Strategy Revolution

Forbes has published a review of Roger Martin's "Fixing the Game". I consider this a seminal work in the area of leadership and management strategy. I also thought it was an appropriate focus for a return to the blogging sphere.

The review points out fundamental weaknesses in our current financial incentive world. For public companies it's all about managing earnings and expectations.

The best companies have avoided the traps, but they are few. I think mostly of Apple, who's leadership (not just the departed) focuses on the customer, and not on what the customer thinks it needs (no market research here) but rather on what they really want (but just don't know it yet).

Translating this to the private market, the focus needs to be on serving the customer best, and only then will profits follow. Maximizing shareholder value (a term called the "dumbest in the world" by no less a titan than Jack Welch) should not be the driving force. Incentives are OK, but they must be tied to customer related goals as well as profitability.

You small guys trying to do things better, keep the focus on your customer and you will succeed. Just bring in a good financial mind to incentivize the workforce and count the beans.

Politics and Economics of Carbon Strategies

Summer vacation done, my first post since June and back on the war path...

An esteemed professor from my Business School (Ross Michigan (Ann Arbor)) gave the Chicago alumni a nice presentation recently. Andrew J. Hoffman summarized his new book entitled Carbon Strategies. He made it clear that some companies are way ahead of the Bush administration on the issue of climate change.

And a good thing it is, for all concerned. From his summary I gather that the big Fortune 500 companies are all or mostly addressing the issue of carbon consumption. That they know some type of carbon tax is coming. The Bushies contribution is to delay, delay, delay the day that companies will have to face this. The F500 have plenty of money to face it, and products to protect (like Exxon, GE, etc.). The mid to small companies will follow the leaders in time. His book lays out strategies to deal with the issue for those who are not ahead of the curve. So it is not concerned with whether carbon is an issue, but how to address it and deal with it as a risk management issue - and when companies do we will all be better off.

As a country we'll need the national government, possibly following the lead of far ahead states, to address the overall issue of who and how much companies must pay to comply with carbon limits. It should be interesting to see how fast this all happens once we get a leader with a clue...

Zingerman's in the News

The May 3rd NY Times business section has an article on Zingerman's, that great deli turned all things food that serves Ann Arbor locally, and everyone on the web. I have great feeling for this place since I was in Ann Arbor for Bschool from 1983-1985.

In fact, I saw a presentation several years ago sponsored by the UM alumni club here in Chicago. Learned many of the things that the article said, the leaders and co-founders of Zingerman's, Paul Saginaw and Ari Weinzweig, are unique in their outlook, as Weinzweig is quoted, "Our goal in 2020 is to leave our world better than it was when we came here." Nicely said, read this at www.nytimes.com if you can.

Also that day, a long time known issue with stocks was cited by Hal Varian in the Economic Scene. He describes a paper by UM accounting professor Dichev that says that stock market investors who buy and hold are way ahead of buyers who use average dollar investing, that is moving in and out. For the NYSE a buyer in 1926 who held their investment until 2002 would have earned an average annual return of 10%. By contrast, a like buyer who moved in and out based on market sentiment would have earned 8.6% per annum. Of course, Dichev discovered this in 2004, http://www.umich.edu/news/index.html?Releases/2004/Dec04/r121504a, something you can see here for yourself, so what's the big deal in rehashing this now?