Tom Peters

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Tom Peters How New Business Works Rules
for Re-invention01.29.2003
2
If you dont like change, youre going to like
irrelevance even less. General Eric Shinseki,
Chief of Staff, U. S. Army
3
Sequenom/David Ewing Duncan/Wired11.02Sequenom
has industrialized the SNP single nucleotide
polymorphisms identification process. This,
Im told, is the first time a healthy human has
ever been screened for the full gamut of
genetic-disease markers. On the horizon
multi-disease gene kits, available at WalMart,
as easy to use as home-pregnancy tests. You
cant look at humanity separate from machines
were so intertwined were almost the same
species, and the difference is getting smaller.
4
There will be more confusion in the business
world in the next decade than in any decade in
history. And the current pace of change will only
accelerate.Steve Case
5
IT MAY SOMEDAY BE SAID THAT THE 21ST CENTURY
BEGAN ON SEPTEMBER 11, 2001. Al-Qaeda
represents a new and profoundly dangerous kind of
organizationone that might be called a virtual
state. On September 11 a virtual state proved
that modern societies are vulnerable as never
before.Time/09.09.2002
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The deadliest strength of Americas new
adversaries is their very fluidity, Defense
Secretary Donald Rumsfeld believes. Terrorist
networks, unburdened by fixed borders,
headquarters or conventional forces, are free to
study the way this nation responds to threats and
adapt themselves to prepare for what Mr. Rumsfeld
is certain will be another attack. Business
as usual wont do it, he said. His answer is to
develop swifter, more lethal ways to fight. Big
institutions arent swift on their feet in
adapting but rather ponderous and clumsy and
slow. The New York Times/09.04.2002
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From Weapon v. Weapon To
Org structure v. Org structure
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Our military structure today is essentially one
developed and designed by Napoleon.Admiral
Bill Owens, former Vice Chairman, Joint Chiefs of
Staff
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The organizations we created have become
tyrants. They have taken control, holding us
fettered, creating barriers that hinder rather
than help our businesses. The lines that we drew
on our neat organizational diagrams have turned
into walls that no one can scale or penetrate or
even peer over. Frank Lekanne Deprez René
Tissen, Zero Space Moving Beyond Organizational
Limits.
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In an era when terrorists use satellite phones
and encrypted email, US gatekeepers stand armed
against them with pencils and paperwork, and
archaic computer systems that dont talk to each
other.Boston Globe (09.30.2001)
11
Dawn Meyerreicks, CTO of the Defense
Intelligence Systems Agency, made one of the most
fateful military calls of the 21st century. After
9/11 her office quickly leased all the
available transponders covering Central Asia. The
implications should change everything about U.S.
military thinking in the years ahead. The U.S.
Air Force had kicked off its fight against the
Taliban with an ineffective bombing campaign, and
Washington was anguishing over whether to send in
a few Army divisions. Donald Rumsfeld told Gen.
Tommy Franks to give the initiative to 250
Special Forces already on the ground. They used
satellite phones, Predator surveillance drones,
and GPS- and laser-based targeting systems to
make the air strikes brutally effective.In
effect, they Napsterized the battlefield by
cutting out the middlemen (much of the militarys
command and control) and working directly with
the real players. The data came in so fast that
HQ revised operating procedures to allow
intelligence analysts and attack planners to work
directly together. Their favorite tool,
incidentally, was instant messaging over a secure
network.Ned Desmond/Broadbands New Killer
App/Business 2.0/ OCT2002
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A Big Electronics Show Is All About Connections
headline, New York Times/ 01.13.2003/ Consumer
Electronics Show gt COMDEX
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NOKIAConnecting People
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SOS Emergency Agencies Often Unable to Talk to
Each Other headline, p1, USA Today/11.20.2002
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Our entire facility is digital. No paper, no
film, no medical records. Nothing. And its all
integratedfrom the lab to X-ray to records to
physician order entry. Patients dont have to
wait for anything. The information from the
physicians office is in registration and vice
versa. The referring physician is immediately
sent an email telling him his patient has shown
up. Its wireless in-house. We have 800
notebook computers that are wireless. Physicians
can walk around with a computer thats
pre-programmed. If the physician wants, well go
out and wire their house so they can sit on the
couch and connect to the network. They can review
a chart from 100 miles away.David Veillette,
CEO, Indiana Heart Hospital (Healthleaders/12.2002
)
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If early soldiers idealized Napoleon or Patton,
network-centric warriors admire WalMart, where
point-of-sale-scanners share information on a
near real-time basis with suppliers and also
produce data that is mined to help leaders
develop new strategic or tactical plans. WalMart
is an example of translating information into
competitive advantage.Tom Stewart, Business 2.0
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The New Infantry Battalion/New York
Times/12.01.2002Pentagons Urgent Search for
Speed. 270 soldiers (1/3rd normal complement)
140 robotic off-road armored trucks. Every
soldier is a sensor. Revolutionary
capabilities. Find-to-hit 45 minutes to 15
minutes in just one year.
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Erics ArmyFlat.Fast.Agil
e.Adaptable.Light But Lethal.Brand You/
Talent/ I Am An ARMY Of One.Info-intense.
Network-centric.
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The New Infantry Battalion/New York
Times/12.01.2002Pentagons Urgent Search for
Speed. 270 soldiers (1/3rd normal complement)
140 robotic off-road armored trucks. Every
soldier is a sensor. Revolutionary
capabilities. Find-to-hit 45 minutes to 15
minutes in just one year.
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Uncertainty We dont know when things will get
back to normal.Ambiguity We no longer know
what normal means.
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I Believe 1.
Change will accelerate. DRAMATICALLY.2. We will
RE-INVENT THE WORLD IN THE NEXT TWO
GENERATIONS. (Business Health Care
Politics War Education Fundamentals of
Human Interaction.)3. OPPORTUNITIES are
matchless. 4. You are either ON THE BUS
or OFF THE BUS.5. I WANT TO PLAY! AND YOU?
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I. NEW BUSINESS. NEW CONTEXT.
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All Bets Are Off.
