Private Label Strategy: How to Meet the Store Brand Challenge

As retailers have become more powerful and global, they have increasingly focused on their own brands at the expense of manufacturer brands. Rather than simply selling on price, retailers have transformed private labels into brands. Consequently, manufacturers such as Johnson & Johnson, Nestle, and Procter & Gamble now compete with their largest customers: major retail chains like Carrefour, CVS, Tesco, and Wal-Mart. 

The growth in private labels has huge implications for managers on both sides. Yet, brand manufacturers still cling to their outdated assumptions about private labels. 

In "Private Label Strategy: How to Meet the Store Brand Challenge," Nirmalya Kumar and Jan-Benedict E.M. Steenkamp describe the new strategies for private labels that retailers are using, and challenge brand manufacturers to develop an effective response. Most important, they lay out actionable strategies for competing against--or collaborating with--private label purveyors. Packed with detailed international case studies, valuable visuals, and hands-on tools, Private Labels enables managers to navigate profitably in this radically altered landscape.

About the Author

Nirmalya Kumar (Winner: 2011 Thinkers50 Global Village Award) is a professor of marketing at London Business School, where he is also co-director of the Aditya Birla India Center. His work focuses on marketing and the rise of India as an economic force.Kumar is the author of several books. Marketing as Strategy: Understanding the CEO’s Agenda for Driving Growth and Innovation (2004); Global Marketing (2005); and Private Label Strategy: How to Meet the Store Brand Challenge (2007), focused on marketing strategy, where Kumar is also credited with introducing the concept of "3Vs": valued customer, value proposition and value network.More recently, he has written about India and its rise to economic superpower status. In India's Global Powerhouses: How They Are Taking on the World (2009), Kumar provides an insider's guide to doing business with Indian leaders and companies.His latest book is India Inside: The Emerging Innovation Challenge to the West, written with London Business School colleague Phanish Puranam (2011). A keen collector of the work of Indian artist Jamini Roy, Kumar is said to have the largest collection of Roy paintings outside of India.

Hard life for high-profile inmates in jail

Former telecom minister A. Raja spends his day in a 15x10 feet cell in Jail No. 1 of Delhi's Tihar Jail. The cell doesn't have a bed. Charged with facilitating a Rs 1,76,000-crore scam, he sleeps on the floor using two of the six blankets given to him as a mattress. Says Neeraj Kumar, director general prisons (Delhi), "Inside the jail, no one is a VIP. High-profile prisoners have been extended no extra facilities unless permitted by the court." In Raja's case, the court has granted him permission to get home-cooked food twice a week. Two conditions come attached: it should contain no curry and fruits.

Ex. Satyam Boss Ramalinga Raju

Courts have been more generous to some other high-profile prisoners. A court directed the Central Prison in Chanchalguda in Hyderabad to accord "special remand prisoner status" to former Satyam boss M. Ramalinga Raju. Prisoners have the right to apply for this status on the basis of their social standing and economic profile before being incarcerated. There are less than 20 prisoners in the special category among the 13,000 lodged in different jails across Andhra Pradesh.

The special status entitles Raju to better living conditions. Unlike Raja, Raju has a cot, a mattress, two pillows, a mosquito net, a reading table with a chair, and an additional easy chair in his prison cell. The 'special status' also enables him to get fruits, something that is denied to an ordinary remand prisoner like Raja. Raju is also entitled to fresh clothes and reading material. Like ordinary prisoners, he is allowed two visitors a week. Other privileges to those granted special status by a court include a barber on call. Ordinary remand prisoners have to wait for their turn: there are usually only 15 barbers for every 1,000 prisoners.

Haldiram co-owner Prabhu Shankar Agarwal

Life in prison, even with special privileges, is worse than in a hospital bed. Nine months after he was first imprisoned, Raju was moved to an air-conditioned ward in Hyderabad's Nizam Institute of Medical Sciences after he was diagnosed with Hepatitis C and a heart ailment. He stayed there for 10 months before being granted bail by the high court. The Supreme Court cancelled his bail 84 days later and sent him back to prison.

Manu Sharma, sentenced to life in prison for the murder of Jessica Lall, managed to get parole for two months in September 2009 to look after his ailing mother. Keen to make up for the lack of a social life in prison, Sharma hit Delhi's clubbing circuit with a vengeance only to get into a public brawl at a nightclub. His parole was cancelled.

Raja, for the moment, seems content with socialising within Tihar's walls. Prison guards saw him in conversation with R.K. Sharma, a former IPS officer convicted for the murder of journalist Shivani Bhatnagar.

According to Kumar, the prisoners are given ample opportunity to get together. "There are designated hours when prisoners are allowed to visit the common room or the sports field," he says. Sharma is reportedly an enthusiastic sportsperson and captains his jail's Twenty20 cricket team. Tihar Jail also has a television in each barrack.

Jesica Lall murder convict Manu Sharma

Some VIP prisoners help improve the quality of life of their fellow inmates. Prabhu Shankar Agarwal, co-owner of the Rs 500-crore Haldiram Bhujiawala snacks and eateries chain, spent a number of months in Kolkata's Alipore Central Jail, accused of conspiring to kill a tea-stall owner, before he was released on bail last September. He spent his jail term doing what he knew best: supervising the kitchen. "He contributed to improve the quality of food which was being served in our canteen. Many times he would make snacks such as samosas and kachoris to demonstrate to others," says an official at the jail. He trained at least 10 people in the art of cooking.

