Wendell Weeks on Broadband Transforming Internet

Wendell Weeks

April 18th 2002 notes on leadership, business and economics

Do people really value high-quality connections?

Absolutely. We always want the highest-quality connection we can have. Why don’t we use more videoconferencing? Because the quality of the connection is so poor. We value connection to the point where you’ll get on a plane and use a day for a two-hour meeting that you could have done in a video conference, but didn’t - because videoconferencing isn’t good enough.

Wendell Weeks is the President of Corning Optical Communications. His point is that while the investment community is skeptical right now of fiber optics, he believes in the innate value of optical technology for the things that people and businesses need. 

He also appears to have a really good handle on the supply-and-demand phenomenon of business and on the larger business landscape:

Corning Optical Communications is restarting to manufacture fiber because optical-fiber inventories of their customers have come down to a “level appropriate to our ongoing order rate. Restarting production will match our operations to demand.”

To his credit, Weeks does not view the lowered inventory and increased orders as a signal that the market has turned around. Instead, more reasonably, he views these as warranting the statement: “business conditions are not worsening.” 

Weeks does believe that broadband will transform the Internet. Fiber optics is, of course, the vehicle by which more and more things go through fatter and fatter pipes (broadband) at much higher speeds than they could otherwise in the old telephone lines. Broadband will provide the “visual richness” (and speed, of course) that people value dearly in their efforts to connect.

He acknowledges that people got on the Internet bandwagon without really thinking through the needs and implications of their business: “People began to shift everything over to the Internet without paying attention to fundamental economics, such as having [the market] to actually pay for it [e.g., Netzero, "Defenders of the free world”]. Then classic economics stepped in, and the capital markets stopped giving money to every idea. First everything was good; not it’s all bad. It’ll [all] even itself out.”

Reference: French, T.D. & Subramaniam, S. (April 2002). The future of fiber. The McKinsey Quarterly.

People advantage is competitive advantage

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April 18th 2002 notes on leadership, business and economics

This article is a great support for the work that we do at PDI. It rings the bells we have rung on human capital strategy or strategic talent management, and the authors use choice metaphors that I believe our clients will resonate with:

Today development must be embedded in the company’s bloodstream, with all managers responsible for giving team members ongoing feedback and coaching.

As any good gardener knows, to promote healthy growth, in addition to fertilizing and watering, you also must prune and weed. 

The Vice President of Human Resources for a major multinational client has specifically emphasized this critical dual responsibility (i.e. feedback and coach, prune and weed) and has called on PDI to offer solutions. The authors also cite rather evocative examples of what company leaders are doing:

Henri Termeer, the CEO of Genzyme, a company that focuses on developing therapies for rare diseases. He meets regularly with people who suffer these rare diseases: “He wants to feel angry about the pain and loss the disease is causing and [he wants to feel] passionate about the need to help. And he wants to transmit that passion to those working at Genzyme."

The bonding process can succeed only when senior management realizes that the company is more than a mere economic entity; it is also a social institution through which people acting together can achieve meaningful purpose. In the war for talent, organizations are engaged in what one senior executive describes as a ‘competitive for dreams’.

McKinsey and other organizations making the change have found new meaning in the term competitive strategy as they compete for the hearts, minds, and dreams of exceptional people.

Here are the key challenges and responsibilities of both the top executive and the HR leader and, of course, the members of their company:

The Role of the Executive in the “War for Talent” Era

• A changing view of strategic resources
• A changing view of value
• A changing view of senior managers’ role

Implications for HR Professionals

• The building challenge
• The linking task
• The bonding process

Interestingly, and certainly not surprisingly, the authors’ strategic implications for HR include two words that are powerfully related to each other: linking and bonding. The emphasize - in ways that sociologists and, yes, psychologists, do as well - the social institution that is the nature of companies and other organizations. 

Reference: Bartlett, C.A. & Sumantra, G. (Winter 2002). Building competitive advantage through people.  Sloan Management Review (pp 34-41).

Nokia did it with foresight and quickness

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March 29th 2002 notes on leadership, business and economics

Nokia has the following abilities

Coke­-like ability to sell and build its brand. In 1994, Nokia listed on the NYSE. Even though the company needed capital at the time, it invested well in advertising and sponsorship. It knew that in the US, Wall Street dominated the media and therefore the attention of people. So, the better known Nokia’s stock was, the better it would boost its sales.
 
Dell-like mastery of logistics. Nokia has a constant scrutiny of its supply chain. So when its key supplier of critical radio-frequency chips, Philips, suffered a fire at its semiconductor plant in Albuquerque, NM, its system alerted it to a blip in chip deliveries---even before Philips announced the fire. Its CEO, Jorma Ollila, personally persuaded the company (Board?) to dedicate other plants to supply Nokia. They acted quickly and effectively, and met their production targets… unlike Ericsson. 

