Syllabus June 28: MBA 624: Strategic Management of Technology and Innovation: Summer 2006

In the last decade of the Victorian era, an obscure public schoolboy made a prophecy about the British Empire's fate in the coming century:

"I can see vast changes coming over a now peaceful world; great upheavals, terrible struggles; wars such as one cannot imagine; and I tell you London will be in danger -- London will be attacked and I shall be very prominent in the defence of London. I see farther ahead than you do. I see into the Future. The country will be subjected somehow to a tremendous invasion, but I tell you I shall be in command of the defences of London and I shall save London and the Empire from disaster."

Winston Churchill was just sixteen when he spoke those words to a fellow Harrovian, Murland Evans. They were astonishingly prescient. Churchill did save London, and indeed Britain. But, in the end, not even he could save the British Empire.

Within a single lifetime, that Empire -- which had not yet reached its furthest extent when Churchill made his prophecy in 1892 -- unraveled. By the time Churchill died in 1965, all its most important parts had gone. Why? Traditional accounts of 'decolonization' tend to give the credit (or the blame) to the nationalist movements within the colonies, from Sinn Fein in Ireland to Congress in India. The end of Empire is portrayed as a victory for 'freedom fighters', who took up arms from Dublin to Delhi to rid their peoples of the yoke of colonial rule. This is misleading. Throughout the twentieth century, the principal threats -- and the most plausible alternatives to -- British rule were not national independence movements, but other empires.

By the time Churchill became Prime Minister in 1940, the most likely alternatives to British rule were Hirohito's Greater East Asia Co-Prosperity Sphere, Hitler's Thousand Year Reich and Mussolini's New Rome. Nor could the threat posed by Stalin's Soviet Union be discounted, though until after the Second World War most of his energies were devoted to terrorizing his own subjects. It was the staggering cost of fighting these imperial rivals that ultimately ruined the British Empire. In other words, the Empire was dismantled not because it had oppressed subject peoples for centuries, but because it took up arms for just a few years against far more oppressive Empires. It did the right thing, regardless of the cost. And that was why the ultimate, if reluctant, heir of Britain's global power was not one of the evil empires of the East, but Britain's most successful former colony.

How important is the Internet?

20th century: TV, telephone
modern era: steam engine, railroads
Western Civilization: Scientific Revolution, Industrial Revolution
Human Communication: scroll, codex (book), printing press
Humanity: hunter/gather, agricultural, industrial, information

The horseless carriage was just arriving in San Francisco, and its debut was turning into one of those colorfully unmitigated disasters that bring misery to everyone but historians. Consumers were staying away from the 'devilish contraptions' in droves. The men who had invested in them were the subjects of cautionary tales, derision, and a fair measure of public loathing. In San Francisco in 1903, the horse and buggy was not going the way of the horse and buggy.

For good reason. The automobile, so sleekly efficient on paper, was in practice a civic menace, belching out exhaust, kicking up storms of dust, becoming hopelessly mired in the most innocuous-looking puddles, tying up horse traffic, and raising an earsplitting cacophony that sent buggy horses fleeing. Incensed local lawmakers responded with monuments to legislative creativity. The laws of at least one town required automobile drivers to stop, get out, and fire off Roman candles every time horse-drawn vehicles came into view. Massachusetts tried and, fortunately, failed to mandate that cars be equipped with bells that would ring with each revolution of the wheels. In some towns police were authorized to disable passing cars with ropes, chains, wires, and even bullets, so long as they took reasonable care to avoid gunning down the drivers. San Francisco didn't escape the legislative wave. Bitter local officials pushed through an ordinance banning automobiles from the Stanford campus and all tourist areas, effectively exiling them from the city.

We've always done it this way.

According to Robert Heilbroner, the invention of markets based on land, labor, and capital are the most important development of modern times. They aren't much older than the U.S.

When people long for the good old days or say "Things are different now" and mean "Things are worse", they may visualize some Ozzie and Harriet way-we-never-were world. If you ask them, they often reply that they mean what Heilbroner calls a "bygone world", that is, before we separated home and work. They don't realize that was only 200 years ago.

There is something common to all these scattered fragments of bygone worlds. It is this: first, the idea of the propriety (not to say the necessity) of a system organized on the basis of personal gain has not yet taken root. Second, a separate, self-contained economic world has not yet lifted itself from its social context. The world of practical affairs is inextricably mixed up with the world of political, social, and religious life. Until the two worlds separate, there will be nothing that resembles the tempo and the feeling of modern life. And for the two to separate, a long and bitter struggle must take place.

It may strike us as odd that the idea of gain is a relatively modern one; we are schooled to believe that man is essentially an acquisitive creature and that left to himself he will behave as any self-respecting businessman would. The profit motive, we are constantly being told, is as old as man himself.

