career paths, standardized functional processes such as the performance management process (for example, target setting, budgeting, controlling, and so on), and the talent development processes (for example, recruitment, appraisal and rewards, development and training, and so on).

To continue‌

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Scott Keller & Colin Price

Beyond Performance

BUY NOW

How Great Organizations Build Ultimate Competitive Advantage Scott Keller & Colin Price 978-1-1180-2462-1 • Hardback • 280 pages July 2011 • £19.99/€24.00/$29.95

Chapter 1 The Big Idea: Performance and Health In early 2004, the Coca-Cola Company was struggling.

Since the death of CEO Roberto Goizueta in 1997, its fortunes had suffered a sharp decline. Over that seven-year period, Coke’s total return to shareholders stood at minus 26 percent, while its great rival PepsiCo delivered a handsome 46 percent return. Two CEOs had come and gone. Both had overseen failed transformation attempts that left employees weary and cynical. A talent exodus was under way as leaders in key positions sought to join winning teams elsewhere.

At this less than auspicious moment, enter Neville Isdell.

As vice chairman of Coca-Cola Hellenic Bottling Company, then the world’s second largest bottler, he had enjoyed a long and successful career in the industry. Since retiring from that role he had been living in Barbados, doing consultancy work and heading his own investment company. However, the opportunity to lead the transformation of one of the world’s iconic companies was a powerful lure, and he was soon installed in the executive suite at headquarters in Atlanta.

Isdell had a clear sense of what needed to be done. The company had to capture the full potential of the trademark Coca-Cola brand, grow other core brands in the noncarbonated soft drinks market, develop wellness platforms, and create adjacent businesses. But how could he follow these paths to 15

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growth when his predecessors had failed?

Experience told him that focusing solely on improving performance wouldn’t get Coke where it needed to be. There was another equally important dimension that wasn’t about the performance of the organization, but its health. Morale was down, capabilities were lacking, partnerships with bottlers were strained, the company’s vision was unclear, and its oncestrong performance culture was flagging.

Just a hundred days into his new role, Isdell announced that Coke would fall short of its meager third- and fourthquarter target of 3 percent earnings growth. “The last time I checked, there was no silver bullet. That’s not the way this business works,” Isdell told analysts. Later that year, Coke announced that third-quarter earnings had fallen by 24 percent, one of the worst quarterly drops in its history.

Having acknowledged the shortfall in performance, Isdell ploughed onward, launching what he called Coke’s “Manifesto for Growth.” This outlined a path to growth showing not just where the company aimed to go, but what it would do to get there, and how people would work together along the way.

Working teams were set up to tackle performance-related issues such as what the company’s targets and objectives would be and what capabilities it would require to achieve them. Other teams tackled health-related issues: how to go back to “living our values,” how to work better as a global team, and how to improve planning, metrics, rewards, and people development to enable peak performance. The whole effort was designed through a collaborative process. As Isdell explained, “The magic of the manifesto is that it was written in detail by the top 150 managers and had input from the top 400.

Therefore, it was their program for implementation.”

It wasn’t long before the benefit of addressing performance and health in an integrated way became apparent.

Shareholder value jumped from a negative return to a 20 percent positive return in just two years. Volume growth in units sold increased from 19.8 billion in 2004 to 21.4 billion in 2006, 16

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roughly equivalent to sales of an extra 105 million bottles of Coke per day. By 2007, Coke had 13 billion-dollar brands, 30 percent more than Pepsi. Of the 16 market analysts following the company as of July 2007, 13 rated it as outperforming, and the other three as in line with expectations.

These impressive performance gains were matched by visible improvements on the health side. Staff turnover at U.S. operations fell by almost 25 percent. Employee engagement scores saw a jump that researchers at the external survey firm hailed as an “unprecedented improvement” compared with scores at similar organizations. Other measures showed equally compelling gains: employees’ views of leadership improved by 10 percentage points to 64 percent, and communication and awareness of goals increased from 65 percent to 76 percent.

But the biggest change could be felt in the company’s halls. In a 2007 interview, Isdell noted that “When I first arrived, about 80 percent of the people would cast their eyes to the ground. Now, I would say it’s about 10 percent. Employees are engaged.” When he returned to retirement in July 2008, he was able to hand over a healthy company that was performing well.

The Health of Organizations Neville Isdell’s actions at Coca-Cola revealed his intuitive grasp of a great paradox of management. When it comes to achieving and sustaining excellence in performance, what separates winners from losers is, paradoxically, the very focus on performance itself. Performance-focused leaders invest heavily in those things that enable targets to be met quarter by quarter, year by year. What they tend to neglect, however, are investments in company health—investments in the organization that need to be made today in order to survive and thrive tomorrow.

Perhaps surprisingly, we have found that leaders of successful and enduring companies make substantial 17

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investments not just in near-term performance-related initiatives, but in things that have no clear immediate benefit, nor any cast-iron guarantee that they will pay off at a later date. At IT and consultancy services company Infosys Technologies, for instance, chairman and chief mentor N. R. Narayana Murthy talks of the need to “make people confident about the future of the organization” and “create organizational DNA for longterm success.”

So why is it that focusing on performance is not enough— and can even be counterproductive? To find out, let’s first look at what we mean by performance and health.

Performance is what an enterprise delivers to its stakeholders in financial and operational terms, evaluated through such measures as net operating profit, return on capital employed, total returns to shareholders, net operating costs, and stock turn.

Health is the ability of an organization to align, execute, and renew itself faster than the competition so that it can sustain exceptional performance over time.

For companies to achieve sustainable excellence they must be healthy; this means they must actively manage both their performance and their health. Our 2010 survey of companies undergoing transformations revealed that organizations that focused on performance and health simultaneously were nearly twice as successful as those that focused on health alone, and early three times as successful as those that focused on performance alone.

High performance is undoubtedly a requirement for success. No business can thrive without profits. No public sector organization can retain its mandate to operate if it doesn’t deliver the services that people need. But health is critical, too.

No enterprise that lacks robust health can thrive for 10, 20, or 50 years and beyond.

In fact, we would argue that strong financial performance can have a perverse effect: it sometimes breeds a degree 18

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of complacency that leads to health issues before long. In the months before the 2008 economic crash, the financials of most banks were at record highs. Similarly, oil at record prices of more than US$200 per barrel led the oil majors to declare record profits. As it turned out, this didn’t mean that the banks and the oil companies were in the best of organizational health.

The importance of organizational health is firmly supported by the evidence. When we tested for correlations between performance and health on a broad range of business measures, we found a strong positive correlation in every case.

For example, companies in the top quartile of organizational health are 2.2 times more likely than lower-quartile companies to have an above-median EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, 2.0 times more likely to have above-median growth in enterprise value to book value, and 1.5 times more likely to have above-median growth in net income to sales. Across the board, correlation coefficients indicate that roughly 50 percent of performance variation between companies is accounted for by differences in organizational health.

The results from our large sample of companies are mirrored by the results within individual organizations. At a large multinational oil company, we analyzed correlations between performance and organizational health across 16 refineries.

We found that organizational health accounted for 54 percent of the variation in performance.

So strong is this relationship between performance and health that we’re confident it can’t have come about by chance.

We’d be the first to admit that correlations need to be treated with caution. Take an example: education and income are highly correlated, but that doesn’t mean that one causes the other. It’s just as logical to argue that a higher income creates opportunities for higher education as it is to argue that higher education creates opportunities for a higher income (and even if it does, we can’t infer that everyone who gains more education will have a higher income).

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But our argument doesn’t rely solely on correlations. On the strength of our research and analysis, we assert that the link between health and performance is more than a correlation, and is in fact causal. We argue that the numbers show that at least 50 percent of your organization’s success in the long term is driven by its health, as we see in Chapter 2. And that’s good news. Unlike many of the key factors that influence performance—changes in customer behavior, competitive moves, government actions—your organization’s health is something that you can control. It’s a bit like our personal lives. We may not be able to avoid being hit by a car speeding round a bend, but by eating properly and exercising regularly we are far more likely to live a longer, fuller life.

To shed more light on this causal link, here’s an anecdote from our own experience. At McKinsey, we hold an internal competition called the Practice Olympics to develop new knowledge. A “practice” is a group of consultants dedicated to a specific industry (such as financial services) or function (such as strategy). In the Practice Olympics, teams of consultants compete to develop new management ideas and present them to a panel of judges at local, regional, and organizationwide heats. In 2006, the topic of performance and health made it through to the last round.

A few days before their final presentation, the performance and health team decided to add in an extra ingredient. Rather than drawing conclusions from a retrospective view of performance and health at various organizations, they asked themselves, “If we look at the health of today’s highperforming companies, what does it tell us about their prognosis for performance in the future?” After reviewing publicly available information about Toyota, the team concluded that it would face performance challenges within the next five years.

What were the reasons for this seemingly unlikely verdict?

The team noted that Toyota’s strong focus on execution meant that its organizational health was partly driven by how well it developed talent in key positions—something that was likely to come under strain before long because of the way it was 20

Scott Keller & Colin Price

pursuing performance.

In 2005, Toyota had set itself the aspiration to overtake General Motors as the world’s largest carmaker. Renowned for its manufacturing expertise, the company had developed unusually close collaborations with suppliers during decades of shared experience. But this new aspiration would force it to expand so rapidly that it was hard to see how its supply-chain management capability could keep up. The company would have to become increasingly dependent on new relationships with suppliers outside Japan, yet it didn’t have enough senior engineers in place to monitor how these suppliers were fitting into the Toyota system. And those engineers it did have wouldn’t be able to give new suppliers a thorough grounding in how to do things the Toyota way in the limited time available.

In front of the judges at the finals of the 2006 Practice Olympics, the team put their stake into the ground. Toyota, with its proud reputation for building quality into its products at every step, was likely to have health issues that would affect its medium-term performance. Having sat through a day of novel ideas, the panel of judges reacted with outright disbelief. Toyota had just posted a 39 percent increase in net profit largely driven by U.S. sales, and appeared to be on a roll.

One of the judges remarked that the team’s prediction was “provocative, but completely ridiculous.”

Fast forward to 2010, and Toyota was in the throes of recalling a number of models on safety grounds. So serious was the situation that its president Akio Toyoda was called before the U.S. Congress to offer an explanation and an apology for the defects. The general consensus on the reasons for the breakdown in quality was in line with the turn of events that the team had foreseen four years earlier.

That organizational health matters is repeatedly borne out by leaders’ testimonies. Larry Bossidy, former chairman and CEO of Honeywell and Allied Signal, comments that, “The soft stuff—people’s beliefs and behaviors—is at least as important as the hard stuff. Making changes in strategy or structure by 21

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itself takes a company only so far.” Don Argus, retired chairman of BHP Billiton, suggests the key to long-term success is to “mobilize and develop our people to unleash their competencies, creativity, and commitment to get things moving forward.” We could fill a chapter with similar quotes from virtually every successful leader we have spoken to.

The notion that organizational health matters as much as performance makes intuitive sense when we consider that ultimately it isn’t organizations that change; it’s people. Take people away and the life-blood of the organization is gone, leaving only the skeleton of infrastructure: buildings, systems, inventory.

Because getting and staying healthy involves tending to the people oriented aspects of leading an organization, it may sound “fluffy” to hardnosed executives raised on managing by the numbers. But make no mistake: cultivating health is far from a soft option. As the co-founder of Fast Company, William C. Taylor, observed in his book Practically Radical: “The truth is, the work of making deep-seated change in long-established organizations is the hardest work there is.” Nor should health be confused with other people-related management concepts such as employee satisfaction or employee engagement.

Organizational health is much more profound and far-reaching. It is about the extent to which your organization is able to adapt to the present and shape the future faster and better than your competitors can. In that sense, health encompasses all the human elements required to achieve sustainable success.

To continue…

22

Dov Seidman

How

BUY NOW

Why How We Do Anything Means Everything, Expanded Edition Dov Seidman 978-1-1181-0637-2 • Hardback • 384 pages November 2011 • £18.99/€22.40/$27.95

Chapter 1 From Land to Information Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?

—T. S. Eliot Sometimes, to look ahead we must look back, in this case, way back, to feudal Europe circa 1335 A.D. In the 1330s, England needed wine. It needed wine because in the century before, Norman fashions had become all the rage and your average noble Joe had given up his daily pint of beer for a glass of vin rouge. It needed wine because wine provided vitamins, yeast, and calories to get the English through the long winters. And it needed wine because, well, wine is fun.

Given that England was too cold to grow a decent grape, the English required a system of foreign exchange to get their spirits from France. They traded English fleece to Flanders for Flemish cloth (the good stuff at the time), then brought that to southern France to trade for the fruit of the vine. Luckily, the English controlled both Flanders and Gascony (on the west coast of France) at the time. Thus they were able to trade freely, transport safely, and drink to their hearts’ content. For these reasons, and a million other feudal details, the French hated the Brits. In 1337, they attacked Flanders to regain control of the mainland, beginning the Hundred Years’ War, which 23

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really lasted 116 years until 1453, when the Brits were finally expelled from continental Europe and went back to drinking beer, a habit they largely retain to this day.

What does all that have to do with us, doing business in a high technology information age? Well, beer is not the only habit that has hung around since the Middle Ages. Back then we were a land-based world, and the people who controlled more high-value land than anyone else ruled. Land is a zerosum game: The more I have, the less you have; and the more I have, the more powerful I am relative to you. Land meant crops, and land meant rent from serfs—tradesmen, farmers, and craftspeople—who created the goods and consumables that drove the economy. There was a one-to-one correlation between the most powerful people and the ones who had the most land. To this day, Queen Elizabeth remains one of the richest people in the United Kingdom based on her family’s landholdings. In a time of finite resources, feudal nobility learned that to succeed and gain more power, they needed to protect and hoard what they had. They built castles with moats around them to protect their fiefdoms, conquered everything they could, and built their wealth one furlong at a time, habits that served them well for centuries.