Apple-like flair for combining form and function. Nokia made its phone smooth and rounded, and therefore pleasant to hold. (It also made different colors that made it cool to own and use.) It made the phones altogether user-friendly.
 
Ollila saw in early 2000 that the company was getting too big, too fast. Its headcount was approaching 60,000, at a hiring rate of 1000 per month. It quit hiring, stopped adding new projects, and outsourced production of network equipment and cell phones. Its sales, of course, were still hit hard, but the company was able to avoid big layoffs.
 
Again, what foresight and quickness.
 
Nokia is working to capitalize on the new “3-G” (3rd generation) technology: This will allow users to cruise the internet as easily as they can from a PC. 

As Nokia develops next generation products and enters new markets, it will face rather stiff and quite new competitors. For example, it is battling Microsoft around software standards. Big MS is working to extend its dominance in PCs to mobile phones. Nokia wants more and more people to be able to purchase its next generation products. It cannot expect a relatively small segment of consumers to purchase a next generation product, if the larger segment cannot afford it. For example, what use is it to buy a phone that can send pictures, if hardly anyone can receive it!
Apparently another success “secret” of Ollila… 

“I didn’t want to be CEO of this company 100,000 people because you can’t keep in touch with the front line… And when management stops with being interested in the front line, or can’t see it, the company gets in trouble.”

Reference: Guyon, J. (March 4th 2002). Nokia rocks its rivals. Fortune, 145(5), 115-118.

Patricia Russo's Leadership Attributes and Skills

Patricia Russo

April 24th 2003 notes on leadership, business and economics

There is apparently cautious optimism in the industry with Patricia Russo’s return to AT&T/Lucent, after a brief stint as the number two at Kodak, even as analysts are highly skeptical that a long-time insider can shake up the struggling company in new ways.

Russo’s Identified Attributes and Skills

• Deep knowledge of their industry and customers
• Ability to lead an organization through change, because she understands its dynamics and buying cycles
• Understands and embraces their strategic and restructuring plans
• Will stick to basics, such as closing a sale with a big customer and getting out in the field
• Is a “straight shooter”: comfortable delivering bad news as well as good news
• Can dole out “tough love”
• Ability to win eager followers

Russo joins Carly Fiorina as a woman at the top of a major corporation. I am disappointed that Fiorina is struggling and appears to be failing at HP. I hope Russo does not fail. She expects to return Lucent to profitability sometime during FY2002.

Under Richard McGinn, Lucent was certainly a high flyer riding the internet boom, and became one of the fastest-growing tech companies. As with Chrysler, its successful strategies during the long-running bull market of the 1990s led Lucent to some critical missteps: a series of costly acquisitions, aggressive sales targets (that I gather were grossly out of touch with market reality), and (overly-)generous vendor-financing deals (that McKinsey & Co. identified as a key factor in the demise of tech companies as the bubble burst). 

Henry Schact let McGinn go in October 2000 and took over the CEO post. The Wall Street Journal recently reminded readers that the search for a candidate to fill the post permanently had been protracted. Now, with Russo, Schact can resume his preferred role as Chairman of the Board and have her work with a company that is now half its former size and is refocused on “selling gear exclusively to the world’s largest telephone companies.”

References

Berman, D. (January 7, 2002). Lucent veteran Russo to return as CEO; firm’s protracted search for chief ends. www.WSJ.com.

Berman, D. & Lublin, J.S. (January 8, 2002). Russo’s goal as Lucent’s new chief: Restore luster company once had. www.WSJ.com.
 

Reinventing the Wheel: Not necessary

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April 24th 2003 notes on leadership, business and economics 


From Dieter Zetsche at Chrysler to Phil Martens at Ford (and Mazda), come fundamentally the same realization and approach to business management: You don’t have to keep reinventing yourself, and in fact your efforts to do so is not helping the business succeed.
 
Martens woke up, jet lagged, in the middle of the night in a hotel in February 2002, and scribbled a diagram that was to represent a way for Ford to streamline its vehicle development… and thus reduce development time and reduce production costs. 

One problem was its “internal fiefdoms” organized around vehicle types: Tough Trucks, Outfitters, Ford Family Vehicles, Ford Living Legends, and Lincoln-Mercury. These teams made few efforts to share resources or information, resulting in overlaps in design. 

In the early 1990s, Ford’s big SUVs shared many components with the their large pickups, so they were able to reap the benefits of economies of scale to reap huge profits. But in the late 1990s, as it came time to redesign these vehicles, apparently each engineering group took steps to improve their respective vehicles.

