Posted by Adam Gordon on Apr 30, 2012 in all, decision-making, innovation, leadership, managing uncertainty
Ninetendo last week announced a first-ever annual operating loss of 37.3bn yen (about $460m) in the year to March 31.
The company projected sales of 13m Wiis, but moved just 9.8m; and sold about 80% of forecast 3DS handhelds and 50% of forecast DS machines.
In industry foresight we know that projections are reliable when nothing fundamental changes during the forecast period. Where the underlying changes, the forecast becomes ridiculous, leaders look stupid, and investors lose money. That’s why we use non-extraplative tools more suitable to complex situations.
So, what has changed? Rapid, worldwide smartphone and tablet adoption of course, particularly Apple devices. A bespoke hardware-based game company becomes vulnerable when users can play desirable games on the same handheld they use for everything else.
This is familiar ground in media-entertainment, a field that defines itself in part via the ongoing strategy debate of bespoke platform vs. open systems. Yes, if you can win with your own platform, as occurred with Wii, that’s beautiful. But the aggregators like iOS and Android stalk you.
Nintendo is not going to suddenly turn around and license Super Mario and other games for non-Nintendo devices, not least because it has a $14bn cash cushion as a result of the Wii success, so no need to panic.
Cannibalization
When it comes to leaders managing the future, cannabilization of past success in the service of future success, is the hardest thing to do.
But, even leaving aside platform aggregation, there are underlying market change-drivers that are far bigger thanNintendo, that will vigorously shape its future outcomes, which suggest bold leadership moves are required.
These are, first, the inexorable popular drive to ‘social’ – can I easily share what I’m doing, or playing, with others? The second is ‘mobile’ – can I do this wherever I am, and keep doing it as I move through my day and my week?
Reuters reports that a recent survey by mobile gaming site MocoSpace asked 15,000 gamers where they gamed: 53 percent said they played in bed, 41 percent in the living room, 72 percent commuting and 5 percent on the commode.
What goes from the bedroom to the bathroom, to the car, to the office, to the gym, the restaurant, and beyond? The one and only smart phone.
Experience shows that an apparently small leadership move that misses the future can quickly eviscerate a company, no matter what its cash position. Just ask Kodak, or Blockbuster, or even Encyclopedia Britannica. $14bn today… gone tomorrow.
Cursed Pages
Nintendo of course has its plan to turn things around. The company says it will continue its strategy of “Gaming Population Expansion,” growing its market by offering products across age, gender, and gaming experience segments. Later this year it will release the Wii successor, Wii U. Hoping a weaker yen and new games, including Mario Party 8and more Dragon Quest from Square Enix will boost sales, Nintendo’s president Satoru Iwata expects the business will return to profit next year.
In other words, business as usual. But, I look at the new “Spirit Camera” game blurb and I read… “terror from all directions,” “haunted visions,” and “cursed pages,” and I think, yeah, that about sums it up.
read morePosted by Adam Gordon on Mar 8, 2012 in all, decision-making, leadership, management, strategic foresight
The leadership brouhaha of the week was the sacking of Chelsea Football manager André Villas-Boas after only 8 months in charge. This means the London soccer club is looking for its eighth manager since Russian billionaire Roman Abramovich bought it in 2003.
When not firing managers, Abramovich is famous for, among other things, spending $52,215.34 on a lunch for 6 in at Nello’s in Manhattan.
Villas-Boas’ error, like those fired before him (bar one who quit) is he didn’t win enough fast enough. In his charge the team won three of their last 12 Premier League games, and face exit to SSC Napoli after loosing the first leg of their UEFA Champions League round-of-16 tie.
Villas-Boas’ remuneration for the year, including severance, is around the $20m mark.
In industry foresight, noticing extremes helps us see and interpret less visible changes in the world. Stellar pay and commensurately rapid churn at the top of Chelsea FC clues us in to what is going on in the daily mainstream that we may be too immersed in to register.
High pay is nothing new. Also, evidence of high CEO churn is on the radar. A 2006 University of Chicago study showed CEO turnover was 17.4% per year 1998-2005, implying average tenure of less than six years. It related CEO longevity to three components of stock performance – performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market.
More recently, executive search firm Crist|Kolder studied Fortune 500 and S&P 500 companies and found that while average CEO churn dipped during the recession it was back on the way up, hitting 13% in 2011.
