[YEDG] 3 articles for meeting 19th Jan.
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Corporate culture
Learning the lingo
Forget annual reports. Go to the canteen for what makes a company tick
Jan 11th 2014 | From the print edition
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Leverage: The CEO’s Guide to Corporate Culture. By John Childress. Principia Associates; 353 pages; $24. Buy from Amazon.com
IN JULY 2012 the treasury committee of Britain’s House of Commons summoned the boss of Barclays, Bob Diamond, to face the music. Barclays had been caught taking part in an industry-wide conspiracy to fix Libor, a benchmark interest rate, and the members of parliament wanted to know what was going on. Why had friendly high-street banks been transformed into financial casinos? And why did scandals keep piling upon scandals despite outrage from the public and promises to mend their ways from banking CEOs? Much of the answer, according to both Mr Diamond and his interrogators, lay in a phrase that was used more than 50 times during the hearing: “corporate culture”.
“Culture” is the mot du jour in the business world. Why do the wolves of Wall Street howl? Because Wall Street has a wolverine culture. Why do mergers fail? Because the cultures of the companies doing the merging often clash. Why do some companies succeed and others fail? Because they have either supportive or toxic cultures.
This is not just pap for lazy journalists. Some of the most successful bosses are obsessed by “culture”. Dave Barger, the CEO of JetBlue, a budget airline, argues that it is much harder for competitors to copy your culture than your strategy. Tony Hsieh, the founder of Zappos, an internet retailer, ascribes his company’s success to its idiosyncratic culture, which is lovingly described in a book, “Delivering Happiness”. Netflix, an online-video business, regards its culture as so important that it has tried to distil it into a 126-page PowerPoint presentation. So far the document has been viewed more than 4m times.
But what does “corporate culture” actually mean? For some people it means the image that a company projects to the world. For others it means a company’s most cherished habits—the HP Way or the Walmart Way. For others still it means its canteen culture, “the way we do things around here”, which is often the opposite of the formal rules. Goldman Sachs’s formal culture proclaims that customers come first. Its canteen culture, at least according to one former banker at the firm, proclaims that customers are “Muppets”. “CEOs can talk and blab all day about culture,” Jack Welch once said, “but the employees know who the jerks are.”
The term is so vague that culture-based explanations are often meaningless. Are bankers greedy because banks have a toxic culture or do banks have a toxic culture because bankers are greedy? Do companies fail because they have a toxic culture or do they have a toxic culture because they are going down the pan? Some successful companies, such as Apple, elicit cultlike loyalty from their employees. Others, including Ryanair, are as unpopular with their employees as they are with their customers. Perhaps there are as many successful cultures as there are successful companies.
And how do you manage “culture” successfully? Companies routinely produce mission statements that are supposed to express their cultural DNA, but in fact simply list feel-good words in different permutations. Companies equally routinely engage in “culture change” programmes. But these usually provoke fierce resistance from employees. Peter Drucker, a booster of corporate culture, liked to say that “culture eats strategy for breakfast”; it is equally true to say that canteen culture eats corner-office culture for breakfast.
John Childress, a management consultant, has written a sensible if somewhat flat-footed guide to the subject. Mr Childress could have done with a better editor: “Leverage” would have had more leverage if it had lost 100 pages and a dozen overused examples. His folksy prose-style (“just what the heck is corporate culture?”) is grating. Still, he knows his subject well, and writes about it with enthusiasm. He produces some nice examples of culture-driven disasters: Carly Fiorina failed as CEO of Hewlett-Packard because she tried to impose a sales-driven culture on an engineering-dominated organisation. He notes that it is pointless to focus on producing the right culture if you do not back it up with robust business capabilities: Zappos can turn around an order in eight minutes thanks to heavy investment in technology. He also points out that the most common mistake bosses make when they try to change cultures is to think in grandiose terms, whereas it is often the little things that matter most. “Sensible” might not sound like particularly high praise but, for a business book in this charlatan-infested field, it is an accolade worth having.
