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Executive Times |
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Volume 2, Issue 7 |
July, 2000
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ã 2000 Hopkins and Company, LLC 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. Competitive Allies Competitors often join forces to exploit
opportunities and issues of mutual benefit. Companies form trade associations
to represent common interests. Alliances produce industry-wide standards that
can reduce costs and improve effectiveness for all participants. Partners
with different competencies rely on each other to deliver products and
services to the markets they serve. The pace of alliances seems to have
increased as “old economy” companies attempt to embrace some of the practices
of “new economy” companies. We’ve begun to pay attention to what appears to
be a diminished ability of large companies to overpower smaller competitors.
Our perspective may be formed by increased antitrust actions, as well as by
some unusual mergers. Companies that a few years ago seemed to avoid anything
“not invented here” are welcoming the innovations and ideas from outside
their corporate walls. Easy access, n’est
pa? Da! We read in The
Wall Street Journal (June 7, 2000)
that seven large international banks banded together to provide major foreign
exchange clients with a single electronic interface for online spot and
futures trading as well as reading the research produced by each bank. Until
now, a client needed to use one proprietary box for each bank with which it
did business. By using the shared system, called FXall.com, a client
can see on one web site the competing offers from all seven banks. While
three of the largest banks involved in currency trading haven’t entered the
alliance, the fact that seven competitors worked together on a solution for
their clients is remarkable. Is your organization more likely to be one
of the seven in the alliance, or one of the three on the outside? Why? Have
you examined the processes your customers use to interact with your company
and your competitors? Have you made customer comparisons easy or hard? Will
your strategy survive today’s technology tools? Can you lead changes to serve
customers better? Will you? Open sesame We can remember when IBM was used as the best illustration of the
management mentality that avoided anything “not invented here.” By mid-July,
a company called e2open.com will be operating, the result of eight companies investing
in a new company that will trade in electronic, computer and other equipment,
a global business to business market estimated at $700 billion. The founding
members are IBM, Hitachi Ltd., Matsushita Electric Industrial
Co., Toshiba Corp., Seagate Technology Inc., Solectron
Corp., Nortel Networks Corp. and LG Electronics Inc. According
to IBM, e2open.com's
electronic marketplace “will bring together thousands of computer,
electronics and telecommunications companies -- of all sizes, worldwide -- to
plan, manage and execute supply-chain transactions over the Internet.” If you are part of a large
organization, what are the implications of technology that enables small
companies to operate with ease using tools that you helped create? If you are
part of a small organization, how can you exploit technology to compete more
effectively with larger competitors? Are you a partner in alliances that
forward the interests of your company? Hey Cisco For many years, General Electric
Company has been involved in factory automation, leading to significant
cost reductions. Since many of the GE activities have been self-generated, we
were intrigued to note the formation of a new company, GE Cisco Industrial Networks, which is 20%
owned by Cisco Systems. According to a statement by Lloyd
Trotter, President and CEO of GE Industrial Systems, “we've
combined GE's strength in factory control and automation with Cisco's
capability in information technology. We've created a unique offering that
will be delivered by a team of experienced and cross-trained engineers and
consultants.” How do you know when to call in a
partner and when to proceed on your own? What strengths, skills, weaknesses
and doubts do the partners bring to the venture? Can you find a partner who
will create a unique offering with you? Enemy not invited The increase in alliances being formed
doesn’t mean that enmity has become unfashionable. The New York Stock
Exchange is reported (The
Wall Street Journal, June 8, 2000)
to be forming what it calls GEM, a Global Equity Market. According to
the Journal, “The Big Board's coalition includes the Australian Stock
Exchange; the unconsummated Euronext alliance between exchanges in Amsterdam,
Brussels and Paris; the Stock Exchange of Hong Kong; the Bolsa Mexicana de
Valores; the Bolsa de Valores de Sao Paulo; the Tokyo Stock Exchange; and the
Toronto Stock Exchange.” One prominent player missing from the alliance is
the NYSE’s longtime foe, Nasdaq, which has formed alliances of its own
with some of these and other international exchanges. It’s pretty clear that
NYSE doesn’t want to tarnish its brand with many of the Nasdaq listed
companies that don’t meet NYSE standards. The inability to access the top
Nasdaq companies may be viewed as a small price to pay to keep out others. Which of your
competitors are true enemies? Which could become allies? What actions could
change the way you think about competitors? Inevitable Three bond dealers who collectively
represent 35% of the market, Goldman Sachs, Merrill Lynch and Morgan
Stanley Dean Witter, have created BondBook, LLC, as a means to
facilitate the online trading of corporate, municipal and junk bonds. (The
Wall Street Journal, June 13, 2000).
