Telling It Like It Is

THE ENTERPRISE-HAPPY THANKSGIVING

THE ENTERPRISE

We just finished a Thanksgiving weekend when Americans came out in force to hit the shopping malls early Friday morning. Whether they bought in proportion to their numbers will remain to be seen, because reports are mixed, but the people were out there. Once again, the retailers that offered the most neck-snapping, eye-bulging deals had the longest lines and the strongest early traffic. Advertising and price cuts still drive traffic.

The economy keeps chugging along. We are in a respite between the high automobile gas prices (now reduced to "reasonable levels" at under $2.50 a gallon) and the impact of high heating gas prices (which will kick in after the recent cold snap, but with a month's time-delay in the billing cycle). Don't be surprised if late Christmas retail traffic sags, as consumers discover that less money is left for shopping after paying the latest utility bills.

MICROSOFT'S NEW BRAIN TRUST
If you were out of touch with business news or stranded on a remote island, you may not already know that a man named Ray Ozzie joined Bill Gates and company at Microsoft. If that name sounds familiar, Ray Ozzie is the creator of Lotus Notes (among other important and innovative software back in the late 1980's and early 1990's). Microsoft bought Groove Networks, and happily absorbed Groove's network software into its Office suite. It was even more delighted to absorb Groove's founder, Ray Ozzie into a top creative management position.

Write this one down. Ray Ozzie is a brilliant creative guy--perhaps at the genius level when it comes to realizing what can be done next with computers, software and networks. While Google is gloating about its IPO and eBay is ecstatic about its market multiples, the behemoth of Redmond (WA) is going back to work creating like it used to. Watch Microsoft go; it's spurt will start in about 6-12 months.

PRICING LEVERAGE AND INFLATION
Pricing and inflation go together like turkey and dressing or mashed potatoes and gravy at Thanksgiving dinner. Suppliers are gaining some traction in passing on commodity and energy cost increases. When the same goods or services sell for more money, that is called inflation. It's coming. Experts are guessing 4%, held down to that level by the clout of mega-customers and Chinese competition. I wouldn't be surprised to see if go a bit higher temporarily.

All of the indices are misleading because the pull-back in gas prices has hidden the already existing inflation. A spike could be written off as driven by winter heating fuel costs but the inflationary pressures will be much broader than that. But don't worry too much. We've had lots of experience in dealing with periods of moderate inflation, and the Fed has managed to get the interest rate all the way up near 4% before it has to rethink its philosophy, as Greenspan steps down. The new Fed head Bernanke will earn his stripes early in his term based on his next decisions.

TREES DON'T GROW TO THE SKY--BUT DO GROW TO THE HORIZON
I've said for a long time, only Wal*Mart can stop Wal*Mart. It's own missteps (and perhaps government intervention) will limit Wal*Mart's growth, but Wal*Mart won't collapse under its bigness. It has faltered under the pain of a thousand cuts, but it is still a big, powerful and competent retailer. The fearsome menace of China will also limit its own potential by "fouling its own nest." Pollution has been a big problem there for decades, but now the industrialization of China is so pervasive the pollution has become a big social issue. The unrest is already brewing; watch it grow. China is too big and too powerful (and too governmentally controlled) to let anything its growth, but it will get slowed and tripped up occasionally.

"I JUST DON'T UNDERSTAND..."
There are several things I just don't understand:
How we can develop so many complex, powerful and realistic video games, and not innovate more in our basic consumer products. Some of the things I'm using in my house haven't changed much in years. Kitchen appliances are cheaper, but a coffee maker that makes one cup at a time doesn't seem much like a big innovation to me. Mine could do that years ago. I just put in one cup of water and one scoop of coffee.

How can we come up with such creative ways to pirate music and movies but not make it a lot easier to get through to the cable company without going through 7 menu choices and then waiting on hold for 10 minutes while being told every 15 seconds how important we are to them. I don't believe that. Do you?

And how can we come up with so many clever, but mischievous people hacking into systems and stealing our identification or writing viruses that just mess up everybody's lives. I remember when mischief was soaping windows or Tee-Pee-ing trees, not shutting down corporate computers and airline reservation systems. I guess that no matter how smart the honest people are, there are a smart group of miscreants and criminals who are just a little bit smarter--or at least more reckless and ruthless--until authorities catch up with them. In this case, the ubiquitous nature of Internet has made it harder, not easier to find and stop them.