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lt1000A.D. paradigm shift 1000s of years1000
100 years for paradigm shift1800s gt prior 900
years1900s 1st 20 years gt 1800s2000 10 years
for paradigm shift 21st century 1000X tech
change than 20th century (the Singularity, a
merger between humans and computers that is so
rapid and profound it represents a rupture in the
fabric of human history)Ray Kurzweil
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Vernor Vinge/Mr. SingularityThe transition
time from human history to post-human singularity
time, Vinge thinks, will be astonishingly
shortmaybe one hundred hours from the first
moment of computer self-awareness to computer
world conquest.Esquire/12.2002
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We are at a pivotal point in history. We are
at one of a half dozen turning points that have
fundamentally changed the way societies are
organized for governance. Philip Bobbitt, The
Shield of Achilles War, Peace, and the Course of
History
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Theres going to be a fundamental change in
the global economy unlike anything we have had
since the cavemen began bartering.Arnold
Baker, Chief Economist, Sandia National
Laboratories
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NOW THATS B-I-G!The period 2000-2002 will
bring the single greatest change in worldwide
economic and business conditions since we came
down from the trees.David Schneider Grady
Means, MetaCapitalism
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In 25 years, youll probably be able to get the
sum total of all human knowledge on a personal
device.Greg Blonder, VC was Chief Technical
Adviser for Corporate Strategy _at_ ATT Barrons
11.13.2000
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I genuinely believe we are living through the
greatest intellectual moment in history.Matt
Ridley, Genome
31
Doctors are faced with the very real threat of
irrelevance in ten years. Youll go to a lab,
have a blood sample drawn, and a readout of your
genetic deficiencies will be producedalong with
Doctors Orders for appropriate treatment only
there wont be any doctor.Leading Pediatric
Cardiologist (11.2002)
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Yo, Bioinformatics!Researchers say they have
found a way to mate human cells with circuitry in
a bionic chip The tiny device smaller and
thinner than a strand of hair combines a
healthy human cell with an electronic circuitry
chip.AP/AOL/02-00
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Help! Theres nobody in the cockpit. In the
future, will the airlines no longer need
pilots?Grumman Global Hawk/ 24 hours/ Edwards
to South AustraliaSource The
Economist/12.21.2002
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We are in a brawl with no rules.Paul Allaire
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S.A.V.
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Strategy meetings held once or twice a year to
Strategy meetings needed several times a week
Source New York Times on Meg Whitman/eBay
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2. The Destruction Imperative.
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It is generally much easier to kill an
organization than change it substantially.
Kevin Kelly, Out of Control
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C.E.O. to C.D.O.
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Facing Crisis, Media Giants Scrounge for Fresh
Strategies headline, P1, Wall Street Journal/
01.14.2003
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We must not only transform our armed forces but
the Defense Department that serves themby
encouraging a culture of creativity and
intelligent risktaking. We must promote a more
entrepreneurial approach one that encourages
people to be proactive, not reactive, and to
behave less like bureaucrats and more like
venture capitalists one that does not wait for
threats to emerge and be validated, but rather
anticipates them before they appear and develops
new capabilities to dissuade them and deter
them. Donald Rumsfeld, Foreign Affairs
42
Wealth in this new regime flows directly from
innovation, not optimization. That is, wealth is
not gained by perfecting the known, but by
imperfectly seizing the unknown.Kevin Kelly,
New Rules for the New Economy
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Analysts said we dont care about revenue, just
give us the bottom line. They preferred cost
cutting, as long as they could see 2 or 3 years
of EPS growth. I preached revenue and the
analysts eyes would glaze over. Now revenue is
in because so many got caught, and earnings
went to hell. They said, Oh my gosh, you need
revenues to grow earnings over time. Well,
Duh!Dick Kovacevich, Wells Fargo (in ABA
Banking Journal)
44
Forbes100 from 1917 to 1987 39 members of the
Class of 17 were alive in 87 18 in 87 F100
18 F100 survivors underperformed the market by
20 just 2 (2), GE Kodak, outperformed the
market 1917 to 1987.SP 500 from 1957 to 1997
74 members of the Class of 57 were alive in 97
12 (2.4) of 500 outperformed the market from
1957 to 1997.Source Dick Foster Sarah
Kaplan, Creative Destruction Why Companies That
Are Built to Last Underperform the Market
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Mr. Foster and his McKinsey colleagues collected
detailed performance data stretching back 40
years for 1,000 U.S. companies. They found that
none of the long-term survivors managed to
outperform the market. Worse, the longer
companies had been in the database, the worse
they did.Financial Times/11.28.2002
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Its just a fact Survivors underperform.
Dick Foster
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Good management was the most powerful reason
leading firms failed to stay atop their
industries. Precisely because these firms
listened to their customers, invested
aggressively in technologies that would provide
their customers more and better products of the
sort they wanted, and because they carefully
studied market trends and systematically
allocated investment capital to innovations that
promised the best returns, they lost their
positions of leadership.Clayton Christensen,
The Innovators Dilemma
48
ForgetgtLearnThe problem is never how to get
new, innovative thoughts into your mind, but how
to get the old ones out.Dee Hock
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When asked to name just one big merger that had
lived up to expectations, Leon Cooperman, former
cochairman of Goldman Sachs Investment Policy
Committee, answered Im sure there are success
stories out there, but at this moment I draw a
blank.Mark Sirower, The Synergy Trap
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Conglomerates dont work James Surowiecki, The
New Yorker (07.01,2002)
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MERGERS Why Most Big Deals Dont Pay Off. A
BusinessWeek analysis shows that 61 of buyers
destroyed shareholder wealth. BusinessWeek/10.14
.2002
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I believe large research organizations are less
transparent, with less communication and more
bureaucracy and it is more difficult and
problematic to produce innovations in large
institutions.Franz Humer, CEO, Roche
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Way to Go, Guys 2002 write downs from recent
acquisitions
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1,000,000,000,0001 trillion (Source
Harpers Index 04.2002)
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Acquisitions are about buying market share. Our
challenge is to create markets. There is a big
difference. Peter Job, CEO, Reuters
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Active mutators in placid times tend to die off.
They are selected against. Reluctant mutators in
quickly changing times are also selected
against.Carl Sagan Ann Druyan, Shadows of
Forgotten Ancestors
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Lessons from the Bees!Since merger mania is
now the rage, what lessons can the bees teach us?
A simple one Merging is not in nature.
Natures process is the exact opposite one of
growth, fragmentation and dispersal. There is no
megalomania, no merging for mergings sake. The
point is that unlike corporations, which just get
bigger, bee colonies know when the time has come
to split up into smaller colonies which can grow
value faster. What the bees are telling us is
that the corporate world has got it all
wrong.David Lascelles, Co-director of The
Centre for the Study of Financial Innovation UK
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TP on
Acquisitions1. Big Big Disaster.
