Tom Peters Base Case Re-Imagine Business Excellence in

Tom Peters’ “Base Case”: Re-Imagine! Business Excellence in a Disruptive Age Base. Case/05 October 2005

Slides at … tompeters. com

Context.

3, 000, 000

THREE BILLION NEW CAPITALISTS —Clyde Prestowitz

26 m

43 h

3, 000, 000

“A focus on cost-cutting and efficiency has helped many organizations weather the downturn, but this approach will ultimately Only the constant pursuit of innovation can ensure long-term success. ” —Daniel render them obsolete. Muzyka, Dean, Sauder School of Business, Univ of British Columbia (FT/09. 17. 04)

“It is not the strongest of the species that survives, nor the most intelligent, the one most responsive to change. ” but —Charles Darwin

No!

“Not a single company that qualified as having made a sustained transformation ignited its leap with a big acquisition or merger. Moreover, comparison companies—those that failed to make a leap or, if they did, failed to sustain it—often tried to make themselves great with a big acquisition or merger. They failed to grasp the simple truth that while you can buy your way to growth, you cannot buy your way to greatness. ” —Jim Collins/Time/11. 29. 04

“I don’t believe in You don’t get better by being bigger. You get worse. ” economies of scale. —Dick Kovacevich/ Wells Fargo/Forbes 08. 2004 (ROA: Wells, 1. 7%; Citi, 1. 5%; Bof. A, 1. 3%; J. P. Morgan Chase, 0. 9%)

Forbes 100 from 1917 to 1987: 39 members of the Class of ’ 17 were alive in ’ 87; 18 in ’ 87 F 100; 18 F 100 “survivors” underperformed the market by 20%; just 2 (2%), GE & Kodak, outperformed the market 1917 to 1987. S&P 500 from 1957 to 1997: 74 members of the Class of ’ 57 were alive in ’ 97; 12 (2. 4%) of 500 outperformed the market from 1957 to 1997. Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market

“I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, ‘How do I build a small firm for myself? ’ The Buy a very large one and just wait. ” answer seems obvious: —Paul Ormerod, Why Most Things Fail: Evolution, Extinction and Economics

Yes!

“To grow, companies need to break out of a vicious cycle of competitive benchmarking and imitation. ” —W. Chan Kim & Renée Mauborgne, “Think for Yourself —Stop Copying a Rival, ” Financial Times/08. 11. 03

Innovation! NOT Imitation

“Value innovation is about making the competition irrelevant by creating uncontested market space. We argue that beating the competition within the confines of the existing industry is not the way to create profitable growth. ” —Chan Kim & Renée Mauborgne (INSEAD), from Blue Ocean Strategy (The Times/London/01. 2005)

“Acquisitions are about buying Our challenge is to create markets. market share. There is a big difference. ” —Peter Job, CEO, Reuters

GH/TP: “Get better” vs “Get different”

The SE 22: Origins of Sustainable Entrepreneurship.

SE 22/Origins of Sustainable Entrepreneurship 1. Genetically disposed to Innovations that upset apple carts (3 M, Apple, Fed. Ex, Virgin, BMW, Sony, Nike, Schwab, Starbucks, Oracle, Sun, Fox, Stanford University, MIT) 2. Perpetually determined to outdo oneself, even to the detriment of today’s $$$ winners (Apple, Cirque du Soleil, Nokia, Fed. Ex) 3. Treat History as the Enemy (GE) 4. Love the Great Leap/Enjoy the Hunt (Apple, Oracle, Intel, Nokia, Sony) 5. Use “Strategic Thrust Overlays” to Attack Monster Problems (Sysco, GSK, GE, Microsoft) 6. Establish a “Be on the COOL Team” Ethos. (Most PSFs, Microsoft) 7. Encourage Vigorous Dissent/Genetically “Noisy” (Intel, Apple, Microsoft, Citi. Group, Pepsi. Co) 8. “Culturally” as well as organizationally Decentralized (GE, J&J, Omnicom, Virgin) 9. Multi-entrepreneurship/Many Independent-minded Stars (GE, Pepsi. Co, J & J)

HP’s Big “Duh”! Decentralize ($90 B) Undo “Matrix” Accountability Source: “HP Says Goodbye To Drama”/ BW/09. 05/re Mark Hurd’s first 5 months