But it is not. The profit motive as we know it is only as old as "modern man." Even today the notion of gain for gain's sake is foreign to a large portion of the world's population, and it has been conspicuous by its absence over most of recorded history. ...

The idea of gain, the idea that each working person not only may, but should, constantly strive to better his or her material lot, is an idea that was quite foreign to the great lower and middle strata of Egyptian, Greek, Roman, and medieval cultures, only scattered throughout Renaissance and Reformation times; and largely absent in the majority of Eastern civilizations. As a ubiquitous characteristic of society, it is as modern an invention as printing.

Not only is the idea of gain by no means as universal as we sometimes suppose, but the social sanction of gain is an even more modern and restricted development. ...

The Middle Ages, the Renaissance, the Reformation -- indeed the whole world until the sixteenth or seventeenth century -- could not envisage the market system for the thoroughly sound reason that Land, Labor, and Capital -- the basic agents of production which the market system allocates -- did not yet exist. Land, labor, and capital in the sense of soil, human beings, and tools are of course coexistent with society itself. But the idea of abstract land or abstract labor did not immediately suggest itself to the human mind any more than did the idea of abstract energy or matter. Land, labor, and capital as "agents" of production, as impersonal, dehumanized economic entities, are as much modern conceptions as the calculus. Indeed, they are not much older. ...

There would be nothing for any economist to do for several centuries -- until this great self-reproducing, self-sufficient world erupted into the bustling, scurrying, free-for-all of the eighteenth century. "Erupted" is perhaps too dramatic a word, for the change would take place over centuries rather than in a single violent spasm. But the change, long drawn out though it was, was not a peaceful evolution; it was an agonized convulsion of society, a revolution. ...

The market system with its essential components of land, labor, and capital was thus born in agony -- an agony that began in the thirteenth century and had not run its course until well into the nineteenth. Never was a revolution less well understood, less welcomed, less planned. But the great market-making forces would not be denied. Insidiously they ripped apart the mold of custom; insolently they tore away the usages of tradition. ...

The new way of life grew inside the old, like a butterfly inside a chrysalis, and when the stir of life was strong enough it burst the old structure asunder. It was not great events, single adventures, individual laws, or powerful personalities that brought about the economic revolution. It was a process of spontaneous, many-sided change. ...

After Adam Smith had displayed the first true tableau of modern society, all the Western world became the world of Adam Smith: his vision became the prescription for the spectacles of generations. Adam Smith would never have thought of himself as a revolutionist; he was only explaining what to him was very clear, sensible, and conservative. But he gave the world the image of itself for which it had been searching. After The Wealth of Nations, men began to see the world about themselves with new eyes; they saw how the tasks they did fitted into the whole of society, and they saw that society as a whole was proceeding at a majestic pace toward a distant but clearly visible goal. In a word, a new vision had come into being.

How long have we been doing it this way?

Management has been around for a very long time. I am often asked whom I consider the best or the greatest executive. My answer is always: 'The man who conceived, designed, and built the first Egyptian Pyramid more than four thousand years ago -- and it still stands.'

But management as a specific kind of work was not seen until after World War I -- and then by just a handful of people. Management as a discipline only emerged after World War II. As late as 1950, when the World Bank began to lend money for economic development, the word 'management' was not even in its vocabulary. In fact, while management was invented thousands of years ago, it was not discovered until after World War II. ...

The right definition of a manager is one who is 'responsible for the application and performance of knowledge.'

Drucker's point is that business management (aka scientific management) -- where a manager is defined as a boss and management is all about "rank and power" -- is just one possible style of management.

Alfred Chandler documents that managerial capitalism is only a century old. MBAs weren't common until the past 40 years.

The Visible Hand: The Managerial Revolution in American Business (.zip file)
by Alfred D. Chandler, Jr.
Harvard University Press, 1977

The multiunit enterprise administered by a set of salaried middle and top managers can then properly be termed modern. Such enterprises did not exist in the United States in 1840. By World War I this type of firm had become the dominant business institution in many sectors of the American economy. By the middle of the twentieth century, these enterprises employed hundreds and even thousands of middle and top managers who supervised the work of dozens and often hundreds of operating units employing tens and often hundreds of thousands of workers. These enterprises were owned by tens or hundreds of thousands of shareholders and carried out billions of dollars of business annually. Even a relatively small business enterprise operating in local or regional markets had its top and middle managers. Rarely in the history of the world has an institution grown to be so important and so pervasive in so short a period of time. ...

the new subspecies of economic man -- the salaried manager ...

The modern, multiunit enterprise, by its very act of administrative coordination, brings imperfect competition and misallocation of resources. Since many economists have for so long considered the modern business enterprise as an aberration, and an evil one at that, few have taken the trouble to examine its origins. ...

