Wednesday, March 30, 2011


The Enterprise of the Future
IBM Global CEO study

Some fascinating insights from IBM’s extensive study of CEO from around the world. Read the full article

"Organizations are bombarded by change, and many are struggling to keep up: eight out of ten Ceos see significant change ahead, and yet the gap between expected change and the ability to manage it has almost tripled since our last Global Ceo Study in 2006.
Ceos view more demanding customers not as a threat, but as an opportunity to differentiate: Ceos are spending more to attract and retain increasingly prosperous, informed and socially aware customers.
Nearly all ceos are adapting their business models—two-thirds are implementing extensive innovations. More than 40 percent are changing their enterprise models to be more collaborative.
Ceos are moving aggressively toward global business designs, deeply changing capabilities and partnering more extensively: Ceos have moved beyond the cliché of globalization, and organizations of all sizes are reconfiguring to take advantage of global integration opportunities.
Financial outperformers are making bolder plays
. these companies anticipate more change, and manage it better. they are also more global in their business designs, partner more extensively and choose more disruptive forms of business model innovation"

Thursday, March 24, 2011

Total Shareholder Returns
This measure of business performance is the best indicator of corporate success.
This very powerful summary is clearly worth looking at. You get what you measure and this article explores the critical measures and systems to optimize them.

Total shareholder return is a measure of corporate performance. But as we shall see, it is also a system of management, grounded in a set of metrics and practices for running a company to maximize its value creation, over both the short term and the long haul. ......When starting down the TSR path, it is helpful to begin with two questions: How broad or narrow should we make our focus on TSR? What issues and opportunities are we seeking to address by adopting a sharper focus on managing for TSR?Primary TSR MetricsThese are the four primary metrics to use when managing for top-tier TSR.1. Total shareholder return. This is the change in a company’s stock price for a given period, plus its free cash flow over the same period, as a percentage of the beginning stock price. For example, if a company has a stock price of US$100 at the beginning of a year, free cash flow of $3 during the year, and a stock price of $110 at the end of the year, its TSR for that year is 13 percent. TSR can be measured only for publicly traded companies because it requires observable stock prices....

...2. Free cash flow (from a shareholder perspective). This is the difference between earnings and retained earnings (sometimes called equity cash flow). At the company level, it is the portion of earnings paid out to investors...

....3. Economic profit. This is the difference between earnings and the cost of invested capital for a given period of time. A business that is earning at least its cost of capital is generating positive economic profit; a business that is earning less than its cost of capital has negative economic profit, even if its earnings are positive...

....4. Warranted value. This is the current value of a company or an operating unit based on the best estimate of its expected free cash flow (or economic profits) under a particular future strategy. This metric is sometimes called intrinsic value. Warren Buffett defines it as “the present value of the earnings power a business has over its remaining life.”...

Monday, March 14, 2011

Capitalizing on Complexity--IBM
Insights from the Global Chief Executive Officer Study

This study is based on face-to-face conversations with more than 1,500 chief executive officers worldwide

This series of studies by IBM are excellent and I plan to excerpt different parts of it in future postings.

"This study is the fourth edition of our biennial Global CEO Study series,
led by the IBM Institute for Business Value and IBM Strategy & Change.To better understand the challenges and goals of today’s CEOs, we met
face-to-face with the largest-known sample of these senior executives.
Between September 2009 and January 2010, we interviewed 1,541 CEOs,
general managers and senior public sector leaders who represent different
sizes of organizations in 60 countries and 33 industries  

Today’s complexity is only expected to rise, and more than half
of CEOs doubt their ability to manage it. Seventy-nine percent of
CEOs anticipate even greater complexity ahead. However, one set of
organizations—we call them “Standouts”—has turned increased complexity
into financial advantage over the past five years.
 Creativity is the most important leadership quality, according to
CEOs. Standouts practice and encourage experimentation and innovation
throughout their organizations. Creative leaders expect to make deeper
business model changes to realize their strategies. To succeed, they take
more calculated risks, find new ideas, and keep innovating in how they
lead and communicate.
  The most successful organizations co-create products and services
with customers, and integrate customers into core processes.
They are adopting new channels to engage and stay in tune with customers.
By drawing more insight from the available data, successful CEOs make
customer intimacy their number-one priority.
  Better performers manage complexity on behalf of their
organizations, customers and partners. They do so by simplifying
operations and products, and increasing dexterity to change the way
they work, access resources and enter markets around the world.
Compared to other CEOs, dexterous leaders expect 20 percent more
future revenue to come from new source"

