Executive Times

Volume 8, Issue 2

February 2006


 2006 Hopkins and Company, LLC

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The ski slopes are crowded in parts of North America and Europe this month, and, at some locations, the dangers of avalanche encourage skiers to exercise care. The same conditions that can lead to a perilous avalanche have challenged some executives in recent weeks, and that congealed as the theme of this issue. As you think about the way these executives have responded to the challenging performance conditions they’ve faced, think about your own situation, and the perils and opportunities that you face in coming weeks and months. Decide how you need to improve your skills to weather the storms and shifting ground that influence your organization and the markets you serve. 


Fifteen new books are rated in this issue, beginning on page 5. Two books are highly recommended with four-star ratings; ten books merited three stars, and three are mildly recommended with two-star ratings. Visit our 2006 bookshelf at http://www.hopkinsandcompany.com/2006books.html and see the rating table explained as well as explore links to all 152 books we’re reading or considering so far this year, including 22 that we added to the list in January. If there’s something missing from the bookshelf that you think we should be considering or if there’s a book lingering on the Shelf of Possibility that you think we should read and review sooner rather than later, let us know by sending a message to books@hopkinsandcompany.com.


In December 2004 when Johnson & Johnson offered $76 a share to buy Guidant Corporation, it looked like the king of the mountain. Filling a gap in its product line with the largest acquisition it ever pursued, J&J looked like it was making another smart move. Storm clouds arrived in June 2005, when some Guidant products malfunctioned, and the value of that business looked like it was declining. Negotiating from perceived strength, J&J arm wrestled Guidant into a revised offer of $63 a share in November. A few weeks later, a bidding war began when Boston Scientific offered $72 a share, and J&J upped its bid to $68. In the blizzard that followed, issues about regulatory approval led to different ways to assess the strength of bids, and the sheer size and capability of J&J made them appear as in control of the war. After Boston Scientific bid $80 a share, which would make a comparable bid from J&J have to come in above the first offer it made of $76 more than a year earlier, J&J stopped bidding. As we go to press, the deal appears to be wrapping up with Boston Scientific, which made a $6 billion side deal with Abbott Laboratories to sell parts of Guidant to it, facilitating the higher bid. It remains unclear who came out of this storm in the best shape. In most mergers, the shareholders of the acquired company come out best, and the holders of Guidant look like they’re getting a great deal. Boston Scientific gives its shareholders the benefits of a larger business with great potential. J&J told its shareholders that the price went too high. Most observers expect J&J to go shopping elsewhere, and some credit their actions to force a competitor to overpay. Abbott got valuable assets. Time will tell who came out of all this a winner.


When you set your sights on achieving an objective, what would cause you to abandon your plan? When you are confident that you are in control of a situation, how alert are you to signs that your confidence is misplaced? When faced with strong opposition, how creative can you be in generating alternative solutions? Are you prepared to zigzag toward success if the path down your mountain isn’t a straight one? How do you keep from becoming overwhelmed by challenges?


A different recent merger seemed to be focused more heavily on how key individuals will lead necessary change than on price or control. In many ways, Disney’s purchase of Pixar seems obvious. As distributor of Pixar’s movies from its start, the partnership between companies seemed effective, except for the ego clash between former Disney CEO Michael Eisner and Pixar’s Steve Jobs. When Bob Iger became Disney’s new CEO, he acted quickly to move forward with improvements in the company’s technological innovation, and to begin to make his mark on the company. A deal with Apple for innovative content distribution showed Jobs that there were real changes in Disney’s attitudes under new leadership. Many press reports point out that a key Pixar executive, John A. Lasseter, was the key player in deciding whether to be acquired by Disney or not. According to The Wall Street Journal, (http://online.wsj.com/article/SB113814919560755362.html) (1/25), “While Mr. Jobs, with just over 50% of Pixar's stock, ultimately made the decision to sell the company, Mr. Lasseter’s blessing of the deal was crucial to making it happen, according to people familiar with the matter.” Named chief creative officer of the animation operations of the combined business, Lasseter began his career at Disney. He left the company in the early 1980s, when he saw that Disney planned to use computers to cut costs, not to create better animation. Like a bellwether of what trends were coming, Lasseter saw the opportunities available through technology, and he left Disney for Lucasfilm, the animation portion of which Jobs later purchased. We read in The New York Times (http://www.nytimes.com/2006/01/25/business/media/25lasseter.html) (1/25) that ‘“John Lasseter is probably the most respected single person in American animation,’ said Kevin Koch, president of Animation Guild Local 839, the Hollywood animators' union. ‘He's a creative leader without being overbearing or over-controlling.’ Mr. Lasseter, 49, has been seen by animators as an innovator who honors the fundamentals. Much like the late Walt Disney, his trademarks are well-told, broadly appealing stories, technological advances, interesting characters and a quality that has been conspicuously absent from many recent American films: heart.” The Washington Post reported (http://www.washingtonpost.com/wp-dyn/content/article/2006/01/24/AR2006012401541.html) (January 25), “Lasseter's hallmark is his ability to foster originality and create strong story lines, taking advantage of innovative technology to deliver the results. … At an animated film screening in the late 1980s, Lasseter talked about his goals for computer animation, … He was saying that his goal was to do an animated feature film, all in 3-D computer animation, and that high ambition set the crowd abuzz …” Now we’ll see what Lasseter does as he returns to Disney.