FREEDOM!
Perhaps this is the curse of our free society. That freedom is something I enjoy a lot. I know we'll figure these things out, because we always do. After all, I am writing this while sitting watching a streaming video of a Tennessee Lady Vol basketball game being played in St. Thomas, Virgin Islands, while listening to the streaming audio of the Lady Vol commentator on a Knoxville, TN radio station. Some people would say that's progress....and I guess it is.

Maybe this Thanksgiving, I'll stop trying to understand it all and just give thanks for all of the wonderful things we do have in the US, including our freedom. And I'll say a prayer of thanks for all of those brave Americans who have fought and died so my family and I can enjoy our Thanksgivings. I guess, in perspective, we have it pretty good. Happy Thanksgiving.

Best, John

THE ENTERPRISE--I've always wondered...

THE ENTERPRISE

A week after Peter Drucker's death, it dawned on me why his beliefs resonated so much with me. It was his deep conviction that people are the key to everything in management. It was Drucker who saw the modern corporation as an invention of people, for people, to make society a better place. He abhorred the ruthless raiders who pillaged corporations leaving damaged lives--damaged people--in their wake. For the best write-up I've seen on Drucker's amazing life and contributions to society, I recommend John Bryne's great article in the Nov. 28 edition of BUSINESS WEEK.

Something else also dawned on me. I think I have finally realized what my niche is...one part pragmatic business strategist, one part creative artist, one part Peter Drucker and one part Andy Rooney. That means a mixture of the practical, the eclectic, the profound and the wry, sometimes cynical. If that isn't a mixture I don't know what is...but it feels right, so here goes. 

You know how Andy Rooney always says, "I've always wondered"....well, me too. I've always wondered why people act like they believe things, when they know better. 
For example:
---Does anyone really think we can dodge a nasty dose of inflation over the next year? I don't. Oil, gasoline, natural gas, plastics, chemicals, metals, and more commodities have jumped in cost multiple times over the past year. These increases are just now making their way through the supply chain, and will fully hit in 2006. But we've been through a bit of inflation before and know how to deal with it.
---Does anyone believe there won't be a plan to bring most of the troops back from Iraq by 2007? Sure, there will be a force that stays, but less than 20% of those in Iraq now. Why bring them home in 2007? Because there will be many more Iraqi soldier/police trained by then, and also, 2008 is an election year. 
---Does anyone believe it when GM says bankruptcy is not in our plans? Maybe they think that, but every time I've heard that over 25 years, it wasn't long before bankruptcy WAS in the plans.
---Does everyone over age 50 realize that more than 50% of you have no plans for how you will support your lifestyle in retirement? Social Security will still be around, but that won't do it. More "boomers" will have to work longer than they thought, and many will live poorer than they hoped. There is neither the time nor the means to change that much in the next 10+ years. It will not be pretty for many--it will be tragic. (And Europe and Japan have the same aging population problem too).

Finally, my management part is to share a recap of an excellent speech I heard this week. Jeff Immelt, Chairman & CEO of General Electric spoke at Miami University (OH) business school. His remarks were interesting, entertaining and relevant, so I am sharing them with you.
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First of all, Immelt is tall, and slender--more slender than he was when he took the CEO helm 4 years ago, succeeding the legendary Jack Welch, at a very tough time. He seems very comfortable speaking about GE, as its leader, as he should be, given GE's results during his leadership. We were able to meet briefly at a reception following the speech, and there it was clear that his tough schedule weighs on him as the day wanes.

Immelt pointed out that GE is a BIG company with $170B in revenues, earning $20B, with 320,000 employees scattered throughout 100 countries in the world. He further pointed out that it is a bit of an anomaly-a very large company, which is also a growth company. Its plans are for 8% growth each year, which means $15B in new revenues, and that it has been achieving about 10% growth in recent years-remarkable for a company of its size. He started by pointing out three large world themes.
---It is a slow growth world…and most of that growth is coming in places far away from and not familiar to the US.
---Volatility of everything is greater than ever….get ready to deal with it. Get as comfortable as you can with volatility.
---There are, and will be a lot more laws and regulations as people and governments become more and more concerned about protecting themselves.

