Management – Page 23 – artdiamondblog.com

How Entrepreneurship Rebuilt San Francisco After the Fire

(p. 5) At 5:12 a.m. on April 18, 1906, Amadeo Peter Giannini felt an odd sensation, then a violent one, a slight, almost imperceptible shift in his surroundings coupled with a distant rumble like faraway thunder or a train! Pause. One second. Two seconds. Then-bang!-his house in San Mateo, California, began to pitch and shake, to, fro, up, and down. Seventeen miles north in (p. 6) San Francisco, the ground liquefied underneath hundreds of buildings, while heaving spasms under more solid ground catapulted stones and facades into the streets. Walls collapsed. Gas mains exploded. Fires erupted.

Determined to find out what had happened to his fledgling company, the Bank of Italy, Giannini endured a six-hour odyssey, navigating his way into the city by train and then by foot while people streamed in the opposite direction, fleeing the conflagration. Fires swept toward his offices, and Giannini had to rescue all the imperiled cash sitting in the bank. But criminals roamed through the rubble, prompting the mayor to issue a terse proclamation: “Officers have been authorized by me to KILL any and all persons found engaged in Looting or in the Commission of Any Other Crime.” With the help of two employees, Giannini hid the cash under crates of oranges on two commandeered produce wagons and made a nighttime journey back to San Mateo, where he hid the money in his fireplace. Giannini returned to San Francisco the next morning and found himself at odds with other bankers who wanted to impose up to a six-month moratorium on lending. His response: putting a plank across two barrels right in the middle of a busy pier and opening for business the very next day. “We are going to rebuild San Francisco,” he proclaimed.

Giannini lent to the little guy when the little guy needed it most. In return, the little guy made deposits at Giannini’s bank. As San Francisco moved from chaos to order, from order to growth, from growth to prosperity, Giannini lent more to the little guy, and the little guy banked even more with Giannini. The bank gained momentum, little guy by little guy, loan by loan, deposit by deposit, branch by branch, across California, (p. 7) renaming itself Bank of America along the way. In October 1945, it became the largest commercial bank in the world, overtaking the venerable Chase National Bank. (Note of clarification: in 1998, NationsBank acquired Bank of America and took the name; the Bank of America described here is a different company than NationsBank.)

Source:
Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.

Collins’ “How the Mighty Fall” Is Useful Business Book

Source of book image: http://www.harpercollins.com/harperimages/isbn/large/9/9780977326419.jpg

Jim Collins’ business books are usually sensible, and are full of arresting examples and memorable hypotheses. His latest full-scale research effort (Great by Choice) is just out, but I have not yet read it. In the next few weeks, I will quote a few of the more thought-provoking or useful passages in his 2009 small book How the Mighty Fall.

Book discussed:
Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.

Finance and Strategy Should Be More Integrated

“‘God never said that finance and strategy are fundamentally different functions.’ –Clayton Christensen” Source of caption and photo: online version of the WSJ interview quoted and cited below.

MR. MURRAY: We’ve talked about the innovator’s dilemma, but what’s the solution?
MR. CHRISTENSEN: The financial function stands in the way of much of this. God never said that finance and strategy are fundamentally different functions, yet the business schools decided to teach strategy and teach finance. This gets implemented in companies where strategy is the responsibility of this group, and finance this group. And a lot of the things that make sense financially make no sense strategically.
. . .
MR. MURRAY: The United States has led the world in various types of innovation for much of the past century. Is that something that will continue?
MR. CHRISTENSEN: I am very worried about America. I was thinking about this hard over the past year. It turns out that the majority of the entrepreneurs that made Silicon Valley happen weren’t Americans. They were from Israel, China and India. We were a magnet to bring to our shores the best technologists in the world. Now our message to the rest of the world is, “You guys, we don’t want you.” The minute we say that and push those to Singapore and to Britain and elsewhere, I worry.

For the full interview, see:
Alan Murray, interviewer. “The Innovator’s Solution; Clayton Christensen, Glenn Hutchins and Ellen Kullman on being cutting edge–without breaking the bank.” The Wall Street Journal (Weds., June 27, 2011): C9.
(Note: bold and italics in original; ellipsis added.)