Social hierarchies don't just dissolve in jail. A Tihar prisoner who was released three months ago says, "The social profile outside the jail prevails inside the jail. Some privileges get accorded in a clandestine manner." He blames the lower level prison staff for this. In 2009, for example, Tihar officials recovered prohibited Internet data cards and pen drives from jail numbers 2, 3 and 4. In 2010, authorities recovered nine cellphones and 11 sim cards. A number of counter-measures like mobile phone jammers and cctv surveillance were installed after these incidents. Says the former prisoner: "Tihar jail is much better than other prisons, but high-profile prisoners can still buy their comfort."

For a high-profile prisoner, Raja seems to have caused minimal problems for the authorities and made few demands. Says Kumar: "He is cooperative and we have no issues with him." Raja follows the jail routine to the tee. He gets up at 5 a.m. and arrives punctually for breakfast at 6 a.m. At 7 p.m., he lines up with the other prisoners for a headcount before all are locked in their respective cells for the night.

"Jail is a great leveller," says Kumar. But a privileged few will always be more equal than others.

Book Review: Tom Cruise: All the World's a Stage

You can't envy Iain Johnstone the task of trying to write an up-to-the-minute biography of mercurial star Tom Cruise. Unlike some of the other biographies the former film critic has written -- notably on Dustin Hoffman and Clint Eastwood -- Tom Cruise is very much a work in progress and every day seems to bring new potential fodder for the biography mill. No matter: deadlines must be met, contracts must be honored, books must be written so, coming out of the gate, Tom Cruise: All the World's a Stage is not quite as fresh as it could be. The story is still being written, in a way. But the book? The book is here.

Now, all of that said, Johnstone has done a credible job in weaving in all the threads of the ongoing story that is the actor Tom Cruise. His relationships, both failed and in progress, as well as various fist-raising and couch jumping episodes ("The year 2005 was, without doubt, the most astonishing in Tom Cruise's life...") and although the final picture is still incomplete, Johnstone gets points for insight and detail.

It should be pointed out that saying that the book is incomplete is not a quibble. The subject of the book is still a relatively young man and, perhaps more importantly, one who seems more and more emotionally volatile as the years pass. Unlike much of the entertainment press, Johnstone restrains himself from taking runs at this new volatility, though he does examine some of the causes. And while the portrait he produces seems as evenhanded as can be, it's more stately than might be expected, considering the type of press Cruise has been getting the last few years.

Because Cruise is arguably the most significant star of his generation -- and certainly has been for many years one of the best paid -- much has been written about him throughout his career. As a result, the star's die-hard fans won't find much here that's new. After all, in one form or another, it's all been said before. On the other hand, Johnstone brings an insider's insight to his Cruise biography project. As Johnstone points out in his prologue, he was appointed film critic of London'sSunday Times in 1983, the same year Tom Cruise starred inRisky Business.

During my dozen years as a critic, I observed and analyzed this arrestingly handsome young man with his perfectly symmetrical features, searchlight blue eyes and killer smile.

More salient to the text than even Johnstone's professional observations have been the author's proximity to both the industry and even, on occasion, the star himself. Johnstone co-write the screenplay for Fierce Creatures with John Cleese. Still in the prologue, Johnstone relays his first meeting with Cruise, who visited the set of Fierce Creatures with Sarah Ferguson and "assorted children" in 1996. At first, no one recognized Cruise:

They recognised the Duchess of York, her red mane not being the best disguise in the world; but not our chauffeur in his baseball cap and dark shades. All eyes turned to Fergie, who attracts a slightly mixed reaction amongst the British public -- and so it was that suffocating summer's morning. Little attention was paid to the man in black. Until he smiled -- that smile. Cynthia Cleese, normally the coolest of customers, permitted her mouth fall open when she realised who was addressing her.

As these snippets from the prologue indicate, Tom Cruise: All the World's a Stage manages just about a perfect balance of insider insight and good old journalistic research. Hard-core Cruise fans will find few surprises, but the rest of us will find much of interest.

- Deepak Bhatt is a freelancer writer and chief editor of Leadership Express.

Book Review: How Will You Measure Your Life?

Writing this column for the past several weeks has been hard for me. How I wish it were the only thing I could do. But scrambling to live, I’m forced to attend to other matters. They are namely matters that enable me to have a roof over my head, but, as a result, give me little time to focus on global entrepreneurs and global innovations in the detailed and analytical manner both deserve. As such, I’m forced to choose between quantity (getting material out) and quality (getting the story right). For me, quality wins.  After reading Clay Christensen’s new book, How Will You Measure Your Life?, I’m relieved to know that’s spot-on.

Christensen, a professor at Harvard Business School, rose to fame with The Innovator’s Dilemma, a book that looks at how companies stay cutting-edge and relevant through disruption. It caught the attention of many Silicon Valley stars, most prominently former Intel chief Andy Grove, who famously asked Christensen to talk about what disruptive innovation meant for Intel. “But instead of telling him what to think,” Christensen writes in his latest book’s first chapter, “I taught him how to think. He then reached a bold decision about what to do, on his own.” How Will You Measure Your Lifestrives for a similar goal. Only Christensen and his co-authors, James Allworth and Karen Dillon, hope that goal is a worthy and fulfilling life.