> Modern multiunit business enterprise replaced small traditional enterprise when administrative coordination permitted greater productivity, lower costs, and higher profits than coordination by market mechanisms. ...

> The advantages of internalizing the activities of many business units within a single enterprise could not be realized until a managerial hierarchy had been created. ...

> Modern business enterprise appeared for the first time in history when the volume of economic activities reached a level that made administrative coordination more efficient and more profitable than market coordination. ...

> Once a managerial hierarchy had been formed and had successfully carried out its function of administrative coordination, the hierarchy itself became a source of permanence, power, and continued growth. ...

> The careers of the salaried managers who directed these hierarchies became increasingly technical and professional. ...

> As the multiunit business enterprise grew in size and diversity and as its managers became more professional, the management of the enterprise became separated from its ownership. ...

> In making administrative decisions, career managers preferred policies that favored the long-term stability and growth of their enterprises to those that maximized current profits. ...

> As the large enterprises grew and dominated major sectors of the economy, they altered the basic structure of these sectors and of the economy as a whole.

Then we have Taylorism and scientific management, which led to Fordism and such horrors as psychometrics -- market research, IQ tests, and the final exam, to say nothing of statistically bogus grade point averages. See Raymond Callahan's Education and the Cult of Efficiency, published by the University of Chicago Press in 1962, which examines the adoption of business values and practices in public schools in the early 1900's. See also The Mismeasure of Man by Stephen Jay Gould, published by W.W. Norton & Company in 1996.

Chandler makes it clear that managerial capitalism is based on control of information. Isn't it interesting how during the typical final exam, the teacher has all the answers but won't give them. The one "correct" answer to every question is probably in the room somewhere, but you can receive the ultimate sanction (getting banished from the school in disgrace) if you get caught sharing. Sounds just like the real world to me <grin>.

IACBE is the organization that accredits this MBA program. I wrote the self-study in preparation for their site visit last November. The manual that told me how to write the self-study said the I should be "assessing the educational processes used to convert inputs into high-quality outputs".

I'm not denigrating IACBE here; I'm pointing out the effects of Taylorism in education. You the student aren't a person let alone this mythical "customer" that you may think of yourself as. You're a widget in the factory, an input being subject to a process that will convert you into an output. And a high-quality one at that! Makes you feel special, doesn't it?

Taylor's gospel also known as "Taylorism" would become the standard for businesses worldwide. Such early 20th century thought would be practiced not only in business, but in the schools as well where students like workers would be scored and ranked--hence the grade point averages or GPAs. Occasionally, movements would rise to counter Taylorism such as the teachings of teamwork by Edwards Deming, only to be rejected by a competitive, "me generation" society.

An engineer by training, Taylor believed that there were rational, practical, measurable, solutions to all workplace problems. By their very nature, people with formal, academic training had little taste for the real world. �Young engineering graduates disliked the routine activity of the industrial firm, while manufacturers disliked the condescending manner and uncooperative behavior of the graduates. Both attitudes, he believed, were results of mistaken policies by universities�. Frederick Taylor�s ambivalence about the relationship of professional educators to the workplace mirrored his contempt for people who were unwilling to embrace the necessity of organizational efficiency. ...

Both supporters and critics of Taylor�s ideas agree that the control of information was central to his ideas about the organization of production. Under earlier productive systems, individuals and close-knit work groups facilitated or restrained output through their use of knowledge gained on the shop floor. Although this might have been sufficient in an era of hand production and small workshops, Taylor believed that it was totally unsuited for the competitive environment of the late 19th and early 20th centuries. �Thus all of the planning which under the old system was done by the workman, as a result of his personal experience must of necessity under the new system be done by management in accordance with the laws of science; because even if the workman was well-suited to the development and use of scientific data, it would be physically impossible for him to work at his machine and at a desk at the same time� (Taylor 1967).

By planning all aspects of the work process, foremen created the opportunity for workers to increase individual output. This would allow each employee to earn as much as his ability would allow. Rather than view this as a mechanism of labor exploitation, Taylor truly believed that his approach was a major step forward in the effort to increase the standard of living for workers. According to Spender (1996) it was the misuse of Taylor�s original ideas by others that fatally undermined the positive aspects of scientific management. It was managers �who abused scientific management�s promise and methods merely to speed up and to de-skill work and so advance Fordism, the true expression of the belief that workers were machines� (p. 15).

Whoever ultimately was responsible for the mass production system that evolved in the United States during the early years of the 20th century, it became the model for the organization of work in most sectors of the economy. A hierarchical management system planned, directed, and controlled the flow of work. Hourly employees were expected to follow detailed instructions laid out by front-line supervisors. The success or failure of a firm increasingly rested on the quality of that supervision, not the skill of the work force. ...