“Win Now”
What is less clear at this point is the correlation between higher pay levels and higher churn, that may play out more fully in the future. But if the trend is that CEOs are increasingly paid like sports (or sports management) stars — and they are — it’s reasonable to anticipate that this will be on an ever-increasingly short-fuse “win-now” basis.
If the analogy holds, we can expect chief executives to face shorter and shorter periods to justify their pay; probably the higher the remuneration the shorter the justification period. Where eye-watering sums are changing hands, fingers will be itchy on the trigger.
The poverty of management decision-making here is not just in embracing and fostering short-termism, the cancer of management. It is in prejudging and potentially wasting leadership talent, because short-term data is effectively no data. Put it another way, short-term wins or losses are at the mercy of randomness, such that what looks like good or bad results are almost always part of normal near-term fluctuation spread, as argued by Nassim Taleb in his book “Fooled By Randomness.”
Over the long term, twists of fate, or twists of ankles are ironed out, and quality prevails. Nobody would argue that Steve Jobs was not successful or not worthy of star pay. But Villas-Boas … won championships for Porto FC in 2010 and lost championships for Chelsea FC in 2011, and neither results tell us or Abramovich whether he’s any good or not.
The only thing we can expect with confidence is that where the sports-star model of remuneration migrates, Boards (or shareholders) will be eager to read too much into early data, and prone to make Abramovich-like decisions.
read morePosted by Adam Gordon on Jan 30, 2012 in all, decision-making, leadership, managing uncertainty, scenario planning, sense-making
Martin Sheen as Josiah 'Jed' Bartlet. Picture: @Pres_Bartlet
Even by the standards of modern political media prattle, this was odd: the Guardian yesterday invited and ran a “response” to Barak Obama’s State of the Union address, from Jed Bartlet the fictional president in The West Wing.
One should immediately add that the response was not that of Martin Sheen (the actor who played Bartlet) or anyone from the show. It was that of an unnamed tweeter who can be found here.
The reader vox-pop box was quick to cry foul, asking what next: a piece on space exploration by Captain Jean-Luc Picard, or 007’s analysis of the War on Terror?
Fair enough. But if there is a serious point to be made, and I think there is, it is that fictional leaders do have a role in real world business and policy leadership.
Fiction and storytelling is important and enduring in all human societies because it is an excellent vehicle for considering complex human situations, reflecting on competing motivations and interpretations, assessing choices made with incomplete information, and following these through to their win-or-lose conclusion. Fiction allows multifaceted situations to be captured without losing the complexity.
Parallels
Incidentally, this is why scenario method, which tells stories of alternative future situations, is such an effective planning device. But the point here is that fiction captures complex human situations and senior executives would be the first to recognize parallels between the challenges that imaginary leaders are put through and what they do in a real working day.
If fiction captures and communicates tricky situations well, it therein becomes a learning vehicle. Whether reading a difficult modern novel or watching a soapy TV show, we put ourselves in others’ shoes, vicariously experiencing their conundrums and learning from the outcomes of their decisions.
Would-be successful leaders could do worse than take note of the leadership attributes of winners such as Sherlock Holmes or Superman or Andy Dufresne; or unpick the illusions and ultimate failures of dark lords such as Voldemort or Mr Kurtz.
Furthermore, a good way to learn is to judge real performance against an ideal template. (Judging me against my clarinet teacher, for example.) Whether your politics aligns with the positions and preferences of The West Wing White House or not, there is no denying that Bartlet is set up as a model president in a model administration. He is thoughtful, caring, effective; manifests an ideal balance of intellect, EQ, and decisiveness; is respected and loved by his staff who will go to the ends of the earth for him. He is a template leader.
So it’s hardly off-the-wall to wonder what Bartlet would have made of Obama 2012. That said, it would have been far more interesting to know what West Wing screenwriter Aaron Sorkin or even Sheen, rather than abitrary unnamed tweeter, thought of the State of the Union address.
For the record:
The Lion: President Obama. Mangy, patchy, apparently underfed. Definitely caged. But he has a heart. Whether it is the lion heart of the ruler of Narnia … time will tell.
The Witch: Here we have to go with Shakespeare; in fact there are three witches: Romney, Gingrich, Santorum. On Tuesday Obama called for a fairer country. Notice they responded: fair is foul, and foul is fair.
The Warmonger: he that exited the presidency in 2008, having wasted 4,000 lives and $800,000,000,000 on a war as poorly judged as that of Douglas Haig at Somme, 1916.