SE 22/Origins of Sustainable Entrepreneurship 10. Keep decentralizing—tireless in pursuit of wiping out Centralizing Tendencies (J&J, Virgin) 11. Scour the world for Ingenious Alliance Partners—especially exciting start-ups (Pfizer) 12. Acquire for Innovation & Talent, not Market Share (Cisco, GE, Omnicom) 13. Don’t overdo “pursuit of synergy” (GE, J&J, Time Warner) 14. Execution/Action Bias: Just do it … don’t obsess on how it “fits the business model. ” (3 M, J & J) 15. Find and Encourage and Promote Strong-willed/Hypersmart/Independent people (GE, Pepsi. Co, Microsoft) 16. Support Internal Entrepreneurs/Intrapreneurs (3 M, Microsoft) 17. Ferret out Talent … anywhere and everywhere/“No limits” approach to retaining top talent (Nike, Virgin, GE, Pepsi. Co)

SE 22/Origins of Sustainable Entrepreneurship 18. Unmistakable Results & Accountability focus from the get-go to the grave (GE, New York Yankees, Pepsi. Co) 19. Up or Out (GE, Mc. Kinsey, big consultancies and law firms and ad agencies and movie studios in general) 20. Competitive to a fault! (GE, New York Yankees, News Corp/Fox, Pepsi. Co) 21. “Bi-polar” Top Team, with “Unglued” Innovator #1, powerful Control Freak #2 (Oracle, Virgin) (Watch out when #2 is missing: Enron) 22. Masters of Loose-Tight/Hard-nosed about a very few Core Values, Open-minded about everything else (Virgin, Horatio Nelson)

Bang!

No Wiggle Room! “Incrementalism is innovation’s worst enemy. ” Nicholas Negroponte

“Beware of the tyranny of making Small Changes to Small Things. Big Changes to Big Rather, make Things. ” —Roger Enrico, former Chairman, Pepsi. Co

IS/IT: Power Tools for Power Strategies! —TP

“Reward excellent failures. Punish mediocre successes. ” Phil Daniels, Sydney exec

Up!

And the “M” Stands for … ? “Systems Integrator of choice. ” Gerstner’s IBM: (BW) IBM Global Services: $55 B

“Big Brown’s New Bag: UPS Traffic Manager for Corporate America” Aims to Be the —Headline/BW/07. 19. 2004

“[Closing/selling Boeings 8, 000 person facility in Wichita] was an important decision in moving forward with Boeing’s longterm strategy of becoming a large-scale integrator. ” —The Wichita Eagle/06. 16. 2005

Answer: PSF! [Professional Service Firm] Department Head to … Managing Partner, HR [IS, R&D, etc. ] Inc.

Experience Ladder/P&G-TP Solutions Services Goods Raw Materials

Up! Up!

“Experiences are as distinct from services as services are from goods. ” Joe Pine & Jim Gilmore, The Experience Economy: Work Is Theatre & Every Business a Stage

Experience: “Rebel Lifestyle!” “What we sell is the ability for a 43 -year-old accountant to dress in black leather, ride through small towns and have people be afraid of him. ” Harley exec, quoted in Results-Based Leadership

2/50 3 Q 04

“The [Starbucks] Fix” Is on … “We have identified a ‘third place. ’ And I really believe that sets us apart. The third place is that place that’s not work or It’s the place our customers come for refuge. ” home. Nancy Orsolini, District Manager

“With its carefully conceived mix of colors and textures, aromas and music, Starbucks is more indicative of our era than the i. Mac. It is to the Age of Aesthetics what Mc. Donald’s was to the Age of Convenience or Ford was to the Age of Mass Production—the touchstone success story, the exemplar of all that is good and bad about the aesthetic imperative. … ‘Every Starbucks store is carefully designed to enhance the quality of everything the customers see, touch, hear, smell or taste, ’ writes CEO Howard Schultz. ” —Virginia Postrel, The Substance of Style: How the Rise of Aesthetic Value Is Remaking Commerce, Culture and Consciousness

Experience Ladder/P&G-TP Awesome Experiences Solutions Services Goods Raw Materials

Sales per Square Foot/Grocery Albertson’s: $384 Wal*Mart: $415 Whole Foods: $798

Up! Up!

