Merck Plans Radical Overhaul of Drug R&D Unit
PETER LOFTUS And  JONATHAN D. ROCKOFF
Updated Dec. 27, 2013 4:50 p.m. ET

http://online.wsj.com/news/articles/SB10001424052702304753504579284651836908502?mod=djemalertNEWS

This is an example of how companies who drove innovation primarily from internal sources are deploying whole new concepts of innovation outside their companies. Merck is joining such companies as IBM and Proctor and Gamble. From these examples, it is clear this approach is viable for any industry. Also, I believe it is a way for smaller companies to leverage the internal sources to better compete with the big guys in their industries.

Merck MRK +0.02% & Co. is working on a plan to radically reshape its once-storied research-and-development unit that would create international innovation hubs tapping into drug research outside of its labs. 

Merck would create these hubs in or near Boston, the San Francisco Bay area, London and Shanghai, according to people familiar with the matter—regions with a critical mass of academic and commercial R&D. The company would use the bases to scout for promising biotechnology and pharmaceutical research that Merck could license or acquire in deals, according to these people…. 

….A Merck spokesman confirmed the company plans to establish a "scientific presence" in the four regions, to identify both early- and late-stage opportunities. "This is consistent with our strategy of actively seeking external scientific innovation to bolster our pipeline with candidates that provide unambiguous promotable advantage," the spokesman said. He declined to comment on potential divestiture plans. 

Together, the moves would represent a significant shift for Merck, making it more receptive to external opportunities and less wedded to in-house handling of the entire life cycle of a drug's development, from discovery through clinical trials….. 

….Merck's labs were once the envy of industry, discovering products like the first measles vaccine and the first marketed statin drug to lower cholesterol. Merck researchers prided themselves on carrying drugs from discovery to the last stages of development in-house. But they haven't scored a major success since diabetes drug Januvia and cervical-cancer vaccine Gardasil were approved in 2006.(very typical of companies with a history of internal innovation).

How to Monetize Your Close
Thomas Friedman, NY Times

http://www.nytimes.com/2013/12/22/opinion/sunday/friedman-how-to-monetize-your-closet.html?_r=0

This title may sound a bit strange but it refers to an emerging concept called a sharing economy—one that focuses on benefiting from a utility without ownership. The example discussed in the article is one where women can exchange clothing in a way never before possible on the internet. Although not applicable to all situations, the concept of focusing on what you need and potentially gaining the utility in ways other than ownership is very powerful to many if not all business situations. The web site is www. Tradesy.com.

....Tradesy, which enables women to monetize the used or unused clothing and accessories in their closets by creating a peer-to-peer marketplace in which pricing, listing, buying, selling, shipping and returning goods is seamlessly easy — and with Tradesy taking a 9 percent commission. She is not alone in that space, but it’s working.... 

...“A sharing economy platform can aggregate massive amounts of inventory more quickly and cheaply than retailers because our supply is crowd-sourced from users,” DiNunzio said via email. “Having an abundance of product and content available allows our site to achieve larger and faster distribution across web channels such as search and social media, accessing masses of customers quickly and cheaply. Tradesy has accumulated $97.5 million in inventory, at virtually no cost to our business, in 13 months. If we had to do that with product that we produced or purchased, it would certainly take more time and resources, and expose us to significant inventory risk.”
The sharing economy is producing both new entrepreneurs and a new concept of ownership. “With improved peer-to-peer commerce platforms that remove the friction and risk from multiparty transactions, consumers are being empowered to value and sell their space, their belongings and their time in ways that weren't previously possible,”.... 

“For those at the cutting edge of this trend, durable goods are viewed as temporal objects to enjoy and pass on rather than ‘belongings.’ Personally, I no longer feel like I ‘own’ anything. I enjoy my consumer goods for a day, a week or a year, take good care of them because I assume they’ll go on to have another life with someone else, then share or sell whatever I’m tired of. I get access to goods and services that would typically be beyond my means, without accumulating a ton of stuff.” 

This “lightweight living,”“goes hand in hand with a re-imagined concept of ownership that’s focused on utility rather than possession, and can ultimately result in consumers enjoying more variety for their dollar.” Aren’t retailers hurt? “Tradesy’s early data suggests that our customers actually spend more at retail when they feel confident that there’s a viable resale opportunity on the secondary market.”

Ballmer on Ballmer: His Exit From Microsoft
By
MONICA LANGLEY

http://online.wsj.com/news/articles/SB10001424052702303460004579194150724298162

The bottom line of Microsoft’s problem and Ballmer’s specifically, was the culture of protecting the strong base of PC based software. Even when changed was demanded by the Board, it was hard for him not to put top proprietary on Windows. Once he realized that speed of implementation as critical, he felt, and I think correctly, he had little credibility with the organization

"Microsoft's culture included corporate silos where colleagues were often pitted against one another—a competitive milieu that spurred innovation during Microsoft's heyday but now sometimes leaves groups focused on their own legacies and bottom lines rather than on the big technology picture and Microsoft as a whole… 

He recalls thinking: "I'll remake my whole playbook. I'll remake my whole brand."The board liked his new plan. But as Mr. Ballmer prepared to implement it, his directors on the January conference call demanded he expedite it…. 

