Day 35, Monday Oct 11th, 2010

There is a feeling of excitement that we are already in the 6th week of the course. And in way the count down for graduation day has already started.

The first case for today was the US newspaper - USA Today, which in 1999 was in the midst of huge changes caused by the Internet. The organization had three different lines of business - the paper, the Online part and the Live television part. The CEO's network strategy required the integration of these three different media formats, thereby leveraging the content for distribution across multiple channels.  However, given the different characteristics of these three channels, the different profile of people in these three channels made it quite difficult. Accomplishing such a strategy would need significant changes to the technology infrastructure, corporate culture and organizational structure.

Almost all good leaders are good politicians - not in the negative sense, but in the sense of getting things done. What ever view one may have on politicians, the good politicians get things done. In most cases, including the USA Today case here, one cannot get to the future through continuous incremental changes. You need a punctuated change, which is almost a revolutionary change, a discontinuous changes.

In deciding whether we need a discontinuous change, we need to ask three questions:

1. Is this the right time to do it ?
2. What is the context of the change ?
3. Can we execute it ?

Organizations which are successful in the long run, continuously explore and exploit. Explore in the discontinuous change and exploit is to execute efficiently the current strategy. The traditional concept of PDCA - Plan, Do, Check, Act - cycle, works well in the Exploit cases, but in the explore situation, it is all about innovation. PDCA works well for incremental changes, but assumes that the future is same as the past.

There has been quite a lot of study on the performance patterns and group age - where group age is defined as the number of years the group has worked together. Apparently after about 2.5 years, the performance of the group starts to deteriorate. And hence there is a need to keep the group age low, by moving some people around. Not all should be moved, as you still need an anchor to the past history and culture.

When organizations are threatened by external forces, in the absence of changes within, they invariably move backward.  USA Today was being threatened and they need to change. The issue was whether to spin-off Online, which was seen as the new world, or not. There are two schools of thought here : Prof. Clay Christensen would argue that innovative ideas are best implemented by new teams; Prof. Mike Tushman argued that if there are strategic interdependency's, then it is better to integrate than spin off. I would tend to agree with Prof. Tushman here. Which is what USA Today did.

How do organizations evolve ? Often not by incremental change alone - but by having revolutionary change involving simultaneous shifts in strategy, structure and culture once in a few years. This process is characterized by periods of stability with continuous incremental change, punctuated by major reorientation, usually led by new senior management teams.

The second case for the day was zappos.com - an online retailer of shoes, which was started in 1999 and closed the 2008 with over $900m in revenues. In Nov 2009, Amazon paid US $1.2b to acquired zappos.com - but decided to run it independently with the founders of zappos still in charge. What was great about this company ? What is their service differentiators ?

Zappos leadership viewed the company culture as the differentiator that afforded the company a competitive advantage. The founders learnt from Starbucks. When the Starbucks CEO was asked in a conference, why everyone at Starbucks smiled, he said, " we only hire people that smile".  Tony Hsieh and Alfred Lin, the founders of zappos.com, started of with the philosophy that you can't have happy customers without having happy employees, and you can't have happy employees without having a company where people are inspired by the culture.

The zappos differentiators were the three C's : Company culture, Customer service and Clothing. zappos recruited for skills and culture - a little fun and a little different. After training was completed, they offered $2000 for people to leave - as a process to weed out uncommitted new hires !

zappos is a great example of a successful service operations which combine a customer management system, an employee management system and a funding model. With a clear articulation of which aspect of service you will be really good at - in this case, it was customer service. And in the employee management system, it is important to set up a typical employee for success.

The service profit chain looks something like this:

The third session was our continuing discussion on Governance and Leadership, were we discussed the use of child labour in the supply chain. Many retailers source products from many countries where there is a very high probability of using child labour in producing goods.  Of course the buyers are worried about the child labour issue, but the question is where does one stop ? How far does a Walmart or a Nike go, in ensuring that no child labour is used anywhere in the supply chain ? Non-governmental organizations have also been quite active in this space to ensure that multi-national companies do their bit. Question is this: is the solution simply to pull out of countries or suppliers who are suspected of using child labor ? Many believe that the root cause is education and poverty ? Is this the government's job ? There are no easy answers - but clearly companies, NGO's and the governments should participate in ways to eliminate this world over.

Today, I had my 360 degree feedback with my coach here. It was an interesting discussion and quite different from similar discussions that I have had in the past.  Some more homework for me to do !

And finally, we had the session from Robert Kaplan or balanced scorecard. But I will reserve that for a separate blog. Let the suspense continue for some more time .... More later.