Immelt then shifted to the challenge of how to lead and manage such a large company in that kind of environment. 

It starts with the choice of the businesses to be in. If you are going to be a large company and grow, you must be in large and important businesses. He named and commented on the major businesses GE is in-infrastructure (like locomotives), aircraft engines, health care, financing, appliances and entertainment.

Next, you must operate with a sense of performance …and compliance (with regulations, etc.), and having that performance-oriented operating mentality is very important.

Finally, you must always be driving growth-that is the role of corporations that are leaders.
How to drive growth is the issue. It requires a focus on technology; a strong focus on customers (he spends 5 days per month with customers), being a global company; seeking growth where it is available; (since there is overcapacity in most industries) it requires a strong competitive thrust and cost effectiveness; a most important aspect of driving growth is innovation (he described GE's “Imagination Breakthroughs”-100 projects with $100MM growth potential to which resources are allocated); and last, but more likely first, you must have great people. 

Immelt commented that he couldn't possibly know all of GE's 320,000 employees, but that he could, and did know the 500 highest potential/highest performing ones who are the leaders who set the pace for the rest.  One of his most important jobs was to develop those leaders. Another of his critical jobs was to cultivate the culture-a “company-first” sense of one-ness of GE. This is so necessary because GE tries to be a different kind of company-a very big company, but a growth company that can move quickly and numbly when it is called for. 

He then addressed the students telling them that if they wanted to start something small and run it, then GE wasn't the place for them. But, “if you want to see big dreams happen and be a part of it, we are the place for you.” He repeatedly told them that if they graduated from a good university, a good business school with a good education, then they had the “smarts” that was needed. The question was whether they had “the rest of it.”

“What we look for is the ability to learn, determination to get the job done, able to be part of a team, passionate about what you do and believe in, and have that right attitude-a can do, spirited attitude.”

He closed by stating five of his beliefs:
1. Passion for what you do-making the place better by doing it.
2. People-you must believe in people and connect with them.
3. Change-don't live in the past, what was or might have been, live in the now and the future-what's next?
4. Commerce-business is a force for good and makes more good things happen.
5. Great & Good-a spirit that believes “compete to be your best.”

His delivery was very natural and relaxed and never seemed scripted. He spoke equally to the students and the faculty and business community in the audience (the first 3 rows were either GE employees or their guests/former associates of Immelt.)
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That's plenty for this week. I hope readers enjoyed hearing the beliefs of one of our strongest corporate leaders. I also hope you'll all think hard about the things you hear that you just know can't be so. As Will Rogers was known to say, "It ain't what you don't know that gets you; it's what you think you know that ain't so."

Best, John

THE ENTERPRISE--A Tribute to Peter Drucker

THE ENTERPRISE

A legend is gone. The passing of Peter F. Drucker signals the end of an era in management thought. There have been many brilliant people who have contributed to the practice of management over the past century, some living and some dead. But NONE, that's right NONE, have contributed as much or as broadly to our body of knowledge and our understanding of the business of corporate management as Peter F. Drucker.

I read his first book, The Concept of the Corporation--a study of General Motors circa 1946--while I was in college. I quickly then read his legendary classic, The Practice of Management (1954). Anyone who is involved in business or management in any way that has not read this book should buy it and read it. You won't believe how much of it is as timely today as it was when it was written half a century ago.

Drucker didn't come up with trite concepts. He rejected simplistic solutions. What he did was contribute deep, probing and profound knowledge and wisdom to millions around the world. I cannot name another thinker who has so significantly contributed to my knowledge...and to the extent I have been successful...to that success. The world will miss him. I only hope I can contribute a small fraction of what he did to the world's knowledge base (and I hope I am blessed with 30 more years in which to do it!)

What follows are excerpts from the AP story on his passing at age 95.
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AP, LOS ANGELES - Peter F. Drucker, revered as the father of modern management for his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday. He was 95. Drucker died of natural causes at his home in Claremont, east of Los Angeles where Drucker taught at Claremont Graduate University,

Drucker was considered a management visionary for his recognition that dedicated employees are key to the success of any corporation, and that marketing and innovation should come before worries about finances. His ability to explain his principles in plain language helped them resonate with ordinary managers, said former Intel Corp. Chairman Andy Grove. "Consequently, simple statements from him have influenced untold numbers of daily actions. They did mine over decades," Grove said.

