Management Features

This page features a selection of articles from

Business Direction and the bottomline magazines

iKnowledge

One of the big business stories of recent years has undoubtedly been that of Apple iPod and their online iTunes music store. But it is not just the level of sales or the share of the market Apple has captured that marks out the iPod/iTunes as a success story. What is remarkable about the iPod is the way it took technological innovation and understood how it could help chart new consumer trends. What is also revolutionary about the iPod story is that it is changing what we understand by manufacturing and distribution and how companies relate to their customers by putting more power in their hands to customise the product for themselves. The following article, which first appeared in the bottomline magazine, takes a look at the implications of the iPod for CRM. It also looks at the ongoing role and knowledge of ‘gatekeepers’ in defining consumer trends.

Apple was reported to have sold two million iPods and to have captured eighty two per cent of the US market for portable digital music players in their first year. Important as they are, it is not the level of sales or the share of the market Apple has captured that marks out the iPod/iTunes as a success story. Neither is the iPod a success simply because it is a stylish product that looks good and is easy to use.

What is revolutionary about the iPod story is that it is changing what we understand by manufacturing and distribution and how companies relate to their customers. Rather than record labels putting their albums out to manufacturers to burn CDs for distribution via record stores, the manufacturers and retailers are being cut out of the loop. The product is now being delivered straight to the consumer, who is able to customise and compile their own collection for use on their music system.

And if customers want to make music that is convenient for the rest of the household to listen to or for use in the car, then it is simply a case of ‘manufacturing’ a CD via their computer. In effect, the consumer, in concert with the record labels and Apple becomes a co-producer of goods customised for their use. The holy grail of one-to-one marketing has been achieved! So, good news for the consumer? Yes, to a point. But we shouldn’t forget that music retailers also act as a channel for information about new musical trends and as a place where consumers are able to meet up, browse, seek advice and share information about their musical tastes. In short, music stores perform an important mediation process in helping consumers navigate the range of music products available.

It is ironic that with the advent of the world wide web, the need for mediation to help manage and navigate a bewildering range of choice is even greater. But what will these new forms of mediation look like and how will they integrate with the new forms of ‘manufacture’ and distribution.

Well, it would seem the answer is already out there – what the marketing industry calls cultural tastemakers or gatekeepers. These tastemakers – TV and film reviewers, car reviewers, fashion buyers, graphic and interior designers, disc jockeys, magazine editors – help filter, channel, validate, fashion and focus this information, articulating new knowledge and insights into the tastes of emerging segments of an ever shifting marketplace.

Perhaps a measure of the importance of this activity was given by the DJ, Andy Kershaw when paying tribute to the late John Peel. He claimed that Peel’s contribution to the pop industry in identifying and promoting new musical trends and bands eclipsed that of even the Beatles. Arguably, this mediation process, this identification and articulation of new consumer trends are part of what we might understand by a knowledge economy.

But as the iPod demonstrates, consumers are becoming more closely involved in determining ‘product’ across a whole range of business activities. Through the web, individual consumers are able to articulate new demands and influence production more directly.

And there is a further irony in the prediction that the web would bring about the death knell of the printed magazine, TV and radio. In fact, the reverse appears to be the case. As with the iPod, these media are ‘integrating’ with the web to improve the dialogue with consumers. Consequently, rarely a week goes by without the launch of a new publication, TV or radio programme serving a newly identified consumer trend. And this in itself represents further business opportunities for astute intermediaries.

As was the case with John Peel, cultural intermediaries are vital in maintaining the cycle of giving birth to new desires, products and experiences.

Glyn Fry

(This article first appeared in Issue 2 of bottomline, 2004)

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Innovation and relationship management•

Real innovation is about the creative configuration and reconfiguration of goods and services to track and meet the shifts and changes in consumer aspirations. It is this creative engagement with its customer base that is a mark of IKEA’s innovation. What IKEA offers is real customer relationship management: firstly, in the imaginative presentation of its products so that customers can readily relate to how they might look in a ‘real life’ setting; secondly, in the technological sense, with their stock and inventory system that is available to customers and which helps in keeping prices competitive. The following article, which first appeared in bottomline magazine takes a sideways look at innovation, creativity and CRM.

Just a few years back, depending on which papers you happened to be reading, Ingvar Kamprad, the founder of IKEA acquired the status of the richest person in the world – estimated to be worth £29 billion, as opposed to Bill Gates £25.5 billion. When I passed on this information about Ingvar’s new found status to a business colleague at my local business network – Pentyrch rugby club – he flatly refused to believe it. “No way! Not in a million years can someone who sells flatpack furniture be richer than Bill Gates.” Given that Ingvar Kamprad has a reputation as something of a recluse and that Bill Gates is a past master of ‘spin’, the reaction was hardly surprising.

