A to Z of new business

Want to convince the board you’ve got your finger on the pulse? Here is a
guide to gen up on the people, the brands, the ideas, the products and
technologies that are shaping today’s business

Adhocracy

Adhocracy is characterised by blurred divides between roles, functions and
departments. A word coined by the US thinker Warren Bennis, it refers to an
organisation founded on ambiguity rather than clarity, utilising small groups
to achieve clearly specified goals.

The concept was taken up by the futurist Alvin Toffler in his 1970 book
Future Shock, which predicted – way ahead of its time – that "businesses
were going to restructure themselves repeatedly. That they would reduce
hierarchy and adopt what we termed adhocracy". After decades assembling
carefully constructed hierarchies, companies saw no reason to dismantle them.
Many still don’t.

Anglian Water

In 1989, the UK Government privatised the nation’s water industry.
Overnight, regional water companies were transformed into commercial
organisations.

Anglian, with over 5,000 employees, has emerged as one of the largest water
companies in the world, serving more than 5 million people with operations in
the Americas, Europe, Asia, Australia and New Zealand. Its stated intention is
to be the number one water company in the UK and one of the best globally by
2007.

Central to its transformation from a public organisation burdened by
bureaucracy and comfort zones has been its management of innovation. It was one
of the first companies in the UK to appoint a director of innovation. Anglian
has coined the phrase "kennovation", condensing knowledge
"ken" and innovation into one, and has created a virtual corporate
university Aqua Universitas, known as the University of Water.

Big Mac Index

McDonald’s has conquered the world – now comes the measurement. The ultimate
tool is the Big Mac Index.

Developed by The Economist as a measure for the strength of worldwide
currencies, the index takes the price of a Big Mac, available in over 100
countries, as the currency benchmark for the world. So if a Bejing Big Mac
costs $1.16, a US Big Mac $2.42, and a Swiss Big Mac $4.02, the Chinese yuan is
undervalued and the Swiss franc overvalued.

For over a decade it has endured the vicissitudes of market forces. When
McDonald’s cut the price of a Big Mac by 65 per cent, the markets shook. The
Whopper Index may only be a bite away…

Career Management

Career management is a new phenomenon. During the 20th century, the
corporation determined your career. Increasingly now individuals manage their
own careers. The objective is simple: happiness comes from working at what we
are good at and ways that suit our abilities, although this rarely happens.

The reason, says management guru Peter Drucker, is that we often have little
idea of what we are good at. The route to outstanding performance is to identify
and improve your unique skills and then find jobs which match your skills and
values, etc. Ask questions, find answers and then you can make the right
decisions for your career and life development.

Dyson, Esther

According to the New York Times Esther Dyson is "the most important
woman of the electronic age". She is a journalist and securities analyst
who, since 1982, has edited monthly newsletter Release 1.0.

Her company, Edventure, employs seven people. Her work appears throughout
the world and includes the book Release 2.0. "The Net is no place for
propaganda, but it’s great for conspirators," she says.

Employer Value Proposition

The race is on to become the employer of choice. And the race has to be led
from the top. Recruitment and retention will become full-board
responsibilities, as prospecting for executive talent becomes a business
imperative. If management talent is a top corporate priority, companies must
create and refine employee value proposition. Senior management must have a
persuasive answer as to why a talented employee should work for their company
rather than a competitor.

Feminising the Boardroom

Despite all the talk about the softer side of management, women are notably
absent from the world’s boardrooms.

Research from the Kelly School of Business shows the number of women with
executive positions in the US is lower than it was 10 years ago. In 1987 there
were 11 female directors at Fortune 500 companies but by 1997 there were just
eight. So take a bow Golden West Financial Corporation, Avon Products, Beverley
Enterprises and publishing group Gannett. These are the four companies from the
Fortune 500 with almost as many women as men on their boards.

Game Theory

Mathematical genius John Von Neumann came up with a unique insight into the
possibilities and probabilities of human behaviour. Game Theory is based on the
premise that, irrespective of the game or circumstance, there is a strategy
that will enable you to succeed.

If you are playing poker, negotiating salaries or bidding in an auction,
rules are at work.

The key lesson is that the interactions of companies and other organisations
are interdependent. What you do interacts or impacts on the possible choices of
others in your situation or industry. Success depends not only on what you do,
but on how others respond and act.