Drucker championed concepts such as management by objective and decentralization, and his motivational techniques have been used by executives at some of the biggest companies in corporate America, including Intel and Sears, Roebuck & Co. In the early 1940s, Drucker was invited to study General Motors' inner workings, an experience that led to his 1946 management book, "Concept of the Corporation." He went on to write more than 30 books and start a foundation for non-profit management. Drucker showed a knack for identifying sea changes in business and economics years in advance. He foresaw the emergence of a new type of worker whose occupation would be based on knowledge, not physical labor or management.

Drucker was born in Vienna, and educated there and in England. He received a doctorate in international law while working as a newspaper reporter in Frankfurt, Germany. He remained in Germany until 1933, when one of his essays was banned by the Nazi regime. For a time, he worked as an economist for a bank in London, then moved to the United States in 1937. He taught politics and philosophy at Bennington College in Vermont and for more than 20 years was a professor of management at New York University's graduate business school. Beginning in 1971, he taught a course for midcareer executives at Claremont Graduate School in California, which named its business school after him.

Drucker's management books included: "The Effective Executive," 1966; "Management: Tasks, Responsibilities, Practices," 1974; and "Managing in a Time of Great Change," 1995. While much of his career was spent studying employees in the workplace, Drucker also dedicated time to the service sector, founding the New York-based Peter F. Drucker Foundation for Nonprofit Management, known since 2003 as the Leader to Leader Institute.

Drucker is survived by his wife, Doris, and four children.
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I could fill pages with the ideas, concepts, thoughts and conclusions I've learned from Peter Drucker. At times, as with all learning, it has been hard for me to delineate where my original thought started and ended since his wisdom was so broad, deep and insightful. Because of that, the only suitable topic for this edition of THE ENTERPRISE is a tribute to him and a heartfelt thank you on behalf of the millions who have learned from him. May God bless Professor Drucker and his family.

Best, John

THE ENTERPRISE--Brooks & Wal*Mart

THE ENTERPRISE
Every once in awhile, I find something so good, that I just can't resist passing it on. That is the case with the first of the two attached pieces. If it doesn't make you at least break a grin, then you are a serious liberal/Democrat, and won't think it is funny at all...but I sure did. Apparently, so did the editors at the NY Times who allowed it to run.

Is Harry Reid trying to outdo Howard Dean, Michael Moore or what? In "sensationalism in leadership" as in advertising, there is a point of "going too far." Is this it for a member of Congress?

First David Brooks column of this past week:
Pssst! With this secret decoder ring, you, too, can unravel the conspiracy
Friday, November 04, 2005
DAVID BROOKS

Harry Reid sits alone at his kitchen table at 4 a.m., writing important notes in crayon on the outside of envelopes. It’s been four weeks since he launched his personal investigation into the Republican plot to manipulate intelligence to trick the American people into believing Saddam Hussein had weapons of mass destruction.

Reid had heard of the secret GOP cabal bent on global empire, but he had no idea that he would find a conspiracy so immense.

Reid now knows that as far back as 1998, Karl Rove was beaming microwaves into Bill Clinton’s fillings to get him to exaggerate the intelligence on Iraq. In that year, Clinton argued, "Iraq still has stockpiles of chemical and biological munitions and the capacity to restart quickly its production program and build many, many more weapons."

These comments were part of the Republican plot to manipulate intelligence on Iraq.

Reid now knows that in the late 1990s, Dick Cheney and other Republican officials used fluoridated water in the State Department and other government agencies to brainwash Clinton administration officials into exaggerating the threat posed by Saddam Hussein.

In 1997 Clinton’s defense secretary, William Cohen, went on national television and informed the American people that if Saddam has "as much VX in storage as the U.N. suspects" he would "be able to kill every human being on the face of the planet."

Secretary of State Madeleine Albright compared Saddam to Adolf Hitler and warned that he could "use his weapons of mass destruction" or "become the salesman for weapons of mass destruction."