Neuroscientist Sees Entrepreneurs as “Never Satisfied” Due to “Attenuated Dopamine Function”

Source of book image: http://www.kurzweilai.net/images/The-Compass-of-Pleasure-Linden-David-J-9780670022588.jpg

David J. Linden is the author of The Compass of Pleasure and a Johns Hopkins University School of Medicine Professor of Neuroscience.

(p. 4) . . . , the psychological profile of a compelling leader — think of tech pioneers like Jeff Bezos, Larry Ellison and Steven P. Jobs — is also that of the compulsive risk-taker, someone with a high degree of novelty-seeking behavior. In short, what we seek in leaders is often the same kind of personality type that is found in addicts, whether they are dependent on gambling, alcohol, sex or drugs.

How can this be? We typically see addicts as weak-willed losers, and chief executives and entrepreneurs are people with discipline and fortitude. To understand this apparent contradiction we need to look under the hood of the brain, and in particular at the functions that relate to pleasure and reward.
. . .
Crucially, genetic variants that suppress dopamine signaling in the pleasure circuit substantially increase pleasure- and novelty-seeking behaviors — their bearers must seek high levels of stimulation to reach the same level of pleasure that others can achieve with more moderate indulgence. Those blunted dopamine receptor variants are associated with substantially increased risk of addiction to a range of substances and behaviors.
. . .
The risk-taking, novelty-seeking and obsessive personality traits often found in addicts can be harnessed to make them very effective in the workplace. For many leaders, it’s not the case that they succeed in spite of their addiction; rather, the same brain wiring and chemistry that make them addicts also confer on them behavioral traits that serve them well.
So, when searching for your organization’s next leader, look for someone with an attenuated dopamine function: someone who is never satisfied with the status quo, someone who wants the feeling of success more than others — but likes it less.

For the full commentary, see:
DAVID J. LINDEN. “Addictive Personality? You Might be a Leader.” The New York Times, SundayReview Section (Sun., July 24, 2011): 4.
(Note: ellipses added.)
(Note: the online version of the commentary is dated July 23, 2011.)

The book mentioned above is:
Linden, David J. The Compass of Pleasure: How Our Brains Make Fatty Foods, Orgasm, Exercise, Marijuana, Generosity, Vodka, Learning, and Gambling Feel So Good. New York: Viking Adult, 2011.

McKinsey Finds 30% of Employers Will Drop Health Coverage in Response to Obamacare

McKinsey is probably the best known business consulting and forecasting firm in the United States. Many well-known management gurus, and corporate executives, have spent time working for McKinsey (as did Chelsea Clinton). One of their senior partners (Foster) co-authored a useful book called Creative Destruction.

(p. A2) A report by McKinsey & Co. has found that 30% of employers are likely to stop offering workers health insurance after the bulk of the Obama administration’s health overhaul takes effect in 2014.
. . .
Previous research has suggested the number of employers who opt to drop coverage altogether in 2014 would be minimal.
But the McKinsey study predicts a more dramatic shift from employer-sponsored health plans once the new marketplace takes effect. Starting in 2014, all but the smallest employers will be required to provide insurance or pay a fine, while most Americans will have to carry coverage or pay a different fine. Lower earners will get subsidies to help them pay for plans.
In surveying 1,300 employers earlier this year, McKinsey found that 30% said they would “definitely or probably” stop offering employer coverage in the years after 2014. That figure increased to more than 50% among employers with a high awareness of the overhaul law.

For the full story, see:
JANET ADAMY. “Study Sees Cuts to Health Plans.” The Wall Street Journal (Weds., JUNE 8, 2011): A15.
(Note: ellipsis added.)

The Foster book is:
Foster, Richard N., and Sarah Kaplan. Creative Destruction: Why Companies That Are Built to Last Underperform the Market—and How to Successfully Transform Them. New York: Currency Books, 2001.

The Anecdote for Malignant Perfectionism: “I’ll Fix that in My Next Piece”

