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Executive Times |
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Volume
8, Issue 2 |
February 2006 |
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Note
re: links---certain hyperlinks assume that you are registered as a subscriber
to the site. If you are not a subscriber to certain sites, the links will
fail. If you register, the links should work. Also, certain hyperlinks expire
and may not be available when you try to go to the site. Avalanche
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 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?” Wipeout 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? Crevasses 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? Signposts 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? Follow-up
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). Legacy
Affluential Anton Rupert made things happen. A life-long resident
of 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).
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2006 Hopkins and Company, LLC. Executive
Times is published monthly by Hopkins and Company, LLC at the
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