“Finding happiness” is the header titles for the respective sections of the approximately 200-page book (except the last one which he calls “Staying Out of Jail”). That is its only flaw. Though Christensen presents his material in self-help jargon, it avoids the maudlin and illusionary comfort most in the “you can do it too!” genre render. There is no focus on explanations or exceptionalism here. Christensen anchors How Will You Measure Your Lifeon the opposite premise: you’re not special. Life, it points out, while rewarding, is hard. So too must how we grapple with it. Christensen boils that down to accepting, working with and appreciating what we have. Purpose and process, he says, are key factors.

Christensen devotes the end of his book to purpose, asking readers to think about the lives ahead of them: who, not what, did they want to be? He asks that people not confuse purpose with priorities, which is a knee-jerk default in today’s hyper-connected multi-tasking world. We’ve all got things to do, it argues, but how do those things you’re doing impact you? It is an appropriate conclusion to a book that asks us to question our decisions by thinking ahead and, more importantly, outside of ourselves.

“Many products fail,” Christensen writes, “because companies are developed from the wrong perspective…We go into them thinking about what we want rather than what is important to the other person.” He uses milk shakes as an example. Asked by a “big fast-food restaurant” to advise them on how to “ramp up sales of their milk shakes,” despite repeated improvements. “I wonder what job arises in people’s lives that causes them to come to this restaurant to ‘hire’ a milk shake?” he posits, “bringing a completely different perspective” to the problem.

Interestingly, all of the books problems are addressed through business case studies. While Christensen does regale us with a personal anecdote about how his mother shared with him her thoughts about how she would mend a pair of socks in order to make a point about empathy, How Will You Measure Your Life provides concrete examples from experiences incurred by big brands such as Dell, Netflix, Honda and IKEA. This helps anchor the book at the practical intersection of life and work. While morality and conscious dominate in this book, it avoids earnest idealism. In many ways, though it never explicitly says so, it argues against it.

What it argues for is hard work, which is harder than you may think. Today’s world provides too many scapegoats and shortcuts. That’s what How Will You Measure Your Life is trying to stop. Or else Christensen says you’ll be “set off in the wrong direction.” He uses his former HBS classmate Enron CEO Jeffrey Skilling as an example. “When his entire career unraveled with his conviction on multiple federal felony charges relating to Enron’s financial collapse, it not only shocked me that he had gone wrong, but how spectacularly he had done so.” That, Christensen says, was probably a result of “just this once..” or marginal thinking.

Marginal thinking is just that, seeing everything from the margins – a narrow purview. Problem with that Christensen says is that when you’re looking at things from the sidelines, you’re not seeing the whole picture or considering all options, including who and what you want to be. That’s what happened to Blockbuster, Christensen says, when it ignored Netflix when it rolled out DVD by post. And we know how that turned out.

To avoid this fate, Christensen says, “you need to decide what kind of person you want to be and what you stand for – and how often you want to stand for it; not some of the time, not most of the time – but all the time.” All the time – hard work, hardly ideal.

Hardly ideal is how I sometimes feel about the pieces I’ve put together for Entreventures. On those days I let the deadline pass. That annoys a great many, including me. But with a plethora of information generated by an even greater number of so-call “experts,” it seems only right to give readers well researched and thought through material. Quality counts. That’s how I want you to measure me.

How Will You Measure Your Life hits bookstands tomorrow.

Source: Forbes

Glow: How you can radiate energy, innovation and success by Lynda Gratton

Business theory larded with self-help truisms make for an overblown read. He may not be all aglow, but Peter York finds himself strangely warming to its author.

Glow: How you can radiate energy, innovation and success Lynda Gratton

FT Prentice Hall

£14.99

When I first went through Lynda Gratton's Glow - reading's not really the word for it - I felt something calling me. I felt strangely drawn back to the comedian Neil Mullarkey's Don't be Needy Be Succeedy, a spoof of the Cool Culture Change genre book, which I reviewed for MT last year.

I didn't think it was accurate or funny then, mainly because the real things, motivational management books, were pretty much beyond parody. The language, the format, everything about Glow made me wonder if this woman could possibly be a real professor (she is, of management practice at LBS), and really be on The Times and FT lists of the world's top business thinkers (she is).

I mean, the book's called Glow; Gratton has founded an onward and upward global business community, Hot Spots Movement, which 'conducts research in the field of energy and innovation', and in 2006 she became head of the Lehman Brothers Centre for Women in Business (sic).

Everything in Glow is written in the self-help Double Plus language of that great publishing hybrid genre of our time, where the American big-idea business book meets the self-help 10-point plan for success, with a liberal helping of evangelism. 'Glowing' is, of course, what you do when you've been touched by Him.

Gratton wants to get people Glowing away, because that's how they'll 'radiate positive energy', so glowy indeed that they'll excite and 'ignite' everyone for miles. I'm driven, absolutely forced, to the great glowing metaphor of Spontaneous Human Combustion - the wonderful, presumably mythical, notion of people who are altogether too vibrant and glowing for their own good and literally ignite without matches, leaving just a pile of ashes.