Taylor and his disciples emphasized total management control over all work processes. By identifying the best way to do specific jobs, engineers attempted to eliminate any employee input into the way work assignments were designed and completed. That kind of environment all but eliminated the need to train employees beyond teaching them how to carry out discrete tasks. Extensive training was required for supervisors, however, since it was up to them to make sure the whole system worked. Only workers in the building trades and in the skilled trades departments of major manufacturing enterprises continued to receive the kinds of training that would allow them to upgrade individual skill levels consistently. ...

Taylorism was specifically designed to strip any semblance of power from workers by diminishing the value of their knowledge and experience. Its widespread acceptance by employers, throughout all segments of the economy, discouraged both public and private institutions from training prospective employees in exactly those critical thinking, personal, and organizational skills that are supposedly so much in demand today. Academics and practitioners alike have been struggling for the past 20 years to develop viable models of learning that can overcome this roadblock.

By requiring the use of multiple-choice, standardized testing for assessment purposes, the federal and state governments are intruding upon the prerogative of teachers to teach what they want in the manner they see fit. These requirements echo the attempts of Frederick Taylor and other practitioners of what Taylor called "scientific management" to control industrial workers around the turn of the Twentieth Century. Forcing teachers to address content that can be measured in standardized tests and to avoid more analytical material hinders learning. Doing so also devalues the profession of teaching in the same way that scientific management devalued the role of skilled craft workers in American factories. ...

As curricula standardize around high-stakes exams, teachers become, in essence, educational delivery systems rather than skilled professionals. ...

Contrary to the assumptions of standardized test advocates, education is not an ordinary commodity. It cannot accurately be measured in discreet units. Thus, it defies numerical measurement.

Do I teach the subject or do I teach the student? That's a false dichotomy. Better: Do I teach the subject to the student? Or do I teach the student to learn the subject?

If you test a child on basic math and reading skills, and you�re teaching to the test, you�re teaching math and reading. And that�s the whole idea.

The president says that I teach the subject like a good foreman gets the widgets out the door. The defective ones will grade as F and get tossed out or sent back for re-tooling / re-schooling.

I asked a small group of educational leaders (400 or so) how many of them wanted their kids to do well on statewide exams. All hands went up. Being on a roll, I then asked how many of them wanted these same children to lead successful lives when they finished school. Again, all hands were raised. Just to make things interesting, I asked how many audience members considered themselves to be successful � again almost all hands went up.

So I did the only logical thing: I then told my audience (using a trick I learned from Bill Daggett) that the stack of paper I was holding contained questions from the test they were currently giving to every tenth grader in their state, and that, after they took the test I would have it graded and would share the results with the '60 Minutes' crew standing in the hall.

The room became still, punctuated by the ever-so-slight sound of sweat dripping from 800 palms onto the auditorium's carpet.

"What's wrong?" I asked. "This is the same test you expect kids to master, and you already said that you want kids to be successful in life (as you are), so why are you so reluctant to pit wits against your own kids?"

The most common response was that, whatever the tests measured, they did not measure the skills needed to be successful in life, therefore the educational leaders were not prepared to take the test.

So, of course, we then explored the now plausible notion that whatever these tests measured had little to no relevance in the world outside of school -- even for educators. The tests were just another hurdle for learners to jump. Of course, these folks argued that they were powerless to change the system � yes, the tests were junk, and they might even take time away from effective teaching, but there was nothing they could do to change the system.

7:00 - 7:30

What happens?

Governments suppose that the gray market creates jobs and relieves social tensions. Academics think it will disappear of its own accord. Neither idea stands up to scrutiny.

It�s no secret that some companies operate partially or wholly outside the law by underreporting employment, avoiding taxes, ignoring product quality and safety regulations, infringing copyrights, and even failing to register as legal entities. The problem is particularly acute in developing countries, but it is widespread in some developed nations too (see "Making Portugal competitive"). The World Bank estimates that this informal economy generates 40 percent of the GNP of low-income nations and 17 percent of the GNP of high-income ones. In some industries, such as retailing and construction, informality can account for as much as 80 percent of employment.

Policy makers show surprisingly little concern about this phenomenon. In emerging markets, governments frequently view it as a social issue and fail to understand its damaging effect on productivity and economic growth. The informal economy, they believe, creates jobs for unskilled workers and relieves urban employment tensions. Some academics argue that the informal economy will disappear over time as the formal manufacturing and service sectors grow and create more jobs. Well-meaning development experts believe that informal companies themselves will grow and eventually join the formal economy if they are given credit and other types of technical assistance�hence the popular "microcredit" programs of recent years.

Research by the McKinsey Global Institute (MGI) has found these beliefs to be untrue.

Under pressure to provide unlimited access to telephones, African countries are considering a U.S. technology that also offers the promise of bringing the Internet to some of the world's poorest people.