(Statistically.) (There are exceptions e.g.,
Citigroup.)2. Big (GE, Cisco, Omnicon) acquires
small/specialist Good if you can
retain Top Talent.3. Odds on achieving
projected synergies among Mixed Big
cultures 10.4. Max Scale Advantages are
achieved at a smaller size than imagined.5.
Attacked by Big, Mediocre Medium marries
Mediocre Medium to bulk up. Result Big
Mediocrity or worse.6. Any sizeif Great
Focusedcan win, locally or globally.7.
Increasingly, Alliances deliver more value than
mergers and clearly abet flexibility.
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CEOs appointed after 1985 are 3X more likely to
be fired than CEOs appointed before 1985Warren
Bennis, MIT Sloan Management Review
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The New Ge WayDYB.com
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Top-performing Companies Extremely contentious
boards that regard dissent as an obligation and
that treat no subject as undiscussable Jeffrey
Sonnenfeld, Yale School of Management
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Change the rules before somebody else does.
Ralph Seferian, VP, Oracle
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Most of our predictions are based on very linear
thinking. Thats why they will most likely be
wrong.Vinod Khosla, in GIGATRENDS, Wired
04.01
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The Gales of Creative Destruction29M -44M
73M4M 4M - 0M
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The secret of fast progress is inefficiency,
fast and furious and numerous failures.Kevin
Kelly
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RM A lot of companies in the Valley fail.RN
Maybe not enough fail.RM What do you mean
by that?RN Whenever you fail, it means
youre trying new things.Source Fast Company
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The Silicon Valley of today is built less atop
the spires of earlier triumphs than upon the
rubble of earlier debacles.Newsweek/ Paul Saffo
(03.02)
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Silicon Valley Success Failure?
SecretsPursuit of risk 4 of 20 in V.C.
portfolio go bust 6 lose money 6 do okay 3 do
well 1 hits the jackpotSource The Economist
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Axiom (Hypothesis) We have been screwed by
Benchmarking Best Practice C.I./Kaizen.
Axiom (Hypothesis) We need Masters of
Discontinuity/ Masters of Ambiguity in
discontinuous/ambiguous times.
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In the modern military, risk is anathema to
rising stars, who cannot afford any slip-ups on
their records. Zero defects and zero
tolerance are common bywords.Newsweek/09.16.02
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Organize for performance customer
satisfaction.Disorganize for renewal
innovation.
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Rumsfeld values mavericks and tries to protect
and promote them. Newsweek/ 09.16.02
73
Rose gardeners face a choice every spring how
to prune our roses. The long-term fate of a rose
garden depends on this decision. If you want to
have the largest and most glorious roses of the
neighborhood, you will prune hard. You will
reduce each rose plant to a maximum of three
stems. This represents a policy of low tolerance
and tight control. You force the plant to make
the maximum use of its available resources, by
putting them into the the roses core business.
However, if this is an unlucky year late frost,
deer, green-fly invasion, you may lose the main
stems or the whole plant! Pruning hard is a
dangerous policy in an unpredictable environment.
Thus, if you are in a spot where you know nature
may play tricks on you, you may opt for a policy
of high tolerance. You will leave more stems on
the plant. You will never have the biggest roses,
but you have a much-enhanced chance of having
roses every year. You will achieve a gradual
renewal of the plant. In short, tolerant pruning
achieves two ends (1) It makes it easier to cope
with unexpected environmental changes. (2) It
leads to a continuous restructuring of the plant.
The policy of tolerance admittedly wastes
resourcesthe extra buds drain away nutrients
from the main stem. But in an unpredictable
environment, this policy of tolerance makes the
rose healthier. Tolerance of internal weakness,
ironically, allows the rose to be stronger in the
long run.Arie De Geus, The Living Company
74
Japans Science Gap Rice farming culture
uniqueness suppressed. Govt control of R D.
Promotion based on seniority. Consensus vs.
debate. (U.S. friends can be mortal enemies.)
Bias for C.I. vs. bold leaps. Lack of
competition and critical evaluation (peer
review). Syukuro Manabe What we need to create
is job insecurity rather than security to make
people compete more.Hideki Shirakawa, Nobel
laureate, chemistry
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December 2000 Swiss House for Advanced Research
Education. Cambridge, Massachusetts. Xavier
Comtesse You never hear a Swiss say, I want to
change the world. We need to take more risks.
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The Word(s) on Vitality Gary HamelSell By
jettison old crapSpin Out support
entrepreneursSpin In buy young firms
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No Wiggle Room! Incrementalism is innovations
worst enemy. Nicholas Negroponte
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Just Say No I dont intend to be known as the
King of the Tinkerers. CEO, large financial
services company (New York, 5-99)
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Jim Tom. Joined at the hip. Not.
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Huh?Quiet, workmanlike, stoic leaders bring
about the big transformations.--JC
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Pastels?T. Paine/P. Henry/A. Hamilton/T.
Jefferson/B. FranklinA. Lincoln/U. S. Grant/W.
T. ShermanTR/FDR/LBJ/RR/JFKM.L. KingC. de
GaulleM. GandhiW. ChurchillM.
ThatcherPicassoMozartCopernicus/Newton/Einstein
J. Welch/L. Gerstner/L. Ellison/B. Gates/S.
Ballmer/S. Jobs/S. McNealyA. Carnegie/J. P.
Morgan/H. Ford/J.D. Rockefeller/T. A. Edison
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Jim Collins vs. Michael Maccobyquiet,
workmanlike, stoicvs. larger-than-life
leaders/ egoists, charmers, risk-takers with
big visions Carnegie, Rockefeller, Edison,
Ford, Welch, Jobs, Gates
83
But what if former head of strategic planning
at Royal Dutch Shell Arie De Geus is wrong in
suggesting, in The Living Company, that firms
should aspire to live forever? Greatness is
fleeting and, for corporations, it will become
ever more fleeting. The ultimate aim of a
business organization, an artist, an athlete or a
stockbroker may be to explode in a dramatic
frenzy of value creation during a short space of
time, rather than to live forever.Kjell
Nordström and Jonas Ridderstråle, Funky Business
84
Built to Last v. Built to FlipThe problem with
Built to Last is that its a romantic notion.