In other words, it's Glow's hyper-charged language that makes me so allergic to an otherwise pretty formulaic genre book. There are masses of call-and- response, gospelly repetition; homely homilies about invented people in before-and-after situations; awful warnings about what happens if you don't stay ahead of the curve (answer: 'globalisation gobbles you up'); excitable sub-heads everywhere; three big Principles of Glowing and nine Actions to make you 'Glow every day'.

This approach cuts both ways. Everyone - publishers and their publicists especially - always says authors should make the writing 'accessible' and give the readers little routines to do ('cleanse, tone, moisturise'), so these kinds of books are nothing if not familiar. You know where you are. But, like mainstream ghost-writing, that's the problem for me. I'm so distracted by the certainty that I've been here before, that I can't concentrate on whatever the book's supposed to be delivering.

It means a second, maybe a third go at something that doesn't seem to warrant it, waiting for something engaging and original to connect with. This sort of book, with its highly non-specific optimism, doesn't describe anything but the psycho-bongo, all-purpose emotional side of corporate culture. There's no feeling for sector or place, ethnicity or class as causal factors in the simple situations Gratton describes.

There never is in these books; it'd narrow the market. In other words, it sends me into an absolute tailspin of snobbiness, cynicism and all-round non-positiveness.

The fact is that this kind of formula puts off as many as it turns on, even on the literary nursery slopes of management books.

People are forever looking for the identifiable, the shock of recognition, the significant details. Not management-speak with its grim enthusiasms and its laminated word-compounds.

Which is a pity, because Gratton has two highly relevant, little big things going for her, and I'd have come round to them sooner if the format and the language hadn't got in the way. First - blow me down - she's a bit of a woman-person who thinks women have the right attitude and are good at innovation, which is worth checking out in case she's right.

The other related idea is co-operation. Businesses actually work better if people share and co-operate and merge their heuristics - a hugely 2009 perspective, set against the individualist warfare-for-dummies language of The Apprentice - which is so instantly, hideously dated by events.

Gratton's three big glowing principles are, first, Developing a Co-operative Mindset. This means getting the right skills and habits, listening and having good conversations and not staying around anywhere where you can't put the other two to good use, because it's a dog-eat-dog culture. This seems a bit hopeful in the present recession.

The second principle is all about Jumping Across Worlds. This is to work with people who aren't like you, because that's the only way to stay excited and innovative and to be downright Glowy.

The third great principle - and I can hardly bring myself to write it, even though it's about something perfectly credible - is called Igniting Latent Energy. In English, this means getting people going by seeing the big positive ideas in their products and markets, the things that give more meaning to work than grim calculations like Shareholder Value.

Even here, Gratton is off on Wings of Song, moving from 'making a real difference in our community' to 'what does this mean for world hunger?' It sounds like a touch of the Trudie Stylers, but I'm starting to like Gratton. She could be All Heart.

Capitalism at Risk: Rethinking the Role of Business

By Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine

What does the future hold for the global market?

The spread of capitalism worldwide has made people wealthier than ever before. But capitalism’s future is far from assured. The global financial meltdown of 2008 nearly produced a great depression. 

Economies in Europe are still teetering. Income inequality, resource depletion, mass migrations from poor to rich countries, religious fundamentalism—these are just a few of the threats to continuing prosperity.

How can capitalism be sustained? And who should spearhead the effort? Critics turn to government. In Capitalism at Risk, Harvard Business School professors Joseph Bower, Herman Leonard, and Lynn Paine argue that while governments must play a role, businesses should take the lead. For enterprising companies—whether large multinationals, established regional players, or small start-ups—the current threats to market capitalism present important opportunities.

Capitalism at Risk draws on discussions with business leaders around the world to identify ten potential disruptors of the global market system. Presenting examples of companies already making a difference, the authors explain how business must serve both as innovator and activist—developing corporate strategies that effect change at the community, national, and international levels.

Filled with rich insights, Capitalism at Risk presents a compelling and constructive vision for the future of market capitalism.

Simply put, market capitalism is the most successful engine of wealth creation for society. In the last quarter of the 20th century, more than 97 percent of the world’s countries experienced increased wealth.  According to the World Bank, more than 450 million people have been lifted out of extreme poverty since 1990.

The global financial meltdown of 2008 has threatened to reverse what capitalism has created over recent decades. After moving on from the blame game and deciding who should fix the system’s ills, many will point to government as being responsible for saving capitalism.

But Harvard Business School professors Joseph L. Bower, Herman B. Leonard, and Lynn S. Paine, authors of the compelling new book, Capitalism at Risk: Rethinking the Role of Business (Harvard Business Review Press, October 3rd, 2011) put the responsibility squarely on business.

In Capitalism at Risk, Bower, Leonard, and Paine draw on discussions with business leaders around the world to identify ten potential disruptors of the global market system and diagnose the causes behind existing institutions inability to combat them effectively. While the authors certainly recognize that the government will play a role in restoring capitalism, they maintain that all businesses, whether small, large or global, should lead the way by taking advantage of the vital opportunities fruited by the current threats to market capitalism.

“Business has a crucial role to play in addressing these threats,” says Paine.  “Some say that these issues are best left to governments. We disagree. Good government is very, very important, but if business stands on the sidelines waiting for governments to act, it may well be too late.”

“An important book. The authors argue that the future of market-driven capitalism is at risk unless business leaders develop new strategies that reduce the negative fallouts of the system, such as growing income disparity and environmental degradation. A clarion call for business to take the lead in saving the system of market capitalism.”