Fast-forward a few hundred years to the birth of the industrial revolution. The invention of machines, powered mainly by the steam engine, brought a host of innovative ways to make things. The rate and scale of manufacturing increased exponentially. A savvy entrepreneur could suddenly massproduce goods efficiently and bring them to market at lower prices than his craft-guild cousin. Machines created a systematic way to get rich relatively quickly. One no longer needed a lifetime to amass wealth or had to risk a dangerous voyage in search of treasure. Anyone with money to invest could identify cutting-edge inventions, build an efficient factory to make them (or make with them), and take market share from his old-world rivals. Initiative and innovation became wealth, and old gave way to new, all powered by a new investor class able to make money with money. In 1776, Adam Smith wrote The 24

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Wealth of Nations, and capitalism was born. The word capital, by the way, comes from the Latin word capitalis, meaning head.

Under capitalism, you could use your head to get ahead.

As we shifted from land to capital as the engine of wealth, however, the zero-sum mentality of feudal times remained.

Capital, too, is finite, and the more capital I had the less you had. With more, I could innovate, expand, and do things that you could not. Capitalists developed habits of power, certain rules of thumb about how to succeed in the new economy.

When we had stuff, we hoarded it; we did not share. We did not give it away; we meted it out and only for high returns. We extracted interest. For hundreds of years, assets meant power, and to succeed we controlled them zealously. Generally, we built a fortress around our holdings and defended them against all invaders. We dominated markets, protected trade secrets, and made sure everything we did received a patent or copyright. We could also control information flow to the market, and so developed a host of one-way communication habits to control how it viewed us. We invented the press release, perfected the arts of messaging and spin, and learned to divide and conquer, telling one thing to Customer A in one market and something different to Customer B in another. Company structures mirrored these impulses with command-andcontrol structures and top-down hierarchies. The habits of fortress capitalism soon permeated every facet of enterprise.

LINES OF COMMUNICATION Let’s pause in our brief rush through history to note a couple of specific industrial age events whose significance to our discussion will become quickly apparent. With the coming of the telegraph to the United States in the mid-1850s, some savvy entrepreneurs tried to strike it rich by stringing up thousands of miles of copper cable connecting both the established mercantile centers of the East and the rapidly developing Midwest. In their helter-skelter pursuit of wealth, the enterprise produced a glut of transmission capacity without the market to sustain the infrastructural costs of its installation.

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Prices collapsed, as did the fortunes of those who invested.

Call it the dot-dash explosion. Suddenly, the cost of transmitting a word of text dropped to a then-unheard-of penny per word. This leap in connectivity and economy had some unintended consequences, as journalist Daniel Gross reported in Wired magazine: “Reporters could file long stories from the Civil War battlefields, fueling the great newspaper empires of William Randolph Hearst and Joseph Pulitzer. Likewise, the spread of the ability to send cheap telegraphs spurred a national market in stocks and commodities and made it much easier to manage international business.� These were world-altering developments. Half a century later, American Telephone and Telegraph extended that network dramatically when it introduced the telephone, although they were savvy enough to protect themselves by soliciting monopoly protection from the U.S. government in 1913, thus assuring profitability. The telephone was the telegraph on steroids, and its impact on business was similarly huge.

Fast-forward to 1994, and reflect on the birth of the information age. Technology again allowed multifold leaps in the way we did things. Opportunity was everywhere, and though few had a clear vision of where it would lead, inventions, products, and processes made things possible that were previously only a dream. Once again, entrepreneurs jumped in all over the place. A host of entrepreneurs (seemingly ignoring the lessons of the dot-dash era) invested heavily, laying fiber-optic cable around the world. Fiber-optic cable provided a quantum leap in transmission capacity from the copper cable originally installed by Ma Bell and her telegraph brethren. A single pair of optical fibers can carry more than 30,000 telephone conversations for distances of hundreds of kilometers, whereas a pair of copper wires twice as thick carries 24 conversations about 5 kilometers. When you apply new technologies like wavelength division multiplexing (WDM), fiber capacity increases by up to 64 times. With the new technologies on the horizon, scientists believe fiber-optic cable’s theoretical transmission capacity to be infinite. Laying fiber-optic cable was like replacing every bathroom faucet with something the 26

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size of a missile silo. Suddenly, total global electronic communications consumed just 5 percent of transmission capacity. Transmission prices again collapsed (along with a lot of the companies hatched with the idea of getting rich quick on the back of this new technology), and we found ourselves in a world in which information flowed around the world instantly and cheaply like light through a darkened room.

GETTING FLATTENED This changed everything. Information, unlike land and capital, is not zero-sum; it’s infinite. The more I have, the more you can have, too. And, unlike money, it is elastic; a dollar is worth a dollar no matter how much you desire it. Knowledge, in contrast, becomes more valuable directly in proportion to your need or desire for it. If you were told that you had a disease, for instance, you would pay much more for the information to cure it than you would if you were healthy.

In the days of fortress capitalism, a professional class of lawyers, doctors, accountants, and other gatekeepers of knowledge took advantage of information’s elasticity and profited from it in two significant ways: They hoarded knowledge (like any other commodity) and meted it out in small doses for high fees (typically, to people who really needed it because they were in trouble, ill, or their metaphoric houses were otherwise on fire). Simultaneously, they built indecipherably specialized language and complex codes—like legalese, the tax code, and other “fine print”—as barriers to keep people from gaining easy access to what they knew. This increased their value. The more someone needed certain information, the more they were willing to pay a specialist to explain it.

The wired world, by conducting information so quickly and cheaply, in contrast removed the layers between individuals and knowledge, making the professional specialist somewhat less valuable and the information itself more so. The unit cost of information dropped dramatically, from the $300 you might pay a private investigator to locate a deadbeat dad, for instance, to the $50 or so you might spend to do a nationwide 27

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online records search yourself. Power and wealth shifted from those who hoard information to those who could make it available and accessible to the most people.

This simple fact makes the habits of fortress capitalism obsolete. With the ascent of information as the engine of commerce, power has shifted to those who open up, who share information freely. The young titans of the information economy—Yahoo, Google, Amazon, eBay—understand that it is no longer about hoarding, no longer about creating secrets, no longer about keeping things private; it is about reaching people. Google, now a company with one of the largest market capitalizations in the world, trumpets its corporate mission as nothing less than “to organize the world’s information and make it universally accessible and useful.” Think about it: a multibillion-dollar enterprise organized around giving stuff away. Amazon.com also gives it away: not its products—it sells books and other stuff, just like thousands of others—but its knowledge. Its success lies in the novel and inventive ways it has developed to share information. Wish Lists, Search Inside!, and Listmania Lists use information to powerfully connect Amazon customers in common interest communities.

EBay takes this idea a step further, organizing its entire market into a self-governing community based on the free flow of information about its users. The new information-based economy affects everyone, not just those in the information business. Every business, in almost every industry, has undergone a major transformation in how it accomplishes its goals. Manufacturers no longer employ assembly-line workers; they employ trained knowledge workers who can keep the automated manufacturing systems running.

Pulitzer Prize–winning New York Times journalist Thomas L. Friedman, in his seminal book The World Is Flat, comprehensively details the global effects of this newly unfettered flow of information. He describes some of the unprecedented possibilities suddenly available to us, many of which are being exploited by the business world: new paradigms of collaboration, specialization, supply and distribution, and expansion of 28

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core competencies. We can partner, “plug and play,” and work together in totally new ways because we can share information as never before.

Collaboration itself—our heightened ability to connect— serves as an engine of growth and innovation. Sharing not only drives the relationships companies maintain with customers, it also drives the companies themselves. Friedman details many forward-thinking companies pursuing new business paradigms to exploit this new reality: UPS uses the efficiency of its shipping system to run the repair center for Toshiba less expensively than Toshiba can itself; call centers in Bangalore seamlessly provide Dell Inc. computer customers vital product support; housewives from the comfort of their own homes in Salt Lake City interface directly with JetBlue Airways’ central booking computers to take and process reservations.

Clearly, the maglev bullet train of zeros and ones has left the station and no one knows where it will stop.

Friedman’s macroeconomic and social analysis of our newly “flat,” interconnected world presents a vision of the forces reshaping global business in the twenty-first century.

The free flow of information significantly changes the way internal business units perform and are governed, and how individuals work together every day.

Fading away are the days of the vertical silo model, when departments and programs within a corporation ran independent fiefdoms organized in top-down, command-and-control hierarchies in the spirit of feudal systems. Increasingly, our typical workday involves relating to people of relatively equal status in an ever-evolving array of teams and partnerships between units throughout the globe. Since knowledge allows people to act, companies that can instantly deliver more highvalue information to their workers can enable more of them to act on it.

Companies are flattening, like our world, so that many activities that were once the province of one department are now everyone’s job. In 2005, for example, Computer Associates 29

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International, Inc., a company struggling to rehabilitate itself after being tainted by scandal, product deficiencies, and management problems, eliminated all 300 of its customer advocate positions worldwide. CEO John Swainson explained that the goal was to make the company’s sales workers “more accountable,” but the underlying message was clear: Advocating for the customer is no longer the special responsibility of customer advocates; it is now a part of everyone’s job description. In company after company, managers are eliminating so-called “Centers of Excellence” and “Centers of Innovation,” making these jobs the province of all workers. Everyone now must increase company excellence and everyone must innovate. How can you make a Wave of innovation if only the 20 or so people in your Skunk Works stand up?

As traditional job silos break down and become horizontal, command-and-control hierarchies begin to lose their relevance. A new model emerges: connect and collaborate.

To succeed in this new model, Workers and companies alike need to develop new skills and harness new powers within themselves. Companies—and the people who comprise them— need to recontextualize how they do business. Individuals must develop new approaches to the sphere of human relations. Both companies and employees must learn to share in whole new ways.

The world has become even more like the game of chess.

Every piece on a chessboard is highly specialized, with virtues and vices, strengths and weaknesses, assets and liabilities.

Some move diagonally and some move straight; some roam free and unfettered while others are tightly regimented. But, with a few exceptions, you can’t typically achieve checkmate with fewer than three pieces. Most accomplishments in chess are team-based; only when you position pieces properly—and in communication with one another—do they start to win. Two rooks, if communicating, are very powerful, even if they are very far apart; without close communication, rooks are far less powerful. Business is now much more like that. Success depends on how people of diverse backgrounds and skills 30

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communicate with and complement one another. In a connected world, power shifts to those best able to connect.

Six hundred years ago, people succeeded with barter arrangements on street corners. Today, most business takes place in formalized organizations; a corporation, for the most part, is nothing more than a society of individuals who share a common interest to get something done. (The corporation itself is for the most part a legal fiction. Many of them are incorporated in Delaware, but few of us commute to Delaware every morning, do we?) While not everyone works in a company—some people are independents: accountants, contractors, agents, consultants, entrepreneurs, and the like—everyone working in the world of exchange and commerce needs to connect with others, be they customers, clients, vendors, suppliers, team members within our companies, or subcontractors.

No man or woman, as poet John Donne famously said, “is an island, entire of itself”; we are all part of a larger landscape of people, because most of what we do cannot be done alone.

I cannot accomplish anything by myself. I find myself a member of an organization. I find myself in a marketplace, competing, trying to do something that depends on other people. That is quite a place to find yourself. It stands to reason that, in such a world, your success will depend on your ability to relate to others in powerful ways. The information economy places new emphasis on how we bridge the spaces between us. How do we reach out? How do we create strong synapses capable of making our action potentials real? With the fundamental shift from land to capital to knowledge and information as the currency of business, we’ve seen a concurrent shift from the power of command-and-control hierarchies to the power of collaborative, horizontal effort. The necessity to work together like pieces on a chessboard places a new premium on our ability to conduct ourselves successfully in the sphere of human affairs.

More profoundly than just getting things done, strong connections with others represent a value unto themselves.

Relationships lie at the heart of who we are as humans; they 31

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give our lives meaning and significance. When we die our headstones seldom read SYLVIA JONES, 1960–2042, VP OF STRATEGIC PLANNING AND IMPLEMENTATION. MADE THE NUMBERS 16 QUARTERS IN A ROW. Instead, we write STAN SMITH, BELOVED HUSBAND, FATHER, BROTHER, UNCLE. HE MADE THE WORLD WARMER WITH HIS SMILE. Though our jobs may make us wealthy, our relationships give us lasting value and enduring worth. Building stronger relationships, then, can lead to more than success: It can lead to a kind of significance.

To continue…

32

Jennifer Clark

Mondo Agnelli

BUY NOW

Fiat, Chrysler, and the Power of a Dynasty Jennifer Clark 978-1-1180-1852-1 • Hardback • 392 pages December 2011 • £19.99/€24.00/$29.95

Chapter 1 The Scattered Pieces A short time before he died, Gianni Agnelli had asked his younger brother Umberto, who had come to visit him every day at Gianni’s mansion on a hill overlooking Turin, to do something very difficult. Umberto said he needed to think about it. Now, at the end of January 2003, Umberto had come to give Gianni an answer.

Gianni was confined to a wheelchair, spending his final days in his study. He had once found solace looking out of the window onto his wife Marella’s flower gardens below, especially his favorites, the yellow ones. But now it was winter.

Gianni looked out at the city of Turin, which was visible across the river through the bare trees. Street after street stretched out toward the horizon in the crisp January air, lined up like an army of troops marching to meet the Alps beyond. It was a clear day, and he could see Fiat’s white Lingotto headquarters, as well as the vast bulk of Fiat’s Mirafiori car factory on the far side of the city. The factories had been built by their grandfather, Giovanni Agnelli.

Gianni wouldn’t admit to his family that he was dying, but they all knew.

Gianni had always thought he would die a violent death.