But this reaction to Ingvar Kamprad’s wealth is perhaps symptomatic of more general perceptions as to what constitutes the keystone of a successful business. We seem to believe that modern, innovative businesses have to be founded on information technology. And if you happen to produce the software that drives some ninety per cent of the world’s PCs, then not only is this proof positive, but clearly you are a candidate to sit at the right hand of God. And while no doubt IKEA now makes full use of information technology to manage their supply chain and customers, arguably their most significant piece of technology is the allen key.

While there is some dispute as to whether Bill Gates or Ingvar Kamprad is actually the richest – not least by IKEA itself – Ingvar has clearly amassed a quantity of flatpack cash that would no doubt stack into the stratosphere and beyond.

While few are likely to view IKEA as an innovative business in the mould of Microsoft, on its own terms it is arguably more innovative. It is just that its business model isn’t built around technology for its own sake.

IKEA is innovative for the way it has tapped into the modern lifestyle zeitgeist – recognising what makes the modern consumer tick and finding ways of satisfying demand with products priced and made available in ways that meet changing lifestyle aspirations. Innovation may entail using technology but it is much more about determining what happens in market places that are increasingly dynamic and subject to constant shifts and change.

Real innovation is about the creative configuration and reconfiguration of goods and services to track and meet these shifts and changes in consumer aspirations. It is this creative engagement with its customer base that is a mark of IKEA’s innovation. What IKEA offers is real customer relationship management: firstly, in the imaginative presentation of its products so that customers can readily relate to how they might look in a ‘real life’ setting; secondly, in the technological sense, with their stock and inventory system that is available to customers. It is a far cry from Microsoft’s more recent approaches to winning customers, which has made use of the ‘bundling’ practices that has tested their innovative powers of argument with regard to litigation.

It is important – not least for the various business support agencies operating in Wales – to recognise that innovation is more than the acquisition and application of technology for its own sake. While the Welsh Assembly’s ‘Innovation Action Plan’ claims that innovation is not just about the application of technologies and R&D, its language, semiotics and criteria for business support suggest otherwise. If we are serious about encouraging innovation, we need to remember that technology is a tool and that technological invention is the product – not the driver – of creative thinking.

On the question of creativity, it is estimated that one in ten people are currently conceived in an IKEA bed. But if IKEA’s current rate of ‘penetration’ continues, it will give new meaning to the phrase ‘go forth and multiply’. So, while Bill Gates might qualify to sit at the right hand of God, he could well find that when he turns to his left and looks up, that he is sitting next to Ingvar Kamprad.

Glyn Fry

 

(This article first appeared in Issue 1 of bottomline, 2004)

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The Emperor’s New Clothes

Everyone is talking about the Knowledge economy; and it seems that no-one wants to be left out of this exciting new development in how we do business. But while we all seem to agree that it is something important, there seems to be little agreement as to what it actually is. Indeed, there are those, like the little boy in the fable of ‘The Emperor’s New Clothes’, who are not afraid to tell it like it is. Professor Phil Brown and Dr Anthony Hesketh in a book entitled ‘The Mismanagement of Talent’ argue there has in fact been little growth in the number of jobs requiring knowledge workers. And Kim Howells MP, Foreign Office Minister, once trenchantly commented: “When wasn’t there a knowledge economy? Are you telling me the mining industry didn’t need knowledge to get coal out of the ground?” So, is talk of the knowledge economy and one of its latest siblings, ‘thought leadership’ part of just another fad?

What might we understand by the knowledge economy? Some talk about knowledge as the discovery of new insights into the physical world and ways of acting on it. This is the sort of knowledge for which we might take out patents, to secure and protect commercial intellectual property rights that might then be exploited. But arguably this is the stuff of classic R&D, which has been at the heart of business activity since industrialization first got under way.

Taking a more strategic perspective, knowledge of the environment in which business operates is regarded – and guarded – as crucial to securing a strong competitive position: charting changes in the political environment, spotting the implications of changing social priorities, assessing the potential of emerging technologies. Knowledge as competitive intelligence focuses on developing an understanding of what your competitors are doing, of potential substitute products and new potential competitors. While we might now be more sophisticated in our approach, this again is something that has long been a key aspect of business activity.

Others view knowledge as a focus on developing insights into the market; understanding what turns customers on – and off. Developing links for sharing knowledge across the supply chain are increasingly crucial for creating insights into the market that can be quickly acted upon. Similarly, organisational knowledge is about finding and implementing the means and processes for sharing and making all these varieties of knowledge ‘actionable’, of creating a learning organisation.

