Tag: CEO


The Joys and Perils of Dancing on a Knife’s Edge

February 25th, 2011 — 11:09am

The tumultuous crowds that brought down a dictator in Egypt had an unintended impact far from their homeland: they drowned out – rightfully! – the announcement of a strategic partnership between Nokia and Microsoft. I admire the Nokia I researched; yet I acknowledge it is currently in deep trouble. I have long disdained Microsoft for its product quality and its reliance on monopolistic power instead of innovation (sole exceptions: Xbox and Kinect; and yes, I admit that Office 2011 for the Mac is far better than iWorks!). So, what do I think of this alliance?

A key “prerequisite” question is: Do I still believe the ideas in The Spider’s Strategy? Absolutely! Toyota’s “unexpected acceleration” fiasco and its resultant recalls of millions of cars didn’t discredit Lean Enterprise. Why then, should Nokia’s recent challenges discredit Networked Organizations? Indeed, Nokia got into trouble because in the key area of product innovation, it stopped applying the ideas that powered its 17% compounded annual organic growth rate (in revenues and operating profits) from 1995 to 2006.

Nokia violated a subtle rule embedded in my third Design Principle, “Value and nurture organizational learning.” It used to learn rapidly by setting seemingly impossible targets that demanded the periodic reinvention its business model. Simultanneouly, to keep control, it insisted its managers follow a “no surprises” policy. This brilliant rule is the proverbial knife’s edge. Balance well, and you can pull off miracles. Tilt toward “big risk” and you can lose your shirt. Tilt toward “no suprises” and you will bring innovation to a screeching halt. As it grew, Nokia made the mistake many other large companies have: it tilted toward “no surprises.” So, unlike Apple, it didn’t build a network of complementary product makers to buttress its proprietary Symbian software. Unlike Google, it didn’t attract a different type of sustaining network by making Symbian open source – until it was too late.

The alliance with Microsoft was in the cards from the day Nokia’s Board appointed Stephen Elop CEO. Nokia’s press release spoke of a strategy to “build a new global mobile ecosystem” with Windows Phone software at its core; “capture volume and value growth to connect ‘the next billion’ to the Internet in developing growth markets;” and make “focused investments in next-generation disruptive technologies.”

The second element – a continued focus on markets like India and China – is an key, though the notoriously developed-world-focused financial analysts may not care. Apple has ignored these markets and Windows still has a true monopoly among operating systems. These facts, plus Nokia’s still dominant marketshare there, give the alliance a strong base on which it can build; Nokia can instantly create volume for the Windows Phone and a seemless integration with Wintel computers may give it an edge over low cost Chinese phone makers. At the very least, this element will buy the alliance time; at best, the “next billion” is a huge market. That’s where the first element is also critical.

To bring the alliance value, the goal of building a mobile ecosystem must truly assimilate the lesson of a recent The New York Times story about a start-up company that hoped to build a business around enabling group dates. The founders noted that the site’s users were mostly South or East Asians, but filed that fact away as “Interesting, but Unimportant.” Success came only when they reluctantly acknowledged that group dating wouldn’t fly in the US and shifted their focus to India. The world, as Thomas Freidman said, is flat. But that doesn’t mean people’s needs are the same everywhere. That’s why the word “global” in the language of this strategic element is troubling. Its use may seduce financial analysts, but unless an ecosystem to specific markets, it won’t amount to a hill of beans. At one time Nokia knew this lesson; it had had anthropologists in Indian villages whose work strengthened its market position there. Does it still remember that lesson and can it convince a monopoly to learn it too?

The third element is critical for the long term and most troubling: Will two companies who haven’t created any disruptive technology recently be able to do so in the near future? Nokia’s Chairman Jorma Ollila had championed the Networked Organization philosophy and as CEO, had managed its phenomenal growth. I could make a cogent case that he and the Board had no choice but to create the alliance with Microsoft. (Which would explain why they pursued Mr. Elop in the first place.) Now, he must ensure that Mr. Elop realizes that his most critical tasks are (1) putting into leadership positions those within Nokia who are still capable of dancing gracefully on a knife’s edge and (2) using his deep knowledge of Microsoft to convince Mr. Ballmer to do the same. Then, and only then, will the alliance succeed. If so, I may one day become once again an enthusiastic customer of both companies.

Comment » | Business Environment, Company Performance, Corporate Culture, Leadership

The Prototype Boss of the 21st Century?

July 5th, 2008 — 4:17pm

A recent Financial Times article about Neville Idsell, Coca Cola’s retiring CEO (“Final encore for a man of the people”) struck a chord because of the contrast it posed with a prior Coke CEO, Douglas Ivestor.

Ivestor became CEO in late 1997 after Roberto Goizuetta sudden death. Michael Watkins wrote a HBS case (The Coca Cola Company (A): The Rise and Fall of M. Douglas Ivestor) about the succession. Wall Street was so certain of his credentials that it almost ignored the beloved Goizeutta’s passing. Ivestor was a financial genius, and as the following quotes from the (meticulously footnoted) case show, a ruthless competitor and hard driving operator:
_ “… play by the rule of McDonald’s founder Ray Kroc, ‘What do you do when your competitor is drowning? Get a live hose and stick it in his mouth.’”
_ “The highly disciplined organizations are the most creative. If you can create high discipline, in effect you’ve created security and safety…. It’s follow-up. It’s returning phone calls. … We operate with a rigid control system. It is an enabler, not a restrictor.”

Yet, 18 months into his tenure, Ivestor stepped down. The man whom Fortune magazine had called the “prototype boss for the 21st century” could not solve the huge problems that had their roots in policies initiated – with Ivestor’s active participation – during Goizuetta’s reign.

In mid-2004, Coke’ Board lured Neville Idsell, a former Coke executive, out of retirement after Ivestor’s successor, Douglas Daft also failed to make headway. Four years later, he is leaving Coke in much better shape. Idsell succeeded not by charting a new path, but by changing how Coke operated. The FT article quotes him saying, “My major was sociology; I am a qualified social worker. I do think it is all about people.” Early in his tenure, he appointed a top executive to focus on internally on Coke’s people and a team to focus on building better relations with Coke’s bottlers. He brought in 150 top executives into a powwow on what ailed Coke and listened to them. He passed over his protégée and anointed a successor whom he called “ambassadorial” and “… one of the world’s great best networkers …”

Idsell, rather than Ivestor, deserves to be called the “prototype boss for the 21st century” – and he is not alone. Two years ago, the Idsells of the world would have stood no chance; today, they are in demand. For example, John Thain replaced Stan O’Neil at Merrill and Jeffrey Kindler replaced Henry McKinnell at Pfizer.

This new breed of executive will not get a free ride on performance. Charles Prince brought a softer edge to Citigroup, but was forced out for failing to resolve Citi’s mounting problems. Interestingly, Citi’s Board did not rush to get back a Sandy Weil look-alike, but sought out an executive with an even bigger reputation for collaborative management: Vikram Pandit.

These CEO choices don’t mean that Boards of Directors are going soft in the head. My money is on the idea that they are belatedly coming to the understanding that the “It’s my way or the highway” style of management preferred by the Ivestors and O’Neils and McKinnells doesn’t work in a networked world.

Let’s build a list of this new breed of CEOs and collectively keep tabs on how they work and how they fare.

2 comments » | Leadership

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