Large companies are incapable of ongoing
innovation, of ongoing flexibility.Increasingl
y, successful businesses will be ephemeral. They
will be built to yield something of value and
once that value has been exhausted, they will
vanish.Fast Company (03-00)
85
The Futility of Size Virtualization is the
recognition that territorial size does not solve
economic problems. Economic access must become
the substitute for increasing domain.Richard
Rosecrance, The Rise of the Virtual State
86
In Italy for 30 years under the Borgias they had
warfare, terror, murder, bloodshedand produced
Michelangelo, da Vinci and the Renaissance. In
Switzerland they had brotherly love, 500 years of
democracy and peace, and what did they
producethe cuckoo clock.Orson Welles, as
Harry Lime, in The Third Man
87
Warren Bennis Patricia Ward Biederman/
Organizing Genius Great Groups Dont Last Very
Long!
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W.A. Mozart 1756 1791 HE CHANGED THE
WORLD AND ENRICHED HUMANITY
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The corporation as we know it, which is now 120
years old, is not likely to survive the next 25
years. Legally and financially, yes, but not
structurally and economically.Peter Drucker,
Business 2.0 (08.00)
90
The difficulties arise from the inherent
conflict between the need to control existing
operations and the need to create the kind of
environment that will permit new ideas to
flourishand old ones to die a timely death. We
believe that most corporations will find it
impossible to match or outperform the market
without abandoning the assumption of continuity.
The current apocalypsethe transition from a
state of continuity to state of discontinuityHas
the same suddenness as the trauma that beset
civilization in 1000 A.D. Richard Foster
Sarah Kaplan, Creative Destruction (The
McKinsey Quarterly)
91
The Three Levels of InnovationTransformational
SubstantialIncrementalSource Dick Foster,
Business 2.0 (05.01) Note Each level requires
totally different processes!
92
Jane Jacobs Exuberant Variety vs. the Great
Blight of Dullness. F.A. Hayek Spontaneous
Discovery Process. Joseph Schumpeter the
Gales of Creative Destruction.
93
Boyd
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Eglin Flag 100 AGAINST ZERO DEFECTSGeneral,
if youre not having accidents, your training
program is not what it should be. You need to
kill some pilots.BOYD The Fighter Pilot Who
Changed the Art of War (Robert Coram)
95
OODA Loop/Boyd CycleUnraveling the
competition/ Quick Transients/ Quick Tempo (NOT
JUST SPEED!)/ Agility/ So quick it is
disconcerting (adversary over-reacts or
under-reacts)/ Winners used tactics that caused
the enemy to unravel before the fight (NEVER
HEAD TO HEAD)BOYD The Fighter Pilot Who
Changed the Art of War (Robert Coram)
96
Fast TransientsButtonhook turn (YF16
could flick from one maneuver to another faster
than any aircraft)BOYD The Fighter Pilot Who
Changed the Art of War (Robert Coram)
97
Blitzkrieg is far more than lightning thrusts
that most people think of when they hear the
term rather it was all about high operational
tempo and the rapid exploitation of
opportunity./ Arrange the mind of the
enemy.T.E. Lawrence/ Float like a butterfly,
sting like a bee.Ali BOYD The Fighter Pilot
Who Changed the Art of War (Robert Coram)
98
F86 vs. MiG/Korea/101Bubble canopy (360 degree
view)Full hydraulic controls (The F86 driver
could go from one maneuver to another faster than
the MiG driver)MiG faster in raw
acceleration and turning ability F86 quicker
in changing maneuversBOYD The Fighter Pilot
Who Changed the Art of War (Robert Coram)
99
USMC COL Mike Wyly kept the enemy off-balance
they knew Delta Company RVN could show up
anywhere, anytime BOYD The Fighter Pilot Who
Changed the Art of War (Robert Coram)
100
ManeuveristsBOYD The Fighter Pilot Who
Changed the Art of War (Robert Coram)
101
The stuff has got to be implicit. If it is
explicit, you cant do it fast enough.BOYD
The Fighter Pilot Who Changed the Art of War
(Robert Coram)
102
II. NEW BUSINESS. NEW TECH.
103
3. The White Collar Revolution the Death of
Bureaucracy.
104
108 X 5vs. 8 X 1 540 vs. 8 (-98.5)
105
The coefficient of friction associated with the
grunge of business is amazing!Michael Schrage
106
A bureaucrat is an expensive microchip.Dan
Sullivan, consultant and executive coach
107
IBMs Project eLiza! Self-bootstrapping/
Artilects
108
There Is No Such Thing as the Tooth Fairy.IBM
Self-healing eServersApproximate TV ad copy
(11.2002)
109
We own all the intellectual property, we farm
out all the direct labor.Jim McDonnell, VP, IBM
110
Dont own nothin if you can help it. If you
can, rent your shoes.F.G.
111
The virtual corporation is research,
development, design, marketing, financing, legal,
and other headquarters functions wth few or no
manufacturing capabilities a company with a
head but no body.Richard Rosecrance, The Rise
of the Virtual State
112
Deep Blue Redux 2,240 EKGs 1,120 heart
attacks. Hans Ohlin (50 yr old chief of coronary
care, Univ of Lund/SW) 620. Lars Edenbrandts
software 738.Only this time it matters!
113
Most physicians believe that diagnosis cant be
reduced to a set of generalizationsto a
cookbook. How often does my intuition lead me
astray? The radical implication of the Swedish
study is that the individualized, intuitive
approach that lies at the center of modern
medicine is flawedit causes more mistakes than
it prevents. Atul Gawande, Complications
114
Doctors are faced with the very real threat of
irrelevance in ten years. Youll go to a lab,
have a blood sample drawn, and a readout of your
genetic deficiencies will be producedalong with
Doctors Orders for appropriate treatment only
there wont be any doctor.Leading Pediatric
Cardiologist (11.2002)
115
Probable parole violations Simple model (age,
of previous offenses, type of crime) beats M.D.
shrinks. 100 studies Statistical formulas gt
Human judgment. In virtually all cases,
statistical thinking equaled or surpassed human
judgment.Atul Gawande, Complications
116
Unless mankind redesigns itself by changing our
DNA through altering our genetic makeup,
computer-generated robots will take over the
world. Stephen Hawking, in the German magazine
Focus
117
Vernor Vinge/Mr. SingularityThe transition
time from human history to post-human singularity
time, Vinge thinks, will be astonishingly
shortmaybe one hundred hours from the first
moment of computer self-awareness to computer
world conquest.Esquire/12.2002
118
N.W.O./Holy Moly Unemployment up 2 real wage
growth highest since 60s productivity
soaring.Source BW/02.11.2002
119
E.g. Jeff Immelt 75 of admin, back room,
finance digitalized in 3 years.Source BW
(01.28.02)
120
Everybodys Doin It!The leading Indian
outsourcers reckon that the key to their
long-term prosperity is bagging ever larger deals
and moving ever higher up the value chain. The
Economist/01.11.2003
121
BW Cover/02.2003IS YOUR JOB NEXT? A New Round
of GLOBALIZATION Is Sending Upscale Jobs
Offshore. They Include Chip Design, Basic
Researcheven Financial Analysis. Can America
Lose These Jobs and Still Prosper?
