You are currently browsing the monthly archive for January 2012.
Managers: You Are Missing Opportunities Daily! Unfreeze!
By Shlomo Maital
A common reaction to crisis, among ordinary people, is simply to freeze. Facing danger, risk or threat, many of us simply become incapable of doing anything.
Apparently, this is equally true of highly-paid executives. A new study by the global consulting firm McKinsey, published in the September 2011 issue of McKinsey Quarterly, * reveals that “executives are foregoing opportunities that, despite today’s volatility and uncertainty, are probably worthwhile”.
According to McKinsey’s global survey of CEO’s, two-thirds of the respondents believe that their companies are underinvesting in product development. This, despite the well-known finding that recession and its aftermath are the times when competitive rankings within industries change the most, with the ‘bottom feeders’ tending to rise, and the ‘top teams’ tending to fall. The firms that improve their market share and competitive position are those that seize opportunities inherent in global crises.
Last year, together with my colleague D.V.R. Seshadri, I published the book Global Risk/Global Opportunity, showing how talented managers and entrepreneurs can transform global risk into massive opportunities. Apparently, according to McKinsey, nobody read the book or is even interested. Like us ordinary people, those who lead global businesses seem to be reacting to global crisis, volatility and uncertainty simply by ‘freezing’ – by avoiding any risky investments or product development programs. In general, facing danger, ‘freezing’ is the worst thing we can do. And it is also the worst thing our business leaders can do. Nonetheless, that’s what they are doing. And so, incidentally, are our political leaders, especially in Europe.
I wonder how this damaging paralysis can be cured.
- “A bias against investment”, Sept. 2011
If You’re Daydreaming, You’re In Trouble
By Shlomo Maital
Often, we associate creativity with ‘dreamers’. Dare to dream, we say. Dreaming is important. But new research shows that it both reflects, and causes, unhappiness.
Writing in Science magazine, Harvard psychologists Matthew Killingsworth and Daniel Gilbert gathered 250,000 data points, using an iPhone app. The data points study subjects’ thoughts, feelings and actions as they go about their daily life. They are accurate because they are recorded as the events and emotions happen.
“A human mind is a wandering mind, and a wandering mind is an unhappy mind,” notes Killingsworth. Apparently, people spend half their time thinking about something other than what they’re doing, and this mind-wandering makes them unhappy.
“How often our minds leave the present and where they tend to go is a better predictor of our happiness,” Killingsworth claims, “than the activities in which we are engaged.” They found that less than 5 per cent of a person’s happiness, at a given moment in time, was attributable to the specific activity he or she was doing. (People, apparently, are happiest when making love, exercising, or conversing. They are least happy when resting, working, or using their computer).
“Our mental lives are pervaded, to a remarkable degree, by the non-present,” Killingsworth notes.
I think these results confirm another important aspect of creativity. We daydream when we are bored, irritated or displeased with what we are doing, with the reality as we experience it. A great deal of creativity arises out of such unhappiness. Many wonderful works of art and literature were created by unhappy individuals. Happiness by definition means living in a comfort zone, which rarely spawns creativity. So, dream on, innovators! But hey — don’t just dream, pick a few of those fantastic dreams and make them come true. That is the key.
If you want to join the study with the iPhone app, go to http://www.trackyourhappiness.org
Make Meaning: When Tragedy Becomes Triumph (2)
By Shlomo Maital
On Feb. 6, 2010, tragedy struck a family from central Israel, hiking in the snow in the Golan Heights. The snow obscured signs warning of land mines. As a result, one of the three children in the family stepped on a mine. “We threw snowballs and played around for five minutes,” 11-year-old Daniel Yuval said. “Then I remember taking a step forward and I heard the explosion. For a few minutes I don’t remember much. My father picked me up.” Daniel’s leg had been severed by a landmine. It emerges that there are some 260,000 more landmines in the area.
Daniel is a tough, brave kid. Within a month he walked his first steps. He allowed his dressings to be changed, painfully, without painkiller. And he quickly made up the time he lost in school. After his leg was blown off, he asked his father Guy (who was carefully retracing his steps with Daniel in his arms, to avoid other mines) to stop and re-attach his lost leg.
Daniel wrote a letter to all 120 members of Israel’s Parliament, and launched a high-profile campaign to clean up land mines. He spoke to Parliament, to the Foreign Affairs and Defense Committee. A bill is now being promoted, costing $89.4 m., to clean up the land mines.