But there is a problem: on the one hand there is a view of knowledge as a commodity that has to be guarded, protected and exploited, while on the other there is the contradictory view that knowledge is something to be shared.

Perhaps the key to success in a knowledge economy is finding a way of overcoming the conflicts that arise when trying to get people to share information that is a potential source of power and esteem. As Sir Francis Bacon recognized four centuries ago, ‘Knowledge is power’. The way this conflict has usually been overcome is to provide some incentive, some form of reward, be it a financial bonus, new company car or a weekend break.

Arguably the knowledge economy is nothing new; its just that ideas – which have always been the lifeblood of enterprise – are being cycled and recycled at ever increasing speed. But this is not likely to detract from the fact that the premium on knowledge will become ever greater nor that the incentives to share will also need to be greater.

In many ways this is likely to become part of the mind-shift that is necessary for developing a more dynamic, enterprise economy. Those who come up with new, innovative ideas and ways of doing things are no longer likely to be content with the incentive of a weekend in Tenby, when they can have the opportunity to set up their own business. It has long been the case that no organization is keen to share the knowledge that could ultimately lead to an employee setting up in competition. Similarly, an employee who has come up with a way of better developing a business proposition will want to take advantage of that as an opportunity for him or herself. It is a situation that will only intensify the contradiction at the heart of the knowledge economy; unless of course both parties form a ‘partnership’ or association in which the power and rewards are more equally shared. But to achieve this I suspect we will need to get away from the large, corporatist framework within which so much of the debate on the knowledge economy currently takes place. Unless, of course we are simply looking at a modern version of the ‘emperor’s new clothes’ and the knowledge economy really is nothing new. Maybe putting their knowledge to good use to come up with new ideas for business and new ways of doing things is what people setting up businesses have always been good at.

Glyn Fry

(A version of this article first appeared in Issue 3 of bottomline, 2005)

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Going Solo

IBM recently celebrated the twenty-fifth anniversary of the personal computer; although, Steve Jobs of Apple Computers laid claim to having celebrated the anniversary some five years earlier.  But what is not in dispute is that computerised technology has reshaped the world.  It has revolutionised industrial and business processes, forms of commercial activity and working practices.

And all this was given further massive impetus with the advent of the internet some ten years ago.  As part of this transformation we have witnessed a shift from mass, uniform production of utilitarian goods to the kaleidoscopic, customised production of brand-enhanced goods and services.
This shift has helped mark out the ground for an economy that effectively trades in ‘knowledge’.  Key success factors are not so much to do with product and service quality – that is taken as read – but now comprises up-to-date knowledge of the market and the latest trends; bringing to bear the knowledge that accrues from a particular network of contacts; knowledge of the business processes that can make things happen quickly; knowledge of what makes people ‘tick’; and all importantly an understanding of the processes of entrepreneurialism, creativity and innovation – the ability to think ‘outside the box’.
While corporate organisations have been more than ready to embrace the efficiencies and cost savings that technology brought to their business processes and commercial activities, there are signs that the radical implications of technology on working practices are not being fully registered.
The extent of this problem for the corporate world was placed firmly on the agenda in ‘The War for Talent’ – the title of a survey published in 1998 by the consulting firm McKinsey & Company.  This survey highlighted a severe and worsening shortage of the high calibre people needed to lead companies and manage critical functions.  And any thoughts that this was a temporary phenomenon have been quickly dispelled by an update to the survey carried out by McKinsey earlier this year.  This found that the ‘war for talent’, far from easing, was in fact becoming more intense; and that against a background of economic slowdown and the end of the dot.com boom.
A number of factors would suggest the problem is structural rather than cyclical.  Demographic trends indicate that the number of 35 to 44 year olds in Europe and North America as a proportion of the total population is set to fall by 15 per cent over the next decade, a development which will dramatically shrink the pool of people available for recruitment to the top corporate ranks.  Information technology is increasingly defining the workplace, with the result that the prized capabilities of previous generation do not now fit with the demands of the new, networked economy.
What the ‘War for Talent’ survey also highlights is that an increasing number of knowledge workers have very different expectations to those of the corporate workforce of ten years ago.  The death of the corporate promise – job security within large businesses – resulting from the major recession of the early Nineties has generated a new, skeptical frame of mind in the workforce.  The accompanying trend toward downsizing, delayering and outsourcing has also resulted in the creation of a more autonomous, mobile and self-reliant cadre of workers, many of whom have developed a hybrid employment status, combining reduced-hours contracts with previous employers alongside such activities as freelancing and interim management projects.