Telephones are a luxury for the continent's estimated 800 million people, over half of whom have never made a call.

Experts say a version of the US Code Division Multiple Access (CDMA) standard offers Africa an opportunity to leapfrog technology into the digital first-world.

The CDMA 450 wireless local loop technology, also known as the "third world standard," is already being used in some Eastern European countries and Russia as they switch from analog to digital cellular systems.

It promises a new lease of life to many cash-strapped fixed-line African operators by giving them a chance to roll out high-quality, affordable voice and data services using non-conventional methods in areas deemed unprofitable.

Economies advance through the adoption of better technologies and business methods. Production and efficiency improve. Prices go down or incomes go up. In Mexico, this process is weak. To simplify slightly: its economy consists of two vast sectors, each slow to adopt better technology and business practices.

One sector involves large, modern firms in semi-protected markets that limit the pressure to improve efficiency or lower prices. "Mexico's business sector is risk-averse. It's never had to operate in a true competitive environment," said Pamela Starr, an analyst for the Eurasia Group, a consulting firm. "It's operated with monopolies and oligopolies encouraged by the government."

An extreme case in point is Pemex, the state-owned monopoly oil company. Without competitors or complaining shareholders, its operations are lax. In 2004, Pemex had $69 billion in sales and 137,722 employees; in the same year, Exxon Mobil had $291 billion in sales and 85,900 employees.

The other part of the economy is usually called the "informal sector." It consists of thousands of small firms - street vendors, stores, repair shops - that theoretically aren't legal, because they haven't registered with the government and often don't pay taxes or comply with regulations on wages and hiring and firing. Almost two-thirds of Mexico's workers may be employed in the informal sector.

Its size might suggest great entrepreneurial vitality. The trouble is that these firms are virtually compelled to remain small and inefficient. Because they're technically illegal, they can't easily get bank loans and can't grow too large without being forced to pay taxes or comply with government regulations. In Mexico, companies with fewer than 10 workers account for almost two-fifths of all employment. In the United States, such firms represent XX??? of total jobs.

7:30 - 8:00

What metaphors do you use?

Internet as Humanity's nervous system -- distributed information, just like cells. Why are organizations so different from organisms?

How do you think about an organization? Is the organization a machine or a body? Is the organization a system that's part of larger systems?

A system is an entity which maintains its existence through the mutual interaction of its parts.
-- Ludwig von Bertalanffy

How does change happen?

Change the organization? Create a new part to the organization? Create a new company?

Develop your own? R and D? R or D? Buy someone else's? Outsource to a university?

From the perspective of managerial control within the organization, it's a question of how to turn disruption into innovation. Change the names, take it slow, train, hire wisely, wait.

incremental innovation vs disruptive innovation

sustaining innovation vs disruptive innovation

A whole literature has grown up around the apparently intractable hostility between innovation and bureaucracy, between those who create and those who control. Smart and speedy start-ups blindside mature companies with their inventiveness then grow up into mature companies and are outsmarted in their turn.

The only way for innovation to survive in mature companies is to isolate the creators from the managers in protected enclaves. If this is true, it means that it is virtually impossible for sustained innovation to be built into the everyday operation of mature companies; it can only ever be an intermittent aberration. ...

Mature companies talk the talk of innovation, but rarely if ever seem to manage to breed organisational cultures that identify, nurture and reward creativity. Again and again, they restructure, downsize, upsize, rightsize, bring in a new management team, cut the fat, discover quality assurance or best practice or the ouija board, tip the hierarchical pyramid on its side or upside down or inside out. But, bureaucracies are notoriously resilient and if the leaders who support innovation are replaced by those who favour control, their processes do not appear to have a sufficiently independent life to survive the change.

Reinventing the Industrial Giant -- or try this .zip file
from Changing Fortunes: Remaking the Industrial Corporation
by Nitin Nohria, Davis Dyer and Frederick Dalzell
Harvard Business School Working Knowledge, June 10, 2002, free reg req

It's not easy to transform a trusty but ailing old stalwart; General Motors and Kodak are attempting precisely that.

Corning Dumps the Cookware (no longer available)
by William J. Holstein
Business 2.0, May 2001

In today's wrenching economy, the transformation of Corning from an old-line conglomerate into a technology powerhouse should be of keen interest to denizens of the New and Old Economies alike. Over its 150-year history, Corning has repeatedly been on the cutting edge of technologies that change the world. It perfected Thomas Edison's light bulb and then invented a rapid-fire machine in 1926 that could produce about 200 of them per minute. Decades later, it made television tubes for a nascent TV industry. Over and over again: Corning creates and then moves on when conditions shift or when technologies are overtaken. "If any company has a long-term claim on these kinds of skills, it's probably Corning," says McKinsey partner Richard Foster, co-author of Creative Destruction. "They've been through five or six major transitions. They are going through another one right now." Although Corning has recently laid off a few hundred people to better weather the current economic downturn, Foster says he thinks the company is positioned for the "sweet spot" of future growth.