-Barbara Hackman Franklin, President and CEO, Barbara Franklin Enterprises; former U.S. Secretary of Commerce

Capitalism at Risk: Rethinking the Role of Business will be available on Amazon.com and major book retail websites in October. 

About the authors:

Joseph L. Bower is the Baker Foundation Professor of Business Administration at Harvard Business School. Over the past four decades, his research has focused on the challenges involved in leading companies as they deal with important changes in the economic, social, and political environment.

Herman B. Leonard is the Eliot I. Snider and Family Professor of Business Administration at Harvard Business School and George F. Baker, Jr., Professor of Public Management at Harvard’s Kennedy School of Government. His work at HBS has focused on corporate social responsibility and the leadership of socially oriented components of business organizations.

Lynn S. Paine is the John G. McLean Professor of Business Administration at Harvard Business School. She has written widely on the leadership and governance of companies that meld high ethical standards with outstanding financial results.

World 3.0 by Pankaj Ghemawat

This book provides a look inside the global corporate mindset through the eyes of a leading business school academic and consultant. Ghemawat's World 3.0 is not seen as a living planet with human societies within its biosphere. Rather his World 3.0 is a view of jostling geopolitical actors: nation states ("developed" or "emerging markets") and global corporations as well as smaller businesses, set within markets from global to local and today's international economic infrastructure, including the IMF, World Bank, WTO, that emerged with this current system.

Ghemawat is essentially a humanitarian liberal reformer trying to temper the global competition between the dominant corporations for market share and penetration of developing countries for access to their resources. He counsels his corporate clients to show sensitivity to local cultures and politics – in their own enlightened self-interest so as to prevent "anti-globalists" and other political backlashes.

Ghemawat's view is also from inside the box of conventional economics and its predominant goal of GDP-measured economic growth, citing all the now-suspect macroeconomic statistics and indicators of inequality, unemployment, inflation, capital investment, etc. from IMF, World Bank, WTO, NBER and other government and academic sources. He does note the ideological components of these macroeconomic categories and the tug-of-war continuing between Harvard's worries about "externalities" and the Chicago School's free market fundamentalism and disdain for governments. These inside-the-economics-box wars between "saltwater v. freshwater," Keynes v. Hayek continuing today between Chicago versus the Roosevelt Institute and INET – are getting tiresome. This economic view and its litter of ideological and theoretical detritus has long been de-bunked by game theory, behavioral and brain scientists, endocrinologists, complexity, chaos and systems theorists ("Real Economies and the Illusions of Abstraction," Henderson).

Macroeconomic models have long held sway over policy and national debates, preventing for example the overhauling of GDP promised by 170 nations in 1992 at the UN Earth Summit in Article 40 of Agenda 21. Thus, the publics in 12 major countries see the need for including all the indicators of health, education, poverty gaps and environment into GDP and national accounts. This has been accomplished by accountants and micro-economists at the company level in ESG (environment, social, governance) "triple bottom line" accounting (GRI) used by 1600 corporations.

While Ghermawat share these social and ethical reformist goals, he does not cite such global standards, nor the 800 institutional investors who support such accounting reforms of the UN-PRI, the UN Global Compact, UNEP-FI, ILO or the UN's goals in its Green Economy Initiative. Neither does the author reference the TEEB models and the new "dashboard" approaches to measuring national progress Beyond GDP (beyond-gdp.eu) such as the Calvert-Henderson Quality of Life Indicators (calvert-henderson.com), Hans Rosling's and Jochen Jesinghau's web-based information displays.

Nevertheless, World 3.0 is a very useful book, seeing inside the minds of global corporate executives and their enabling academic sycophants like the Harvard Business School. As the Oscar-winning movie Inside Job shows, these academic consultants have used their ideological influence and economic theories to manipulate politicians, media and public opinion with little accountability. One hopes that reforming business schools and their obsolete economic and financial models and curricula will further engage Ghemawat and his colleagues. Harvard produced Enron's Jeff Skilling and Kellogg produced Andy Fastow. These and other business schools spawned the financial engineers that gave us CDOs and CDSs and the resulting Wall Street collapse of 2007-2008 and the widespread suffering of innocent local businesses and citizens. As influential academic consultants like Ghemawat widen the scope of their research, they will be welcome in the ethical markets. We invite them to join the over 80 signers of our Transforming Finance statement. These reforms are driving the next wave of human innovation beyond the fossil-fueled Industrial Era: the Green Transition to the cleaner greener information-rich technologies of the Solar Age.

The Essential Advantage: How to Win with a Capabilities-Driven Strategy

The Essential Advantage: How to Win with a Capabilities-Driven Strategy
Paul Leinwand and Cesare Mainardi

Harvard Business Review Press (2011)

The strategic power of coherence

According to Paul Leinwand and Cesare Mainardi in the first chapter, to achieve and then sustain a competitive advantage, a company “must be resolutely focused and clear-minded about three critical elements: its market position (it’s chosen ‘way to play,’ if you will); its most distinctive capabilities, which work together as a system; and its product and service portfolio. In a coherent company, the right lineup of products and services naturally results from conscious choices about the capabilities needed for a deliberate way to play.” There are no head-snapping revelations in this book, nor do Leinwand and Mainardi make any such claim. Their purpose is clearly stated: to help their reader to take deliberate steps — “to reconsider your current strategy, overcome the conventional separation between your outward-facing and inward-facing activities, and bring your organization into focus.” After briefly identifying the “what,” they devote most of their attention to the “how” and “why” of formulating and then executing a capabilities-driven strategy.