…"But, I didn't want to shift gears until I shipped Windows," Mr. Ballmer says he told the directors on the call (Your company watches what you do, NOT what you say), explaining that he hadn't moved faster in late 2012 because he was focused on releasing in October the next generation of Windows, Microsoft's longtime cash cow."

When Marketing Is Strategy
by Niraj Dawar

http://hbr.org/2013/12/when-marketing-is-strategy/ar/1

An incredible thought provoking article!!!

"It’s no secret that in many industries today, upstream activities—such as sourcing, production, and logistics—are being commoditized or outsourced, while downstream activities aimed at reducing customers’ costs and risks are emerging as the drivers of value creation and sources of competitive advantage….. 

…Downstream activities—such as delivering a product for specific consumption circumstances—are increasingly the reason customers choose one brand over another and provide the basis for customer loyalty. They also now account for a large share of companies’ costs. To put it simply, the center of gravity for most companies has tilted downstream…. 

….Yet business strategy continues to be driven by the ghost of the Industrial Revolution, long after the factories that used to be the primary sources of competitive advantage have been shuttered and off-shored. Companies are still organized around their production and their products, success is measured in terms of units moved, and organizational hopes are pinned on product pipelines. Production-related activities are honed to maximize throughput, and managers who worship efficiency are promoted. Businesses know what it takes to make and move stuff. The problem is, so does everybody else…. 

…The strategic question that drives business today is not “What else can we make?” but “What else can we do for our customers?” Customers and the market—not the factory or the product—now stand at the core of the business. This new center of gravity demands a rethink of some long-standing pillars of strategy: First, the sources and locus of competitive advantage now lie outside the firm, and advantage is accumulative—rather than eroding over time as competitors catch up, it grows with experience and knowledge. Second, the way you compete changes over time. Downstream, it’s no longer about having the better product: Your focus is on the needs of customers and your position relative to their purchase criteria. You have a say in how the market perceives your offering and whom you compete with. Third, the pace and evolution of markets are now driven by customers’ shifting purchase criteria rather than by improvements in products or technology."

The Tools That Can Make You a Better Innovator

http://www.strategy-business.com/blog/The-Tools-That-Can-Make-You-a-Better-Innovator?gko=d06c2

Tremendous insight and I STRONGLY urge you to read the article.

As part of the 2013 Global Innovation 1000 study, Booz & Company surveyed executives at more than 350 companies around the world to learn more about the digital tools that are transforming innovation. Our results show that at the development phase, productivity tools have reached maturity—most are widely used and effective. In other phases, particularly the front end of the innovation process, companies are experimenting with new marketing and customer insight tools that have game-changing potential.
Customer immersion labs, rapid prototyping, social media dashboards—these are just a few of the digital tools that your company may be using, or considering using, to improve its innovation performance. And I do mean “just a few.” In fact, a broad array of tools are available to you across the innovation life cycle, from collecting customer insights to generating ideas to designing new products, and, finally, to tracking products’ success after launch. A new interactive graphic from s+b enables you to explore this landscape.

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Innovation Imperative: Change Everything
Online Education as an Agent of Transformation
By CLAYTON M. CHRISTENSEN and MICHAEL B. HORN

http://www.nytimes.com/2013/11/03/education/edlife/online-education-as-an-agent-of-transformation.html?pagewanted=2&_r=0

Very, very important concept to always keep in front of your businesses: look for the potential system/company that could potentially disrupt while you try to disrupt yourself. Read the full article for other great examples.

…online education is a disruptive innovation — one that introduces more convenient and affordable products or services that over time transform sectors. Yet many bricks-and-mortar colleges are making the same mistake (made by many other companies), they offer online courses but are not changing the existing model. They are not saving students time and money, the essential steps to disruption. And though their approach makes sense in the short term, it leaves them vulnerable as students gravitate toward less expensive colleges. 

For-profit universities latched on early to online learning, rough as it was in the 1990s. The target, as with all disruptive innovations, was customers who wouldn’t otherwise consume their product — in this case, working adults for whom traditional higher education was inconvenient… 

…Still, the theory predicts that online education, existing consumers will ultimately adopt the disruption, and a host of struggling colleges and universities — the bottom 25 percent of every tier, we predict — will disappear or merge in the next 10 to 15 years… 

….. The lessons from any number of industries teach us that those that truly innovate — fundamentally transforming the model, instead of just incorporating the technology into established methods of operation ¬ — will have the final say. So it’s no wonder that observers of this phenomenon ask if online learning portends the end of the residential collegiate experience — the opportunity for students to live, socialize and learn together…. 

…. As concepts and skills are taught more effectively online, it’s unlikely that face-to-face interaction will cease to matter. Instead, students will be able to arrange for such experiences when it suits the job they need to get done. Given the reality that we all have different learning needs at different times, that’s a far more student-centered experience. It may not benefit some colleges but should create more options for all students

How to Sidestep the Excellence Trap
Rita Gunther McGrath, author of The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, introduces a passage about when—and when not—to demand excellence from Tipping Sacred Cows: Kick the Bad Work Habits That Masquerade as Virtues, by Jake Breede
http://www.strategy-business.com/article/ac00053?gko=fa299&cid=BL20131024&utm_campaign=BL20131024

This article builds off our last post on the importance of not always striving for excellence perfection.

