Friday, March 31, 2006

Sunday, March 26, 2006

An Entrepreneurial Mindset

All leaders emphasise the importance of being entrepreneurial. But what does entrepreneurship imply?

Entrepreneurship is not about starting a new business or about taking undue risks or about mobilising capital. It is all about a new mindset, that is sharply focused on improving the current state of affairs. It is about chasing opportunities, without being unduly worried about current resource constraints.

The famous French economist, John Say mentioned that an entrepreneur shifts resources from an area of lower yield or productivity, into a higher one.

In his classic, “Innovation and Entrepreneurship” Peter Drucker mentions the fact that an entrepreneur need not be a capitalist ,investor or employer. In his authoritative style, Drucker points out that entrepreneurship is a type of behavior rather than a personality trait. Anyone who enjoys taking decisions can be an entrepreneur. Entrepreneurs are people who don’t get unfazed by uncertainty. They are people comfortable with change. Indeed, entrepreneurs look at change as an opportunity waiting to be tapped. Drucker adds that entrepreneurship is not all that risky as it is made out to be. Entrepreneurs fail because they violate some basic principles or because they are not trained in the required methodology.

Harvard Business School professor, Robert Simons, in his recent book,” Levers of Organization
Design ” mentions that an entrepreneur’s span of responsibility exceeds the resources he controls. This entrepreneurial gap actually puts pressure on the entrepreneur to innovate in various ways. The entrepreneur has to learn to work with limited resources, get the support of key people, quickly build a prototype to make a business case for more resources and so on. He recommends that to promote entrepreneurship and innovation, people must be given less resources than they actually need to get the job done.

It is quite clear that entrepreneurship and innovation are closely related. An entrepreneur has to be necessarily innovative. At the most basic level, the innovation may be to introduce a process improvement and at a more advanced level, it could be a new product concept. Finally at the highest level, it could be a new way of doing business. Vijay Govindarajan calls it strategic innovation, Gary Hamel calls it business concept innovation, Clayton Christensen refers to it as disruptive innovation , Chan Kim calls it Blue Ocean Strategy and so on. Whatever the terminology used, at its highest level, entrepreneurship is all about changing the rules of the game.

Three questions can help managers develop an entrepreneurial mindset.
Who are the customers?
What are they looking for?
How do we provide value to them in a way better than what is happening now?
These are profound questions which tend to look deceptively general. Constantly addressing them is the first step towards becoming an entrepreneur.

The importance of thinking

Why thinking is important
Thinking is extremely important. Yet we do not spend enough time on this important activity. I this blog, I try to explain how thinking can help us. At the most basic level, thinking prevents hasty decisions and rash actions. Recall the old saying,” Look before you leap.” In an organization, what this means is that if we think through the possible implications before doing something, the outcome is likely to be more desirable.That is why there is so much emphasis on planning. Often, planning is equated with targets and budgets. But the real value in planning comes from the associated thinking process. During planning, we are forced to think of various possibilities, understand what the department /organization needs to do to cope effectively in different scenarios and then frame a suitable course of action.
Thinking is also a very effective way of learning from our past mistakes. This especially applies to project managers. Toyota, one of the greatest learning organizations around, emphasizes hansei (reflection) after each key milestone and the completion of a project. Toyota believes that without hansei, kaizen (continuous improvement) is not possible. Hansei is all about becoming aware of our weaknesses and working on them.
At a higher level, thinking helps us to bring more clarity into our thought processes and help improve our personal effectiveness. This applies especially to managers and leaders. Why are things happening the way they are? Is there something I can do to improve the state of affairs? Is my evaluation of different team members right? Or am I getting carried away by my prejudices and biases? Are associates enjoying their work? Are they feeling frustrated for some reason?
Finally, thinking is a powerful tool for innovation. Even if innovation is 99% perspiration, it still involves 1% inspiration. And that inspiration cannot come without thinking. Many people saw the apple falling from the tree. Only one person asked why and he went on to develop the theory of gravity. Bill Gates has developed some of his greatest ideas in recent times during his thinkweeks. Peter Drucker developed some of the most fundamental principles of management and became the greatest management guru of our time, by carefully reflecting on what he saw around him.
To conclude, there is nothing intellectual or esoteric about thinking. It is a powerful tool in the hands of managers in their quest to become more effective.

Friday, March 10, 2006

Peter Drucker

Peter Drucker


The story of Peter Drucker is the story of modern management.. His teachings have formed a blueprint for most business leaders. By emphasising some fundamental principles like picking the best people and nurturing them, of concentrating on opportunities and not problems, of focusing on the customer, of understanding competitive advantages, and refining them, Drucker did more to advancing management as a practice, than anyone else.

Drucker’s early years certainly shaped his thinking. Born in Austria in 1909 into a highly educated family, Drucker grew up in Vienna, then a cultural and economic hub of Europe. As a student, a clerk in a Hamburg export firm, and a securities analyst in a Frankfurt merchant bank, he lived through the years of Hitler's emergence, recognizing early the menace of centralized power.