He had broken his two legs a total of five times. He had fought in World War II, and had lived through the terrorism of Italy’s 33

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anni di piombo, or years of lead. He had pushed his body and mind to the limit repeatedly. And yet now here he sat, cocooned in the soothing beauty of Villa Frescot’s flowered wallpaper, worried about Fiat.

Umberto was shown into the room by Bruno, the butler. He walked across the antique rug, which had a threadbare patch in front of the chair, and sat down next to Gianni.

“I want you to accept the chairmanship of Fiat after I go, as I asked you a few days ago,” Gianni said.

In normal times, being chairman of Fiat would have been more of a privilege than a duty. It was Italy’s largest industrial group, a big employer, and enjoyed huge political clout. As Fiat chairman, Umberto would find journalists hanging on his every word, and heads of state would be obliged to visit him when they came through Italy. But this was not a normal time.

Fiat’s car business was bleeding money. It looked unfixable.

And, worse yet, both the company and the country seemed to have lost their pride in the Agnelli-owned group.

Umberto, who was 68, knew there was no way he could refuse, although part of him wanted to. He had been left fatherless as an infant when their father died in an accident, and Gianni, 13 years older than Umberto, had been more a parent than a brother to him. The two men were almost mirror opposites—Gianni a restless globe-trotter, Umberto a family man—but they shared a sense of duty toward the company that made it come above anything else, certainly above any personal considerations. If Fiat was going to go down in the storm, Gianni wanted an Agnelli on deck, and Fiat’s current chairman, Paolo Fresco, was not a family member. It was the responsible, dutiful thing to do.

The pair fell silent, both lost in thought.

Gianni’s request to Umberto was calculated. In just over two years’ time, Fiat’s creditor banks could call in a three-billion-euro loan made in 2002 and take a majority stake in Fiat if the Agnellis were unable to repay. Gianni had no illusions that 34

Jennifer Clark

Fiat could repay, but he refused to resign himself to the banks becoming the largest shareholder of the company founded by his grandfather. The family’s chances of keeping the banks in line—or even keeping control of the company—were better if Umberto was chairman than if the company was run by a manager found from outside, Gianni figured.

In theory, Umberto was entitled to turn Gianni down. He certainly had more than enough reason. Gianni had promised him the chairmanship in 1987, when they had both worked at Fiat together. The idea was that Umberto would eventually step into the top spot. But in 1993, Umberto was forced out in a power struggle with Fiat managers and Mediobanca, Fiat’s main bank, without Gianni lifting a finger to defend him. The memory of those days still smarted for Umberto.

Moreover, Umberto and Gianni disagreed about Fiat’s car business. Gianni had passed up many chances to sell it, unable to part with his grandfather’s creation. Umberto, who since leaving Fiat had managed the family’s nonauto investment company, was more pragmatic and had made no secret about his view that the family needed to reduce its exposure to the money-losing car business. He had also told Gianni many times he thought Fiat Auto, the car unit, was badly managed. But Gianni’s views were the only ones that counted. The Agnelli family had operated on the principle that “only one person can rule at a time,” adopting a favorite saying of the kings of the House of Savoy, Italy’s royal family up until 1946, after the end of World War II. So the views of Umberto, who was named after the Savoy crown prince, were brushed off.

Umberto did not possess Gianni’s charisma or his love of the good life, preferring to eat dinner at home with his family rather than flitting about from one residence to another by helicopter, like Gianni did. He did not possess Gianni’s swept-back hair, stunning smile, high forehead, or aquiline nose. Umberto’s long, thin face would pass unnoticed in a crowd, and his smile was sweet rather than stunning. But both possessed a gritty sense of discipline. The aura of wealth and privilege that surrounded Gianni and the rest of the Agnellis 35

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belied the street-fighting spirit of the dynasty’s founder, Giovanni Agnelli, a former military officer who won himself a place of honor as one of international capitalism’s original robber barons.

Umberto could have told his dying brother that Fiat Auto was too small and too badly managed to survive. In the absence of the right conditions, which were lacking, he favored selling it to Fiat’s U.S. partner, General Motors, which Fiat was entitled to do under the terms of a 2000 contract. In a few months, Fiat would announce its biggest-ever loss, 4.3 billion euros. Umberto could have told Gianni that he didn’t want to be the one with his face in the papers that day. And he could have said he didn’t want to have to tell the family that it would get no dividend for 2002.

Last but not least, Umberto could have pointed out that taking the helm at Fiat would mean he would need to find someone to replace himself at IFIL Group, the family investment company. He had no one. The month before, he had had a painful falling-out with his longtime lieutenant, Gabriele Galateri, a victim of Fiat’s downward spiral. If he took over at Fiat, Umberto would be terribly alone.

But to say no to Gianni would have been the equivalent of betraying his brother, his family, his company, and all that they stood for. Both men idolized their grandfather, and each kept a picture of the old man in his office. Neither could turn their back on the family legacy.

“I’ve thought it over, and have decided it is my duty to honor your request. Va bene, Gianni,” he said, his thin face looking even thinner.

Gianni was visibly moved.

“Thank you, Umberto,” he said. “I am very happy.”

Umberto knew he had one last chance to fix the company. He had the three billion euros from the banks. He could convince the family to put up more money. And if he could cut costs and find a good manager, he might be able to make 36

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it work.

It was worth a shot.

♦♦♦♦ On January 24, 2003, while it was still dark, Umberto called Italian President Carlo Azeglio Ciampi and told him that Gianni was dead. It was announced publicly at 8 a.m. In Fiat factories, loudspeakers relayed the news to workers on the floor, and at Mirafiori, once Europe’s largest auto plant, the production lines halted. At Turin’s city hall, flags were lowered to half-mast.

“He created work . . . he gave us jobs,” a Fiat employee, Domenica Zaccuri, told a newspaper reporter as she wiped away tears, standing outside the Mirafiori gate shortly after Agnelli’s death.

Gianni Agnelli had lived many lives, and not one of them could be called ordinary. Born into one of Europe’s most powerful industrial dynasties, he fought both for Mussolini and for the Allies during World War II before embarking on a career as one of Europe’s wealthiest and most talked-about playboys in the 1950s. When it came time to choose a mate, he married an internationally acclaimed beauty, tastemaker, and princess, Marella Carraciolo. He grew elegantly old as an industrialistcum-elder statesman, but never truly settled down.

Fiat’s downward spiral in 2002 seemed to mirror Gianni Agnelli’s physical decline as he shuttled back and forth between Turin and New York fighting off prostate cancer.

“When my father died, it seemed as if the springs of a watch broke, and all of the pieces were scattered,” Margherita said years later.

As leader of the family, Umberto faced what seemed to be an impossible task: fix the family car business. Selling it to General Motors was against Prime Minister Silvio Berlusconi’s wishes, Umberto knew, as well as against Gianni’s. But he also knew he might not be capable of fixing the business.

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The day Gianni died the sky was a deep, brilliant blue and the snow-covered Alpine peaks gleamed in a blaze of white on the horizon near Turin, lit up as if by spotlights, just a few minutes’ drive from the city.

Umberto drove up to Villa Frescot to say a final good-bye to his brother, and then to a family meeting at Fiat’s history museum, housed in the very first factory where his grandfather and his partners had set up shop. Formerly on the outskirts of the city, now it was surrounded by buildings, such as the hideous modern construction that housed La Stampa, the Turin daily paper owned by the Agnellis, with its satellite dishes poking out from its roof. Umberto parked his car in a spot behind a row of other dark-colored cars belonging to the rest of the clan. Normally, Umberto would have been cheered by news that day that a new small car was rolling off the assembly line in Tychy, Poland, where Fiat had just revamped the factory that, a few years later, would produce the wildly popular new 500 that would become an icon of Fiat’s recovery.

But today was different.

The meeting of Giovanni Agnelli & C. (GA&C), the family’s limited partnership, had been scheduled for some time. The limited partnership was one of the secrets of why the Agnelli dynasty had lasted over one hundred years. Gianni didn’t share power with the rest of the family. Most family members belonged, but there was no group decision making. He could consult with others, but decisions were his to make. It kept the shareholders, which numbered over 80 people, from fighting.

Fiat was a family-controlled company, but only one person held the family’s controlling stake. That person, for nearly 60 years, had been Gianni, and GA&C had been his command center.

While other family business dynasties, like the Barings, the Guggenheims, the Rothschilds, and the Rockefellers, may have lost the prominence they once held in their industries, the Agnelli clan had stayed at center stage in theirs. Year after year, through wars, bombings, the oil crisis, and terrorism, through strikes and booms and busts, they had persevered.

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They were still leaders in their industry, and they continued to have their say in Italy and worldwide. Umberto was proud of his family, of Fiat, and of his brother.

The GA&C partnership was worth about 1.3 billion euros, and its assets consisted of listed holding companies Istituto Finanziario Industriale (IFI) and Istituto Finanziaria di Partecipazioni (IFIL), through which the family controlled Fiat and IFIL’s stakes in other companies.

This year’s meeting had been scheduled before Gianni died, of course. But the company was doing so badly and pressure was so intense that the family had decided to go ahead with the meeting despite the fact that they were in mourning. On that January morning, as the family assembled hours after Gianni’s death, it turned to Umberto to lead. Much of the 40-minute meeting was taken up by red tape and organizational details involving Gianni’s passing. Then Umberto made a short speech.

“In order to reach the final amount of the capital increase planned for later this year, the family needs to put in 250 million euros,” he said, aware that some members would have a hard time coming up with their part. “The family has to do its share. Remember that everything we own, we owe to Fiat. So we owe this to Fiat.”

Umberto did not try to win the family over with a fancy speech; it wasn’t his style. But he didn’t need to. The family respected him. Umberto had dedicated his life to running Fiat and, after he was pushed out, to managing the rest of the Agnelli family holdings at IFIL, and he knew the companies inside out. IFIL’s fat investment portfolio included stakes in Club Méditerranée, French conglomerate Worms & Cie., and department store chain La Rinascente, and provided the family with a steady stream of reliable dividends that offset the wild fluctuations of profitability—and lately, loss—at Fiat. Up until 2000, IFIL’s profits had grown every year for 15 years, and it had paid 82.7 million euros in dividends to IFI, its parent company, in 2000. Umberto deeply loved Fiat. He delighted in 39

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visiting the Fiat design center and Fiat factories, and unveiling new cars at auto shows.

The family approved the plan to name Umberto as Fiat chairman, sending him back to an operating role at the company for the first time since he had been forced out years earlier. The family also confirmed Umberto as head of the limited partnership for the time being. Umberto proposed the capital increase, and the family approved it. The meeting broke up.

“It’s a very sad moment … but the world must go on, and we must continue to manage well,” said Fiat chairman Paolo Fresco, who tendered his resignation the day after the funeral, as he left.

To continue…

40

Bill Roedy

What Makes Business Rock

BUY NOW

Building the World’s Largest Global Networks Bill Roedy 978-1-1180-0476-0 • Hardback • 320 pages April 2011 • £18.99/€22.40/$27.95

Chapter 1 Born in the U.S.A. Ladies and gentlemen, rock and roll.

—John Lack, August 1, 1981 Television was the miracle of my childhood. The reality of moving images being sent through the air into your home was brand-new when I was growing up in Miami, and for me our 12v black-and-white TV set was my escape capsule. My family was struggling; my father was long gone and money was a problem. I can remember being in a grocery store and wondering if we could afford a 17-cent jar of mustard or a loaf of bread for 22 cents. But every night at 7 o’clock, my grandmother, my great-aunt, my mother, my sister, and I would gather in front of our set and be transported to places where people were happy and having adventures and living exciting lives.

Those people on television didn’t struggle to pay the mortgage, or scream at each other, or have to meet an endless series of potential stepfathers. Television was our only respite, and one of the few times I remember hearing laughter in our home.

At 10 o’clock, much too late, my mother and I would sit together and do my homework—with the TV on in the 41

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background. The TV was always on; it brought the whole world into my life. Even as a child I realized that television was magical. As I got older, to please my mother, each week I would memorize the entire TV Guide, and my mother would proudly have me recite the primetime schedule for her friends. Maybe other kids could recite the preamble to the Constitution of the United States, but I could tell you what time and on what channel Have Gun—Will Travel was on.

I loved television. I loved everything about it, and my dream was to work in that industry one day. Even at that age I understood the power of television. It was the ultimate shared experience. Everyone I knew watched TV, and most of us watched the same programs. In school, whatever show was on the night before was almost always a subject of conversation.

I listened to the way the people I knew talked about television and I saw how it affected their thinking. It made an impact on me. Television was important to everyone I knew. I figured that if I was watching, so was everyone else—and television could be my way to connect with those people. If I could work in television, I believed, I would have the ability to influence huge numbers of people. And I might even get to meet the star of Have Gun—Will Travel, Richard Boone!

It did not occur to me that working in television would allow me to watch as communications history was made. I was there at the beginning of the cable-TV industry, the digital television industry, and the miracle of TV everywhere.

I watched as television was transformed from my small black-and-white picture to a 60v 3-D television or a 4v screen on my mobile device with extraordinary clarity. In so many ways television has shaped and changed all of our lives, but in my own life, it has made all the difference. And I certainly never dreamed that one day I would be the person responsible for bringing Beavis and Butt-Head to Russia, or Pimp My Vespa to Italy. Or that I would support dressing the animated children’s character Dora the Explorer in a burka. Or that I would drink moutai with its 53-percent alcohol content with Mongolian cable operators, negotiate contracts with the mayor 42

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of Leningrad, rap with rappers in Saudi Arabia, sing “I want my MTV” with 3,000 Pakistanis in Karachi, and visit Mecca to get permission to launch MTV Arabia. Or that television would allow me to be in Berlin when the Wall came down or in Russia at the birth of capitalism. Or that I would have the privilege and the resources to save many lives by educating young people around the world about the dangers of—and the truth about—AIDS. Or that I would be cited in gossip columns as being engaged to Naomi Campbell, the best-known supermodel in the world. I certainly never dreamed I would find myself dressed as a police officer in a Japanese karaoke bar at 5 A.M. and singing a duet with U2’s Bono—who was dressed as a nurse. But more than anything else, I never expected that together with an extraordinarily young and diverse organization we would build the largest and most successful media network in the world.