An excerpt from chapter 5 of Tipping Sacred Cows:
Kick the Bad Work Habits That Masquerade as Virtues

Ella ran a team responsible for marketing a drug for a large pharmaceutical company. Ella held herself and her team to the same high standards. She choreographed product launch events with the same relentless attention to detail that had driven her academic success. After earning a PhD in biology from Stanford and an MBA at Harvard, Ella had a long track record of striving for high standards. So Ella was shocked when her boss took her aside to tell her she was in danger of receiving a poor annual review. For the first few seconds of the conversation, all she could hear was the sound of her own heartbeat thumping in her chest. She replayed all of the sacrifices she had made for her job, and she was outraged. What else did he want from her? 

“Ella, I think you thrive on intensity,” her boss said. “But things aren’t just intense on your team. They’re tense.” 

As her pulse finally slowed, Ella realized that the one professional value she treasured most—excellence—had backfired. In school and in the early part of her career, Ella’s obsession with producing the best work had always paid off. But something was broken now. Armed with this insight, Ella applied her well-developed “excellence muscle” to the new task of creating a more supportive culture and making it safer for her team to ask for help. She started to listen more to her team and less to the relentless voice inside her head demanding that every action be perfect. Ella didn’t need to lower her standards—she needed to raise her game.

“Excellence not only kills ideas, it kills energy.” –Jake Breeden, Tipping Sacred Cow

How to Sidestep the Excellence Trap
Rita Gunther McGrath, author of The End of Competitive Advantage:
 How to Keep Your Strategy Moving as Fast as Your Business, introduces a passage about when—and when not—to demand excellence from Tipping Sacred Cows: Kick the Bad Work Habits That Masquerade as Virtues, by Jake Breeden.

http://www.strategy-business.com/article/ac00053?gko=fa299&cid=BL20131024&utm_campaign=BL20131024

I apologize to Rita for quoting her entire statement but it is very important to have a corporate culture that embraces uncertainty and has the tools in place to manage it.

“Don’t bring me any surprises. Don’t bring me a problem without a solution.” Do these phrases sound familiar? They are manifestations of a managerial mind-set that Jake Breeden rightly calls out in his new book, Tipping Sacred Cows, as an unhealthy obsession with excellence. The demand that employees get everything right is deadly for innovation, experimentation, and discovery. When excellence is defined as living in a world of no surprises, you aren’t going to get any…until it’s too late. 

For innovation to thrive, you need a little messiness, a tolerance for intelligent failures, and a willingness to engage in trial-and-error learning. As the Lean Startup movement is proving, you’ll discover more from launching a “minimum viable product” than you will from conducting seemingly endless prelaunch analyses. When it comes to communicating your ideas, you’ll make a bigger splash with a quick, colorful story, replete with mistakes, than a thick deck of perfectly formatted PowerPoint slides. And when it comes to keeping people energized and engaged, you’ll get much better results by focusing their creativity on a few key things than by cajoling them to be excellent at thousands of small ones. Breeden’s advice for making a conscious decision about where excellence matters and where it doesn’t is extraordinarily pertinent.

Soap Opera: Amazon Moves In With P&G

E-Commerce Giant Sets Up Shop Inside Warehouses of Suppliers

http://online.wsj.com/news/article_email/SB10001424052702304330904579135840230674458-lMyQjAxMTAzMDEwNTExNDUyWj

This article summarizes the next major growth area perceived by Amazon and shows the critical importance of understanding and leveraging the nuances of supply chains. Innovation is far more than just product or service!

"TUNKHANNOCK, Pa.—Atop a hill at the end of a road called P&G Warehouse Way sits a warehouse stocked with Pampers diapers, Bounty paper towels and other items made byProcter & Gamble Co.  It also houses an ambitious experiment byAmazon.com Inc.
Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them. 

The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo.
The under-the-tent arrangement is one Amazon's competitors don't currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals including discount chains, club stores and grocers. 

Logistics have long been crucial to success in retail. Years ago, Wal-Mart Stores  set up a system that lets suppliers monitor what needs to be replenished. Amazon instead is going out to its suppliers with a program it calls Vendor Flex. By piggybacking on their warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Wal-Mart and club stores like Costco Wholesale Corp., and cut the time it takes to get items to doorsteps.... 

.....…More efficient distribution and changing consumer habits are unlocking the market. If online sales of consumer packaged goods could rise to the 6% share the Internet claims of retail overall, Amazon could generate an extra $10 billion in revenue selling nonfood consumer goods, up from less than $2 billion currently, estimates Mark Mahaney, an Internet stocks analyst at RBC Capital Markets in San Francisco."

BlackBerry Saga

If you don’t think market positions can change, this is what happened to Blackberry:

http://online.wsj.com/news/articles/SB10001424052702303983904579091473667579040

The history leading to this is:

http://www.nytimes.com/interactive/2013/09/29/technology/when-blackberry-reigned-the-queen-got-one-and-how-it-fell.html?_r=00

What do you think the management was thinking when Apple introduced the iPhone? Did they take it seriously? Did they think it was a toy? Were they enamored with their security systems that lead them to believe they would hold onto their share of the corporate world? What surprises have you and your company been blindsided by? How did you react?