122
4. IS/ IT/ Web On the Bus or Off the Bus.
123
2.5G, 3G, 4GWindowsSymbianJavaBluetooth
Wi-FiPCs-PDAs-CellphonesE-business vs.
M-businessEtc.
124
Outsiders view (1) Billions are being spent,
even in a down market. (2) NOBODY HAS A CLUE AS
TO WHO THE WINNERSAND LOSERSWILL BE. (3) Yet
you must play. Now. Hard. Fast.
125
100 square feet
126
Dells OptiPlex FacilityBig Job 6 to 8
hours.(80,000 per day)Parts Inventory 100
square feet.
127
The Real News X1,000,000TowTruckNet.com
128
This is the first meter of a 10-kilometer race.
Eventually, all markets will come to resemble
todays foreign exchange market.Hamid Biglari,
Head of Corporate Strategy, Citigroup, in
GIGATRENDS, Wired 04.01
129
Impact No. 1/ Logistics Distribution
WalMart Dell Amazon.com Autobytel.com
FedEx UPS Ryder Cisco Etc. Etc. Ad
Infinitum.
130
Autobytel 400. WalMart 13.Source
BW(05.13.2002)
131
If early soldiers idealized Napoleon or Patton,
network-centric warriors admire WalMart, where
point-of-sale-scanners share information on a
near real-time basis with suppliers and also
produce data that is mined to help leaders
develop new strategic or tactical plans. WalMart
is an example of translating information into
competitive advantage.Tom Stewart, Business 2.0
132
From Supply-chain Optimization To
Design-chain OptimizationSource Cadence Design
Systems
133
A Big Electronics Show Is All About Connections
headline, New York Times/ 01.13.2003/ Consumer
Electronics Show gt COMDEX
134
NOKIAConnecting People
135
NTT/DoCoMo/i-motion/remote control for your
life/If Tokyo and DoCoMo are the first capitals
of the wireless Internet industry, Helsinki and
Nokia have been the wellsprings of mobile
telephonyFinland leads the world in both
Internet connections and mobile phones per
capita.Source Howard Rheingold/Smart Mobs
136
m-On or Out of the LoopManagers in Finland
always keep their phones on. Customers expect
fast reactions. And if you cant reach a
superior, you make many decisions yourself.
Managers who want to influence decisions of
subordinates must keep their phones open. Risto
Linturi, Finnish m-guru, in Howard Rheingolds
Smart Mobs
137
SOS Emergency Agencies Often Unable to Talk to
Each Other headline, p1, USA Today/11.20.2002
138
Our entire facility is digital. No paper, no
film, no medical records. Nothing. And its all
integratedfrom the lab to X-ray to records to
physician order entry. Patients dont have to
wait for anything. The information from the
physicians office is in registration and vice
versa. The referring physician is immediately
sent an email telling him his patient has shown
up. Its wireless in-house. We have 800
notebook computers that are wireless. Physicians
can walk around with a computer thats
pre-programmed. If the physician wants, well go
out and wire their house so they can sit on the
couch and connect to the network. They can review
a chart from 100 miles away.David Veillette,
CEO, Indiana Heart Hospital (Healthleaders/12.2002
)
139
All to All
140
Karl Marx Meets Adam Smith Lessons from the
Bush (1) Specialization-excellence. (Or death.)
(2) Luck is irrelevant. (In a drought, drought
specialists survive.) (3) Bigger is not
necessarily better. (All hail the termites
bacteria!) (4) Efficiency matches
effectiveness no wasted motion, no bureaucratic
B.S., very low transaction costs. (Inet does
this. C.f. Dell.) (5) Hyper-interdependence.
(The power resides in the network
Self-organization is the rule. Inet redux. Viral
marketing. Farm-out is the norm.)
141
? Americans on the Web/03.200250,000,00075,00
0,000100,000,000125,000,000150,000,000175,
000,000
142
157,000,000 2M/mo.Source Newsweek
(03.25.2002)
143
WebWorld Everything Web as a way to run your
businesss innardsWeb as connector for your
entire supply-demand chain Web as spiders web
which re-conceives the industryWeb/B2B as
ultimate wake-up call to commodity
producersWeb as the scourge of slack,
inefficiency, sloth, bureaucracy, poor customer
dataWeb as an Encompassing Way of LifeWeb
Everything (P.D. to after-sales)Web forces you
to focus on what you do bestWeb as entrée, at
any size, to Worlds Best at Everything as next
door neighbor
144
Jargon Bath!Bureaucracy free Systemically
integrated Internet intense Knowledge based
Time and location free Instantly responsive
Customer centric Mass customization enabled.
145
Translation Bureaucracy free Flat org, no
B.S.Systemically integrated Whole supply chain
tightly wired/ friction-freeInternet intense
Do it all via the WebKnowledge based Open
accessTime and location free Whenever,
whereverInstantly responsive Speed
demonsCustomer centric Customer calls the
shotsMass customization enabled Every product
and service rapidly tailored to client
requirements
146
Message eCommerce is not a technology play! It
is a relationship, partnership, organizational
and communications play, made possible by new
technologies.
147
Message There is no such thing as an effective
B2B or Internet-supply chain strategy in a
low-trust, bottlenecked-communication, six-layer
organization.
148
Ebusiness is about rebuilding the organization
from the ground up. Most companies today are not
built to exploit the Internet. Their business
processes, their approvals, their hierarchies,
the number of people they employ all of that is
wrong for running an ebusiness.Ray Lane,
Kleiner Perkins
149
Read It Closely We dont sell insurance
anymore. We sell speed. Peter Lewis,
Progressive
150
The New Infantry Battalion/New York
Times/12.01.2002Pentagons Urgent Search for
Speed. 270 soldiers (1/3rd normal complement)
140 robotic off-road armored trucks. Every
soldier is a sensor. Revolutionary
capabilities. Find-to-hit 45 minutes to 15
minutes in just one year.