Corning's executives have figured out an important maxim for prospering in a new economy. Running a successful business is about more than just knowing when to destroy. It's also about knowing how to create an innovation process that gets research into the marketplace as fast as possible. To do that, Corning stripped out layers of bureaucracy separating technologists from key decision-makers who controlled spending. It consciously tried to create a culture that encourages innovation and cross-fertilization among disciplines. And it has been spectacularly successful in using incubators and "skunkworks." All of which stands in stark contrast with Lucent Technologies and Xerox, which haven't been able to exploit the vast potential of their labs.

This article elaborates the difference between what GE wants the Internet to do and what the Internet is really doing at GE. While praising its attempt, the article compares GE's performance unfavorably to other companies'.

The story goes something like this. In late 1998, Jack Welch noticed GE employees shopping online. At home, his wife was buying gifts on the Web for the grandchildren. Suddenly, Welch "got" the Net. At an annual meeting of 500 of GE's top executives in Boca Raton, Fla., in January 1999, Welch ordered everyone to come up with a strategy for moving their businesses online. The executives were to set up "Destroyourbusiness.com" teams. The aim: Reinvent each unit's business before some upstart in a Silicon Valley garage did.

But the execs knew nothing about the Web. So Welch took an idea he'd heard about while visiting a subsidiary in Europe and made it a corporation-wide mandate: Some 1,000 Web-savvy employees were assigned to mentor senior executives about the Internet. Even Welch got a mentor. Armed with the wisdom of people like Stuart, the red-haired slacker who tutors the old-line executive in the Ameritrade commercial, the remaking of GE was under way. The teams got beer parties and brightly colored offices, an attempt to create a proper dot-com aura. Eventually, they discovered that there probably weren't any Internet entrepreneurs hiding out in Silicon Valley devising ways to sell turbines or aircraft engines online. With that fear laid to rest, the teams were transformed into "Growyourbusiness.com" units. Later, they were disbanded altogether, and e-business was brought into the mainstream of GE's operations.

The following article isn't available still for free, but the quote below says enough.

Kutner said it's not easy selling his fellow GM executives on his e-commerce message. "Driving a culture change in this company, and in any big company, especially an established company, is a very difficult job.

"There's still a lot of people who still don't believe we have to be connected in everything we do, from the Internet to the home to the cars and the office," he said. "Some of those people will not fit anymore in our company and are going to have to go. So for those of you who want to do something exciting and want to change, there's lots of opportunities for young people in all the industries in North America, because we all have to do this."

How do you account for intangibles?

The cost accounting of managerial capitalism quietly left out the intangibles -- the managers themselves, what we might call "wetware" (between the ears).

leadership

strategy execution

communication and transparency

brand equity

reputation

alliances and networks

human capital

workplace organization and culture

innovation

intellectual capital

adaptability

Large organizations are struggling with how to value and develop their information assets such as human capital and social capital. How large is the gap?

1980 is an interesting inflection point. The 1980 census was the first where the number of knowledge workers exceeded the number of production workers. Since 1980, more US workers have processed information about things than have made the things themselves. In addition,

Would a $400 million chief work as effectively for only $50 million? ...

Through the 1970s, CEOs were compensated mainly "like bureaucrats in the sense that they were primarily paid for increasing the size of their organizations," economists Michael Jensen and Kevin Murphy argued in 1990. Because pay increased with company size, CEOs often created ever-expanding, unwieldy and inefficient conglomerates. This approach was bad for America and for shareholders.

The recognition of that led to change. Compensation for CEOs and other top executives in the 1980s and 1990s was increasingly tied to a company's stock performance. The aim was to motivate executives to improve efficiency and profitability. The usual instruments were stock options: the right to buy shares at a fixed price. If the stock rose, the CEO would get rich.

Business Metrics For The New Economy
by Matt Cutler and Jim Sterne
NetGenesis, 2000 (.pdf)

That's the old way of trying to do it with static, mechanical economics. What's next?

What's wrong with the 500-year-old way in which all companies keep their books? Just about everything, says Baruch Lev, who has proposed a new method for determining the value of the intangible assets that are at the heart of the new economy. ...

We are using a 500-year-old system to make decisions in a complex business environment in which the essential assets that create value have fundamentally changed.

During the agricultural and industrial eras, the main sources of economic value creation were tangible assets such as land, minerals, and factories. Knowledge (always essential) was not the key component of value creation.