How Microsoft Can Once Again Punch Above Its Weight

http://www.strategy-business.com/blog/How-Microsoft-Can-Once-Again-Punch-Above-Its-Weight?gko=f2f10&cid=20131003aagB&utm_campaign=20131003aagB

The concept of the corporate center in this article is profound and how it measures its success is critical for large, multi-faceted companies. An interesting case is the challenge faced by the DuPont Company—my old stomping grounds.  A few aggressive investors are pushing for breaking up the company by separating the Agricultural business from the rest to optimize value for the stockholders.  The DuPont management suggests there is strong synergy among all the business around technology/science. Defining and measuring the strength of the corporate center as defined in this article could be very telling on which approach will generate more stockholder value.

…that Microsoft is battling the classic tension between operating as one and as many. The telltale sign is the company’s swing from emphasizing “focus and accountability” within its recently disbanded divisions to a loud new call for “One Microsoft.” I said that Microsoft is not alone in this battle; every enterprise faces the strain between the whole and its parts (Sept. 19, 2013 posting)….. 

...In our experience, a company must have two big intangibles to punch above its weight: a respected corporate center and a strong corporate affinity. A respected corporate center doesn't rely on compulsion to drive coordination across the enterprise, and it’s able to minimize the balkanization, redundancy, and competing agendas that often result from demanding sharp accountability of the organization’s individual parts. A strong corporate affinity makes people want to collaborate and it induces them to accept accountability for producing results without the complete autonomy and authority they can never be given. 

So what makes for a respected corporate center? For starters, it measures itself by one key metric: how well the businesses perform in their markets specifically because they are part of a bigger whole. It’s not good enough for a corporate center just to be the “necessary overhead” that goes with running a large company. The rest of the organization needs a compelling case and tangible evidence of how it benefits from having a head office. There are just a handful of ways for a corporate center to succeed by this measure, and no one company employs all of them, nor do any two employ any of them in the same way

“Growth in Middle-Market Companies.”

http://www.kellogg.northwestern.edu/news_articles/2013/09102013-lessons-from-the-road.aspx

All small and middle-market businesses strive to identify avenues for growth, but the best path is often far from clear. Here are four guidelines:

1. Find opportunities to increase quantity without incurring additional fixed costs. 
Large investments—for instance, in enhanced production capacity or cutting-edge technology—can hold significant risk for middle-market companies.

2. Verify that sufficient demand exists before investing in fixed costs. 
Before making strategic decisions about products or services, executives must first confirm that a customer base exists.

3. Ensure that growth is built on superior resources and capabilities.
Many companies approach growth with an attitude of, “How could we sell the same product we’re selling to more people?” or “What’s the next adjacent product to our flagship offerings?” These strategies can deliver value but may be somewhat limiting. Middle-market companies should also think hard about opportunities to identify new applications for their core knowledge, skills, or processes

4. Recognize the areas of the business that are not scalable.
Sometimes when companies grow, they lose the distinctive characteristics―such as efficiency or a unified vision―that made them successful in the first place. If a business’s success is based on its deep knowledge of local markets, for example, expansion into new geographies would effectively put it on even footing with the competition. Similarly, growth can often create additional layers within an organization—rigid infrastructure or an authority hierarchy—that effectively impede innovation and responsiveness to changing market conditions.

Microsoft's Immediate Solution

What is the immediate short-term effort: they are buying Nokia’s phone business.

 Microsoft Corp. struck a $7 billion bargain with Nokia Corp. to bolster a mobile future for the software giant. But the odds are long that a deal can reverse the fortunes of two laggards in a cutthroat market.

Barrier: Fear of Failure

One of the most profound barriers to organic growth is the fear of failure in the culture of a company that more often than not stems from a lack of understanding how to manage uncertainty. Microsoft unfortunately has suffered from this:

Barrier: Organizational Silos

The company’s Pipeline driven by siloed organizations, often with the current, dominant business winning all the resource debates.
Symptoms are:

• Market needs do not align with organization resulting in missing the next wave of change in the market(s). Each silo is looking out for itself.
• Incremental opportunities are usually the result since the full power of the company is never optimized for any given initiative. 

In Ballmer’s 2005 reorganization, his thought
he was simplifying the organization to aid decision making which may have happened within the silos but did not optimize the performance of the company:

However, attacking this problem is not as easy as it sounds. There is a critical balance –as in almost everything  leaders faces – between coordinating efforts as a one company against accountability for the parts:

Barrier: Congealed leadership Mindset

Congealed leadership mindset symptoms are:

• Success breeds inertia—locked into existing business models and businesses. Over protecting the current businesses at the expense of investing in new ones.
• Short vs. long term – the critical struggle of meeting today’s requirements and meeting future goals. It is not one or the other, it is the “proper” balance
• Manage everything the same – expecting a new business or venture to perform the same (profits) as a well-established enterprise.

What happened at Microsoft:

The Result

I wanted to start with a simple summary of the impact on Microsoft of not dealing with their barriers to growth which, by the way, are almost all internal under the full influence of leadership. This is why all the postings will be characterized as Leadership.

The impact is profound:

Driving Organic Growth Through Innovation

I think the digital marketplace is an excellent test bed for understanding the challenges facing all companies with respect to growth. The “great” thing about this marketplace is that breakthrough technologies create such rapid, dramatic changes that you don’t have to wait long to see the impact on companies who are not paying attention. HOWEVER, it is a HUGE mistake for companies not in this position to think they are immune to the same underlying forces that albeit may not be a dramatic or as fast but do equal damage.