For example, one group redesigned the truck frame to give it a smoother ride and better crash-worthiness. They definitely got what they wanted, and indeed got the government five-star rating. But this much re-engineering was not quite necessary to get sufficient crash-worthiness and five-star rating. What is more, it was as much as $2000 in cost overrun per truck.

Essentially, you had bright, well-intentioned engineers and managers who forged ahead with a better product, but without sufficient attention to the impact on process, numbers, and other vehicle designs. They lost a key part of founder Henry Ford’s emphasis: “low-cost high-quality engineering and manufacturing.”

So, enter stage right: Martens scraps the internal teams, and creates new R&D ones around the vehicle’s basic platform: its chassis, engine, and transmission. Ford now emphasizes sharing parts, systems, and engineering around vehicle teams. By 2020, this should reduce the platforms that Ford uses by 33%: from 18 to 12.

Even now, Ford is already developing as many as 10 cars and car-SUV hybrids based on the existing Mazda6, thus allowing them to tap the same Mazda suppliers and consequently cutting overall engineering and production time and costs.

Toyota is considered the industry leader in time of vehicle development: routinely under two years. Ford is about three years.

Martens has identified the source of the problem, and should make drastic reductions in this three-year timeframe as well as drastic reductions in costs and ultimately clear improvements in profit. 

Sometimes organizations fall easily into silos and Us-vs-Them mindsets and practices.  They require mindful, tough CEOs to pull them out.

Reference: Ford’s new development plan: To stop reinventing its wheels, by Norihiko Shirouzu (April 16th 2003).

Inside the Box may be where the money is

Sometimes, and most forthrightly so, innovation is best exemplified in how we think and how we solve problems, rather than just in what products we develop.  So reference an old article from the Wall Street Journal:  Chrysler's New Bosses Provide Lessons In Merging High Style With Lower Costs, by Jeffrey Ball (January 4th 2002), which commented on a few days later.

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January 9th 2002 notes on leadership, business and economics 

In short, Dieter Zetsche and Wolfgang Bernard have restored Chrysler’s driving, innovative spirit, while laying out such emphases as cost and process efficiency and strong attention to the market: What Zetsche calls “disciplined pizzazz.” 

As Chrysler worked to sustain is success in the late 1990s, it “invested lavishly to stay ahead.” It worked hard to re-invent itself. For example, in 1999, Robert Eaton boasted that the new version of the Grand Cherokee has so few components in common with its predecessor that these shared parts could fit into a bag. 

This approach was certainly evident in several Dodge advertisements: “We’ve changed everything again.” And “Different” was its tagline. I really liked the TV commercials because of the innovative way they crafted images around being different. For example, in a boardroom of people, the camera pans at the level of their legs and shoes. While most had the typical professional, business attire, one individual wore red and white gym shoes. I also really like these commercials and tagline, but I, too, like being different, re-inventing myself, doing something I hadn’t done before (e.g., which I worked to do as a professor in teaching subsequent classes of the same courses). 

However, this approach led to Chrysler’s business struggle in the late 1990s. 

Enter stage right: Zetsche, with a different perspective and emphasis: Create a core that different models shared. In effect, the ‘shell’ (my word) varied from model to model, but these models were essentially the same vehicle. This has been key to Chrysler’s rigorous new-product development. This approach allows the company to achieve dual objectives: “trim development costs while increasing the variety of models in Chrysler showrooms.” 

It seems to me that Zetsche has certainly directed a return to business fundamentals---and, apparently unexpectedly, has worked to re-instill in Chrysler its former “brash American style.” So… after a marketing brainstorm, they decided to begin with the Jeep, the one that the company virtually invented in 1984 and the one that now is expected to bring in the additional 300,000 annual sales. More specifically, they focused on a low-end model that they would direct to “Millennials” (auto buyers under 22 years of age). 

The notes from this meeting found its way to a Jeep engineer, Rick Kukucka. Without much of a marketing budget, he and his team hung at teenage venues such as chat rooms and sandwich shops. As it is often with me, an idea popped into Kukucka’s mind in the middle of the night: As part of his team’s tinkering with the design etc., he thought the low-end Jeep should have a smooth floor, thus taking out the carpeting. Not only would this be more hip to a generation that prefers bare-wood floors to wall-to-wall pile, but also it would save costs. The cost savings obviously can make this Jeep affordable for the Millennials.

You see, innovation never exists in a nirvana of limitless time and funding.  It exists in the exigencies and the constraints of the business world.  How well CEOs acknowledge this reality is a hallmark of what James Collins calls great leadership.