According to anti-mine campaigner Jerry White, founder of the anti-landmine organization Survivor Corps (White himself lost his leg while hiking in the Golan), “Daniel Yuval is the tipping point where Israelis woke up.”
If an 11-year-old can overcome losing his leg, and find meaning in the incident, to work to keep others from the same fate, surely the rest of us can find meaning in far less painful circumstances.
“When I awoke from the surgery at the hospital and saw my amputated right leg,” he wrote in his letter to Israel’s Knesset members, “I told my mum that I wanted no one else to ever be hurt by a landmine, and that I meant to do something about that.” And he did.
Transforming adversity and depression into meaning is often simply about acting, rather than complaining. Daniel Yuval did. We can all learn from him. And Daniel? He follows artificial limb technology closely and still dreams of playing football, his main passion.
Make Meaning: When the Ref Is the Story (1)
By Shlomo Maital
Football writer Rob Hughes (Global New York Times) covers his beat like a blanket. He is the only sports writer I know who finds the main story behind a fierce FA Cup rivalry in England, between Liverpool and Manchester, in the referee, Mark Halsey.
Halsey refereed Saturday’s match between Liverpool and Manchester, when Liverpool defeated nearby Manchester 2-1 and knocked United out of the FA Cup running. This was an explosive match, scheduled to be played mid-day under heavy police surveillance. The reason: A complaint by Manchester captain Patrice Evra, that Liverpool’s Uruguayan striker Luis Suarez used a racial epithet against him (related to the Spanish word for ‘black’), brought Suarez and 8-game suspension. As a result, Liverpudlian fans booed Evra each time he handled the ball. Suarez himself claims the epithet is widely used in Latin America, as a fond nickname.
“Mark Halsey gave a near-faultless display in a match of the kind that often unsettles the best of arbiters. He controlled the fierce exchanges, he ignored the baying fans, he called every contentious issue accurately,” wrote Hughes.
This is amazing, for two reasons. First, Halsey is 50 years old. In a top-level professional soccer match, players run an average of 7-10 kms. Referees run far more, because they need to be where the play is, at both ends. Halsey is fit as a fiddle. Second, Halsey learned in 2009 that he had throat cancer. He underwent chemotherapy and got thousands of letters from all over the world. (Ill referees are beloved; active ones are universally hated, that’s life).
Halsey found meaning in life in what he does – referee games with skill, professionalism, fairness and quick decisiveness. His refereeing helped make the game a memorable one, with United holding the upper hand, but Liverpool stealing a late goal to win. I’m certain the fact he aspired to return to the field helped his recovery from cancer.
It is a fact that people who are optimistic live longer and live better. Finding meaning – the answer to the question, why were we placed here on earth? – powerfully enables us to overcome the worst of times, and make the most of the best of times. With incredibly highly paid athletes on the pitch, Hughes writes, “transcending all the sport and all the foreboding (about the game) was the performance of one man” – not the striker, or goalie, or defender, but the referee! Kudos to Mark Halsey. And kudos to Rob Hughes, who finds great stories about meaning in dark corners.
Team Sports: No, It’s NOT Always the Money!
By Shlomo Maital
Hans Weisweiler (young and old)
If you’re a sports fan, like me, and if you are old enough to remember the ‘50s and ‘60s, you may long for the age when baseball, basketball, American football and soccer stars got tiny salaries, and when “major market” TV contracts did not enable teams to buy trophies.
Blissfully, and perhaps accidentally, that era has returned, in Britain, Germany and Israel, this year.
In Israel, the premier soccer league is led by a team from the farthest periphery of Israel, Kiryat Shmoneh, with a total budget of NIS 17 m. ($4.4 m. or 3.4 m. euros). This budget is less than one-fifth the budget of top-spending Maccabi Tel Aviv, against whom Kiryat Shmoneh plays tomorrow. Yet with brilliant coaching and team spirit, Kiryat Shmoneh leads the league with 51 points, after 22 games, while Maccabi Tel Aviv languishes in seventh place, with only 33 points. Kiryat Shmoneh has already won the League Cup, for the second year in a row.
In Britain, four teams from small-spending periphery clubs are in the top 10 of the Premier League: Newcastle (#6), Stoke City (#8), Norwitch City (#9) and Sunderland (#10), while Fulham and Swansea follow in #12 and #13 positions. Norwitch has risen through three divisions in three seasons. Norwitch’s captain Grant Holt cost his team 1/125 (yes, that is less than one per cent) than Fernando Torres, star Spanish striker, cost Chelsea – yet Holt regularly outplays Torres.