In our Kellogg classes on Driving Organic Growth through Innovation we initially discuss the critical barriers to growth:

Over the next postings, I will demonstrate the impact of these barriers using the recent press on Microsoft. I will pace the postings a few days apart vs. once a week to maintain continuity.

Making the Shift from Sustainable to Transient Advantage

http://www.innosight.com/innovation-resources/strategy-innovation/making-the-shift-from-sustainable-to-transient-advantage.cfm#.Uf0nsY5XcVc.gmail

Whatever Rita McGrath does is worth your attention.

In her new book, "The End of Competitive Advantage," Columbia Business School professor and Innosight Fellow Rita Gunther McGrath argues that companies need to shift their strategy from long-term to transient edges in the marketplace... 

…The Holy Grail of strategy for many years has been defined as sustainable competitive advantage: you find an opportunity, you throw up entry barriers like crazy and then you get to enjoy it for a long period of time. But increasingly, this no longer works well or even makes sense, thanks to globalization, digital disruptions, and so on. So in response to this shift, organizations need to build up temporary or transient advantages where they seize opportunities, exploit them, and then move on quickly when they've exhausted the opportunity…. 

…One result of this shift to transient advantage is that is that innovation becomes more imperative, which means that organizations really do need to make it a routine capability, rather than pursue it in fits and starts. So you need a governance structure. You need a well-thought-out process for getting new ideas into the market quickly. You need a way of making sure that the funds are there in the right way.You need to create the right the incentives. 

How to Make a New Product Unique

http://www.strategy-business.com/blog/How-to-Make-a-New-Product-Unique?gko=2428c

This article is a definite read. The concept of marrying product attributes with unique capabilities sounds obvious but companies rarely put the two together.

 …two factors help a company stand out from the competition when introducing a new offering:
• Unique product attributes (difficult for rivals to copy), in technology, packaging, customer experience, or design
• Differentiated capabilities that create coherence in your company—an alignment between your business strategy and your portfolio of products
…. four-step strategy to create a great product coupled with a coherent capabilities system.
1. Articulate how your company or division’s innovation approach fits with its overall strategy. For example, is your company a premium or a value player, a technological pioneer or a fast follower? 

2. Identify the needs—articulated and unarticulated—of the particular consumers you have chosen to reach, and figure out how your new products can meet those needs 

3. Devise a group of differentiated innovation capabilities that will sustain those new products. For example, are you going to win by getting closer to the consumer using proactive market insights? Are you going to beat your competition with distribution through your superior front-of-store prowess? Will you employ claims-based research to out-market the upstarts? If these capabilities are too common and generic, your competitors will too easily copy them. If they are too complex and specialized, you may destroy your margin value. Try to find capabilities that complement one another so that they are mutually reinforcing and make the most of your investment in them. 

4. Remember that not every product will be wildly successful. Fail fast, fail cheap, and create a culture of thoughtful risk taking.

New York Times Company Posts a 2nd-Quarter Profit
By CHRISTINE HAUGHNEY
Published: August 1, 2013

http://www.nytimes.com/2013/08/02/business/media/new-york-times-company-swings-to-a-profit.html?_r=0

The sale of the iconic brand The Washington Post created enormous discussion this past week. The challenge faced by these leading companies in markets that are dramatically changed due to technology is profound. This article talks about efforts made by another iconic brand, The New York Times. Basically, the effort seems to be changing and re-branding the delivery method for its profound content. The content is still the key to their future success and whether people will pay for it on line. I do and it is well worth it:

• The New York Times Company swung to a profit in the second quarter on stronger circulation revenue and lower operating costs, but continued weakness in advertising weighed on results.
• Print advertising at the company’s newspapers, which include The New York Times, The Boston Globe and The International Herald Tribune, declined 6.8 percent, and digital advertising fell 2.7 percent. Digital advertising now accounts for 24.7 percent of the company’s total advertising revenue.
• The number of paid subscribers to the Web site, e-reader and other digital editions of The Times and The International Herald Tribune grew to 699,000, a jump of more than 35 percent from the period a year earlier
• Since Mr. Thompson joined The Times in November, he has focused on re-branding The Times as a global operation.
       o the company announced it would sell the New England Media Group, which includes The Boston Globe, Boston.com, The Worcester Telegram & Gazette and Globe Direct, a direct-mail marketing company. Bids for the properties were due in July but a sale has not been announced.
               o The Times also announced in February that it would rename The International Herald Tribune, its 125-year-old newspaper based in Paris, The International New York Times. It also will unveil a new Web site for international audiences in the coming months.
• The company has also continued to increase its plans to charge readers for content. In June, the company started to charge non-subscribers who want to read more than three articles a day on The New York Times apps for mobile devices.

Leadership In Action Series: Thomas L. Friedman
The Aspen Institute

I normally do not post videos but I believe this is so fundamental on  personal and business levels that you MUST take the 35 to 45 minutes it takes to watch this. It is NOT about politics. As business leaders, you must clearly understand the dynamics that Friedman is discussing.

http://www.youtube.com/watch?v=2vcggLol64E&feature=player_embedded

Prepare for the New Permanent Temp
by Michael Schrage  |  12:00 PM July 15, 2013
http://blogs.hbr.org/schrage/2013/07/prepare-for-the-new-permanent.htm


Growth is about growing value in a business. This article touches on how companies try to optimize their value creation via dramatically different human resource approaches. This has a huge impact on our current state and the future. This is extremely important and probably very personal
either for us or our kids. This is truly a major leadership issue going forward!!