Entertainment companies
Give me another hit
Bigger bets are not necessarily riskier
Jan 11th 2014 | From the print edition
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Blockbusters: Hit-making, Risk-taking, and the Big Business of Entertainment. By Anita Elberse. Henry Holt; 320 pages; $30. Faber and Faber; £14.99. Buy fromAmazon.com, Amazon.co.uk
IN THE second world war a “blockbuster” was a bomb that could obliterate whole streets. Today it is the kind of hit creation that every media executive prays for. Popular films, books, music albums and sports teams that bring in huge audiences—and vast profits—can determine whether a year is profitable or loss-making, and break a boss’s career.
The entertainment industry’s search for the golden release is the focus of “Blockbusters” by Anita Elberse, a professor of business administration at Harvard Business School. Conventional corporate wisdom maintains that spreading resources across many smaller properties is sounder than pushing money into a few big, concentrated bets. Ms Elberse uses case studies from the film, television, music and sporting worlds to argue that, counterintuitively, “the idea of smaller bets being ‘safer’ is a myth.” Nurturing a few choice works—and pumping marketing dollars their way—helps firms create superstars and super products, and is the key to far higher profits. Ms Elberse cites Grand Central Publishing (formerly Warner Books) as one example: the top 10% of its titles account for 64% of the publisher’s costs, but 126% of its profits.
The thesis that popular products earn more money might seem as obvious as the plot of the latest Hollywood film you saw. But it is not what business experts predicted would happen. In 2006 Chris Anderson, the editor of Wired and a former journalist at The Economist, wrote “The Long Tail: Why the Future of Business is Selling Less of More”, in which he argued that the internet would change the demand curve for entertainment products. With unlimited “shelf” space available online and more refined search algorithms to direct people to songs and books they might be interested in, niche products would attract more attention and a greater share of spending.
Ms Elberse originally refuted Mr Anderson’s work in a 2008 article for the Harvard Business Review, which is the basis for her book. The tail has become longer, but the internet has helped bestsellers become even bigger, because people follow the recommendations of friends and casual consumers opt for known quantities. In 2011 just 102 of the 8m digital musical tracks sold generated nearly a sixth of all sales. Blockbusters tend to be self-reinforcing, because firms spend more to promote products they think stand a better chance of becoming popular.
Ms Elberse observes that blockbusters are not just a phenomenon of the cinema but exist across entertainment sectors. Even dance clubs are pursuing “blockbuster” strategies, trying to recruit star disc jockeys to bring in more revellers. But blockbusters can, of course, revert to their original definition and be bombs. Spending more than $250m on a film, for example, does not guarantee it will have an audience—as Disney, one of the savviest studios, discovered with “John Carter”, a space-adventure flop. Ms Elberse writes a great deal about the role of marketing and advertising campaigns in launching products, but devotes hardly any attention to what determines whether a media property will take off.
Ideally firms should learn how to spot talent early and sign up musicians and writers before they become famous. Instead, firms prefer to buy artists and franchises that are already successful. Yet it is far more expensive to buy a “blockbuster” property than try to nurture one internally. Nowhere in her book does Ms Elberse address the question of when paying becomes overpaying. As more and more media companies follow the crowd, the temptation to bid up the price of author manuscripts, celebrity talent, film scripts and sports rights becomes hard to resist. This makes it more likely that returns on investment will decline. It is hard to predict when a potential blockbuster is too expensive, but that is the one question every hit- hungry media executive needs answered, and answered soon.