151
Theres no use trying, said Alice. One cant
believe impossible things. I daresay you
havent had much practice, said the Queen. When
I was your age, I always did it for half an hour
a day. Why, sometimes Ive believed as many as
six impossible things before breakfast.Lewis
Carroll
152
Inet allows you to dream dreams you could
never have dreamed before!
153
Dont rebuild. Reimagine.The New York Times
Magazine on the future of the WTC space in Lower
Manhattan/09.08.2002
154
HUMANAs Dreams. Emphesys Put everything on the
Internet. CEO Mike McCallister, charge to
200-person outside Inet unit Imagine an
ideal Web-based health insurance system and then
create a product as close as possible to that
vision. Start with own employees SmartSuite.
Member employees Plan their own coverage and
shoulder more costs. Dell is model Fully
customized health for every individual.
Marketing pitch for employers Buy choice for
employees through a single sourceHumana.Source
Fortune/05.27.2002
155
Supposejust supposethat the Web is a new world
were just beginning to inhabit. Were like the
earlier European settlers in the United States,
living on the edge of the forest. We dont know
whats there and we dont know exactly what we
need to do to find out Do we pack mountain
climbing gear, desert wear, canoes, or all three?
Of course while the settlers may not have known
what the geography of the New World was going to
be, they at least knew that there was a
geography. The Web, on the other hand, has no
geography, no landscape. It has no distance. It
has nothing natural in it. It has few rules of
behavior and fewer lines of authority. Common
sense doesnt hold here, and uncommon sense
hasnt yet emerged. David Weinberger, Small
Pieces Loosely Joined
156
The e-conomy is one of re-intermediation, where
new technologies make it possible to radically
increase complexity and efficiency with the
introduction of new marketplaces. In these
markets, value chains constantly reorganize as
the demands of the consumer and business
change.Thomas Koulopoulos, Delphi Group
157
Words to Live By Hierarchy is an
organization with its face toward the CEO and its
ass toward the customer.Kjell Nordstrom and
Jonas Ridderstrale, Funky Business
158
Hyperlinks subvert hierarchy!The Cluetrain
Manifesto
159
Case CRM
160
Anne Busquet/ American ExpressNot Age of the
InternetIs Age of Customer Control
161
Amen!The Age of the Never Satisfied
CustomerRegis McKenna
162
The Web enables total transparency. People with
access to relevant information are beginning to
challenge any type of authority. The stupid,
loyal and humble customer, employee, patient or
citizen is dead.Kjell Nordström and Jonas
Ridderstråle, Funky Business
163
Parents, doctors, stockbrokers, even military
leaders are starting to lose the authority they
once had. There are all these roles premised on
access to privileged information. What we are
witnessing is a collapse of that advantage,
prestige and authority.Michael Lewis, next
164
A seismic shift is underway in healthcare. The
Internet is delivering vast knowledge and new
choices to consumersraising their expectations
and, in many cases, handing them the controls.
Healthcare consumers are driving radical,
fundamental change.Deloitte Research, Winning
the Loyalty of the eHealth Consumer
165
Welcome to D.I.Y. Nation Changes in business
processes will emphasize self service. Your costs
as a business go down and perceived service
goes up because customers are conducting it
themselves. Ray Lane, Oracle
166
Psych 101 Strongest Force on Earth?My need to
be in perceived control of my universe!
167
UBIQUITY! Its the cars, not the tires, that
squeal NYT/Circuits/10.25.01) E-ZPass (6M in
NE), tests with McDs, gas stations and parking
lots next. OnStar (GM/1.5M). Plus black
boxes, GPS (the case of the 450 ticket), CA
smog offenders.
168
CRM has, almost universally, failed to live up
to expectations. Butler Group (UK)
169
No! No! No! FT The aim of CRM is to make
customers feel as they did in the pre-electronic
age when service was more personal. Rebuttal
(1) Service sucked in the pre-electronic age.
(2) NewGen believes in the screen! (So do I.)
170
One Persons OpinionTP to reporter Service
is MUCH better! Would you go back to bank
tellers and phone operators? Value that I place
on a smile 3 on a scale of 10. Value I place
on fast accurate digital response 11 on a
scale of 10!!
171
M. Rogers -5 defections 25 to 85 profit.
Lose 15 to 35 p.a. 69 defect as a result
of lousy sales or service experience. (Q But is
this the point???? A Yes. No.)
172
CGEY (Paul Cole) Pleasant Transaction vs.
Systemic Opportunity. Better job of what we do
today vs. Re-think overall enterprise strategy.
173
Message CRM Madness 600 CRM vendors. ???
Do it all or do something. Past
over-invest in low-value customers. Idea
better experience, not off-load work to customer.
Relationship f(dialogue knowledge
duration). Key new attitudes, DESTRUCTION of
functional barriers to info action.
174
Wells Fargo (285B) Master of BC900M since
99. 3M. 1/3rd of chk acct customers on line.
5,400 branches 4 of 5 who do product research
on line purchase at branch. Wire transfer, save
30 17 less calls. Material diff to bottom
line.Source BW Online (03.20.02)
175
Here We Go Again Except Its Real This
Time!Bank online 24.3M (10.2002) 2X
Y2000.Wells Fargo 1/3rd 3.3M 50 lower
attrition rate 50 higher growth in balances
than off-line more likely to cross-purchase
happier and stay with the bank much longer.B
of A 4M of 15M ( way beyond the early
adopters).Source The Wall Street
Journal/10.21.2002
176
The Cluetrain Manifesto
177
Hyperlinks subvert hierarchy!The Cluetrain
Manifesto
178
Corporate Resistance to ItIt all goes back
to fear of losing control!The Cluetrain
Manifesto
179
E-business is the final nail in the coffin for
bureaucracy at GE.Jack Welch/GE Annual Report
2000
180
Words to Live By Hierarchy is an
organization with its face toward the CEO and its
ass toward the customer.Kjell Nordström and
Jonas Ridderstråle, Funky Business
181
Richard Rosecrance, The Rise of the Virtual
State Wealth and Power in the Coming Century
182
Hong Kong Prototypical Virtual State83
Service8 Mfg.Source Richard Rosecrance,
The Rise of the Virtual State
183
The new dependence on productive assets located
within someone elses state represents an
unprecedented trust in the integrity and
peacefulness of strangers.In its pure form
an ideal model toward which many states are
tending the virtual state carries within it the
possibility of an entirely new system of world
politics.Richard Rosecrance, The Rise of the
Virtual State
184
Imagine a world where a citizen could search the
globe to assemble my government, the ultimate
in customized,customer-centric services. Health
care from the Netherlands, business incorporation
in Malaysia Don Tapscott
185
The virtual corporation is research,
development, design, marketing, financing, legal,
and other headquarters functions with few or no
manufacturing capabilities a company with a
head but no body.Richard Rosecrance, The Rise
of the Virtual State
186
We own all the intellectual property, we farm
out all the direct labor.Jim McDonnell, VP, IBM
187
Is There a There There The Ericsson Case1.