With all the attention television gets, with all the glamour surrounding television and the stars it creates, and the immense pleasure it brings to billions of people in every country in the world, the most important thing to remember about the television business is that it is a business and it has to be run as a business. Like any other business, the bottom line is still the bottom line. The problems that I faced in building MTV Networks International were in many ways similar to the problems any business trying to expand throughout the world will encounter and has to overcome. The lessons that I learned can be applied to almost any effort to expand any company into the international market. My business just happens to be more visible than most.

There was a time when an executive at an American company could basically ignore the rest of the world. Many people spent their entire career at one company focusing only on the domestic market. More and more that has become a rarity.

It’s now estimated that the average person will have at least 10 different jobs in his or her lifetime. To become a successful manager in an increasingly global business community it’s absolutely imperative that an executive understand the way the 43

What Makes Business Rock

rest of the world does business. More than ever, as the economic growth shifts from America and Europe to China, India, and the emerging nations, having an international perspective is an absolute necessity.

When I joined MTV Europe in 1989 it was a startup operation. At least once, they had to use a car battery to provide the power to keep the channel on the air. Just before I arrived in London a ferocious windstorm had knocked out all the power in our building, preventing us from transmitting. Much of London had lost power; even the BBC was off the air. Then our security guard, affectionately known as “The Amazing Tony,� had a great idea. He drove his Ford Cortina up to the front window, got a long extension cord, and used alligator clips to attach it to his car battery. We managed to get back on the air before the BBC. But in the more than two decades I spent there, MTV Networks International grew from a single channel broadcasting to a few hundred thousand European households, mostly in Holland and Greece, into a giant media network operating 175 locally programmed cable, satellite, and terrestrial television channels and about 400 digital media properties stretching across 163 countries with a potential audience of more than two billion people.

But let me backtrack. I began working in the industry at HBO in 1979, when television consisted almost exclusively of the three national networks as well as several local channels in each city transmitted through the terrestrial signal, frequencies that were picked up by a rooftop antenna. Cable television was in its infancy. For the most part it consisted largely of mom-and-pop operations strung out across the nation. No one possibly could imagine that it would eventually overwhelm the networks and become a $140-billion-a-year industry. In fact at that time there was considerable doubt it would survive.

The business model made little sense: Television was free and it had always been free, so why would anyone pay for it?

In those early days the most exciting technological advances were color television and the remote control, which allowed viewers to change channels without getting up, therefore 44

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creating the couch potato.

The television business was pretty straightforward in those days. The three major networks essentially had a monopoly and advertisers had limited options if they wanted to reach a mass audience. That wasn’t true only in television; at that time most industries offered consumers only limited choices, from the products manufactured by the Big Three automakers and a few foreign manufacturers to the three popular flavours of ice cream. America was the largest market in the world, and an industry could remain very profitable without offering multiple choices and certainly without expanding beyond our borders.

Since that time waves of new technology have revolutionized the world. The United States is now merely part of the growing global market. Those companies that were slow to recognize and adapt to these changes exist today in a far different form, if they are fortunate enough to still be in business.

Remember U.S. Steel, or Polaroid? In the media world, technology has now made it possible for viewers to choose when and where and how they want to watch the programs of their choice. From the rigid weekly TV Guide schedule I memorized as a kid, the business has progressed to the delivery of programming on demand to any of several devices most convenient for the consumer. Technology is forcing the industry to change more rapidly than at any time in the past.

MTV Networks International (MTVNI) has ridden all of those waves and, while at times it has been a very bumpy ride, we’ve emerged to become, according to the respected BusinessWeek and Interbrand annual study, one of the most recognizable brands of any type and the most valuable media brand in the world. We took the original American MTV concept of delivering music with a creative cutting edge and adapted it to the customs and desires of almost every culture on every continent—with the exception of Antarctica (so far). We’ve adapted our programming to meet the technological changes and the generational shifts. We built our brand country by country; sometimes it seemed like we were doing 45

What Makes Business Rock

it house by house. I’ve watched MTVNI in the tallest building in the world and in a hut in Africa; I’ve watched it in fevalas and I’ve watched it in the desert. We’ve done what few companies in any industry have been able to do: We’ve successfully maintained our global identity while responding to local cultures. The term we’ve used to describe it is “glocal,” meaning think local, act global. That concept has become so common in business it literally is a cliché, but no one can dispute that we were the first company to do it successfully. Ted Turner used to say about Turner Broadcasting, “We were cable before cable was cool,” which I amended and said about MTV around the world, “We were local before local was cool.”

It has not been easy. As with the growth of any business, we have had some tremendous successes as well as some discouraging failures. While building our brand we helped bring down the Berlin Wall, hosted concerts for more than 500,000 people, introduced extraordinary performers to the world—please don’t blame me for the Spice Girls—and made a significant impact in reducing the spread of AIDS and human trafficking. But I’ve also had to make my share of “apology tours.” We have been thrown off the air for a period of time in several different countries and we have made attempts to plant our corporate flag that just didn’t work. For two decades I awoke to a new challenge every day.

MTVNI grew up with the satellite and cable industry. In some countries we helped it grow. There was no business model to follow because no media company had successfully created a worldwide brand. Each day brought a new challenge, a new problem, and usually in a foreign language. But we did something no media company had done before and we did it more successfully than any company has done it since. At MTVNI we wrote the rulebook, and we did it by following one basic principle: Break the rules. The foundation of my business philosophyis that in business there are so many rules and so much authority that if you’re going to get things done you’ve got to break those rules.

To continue…

46

Julie MacIntosh

Dethroning the King

BUY NOW

The Hostile Takeover of Anheuser-Busch, an American Icon Julie MacIntosh 978-1-1181-5702-2 • Paperback •416 pages November 2011 • £12.99/€15.20/$18.95

Chapter 1 The Game Is Afoot There’s a shark in the water, and the shark is InBev. —Anheuser-Busch executive Wednesday, June 11, 2008, was forecast to be hot and sticky in St. Louis, with afternoon temperatures rising well above 80 degrees. None of the Anheuser-Busch executives who pulled into the parking lot of the soccer park in Fenton that morning expected to see much sunlight for the next 48 hours, however. After several decades of overpowering domination of the U.S. beer market, and a history of independence that stretched back more than 150 years, the company was under attack.

Anheuser’s top staffers met often at the soccer park, one of several sites the company owned that were scattered around St. Louis. The Busch name was plastered all over town, in fact, on everything from the beer billboards that lined the city’s highways and bus shelters to the plaques that marked some of its best-loved recreational sites. The St. Louis Cardinals professional baseball team had called Busch Stadium home since 1953. Parents had been shuttling children for years to Grant’s Farm, the Busch family ancestral home turned free–admission zoo. Students at St. Louis University congregated at the Busch Student Center, and 47

Dethroning the King

visitors to the August A. Busch Conservation Nature Center in St. Charles, just outside the city, could even blast shotguns at the August A. Busch Shooting Range.

Less than three weeks earlier, the newspapers had picked up on something that prompted Anheuser-Busch to draw its own arsenal. Global beer giant InBev, the papers said, was preparing to lay siege to Anheuser with an unwanted $ 46.3 billion takeover bid.

Nothing was clear yet; InBev hadn’t actually made a formal offer. The concept alone, however—and the fact that details in the newspaper reports were so explicit—set people afire at Anheuser’s headquarters. Few companies on earth were more evocative of America, with all of its history and iconography, than Anheuser-Busch. Despite the forces working against it, from brewing rivals to alcohol tax–wielding politicians, the company had somehow made itself—and its key brand, Budweiser—as ubiquitous a part of American life as firecrackers and apple pie. If InBev decided to pounce and its takeover effort was successful, the glittering shrines Anheuser had built to itself in St. Louis could come crashing down, along with its supremacy as America’s beer brewer of choice.

Most of America seemed to have never even heard of InBev. The company had grown from a tiny Brazilian brewing outfit into a globe-spanning megalith in an incredibly short period of time by normal business standards. InBev was now based in Belgium, but it was run by an intense, hard-charging group of Brazilians who had consistently gotten what they wanted as they pushed their company further and further up the list of global corporate powers. There could hardly be a more dramatic counterpoint to the gold-plated, history–laden Anheuser-Busch than cold, number-crunching InBev. Arrogance and denial made some Anheuser-Busch executives believe that despite the missteps they had made over time, a takeover would never happen. The company—once the world’s top brewer—had slipped into fourth place because of the insular, America-centric strategy it had espoused in 48

Julie MacIntosh

recent decades, and it now appeared vulnerable. Its corporate planning committee, though, had repeatedly run the numbers and determined that Anheuser-Busch was simply too expensive to buy. The concept seemed too illogical to entertain. How could Budweiser, a beer synonymous with American culture, ever be brewed by a Belgian juggernaut whose executives spoke Portuguese at the office? It was unthinkable.

As days ticked by with no official bid from InBev, sentiment among Anheuser staffers at headquarters arose that this was, yet again, just another one of the rumors that artificially boosted the company’s stock price every few months. It was summer lightning, they thought—all flash but no rain. Still, something felt different this time. One newspaper report had included not just the price InBev was planning to offer but even the code names its Wall Street bankers were using for the project. A few members of the strategy committee—the 17 executives who mapped out Anheuser-Busch’s future—were plagued by an ominous feeling about the whole thing.

Robert “Bob” Lachky, a well-liked executive who was famous in America’s marketing circles for green-lighting Anheuser’s “Wassup?!” ad and the Budweiser frogs, reacted at first to the takeover rumors with a defiant charge of energy.

No bid from InBev had actually materialized, he reasoned, and even if one did, surely a company that pulled the kind of weight Anheuser-Busch did could fend it off. However, a conversation with one of his mentors—a former company executive—over the Memorial Day holiday weekend had abruptly spun him in the opposite direction.

“It’s done. You’re done,” his former colleague had said.

“Come on, man, we can fight this,” Lachky shot back, startled by the man’s conviction.

“You’re done,” his mentor repeated determinedly, explaining that much of Anheuser’s stock was owned by struggling pensions and hedge funds that would gladly take InBev’s money. The markets were in the tank, and a bid from InBev would lock in badly needed gains for anyone who owned the stock.

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“This is a real offer. There’s such sentiment right now that’s going to be used against us,” he said. “The fact that we’re going to be forced to listen to it means that we’re in, we’re done.”

In a way, some staffers were relieved to hear that InBev’s long-rumored bid was on its way. “Maybe this is actually a good thing,” they thought. “It’s finally out in the open. We’re in play now.” Anheuser-Busch had been rumored as a takeover target for years, and battling the persistent speculation had been frustratingly distracting. Now, the company would know exactly which shark in the water was scouting an attack and how much it thought the company was worth. The takeover reports had already boosted the price of Anheuser’s stock, which had gone nowhere since 2002, by more than 8 percent.

If Anheuser could arm itself with the right data, it might even be able to convince investors it was worth more than InBev thought. The company was just starting to get back on its feet again after several rough years.

Positive thinking was only going to go so far, though, for a company that had done almost nothing to protect itself from the increasing threat of a takeover. Some sort of big change was starting to look inevitable. “The scenario you all hope for is that you can beat them off with a stick and be okay,” said Lachky. “But you knew darn well they were going to come back again. This is a matter of time. They’re either going to get us now or they’re going to get us later.”

Fear of the unknown had caused significant fissures within Anheuser-Busch since the reports of InBev’s interest first hit. Staffers had been huddling in each others’ offices at Anheuser’s headquarters, which were perched on a sloping hill just west of the Mississippi River, for muffled but fervent debates about whether they’d all still be standing there in a year’s time.

The company was refusing to comment on the rumors, in part because there was no actual bid on the table. How could it respond when InBev hadn’t actually stepped forward to confirm or deny its interest? Still, that wasn’t enough to appease 50

Julie MacIntosh

the rank and file, who increasingly suspected that top executives knew more than they were letting on. The vacuum of information was causing a real credibility problem.

Douglas Muhleman, head of the company’s brewing operations, faced a particularly frustrating quandary. Brewery workers were looking to him for answers, as their boss and as a member of the agenda-setting strategy committee. The fact was, he and the rest of the committee had little more information than their subordinates did about whether they were actually being hunted. During a routine visit to the company’s brewery down in Houston, Muhleman stood in front of several successive shifts of workers and did his best to calm the crowd as indignant employees ranted about the lack of information. The brewery’s frustrated floor staffers, who weren’t bound by the decorum that dampened criticism higher up the food chain, were getting hot under the collar. Hadn’t they already been slashing costs for a year to make the company more competitive? And what did the Busch family think about all this? Didn’t they control Anheuser-Busch?

“Guys, I’m down here and I’m trying, but I’m telling you I don’t know anything,” Muhleman said, looking out over a roomful of suspicious stares.

To continue…

51

What You Need to Know about Business

What You Need to Know about Business

BUY NOW

Roger Trapp 978-0-85708-115-5 • Paperback • 256 pages November 2010 • £12.99/€15.60/$19.95

Chapter 1 A SHORT HISTORY OF BUSINESS There is nothing new to the realisation that a successful business community is vital to a successful political system. One of the earliest examples of what we now think of as a company was the British East India Company, which was founded by Queen Elizabeth I in 1600 and over the next two-and-a-half centuries became inextricably linked with the growth of the British Empire. Perhaps even more significant were the businesses created at about the same time in the newly colonised North America. Historians cannot quite decide on which came first–Puritanism or Capitalism. But it is clear that the two are closely entwined, particularly in America, where such virtues as subordinating the individual to the group, marshalling resources to achieve a single purpose and a belief in self-help are shared by both creeds.