In the information era, the source of value of products such as computers, cellular phones, pharmaceuticals, even branded consumer products, has shifted from physical content to knowledge content. Corporate investment in intangibles, such as R&D, franchise and brand development and human capital enhancement, is growing at a substantially faster rate than tangible investment throughout all developed economies. They may be the primary contributor to the earnings power of an enterprise.

Intangible assets are present in every business enterprise, yet only tangible assets and intangible assets purchased in an acquisition appear on the company's balance sheet.

The green-eyeshade gang isn't measuring what really matters to investors. Some far-out thinkers plan to change that. ...

The Financial Accounting Standards Board, the profession's vestal virgins, says that accounting's fundamental purpose is to "provide information that is useful ... in making rational investment, credit, and similar decisions." By that standard, it flunks.

We're not talking fraud here--we're talking irrelevance, with the result that investors are in the dark and managers operate by guess and by gosh. At the very least it reduces prosperity.

more ...

Organizations of the Future

"When I get to be the boss, ..."

With your MBA, you just may get the chance to find out. What kind of boss will you be?

Organization structure, design and culture

What kinds of corporate culture is conducive to adapting to disruptive technologies? A manager who thrives here would have been unhappy, if indeed employed at all, in the days of Taylorism. The old-style manager would consider these managers disruptive because they value:

speed

risk taking and learning from mistakes

entrepreneurial spirit

collaboration

information sharing

learning

individual development

Many organizations are trying to strengthen themselves by loosening their grip � by becoming less hierarchical and more adaptable. A useful metaphor, again, is the brain. "If you cut a wire in a machine, it will break," Kurzweil says. "In the brain, there are a few wires you don't want to cut, but many you can dispense with" � as stroke victims demonstrate when, with therapy, they "wire around" damaged brain regions. The parts are sufficiently autonomous to keep the whole running.

A central feature of natural systems is self-organization: the interaction of parts shapes and propels the whole. The textbook example of the self-organizing business is eBay. Executives there have limited control over who sells what, but have become skilled at encouraging growth by giving their customers good tools for shopping, communication and payment.

The learning organization

Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them.
--Laurence J. Peter

The idea that informational media are under the control of any particular centralized power is becoming obsolete in the face of the proliferation of alternative channels of communication opened up by the Web.

Nowhere has this been more decisively demonstrated than in an event that took place on March 24, 1999. At 2:50 AM, two technical operatives of the Yugoslav Federal Telecommunications Ministry, backed by about ten policemen, entered the premises of Radio B92, the main independent radio station for Belgrade, and the dominant provider of non-government-provided news for the region. The staff of the station was told to immediately stop all broadcasts, to disconnect their computers and telephones, and to turn over the transmitting equipment. When the station's editor-in-chief, Verna Matic, entered the station, he was immediately arrested and held for eight hours.

In the past, such an act would have caused the silencing of an independent voice. In this case, control was shifted instead.

Within minutes, Radio B92 was back in operation, using RealAudio to stream live content to the world at large through Radio B92's Web site. Other radio stations throughout the world (including BBC) were then able to pick up the audio feed and re-transmit it from transmitters outside the country. While I'm sure the local government would have loved to shut down the Web site, Radio B92's site is hosted by XS4ALL in the Netherlands, a country in which the Yugoslav police have little clout. As for the location of the local source in Belgrade, the broadcasts are probably being made from moveable sites, perhaps from basement studios hidden throughout the city. Short of closing all telecommunications from Belgrade to the rest of the world, it is hard to imagine how Radio B92's Web operation could be shut down.

Once soldiers are armed with the power of information, how will traditional military hierarchies adapt?

Will the brass jealously guard information and the status it provides, or radically change their training methods to build a different kind of soldier? What happens when every squad leader in the field has the same information in front of him that his commander has? Will squad leaders continue to follow orders without question or will they demand more input in the decision-making process?

As corporations have discovered, engaging technology to empower employees, disperse control of information and flatten the hierarchy can often bring unexpected�sometimes even unwelcome�ripples of change.

The biggest challenge of getting employees to work together online isn't a technological problem�it's a cultural and organizational one.

Open or closed
One work setting or multiple work settings
Fixed or flexible
Uniform or customized
Designed by experts or designed by workers
Shared or dedicated resources
Devoted to work alone or devoted to life in addition to work
Centralized or decentralized
Mixed or homogenous neighborhoods
Hot or generic locations
Transparent or opaque

Knowledge management revolves around the concept that one of the most valuable corporate assets is the experience and expertise floating around inside employees' heads. In order to manage this intellectual capital, executives must devise a way to capture and share that knowledge with coworkers. If done right, KM is supposed to create a more collaborative environment, cut down on duplication of effort and encourage knowledge sharing�saving time and money in the process. The problem is, in many cases KM devolved into a purely technical process, resulting in expensive software implementations sitting unused by oblivious, fearful or resentful employees.