In Germany Munchengladbach, and Schalke, small budget teams, are tied for first with deep-pocketed Bayern, while Dortmund trails the leaders by only a single point. Munchengladbach, in its heyday, was coached by Hans (Hennes) Weisweiler, in the 1960s and 1970s. Weisweiler ran a dozen youth sides (the “Bokelberg Colts”), building such incredible players as Gunter Netzer, Rainer Bonhof, Berti Vogts, Uli Stielike, and Jupp Heynckes. You cannot tell me that fan loyalty is as strong for players from, say, Ghana and Algeria, as it is for local players who grew up in town and played for youth teams. Weisweiler, notes Rob Huges, Global New York Times’ wonderful soccer writer, had a simple secret: He taught, with simplicity and repetition, attacking football and technical skill. These are both things fans love to watch.
Before I wax too euphoric, let’s recall what Deloitte’s annual Money League statistics show: “Money League clubs (those with the top 20 budgets) [in big-league soccer] have won 43 of 50 domestic league titles available in the big five countries (England, spain, Italy, Germany, France) over the past five years.” In the past 10 years, only one club outside the Big 20, Porto (Portugal) has won the Champions League.
So, yes, money does buy the best players, and the best players tend to win games, cups and championships. But here and there, a well-coached team with young ambitious players and no money can embarrass the big spenders. (Ever heard of baseball’s New York Yankees?) And happily, this is happening in my country, as well as in England and in Germany, this year.
Apple: “No obligation to solve America’s problems”
By Shlomo Maital
Apple’s jobs: in China
A hard-hitting blog by Clyde Prestowitz, former chief trade negotiator under President Ronald Reagan, highlights a key dilemma facing America. Global companies based in America feel no duty to take into account the interests of their country; rather, they seek to maximize profits, often at the expense of American workers.
In a previous blog, (July 1, 2011: “iPod not Apple of America’s Eye”), I noted how most of the iPod jobs are in China. In last Sunday’s New York Times, a top Apple executive was quoted as saying: “We [Apple] don’t have an obligation to solve America’s problems”.
Comments Prestowitz: “Apple’s products still have a large U.S. government R&D content and I’ll bet that the guy who says Apple has no obligation to help Uncle Sam does strongly believe that Uncle Sam has an obligation to stop foreign pirating of Apple’s intellectual property and to maintain the deployments of the U.S. Seventh Fleet and of the 100,000 U.S. troops in the Asia-Pacific region that make it safe for Apple to use supply chains that stretch through a number of countries such as China and Japan between which there are long standing and bitter animosities.”
Prestowitz concludes: “Apple is not the pinnacle of capitalism. It’s the pinnacle of the marriage of Silicon Valley innovation with strategic Asian mercantilism.”
Prestowitz recalls: “In the 1981-86 period I was one of the U.S. government’s top trade negotiators, especially with Japan. At that time, Apple was trying to crack the Japanese market for personal computers and getting nowhere. Steve Jobs and other Apple executives had the funny notion that the U.S. government had an obligation to help them and asked me and other negotiators at the Commerce Department and the Office of the U.S. Trade Representative to help them get on the shelf in Japan. We did all we could and in doing so came to learn that virtually everything Apple had for sale, from the memory chips to the cute pointer mouse, had had its origins in some program wholly or partially supported by U.S. government money.”
Perhaps Apple has slightly modified JFK’s dictum to read: “Ask not what we should do for our country, ask only what our country can do to fatten our own profits”. There is a massive asymmetry here, as Prestowitz notes. America’s trade deficit with China has grown in recent years, even under Obama. It will stay huge, until attitudes of global American companies like Apple completely change.
Joe Paterno 1926-2012: Can Football Build Research and Academics?
By Shlomo Maital
Joe Paterno 1926-2012
Joe Paterno coached Penn State U. football for 62 years, and was head coach since 1966. He passed away on Jan. 22 from lung cancer, after his family honored his wishes and asked that life support be removed.
His eulogies focus on his record of most college football wins. Paterno, nicknamed “JoePa”, holds the record for the most victories by an NCAA Division I football coach and is the only Division One coach to reach 400 victories (his total is 409, which will never be equalled). He coached five undefeated teams that won major bowl games and had 23 finishes in the top 10.
