Our Korean colleague, Hyokon Zhiang, is the Managing Director of a newly formed consulting practice, the Innomove group (
http://www.innomove.com). He was a rising star at Bain, but decided to pursue building his own innovation-oriented consulting group after extensive experience with the tools of consulting left him discouraged. Many of the most time-honored and productive tools (such as the product-portfolio matrix, or portfolio allocation tools) are based on trends from the past. Although useful for making certain kinds of decisions, he notes, such tools aren't really helpful when it comes to finding new opportunities. That is a process which begins with ideas, and is future oriented, rather than starting with what's around today.
We have had the same concern about other consulting type tools - such as Design for Six Sigma (DFSS). Although just fine to use in certain contexts, we've noticed a tendency for companies to try to fit them to everything that they are doing, with what we suspect will be disappointing results.
It all supports and argument we've made for a while - while frameworks and management tools can be helpful in the right circumstances, part of the skill of using them is figuring out what tool works when. Clayton Christensen and Michael Raynor make a similar argument in their book "The Innovator's Solution" in which they make a plea for better management theory to guide actual decision making. There is no silver bullet, and no one-size-fits-all approach to innovation. The good news is that there is thus plenty of opportunity to benefit from infusions of fresh thinking.
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It stunned me to read that the 80 technology players comprising the Standard and Poor's index have $229 billion in cash and equivalents on their balance sheets (reportedly more than 2 times what they had at the end of bubble-year 1999). Depressingly, what are they doing with all that cash? Stock buybacks, acquisitions and dividends -- things shareholders like, but that don't necessarily create opportunities for the future. Indeed, one used to buy technology companies for growth, not for cash out. And yet, I constantly hear leaders in high-tech companies complain that they don't have the resources to manage both today's shareholder expectations and meet tomorrow's growth needs.
Perhaps the agenda should include more investment in time for the kinds of opportunity identification MarketBusting suggests.
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I just read a short piece in Business Week (July 18, 2005 issue, p. 30) in which evidence of Japan's recovery - even resurgence - are detailed. Among the numbers I thought were very interesting were that growth in non-manufacturing (services) has been seen to be 'improving' since March of 2003, with 20% of companies in a recent survey reporting confidence in improvement in this sector. As I've said before, Japanese companies have qualities that I believe will make them formidable competitors in the next round of competition in global services.
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On October 17, the Bankruptcy Abuse Prevention and Consumer Protection Act will make the use of bankruptcy as a way to erase debts and create a fresh start much more difficult. Although clearly some people end up bankrupt from poor money management, poor discipline or even bad luck, I do have some concerns about the long-term effect of the new bankruptcy law on entrepreneurship. If you compare the United States (with a rather high rate of business founding to the population) with other countries, such as Japan or Germany with far lower rates, differences in bankruptcy laws stand out very starkly.
In both Germany and Japan, debtors have to pay off all or most of their debts and have all their assets (homes, for instance) at risk. Over time, the specter of total personal disaster in the event of a business failure has had the effect of increasing the downside of starting a business. In Japan, for instance, it is not all that uncommon for owners of failed businesses to commit suicide as their only way out of an untenable financial situation.
In the US, in contrast, although entrepreneurs do not generally believe their businesses will fail, there is some comfort in knowing that if worst comes to worst all is not lost on the personal side. By increasing the downside of bankruptcy, the new law makes starting a business less like an "option" and more like a fixed commitment, right from the start. Such a change in incentives is likely to have unforseen consequences, but one that we can probably predict is a chilling effect on willingness to take personal risks on the part of our entrepreneurs.
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I've just two days ago returned from a visit to Japan, where I met with people from an incredible diversity of companies while giving talks and directing the Columbia Business School Program "Creating Strategy". Although it's standard commentary now to bemoan lack of creativity in Japanese companies, I had a different take on the issue. It struck me forcibly that the very habits that make it hard for Japanese companies to sustain a great deal of diversity in thinking and behavior might prove to be a godsend in the area of services. Think about it: to create a massively profitable, service based business, a firm either has to generate substantial margins from a few large clients (as IBM tries to do),
or it has to figure out how to capture scale in services.
Scaling up a service business, as anyone who's ever tried to provide customers with a uniform service experience can tell you, can be really tough. Here's where Japan's potential advantage comes in: once a procedure is in place, there is enormous cultural and habitual support for continuing it more or less unchanged. While that may not be so great if you are after divergent thinking, it could be a godsend when what you need the same reliable, repetitive actions no matter where your company is operating.
So let Japanese companies figure out that similar techniques that have made them such fearsome manufacturing competitors will offer advantages in services, and we could be seeing a whole new wave of Japan-led innovation. An interesting example of this next wave of Japanese competition might be the company Recruit. The firm covers job recruitment, as the name suggests, but also publishes and engages in other service businesses, and publishes a large number of magazines and other popular publications.
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