Human Capital

Personnel used to be an admin exercise in paper shuffling and wage
differentials. Then came human resources which is personnel with added
strategic ingredients: careers training and employment trends. The trouble,
some suggest, is the second word "resources". This is redolent of
another age when people were fodder in the industrial machine.

A more accurate and appropriate description could be human capital. This
encapsulates the idea of people as a vital corporate investment and source of
future profits. Order your new business cards now.

Ikea

Ikea is one of the great retail brands of our time. The Swedish furniture
company, which represents stylish design at affordable prices, has grown from a
tiny mail order business to a $5.8bn furniture giant.

The brand is driven by the philosophies of its founder Ingvar Kamprad. The
"Ikea way" enshrines a set of values that have ensured an unrivalled
relationship with its customers. Its mission statement is, "To contribute
to a better everyday working life for the majority of people, by offering a
wide range of home furnishing items of good design and function, at prices so
low that the majority of people can afford to buy them."

The same sort of egalitarian principles apply to the management culture.
Ikea permits no status symbols and refers to all employees as co-workers.

The philosophy is reinforced by the company’s current president, Anders
Moburg, who was handpicked by Kamprad. When travelling on business, Moburg is
famous for flying economy class and refuses to take taxis when public transport
is available.

Job Titles

Executives used to be addicted to using the word strategic in job titles. In
the hierarchy-free age of Gen X and virtual organisations, one would have
thought job titles would have slipped off the agenda. Not so. They are as
important as ever.

Job titles are signposts to corporate culture. They signal what the
organisation considers to be important. Appointing a vice-president of
diversity, makes it clear that the firm is dedicated to fair employment
opportunities. Similarly, chief knowledge officer, is a statement of intent as
much as a new job. After all, companies have been gathering and utilising
knowledge since time began.

Kim, W Chan

Professor of international management at the French business school Insead,
Kim, with Renee Mauborgne, has produced a series of articles and a book on
managing in the knowledge economy.

Among the concepts they champion is that of "fair process" which
contends that "people care as much about the fairness of the process
through which an outcome is produced as they do about the outcome itself".
In a study of 19 companies, Kim found that there is a direct link between
processes, attitudes and behaviour. "Managers who believe the company’s
processes are fair display a high level of trust and commitment which, in turn,
engendered active co-operation."

Kim and Mauborgne argue that successful companies are differentiated by
"the way managers make sense of the way they do business".
Outsmarting the competition involves challenging industry conditions; not
benchmarking against competitors; focusing on what customers value; thinking
like a start-up business; and thinking "in terms of the total solution
buyers seek".

Leahy, Terry

Terry Leahy, born 1956, is the chief executive of Tesco. Educated at Umist
and a member of the influential Demos think-tank, Leahy is a mover and shaker
within the Labour Government.

Tesco is one of Europe’s most innovative and successful retailers. It is in
the midst of a £500m programme building 22 new stores, creating 10,000 new
jobs. It holds 15 per cent of the UK market and during his first year as CEO
Leahy oversaw a 9 per cent increase in profits.

Lexus

Toyota is now the third biggest car maker in the world behind General Motors
and Ford. It sells 5 million vehicles a year and two years ago sales topped
$88.5bn.

Toyota’s production philosophy and the carefully developed strength of its
brand reached a high point in 1990 with the launch of the Lexus. With the
Lexus, Toyota had out engineered Mercedes and BMW. The Lexus took seven years
and cost $2bn to develop and generated 200 patents. Its standard fittings
include satellite navigation system. While the product stood up to scrutiny,
where Lexus really stole a march on its rivals was through the Lexus ownership
experience.

Even when things went wrong, the service was good. An early problem led to a
product recall. Lexus had dealers call people personally and immediately.
Instead of having a negative effect it strengthened the channel. Lexus screwed
things up like everyone else but it sorted the problem out in a friendly, human
way. With the Lexus, Toyota proved that its capacity to stay ahead of the pack
remains undiminished.

McKinsey & Co

McKinsey & Company remains the thought leader among consultant firms. It
has been doing for years what other firms are only now discovering. It has
nurtured its brand with care ever since Marvin Bower and AT Kearney split the
company in the 1930s and Bower, took the McKinsey name rather than using his
own name for the business.