The fastest-growing segments of America's job market — by far — are temporary and part-time employment. According to the Bureau of Labor Statistics, the number of US part-time employees hit a record high of 28 million. Temporary employment has jumped 50% since the depths of the financial crisis… 

...More companies want far greater flexibility with far fewer people. Their greatest human capital concerns have shifted. They seem increasingly focused on productively cultivating that core 20% to 25% of people who reliably generate the 70% to 80% of enterprise value. They're rethinking their economic relationships with the rest… 

..Have people been commoditized? Of course not. But the ways people's knowledge, skills and expertise get plugged into the workplace has been. For roughly half of America's workforce, the role, rules and requirements of "the job" are dramatically different than they were even a decade ago… 

..It's not that troubled economies and disruptive innovations inherently shed more jobs than they create; it's that ongoing global restructuring of markets makes temporary and/or part-time employment more attractive for more organizations. Outside of the enterprise core group, bringing full-time employees onboard is increasingly seen as a riskier and less rewarding business bet….. 

…Most people looking for a job today aren't competing against each other. They're competing against alternative ways to getting that job done. For most organizations, people are a means and medium to an end. They're not hiring employees, they're hiring value creation. If they can get that value — or most of it — from contingency workers, outsourcing, automation, innovative processes or capital investment, why wouldn't they?

Six Ways to Sink a Growth Initiative
by Donald L. Laurie and J. Bruce Harreld

http://hbr.org/2013/07/six-ways-to-sink-a-growth-initiative/ar/1

HBR reprint: R1307G

This is an excellent article that I would definitely read. The content mirrors very closely to our Org. Growth Ex. Ed class where we discuss the barriers to growth within medium to large companies. BTW, the class is scheduled for September 15, 2013.  Also, those who have taken our class will recognize that one of the authors—Bruce Harreld—played a critical role in turning around IBM in the case we discuss in class.

All too often CEOs and their senior teams see managing today’s earnings as their main job and don’t spend enough time on the pursuit of growth and building the kind of learning organization and culture that growth requires. They fail to identify specific policies and actions that only they can take to create the conditions for success and signal to the organization the seriousness of their commitment to growth. In this article we explore six common mistakes that executives make in this arena and offer guidelines for leading growth initiatives:

1. Failing to Provide the Right Kind of Oversight (they ask the wrong questions and don’t dedicate the time): at a time when a team should be trying to listen to customers in order to define a new market and determine what the most powerful business model might be, they asked questions such as How fast is the market growing? What revenue can we anticipate in 18 months? What does the pro forma P&L look like?
2. Not Putting the Best, Most Experienced Talent in Charge…a company’s best, most experienced general managers should lead these initiatives. A start-up will almost certainly have to tap capabilities residing in the established operations, and these individuals have the internal networks and the understanding of the organization’s culture needed to obtain them.
3. Assembling the Wrong Team and Staffing Up Prematurely: Senior executives charged with assembling a team often grab the personnel who happen to be available….More often than not, these people are not company stars. Furthermore, the team is created before anyone has determined exactly what needs to be done and what skills will be required.
4. Taking the Wrong Approach to Performance Assessment (we call this being ambidextrous) : Big companies often apply the same metrics and milestones to running their early-stage businesses that they use in managing their mature businesses. These are worse than useless to start-ups—they are harmful
5. Not Knowing How to Fund and Govern a Start-Up: An amazing number of big companies force their early-stage growth initiatives to follow the annual budgeting cycle of their established businesses, even though start-ups’ needs are not predictable. It’s also common for operating executives to reallocate funding earmarked for those ventures to finance the needs of their mature operations. Both mistakes kill start-ups.
6. Failing to Leverage the Organization’s Core Capabilities: For the past two or three decades the conventional wisdom has been that new ventures within large, mature organizations must be isolated to prevent the established businesses from stifling them. We believe this is wrong.

Innovation Sighting – Apple’s Use of Attribute Dependency in iPhones
 Drew Boyd

http://www.innovationexcellence.com/blog/2012/09/04/innovation-sighting-apples-use-of-attribute-dependency-in-iphones/

This is an interesting approach to thinking about innovation in that it  focuses on the context of the situation  Just thought I would share it as a thought provoker.