By the fourth quarter, institutional investors will be able to trade bonds
with each other online. We’ll see
what participation levels are like, and what this will mean for
profitability. Has some aspect
of your operations remained unchanged when it seems inevitable that change
will eventually occur? What holds you back from change? Inherited woes You’re different so
you get differential pricing American General
acquired an unwanted legacy when the past practices of acquired companies
called for expensive corrective action today. It seems that insurance agents
were charging higher rates to black policyholders than to whites. "It was
imperative that we move swiftly and responsibly to correct an unfortunate
historical practice," said Robert M. Devlin, chairman and CEO of
American General. "We set the highest standards of ethical business
practices as we help our customers achieve their lifetime financial security
goals. The proposed settlement reflects this standard of excellence and is
consistent with our values." It’s likely to cost American General over
$200 million to reduce premiums, revise coverage, and refund excess premiums
on over one million insurance policies held by blacks nationwide. Have you explored any liability at your
organization for past practices? Do your present operating methods create a
liability for the future? How defensible is your differentiated pricing?
Could a particular market segment claim that your practices or prices
discriminate unfairly and demand retribution and damages? Blurred lines Profits at not-for-profit organizations The June 26 issue
of Business Week included an interesting article on the increase in
profit making ventures by non-profit organizations. Non-profits have always
had the ability to enter into profit making activities that are apart from
their core mission, and they pay taxes on those ventures. Through lots of
examples, Business Week makes the case that the increase in profit
making activities calls into question the reason for tax-exempt status for
some organizations. While many non-profits set up profit making subsidiaries
so as not to risk the tax status of the parent company, the differences in
activities and operations between the separate entities can be
indistinguishable. A brand established under the benefits of non-profit
status can be exploited through subsidiaries, the profits of which can be
directed to shareholders who need not be tax-exempt. In the marketplace, the brand looks the
same. If you work for
a profit making company, are some of your competitors not-for-profit organizations?
Have you voiced your concerns to legislators that tax treatment needs to be
examined for nonprofits? If you work for a nonprofit organization, how do you
determine the difference between activities consistent with your core
mission, and those outside the mission? Intentions don’t matter Community calculator doesn’t compute Wells Fargo Mortgage didn’t become the largest lender to minorities by
endorsing discrimination, so we were surprised to read in The Wall Street
Journal (June
21, 2000) that the Association of Community Organizations for Reform
Now (ACORN) filed suit alleging that Wells Fargo Mortgage uses the
Internet to discriminate against minorities and encourage racial segregation.
It seems that a link on the Wells Fargo Mortgage website to a tool called The
Community Calculator used language in describing neighborhoods that contained
racial descriptions, and that whites were steered to white neighborhoods and
blacks to black neighborhoods. On June 23, 2000, Wells Fargo announced that it has
disabled the community search service pending an examination of the editorial
content of the calculator and whether such content is consistent with Wells
Fargo’s commitment to low and moderate income and minority homebuyers. Wells
confirmed that it has no control over the content of the calculator, but
provided the link as a service to consumers. When you’re in
a situation without control over content, what actions do you take to ensure
that the content remains consistent with the principles and values of your
organization? When your organization’s name becomes associated with the actions
of another entity, how do you ensure that the association reflects positively
on your company? Would you have acted quickly, as Wells did, to disable the
calculator? Follow Up Here are selected updates on stories
covered in prior issues of Executive Times: Ø The cover story of the September 1999
issue of Executive Times
explored situations involving a lack of trust in individuals or companies. In
the weeks since Judge Jackson’s ruling on the Microsoft
antitrust case, we keep hearing one word the judge used about Microsoft in
his judgment: “untrustworthy”. In his Memorandum and Order, Judge
Jackson said, “…Microsoft has proved untrustworthy in the past.” Here’s
another reminder that we build trust slowly and can lose trust easily. The
millions of dollars Microsoft is spending on its image campaign, including
both advertising and lobbying, won’t even begin to erase the impact of the one
word that labeled the company precisely and memorably. Ø The February 2000
issue of Executive Times lead
article explored the different ways that companies are waging wars to attract
and retain the best talent. We found it ironic that within a few weeks in
June, we read about the replacement of Proctor and Gamble’s CEO after a brief
tenure, 17 months, in that job (but a lifetime at P&G) and the notable
alumni of P&G who have gone on to head companies of their own, including
Scott Cook of Intuit, Steve Case of America Online, Steve Ballmer of
Microsoft, and Gary DiCamillo of Polaroid.