In addition to the fundamental business skills of industry knowledge, functional expertise and leadership, top Internet executives also have "Web DNA," a set of characteristics critical to success in the Internet economy:

Recognize opportunity

Radiate vision

80/20 mindset (better to be 80 percent right today than 100 percent right tomorrow)

Get the "right stuff" done

Organizational improvisers

Learning-obsessed

What makes emerging technologies a "different game"? Higher levels of uncertainty and complexity, accelerating speed and competency-destroying change are among the characteristics that make managing emerging technology businesses distinct from managing established technology firms. Managers who want to succeed in this environment, therefore, need to take innovative approaches to issues such as technology assessment, strategy, marketing and organizational design.

Innovation, Forecasting Innovative Technologies: Risks and Rewards

At Google.com, search for "forward looking statements" and check out the corporate strategies posted on the Web and in 10-K's.

examine the historical results
evaluate the uncertain environment
optimize the decisions
repeat the process

Country Forecasts focus on the key factors affecting a country's political and economic outlook and its business environment five years ahead.

Global Outlook is a quarterly publication containing in-depth macroeconomic forecasts for the world economy over the next five years.

Country Risk Service measures the political, economic policy, economic structure and liquidity risk to activities in 100 emerging markets over a two-year forecasting horizon.

HVR Risk Tools - "Your one stop site for all your risk management software solution needs"

Managing Risks, Managing Measures: Decision Support Methodologies in Business
Part 1: Guidelines | Part 2 : Decision Aids
by Edward S. Robins
TechnologyEvaluation.com, February 28, 2002

When it comes to making decisions using some tool that purports to measure value, it is wise to know something about the tool and what it is measuring, as well as why. Poor measurement methods contribute at least in part to project failures and corporate inefficiencies that can take off millions or more from bottom lines and poor technology selections alone have contributed to tens of billions of dollars of unnecessary costs. Methodologies implicit within decision aid tools can bring out value for the users, but the question is if these values are really representing what the stakeholders think they are being shown or need. This article provides some guidance into these issues, and how a manager may avoid making an expensive mistake.

When Leadership Means Saying �I Am Part of the Problem Here�
from Leadership on the Line
by Ronald A. Heifetz and Marty Linsky
Harvard Business School Working Knowledge, May 28, 2002 (free registration required)

Before they fix it, leaders need to ask themselves how they broke it in the first place.

Diversity stimulates creativity, as does the divergence of opinion of those connected to the network

Creativity

To Begin The World Anew: The Genius and Ambiguities of the American Founders
by Bernard Bailyn
Knopf, 2003

The Founders of the American nation were one of the most creative groups in modern history. Some among them, especially in recent years, have been condemned for their failures and weaknesses -- for their racism, sexism, compromises, and violations of principle. And indeed moral judgments are as necessary in assessing the lives of these people as of any others.

But we are privileged to know and to benefit from the outcome of their efforts, which they could only hopefully imagine, and ignore their main concern: which was the possibility, indeed the probability, that their creative enterprise -- not to recast the social order but to transform the political system -- would fail: would collapse into chaos or autocracy.

Again and again they were warned of the folly of defying the received traditions, the sheer unlikelihood that they, obscure people on the outer borderlands of European civilization, knew better than the established authorities that ruled them; that they could successfully create something freer, ultimately more enduring than what was then known in the centers of metropolitan life.


course webs


Arts Alley	Parkside Plaza	Lantern Lane
stores and studios	student webs	course webs


search \| sitemap \| help
Ricci Green \| Digital Wares \| Gizmos, Inc. CyberSea Inn \| Port 80

modified: June 28, 2006 by Douglas Anderson http://RicciStreet.net/dwares/lane/mba624/june2806.htm

The Syllabus:
June 28

MBA 624 - Strategic Management of Technology and Innovation - Summer 2006

The Past: Where We've Been and How We Got Here

6:15 - 7:00

How important is the Internet?

We've always done it this way.

How long have we been doing it this way?

7:00 - 7:30

What happens?

7:30 - 8:00

What metaphors do you use?

How does change happen?

How do you account for intangibles?

more ...

Organizations of the Future

Organization structure, design and culture

The learning organization

Innovation, Forecasting Innovative Technologies: Risks and Rewards

Creativity

The Syllabus: June 28

MBA 624 - Strategic Management of Technology and Innovation - Summer 2006

The Past: Where We've Been and How We Got Here

6:15 - 7:00

How important is the Internet?

We've always done it this way.

How long have we been doing it this way?

7:00 - 7:30

What happens?

7:30 - 8:00

What metaphors do you use?

How does change happen?

How do you account for intangibles?

more ...

Organizations of the Future

Organization structure, design and culture

The learning organization

Innovation, Forecasting Innovative Technologies: Risks and Rewards

Creativity

The Syllabus:
June 28