From the print edition: Business books quarterly
IBM
A cure for the Big Blues
The technology giant asks Watson to get it growing again
Jan 11th 2014 | NEW YORK | From the print edition
“IT’S a silly project to work on, it’s too gimmicky, it’s not a real computer-science test, and we probably can’t do it anyway.” These were reportedly the first reactions of the team of IBM researchers challenged to build a computer system capable of winning “Jeopardy!”, a television quiz show. Yet within five years they had created Watson (named after Thomas Watson, who built up the company), which used natural-language programming to understand questions the way a human would, and massive processing power to find the likeliest answer from vast amounts of data. In February 2011 it beat two human “Jeopardy!” champions in a public showdown. Now, less than three years later, Watson is being touted as a business opportunity potentially so lucrative it can get Big Blue out of what has started to look like a serious growth problem.
On January 9th, with much fanfare, the computing giant announced plans to invest $1 billion in a new division, IBM Watson Group. By the end of the year, the division expects to have a staff of 2,000 plus an army of external app developers working within its “open Watson ecosystem”. It also unveiled a raft of new projects under development, on top of the handful already revealed in health care, financial services and retailing with firms such as WellPoint and the Cleveland Clinic. Mike Rhodin, who will run the new division, calls it “one of the most significant innovations in the history of our company.” Ginni Rometty, IBM’s boss since early 2012, has reportedly predicted that it will be a $10 billion a year business within a decade.
That is the sort of success Ms Rometty badly needs. Though IBM’s profits have kept rising, investors have become doubtful about where its future growth will come from, so its shares have fallen by almost 13% since their peak last March (see chart), even as tech stocks and the broader stockmarket have soared. Stanley Druckenmiller, a hedge-fund manager, said in November that his bet against the firm was “one of the more higher-probability shorts I have seen in years,” because “IBM is old technology being replaced by cloud technology.”
Since Ms Rometty took over, investors have put up with IBM falling short of analysts’ expectations for its revenues while it seemed to be making a shift to higher-margin businesses. Now, though, some are worried that the strategy has run out of steam and that Ms Rometty will not achieve the $20 of earnings per share she has promised them in 2015 (from $14.37 in 2012). Analysts at CSFB, an investment bank, recently said that IBM is making over half of its earnings gains from “lower-quality means” such as share buy-backs and cost cutting.
IBM insists it remains on target to reach $20 a share. But Ms Rometty has shuffled her team in an effort to boost performance. She has also moved IBM into the cloud. In June it bought Softlayer, a rising star of cloud computing, for an estimated $2 billion. That followed a painful loss to Amazon in a battle to win a contract to build a private cloud for the CIA.
The cloud is a key part of the Watson strategy, with $100m allocated to invest in building an “ecosystem” of independent Watson app developers. “This is the right strategy for getting rapid growth,” says Jamie Popkin of Gartner, a research firm. So too, he thinks, is IBM’s initial focus on applying Watson to industries such as health and finance, which rely on expensive human advisers. There are good prospects of training Watson to understand “best practice” in such things as cancer diagnosis and wealth management, and to produce sensible results, based on its ability to sift through a mass of data.
Watson is now smaller, more efficient and “24 times faster” than when it won “Jeopardy!”, says Mr Rhodin. Although competitors from Apple to Microsoft are also investing in some form of natural-language question-answering technology, “We are way out in front,” he boasts.
The computer is some way from making doctors and financial advisers redundant. However, IBM is “well-placed to provide them with expert advice” says Barney Pell, founder of Powerset, a natural-language search engine bought by Microsoft in 2008. Whether the firm can commercialise the opportunity fast enough to silence its doubters is a question that, for now, not even Watson can answer.
박주하
Tomorrow we are going to change the meeting venue to new coffee place in Sinchon station #7. just besides Grand Mart( Coffeenie)
Please, have a look at the map
http://m.map.naver.com/siteview.nhn?code=20570114&ret_url=http%3A%2F%2Fm.search.naver.com%2Fsearch.naver%3Fwhere%3Dm%26query%3D%25EC%258B%25A0%25EC%25B4%258C%25EC%2597%25AD%2B%25EC%25BB%25A4%25ED%2594%25BC%25EB%258B%2588%26sm%3Dmsv_nex%23mobile_local
If u have a problem to find it, just call me or Emily!!
See u then!
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