Posted by Adam Gordon on Dec 21, 2011 in all, emerging markets, innovation, leadership, management
Stan Litow, Director, IBM Corporate Service Corps
Warren Buffett surprised pundits when he revealed last month that Berkshire Hathaway had acquired a $10bn, 5.5% stake in IBM. “They have laid out a road map and I should have paid more attention to it five years ago… They’ve done an incredible job,” Buffett said during an appearance on CNBC’s Squawk Box.
Many of the dimensions of this incredible job – transition to service orientation and renewal of company culture, initiated by Lou Gerstner and advanced by just-retired CEO Sam Palmisano – have been well chewed over.
But one subtle and no less important part of Palmisano’s legacy has yet to play out. This is the renewal in leadership development itself at IBM, specifically via the IBM Corporate Service Corps (CSC).
Once upon a not very long time ago, IBM, like other classic Western multinationals, structured executives into the field for ex-pat experience in the form of long-term postings: a 1-3 year tour of duty in some far-flung office before recall to the mother ship.
The CSC format, since 2008, forms teams of 6-10 young executives from IBM offices around the world and sends them to emerging market locations where they work intensively for a single month on a high-profile local assignment.
“It’s not a business trip” says CSC Director Stan Litow. “They rent a house, live together, focus 24/7 on the problem. They make an impact. They learn to deliver value on the ground as a team in a global situation.”
CSC programs have run in more than 25 emerging market countries, from BRICS goliaths to African minnows such as Kenya and Tanzania. In Kenya, for example, CSC provided advice on implementing a “Digital Village”; modernized the postal service; and establish a framework for e-government and electronic voting. In Tanzania, CSC helped develop an eco-tourism industry, and has put cutting edge technology into local universities.
About 200-500 IBM employees and executives are in the program at any one time. Teams are composed to represent all major skills in the company: information technology, marketing, consulting, finance. They spend about 2½ months in prep time, and the same afterwards in various forms of debriefing and handover to a new team.
Having this many people on a 6-month ‘sabbatical’ while delivering free consulting expertise and project implementation worth an average $250-400,000 per project, means IBM is footing a big upfront bill. But, aside from the venerable calling of doing good things with technology in the developing world, Litow maintains the costs are handsomely offset by benefits to IBM.
Cost-Benefit
First, the company builds relationships and goodwill on the ground, and so gains a foothold in growth markets, which becomes a platform for follow-on work. Around 30% of IBM revenue is international, a percentage expected to grow rapidly.
Second, program staffers – future IBM leaders – get skills enhanced and perspectives built, in globally sourced teams, via practical immersion, which all closely duplicates the demands of expected future paid assignments. Since inception, 1,400 executives and staff have been through the program; a reservoir of talent that has “been there.”
Third, the program attracts and rewards aspiring talent. IBM gets 8-10,000 internal applications for the few hundred spots on offer, evidence that CSC is popular and relevant in-company. According to Litow, CSC opportunities help retain executive staff and attract new talent to the company.
The positive cost-benefit of the program for IBM is perhaps most proved in requests from a half-dozen other companies – including FedEx, Deere, Dow Corning, Novartis, PepsiCo, and Best Buy – for help in putting together similar programs, or to piggy back on IBM’s program.
In mid-2011, IBM announced a partnership with USAID’s Center of Excellence for International Corporate Volunteerism to provide resources for companies that are interested in pursuing strategies based on IBM’s model.
Posted by Adam Gordon on Nov 17, 2011 in all, emerging markets, leadership, policy
Ted Turner
In 1950 world population was 2.5 billion. This week it passed 7 billion, an ominous occasion marked by various events across the globe, including a special CNN editorial penned by none other than former boss Ted Turner.
Turner has a right to opine on population growth and global poverty implication, seeing as he donated $1bn to set up the United Nations Foundation, but I wasn’t quite expecting the 1970s thinking that popped out.
Says Turner: “Researchers at the Guttmacher Institute found there are 215 million women worldwide who want the ability to time and space their pregnancies, but do not have access to effective methods of contraception…
“Universal access to voluntary family planning is a cross-cutting and cost-effective solution to achieving all of the Millennium Development Goals…
“There is no better value for the money than international family planning, which provides a higher return on investment than almost any other type of development assistance.”
Turner then rails against Congress’ recent foreign aid budget cuts in funding for international family planning and the U.N. Population Fund.