For example, in Parts I and II, they explain:

•  The essence of competitive advantage
•  How to achieve it
•  How to sustain it
•  The three elements of coherence
•  How to develop each
•  How to coordinate all three
•  What the “coherence premium” is and why it is so valuable
•  The right “way to play” (i.e. compete)
•  The structure of the capabilities system
•  The elements of a capabilities-driven strategy
•  How to achieve and sustain a product and service fit

They continue the same approach throughout the remainder of their lively and eloquent narrative. In Part III, they explain how to create value; in Part IV, they explain how to “live coherence every day.” As noted earlier, Leinwand and Mainardi establish and then maintain a direct, personal rapport with their reader. They cite dozens of real-world examples of capabilities-driven companies that include Coca-Cola, Cisco Systems, Microsoft, Apple, P&G, Herman Miller, Nordstrom, IBM, and Whole Foods. I was especially interested in what they have to say about the leadership qualities are required.

The word “coherent” is one word that comes to mind when CEOs such as A.G. Lafley (P&G) are mentioned: “They have learned to generate excitement and inspiration in a world of ruthless choice…When they go, they leave behind a company that is stronger, more capable, and more coherent than it was before; a company with a solid way to play and a capabilities system that enables people to grow; a company that is primed to create value, wealth, and quality of life for decades to come. In business, this is the most powerful legacy.”

As Leinwand and Mainardi would be the first to point out, it would be a fool’s errand to attempt to adopt or even adapt all of the information, insights, and recommendations they provide in this book. However, I am convinced and do not hesitate to suggest that the leaders of almost any organization (whatever its size and nature may be) can use their system framework to select a set of integrated capabilities that are most appropriate for their organization, one that will enable it to create value in the path it has chosen. Leinwand and Mainardi cannot make those decisions for them. However, they – and do, in this book – offer guidance to assist that decision-making process.

One final point I presume to add: Capabilities improvement is a never-ending journey, not an ultimate destination. An increase of capabilities must be accompanied by an improvement of the talents, skills, and resources needed to apply those capabilities. The most effective strategies are results-driven as well as capabilities-driven. If the road to hell is paved with good intentions, the road to failure in business is paved with “nice tries.” I agree with the Jedi Master, Yoda: “Do or do not. There is no try.”

Liberation Management by Thomas J. Peters

Tom Peters, who with Bob Waterman, brought us IN SEARCH OF EXCELLENCE ten years ago, says that big business as we know it today will be replaced by companies broken into small project-oriented teams. Since technology and markets change rapidly, goods and services have become like fashions — or fads. Businesses have to react quickly to capture fleeting markets; thus, hierarchical management structures must be replaced by flexible structures able to adapt to change and make decisions without waiting for a multilayered chain of command.

As part of this new, project-oriented team structure, job descriptions become fuzzy, and management layers disappear. Functions that used to operate independently and sequentially may occur simultaneously, as part of a team effort. Vertical departments — accounting, purchasing, engineering — may vanish, leaving horizontal project teams in their place.

Team members work on projects as needed, then move to other projects, replaced by fresh team members. Customers and vendors join the teams. And project members take their act on the road, with shop floor workers going to customer locations to see how the product is used so they can help the team build it better. As part of this new concept everyone has access to all the information and project teams make decisions. Front-line employees can answer customer queries without waiting for information to move up and back through a structured chain of command.

Can it work? Tom Peters’ examples say it can. The question is whether companies will heed this advice, and whether the rest will survive the changing marketplace he predicts. Apparently bent on doing for management science what Timothy Leary did for psychology, Peters here extends the cheerfully anarchic precepts advanced in Thriving on Chaos (1987)--which in turn represented a sharp departure from the more conventional wisdom of the two coauthored works (In Search of Excellence and A Passion for Excellence) that helped make him an archguru in the first place. In the brave new on-line real-time world of the near future, Peters asserts, traditional (i.e., hierarchical and bureaucratic) corporations will have ceased to exist, victims of the ongoing fragmentation in global markets. By his account, the commercial dinosaurs will be replaced by pro-tem networks of project-oriented teams able to take immediate advantage of fleeting opportunities for dernier-cri goods and services. In this demanding if Delphian context, Peters offers a lengthy name-dropping manual chock full of anecdotal advisories on how latter-day executives might adapt themselves and their enterprises, entrepreneurial or otherwise, to tomorrow's unruly economy. Evidently formatted to facilitate browsing, the six-section guide has nearly 50 chapters, more than a few of which boast cheeky titles--e.g., ``Glow! Tingle! Wow! (Yuck!).'' While Peters focuses on (among other major concerns) what he characterizes as necessary disorganization, hustle, information technology, innovation through deconstruction, and fashion, those who read straight through the text will be struck by his reliance on shock value--at one point, he does a riff on quantum mechanics to stress the absurdist aspects of what's in store for business. When (by his own admission) words fail him, Peters goes with coinages--e.g., ``customerization''; ``faith in the unexpected''; ``marketizing,'' etc. Nor does he shrink from ambiguity and paradox. As in his previous outings, here again, in the final analysis, Peters broaches a wealth of ideas without ever managing to be genuinely thoughtful--though you wouldn't know it from the 250,000- copy first printing. (Book-of-the-Month Dual Selection for January)

Carly Fiorina Reviews Her Career, and We Review Her Book

Like all timely memoirs of recent disasters, Carly Fiorina's Tough Choices will be read first at light speed, as interested parties skim through to find the account of her final days as Hewlett-Packard CEO and her take on the board members who unceremoniously fired her last year.