Clinton’s national security adviser, Sandy Berger, warned that "Saddam’s history of aggression, and his recent record of deception and defiance, leave no doubt that he would resume his drive for regional domination if he had the chance. Year after year, in conflict after conflict, Saddam has proven that he seeks weapons, including weapons of mass destruction, in order to use them." These comments were also part of the Republican conspiracy to exaggerate and manipulate intelligence.

Harry Reid sits alone at his kitchen table at 4 a.m., writing important notes in crayon on the outside of envelopes. It has been four weeks since he began investigating this conspiracy and three weeks since he sealed his windows with aluminum foil to ward off the Illuminati. Odd patterns now leap into his brain. Scooter Libby was born near a book depository but was indicted while at a theater. Karl Rove reads books from book depositories but rarely has time for the theater. What is the ratio of Bush tax cuts to the number of squares on a frozen waffle? It is none other than the Divine Proportion. This proves that Leonardo da Vinci manipulated intelligence on Iraq and that the Holy Grail is a woman!

Harry Reid sits alone at his kitchen table at 4 a.m. He knows now that seven centuries ago at a secret meeting of the Bilderberg Society-Trilateral Commission-American Enterprise Institute, the six High Lords of the Secret Order of the Neocons decided to implant alien life forms into potential Democratic officials that could be activated in case there was a need to manipulate intelligence on Iraq.

This is why in 2002 Al Gore declared that Saddam Hussein "has stored secret supplies of biological and chemical weapons throughout his country." This is why in 2001, a Clinton assistant secretary of state, Robert Einhorn, said at a congressional hearing, "Today, or at most within a few months, Iraq could launch missile attacks with chemical or biological weapons against its neighbors."

This is why the Clinton National Security Council staffer Kenneth Pollack has written, "The U.S. intelligence community’s belief toward the end of the Clinton administration (was) that Iraq had reconstituted its nuclear weapons program and was close to acquiring nuclear weapons."

These assertions were all part of an elaborate Republican conspiracy to manipulate and exaggerate intelligence on Iraq.

Harry Reid sits alone at his kitchen table at 4 a.m. Odd thoughts rush through his brain. He cannot trust the letter "r," so he must change his name to Hawwy Weed. Brian Lamb secretly rules the world by manipulating the serial numbers on milk cartons.

Reid realizes there is only one solution: "Must call a secret session of the Senate. Must expose global conspiracy to sap vital juices! Must expose Republican plot to manipulate intelligence!"

Harry Reid sits alone at his kitchen table at 4 a.m.

David Brooks writes for The New York Times.  [email protected] 

Secondly, the demonization of Wal*Mart continues. I guess huge (successful) organizations just have to be ready to be attacked because they aren't "perfect" or don't meet the wishes of every part of society and all kinds of fringe organizations. Is Wal*Mart tough to deal with at times? Sure. Are they tough negotiators, Absolutely. Does it make mistakes. Darn right... Is it the devil incarnate? I don't think so. 

I have said for years, that the only one who can stop Wal*Mart ...IS WAL*MART. It's clear by words and actions that Lee Scott and his Wal*Mart management team have gotten that message and are trying to respond to it.

In a seriously profound book, THE POWER OF PRODUCTIVITY, director emeritus of the McKinsey Global Institute explains how the world works. His extensive research proves, he believes that the principle determinant of success in the economic progress of nations, and by extension, of the world is PRODUCTIVITY. The key to improving economic conditions in poor and not so poor countries is increasing productivity through intense, fair competition and protecting the consumer's rights. 

Of all the institutions, public and private, none have done more than Wal*Mart to drive productivity increases both in the US and abroad. Thje consequences of its actions are under intense attack, and Wal*Mart itself has commissioned independent studies to either confirm or deny the claims that it is damaging to its workers, Americans in general and the communities in which it operates. time will tell what that outcome is. All I can offer you today is the text of its Chairman's own remarks to its employees. Read them and form your own conclusions about what kind of a company and a citizen Wal*Mart might be. This is a long text, but you can download the PDF file from Wal*Mart's site:
-------- http://walmartstores.com/GlobalWMStoresWeb/navigate.do?catg=463&contId=5707

I encourage you to read it if you are at all interested in this topic. You'll be surprised.

Best, John