The name makes it easier to attract the best people and the most prestigious
clients. As London Business School dean John Quelch observes "…no man
ever got fired for hiring McKinsey". He also adds that the strength of the
brand can help cushion management decision-making, or even rubber-stamp a
management decision that has already been made.

Neuro-linguistic Programming

NLP critics suggest that it is "Moonie" management. NLP is
basically the systematic use of language to exert influence over people. It is
built on the recognition that voice quality is 38 per cent of the total impact
of the communication. Control that and you control the rest of the
conversation.

NLP has yielded an impressive crop of jargon. There is "syntactic
ambiguity" – an ambiguous sentence where a verb plus "ing" can
serve either as an adjective or a verb – such as influencing and "tonal
marking" which is using your voice to mark out certain words as
significant.

Organisational Agility

US management thinker Richard Pascale, argues that even the most successful
organisations eventually find themselves grinding to a halt. This can only be
avoided if an organisation pursues seven disciplines of agility which range
from "accountability in action" to the elusive and painful
"course of relentless discomfort".

Pascale is an admirer of the intensive training methods used by the US Army
though he admits that converting its methods into the corporate world is
handicapped by the fact that "all it takes is 650,000 acres and $1m a
day". Even so, organisational agility means that it is preferable to be a
ballet dancer than a muscle-bound marine.

Palm Pilot

Palm Computing, now owned by 3Com, brought us the Palm Pilot, which sold
over 1 million units in its first 18 months. Dataquest expects 8 million to be
sold in 2002. As technology moves on, the Palm increasingly functions like a PC
and has a steadfastly devoted fan base.

Reputation Management

Reputation management is an attempt to move PR into a bright new world where
the charges are higher and PR isn’t looked down upon as mere media relations.
The beauty of RM is that it is all-embracing. It advocates bringing media
relations, communications strategy, crisis management and community relations
under one comforting umbrella.

Cynics might suggest that reputation management is simply a means of widening
the power of PR. But this overlooks the sheer genius of RM, the name itself.
Who in the corporate world ever said yes to a bad reputation?

SAS Institute

If a company wishes to attract lots of press coverage and the pick of local
recruits, it needs to do one thing: look after its employees. This is about as
simple as business gets, but it is a point which is proved time and time again.
Few companies demonstrate this more vividly than software company SAS
Institute. Benefits for staff in the UK office include, a gym, pension scheme,
private medical, flexible working hours and casual dress policy.

SAS is hugely successful, its 1997 sales were $750m. And more to the point
in an age in which corporate loyalty is rare, SAS has a staff turnover of 3.7
per cent (14 per cent in the UK). As a result, it makes massive savings in
recruitment and training – enough to pay for a lot of massages.

Employees and customers are surveyed every year. The company says that 80
per cent of the suggestions for product improvements that customers make
eventually find their way into the software. It also ploughs 30 per cent of its
revenue back into R&D. The message is that good business can be good for
you and can be extraordinarily simple.

Spin Doctors

In the media age, a new generation of PR champions is emerging. They are not
interested in spending years perfecting the press release. They want to wield
influence, and increasingly they do.

Faced with an alarming corporate crisis the CEO is as likely to call for his
PR team as anyone else. The difference between the spin doctor and the PR
person is the difference between tactics and strategy: it is about influencing
the media to achieve long-term goals. It is only a matter of time before PR
executives take another step up and actually become the people running
organisations.

Spread Betting

Forget the traditional image of a smoke- filled betting shop, ankle-deep in
discarded betting slips. Betting is moving upmarket and going high-tech in the
shape of spread betting.

Spread bets are the derivatives of the gambling world. They are the gambling
equivalent of trading in the financial markets. The bookmaker takes a view on
an event and quotes a range which a given variable will, in their opinion,
fall. The gambler bets on a higher or lower income – "buying" at the
higher figure, if the bookmaker is too cautious, or "selling" at the lower
if the bookmaker is too optimistic. The drawback is that, unlike fixed odds,
betting your potential losses are not confined to your stake money.

Tapscott, Don

Don Tapscott is a consultant, author and chairman of the alliance for
converging technologies. His books provide a commentary on the rise of the Net
generation. He celebrates the replacement of staid hierarchies with personal
chaos.