Can you be counted on as a bellwether who predicts how trends will change your organization? Can you get things done without being “overbearing or over-controlling?” Do your goals “set the crowd abuzz?” 



In the same way that too much snow doesn’t make for ideal skiing conditions, blizzards of R&D spending don’t generate more innovation, according to a Booz Allen Hamilton study of the top 1000 spenders, as reported in the Winter 2006 issue of Strategy + Business (http://www.strategy-business.com/press/article/05406). Their report concluded that “nonmonetary factors may be the most important drivers of return on innovation investment. The major findings: Money doesn’t buy results. There is no relationship between R&D spending and the primary measures of economic or corporate success, such as growth, enterprise profitability, and shareholder return. Size matters. Scale leads to advantage. Larger organizations can spend a smaller proportion of revenue on R&D than can smaller organizations, and take no discernible performance hit. You can be too rich or too thin. Spending more does not necessarily help, but spending too little will hurt. There isn’t clarity on how much is enough. Instead of clustering into any coherent pattern, R&D budget levels vary substantially, even within industries. This suggests that no single approach to spending money on innovation development is universally recognized as the most effective strategy. It’s the process, not the pocketbook. Superior results, in most cases, seem to be a function of the quality of an organization’s innovation process — the bets it makes and how it pursues them — rather than the magnitude of its innovation spending. Collaboration is key. The link between spending and performance tends to be strongest in those areas most under the control of the R&D silo, such as product design, and weakest in those areas where cross-functional collaboration is most difficult, such as commercialization.” This comprehensive study is required reading for every executive involved in innovation.


How do you measure your return on innovation investment? How do you compare your spending in this area with that of your competitors? What constitutes success when it comes to research and development in your organization? Are you skilled enough to say no to spending that doesn’t produce results?



One peril of skiing on powder off the trails can be falling into a crevasse. For some organizations, mistakes in strategy can be crevasses. There’s a helpful article in McKinsey Quarterly (2006 Number 1) (http://www.mckinseyquarterly.com/article_page.aspx?ar=1716&L2=18) titled, “Distortions and Deceptions in Strategic Decisions,” that will help executives avoid some peril.


Do you know where the crevasses are in the future of your organization? Are you aware your own cognitive biases and risk-taking profile that may hurt your organization? How about the biases and risk profile of your colleagues?



Even with trail maps, skiing can often be challenging. For busy executives, there’s often only enough time to read quick summaries. Here’s our recap of some recent lists or summaries that may please, challenge or frustrate:

Fortune’s 100 Best Companies To Work For


McKinsey’s 10 Trends to watch in 2006


Fast Company’s Social Capitalist Awards for 2006


Top 10 ideas from first 10 years of strategy + business


101 Dumbest Moments in Business  in 2005



What signposts are you likely to follow to handle potential avalanches for your organization? Are you prepared for the trends you’re likely to face? Does your workforce likely working for you? Are you current with the best ideas that may help your organization?



Here are selected updates on stories covered in prior issues of Executive Times:

Ř      We last checked in on Enron’s former CEO Kenneth Lay in the July 2004 issue of Executive Times. Perhaps like many, we assume he’s been tried in the court of public opinion, found guilty, and has disappeared. Not so. His trial is ready to start soon, and there are press stories about how difficult it may be to get a jury to find him guilty. According to Fortune (1/23) (http://money.cnn.com/magazines/fortune/fortune_archive/2006/01/23/8367084/index.htm), “At their criminal trial Jeffrey Skilling and Ken Lay will each advance defenses closely analogous to the naked emperor's: They were tragically misled, their attorneys will argue, by a small group of deceitful subordinates (chief financial officer Andrew Fastow and his minions); their actions were blessed at every turn by seemingly illustrious advisors (sycophantic accountants at Arthur Andersen, blindered lawyers at Vinson & Elkins, and a passive board of directors); and perhaps, too, they got a little carried away by their own presumed innovative brilliance during the irrational exuberance of the late 1990s bubble economy. In this context, their attorneys may suggest, the defendants believed they had discovered a legitimate business model that relied heavily upon the use of extremely complex, structured finance transactions that, in hindsight, may have proved unsound. Though such a defense might seem preposterous at first, its validity for defendant Lay has already been largely conceded by the government. Lay's alleged criminal wrongdoing, according to the indictment, is confined almost entirely to the very waning moments of the Enron debacle, by which point Enron's fate was all but sealed. So this trial is likely to be hard fought, perplexing, and surprisingly suspenseful.” We can’t wait.