“The Quiet Time™  Universal System turns cell phones off automatically in designated areas such as theaters, hospitals, doctor’s offices, and business meeting rooms. Our patented technology converts your incoming calls to text messages and alerts the cell phone owner.”….
….“Imagine a mobile phone that automatically turns off its display and sounds when it senses that it’s in a movie theater. For example, the phone could disable its own noise and display if it knows it’s in a theatre. It could be prevented from communicating with other devices if it detects that it’s in a classroom. Or it could automatically go into sleep mode if entering a sensitive area where noises are taboo….
….This is a classic example of the Attribute Dependency Technique …
…Attribute Dependency differs in that it uses attributes (variables) of the situation rather than components. Start with an attribute list, then construct a matrix of these, pairing each against the others. Each cell represents a potential dependency (or potential break in an existing dependency) that forms a Virtual Product. Using Function Follows Form, we work backwards and envision a potential benefit or problem that this hypothetical solution solves - 

How Ready Are You for Growth?
A Booz & Company study reveals that only 17 percent of companies are poised for a profitable future.

by Ashok Divakaran and Vinay Couto

http://www.strategy-business.com/article/00199?gko=edc83&cid=20130618enews&utm_campaign=20130618enews

Very logical and powerful

Since the economic crisis, many companies have been trying to figure out the best way to re-position themselves for greater performance and success in the future. Clearly the answer involves some combination of growth strategy and cost management. Over the past several years, working in a variety of industries, we have seen firsthand that companies that do three things together seem to be better positioned for a sustainable return to high performance. First, they create clarity and coherence in their strategy, articulating the differentiating capabilities that they will need to win in the marketplace. Second, they put in place an optimized cost structure and approach to capital allocation, with continual investment in the capabilities critical to success, while proactively cutting costs in less-critical areas to fund these investments. Third, they build supportive organizations. They redesign their structures, incentives, decision rights, skill sets, and other organizational and cultural elements to more closely align their behavior to their strategy, and to harness the collective actions of their people

Straight Talk about Change

Ed Whitacre,

http://m.strategy-business.com/article/ac00049

Very clear and powerful message!!!!

How do you optimize the possibility of successfully implementing change? By defining exactly what you wish to create and by doing so using as much behavioral specificity as possible—and as little jargon as possible, too. Phrases such as “increased inter-unit communication” or “enhanced field and staff collaboration” have a comforting blandness to them, but they almost always serve to blur, not sharpen, the picture.

..... No matter the cause or the reason, organizational change entails changing human behavior. It entails making certain key behaviors a reliable and regular part of organizational operation—that is, of “how the place works.” The question for the change leader comes down to this: What behaviors must occur, how must people act, in order to make the change succeed? What’s the story you want told about the way you and your people will operate in the future? What’s different? And what in the work environment still stands in the way? 

Changing organizations comes down to changing human behavior. Design of the work environment or system design, in turn, drives human behavior in complex entities such as organizations. One might well argue that human organizations are systems of systems. To change them requires less magical imagery and Herculean effort and more careful consideration of just what a leader seeks to create with change and how to align the corporate or business unit or department work environment to produce that desired, even longed-for change. To increase the odds of successful change, increase the discipline of thought, planning, and execution, beginning with clarity of what behavior the leader wants and the system changes necessary to produce it. 

Therefore, to create successful change, always remember these two tenets:
1. Focus on the behaviors you want from people.
2. Design the work environment to foster those behaviors. 

Focusing on behaviors and the work environments that support them does not mean that ideals, values, principles, motivations, and other more high-minded issues do not count. Of course they do, but a leader who focuses on behaviors is recognizing and taking advantage of the fact that behavior constitutes the most important currency of exchange within human systems: You do something or you do not do something. I forward sales leads or I do not. I look for customer input or I do not. I actively collaborate with my peers on product redesign or I do not. My behavior and that of other organizational members determines whether a given change initiative lives or dies. Behavior is the connective tissue between strategy and action, between intent and implementation. Behavior comprises culture.
Hence, successful change comes down to identifying the key behaviors that, if they occur reliably and regularly, indicate that a desired change has taken hold. 

Transient Advantage
by Rita Gunther McGrath
http://hbr.org/2013/06/transient-advantage/ar/3



Training your organization to deal with uncertainty is absolutely critical. Professor McGrath is one of the leaders in this area. I strongly urge you read this article and anything else she publishes. Here is an example of her work on how to assess your company’s readiness:

Organizing for Advantage
Published: May 20, 2013
by Ashok Divakaran, Gary L. Neilson, and Jaya Pandrangi
http://m.strategy-business.com/article/00194

A MUST read!!!!!

Every company’s situation is unique, and therefore the right design for one company will probably not work for others, even within the same industry. But the symptoms of adhoc organizational design are regrettably common. They include business units and functions that protect their own domain’s priorities to the detriment of the overall business, hoarded or wasted resources, strategic goals without follow-through, and a culture that dismisses or ignores accountability. These problems are not just a matter of personal ill will, incompetence, external pressure, or cultural resistance. They exist because organizational design determines behavior. When a company’s organizational forms are inconsistent with the broader objectives of the business, that misalignment affects the day-to-day actions of individual employees. It leads perfectly competent people to chronically under-perform  Conversely, companies with a strong link between their strategy and their organizational structure can, like an engine firing on thousands of cylinders instead of a few, generate energy and creativity at all levels….