50 Mfg to Solectron/Flextronics2. Substantial
RD to India3. Division for licensing
technology4. JV with Sony on crown jewel
handsets5. Net a wireless specialist that
depends on services more than manufacturing, on
knowledge more than metal
Source BW/11.04.02
188
The Futility of Size Regarding this issue
the new process of virtualization fully exerts
itself. Virtualization is the recognition that
territorial size does not solve economic
problems. Economic access must become the
substitute for economic domain.Richard
Rosecrance, The Rise of the Virtual State
189
TP Skill at creating, exploiting, and exiting
crucial alliances beats ownership of fixed assets.
190
At the ultimate stage, competition among nations
will be competition among educational systems,
for the most productive and richest countries
will be those with the best education and
training.Richard Rosecrance, The Rise of the
Virtual State
191
Whats the Common Denominator?The Dutch the
British the Rothschilds Cargill Sumitomo
the KGB the CIA Mossad Enron WalMart
McKinsey FedEx UPS Mr. Speaker Henry
Kissinger Executive secretaries the Corner
Grocer Women-in-general?
192
Masters of information acquisition, manipulation,
dissemination, and utilization.Networkmeisters.
Agile.Temporary.Virtual is thy
name.Motto Applied information is
power/wealth.
193
III. NEW BUSINESS. NEW VALUE PROPOSITION.
194
5. The PSF SolutionThe Professional Service
Firm Model.
195
So what will be the Basic Building Block of the
New Org?
196
Every job done in W.C.W. is also done outside
for profit!
197
Answer PSF!Professional Service
FirmDepartment Head to Managing Partner,
HR IS, etc. Inc.
198
TP to NAPM You are the Rock Stars of the
B2B Age!
199
Message You are Re-invention Evangelists!
200
ChicagoNovember 1999HRMAC
201
support function / cost center /
bureaucratic dragor
202
Are you Rock Stars of the Age of Talent
203
Sarah Daddy, what do you do?Daddy Im a
cost center.
204
P.S.F. SummaryH.V.A. Projects (100)Pioneer
ClientsWOW Work (see below)Hot Talent (see
below)Adventurous cultureProprietary Point
of View (Methodology)W.W.P.F. (100)/Outside
Clients (25) When Now!
205
BMWs Designworks/USA gt50 from outside work
206
Bill of (SELECTIVE) RightsYOU HAVE THE RIGHT TO
CHOOSE YOUR CLIENTS! (Wanna be-stay-get COOL
Work With Cool Clients!) (YOU ARE YOUR CLIENT
LIST.) (LIFE IS TOO SHORT TO WORK WITH JERKS.)
(Mass marketers TARGET INNOVATION. E.g.
African-Americans Hispanics the Aging
Population Greens Women)
207
Culture Change is not Corporate.Culture Change
is not a Program.Culture Change does not take
Years.Culture Change does not start
Today.Culture Change starts Right
Now!Culture Change Lives in the Moment!Culture
Change is Entirely in Your Hands!
208
What Do I Do First?One Minute
Excellence!Thomas Watson
209
C.I.O. to C.E.F.R.N.S.
210
Chief Evangelist For Really Neat Stuff
211
G.M. The Recruitment and Development of Top
Talent. Period!V.C. Bets on Talent. Bets
on Projects. Period!
212
Dept. Head I Sports G.M.Dept. Head II V.C.
213
eHR/PCCAll HR on the WebProductivity
Consulting CenterSource E-HR A Walk through a
21st Century HR Department, John Sullivan, IHRIM
214
Model PSF
215
(1) Translate ALL departmental
activities into discrete W.W.P.F.
Products.(2) 100 go on the Web.(3)
Non-awesome are outsourced (75??).(4)
Remaining Centers of Excellence are
retained leveraged to the hilt!
216
Typically in a mortgage company or financial
services company, risk management is an
overhead, not a revenue center. Weve become more
than that. We pay for ourselves, and we actually
make money for the company.Frank Eichorn,
Director of Credit Risk Data Management Group,
Wells Fargo Home Mortgage (Source sas.com)
217
The PSF ProblemProfessionalism Arrogance
Pseudo-science. Hear no evil, see no evil,
dont rat out your peers Docs, Teachers,
Clergy (Law), Accts (Berardino)
218
Everybodys Doin It!The leading Indian
outsourcers reckon that the key to their
long-term prosperity is bagging ever larger deals
and moving ever higher up the value chain. The
Economist/01.11.2003
219
6. The Heart of the Value Added Revolution PSFs
Unbound/ The Solutions Imperative.
220
Base Case The Sameness Trap
221
Companies have defined so much best practice
that they are now more or less identical.Jesper
Kunde, Unique now or never
222
While everything may be better, it is also
increasingly the same.Paul Goldberger on
retail, The Sameness of Things, The New York
Times
223
When McDonalds first started exporting its
formula of quality, cleanliness and service, it
was something of a novelty. These days,
quality, cleanliness and service are a givenand
people are becoming more interested in what they
are eating. FT/12.21.2002
224
We make over three new product announcements a
day. Can you remember them? Our customers
cant!Carly Fiorina
225
The surplus society has a surplus of similar
companies, employing similar people, with similar
educational backgrounds, coming up with similar
ideas, producing similar things, with similar
prices and similar quality.Kjell Nordström
and Jonas Ridderstråle, Funky Business
226
Funky Business To succeed we must stop being so
goddamn normal. In a winner-takes-all world,
normal nothing.