DREAM: “A dream is a complete moment in the life of a client. Important experiences that tempt the client to commit substantial resources. The essence of the desires of the consumer. The opportunity to help clients become what they want to be. ” —Gian Luigi Longinotti-Buitoni

Planetary Rainmaker-in-Chief! “Palmisano’s strategy is to expand tech’s borders by pushing users—and entire industries—toward radically different business models. The payoff for IBM would be access to an ocean of revenue—Palmisano estimates it at $500 billion a year—that technology companies have never been able to touch. ” —Fortune

“By making the Global Delivery Model both legitimate and mainstream, we have brought the battle to our territory. That is, after all, the purpose of strategy. We have become the leaders, and incumbents [IBM, Accenture] are followers, forever playing catch-up. … However, creating a new business innovation is not enough for rules to be changed. The innovation must impact clients, competitors, investors, and society. We have seen all this in spades. Clients have embraced the model and are demanding it in even greater measure. The acuteness of their circumstance, coupled with the capability and value of our solution, has made the choice not a choice. Competitors have been dragged kicking and screaming to replicate what we do. They face Investors have grasped that this is not a passing fancy, but a potential restructuring of the way the world operates and how value will be created in the future. ” trauma and disruption, but the game has changed forever. —Narayana Murthy, chairman’s letter, Infosys Annual Report 2003

Experience Ladder/P&G-TP Dreams Come True Awesome Experiences Solutions Services Goods Raw Materials

IBM, UPS … Dream Merchants!

One company’s answer: CXO* *Chief e Xperience Officer

C DM* *Chief Dream Merchant

C R *Chief Revenue O* Officer

“Analysts said we don’t care about revenue, just give us the bottom line. They preferred cost cutting, as long as they could see two or three years of EPS growth. I preached revenue and the analysts’ eyes would glaze over. Now revenue is ‘in’ because so many got caught, and earnings went to hell. They said, ‘Oh my gosh, you need revenues to grow earnings over time. ’ Well, Duh!” —Dick Kovacevich, Wells Fargo (in ABA Banking Journal)

Bedrock!

“Human creativity is the ultimate economic resource. ” —Richard Florida, The Rise of the Creative Class

Brand = Talent.

“Leaders ‘do’ people. P-e-r-i-o-d. ” —Anon.

Les Wexner: From sweaters to … people!

Did We Say “Talent Matters”? “The top software developers are more productive than average software developers not by a factor of 10 X or 100 X, or even 1, 000 X, but 10, 000 X. ” —Nathan Myhrvold, former Chief Scientist, Microsoft

“We believe companies can increase their market cap 50 percent in 3 years. Steve Macadam at Georgia- changed 20 of his 40 box plant managers to put more talented, higher paid managers in charge. He increased Pacific profitability from $25 million to $80 million in 2 years. ” Ed Michaels, War for Talent

Our Mission To develop and manage talent; to apply that talent, throughout the world, for the benefit of clients; to do so in partnership; to do so with profit. WPP

DD$21 M

Bosses.

“I’m not comfortable unless I’m uncomfortable. ” —Jay Chiat

“If things seem under control, you’re just not going fast enough. ” —Mario Andretti

“If it works, it’s obsolete. ” —Marshall Mc. Luhan

Offense!

“[Other] admirals more frightened of losing than anxious to win” Nelson’s secret:

Action!

“We have a ‘strategic’ plan. It’s called doing things. ” — Herb Kelleher

Lunacy!

Kevin Roberts’ Credo 1. Ready. Fire! Aim. 2. 3. 4. 5. 6. 7. 8. 9. If it ain’t broke. . . Break it! Hire crazies. Ask dumb questions. Pursue failure. Lead, follow. . . or get out of the way! Spread confusion. Ditch your office. Read odd stuff. 10. Avoid moderation!

“You can’t behave in a calm, rational manner. You’ve got to be out there on the lunatic fringe. ” — Jack Welch

Step #1.

“The First step in a ‘dramatic’ ‘organizational change program’ is obvious —dramatic personal change!” —RG

be “You must the change you wish to see in the world. ” —Gandhi