Drucker immigrated to London shortly after Hitler became Chancellor, taking a job as an economist at a London bank while continuing to write and to study economics. He moved to America in 1937 as a correspondent for a group of British newspapers.

Drucker was a professor of politics and philosophy at Bennington when he was given the opportunity to study General Motors in 1945. This assignment led to the publication of his groundbreaking book, Concept of the Corporation. In 1950, he started to teach at New York University's Graduate School of Business.

Drucker's most famous text, “The Practice of Management” was published in 1954. It became his first popular book about management. Drucker drove home the point that management was not a science or an art. It was a profession, like medicine or law.

Drucker can lay claim to being the first writer of modern times to enunciate clearly some of the basic principles of modern management:

• He introduced the idea of decentralization in the 1940s.
• He was the first to assert -- in the 1950s -- that workers should be treated as assets, not as liabilities to be eliminated.
• He originated the view of the corporation as a human community built on trust and respect for the worker and not just a profit-making machine.
• He was the first to make it clear that there was no business without a customer.
• He argued in the 1960s long before others for the importance of substance over style, for institutionalized practices over charismatic, cult leaders.
• He wrote about the contribution of knowledge workers in the 1970s long before anyone knew or understood how knowledge would drive the New Economy.

Drucker did not believe in giving CEOs clear, concise answers to their problems. Instead, he framed the questions that could uncover the larger issues standing in the way of performance. Shortly after Jack Welch became CEO of General Electric in 1981, Drucker posed two questions: "If you weren't already in a business, would you enter it today? And if the answer is no, what are you going to do about it?" These two questions drove GE’s corporate strategy under Welch’s leadership.

In the 1980s, Drucker developed serious doubts about business and capitalism itself. He saw companies increasingly becoming places where self-interest had triumphed over the egalitarian principles he had long championed. As he watched top management handing themselves fat compensation packages, even as they slashed the ranks of ordinary workers, Drucker became one of Corporate America's most important critics.

There has been some criticism of Drucker. Some contend that his work was not backed by rigorous research. Others have pointed out factual inaccuracies in some of his books. Notwithstanding this criticism, there is no doubt that Drucker’s contribution to the field of management has been both unprecedented and remarkable.

Lessons from Andy Grove

Lessons from Andy Grove

There is much to be learnt from the leadership style of Intel’s former CEO and current senior adviser, Andy Grove. At critical junctures, Grove has shown a remarkable ability to change with the times, moving from one role to another as the situation has demanded. His ego has not stood in the way when big decisions are involved. Despite being blunt and forthright, Grove has been open to constructive criticism.

A good example is when Intel executives Craig Kinnie and Dennis Carter confronted Grove, when he wanted to replace CISC with RISC. Engineers liked RISC because of its elegance. It required fewer transistors to accomplish most computing tasks. Grove had even appeared in an Intel video to promote RISC. Kinnie and Carter argued that launching CISC, would shorten the life of one of the most profitable franchises in business history. They won the argument.

How Intel moved into microprocessors is another good example of Grove’s ability to keep his feet firmly planted on the ground. Founder Gordon Moore had famously observed that the number of transistors than can be fixed on a chip tend to double every couple of years (later refined to 18 months). But intel never thought that Japanese firms, too, might master this process and turn memory chips into a commodity. So Intel was not prepared for the Japanese onslaught.

Intel’s top executives simply could not believe the growing evidence that they were being outcompeted in a market they had created. Intel believed its chips were in many of the best minicomputers and also in personal computers which were slowly taking off. Profits from other products helped to sustain the delusion that memories were a viable future.

Intel continued to be in a stage of denial until its profits declined sharply from $198 million in 1984 to less than $2 million in 1985. Grove and Moore had been agonizing over their dilemma for weeks. It was in the middle of this crisis, that Grove stepped back and reflected. He recounts in his book Only the Paranoid Survive: "I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance when I turned back to Gordon, and I asked, 'If we got kicked out and the board brought in a new CEO, what do you think he would do?' Gordon answered without hesitation, 'He would get us out of memories.' I stared at him, numb, then said, 'Why shouldn't you and I walk out the door, come back, and do it ourselves?'"

Another example of Grove’s ability to look ahead and not the past is when Dennis Carter came up with the idea of a large-scale consumer marketing campaign around the slogan "Intel Inside." This was at a time when the concept of branding was totally foreign to Intel. Some senior executives ridiculed Carter’s idea. But Grove gave the go ahead. Grove so loved the idea of building a consumer brand that he selected the name Pentium himself. An internal component soon became one of the most recognized brands in the world.

In recent months, Intel has indicated that it might totally revamp its branding strategy, pushing Pentium to the background. Again, Grove is backing these moves.

Most CEOs have pet themes. They refuse to drop them even when it becomes amply evident that these themes have become irrelevant. They can learn a lot from Andy Grove.