I think the real story is very different. U.S. college football is an enormous and utterly unfair business. A study by Drexel Univ. shows “TV revenues from five major athletic conferences have soared to $1.8 billion per year.” Current and past spending patterns indicate that colleges are likely to spend all of the new revenue on luxury athletic facilities and salary increases for coaches and athletic directors. Many coaches get salaries of $1.5 m. or more. At the same time, the athletes who fuel this revenue (many of them African-Americans from very poor backgrounds) are strictly prohibited from taking any share of this windfall. They get scholarships but they and their families remain poor, until they leave college and turn pro. Because of this, many top athletes do not finish their degrees but enter the pro draft early. Many big colleges pay athletes under the table, and some get into trouble when they’re caught.
Penn State U. is in State College, Pa., in rural Pennsylvania. When Paterno began coaching, Penn State had 9,500 students; today it has 45,000 and is recognized as a major research university. Penn State’s football achievements spurred major alumni/ae donations and helped President Graham Spanier build excellence. Paterno recruited players by speaking first about Penn State’s academic excellence, and his players had higher graduation rates than other schools. His integrity kept Penn State out of scandals that afflicted many other football universities. Paterno himself gave money, supporting (for instance) a penniless program in classics and Mediterranean studies. Paterno was a graduate of Brown Univ., an Ivy League school, and stressed the importance of education to his players. It is the ultimate irony that he was fired for ethical breaches, after 62 years of sterling behavior. “I should have done more”, he said, summarizing his actions in the Jerry Sandusky pedophile scandal. It is ironic that Penn State is now a pariah, when many other football universities have blatantly violated NCAA rules for years.
I believe Paterno’s model is catching on. Great academic schools like Stanford U. and Northwestern U., which used to lose in football regularly, now have strong teams that compete against powerhouses like Ohio State and U. of Southern California. Stanford’s team was 11-2 this year; Northwestern finished 6-7 (7-6 last year) but play in their conference against schools with huge football budgets. They recruit, like Paterno, by stressing academics, and fund-raise, like Paterno (indirectly), by leveraging football achievements.
The enormous hypocrisy of that $1.8 b. in college sports revenues, mainly from TV, must end. The players who create it, with their bodies, energies and skill, must be given immediate need-based help, to keep them in school and to avoid terrible injustices when, for instance, U. of Michigan basketball player Chris Webber took money while playing in college, denied it to a federal jury, and got into deep trouble. Four top Michigan players borrowed a total of $616,000 from a rich supporter. Webber’s contract with the NBA team Sacramento Kings is valued at $122 m. Players with such immense human capital should be given financial assistance above board, provided they stay in school and complete their education.
Paterno’s record at Penn State showed his players had far higher graduation rates than most other schools. According to a 2011 study:
The Penn State football team is tied with Stanford for the top Graduation Success Rate (GSR) among teams ranked in the Oct. 30 Bowl Championship Series and AP Top 25 rankings, according to data recently released by the NCAA. Penn State football student-athletes that enrolled in the University from 2001-04 earned a superlative Graduation Success Rate of 87 percent, tied with Stanford for No. 10 overall among the nation’s 120 Football Bowl Subdivision (FBS) institutions. Penn State’s 87 percent GSR was significantly higher than the 67 percent FBS average and was second to Northwestern (94) among Big Ten Conference institutions, according to the NCAA.
This is the lesson we should learn, I believe, from his life and work. It is his legacy. The question is, will anyone pay attention, while focusing solely on his 409 football victories.
The Fuel of Persistence
By Shlomo Maital
Leadership educator John C. Maxwell writes a blog, Leadership Wired, which includes this amazing story about young Philippe Petit. It was sent to me by a young woman who heard my talk on “Creativity + Character = Change the World” at Univ. of Toronto’s Rotman School of Management. The theme of my talk was the crucial importance of strong character, especially stubborn persistence and resilience, in creating world-changing innovations.
According to Maxwell, in his essay “Passion: The Fuel of Persistence”, Philippe was an 18-year-old French street performer. While searching for venues for his high-wire balancing act, he read about the World Trade Twin Towers in a magazine in a dentist’s office in Paris. He decided he would walk a tightrope between them.
He worked on his dream for the next six years. He practiced his high wire act endlessly and saved money for a ticket to America. Petit ascended the Tower on a Tuesday night. With a bow and arrow, they fired a line from the north to the south tower and spent the night securing it. Early Wednesday morning, petit mounted the high wire. As thousands watched, the cops gathered to arrest him. Petit focused fiercely on his act, and made eight trips back and forth between the towers. Then he turned himself in.
Your reaction? Insanity? Madness? What possible value did Petit bring to the world with his stubborn persistence? A wasted six years of his life?
