Volume 8, Issue 2
2006 Hopkins and Company, LLC
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The ski slopes are crowded in parts of
North America and
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 firstname.lastname@example.org.
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?
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:
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.
reviewed Jack and Suzy Welch’s book, Winning, in the
issue of Executive
Times. Fans will want to read their new biweekly column in Business Week, starting with 1/30
Anton Rupert made things happen. A life-long resident
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).
2006 Hopkins and Company, LLC. Executive
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