…How do you translate a business strategy into an organizational design? How can you connect the dots between company-wide objectives and the concrete details of reporting relationships, information flows, decision rights, and social networks? The answer is not obvious. Figuring it out requires a new way of thinking about organization: what might be called organizing for essential advantage. “Essential advantage,” in this context, refers to the creation of meaningful, lasting value for customers. Although mission statements and lists of business objectives are plentiful, it’s rare to find a statement that explains precisely how a company creates value. As described in several recent books—notably, The Essential Advantage: How to Win with a Capabilities-Driven Strategy, by Paul Leinwand and Cesare Mainardi (Harvard Business Review Press, 2011)—these statements can be distilled down to two elements: a “way to play” and a system of differentiating capabilities. The way to play is how a company engages with the market, its fundamental value proposition. For example, some companies choose to distinguish themselves as innovators, continually introducing new products and service, whereas others are value providers, offering their products or services at an attractive price point. Capabilities are cross-functional combinations of technology, processes, skills, and mind-sets that work together synergistically. Differentiating capabilities are the few (typically, three to six) capabilities that enable a company to stand out from competitors and consistently provide value for its chosen customers that no one else can match

Transient Advantage
by Rita Gunther McGrath

To order PDF: Source: Harvard Business Review
10 pages. Publication Date: Jun 01, 2013. Prod. #: R1306C-PDF-ENG
http://hbr.org/product/transient-advantage/an/R1306C-PDF-ENG

This is an incredibly exciting new concept of creating competitive separation in this crazy world we live in. As I always state, anything Rita McGrath does is worth studying....

Strategy is stuck. For too long the business world has been obsessed with the notion of building a sustainable competitive advantage. That idea is at the core of most strategy textbooks; it forms the basis of Warren Buffett’s investment strategy; it’s central to the success of companies on the “most admired” lists. I’m not arguing that it’s a bad idea—obviously, it’s marvelous to compete in a way that others can’t imitate. And even today there are companies that create a strong position and defend it for extended periods of time—firms such as GE, IKEA, Unilever, Tsingtao Brewery, and Swiss Re. But it’s now rare for a company to maintain a truly lasting advantage. Competitors and customers have become too unpredictable, and industries too amorphous The forces at work here are familiar: the digital revolution, a “flat” world, fewer barriers to entry, globalization.

Strategy is still useful in turbulent industries like consumer electronics, fast-moving consumer goods, television, publishing, photography, and...well, you get the idea. Leaders in these businesses can compete effectively—but not by sticking to the same old playbook. In a world where a competitive advantage often evaporates in less than a year, companies can’t afford to spend months at a time crafting a single long-term strategy. To stay ahead, they need to constantly start new strategic initiatives, building and exploiting many transient competitive advantages at once. Though individually temporary, these advantages, as a portfolio, can keep companies in the lead over the long run. Firms that have figured this out—such as Milliken & Company, a U.S.-based textiles and chemicals company; Cognizant, a global IT services company; and Brambles, a logistics company based in Australia—have abandoned the assumption that stability in business is the norm. They don’t even think it should be a goal. Instead, they work to spark continuous change, avoiding dangerous rigidity. They view strategy differently—as more fluid, more customer-centric, less industry-bound. And the ways they formulate it—the lens they use to define the competitive playing field, their methods for evaluating new business opportunities, their approach to innovation—are different as well.

        THE WAVE OF COMPETITIVE ADVANTAGE   Companies in high-velocity industries must learn to cycle rapidly through the stages of competitive   advantage. They also need the capacity to develop and manage a pipeline of initiatives, since many will be short-lived.

Leading with Intellectual Integrity
One skill distinguishes the effective CEO: the ability to make disciplined and integrated choices.
by A.G. Lafley and Roger Martin, with Jennifer Riel

http://www.strategy-business.com/article/00186?pg=alll

Sorry for the lapse over the past two weeks. Took some time off!!

This is a great article that I strongly suggest you read. The following is just one topic that is discussed.

The Strategic Choice Cascade at Procter and GambleTo instill intellectual integrity throughout a company—as opposed to leaving its development to chance—some kind of explicit, ongoing decision-making process is needed. At Procter & Gamble, the method we used was known as the strategic choice cascade. Each year, we asked hundreds of company leaders, at all levels, to develop choices explicitly using this framework. The cascade consisted of five interdependent choices (see Exhibit). We said explicitly that none of these choices should be treated as “silver bullets” to solve short-range problems. Nor could they be made in isolation from each other.

How do you know if your innovation process is broken?

http://kmc.kaltura.com/index.php/kmc/preview/partner_id/24852/uiconf_id/1679292/entry_id/1_y7ou77ff/embed/legacy



Great insight from Rita McGrath of Columbia (see 3 minute video at above site)

I (Rita) outline five sure-fire indicators that your hoped-for innovations won’t work.  
1. The first is that innovation is on-again, off again.  It needs to be systematic, not episodic.  
2. The second is when big, existing businesses get to control the resources – remember, just because they are profitable today doesn’t mean they will be tomorrow.  
3. A third is when companies try to fit their innovative new ideas into the structure they already have.  Instead, you need to create structures that can support the innovative ideas that may not work with the one you inherited.  
4. How well are you connected to customer insights
5. Finally, don’t treat assumptions as though they were knowledge – that alone has meant more heartbreak for innovators than any other factor when doing new things.

Something You Have To Watch

I am justifying this posting in that it is an example of the importance of context but it is just VERY cool and strongly suggest you take a few minutes to view it.


A palindrome reads the same backwards as forward. This video reads the exact opposite backwards as forward.  This video was submitted in a contest by a 20-year old. The contest was titled "u @ 50" by AARP. When they showed it, everyone in the room was awe-struck and broke into spontaneous applause.



http://www.youtube.com/watch_popup?v=42E2fAWM6rA