Tapscott argues that digital technology is not controlled by anyone, so
"when today’s youth enter the workforce they will do so not as ingenues
but as authorities. They will find hierarchies in which the boss knows less
than they do. They will also find it bizarre how little information sharing
goes on, when they are used to exchanging information with strangers on-line.
And they may be puzzled about why it is necessary to go into the office every
day."

Value Migration

Defined by Harvard’s Benson Shapiro and Richard Tedlow, and consultant
Adrian Slywotzky as "the flow of economic and shareholder value away from
obsolete business models to new, more effective designs". Strip away the
management speak and you have a stark fact of business life: over any period
the needs and expectations of customers change. If a company fails to keep
pace, it will find itself left behind.

The trick lies in being able to identify the level of value migration and
then doing something about it. And, inevitably, it is here the problems begin.
When you are in the throes of actually managing a business, any perception of
value migration is likely to be clouded.

To gain an insight into value migration, Shapiro, Tedlow and Slywotzky
suggest that companies ask themselves a number of questions. These begin with
"List your most important product and customer service attributes for five
years in the future, for today and for five years ago". Honest answers to
the questions provide a sense of how your company is positioned in terms of
value migration.

The dividing line between success and failure is narrow. IBM, the archetypal
"good" company, made $6bn in 1990 and lost $5bn two years later. IBM
failed to change with the market and only moved when value had well and truly
migrated.

Wal-Mart

Wal-Mart is a retailing phenomenon. It is bigger than Sears, Kmart and JC
Penny combined with annual sales of $117,958m. There are 1879 Wal-Mart stores,
512 Supercenters and 446 Sam’s Clubs in the US alone. It also operates in
Canada, Germany, Mexico, Puerto Rico and Brazil and recently took over Asda in
the UK

Sam Walton succeeded for a number reasons. First, he created a brand which
had a deliberate homespun element to it. Second was his ability to create a
strong corporate culture. He gave people responsibility – "A store within
a store" gave departmental heads authority. Then there is profit sharing
and incentives.

Third, Wal-Mart invested heavily in information – sharing it with
enthusiasm. It even invested in a satellite communication system so learning
and experience are quickly communicated within the organisation.

Wal-Mart has also embraced new technology with fanatical enthusiasm. It is
now using data mining software to detect patterns at its 2,400 US stores. The
aim, according to director of replenishment systems Rob Fusillo, is to manage
inventories "one store at a time like each was its own dedicated chain".
Wal-Mart possesses the world’s largest data warehouse containing a massive 24
terrabytes of data.

?What If!

It may be trendy to give business a more casual feel, but a London-based
company has gone further than most. It has turned the office into a home from
home, complete with rugs armchairs and a table football game, holds client
meetings in the kitchen and even runs a company slate at the local pub.

?What If!, an "invention company", is a group of hardened
marketing professionals who have grown a £3m business by harnessing the power
of creativity.

When Dave Allan and Matt Kingdon left their marketing jobs at Unilever to
set up their own business in 1992, their goal was to create the best innovation
company in the world. The authors of How to Start a Creative Revolution at Work
claim to help clients explore the frontier between the corporate world where
products are developed and the real world where consumers actually use them. It
also helps companies identify and overcome internal barriers, including attitudes
and behaviour and physical environment which holds back in-house inventiveness.

Xybernaut

Kaz Toyosato designed the Sony Walkman. He is now designer at Xybernaut. His
new company, which claims to be "the leader in wearable computing",
has brought the world the Mobile Assistant IV. Weighing less than 1.75lb, it
has as much power as a desktop computer. Voice-activated, it has 6 to 8 hours
of battery life and 128Mb RAM. It could also annoy fellow commuters travelling
to work.

Zander, Benjamin

Benjamin Zander, born 1939, is the conductor of the Boston Philharmonic
Orchestra. Zander has taken advantage of the fashionable link between
management and music and offers seminars on "orchestrating the executive
team". He claims his accomplishments in controlling the orchestral world
translate "effortlessly" into the business world.

This is an edited extract from A Freethinkers A-Z of the New World of
Business, by Stuart Crainer, Capstone Publishing. ISBN 1 8411 2014 6. Personnel
Today readers are entitled to a 20 per cent discount on the price of the book
(£18). Call Capstone on 01865 798623 and quote "PT Offer" or e-mail capstone_publishing@msn.com

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