These early joint stock companies–ventures which raised funds by selling shares to investors who became partners in the enterprise (and thus predecessors to the current quoted companies)–paved the way for the businesses that helped develop the fledgling United States. Among these were railway companies and many types of manufacturing enterprises, which in a short period of time turned a few colonist-farmers into the factory of the world.

Similar developments were taking place in Britain, the birthplace of the Industrial Revolution. By the early twentieth 52

Roger Trapp

century, the geographical spread of some of the businesses mirrored the reach of the Empire, with names such as Cable & Wireless and the now–defunct Imperial Chemical Industries seen as synonymous with British power and influence.

However, for sheer audacity nothing could beat the American businesses. Beefed up by serving a huge home market, the likes of the consumer goods company Procter & Gamble, the conglomerate ITT and the Ford Motor Company became huge players around the world. They used this strength to build up significant subsidiaries and own more businesses around the world than many people realised, but particularly in Europe, long before the more obvious US invasion that led to McDonald’s fast-food restaurants and Starbucks coffee shops appearing in every major city.

At their peak, these businesses were immense–so big that individuals could, and often did, spend their whole career at a single employer. Thanks to mass production and the application of scientific principles of management established by early business leaders, these businesses were effectively giant machines operating in huge factories employing so many workers that whole towns depended upon and grew up around them. They also developed equally enormous offices to house the people supposedly running them. The rows of machinery minders in the factories were matched by lines of typists and other clerical workers in the offices.

What had started out as exciting enterprises had ballooned into huge bureaucracies where few people really knew what they were doing and why, and where conformity ruled.

This is the dull, stultified world of the “Corporate Man”, made fun of in films and novels and analysed in the sociological study The Organisation Man by William H. Whyte.

This cosy world of golf clubs and long lunch breaks came crashing to an end in the 1970s, when a sudden rise in the oil price by the increasingly assertive oil–producing nations of the Middle East challenged the whole basis on which business in countries such as the United States and Britain was 53

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conducted. A serious recession on both sides of the Atlantic paved the way for the arrival of Margaret Thatcher in Britain and Ronald Reagan in America and, with them, a robust “market forces” approach to economics. In the 1980s, a chill wind blew through the boardrooms and across the factory floors of both nations. And, when it was realised that in Germany and Japan, the two nations supposedly defeated in the Second World War, industry was in much better shape, producing better, more reliable products at better prices, a heavy bout of soul-searching set in.

Suddenly, management gurus, notably the charismatic and evangelical Tom Peters, and their theories about “quality”, “excellence” and “customer service” were all the rage. In fact, there were so many theories–often contradicting each other–that they were quickly termed fads and ignored by embattled workforces and management teams alike. This was also the period when service industries began to take over in importance from manufacturing. It was the time of deregulation of the financial markets and the arrival of the “Masters of the Universe” on Wall Street and in the City of London. It was also the era of “yuppie” excess. Although nobody at the time realised it was small beer compared with what was to come in the early years of the twenty-first century, it was still seen as unattractive. It was hard to admit to being a merchant banker in polite society.

Despite, or because of, the emphasis on financial engineering at the expense of real engineering, businesses were in no state to cope with the next big recession, which came in the wake of the first Gulf War in the early 1990s. This led to great swathes of job cuts across whole industries that were euphemistically described as “downsizing” or even “rightsizing”. It also led to a renewed focus on market forces and the arrival of the term “shareholder value”, for a concept designed to improve businesses’ focus on their main purpose–making money, or creating value, for shareholders . Conglomerates were “demerged” and “focus” became the watchword.

Business became a lot more efficient. But it also became a 54

Roger Trapp

lot less enjoyable. The failings exposed by the 1990s recession led to a fresh bout of introspection and the realisation that perhaps business had lost its way.

Some people saw a link between the superiority of Japanese and German goods–particularly in such areas as cars and consumer electronics–and these countries’companies were run differently from the Anglo– Saxon model. In Japan, the concept of a job for life had benefits in loyalty and a readiness to take a long-term view, while Germany had the consensual approach to management common across much of continental Europe where workers’ councils typically had much greater influence than the trade unions in Britain and the United States. However, as time wore on–and Japan and Germany both endured difficult economic periods–the Anglo-Saxon, and, it has to be said, increasingly American, view held sway.

Although some of them drew from other cultures, the gurus and consultants who were growing ever more important in business were largely American. As a result, business premises across the world began to ring with American terms such as “double whammy” and “ball park figure” and managing directors became chief executives or CEOs, a title that Peter Drucker, the guru of gurus, had previously said was peculiar to America.

Some of the analysis of “what went wrong” that followed the early 1990s recession, and the spectacular collapses that accompanied it, took place in Britain. For example, the Cadbury Committee came up with a code on corporate governance that did much to pave the way for the improvements in that area that have followed, while the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) initiated an inquiry that gave rise to the ongoing experiment with “Tomorrow’s Company”.

But it was, of course, in America that business was really born again. Particularly in California and in a small area that came to be known as Silicon Valley. The area, close as it is to 55

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the prestigious Stanford University and its mighty engineering faculty, had long been a centre for business, giving rise to what would become the computer giant Hewlett-Packard and many others. However, it really came into its own when it became the de facto centre of the world’s high-technology businesses. Sure, Microsoft was based in Seattle, a few others came out of the area around Boston and some were even spawned around Cambridge University–Silicon Fen. But the vast majority of the new technology businesses and–more importantly–the new attitudes came out of Silicon Valley.

One aspect of this approach–involving employees or customers in the ownership of the business–had been tried before. Indeed, Britain has at least two long-running success stories in this area–the financial services and retail group the Co-operative Society and the retail company the John Lewis Partnership.

However, it was the first time that a significant group of companies had adopted such an approach. Moreover, it looked so attractive that many other businesses had to start following suit in order to avoid losing their best people.

There has been much comment in recent years about businesses moving away from their original purpose–as expounded by the late Chicago free-market economist Milton Friedman–of being to maximise profits for shareholders.

Companies have been encouraged to look at the interests of stakeholders other than shareholders, to engage in corporate social responsibility, even to look for a new form of capitalism. But what has really made business attractive is that people who previously would not have dreamed of going into commerce suddenly saw it as a way of “making a difference”, of getting things done (roles previously answered by public services) and, above all, of having fun.

Having thrown out the notions of loyalty and paternalism in response to market forces, business is now returning to something similar. Companies now queue up to be included in the lists of the best companies to work for, they constantly 56

Roger Trapp

add to the services they provide for their hard-pressed staff and they encourage them to use mobile technology so that they can work flexibly (critics inevitably say this means working longer). Almost without exception, they are also anxious to stress the good they do in their communities through supporting charities, supplying schools with computers, regenerating rundown areas and the like.

This work hard, play hard approach and almost cult–like devotion to the company that you currently work for harks back to the earliest days of industry, when–just as now–there was a blurring between work and life and a belief that business could change the world. Indeed, Google–towards the end of the first decade of the twenty-first century perhaps the most ubiquitous new company of them all–has been described as “a religion posing as a company”.

It is really not going too far to say that business has become a way of life. Which makes this book all the more important.

That said, most people’s idea of business–unless they are involved in it–is of the sort of large international affairs that attract coverage in the media through takeovers, strikes or involvement in catastrophe. In truth, though, such businesses are the exception. There are many more businesses that do not attract any attention at all.

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What’s Stopping You?

What’s Stopping You?

BUY NOW

Why Smart People Don’t Always Reach Their Potential and How You Can Robert Kelsey 978-0-85708-172-8 • Paperback • 240 pages April 2011 • £10.99/€13.20/$17.95

Part One What is stopping you?

Fear Ask what was stopping me and I can tell you immediately: fear. Fear of failure, in fact. Relationship issues with parents, siblings, teachers and peers can be a cause, as can other traumatic events in childhood–especially ones where we feel demeaned or humiliated. But the fear can build from tiny beginnings into an uncontrollable phobia that can mentally paralyse the sufferer in adulthood. It can also strike us at various stages in our career–even once we are seemingly beyond it or have built up strong confidence in a particular area.

My disastrous investment banking “career” provides a strong example in my own story. A seemingly-confident financial journalist with a strong and detailed knowledge of corporate banking, I caught the eye of a leading corporate bank and, after a protracted interview and assessment process, persuaded them I had the perfect training and background for joining their growing corporate banking team within the investment bank.

Yet once inside the door my behaviour changed. I became fearful that my knowledge was paper-thin and I possessed nothing more than a talent for empty bravado. Of course, this was probably true, but was no different to the majority of 58

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bankers in the room–all with very narrow experience compared to my breadth and strength of knowledge across the corporate banking spectrum (exactly the knowledge required for a corporate banking salesperson, in fact). But having sold myself well during the recruitment process, once a practising banker I became scared of putting a foot wrong–leaving them wondering what had happened to the confident, even cocky, person they’d employed as their next hotshot “originator”.

My role was to originate US$100 million-plus financings for the bank to arrange and distribute to investors. These looked easy when writing about them. I thought we just found a willing borrower, asked for some security (we were looking for trade receivables such as oil shipments), handed over the money and waited for it to come back with interest. But half the banks in London were doing the same, forcing me into one of the scariest margins of the 1990s corporate borrower universe: Russia.

In the mid-1990s businessmen were being gunned down on a daily basis on the streets of Moscow, and my clients–the newly-privatized Russian oil companies–were certainly menacing organizations to deal with. Yet that wasn’t the bit that scared me. In fact, that helped mask my real terror, which was the bank discovering how little I knew about how to structure one of these deals. I couldn’t calculate the volumes of oil required to repay the loan, or establish what volumes had to be where, when, and how they got there. It looked way too complex for my simple brain.

And the fact no one in the bank had this knowledge–we simply took the information on trust from the oil companies– didn’t seem to bother anyone but me, which was a key part of the problem with my banking career. Taking such risks is the nuts and bolts of banking. Yet I couldn’t help visualizing one of about 20 disaster scenarios being played out in various hostile environments somewhere out there in the post-Soviet steppes–all of which would have rendered my banking career over in a puff of public humiliation.

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Blind to office politics Being risk-averse and technically inept should not have meant curtains for my banking career, however. Fear stalked the corridors of the entire bank–as did technical ineptitude, come to that. The ultimate reason for failing as an investment banker was that all those technically-inept and risk-averse bankers prospered by being hotshots at office politics. They had strong judgement regarding where the bank was heading and could make self-enhancing decisions on that basis.

But I was awful at office politics. And I had terrible judgement–based on trying to hide my fears and insecurities rather than focusing on the interests of the bank (or myself)–which led me to trust the wrong people and back the wrong deals.

My behaviour changed to the point where I came across as a fool, and soon started being treated as one. Any deal on my desk looked dodgy for the simple reason it was on my desk, and any new project that came my way soon acquired a distinctly hot–potato feel to it.

Even the transfer to America–sold to me as the “move that could make you”–was no more than turning-out-the-lights on a failing office. The only way I could make it work was by discovering the one entity that would hoover up our loan structures no matter what: Enron.

Yet rather than focus on the skills required to become a competent banker–especially the soft skills such as calculating who could and couldn’t be trusted and recruiting people to my cause–I soon sought a way out of banking. I fell back on my core skill of journalism and started writing about my life in New York, which before long had a greater hold on my imagination, and time, than a banking career that I was rejecting, seemingly before it could reject me.

Emotions and their role in survival I detail the fears and behaviour that destroyed my banking career because they seem odd given that it took some guts to win the job in the first place and that I had obviously been 60

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judged as having the required knowledge and at least the capabilities of learning the trade by those within the bank. Yet, as we shall see, those suffering from fear of failure are often able to take extreme risks in situations where failure is almost certain, while finding themselves paralysed by everyday situations that involve only moderate but often very public risks.

And they are more than capable of changing their behaviour in ways that make failure more likely–all of which makes fear of failure a debilitating and self-fulfilling condition seemingly at odds with today’s career needs.

So how did we get to the point where so many people sabotage their own advancement through such self-harming behaviour? In his book Emotion: The Science of Sentiment (2001), British philosopher Dylan Evans tackles this conundrum by asking the question that, given the fact emotions such as fear and sadness seem to be “hardwired” into humans: why are they so bad for modern careers? Or looking at it the other way: as such emotions seem to offer no economic advantage–in fact, just the opposite–why have they not died out in the process of natural selection?

He wonders why we have not evolved to behave like Spock in Star Trek and judge life’s trials in purely logical terms. The conclusion appears to be that Spock’s home planet of Vulcan was entirely free of predators. Meanwhile on Earth, Evans contests that emotions evolved as a quick-reflexive action aimed at encouraging survival–hence it often arriving as an uncontrollable nerve–surge through the body.

Joy, distress, fear, anger, disgust: all played a key role in helping our survival in the State of Nature, says Evans. And to an extent we rarely acknowledge, such emotions continue to play an important evaluation role today, just a more subtle one. Evans provides evidence of this by observing those unable to use their emotions for evaluation.

“Those that lose their emotional capacity through brain damage tend to be easy victims for the unscrupulous,” he observes. “Forced to rely on their logical reasoning, they make 61

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disastrous choices about whom they can trust.”

Impaired mental capacity Evans makes an important point because, as we shall see, those of us with fear of failure may well have such fears due to an impaired mental capacity when it comes to reasoning and evaluations–perhaps due to poor conditioning or traumatic events as a child–meaning that we are also vulnerable, with fear being our response to that vulnerability. So emotions remain important in the modern world, which means that an impaired capacity to use our emotions to evaluate situations is potentially disastrous–or at best paralysing.

Does this therefore enslave us to the potency of our emotions, forcing those with impaired evaluations into selfdestructive behaviour? Not always. Plenty of people behave in ways not dictated by their emotions. The stiff upper lip of the English upper classes is no myth, but is an external response rather than inward feeling–a training from an early age to hide emotions rather than change them–not dissimilar to the poker face of the professional gambler who may inwardly be in emotional turmoil. Indeed, such responses are only ever a mask. In reality “quiet desperation is the English way”–at least according to Pink Floyd.