A quick read will uncover an eyeful, including her cutting portraits of figures like board member Jay Keyworth ("emotional"), Compaq CEO Michael Capellas ("rude and abusive"), and board member Walter Hewlett (easily manipulated), as well as her conviction that her leadership of HP was a success.

But Tough Choices is more than a throw-away tell-all. After extracting the news-related nuggets, readers should put the book down and pick it up again as if they had never heard of Carly Fiorina. Her memoir is peppered with keen observations of the psychological workings of big corporations; more, it is a testament to a passionate love for the teamwork, vision and sheer hard work of business life. Unfortunately, Fiorina fails to use her insight to reconcile this near-triumphant account of her controversial tenure with the widespread belief that it was a disaster.

Fiorina's background doesn't suggest a career in corporate leadership. Her mother was an artist and her father an academic; she studied philosophy at Stanford, dropped out of law school and was rejected from the University of Maryland's MBA program. (She talked her way back in.)

Starting out at the absolute lowest rung -- as a Kelly girl -- Fiorina embraced her first real job, answering phones at a brokerage firm just one block from HP headquarters, with pure joy: "I loved the pragmatic nature of the work. You did something and something happened," she writes. "Most of all, I loved the people of business."

This sense of excitement and devotion drives the first half of Fiorina's story, as she joins AT&T after business school and rises through the ranks. The book delivers several well-paced business stories. One of the most absorbing begins with her feeling like a fifth wheel as the 30-year-old manager of a team of competent AT&T engineers. With divestiture unleashing chaotic forces in the organization, Fiorina looked for a problem to solve and began to review billing records. After discovering systematic overbilling, she lit a fire under headquarters until the problem was resolved, saving the company hundreds of millions of dollars. The anecdote demonstrates how mid-level leadership in a giant corporation can successfully effect change.

In her stories from AT&T and, later, Lucent, she draws out management lessons. Occasionally, her insights fall flat ("Trust was important to business,") but for the most part she successfully weaves them through the narrative, giving life to what otherwise might be boring truisms.

Many of her best insights revolve around the central observation that "business is about people." While at MIT's Sloan school -- where she earned an M.S. in business, sponsored by AT&T -- she saw CEOs up close for the first time. "Just like people everywhere, some were good at their jobs; some weren't," she writes. "Some got to the top after a lifetime of preparation; others still seemed surprised they were there. Some practiced intimidation; some were engaging. Mostly the interactions took the mystery out of the CEO."

This clear-eyed view was key to Fiorina's understanding of herself; she realized that she, too, could be a CEO. Seeing complex, powerful institutions as aggregations of human beings also gave her the ability to break problems into component parts, which she could then tackle. When the intimidating head of AT&T's Network Systems International was yelling and swearing at Fiorina for the many perceived wrongs of her team and the company, she responded with her own harsh and colorful words -- and, she writes, won him over.

Fiorina's focus on people results in an earthy wedding of psychology and business practice. As director of AT&T's International Strategy and Business Development, she and her team agreed on a framework to focus on certain international markets and ignore others. "Intellectually, everyone understood that a framework for deciding how to allocate our resources made sense. Intellectually, people even understood that our win rates would improve. Yet it felt emotionally limiting," she writes. Grasping the problem, Fiorina could decide on a solution: aiming to be the market leader so the excitement of competing would replace the fear of limitation. Grasping the problem, Fiorina decided on a solution: Aim to be the leader inevery market so the excitement of competing would replace the fear of limitation.

Similarly, Fiorina used her emotional intelligence when AT&T and Lucent representatives were mired down in discussions over Lucent's prospectus, often reopening issues that had already been resolved. Asked for help by Lucent's comptroller, Fiorina broke the process down into tangible parts: The group would read each page, and issues would either be decided on the spot or tabled for higher-ups to consider. After each page was completed, it was turned and could not be revisited. "The physical act of turning the page became a symbol of progress and a victory to be celebrated," she writes.

The book's emotional peak comes in Fiorina's involvement in the successful creation of Lucent. She observes several times that it's easier to create a new entity rather than reinvent the "left behind" company, and Lucent's spin-off suited her taste for rapid change, intense teamwork and ambitious goals. She and fellow executives met with potential investors before going public in a road show that was "a mind numbing" three weeks of eight presentations a day. "And yet I loved every minute of it -- the intense pleasure of the seamless team we had become, the thrill of doing something for the very first time, the excitement of talking about something I believed in so deeply, the knowledge that we were building a company right before our very eyes," she writes. And of the moment in 1996 when a hot air balloon with the Lucent logo was released to symbolize the company's independence from AT&T, she writes simply, "I loved Lucent."

Wine, Women and Song

Driven by this enthusiasm, Fiorina is impatient with gender issues. Explaining her discomfort with being crowned the Most Powerful Woman in Business by Fortune in 1998, she writes, "I didn't want to talk about being a woman in business. I wanted to talk about business." 