227
When we did it right it was still pretty
ordinary.Barry Gibbons on Nightmare No. 1
228
Customers will try low cost providers
because the Majors have not given them any clear
reason not to.Leading Insurance Industry
Analyst
229
SWA gt American Continental Delta Northwest
United USAirways.Source Boston Globe
(12.22.2001)
230
Getting Beyond Lip Service!No longer are we
only an insurance provider. Today, we also
offer our customers the products and services
that help them achieve their dreams, whether its
financial security, buying a car, paying for home
repairs, or even taking a dream vacation.Martin
Feinstein, CEO, Farmers Group
231
The Internet is the most effective profit-killer
on earth it stimulates a TRUE FREE MARKET and
a real free market is the most dangerous of
marketplaces for companies selling the SAME OLD
STUFF. To those with COURAGE, free markets are
greatthey help kill off the deadwood competitors
who dont have the courage to changemaking way
for them to LEVERAGE their DRAMATIC DIFFERENCE
into profitable growth.Doug Hall
232
Everybodys Doin It!The leading Indian
outsourcers reckon that the key to their
long-term prosperity is bagging ever larger deals
and moving ever higher up the value chain. The
Economist/01.11.2003
233
The Big Day!
234
09.11.2000 HP bids 18,000,000,000for
PricewaterhouseCoopersconsulting business!
235
These days, building the best server isnt
enough. Thats the price of entry.Ann
Livermore, Hewlett-Packard
236
Gerstners IBM Systems Integrator of choice.
Global Services 35B. Pledge/99 Business
Partner Charter. 72 strategic partners, aim for
200. Drop many in-house programs/products.
(BW/12.01).
237
You are headed for commodity hell if you dont
have services.Lou Gerstner on IBMs coming
revolution (1997)
238
Service-Systems Paradox Cut GrowAutomate
75 of commodity service activitiesand/butA
dd value via people-intensive strategic/systems-i
ntegration activities (E.g. Could Suns
service/sysint business be 60 of revenues?)
(Hiring from PWC, etc.)
239
ATT President David Dorman Back to long
distance but with bundles of lucrative
corporate services for the likes of Merrill
Lynch, MasterCard, Hyatt. Consumer Dump 25M
subscribers (50)hold on to high
enders.Source BW/05.20.2002
240
Is There a There There The Ericsson Case1.
50 Mfg to Solectron/Flextronics2. Substantial
RD to India3. Division for licensing
technology4. JV with Sony on crown jewel
handsets5. Net a wireless specialist that
depends on services more than manufacturing, on
knowledge more than metal
Source BW/11.04.02
241
We want to be the air traffic controllers of
electrons.Bob Nardelli, GE Power Systems
242
Customer Satisfaction to Customer
SuccessWere getting better at Six Sigma
every day. But we really need to think about the
customers profitability. Are customers bottom
lines really benefiting from what we provide
them?Bob Nardelli, GE Power Systems
243
Keep In Mind Customer Satisfaction versus
Customer Success
244
Was Big Iron Transformer Dudes Division. Is
Air Traffic Controllers of Electrons.
245
Was Bunch of Guys Who Make Circuit Breakers
Division. Is GE Industrial Systems.
246
GEs New Six Sigma ApproachOld view Out of
service 9 days. 4 days are transport, which is
client responsibility.New view ALL 9 DAYS ARE
OUR RESPONSIBILITY! Why? 9 days Clients
World.Source Steve Kerr, VP, GE
247
E.g. UTC/Otis Carrier boxes to integrated
building systems
248
Leased AC Units of Coolth
249
Nardellis goal (50B to 100B by 2005)
move Home Depot beyond selling goods to selling
home services. He wants to capture home
improvement dollars wherever and however they are
spent. E.g. house calls (At-Home Service
10B by 05?) pros shops (Pro Set) home
project management (Project Management System
a deeper selling relationship).Source USA
Today/06.14.2002
250
A little-known fact Siemens is now the worlds
largest application service provider to the
health business. Digitally stored X rays,
recordkeeping, the cameras that guide surgeons in
the operating theaterall run on Siemens
software Forbes/09.16.2002E.g. Siemens is
giving Health South an all-digital hospital of
the future.
251
UPS wants to take over the sweet spot in the
endless loop of goods, information and capital
that all the packages it moves
represent.ecompany.com/06.01 (E.g., UPS
Logistics manages the logistics of 4.5M Ford
vehicles, from 21 mfg. sites to 6,000 NA dealers)
252
New Springs TurnkeyFlexible
sourcing.Collections.Packaging.Merchandising.P
romotion.Systems Site mgt.
253
No longer are we only an insurance provider.
Today, we also offer our customers the products
and services that help them achieve their dreams,
whether its financial security, buying a car,
paying for home repairs, or even taking a dream
vacation.Martin Feinstein, CEO, Farmers Group
254
Our mission is to go from being the worlds
premier timesharewhich is a large idea in a
small industryto being what we call the market
makers for global travel and leisure. We need to
enable developers to be involved in more travel
and leisure products, rather than just the
timeshare side.Ken May, RCI (Source
Developments)
255
VISIONS OF A BRAND-NAME OFFICE EMPIRE. Sam Zell
is not a man plagued by self doubt. Mr. Zell
controls public companies that own nearly 700
office buildings in the United States. Now Mr.
Zell says he will transform the real estate
market by turning those REITs into national
brands. Mr. Zell believes clients will start
to view those offices as something more than a
commodity chosen chiefly by price and location.
New York Times (12.16.2001)
256
Architecture is becoming a commodity. Winners
will be Turnkey Facilities Management
providers.SMPS Exec
257
We are a real estate facilities consulting
organization, not just an interior design
firm.Jean Bellas, founder, SPACE (from SMPS
Marketer)
258
Omnicom 57 (of 6B) from marketing services
259
Who was the number one employer of architecture
school grads in the U.S. last year?
260
Message Eat Or Be Eaten.
261
HP. Sun. IBM. GE/PS. GE/IS. (GE/AE.
GE/MD.) UTC. Farmers. Delphi. UPS/ FedEx/
Ryder. Springs. Omnicom. IDEO. Accenture.
Equity Office Properties. RCI. Etc. Etc.
262
Words Partners Value Added
Intellectual-capital Added Consultative-skills
Added Implementation Added Model PSF
Outsourcing (??) Acquisitions-led (Omnicom et