Such masking takes training and is, in any case, an unsatisfactory response in the modern world where we are encouraged to express ourselves, or at least to behave in ways that generate trust and understanding rather than distrust and misunderstanding. And such a masking may simply delay a terrible reckoning–a breakdown as the mask slips and then collapses due to the pressure.

Far better, surely, to try and understand our emotions, as well as how emotions such as fear can motivate and demotivate us, and how they can impair our evaluations and change our behaviours.

Surely self-awareness trumps self-denial every time?

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Experiments in emotional manipulation In his book Motivation (1975) psychologist Phil Evans details the relatively short history of academic experiments on our emotions–and particularly on fear–and how they impact our motivation.

For instance, in 1948 the pioneering America n psychologist Neal Miller experimented on the impact of fear on behaviour by placing rats in a box with two compartments–one black, one white–with those in the white zone consistently given electric shocks. Of course, the rats soon exhibited great reluctance to venture into the white zone, even overcoming physical barriers in order to escape to the safety of the black zone. And before long, Miller’s harassed rodents needed only to catch sight of the white zone to exhibit signs of stress. Miller concluded that fear as a driver can be quickly acquired, can change behaviour profoundly, and can internally condition the rat to elicit a fear response when subsequently triggered (i.e. when reminded of the trauma).

Unsurprisingly, such emotional conditioning is also applicable with humans, at even a subtle level. Evans cites Judson S. Brown, a post-war America n psychologist who thought that, due to fear, humans spend much of their time in search of “reinforcers” such as money and in performing “operant responses” such as holding down a job. Brown’s thesis was that what a person was seeking was potentially less important than what a person was avoiding. A person could be said to be making money, he considered, but could equally be motivated by the fear of not making money.

For me, Brown’s focus on avoidance is beginning to get to the heart of the matter with respect to fear as a driver. Yet it is Stanford University’s John W. Atkinson’s work on “achievement motivation” (which he and others shortened to “nAch”– meaning “need for achievement”–although I think “AM” may be easier to remember) that really roots out the key issues with respect to fear of failure.

Again, detailed by Evans, Atkinson (with G.H. Litwin–and 63

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following on from experiments by David McClelland) set groups of children achievement-related tasks and noticed that they approached them in one of two ways: anticipating success or anticipating failure. Atkinson concluded that an individual’s performance was dictated by whether they had high or low levels of innate “achievement motivation”–with those with high AM levels driven by their expectations regarding the payoff of task fulfilment, and those with low AM levels motivated to avoid the task due to an anticipation, or fear, of failure (which he shortened to FF).

Left to choose their tasks, he noticed that those with high achievement motivation (“High-AMs” as we shall call them) chose a middle range of demanding tasks because they were focused on the rewards of success. Meanwhile, those with low AM, or high fear of failure (“High-FFs” as we shall call them) became anxious about even intermediately-difficult tasks and, in many cases, sought to avoid the task completely.

Yet Atkinson made one further–extraordinary–discovery.

High-FFs had no problem attempting tasks that were deemed very difficult or almost impossible. This was due to the fact the price of failure was reduced. So while High-AMs chose a challenging but achievable range of tasks in anticipation of success and reward, High-FFs chose only those tasks that they were almost certain to complete or almost certain to fail, along with everyone else attempting that task. For instance, Atkinson involved children in a game of throwing hoops on a peg. High-AMs stood a bold but realistic distance from the peg while High-FFs stood either right on top of the peg, or so far back success was almost impossible.

Task perseverance, task avoidance Australian psychologist Norman Feather undertook similar experiments and came to similar conclusions–finding a bias in the willingness of subjects to persist in a task they had failed first-time based on their levels of achievement motivation. Those with high levels of achievement motivation (our High-AMs) would tend to persevere–perhaps reassessing the 64

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difficulty of the task and adding further concentration or determination. Meanwhile, those with a high fear of failure (our High-FFs) were disinclined to continue, wanting to avoid the shame of failing.

Feather also found that he could manipulate the response by presenting the task as easy or difficult. High-FFs were inclined to continue if they were told that the task was difficult because, he concluded, the shame of failing had been lowered. In fact, the task he’d been setting his subjects–drawing around a figure without lifting the pen from the paper–was impossible, although at first glance appeared easy.

Summarising the experiments, Phil Evans contended that levels of achievement motivation played a significant role when it came to “the wisdom of career choices in students”.

High-AM students would choose realistic but challenging careers–perhaps joining a profession or becoming a scientist.

They aimed high–avoiding careers with low incentives–but were grounded. They steered clear of pursuing overly-ambitious or unrealistic “wildest dreams” such as pop stardom or TV fame. High-FFs, on the other hand, would either keep their career choices at an uninspiring level or aim for something that would bring either fabulous rewards (such as fame) or, far more likely, failure–although the consequences of failure would be judged kindly simply because success was so unlikely.

Indeed, in these circumstances, being seen as a “trier” would be viewed positively.

To continue…

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Think and Grow Rich

Think and Grow Rich

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The Original Classic Napoleon Hill 978-1-906465-59-9 • Hardback • 388 pages April 2009 • £9.99/€12.00/$15.99

Chapter 1 The Man Who Thought His Way into Partnership with Thomas A. Edison Truly, “thoughts are things,” and powerful things at that, when they are mixed with definiteness of purpose, persistence, and a burning desire for their translation into riches, or other material objects.

A little more than thirty years ago, Edwin C. Barnes discovered how true it is that men really do think and grow rich.

His discovery did not come about at one sitting. It came little by little, beginning with a burning desire to become a business associate of the great Edison.

One of the chief characteristics of Barnes’ Desire was that it was definite. He wanted to work with Edison, not for him. Observe, carefully, the description of how he went about translating his desire into reality, and you will have a better understanding of the thirteen principles which lead to riches.

When this desire, or impulse of thought, first fl ashed into his mind he was in no position to act upon it. Two difficulties stood in his way. He did not know Mr. Edison, and he did not have enough money to pay his railroad fare to Orange, New Jersey.

These difficulties were sufficient to have discouraged the majority of men from making any attempt to carry out the desire. But his was no ordinary desire! He was so determined 66

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to find a way to carry out his desire that he finally decided to travel by “blind baggage,” rather than be defeated. (To the uninitiated, this means that he went to East Orange on a freight train).

He presented himself at Mr. Edison’s laboratory, and announced he had come to go into business with the inventor.

In speaking of the first meeting between Barnes and Edison, years later, Mr. Edison said, “He stood there before me, looking like an ordinary tramp, but there was something in the expression of his face which conveyed the impression that he was determined to get what he had come after. I had learned, from years of experience with men, that when a man really desires a thing so deeply that he is willing to stake his entire future on a single turn of the wheel in order to get it, he is sure to win.

I gave him the opportunity he asked for, because I saw he had made up his mind to stand by until he succeeded. Subsequent events proved that no mistake was made.”

Just what young Barnes said to Mr. Edison on that occasion was far less important than that which he thought.

Edison, himself, said so! It could not have been the young man’s appearance which got him his start in the Edison office, for that was definitely against him. It was what he thought that counted.

If the significance of this statement could be conveyed to every person who reads it, there would be no need for the remainder of this book.

Barnes did not get his partnership with Edison on his first interview. He did get a chance to work in the Edison offices, at a very nominal wage, doing work that was unimportant to Edison, but most important to Barnes, because it gave him an opportunity to display his “merchandise” where his intended “partner” could see it.

Months went by. Apparently nothing happened to bring the coveted goal which Barnes had set up in his mind as his Definite Major Purpose. But something important was happening in Barnes’ mind. He was constantly intensifying his 67

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desire to become the business associate of Edison.

Psychologists have correctly said that “when one is truly ready for a thing, it puts in its appearance.” Barnes was ready for a business association with Edison, moreover, he was determined to remain ready until he got that which he was seeking.

He did not say to himself, “Ah well, what’s the use? I guess I’ll change my mind and try for a salesman’s job.” But, he did say, “I came here to go into business with Edison, and I’ll accomplish this end if it takes the remainder of my life.” He meant it! What a different story men would have to tell if only they would adopt a Definite Purpose, and stand by that purpose until it had time to become an all-consuming obsession!

Maybe young Barnes did not know it at the time, but his bulldog determination, his persistence in standing back of a single desire, was destined to mow down all opposition, and bring him the opportunity he was seeking.

When the opportunity came, it appeared in a different form, and from a different direction than Barnes had expected.

That is one of the tricks of opportunity. It has a sly habit of slipping in by the back door, and often it comes disguised in the form of misfortune, or temporary defeat. Perhaps this is why so many fail to recognize opportunity.

Mr. Edison had just perfected a new office device, known at that time, as the Edison Dictating Machine (now the Ediphone). His salesmen were not enthusiastic over the machine. They did not believe it could be sold without great effort. Barnes saw his opportunity. It had crawled in quietly, hidden in a queer looking machine which interested no one but Barnes and the inventor.

Barnes knew he could sell the Edison Dictating Machine.

He suggested this to Edison, and promptly got his chance. He did sell the machine. In fact, he sold it so successfully that Edison gave him a contract to distribute and market it all over the nation. Out of that business association grew the slogan, 68

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“Made by Edison and installed by Barnes.”

The business alliance has been in operation for more than thirty years. Out of it Barnes has made himself rich in money, but he has done something infinitely greater, he has proved that one really may “Think and Grow Rich.”

How much actual cash that original desire of Barnes’ has been worth to him, I have no way of knowing. Perhaps it has brought him two or three million dollars, but the amount, whatever it is, becomes insignificant when compared with the greater asset he acquired in the form of definite knowledge that an intangible impulse of thought can be transmuted into its physical counterpart by the application of known principles.

Barnes literally thought himself into a partnership with the great Edison! He thought himself into a fortune. He had nothing to start with, except the capacity to know what he wanted, and the determination to stand by that desire until he realized it.

He had no money to begin with. He had but little education. He had no influence. But he did have initiative, faith, and the will to win. With these intangible forces he made himself number one man with the greatest inventor who ever lived.

Now, let us look at a different situation, and study a man who had plenty of tangible evidence of riches, but lost it, because he stopped three feet short of the goal he was seeking.

THREE FEET FROM GOLD One of the most common causes of failure is the habit of quitting when one is overtaken by temporary defeat. Every person is guilty of this mistake at one time or another.

An uncle of R. U. Darby was caught by the “gold fever” in the gold-rush days, and went west to dig and grow rich. He had never heard that more gold has been mined from the brains of men than has ever been taken from the earth. He staked a claim and went to work with pick and shovel. The going was hard, but his lust for gold was definite.

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After weeks of labor, he was rewarded by the discovery of the shining ore. He needed machinery to bring the ore to the surface. Quietly, he covered up the mine, retraced his footsteps to his home in Williamsburg, Maryland, told his relatives and a few neighbours of the “strike”. They got together money for the needed machinery, had it shipped. The uncle and Darby went back to work the mine.

The first car of ore was mined, and shipped to a smelter.

The returns proved they had one of the richest mines in Colorado! A few more cars of that ore would clear the debts.

Then would come the big killing in profits.

Down went the drills! Up went the hopes of Darby and Uncle! Then something happened! The vein of gold ore disappeared! They had come to the end of the rainbow, and the pot of gold was no longer there! They drilled on, desperately trying to pick up the vein again—all to no avail.

Finally, they decided to quit.

They sold the machinery to a junk man for a few hundred dollars, and took the train back home. Some “junk” men are dumb, but not this one! He called in a mining engineer to look at the mine and do a little calculating. The engineer advised that the project had failed, because the owners were not familiar with “fault lines”. His calculations showed that the vein would be found just three feet from where the Darbys had stopped drilling! That is exactly where it was found!

The “Junk” man took millions of dollars in ore from the mine, because he knew enough to seek expert counsel before giving up.

Most of the money which went into the machinery was procured through the efforts of R. U. Darby, who was then a very young man. The money came from his relatives and neighbors, because of their faith in him. He paid back every dollar of it, although he was years in doing so.

Long afterward, Mr. Darby recouped his loss many times over, when he made the discovery that desire can be 70

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transmuted into gold. The discovery came after he went into the business of selling life insurance.

Remembering that he lost a huge fortune, because he stopped three feet from gold, Darby profited by the experience in his chosen work, by the simple method of saying to himself, “I stopped three feet from gold, but I will never stop because men say ‘no’ when I ask them to buy insurance”.

Darby is one of a small group of fewer than fifty men who sell more than a million dollars in life insurance annually. He owes his “stickability” to the lesson he learned from his “quitability” in the gold mining business.

Before success comes in any man’s life, he is sure to meet with much temporary defeat, and, perhaps, some failure.

When defeat overtakes a man, the easiest and most logical thing to do is to quit. That is exactly what the majority of men do.

More than five hundred of the most successful men this country has ever known, told the author their greatest success came just one step beyond the point at which defeat had overtaken them. Failure is a trickster with a keen sense of irony and cunning. It takes great delight in tripping one when success is almost within reach.

To continue…

71

Managers and Leaders Who Can

Managers and Leaders Who Can

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How You Survive and Succeed in the New Economy Ruth Spellman 978-1-1199-9398-8 • Hardback • 240 pages April 2011 • £18.99/€22.80/$32.50

Chapter 1 Values and Ethics Ethics and values are critical. Business can no longer get by saying one thing and doing another.

Jackie Orme, CEO, Chartered Institute of Personnel and Development Values and ethics have a vital role to play in the modern business world. Leaders and managers are faced with an increasingly complex and challenging business environment.

They are battling to keep up with the pace of technological change, struggling to fend off growing competition and grappling with a difficult economic climate.