The value he brought to the world was to create a powerful narrative about the fuel of persistence and passion. We can only imagine how many powerful arguments were made to dissuade him, to make him give up. He never did. In French ‘petit’ means small. But Philippe was anything but. His dream was huge and his persistence to fulfill it was even bigger. A great many successful innovators will strongly identify with Petit’s story.
As I told my Rotman audience, a survey I did once among Israeli microchip designers found that the two most important factors in successful innovation, according to them, were these: resilience and stubborn persistence. These are qualities we do not teach in MBA classes. And like our biceps, they become stronger with practice. Practice them daily. If you give up with small things, you will likely give up on big things as well.
Drucker’s Five Basic Business Sins
By Shlomo Maital
Writing in Bloomberg Business Week, Rick Wartzman reminds us of Peter Drucker’s 1993 essay, on a quintet of “avoidable mistakes that will harm the mightiest business.” He does this in the context of Kodak’s Chapter 11 bankruptcy, noting that Kodak committed two of these five basic blunders.
- preoccupation with high profit margins. Kodak’s near-monopoly position in silver-iodide film generated very high profit margins. It led Kodak to ignore disruptive technologies that began, as always, with low profit margins.
“About 10 years ago, Kodak did try to move more forcefully into digital cameras. It couldn’t figure out how to make money on them, even as it became the leader in U.S. sales. Kodak’s frustrated chief executive officer, Antonio Perez, wound up calling it a “crappy business”… “ It WAS crappy. You don’t need to buy film to make digital photos, only a camera. But, that’s life. Adapt. Live with it. Otherwise, you’re a dinosaur.
- “slaughtering tomorrow’s opportunity on the altar of yesterday.”
“ … In the mid-1980s, a consulting firm called the Index Group predicted in a report to Kodak’s marketing division that digital technology would take over film by 2000. “They rejected our work and told us it would not happen until after 2020,” says Adam Crescenzi, who helped prepare the Index analysis. “They laughed it off.” “ Disruptive technologies disrupt earlier, rather than later – and even if they don’t, always ASSUME they will…
The remaining three business sins, according to Drucker, are:
- “mispricing a new product by charging ‘what the market will bear’;
- “cost-driven pricing” in which you merely add up your expenses and then stick a profit margin on top.. (always price by value, not by cost), and
- * “feeding problems” while “starving opportunities.”
I’m quite certain Kodak committed those three, too. And a few more. Recall how Kodak bought a drug company, Sterling, for a huge price, incurring massive debt, because…its CEO believes its stable of 500,000 chemicals might somehow turn up a winning medicine! And when it did find itself in trouble, Kodak focused on them, rather than doing as Drucker said, beginning innovation by abandonment (the creative destruction Schumpeter spoke about) before embarking on anything new.
It’s always easy in hindsight to run post-mortem autopsies on failed companies. At the same time, it is hard to understand why smart highly-paid executives, including the brilliant George Fisher, who was CEO and Chair of Kodak from 1993 (the year Drucker wrote his essay) through 2000, made several basic mistakes, over a period of years. As always, ordinary working people pay the price, as their jobs disappear.
The World Is Still Drowning in Debt!
By Shlomo Maital
The good news? America is halfway through its deleveraging (debt reduction) process. The bad news? The rest of the world is still piling up debt and hasn’t even begun.
A report in McKinsey Quarterly by three McKinsey scholars * provides a useful summary regarding where the world stands in its deleveraging process. This is crucial, because until households and businesses feel comfortable with the existing level of debt, they are unlikely to resume their spending and investment and economic growth and job creation are unlikely to resume. Here are the results:
- Although the debt ratio of US households remains high, they may be halfway through the deleveraging process.
- In the United States, household deleveraging may have only a few more years to go, while in Spain and the United Kingdom it has just begun.
- … up to 14 percent of UK mortgages could be in difficulty—identical to the percentage of US mortgages in difficulty today.
- Signiﬁcant public-sector deleveraging typically occurs after GDP growth rebounds. (The World Bank says developed country GDP growth this year will be very weak, only 1.4 per cent).
- The deleveraging process that began in 2008 is proving to be long and painful. The unwinding of debt—or deleveraging—has barely begun. Since 2008, debt ratios have grown rapidly in France, Japan, and Spain and have edged downward only in Australia, South Korea, and the United States. Overall, the ratio of debt to GDP has grown in the world’s ten largest economies.
Fasten your seat belts. More lean years are ahead, as the massive amount of debt continues to grow in most countries.
* Working out of debt . McKinsey Quarterly, JANUARY 2012 . Karen Croxson, Susan Lund, and Charles Roxburgh .