Tuesday, March 08, 2011

Wal-Mart Tries to Recapture Mr. Sam's Winning Formula

2/22/2011 WSJ

Wal-Mart Stores Inc. is in the midst of its worst U.S. sales slump ever.
When we work with clients in helping them grow their businesses, we stress that leadership MUST first define what they are and what they are not. What strategic space do they want to compete in is the key question. Many feel initially that is this a frivolous exercise until they see its power. We use the approach of defining their Core Mission—what is the ultimate value you are creating for your customers (the Core value) and what is the underlying core competency or DNA of your company that enables you to deliver this value better than competition (the Core Process). For Wal-Mart, their Core Value was “Save money, live better” for their target customer base per their advertising slogan. Their Core Process is their incredible value chain systems they put in place with their suppliers. Wal-Mart’s recent history shows the danger of changing your Core Mission (often is search of new growth) once firmly established and successful.

"When it reports earnings on Tuesday, the retailer is widely expected to post its second straight year of declining domestic same-store sales.Wal-Mart's struggles are the result of a misstep: To jump-start lethargic growth and counter the rise of competitors such as cheap-chic rival Target Corp., executives veered away from the winning formula of late founder Sam Walton to provide "every day low prices" to the American working class. Wal-Mart, the world's biggest retailer by sales, instead raised prices on some items while promoting deals on others.
Company executives acknowledge having miscalculated and are adjusting their strategy again. The big question is how quickly the mammoth chain can turn itself around.Wal-Mart's shift from its traditional core customer manifested itself in numerous ways. A foray into organic foods didn't catch on with discount shoppers. A push to sell trendy fashions like skinny jeans bombed. And an attempt to cut clutter in stores to attract higher-income customers wound up undermining Wal-Mart's appeal to its traditional audience.The Bentonville, Ark., chain's up-market push, which began before the recession, succeeded in attracting some well-heeled customers, but at great cost. Wal-Mart lost its iron grip on U.S. households earning less than $70,000 a year—which made up 68% of its domestic business—to other discounters."The basic Wal-Mart customer didn't leave Wal-Mart. What happened is that Wal-Mart left the customer," said former Wal-Mart executive Jimmy Wright, who supervised the company's distribution networks from 1992 to 1998 before leaving to co-found consulting firm Diversified Retail Solutions.Wal-Mart has shuffled top U.S. executives in the past nine months and is going back to basics—eschewing fashionable clothes in favor of socks and sweat pants, for example—it an effort to recover market share........"Clearly, we've lost some of our focus on what I would call the core customer," Andy Barron, a Wal-Mart executive vice president, said at an investor meeting. "You might say, in short, that we were trying to be something that maybe we're not."......…So once again, Wal-Mart is back to cramming wood pallets of $8.97 boxed wine and $8 Justin Bieber CDs into the store's corridors, recreating the messy procession of discount merchandise in the main aisles that the company calls "action alley." Now analysts are concerned that, in changing direction again, Wal-Mart risks alienating whatever higher scale shoppers it had gained"

Tuesday, March 01, 2011

Mobile Wars! Apple vs. Google vs. Those Other Guys
After Nokia's software surrender, the five-way struggle for mobile dominance heats up

This is a fascinating change that well beyond the digital world.” Eco systems” or some call “platforms” vs. products are becoming the basis of competition. All companies and businesses MUST realize this fundamental change to create and sustain competitive separation.

"It's been a big couple of weeks in mobile. Verizon Wireless finally got the iPhone. Hewlett-Packard (HPQ) unveiled the first fruits of its Palm purchase last year. Nokia (NOK), the world's biggest handset maker, abandoned its once-dominant Symbian mobile software system and demoted itself to a kind of glorified contract manufacturer of Microsoft (MSFT)-powered devices.The struggle for mobile dominance has entered a new phase. Why would Nokia throw out Symbian, with its 37 percent market share, in favor of software with less than one-seventh of that? Because recently hired Chief Executive Officer Stephen Elop is convinced that Microsoft has better odds of going up against the four other mobile powers—Apple (AAPL), Google (GOOG), Research In Motion (RIMM), and HP—and making its new Windows Phone 7 software a center of gravity for the world's programmers, manufacturers, and consumers. "The game has changed from a battle of devices to a war of ecosystems," Elop told investors at a London press conference on Feb. 11. Actually, it's the same game that created the most valuable franchises in tech history, from IBM (IBM) to Microsoft to Facebook. All successfully established themselves as "platforms," in which countless entrepreneurs and programmers developed technologies that gave value to customers and profitability to shareholders—sucking oxygen away from rivals all the while.