In the midst of this maelstrom, a strong set of values can serve to illuminate the way ahead. They are the foundation for strong leadership and management, the glue that sticks the organisation together and the unwritten code that helps managers make the right decisions about what they do and how they do it. Values help employees make sense of the new and constantly changing challenges they are being asked to take on and give them a clear picture of how the organisation wants them to behave.

There are some high-profile examples of organisations 72

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that have achieved outstanding results by putting values at the heart of everything they do. Virgin and Pret A Manger, for example, are both highly successful businesses with a distinctive, ethical approach. This is not just tokenism, but a deep-seated ethos that permeates both organisations. Virgin, for example, places huge emphasis across its operations on being a responsible service provider, managing its impact on the environment and playing a role in the communities that it operates in. Pret A Manger has a strong tradition of developing its people, places a high value on encouraging diversity and actively raises funds and donates products to charities for the homeless across the UK. The truth, however, is that many organisations are still struggling to get to grips with how they can effectively harness the power of values on an ongoing basis. They may well have a glossy values statement pinned to the wall in their corporate HQ, but their employees are not living and breathing those values on a day-to-day basis.

The pages of the national press are full of examples of what happens when organisations fail to approach business from an ethical standpoint–or when the actions they take are not congruent with the values they pretend to espouse.

Reputations that have taken years to build can be damaged by a succession of unfortunate media headlines. BP is the latest in a long line of examples from the corporate world.

It is estimated that damage done to the business as a result of the Gulf of Mexico oil spill could result in losses of up to ÂŁ15 billion. The recent MP expenses scandal in the UK, where MPs were exposed for unethical charging of expenses, has also graphically illustrated the importance that people attach to following a moral code rather than simply obeying the rules.

But what do we really mean when we talk about values?

How do leaders and managers develop values propositions that support their business objectives? What do they need to do to ensure their employees buy into those values and demonstrate them in their dealings with stakeholders on a 73

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daily basis?

Perception versus intent It’s important to recognise that most organisations do actually go about their business with honourable intent. Yes, they are there to make a profit and provide a good return for their shareholders, but they don’t generally set out to rip people off, damage the environment or have a negative impact on the communities they operate in.

Despite their good intentions, however, organisations tend to get a pretty poor press. The media are quick to jump onto any misdemeanour and to bay for the blood of the leaders involved, even if there was no malicious intent or serious operational failing.

Trust and respect for business leaders themselves–with a few notable exceptions–is also generally low. Indeed, surveys have shown that business leaders come second from bottom, just above politicians, in terms of public regard.

This negative perception is not just external–it’s often prevalent inside organisations too. Endless rounds of cuts and re-organisations have left employees feeling insecure, initiative-weary and, frankly, pretty cynical about the businesses they work for.

Organisations such as the Chartered Institute of Personnel and Development (CIPD) have been warning for some time that a lack of employee engagement is one of the biggest issues facing the corporate world right now. On the front line, the troops are becoming weary and are feeling disconnected with the battles they are being asked to fight. ‘We’re all in this together’, even if it is true, has a somewhat hollow ring.

In this scenario, values are the secret weapon. They can help organisations protect their reputation and improve the way they are perceived by the outside world. Values can create cohesion within the business, ensure everyone is working towards the same goal and help employees make that 74

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all-important personal connection with the tasks they are being asked to perform.

The right time–or all the time?

The V word has a tendency to rise to the top of the organisational agenda when things are going badly. It’s often a bit of a knee-jerk reaction. The top team need something that will quickly bind the business together after a merger; HR want to re-energise people following a significant downsizing exercise; managers need an intervention that will help them focus on priorities and deliver their business objectives in a difficult climate.

There’s nothing wrong with taking a fresh look at values at times of significant change and difficulty. They can play a valuable role when there’s an urgent need to boost morale, accelerate change or respond to a new business challenge.

It’s not necessary, however, to wait for the worst-case scenario. Becoming a values-driven organisation is an approach that’s equally relevant in good times and bad. A values-driven approach can help keep the business on an even keel when times are good and can even help it get better at what it does.

It’s not about responding to a crisis with a quick fix. It’s about setting the tone, establishing the ground rules, making it clear ‘how we do things around here’ and ensuring that employees know what kind of behaviours will be recognised and rewarded.

It’s also important to recognise that becoming a valuesdriven organisation is not a one-off event. The business world never stands still; as the sands shift around them, organisations need to review their values constantly to make sure they are still fit for purpose. This doesn’t mean starting all over again–it’s just a case of recognising that the business may need to tweak the values occasionally to make sure they still fit the bill.

The stringent savings being demanded of the public sector right now are a case in point. As budgets are slashed, 75

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significant changes will have to be made to the way services are designed, packaged and delivered.

Values will provide the guidelines to make sure organisations act responsibly and in the best interests of the people they serve when they are faced with difficult decisions.

Consultation, not coercion The big question facing many organisations is how they go about defining what they stand for and what their values really are.

There’s a tendency for leaders and managers to spend hours closeted in boardrooms trying to thrash out some kind of statement that resonates with all. When the discussion and debate are over, what often happens is that a list of agreed values is printed on cards and posters and launched with much fanfare to the waiting staff.

The problem is that this kind of approach just doesn’t work, because values can’t simply be decided by the chosen few and imposed from on high. An organisation will only get buy-in to its values if they are developed in consultation with the people who will have to implement them on a daily basis and with the stakeholders who will be on the receiving end.

Organisations need to think about what they want to achieve, how they plan to get there, what messages they want to convey to the outside world and what obstacles might get in the way. They need to invite contributions and feedback from everyone involved and gradually paint a picture of what makes the organisation tick, what needs to be done differently and what customers and stakeholders really want.

The most effective values statements are likely to be those that build on existing strengths and tackle areas of difficulty head on. They need to be intrinsically linked with the organisation’s strategic objectives and fully endorsed and espoused by the top team.

To continue…

76

Claire Diaz-Ortiz

Twitter for Good

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Change the World One Tweet at a Time Claire Diaz-Ortiz 978-1-1180-6193-0 • Hardback • 224 pages September 2011 • £16.99/€20.00/$24.95

Chapter 1 Be a Force for Good One day at Twitter headquarters in San Francisco, I was doing media training, learning to better convey my message and respond to common questions when speaking publicly.

While employees around me had difficult and sensitive questions thrown their way about potential acquisitions and hiring statistics, I had it easy. ‘‘Tell me more ways that Twitter has helped people change the world,’’ people typically ask me eagerly. Or, with interest, “What’s your favorite story of using Twitter to help in a crisis?’’

The trainer asked me what I wanted to work on. No one ever asks me hard questions, I told the trainer. And so he did. ‘‘You say one of Twitter’s operating principles is Be a Force for Good. But what on earth does that mean?’’

Because broad questions don’t merit vague responses, I dove in. I told one story of an individual using Twitter to change the world around her. One example that proved that the Twitter platform seemed built for social change from the beginning and that the way individuals are using it every day only maximizes its power. But there are many such stories I left out that day.

Think of this book as the complete response to that initial question. In these pages, I will teach you to be a force for good on Twitter.

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Twitter for Good

Corporate Social Innovation at Twitter In my position leading social innovation, causes, and philanthropy at Twitter, and as the first employee to drive and shape such work at the company, I work on a daily basis to show non-profit and for-profit organizations how to use Twitter to make a difference. In my work, I help guide small non-profits, large non-profits, and big brands running cause campaigns in how to best use Twitter to reach their goals of social impact and world change. I believe it is not the obligation of an organization to engage in social change, but rather the opportunity an organization has to innovate in extraordinary ways, with this unique real-time information network. This book grew directly out of this work. As such, Twitter for Good is the definitive manual proving that individual activism via Twitter is a viable answer to world change.

Specifically, in Corporate Social Innovation and Philanthropy at Twitter, we work in three main areas to: 1. Support non-profit organizations and causes on Twitter 2. Promote cause marketing advertising initiatives 3. Carry out Twitter’s internal philanthropic efforts Our work breaks down as follows:

Support for Causes Twitter’s operating principle, “Be a Force for Good,’’ is the guiding principle of the service structure we provide to nonprofit organizations and causes. The broad category of our non-profit support encompasses a variety of initiatives aimed at on-boarding new non-profits and improving their experience on Twitter, including the following: • Within our advertising platform, we offer pro bono programs for non-profits already engaged on Twitter.

Promoted Tweets are a tool advertisers use to promote specific campaigns via Tweets on Twitter. The Promoted Tweets for Good program is an application-based pro 78

Claire Diaz-Ortiz

bono program serving a number of non-profit organizations each year. We offer a second type of Promoted Tweets for Good ad hoc to organizations involved in crisis relief during times of natural disaster or civil unrest.

• We conduct regular talks and trainings to non-profits and causes who want to use Twitter better, based on the fivestep T.W.E.E.T. framework explored in this book.

• On Twitter’s Hope140.org, we compile an array of case studies, best practices, and past cause campaigns to help organizations better learn how to get started on Twitter.

• We work with organizations in the field of disaster response, taking advantage of Twitter’s power on mobile devices to use our strategic partnerships to support humanitarian aid initiatives.

• Finally, we regularly bring speakers in to Twitter headquarters to better educate employees about innovative uses of Twitter in the world.

Cause Marketing Within the area of cause marketing, we support brands promoting prosocial or social good initiatives, generally through paid campaigns on Twitter’s platform.

Internal Giving Within our internal philanthropic strategy we have spearheaded a variety of initiatives. Since 2009, we have worked with Room to Read, a non-profit organization supporting girls’ education and library development in nine developing countries. We have mutually supported each other on a variety of initiatives related to literacy, including the creation of a wine label for charity called Fledgling. We have also worked with a number of other organizations on ad hoc fundraising and Twitter-based awareness campaigns, including (RED), Malaria No More, and the American Red Cross.

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Twitter for Good

Twitter for Good provides a comprehensive manual that teaches organizations to help change the world using Twitter.

Through working with hundreds of organizations, I have developed a simple five-step model called T.W.E.E.T. (Target, Write, Engage, Explore, Track), which uses case studies and examples to teach cause-based initiatives how to excel on Twitter’s platform. Twitter for Good lays out this exact framework and will dive deep into the specific strategic steps needed to build and effectively promote cause-based campaigns. Case studies from organizations like the American Red Cross, Water. org, and Free the Children; eye-opening information about Twitter’s own internal work on philanthropic campaigns; and how-to frameworks and models all are key elements of the text.

Although the focus of this book is non-profit organizations, social enterprises, foundations, and corporate entities running cause-based campaigns, many of the strategies explored apply to any entity that wants to make a difference in the world.

Twitter is a tool for enabling individuals to reach their personal and professional goals, and the ideas in Twitter for Good can and will help anyone.

In speaking to thousands of individuals each year, the one question I receive most often is, “Where can I go to get more information about how to promote my cause on Twitter?’’

This book—and Twitter’s Hope140.org—are the answers.

Twitter for Good is designed as an engaging, case study– rich manual for innovative leaders in non-profit and for-profit sectors who want to use Twitter to achieve their cause-based aims. It is also the first work devoted to how causes and mission-based organizations can best use Twitter. It is a practical business book built around a targeted model for success, and it will provide you with the specific steps needed to excel as an organization on Twitter.

The T.W.E.E.T. Framework When I first began teaching organizations how to achieve 80

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their goals on Twitter, I used a variety of tips and strategies I had developed over time. Like most speakers, I sought to provide quality information in practical ways, and I always tried to create presentation outlines to reach my audience most effectively. I had spent thousands of hours learning about how non-profits and causes could best use Twitter, and much of these general resources could be found online—either at Twitter’s website, www.Hope140.org; at www.Twitter4Good.com, the companion website for this book and its teachings; or at my personal website about causes and Twitter, www.ClaireDiazOrtiz.com.

However, when organizations asked me to give talks at conferences or provide hands-on trainings, I worked to craft ideas targeted to their specific cause. It was valuable, hightouch work. It was also not sustainable. As Twitter grew, the number of organizations on Twitter exploded. I needed to find a way to reach more people, so I began to create more generalized presentations and trainings.

I was always interested in the retention level of audience members and workshop participants, and I was often dismayed to hear that typically only a few ideas really stuck. In my years as an attendee at conferences and workshops, I had seen the same thing. Despite the structure that presenters clearly gave to their presentations, the outline was not always obvious to the audience members. Without understanding and being able to recall the skeleton of the presentation, remembering the individual points presented was that much more difficult.

I realized that if my audiences were going to digest my message in one twentieth of the time it took for me to prepare it, it had to be as simple as possible. Only when they remembered the basics—and saw the importance of the one core idea—would they have interest in recalling the intricacies of what I explained or in seeking these resources later online at Twitter’s www.Hope140.org.

Over time, I saw the need for a dedicated framework that 81

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any organization could easily remember and consistently employ. In its simplest form, an organization just needs to remember the five main things they should be thinking about when trying to excel on Twitter—T.W.E.E.T. (Target, Write, Engage, Explore, Track).

The T.W.E.E.T. framework works because it is simple. The jarringly obvious acronym serves as the absolutely easiest way for organizations to remember the five most important things they must do to stand out on Twitter. It has worked for hundreds of organizations, and I am confident that it can work for you as well.

Let’s dive in.

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Andy Boynton & Bill Fischer with William Bole

The Idea Hunter

BUY NOW

How to Find the Best Ideas and Make them Happen Andy Boynton & Bill Fischer with William Bole 978-0-470-76776-4 • Hardback • 192 pages May 2011 • £17.99/€20.80/$25.95

Chapter 1 Know Your Gig THE IDEA HUNT begins with a desire to learn about the world around you, but a good stride in that direction is to know a few things about yourself. Later on we will showcase the value of being interested, of being constantly on the lookout for ideas, of being a learning machine. But what is the energy that fires up your interest and curiosity, the power source for such a machine? What is the fuel that drives the hunt?