“Jeanne Moreau and Orson Welles in ‘Chimes at Midnight,’ a 1965 Shakespeare-based film that’s recently been restored.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D8) Every great artist, . . . , strives for perfection. In fact, that’s part of what makes them great: They’re never entirely satisfied with anything that they do. The classical pianist Artur Schnabel once remarked that he was only interested in performing music that was “better than it can be performed…unless a piece of music presents a problem to me, a never-ending problem, it doesn’t interest me too much.” This sums up the plight of all serious artists: They lead lives of endless frustration, struggling to reach the top of the hill, then seeing another, higher hill just beyond it.
. . .
Alas, that kind of suffering goes with the territory. The trick, as every artist knows, is not to let it interfere with getting things done. The wisest artists are the ones who finish a new work, walk away and move on to the next project. Whenever a colleague pointed out a “mistake” in one of Dmitri Shostakovich’s compositions, he invariably responded, “Oh, I’ll fix that in my next piece.”
The road to malignant perfectionism, by contrast, starts with chronic indecision. Jerome Robbins, whose inability to make up his mind was legendary throughout the world of dance, was known for choreographing multiple versions of a variation, then waiting until the last possible minute to decide which one to use. Beyond a certain point, this kind of perfectionism is all but impossible to distinguish from unprofessionalism, and Mr. Welles reached that point early in his career. . . .
. . .
Mr. Welles’s problem was that he wanted it both ways. He was a perfectionist who expected his collaborators to sit around endlessly waiting for him to make up his mind–and to pay for all the overtime that he ran up along the way. Simon Callow, his biographer, has summed up this failing in one devastating sentence: “Any form of limitation, obligation, responsibility or enforced duty was intolerable to him, rendering him claustrophobic and destructive.” That’s the wrong kind of perfectionism, and it led, as it usually does, to disaster.

For the full commentary, see:
TERRY TEACHOUT. “The Snare of Perfectionism: When Artists Aim Too High.” The Wall Street Journal (Fri., July 22, 2011): D8.
(Note: ellipsis in Schnabel quote was in original; other ellipses added.)

The Movie Auteur as a Model for Technology Entrepreneurship

Source of image: online version of the NYT article quoted and cited below.

(p. 3) Two years ago, the technology blogger John Gruber presented a talk, “The Auteur Theory of Design,” at the Macworld Expo. Mr. Gruber suggested how filmmaking could be a helpful model in guiding creative collaboration in other realms, like software.

The auteur, a film director who both has a distinctive vision for a work and exercises creative control, works with many other creative people. “What the director is doing, nonstop, from the beginning of signing on until the movie is done, is making decisions,” Mr. Gruber said. “And just simply making decisions, one after another, can be a form of art.”
“The quality of any collaborative creative endeavor tends to approach the level of taste of whoever is in charge,” Mr. Gruber pointed out.
Two years after he outlined his theory, it is still a touchstone in design circles for discussing Apple and its rivals.
Garry Tan, designer in residence and a venture partner at Y Combinator, an investor in start-ups, says: “Steve Jobs is not always right–MobileMe would be an example. But we do know that all major design decisions have to pass his muster. That is what an auteur does.”
Mr. Jobs has acquired a reputation as a great designer, Mr. Tan says, not because he personally makes the designs but because “he’s got the eye.” He has also hired classically trained designers like Jonathan Ive. “Design excellence also attracts design talent,” Mr. Tan explains.

For the full story, see:
RANDALL STROSS. “DIGITAL DOMAIN; The Auteur vs. the Committee.” The New York Times, SundayBusiness Section (Sun., July 24, 2011): 3.
(Note: the online version of the story is dated July 23, 2011.)

Edison Excelled as an Organizer of Systems

(p. 131) Where Edison truly excelled was as an organizer of systems. The invention of the light bulb was a wondrous thing but of not much practical use when no one had a socket to plug it into. Edison and his tireless workers had to design and build the entire system from scratch, from power stations to cheap and reliable wiring, to lampstands and switches. Within months Edison had set up no fewer than 334 small electrical plants all over the world; (p. 132) within a year or so his plants were powering thirteen thousand light bulbs. Cannily he put them in places where they would be sure to make maximum impact: on the New York Stock Exchange, in the Palmer House Hotel in Chicago, La Scala opera house in Milan, the dining room of the House of Commons in London. Swan, meanwhile, was still doing much of his manufacturing in his own home. He didn’t, in short, have a lot of vision. Indeed, he didn’t even file for a patent. Edison took out patents everywhere, including in Britain in November 1879, and so secured his preeminence.

Source:
Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.

To Succeed in the Car Business, It Helps if You Care about Cars

Source of book image: online version of the WSJ review quoted and cited below.

(p. B1) . . . , General Motors embarked on a series of initiatives to overcome both the perception and reality of the growing import threat. The 1950s and ’60s marked the decline of the “product guy” at GM and the ascendancy of “professional management,” often individuals with a strong financial background.