Ř      We reviewed Jack and Suzy Welch’s book, Winning, in the June 2005 issue of Executive Times. Fans will want to read their new biweekly column in Business Week, starting with 1/30 issue (http://www.businessweek.com/magazine/toc/06_05/B3969magazine.htm).



Anton Rupert made things happen. A life-long resident of South Africa, he started life poor, dropped out of medical school for lack of funds, but earned a chemistry degree and taught. Rupert went on to build an industrial conglomerate that generates over $10 billion in annual sales, and became one of the wealthiest people in the world. In business, he stressed the importance of product quality, predicting accurately that no amount of marketing can overcome the pitfalls of a shoddy product. He was a savvy marketer, stressing that the impression the personality of a brand left in the memory of a buyer should be positive, lasting and trustworthy. At the same time that he was creating jobs and prosperity for his impoverished country, he spoke out critically of the inhumane policy of apartheid, and supported those who battled to change the system. At a Financial Mail conference in the 1980s, he startled delegates by advising the government of P.W. Botha to “get rid of the dead, stinking albatross of apartheid.” He avoided direct confrontation, but influenced change. As a founder of what is now the World Wildlife Fund, Rupert created the first transfrontier conservation park. With great love for his country, Rupert supported the arts, and paid for language courses in Xhosa, Zulu and Northern Sotho. For many years, he provided free medical service for the people of Lesotho. He seemed to be always ahead of his time, anticipating what was next, and always looking for ways to empower others. Rupert died in January at age 89. The prosperity of his country and the protection of its land will be a lasting legacy.


Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2006 bookshelf at http://www.hopkinsandcompany.com/2006books.html).


Title (Link to Review)



Review Summary


A Short History of Myth

Armstrong, Karen


Context. Survey of the evolution of myth as culture and civilization changed. This first book in the Canongate myth series sets a context, and without reading the myths, leaves the reader with theory, but not examples.  

The Medical Malpractice Myth

Baker, Tom


Evidence. A compelling, factual case for getting to the root of a real problem in medicine: there are more preventable mistakes being made by doctors and nurses. Big payments to undeserving claimants are rare, and few cases of malpractice are litigated.

The American Revelation

Baldwin, Neil


Unity. The stories of ten idealists who helped form our common American character. Explores ten ideals, where they came from, and what they mean for modern Americans.

The Sea

Banville, John


Metamore. More metaphors and similes per page than any other novel in memory. Winner of the Man Booker Prize. Captivating prose that will bring enjoyment to many, but cause others to beg for a life preserver to keep from drowning in words.

The Battle for the Soul of Capitalism

Bogle, John C.


Lucidity. Straight talking on what’s gone wrong in corporate America and how to fix it. Forceful and optimistic, including well placed blame and practical and achievable solutions.

Tooth and Claw

Boyle, T.C.


Fortnight. Read one story a day and enjoy the best two weeks of reading you may find this year. Creative, finely written, and packed with interesting characters and settings.

The Trouble with Poetry

Collins, Billy


Dull. Accessibility and humor are still present, but more poems seemed tired and dull in this collection when compared with laureate’s earlier work.

Often Wrong, Never in Doubt

Deutsch, Donny


Entertaining. Host of CNBC’s The Big Idea produces book as an ad for the Donny brand, full of confidence and certainty, as the title suggests, with a high energy level, providing enjoyable entertainment to readers.

Get a Life

Gordimer, Nadine


Contamination. Complicated story of relationships, illness, and the contradictions of life in modern Johannesburg from Nobel-winning author.

The New Woman

Hassler, Jon


Transitions. Latest Staggerford series novel features 87-year-old former teacher Agatha McGee and her transition from living on her own to moving into the Sunset Senior Apartments. Fine writing, interesting characters.

The Ten Faces of Innovation

Kelley, Tom


Personas. More IDEO methods to increase innovation. This time, how an individual can assume one of ten roles that helps foster faster and better innovation.

Truth and Consequences

Lurie, Alison


Deceits. Professor Lurie sets her latest novel at Cornell again, and with no excess exposition, allows readers to savor the deceits in the relationships of four academic characters.

Teacher Man

McCourt, Frank


Unorthodox. Entertaining memoir of thirty years teaching in the New York City schools with a creative bent, asking students to read aloud from cookbooks, practice writing excuse notes, and drafting suicide notes.

The Art of Pricing

Mohammed, Rafi


Conversational. Some solid ideas on how to think differently about pricing presented in a conversational style, absent a fact base for the methods proposed.

Last Night

Salter, James


Absorbing. Ten masterful short stories, easy to absorb slowly, and then yearn to re-read. Characters described precisely and prose is consistently beautiful.


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