Our answer is the gig. By this, we are not referring to what a musician does on a Saturday night or to a job picked up by a freelance graphic designer. Our notion of the gig is much broader. It’s closer to one’s personal brand or professional identity, even to the sense of vocation that many people seek to nurture. We’re talking about your gig in life or, more specifically, in your professional life. We’re talking about the Big Gig. The Introduction offered a glimpse of one famously successful gig: Walt Disney’s. His gig was to create entertainment for the whole family, whether through amusement parks like Disneyland or animated films like Fantasia. There are similar passions and purposes to be gleaned from every celebrated Idea hunter’s story. Henry Ford’s gig was to create a car for everyone, and he had to refashion the process of manufacturing to do it. Warren Buffett’s distinction, apart from his piggy 83

The Idea Hunter

bank, is that he took a different tack on investing than his colleagues. He sought to understand the fundamentals of a company rather than try to predict the ups and downs of the stock market.

Those icons knew their gigs. And the salient point is that their gigs gave focus and direction to their learning and idea seeking. Because he was interested in family-friendly entertainment, Disney did not go looking for his best ideas in the seamy American amusement parks of his time. He travelled to Denmark instead, to observe the scene at Tivoli gardens, an amusement park full of fresh flowers and happy-faced revellers of all ages. Buffett didn’t pass his days staring at the ticker tape or conjuring up ways to game the market. He set his mind to learning whatever he could about a specific firm or industry. That served his goal of finding stocks that sold below the real worth of the company.

A gig is not defined by someone’s line of work, much less by a job title. It’s not even a formal specialization, although it does reflect a distinctive way of adding value to one’s work. a product developer’s gig is not product development; rather, it might be to encourage the free flow of ideas in a unit or organization, to help build a culture of conversation. A sales associate’s gig is not sales; it might instead rest on a capacity for empathy, a talent for getting beneath the surface and understanding a customer’s needs.

A schoolteacher’s gig might be to serve as a teachers’ leader—by heading up a committee, leading a school team, forming a discussion group, or chairing a department. She might take on these and other roles with an eye to becoming an administrator or a professional-development expert. As this latter example illustrates, gigs also have a future dimension—where you’re heading. National Public Radio’s Scott Simon has spoken of his father’s advice: “dress for the gig you want, not the one you have.” The elder Simon was a comedian, but his advice applies to almost everyone. When you’re looking for ideas and new things to learn, think about your vision.

Think about who you’d like to become, as a professional—and 84

Andy Boynton & Bill Fischer with William Bole

align your learning with that picture of yourself. The teacher, for example, might want to develop conversations with others who have made the transition from working with peers to leading them.

Knowing your gig is a major step forward on the idea trail.

It’s the big steering wheel of your interest and curiosity. Even if you already have a clear conception of your gig, it’s important to occasionally refresh it, because circumstances change and new opportunities arise. But how does one discern or reassess a gig? In short, doing so requires self-reflection— grappling with questions about your passions and talents. And then it’s necessary to connect your answers to the professional marketplace. Put simply: is there a customer for what you’re offering?

Here we would like to borrow questions from two people prominent in different fields, drawing on different sources of wisdom. The first is an iconoclastic management guru; the second is a theologian.

The Discernment In The Brand You 50, author and speaker Tom Peters recalls browsing an advice book about work and bumping into a sentence that jolted him: “When was the last time you asked, ‘What do I want to be?’” Thinking it through, Peters devised four questions that could be asked in arriving at a self-definition. The first is the what-I-want-to-be question that made an instant impression on him. The others are: What do I want to stand for? Does my work matter? and, Am I making a difference?

Other clusters of questions are posed by Peters in other contexts relating to one’s products and projects. For example: “Who are you? What is your product? How is it special? How is it different from others’ similar offerings? How can I demonstrate its trustworthiness? How can I demonstrate I’m ‘with it’/ contemporary?” Thoughtful answers to even just a few such questions will help bring your gig more clearly into focus.

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Michael Himes, a Catholic priest and professor of theology at Boston College, has given considerable thought to how a student or anyone else discerns a vocation or calling in life. In a number of articles and presentations, he has outlined three basic questions people can reflect on, when they’re making choices about a profession or even just a job or some other role. Those questions are: 1. Is this a source of joy?

2. I s this something that taps into your talents and gifts— engages all of your abilities—and uses them in the fullest way possible?

3. Is this role a genuine service to the people around you, to society at large?

Himes has an even pithier version of this self-examination: 1. Do you get a kick out of it?

2. Are you any good at it?

3. Does anyone want you to do it?

“Do I get a kick out of it?” has to be answered by you, the person asking the question. Himes says one way of answering is to think about the issues and concerns that you return to over and over. These are what “fascinate you . . . excite you . . . really intrigue you . . . lure you on. They get you to ask more and more questions.”

On the other hand, “are you any good at it?” is a question for people around you to answer. In this connection, Himes recommends fostering a circle of friends who can be honest with you about your talents. Perhaps a simpler way of going about this would be to consider the people who have been important to you and your career—let’s say teachers, bosses, colleagues, clients. What have you learned from them about yourself, about your skills and the areas in which you excel?

What do you suppose they would say if someone were to ask them about your strengths and weaknesses? We would add that the discernment also has to be about potential. It’s not 86

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simply a matter of what you’re good at now, but what you might become good at—no, great at—in the future.

According to Himes, “Does anyone want you to do it?” must be answered by the people you are serving (or would like to serve). “We must hear from the people around us what they really need.

What is it that they want us to do?” This is vocation talk.

In workday terms, it’s all about the “customer,” elastically defined to include employers, clients, team members, and others. Will they go for the package of skills, perspectives, and approaches that I’d like to sell? Am I offering something that will help make their lives a little easier, their products more valuable, their projects more successful? And will they recognize this?

Discerning your vocation is not exactly the same as understanding your gig. You may have chosen long ago to become a product developer (your vocation), before realizing that you’d like to be, or already are, the one who spearheads conversations about ideas for new products (your gig). Still, the three vocational questions are handy tools for discerning a gig. We would tweak them as follows: hat is it that constantly grabs my interest and sparks 1. W my curiosity?

2. What am I good at? And what do I want to be great at?

3. And where’s the market for this?

Take a moment to reflect on these questions, and keep in mind that they’re not really about reinventing yourself. They’re about reflecting on what you’re already doing, thinking, planning, desiring.

Part of the discernment is to think about the distinctive value you add to your work, the special skills and perspectives you bring to the task. If you’re an accountant, what separates you from the one who works two floors above you?

What makes you stand out? Or, how would you like to stand 87

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out? What’s your vision of how to become the best accountant around? Peters has offered a straightforward assessment tool for examining these questions. Fill in the blanks: “I am known for [2–4 things]. By this time next year, I plan to be known for [1–2 more things].”This will get you pretty close to sizing up your added value as a professional, now and in the near future.

Another path of discernment is to craft a personal mission statement that gets to the core of what you value. Peters recommends something in writing that takes stock of your priorities: how exactly do you spend your time? What’s the nature of your contributions at a meeting? Who exactly do you hang out with? A personal statement of this sort could provoke and clarify ideas about what Peters calls The Brand You—that is, what distinguishes you as a professional. It’s important, though, to keep in mind that a gig should never be written in stone. Like a vocation, a gig is not static. It requires continued self-reflection and revision, because passions change, knowledge expands, and needs shift. As Himes often says in his talks to college students, “The only time your vocation is settled is when you are settled (six feet under that is!).” ditto for the gig.

The Circle of Competence Warren Buffett is well known for steering clear of hightech stocks. He says he has no business in that arena—because he doesn’t understand it. His wariness on that score is part of a principle that he has articulated together with his investment partner Charlie Munger. And that is the importance of keeping within your “circle of competence” (an application of Himes’s second question, “Am I any good at it?”). Buffett knows not just his gig, but his circle of competence. That takes him a long way toward figuring out what he should be doing and where he should be searching for ideas.

It’s easy to think that a phenomenally successful investor like Buffett must be taking some big risks. You could picture him swinging at almost every pitch, trying to hit balls hurled over his head or into the dirt. This is not, however, his stance 88

Andy Boynton & Bill Fischer with William Bole

as an investor. He works differently, and the baseball analogy is not an idle one. An ardent fan, Buffett often speaks of Ted Williams, the famed Red Sox slugger who revealed the secret of his success in his book The Science of Hitting. Nicknamed the “splendid splinter,” his approach was to carve the strike zone into seventy-seven cells, each one the size of a baseball.

He swung at the balls that landed in his best cells, and let the others whizz by, even if it meant being called out on strikes once in a while. As Buffett once remarked at a shareholders’ meeting, Williams knew that “waiting for the fat pitch would mean a trip to the hall of Fame. Swinging indiscriminately would mean a ticket to the minors.”

Buffett and his firm Berkshire Hathaway have exerted the same discipline in their investment strategies. They don’t lunge at opportunities outside their areas of proficiency. “If we have a strength,” Buffett has explained, “it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter.”Munger adds: “Warren and I don’t feel like we have any great advantage in the high-tech sector. In fact, we feel like we’re at a big disadvantage in trying to understand the nature of technical developments in software, computer chips, or what have you. So we tend to avoid that stuff, based on our personal inadequacies.”

Among other virtues, this demonstrates the value of humility—acknowledging what you don’t know. It’s also a powerful idea. “Everybody has a circle of competence. and it’s going to be very hard to enlarge that circle,” Munger advises in his Benjamin Franklin– style book Poor Charlie’s Almanack. In this way Buffett and Munger are simply echoing Thomas Watson sr., the storied founder of IBM: “I’m no genius. I’m smart in spots, and I stay around those spots.”

Another outfit that understands its circle of competence is Google. A touchstone of the company’s philosophy is that it’s best to do one thing really, really well, as described in the company’s “Our Philosophy” web page: We do search. With one of the world’s largest research 89

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groups focused exclusively on solving search problems, we know what we do well, and how we could do it better.

Through continued iteration on difficult problems, we’ve been able to solve complex issues and provide continuous improvements to a service that already makes finding information a fast and seamless experience for millions of people. Our dedication to improving search helps us apply what we’ve learned to new products, like Gmail and Google Maps. Our hope is to bring the power of search to previously unexplored areas, and to help people access and use even more of the ever-expanding information in their lives.

On the surface, this may sound like a straightforward statement of specialization, and to a degree it is. But the emphasis on “continuous improvements” and reaching into “unexplored areas” is not a call to simple, narrow specialization.

The circle of competence is more than that. It’s not just a way of saying, if you’re a physician: “I’m a heart specialist.” It’s a way of considering your strengths and weaknesses as a heart specialist, and where you might be able to stand out, in that field. and, as the Google statement indicates, it’s also about learning and applying the insights to new areas or subareas.

On this point, we are somewhat less sceptical than Munger and Buffett, who underscore the difficulty of enlarging the circle of competence. We believe the emphasis should be on widening the circle through constant learning and deep interest in matters related to your gig (or your next gig). Buffett himself has expanded his range of mastery by learning everything he needed to know about spheres of investment that were new to him, like the newspaper industry. Of course, he made sure to do the learning first, before the investing.

Gigs Matter What Buffett and all effective Idea hunters understand is that the gig is a general filter. It screens out some of the information and ideas that cascade your way, making it easier to 90

Andy Boynton & Bill Fischer with William Bole

repel the demons of information overload. It helps guide you to what you need to be learning and to the ideas you need to be getting. Buffett doesn’t have to scatter his valuable learning time across the market, because he knows that certain sectors, such as high-tech, are not what he’s good at. He could happily leave that to others.

The gig usually stays in the back of your mind, but it’s always there. When fully assimilated, it’s an ever-present preoccupation, a switch that goes on automatically, often unconsciously, no matter what you’re doing. You could be reading, or at the movies, or talking to somebody. All of a sudden, time slows down, and you’re in a zone where you’re connecting what you’re hearing to the few things you’re always switched-on about. Other times you might make the connections later on.

A person can have more than one gig. A professor could be known for a particular method of teaching as well as her distinct contributions to an academic research field, just as an Internet technology specialist can also be an aspiring entrepreneur. The schoolteacher who’s a teacher of teachers is also, needless to say, a teacher of students; she should have a gig for that too.

There are also entire categories of gigs. For example, there are some people—Inventors, like Edison—who focus entirely on creating new things. In pursuit of his gig, Edison prided himself on exhaustive experimentation, and even failure, along the road to discovery. (His gig was not mere invention, though he was plenty good at that; it was creating things that people really need and that are marketable.)

There are others, like Buffett, whose gigs fall into the category of improving things—in his case, the way people make decisions about investing. Still other gigs are marked by their breadth. On the one hand, Walt Disney was squarely focused on family-friendly entertainment. But this gig pointed him and his successors in a rich variety of directions, ranging from amusement parks to film animation to vacation cruises.

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Finally, there is a foundational gig for practically everyone.

Here again, we could apply one of Michael Himes’s themes.

He points out that people have multiple vocations (he is, for instance, a priest, a theologian, a teacher, a writer, a friend, an uncle, and so on). But he says one vocation embraces all the others—to be a human being. “All of my other vocations, all of the many ways in which I live my life, must contribute to that one all-embracing demand, that one constant vocation to be fully, totally, absolutely as human as I can possibly be,” he writes. We feel that in today’s economy, there is a universal gig that encompasses all the other gigs, and that is to be an idea professional. This meta-gig is nothing less than a question of identity and self-definition.

The accountant is not really, at bottom, an accountant. She is an idea professional, or more precisely, someone who hunts for ideas. And part of belonging to this burgeoning class of individuals is to understand that there are not one but two products of the work that people do. The first is the actual thing we make or the service we provide or the process we manage.

The second product, no less essential, is what we learn along the way. It’s the ideas we get about how to do a better job and strengthen our gig. This calls for a new attitude. And it is, in our view, part of everyone’s professional calling. Everyone is an Idea Hunter.

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