The reason
given for CEO Durk Jager’s departure is that “we undertook too much
change too fast.” It sounds like P&G has headed back to the old ways of
doing business, and we’re likely to hear more about famous alumni than about
P&G’s speedy adaptation to today’s competitive environment. Legacies You may not have known Robert Foman,
but chances are you recall the phrase “When E.F. Hutton talks, people
listen.” Foman spent 35 years, his entire working career, with Hutton and its
predecessor firms, leading the company’s growth in the 1970s and 1980s. Foman
yanked those ads in 1985 after the firm pleaded guilty to 2,000 felony counts
of fraud whereby Hutton manipulated customer accounts to earn increased
interest for itself. While Foman was not implicated in the fraud, he was CEO
at the time, and within a few months, the Board turned operating control over
to another executive. One of his strengths as a manager was building
camaraderie that others felt working with him, as a consequence of a loose
management style. A year or so after the fraud event, Foman wrote in a letter
to The New York Times that that a chief executive should be entitled
to rely on his subordinates to perform competently and faithfully. “But that
does not mean that the chief executive is personally liable for all the
actions or failures of the other officers and managers.” Foman died at the
end of May in Florida at age 75. We didn’t often agree with his politics,
but we still enjoyed his editorial cartoons because they always found a way
to make a point with great humor and precision. He was neat, quick, clean and
effective. Jeff MacNelly died in early June at age 52. His
illustrations for Dave Barry’s columns made us laugh as hard as Barry’s text.
We’ll miss reading Shoe in the morning paper. Here are some quotes from his Chicago
Tribune obituary: "The
world has lost a quiet genius," humorist Dave Barry said of his close
friend. MacNelly drew illustrations for Barry's syndicated column. "He
was a hell of an artist ... a guy who had zero pretentiousness, a guy who
never drew attention to himself except to make fun of himself, a guy who could
have run with the media elite, but was much happier having a beer with his
plumber." "Every cartoonist was his friend," said Dick Locher,
who draws "Dick Tracy" and is a retired Tribune editorial
cartoonist. "We worked side by side for 20 years and laughed like crazy
together; everything was funny." We’ll miss all the laughter MacNelly
brought to us. Reading (Note: readers of the web version of Executive Times can click on the
book covers or titles to order copies directly from amazon.com. When you order through these links,
Hopkins & Company receives a small payment from amazon.com. Subscribers to the print version of Executive Times
can receive the web version at no additional cost. Send e-mail to hopkinsandcompany@att.net with a
request to be placed on the web version distribution list. Also, not all books we read make it to the
pages of Executive
Times. Check out other
book selections on our bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).
Explosive
“In
the vast majority of traditional competitive situations, the defense has
the advantage. But when the economics of information are shifting,
insurgents are advantaged precisely by their lack of legacy systems, legacy
assets and a legacy mindset. Having nothing to lose becomes an advantage.” Bold statements like that scare entrenched
“old economy” executives, and stimulate the entrepreneurial insurgents who
often have little to lose. Academics are likely to remain skeptical, since
few statements are backed with facts. We found the ideas in this book to keep
us thinking long after reading them, and recommend it. Made in Japan
Best memoir yet We’ve been finding the memoir genre
tedious and overdone, but every once in a while, there’s a life that makes us
curious to give a memoir another try. We’re glad we read The
Measure of a Man: A Spiritual Autobiography Sidney Poitier.
Poitier’s strength of character and personal integrity shines on every page.
As an added bonus, late in the book, we came across a reflection that made us
think of some executives who may face similar experiences of losing touch:
Read this book, and give a copy to a
friend. If you choose to give it to an executive whom you think has lost
touch with reality, we’ll keep that as our little secret. Semper fidelis
ã 2000 Hopkins and Company, LLC. Executive Times is published monthly by Hopkins and Company,
LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park,
Illinois 60302. Subscription rates for first class mail delivery of the print
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We will send sample copies if requested. The company’s website at www.hopkinsandcompany.com/archives.html
contains the archives of back issues beginning in the month after the issue
date. |
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