It’s not that senior GM management disliked cars. It was more an atmosphere of “benign neglect,” a generalized consensus that we were, after all, primarily in the business of making money, and cars were merely a transitory form of money: put a certain quantity in at the front end, transform it into vehicles, and sell them for more money at the other (p. B12) end. The company cared about “the other two ends”–minimizing cost and maximizing revenue–but assumed that customer desire for the product was a given.
Responsibility for creation of the right product was delegated to lower levels in the organization, often to people with little understanding of quality design or great driving characteristics. I maintain that without a passionate focus on great products from the top of the company on down, the “low cost” part will be assured but the “high revenue” part won’t happen, just as it didn’t at GM for so many years.

For the full excerpt, see:
Bob Lutz. “Japan’s Advantage and How the Cadillac Lost Its Shine.” The Wall Street Journal (Mon., JUNE 13, 2011): B1 & B12.
(Note: ellipsis added.)

The excerpt is excerpted from:
Lutz, Bob. Car Guys Vs. Bean Counters: The Battle for the Soul of American Business. New York: Portfolio, 2011.

“If We Can’t Win on Quality, We Shouldn’t Win at All”

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) At the tail end of the 1990s dot-com boom, Douglas Edwards took a gamble: He left his marketing job at an old-media company, taking a $25,000 salary cut to start work at a small, little-known Internet concern in its second year of operation. That his new employer was losing money and burning through venture capital went without saying. But unlike the footloose 20-somethings who usually populated Silicon Valley start-ups, Mr. Edwards had little margin to bet wrong; he was 41, with a mortgage, three children and a worried wife. He hoped he could get his old job back if the company ran out of money.

. . .
Mr. Edwards came to his job as a subscriber to the conventional wisdom. In an early presentation to cofounder Larry Page and others, Mr. Edwards unwisely declared that only marketing, not technology, could set Google apart. “In a world where all search engines are equal,” he asserted, “we’ll need to rely on branding to differentiate us from our competitors.”
The room became quiet. Then Mr. Page spoke up. “If we can’t win on quality,” he said, “we shouldn’t win at all.”

For the full review, see:
DAVID A. PRICE. “BOOKSHELF; How Google Got Going; Branding, shmanding, a marketer was told. ‘If we can’t win on quality,’ Larry Page said, ‘we shouldn’t win at all.'” The Wall Street Journal (Tues., July 12, 2011): A13.
(Note: ellipsis added.)

Book being reviewed:
Edwards, Douglas. I’m Feeling Lucky: The Confessions of Google Employee Number 59. New York: Houghton Mifflin Harcourt Publishing Co., 2011.

Google CEO Larry Page Admires Steve Jobs

“Former colleagues describe Larry Page, center, as strong-willed and sometimes impolite. He is said to admire Apple CEO Steve Jobs.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) Larry Page’s PageRank algorithm was the basis for Google Inc.’s search engine. As Google’s new chief executive, Mr. Page will face the challenge of leading a company that has grown far beyond that algorithm and must compete with agile Web upstarts such as Facebook Inc. and Groupon Inc.

On Friday, a day after being named to replace outgoing CEO Eric Schmidt in April, Mr. Page gave little hint of how he planned to tackle such challenges. The 38-year-old Google co-founder didn’t immediately address employees in an all-hands note or meeting, said a person familiar with the matter, though the company has a weekly Friday meeting that Mr. Page was expected to attend.
But several of Mr. Page’s former colleagues describe him as having similarities to Apple CEO Steve Jobs, whom Mr. Page has said he admired. Both men are strong willed, sometimes impolite and push engineers hard to execute their ambitious projects.
Some former colleagues said Mr. Page is likely to try to pierce through the sometimes “paralyzing” bureaucracy that product managers and engineers have faced when trying to launch some Google products in recent years.
On Thursday, Messrs. Page and Schmidt said some top-level decision-making had gotten slower and the management change would improve that. Also, the company has said it is trying to allow more projects to operate like start-ups inside of Google in order to speed up innovation.

For the full story, see:
AMIR EFRATI and SCOTT MORRISON. “TECHNOLOGY; Chief Seeks More Agile Google; As CEO, Larry Page Must Pierce Bureaucracy, Compete With Nimble Upstarts.” The Wall Street Journal (Tues., January 22, 2011): B1 & B4.