No one can accuse her of being squeamish about sexism. The book includes not only the well-known tale of her attending a business meeting at a Washington D.C. strip club ("I was cordial and tried to appear relaxed,"), but also a few jaw-dropping stories, as when the president of a Korean company gave her a female companion for a night of traditional drunken feasting and song ("I could see why men absolutely loved this style of entertaining,") and when, as a Lucent executive, she tried to impress a cocky sales team by getting on stage with socks stuffed in her crotch to say, "Our balls are as big as anyone's in this room."

Fiorina was harassed, insulted and propositioned, mostly early on in her career, but from these experiences she culls some sound advice -- you have 20 minutes to prove you know what you're talking about -- and even a bit of wisdom: "Life isn't always fair, and it is different for women than for men."

Ironically, it was not sexism that caused her to stumble, but rather the fame that her success as a woman created. For Fiorina, sexism was just one more challenge, one more complex psychological problem that she could solve. Celebrity was a nut she couldn't crack. After appearing on the cover of Fortune, she writes, "Some people thought that as a celebrity, I was now different from them, separated from others. Many could no longer see me at all. They could only see 'Carly Fiorina, the Most Powerful Woman in Business.'"

With all of her emotional intelligence, she was unable to extract herself from the trap of being a successful woman people love to hate (The New York Times' Alessandra Stanley made the logical link to Hillary Clinton and Martha Stewart). As a result, a person who prided herself on asking questions and sparking debate before making decisions was now branded as cold and remote. "A leader must capture hearts as well as challenge minds," she writes. But the book offers little insight into how she failed so dismally in capturing the necessary hearts in and around HP.

Wrong Fit?

In the second half of the book, when Fiorina joins HP, the vitality fades from her writing. Although she often mentions that what she loved best about HP was its people, we meet very few of them. In place of her lively, character-filled stories from AT&T and Lucent, Fiorina offers a grim, drawn-out assessment of HP as a company in thrall to its past success, with a risk-averse culture and an incoherent organizational structure to boot. She lectures about the need for change, making analogies with everything from evolution to bull-fighting, as if still trying to convince a skeptical audience; one can imagine the feeling of having change crammed down one's throat.

What becomes most puzzling is why the board offered the job in the first place, and why Fiorina accepted it. The board needed someone who could effect major changes. But was bringing someone from sales into an engineering-based company, a straight-talking woman into a conflict-avoidant culture, really a strategic fit? If Fiorina is right that the board was dysfunctional, then perhaps their hiring of her was a symptom of that disorder.

On Fiorina's side, she noticed some troublesome issues with the board before even singing on as CEO. During a pre-hiring meeting with board member Dick Hackborn, Fiorina criticized a reorganization that had created four new CEOs. Hackborn agreed with her on that issue and more, which prompted Fiorina to wonder, "How could a board member who agreed so enthusiastically with me have so passively permitted a major move like this to occur?"

Rather than see this episode as the warning light it was, Fiorina continued her talks with the board. Was she blinded by her own desire to reach the top leadership position? She shares an eerie story about her sense of destiny: Just before her mother passed away (some months before the HP job was on the table,) "she said with a faraway look in eyes, 'Who knows. Maybe someday you'll become the CEO of Hewlett-Packard.'" The comment raised the hairs on the back of Fiorina's neck.

Why she accepted the job, and later, why she championed the Compaq deal, may have something to do with Fiorina's dedication to the decision-making process. The recruitment dance with the board lasted more than six months and involved many detailed discussions. She told her father she didn't want to "sell" the board on her: "The board couldn't get buyer's remorse halfway through the journey. They needed to buy into me as the CEO all the way, and that required them to understand in every possible dimension what a controversial and risky choice I would be." Fiorina may have given the board more credit for due diligence than it deserved.

Similarly, with the Compaq acquisition, she had many bad vibes about the decision in advance, including serious reservations about Michael Capellas, Compaq's head. Yet as HP debated the many options to revive lagging performance, the discussion settled on acquiring Compaq. She appears compelled by the logic of the decision-making process: The job needed to be done, the board wanted to do it, she was capable of it, and yet she knew it would be "incredibly ugly," "a huge shock," and "a fight from start to finish."

While Fiorina declares the Compaq deal "an extremely successful integration" in spite of the controversy, others say the jury is still out. She admits that she could have done better by allowing management more time to make lay-offs and better preparing people for the merger.

By the end of the book, the story is carried along by its own dark momentum, as the reader waits for the ax to fall. Fiorina makes her final mistakes, allowing Keyworth a more active role on and off the board and allowing Tom Perkins to become a board member; both men were active in her dismissal.

With head lifted high, Fiorina contends that in 2005 "stock continued to climb as the organization executed the strategy and the 2005 plan we'd worked on so hard together," in effect taking credit for the bounce-back that followed her firing -- a claim that a number of commentators have refuted in the past week.

Critics have said Fiorina casts herself as a victim in this book. In fact, she casts herself as a hero, asserting that she has not lost her soul in rough-and-tumble of battle, but rather emerged as a whole person, able to enjoy the simple pleasure of sitting pool-side while her granddaughter swims.

Of course the HP story is hardly over. Readers may wonder how Patricia Dunn will cast herself in what will no doubt be another book on the tough choices that corporate leaders face.