Added to this, small and medium sized companies (SMEs) are becoming increasingly attractive to talented knowledge workers, offering the potential of financial reward, autonomy, status and lifestyle.  Indeed, many knowledge workers are being drawn to and encouraged by government agencies to set up their own businesses.
Various commentators have suggested that large corporations need to readjust their mindsets and organisational structures to provide the motivating factors that will help them attract and maintain their talented workers.
Money as ever remains an important factor, not just for its own sake, but as a measure of the value an organisation places on an individual.  And in any case, most high fliers are going to take it for granted that they will receive a good remunerative package.
Autonomy and empowerment is increasingly recognised as a crucial motivating factor for developing and retaining talented knowledge workers.  And again it operates as a measure of the value being placed on these key individuals.  It also means that individuals, as ‘creators’ of particular projects have a real sense of ownership.
But granting greater autonomy, should not mean leaving these individual completely to their own devices: that way runs the risk of isolation.  It is important that each project is recognised as an opportunity for self-development and should be appropriately supported.  The provision of a mentoring programme will register a real commitment to the development and recognition of talented individuals.  Neither should support in the more mundane sense be neglected.  Business wins resulting from the efforts of talented individuals should not be allowed to flounder for the want of efficient administrative support.
Finally, in addition to greater autonomy, the new generation of knowledge worker require ‘creative down-time’ both within and out of work.  If creativity and innovation are important to ongoing business success, then it is crucial to avoid keeping talented workers to well worn paths.  Key knowledge workers need time in the day to be creative, time to think, time to learn new things, time to think outside the box, time to ‘bounce’ ideas and time to engage in speculative dialogue.
All well and good in theory!  But extremely difficult to deliver in practice.  As Richard N. Foster and Sarah Kaplan point out in their book, ‘Creative Destruction: Why Companies That Are Built to Last Underperform the Market’, corporate-control systems all too often limit creativity through their dependence on convergent thinking and the use of conventional strategic-planning process that in fact stifles the very dialogue it is meant to stimulate.  However much they might claim otherwise, most corporate organisations are invariably structured to preserve some form of status quo, an inevitable source of frustration to the talented individuals wanting to make their mark.
While the McKinsey report ‘The War for Talent’ and Foster and Kaplan focus on what corporate organisations should do in order to retain talented people, individuals will perhaps see this ‘war for talent’ in terms of what corporate life can offer as opposed to what ‘going solo’ can provide.
It is increasingly recognised that autonomy is a major source of job satisfaction for the self-employed.  Once experienced, it throws into stark relief the frustration and sense of powerlessness that is so often a feature of corporate life.  However, while autonomy and greater control are part of the positive features of becoming self-employed or freelance, it is not necessarily the right move for everyone.  Going solo can also result in feelings of isolation, financial uncertainty and a sense of being both overwhelmed and ‘underwhelmed’ in equal measure.
If you are thinking about striking out on your own it is important to think about what is entailed and whether you have the right aptitude.  Certainly, if you are able to make the actual break from your corporate environment there is probably a good chance that you have the right mental aptitude for going it alone.  And while it is easy to complain about the frustrations of corporate life, in reality most people are unlikely to move on unless they have strong positive reasons for doing so.
It is also important to remember that even though setting up as an independent business, you will never become fully autonomous.  Clients can have an equal capacity for frustrating your best efforts as line managers.  Indeed, in these days of outsourcing, your old firm could well become one of your clients.  Nevertheless, if you position your new found business correctly it should be possible to exert a degree of control over your destiny that will lead to a marked increase in job satisfaction.
Becoming independent is hard, demanding work and requires a totally different approach to work in a large corporate environment.  There will be no line manager passing work down to you, so you will have to think and act differently.  In essence, you will need to think strategically.  This means being clear about your skill-set, the nature of the ‘knowledge’ that you have to offer and how you intend positioning yourself in the market place.
Your business network and associates will also be important, not just as a source of business but as a means of overcoming the sense of isolation that often comes with going it alone.  The down side of going solo is that you don’t have the social support that is taken for granted in a corporate organisation, so it is important to devise strategies for developing networks, both business and social.
The ways in which knowledge is brought to bear on business and commercial activities and processes is resulting in a continuously shifting range of business opportunities.  If advantage is to be taken of these opportunities, individuals need to be given greater autonomy.  Whether this is to be achieved by changing the nature of corporate processes to give greater autonomy to individual employees or by knowledge workers raising their own independent banners is likely to shape the nature of future economic activity.

Glyn Fry

(This article first appeared in the Autumn, 2001 edition of Business Direction)