It is hard, and perhaps churlish, to disagree. Who in their right mind would counter the obvious social and economic benefits of family planning? Other than the Catholic Church, that is. Therein a tiny clue to the bigger nature of the problem and how thinking has moved on.
Since the 1970s when population growth first hit the radar as part of the Club of Rome’s “Limits to Growth” Studies, the provision of family planning has been part of the global population solutions mix. Perhaps not adequately — there can always be more — but supply side solutions to contraception provision and family planning clinics have consistently been funded.
The demand side
The problem is also in demand. Even where a safe and cheap contraceptive is available, there is little guarantee it gets used. This boils down to the social norms and mental models in developing world communities. Which is not to say that developing world families are not smart enough to perceive their own best interest. They are. In the absence of adequate affordable social services, health care, aged care, and disability insurance, the smartest thing a couple can do is have many children.
There’s never a golden bullet to a systemic problem such as this, but the closest thing that does exists is not contraception provision, it is girls’ education.
Educating girls enables them to see and enact opportunities outside of childraising, and once they have other options they become much more likely to reach for the birth control after 2.5 children, just like their Western counterparts (often in direct contravention of patriarchal and religious doctrine — which education empowers them to resist.)
Educating girls does not privilege girls unduly. It’s corrective of a skewed situation where traditional societies educate boys before girls. Figures that demonstrate this are provided by the Population Reference Bureau.
Whispered heresy
While girls’ education was a whispered heresy in the 1980-90s, partly because of patriarchal assumptions in both developed and emerging markets, it is now a clearly defined development platform. See for example the World Bank report: “Getting to Equal: How Educating Every Girl Can Help Break the Cycle of Poverty.” There are organizations such as Forum for African Women Educationalists (FAWE) and NGOs such as Educate Africa Girls. Even the GE Foundation sees girls education as a specific initiative.
There’s a chicken-and-egg here because contraception allows girls to stay in school longer. And of course the UN Foundation is hardly blind the girls education. It is very much part of their mix: see this release.
It’s just a question of where the emphasis is placed when an influential philanthropist such as Turner communicates over global population hitting the seven million mark. Once upon a time the problem looked like a supply side problem. It doesn’t anymore. It’s about inculcating demand. That means it’s about girls’ education and that what the call-to-arms should be for.
Posted by Adam Gordon on Oct 5, 2011 in all, decision-making, history, leadership, management, sense-making, strategic foresight
“The most vital, obvious, and underestimated lesson in the 100-year history of IBM is you must keep moving to the future,” said IBM President and CEO Sam Palmisano, opening the company’s recent ‘THINK: A Forum on the Future of Leadership‘ conference at the Lincoln Center in New York.
Further gratifyingly embracing the fundamental identity between leadership and successfully navigating the future, Palmisano continued: “It is so easy to stick with things that have made you a successful company or institution – a winning product, a profitable business model … but one of the core responsibilities of leadership is to understand when it’s time to change.”
And then, applying the mantra of respectable industry foresight analysts and practitioners (there are some): “It’s also particularly important to know what not to change, what must endure. To get that balance right is really, really hard.”
The full address is on Youtube.
The THINK conference is a key plank in IBM’s ongoing centennial year observance. It brought together 700 global leaders and IBM partners and employees, shining a light on leadership as a function that demands active, high-quality forward thinking.
Among the many insight nuggets was Carmen Medina, former Director of the CIA’s Center for the Study of Intelligence, commenting that “observing the present” is the only valid basis of future-exploration (correct); and that this sensemaking function is now being augmented by analytic and computational tools that make far better sense of all types of observed data and behavior, for example, social media behavior.
The old horizon scanning function really has become a much more complex, dynamic, and rewarding activity in the current era. Data visualization was also a key theme at the THINK exhibit.
Among the CEO delegates were Sir Howard Stringer (Sony); Jamie Dimon, (JP Morgan Chase & Co.); Jim McNerney (Boeing); Andrew Liveris (Dow Chemical); Peter Voser (Royal Dutch Shell); and Ellen Kullman, (DuPont.) Filling out Shell’s guest list were Abdullah II, King of Jordan; Felipe Calderón, President of Mexico; Laura Chinchilla-Miranda, President of Costa Rica; WTO Director-General Pascal Lamy; NY Mayor Michael Bloomberg; and media celebrities Charlie Rose and Tom Friedman. Selected video highlights are on the IMB100 site.
