A New Manifesto for Management Ken Abbott Robert Best Rem Brown Marianne Gardner Ying Jin Rachel Todd October 10, 2007

Agenda Introduction & Rules of GameRobert Best Rock and a Hard PlaceKen Abbott New Management PhilosophyRachel Todd Creating ValueMarianne Gardner Building Shared Destiny RelationshipsYing Jin ConclusionRem Brown

Introduction Rules of the game: 1. Break into presentation teams 2. Questions will be asked during the presentation – first bark gets to answer…Yes it’s degrading…but fun! 3. Questions at end of sections for points 4. Most points at end wins! (There are prizes) 5. We reserve the right to penalize for bad behavior

The Dominant Philosophy Old Management Paradigm, 3S’s Employee loyalty shattered Mgmt confidence to cut not create Changing environment: Shareholder vociferousness Globalization Focus on operating efficiencies Value Extraction Outsourcing Downsizing Aggressive cost cutting Buybacks – not investing Path to competitive mutual destruction: Game theory: lose-lose IMPACTS END RESULT Strategy Structure Systems

Getting Stuck Mgmt Doctrine Old school: make management predictable, systematic and structured Technology Markets Innovation Old school can’t keep pace Harold Geenen of ITT stated he was building a system that: “ A monkey will be able to run when I’m gone” Click on chimp

Getting Stuck Academic Theory Static Efficiency: Exploit economic options Moving resources to highest value add Theory of competition: Appropriate Value Strategy: Grab all you can (even at the expense of other stakeholders)

The Conflict The Company Create Profits Create Societal Benefits Interests of company are incompatible with interests of society under the Old Model Conclusion: Need a new management model Imperfect Competition Perfect Competition

The Quiz… From the video: What percentage of investment was made into lottery tickets? (100 pts) From the video: What percentage of investment was made into lottery tickets? (100 pts) From the reading…Who was credited with the 3S strategy of the dominant management paradigm? (100 pts) From the reading…Who was credited with the 3S strategy of the dominant management paradigm? (100 pts)

Answers 85% Alfred P. Sloan

New Management Philosophy Modern Societies as organizational economies “That is, most of the value is created not by individuals transacting individually in the market, as in the economists’ ideal, but by organizations involving people acting collectively, with their motives empowered and their actions coordinated by their companies purpose” -Nobel Laureate Herbert Simon

New Management Philosophy Companies by nature are inefficient Companies by nature are inefficient Exists to provide a haven from the laws/market to allow humans to do something markets are not very good at… Exists to provide a haven from the laws/market to allow humans to do something markets are not very good at…INNOVATE!

New Management Philosophy Companies as Value Creators Companies as Value Creators 3M or ABB 3M or ABB Good innovation Good innovation Westinghouse or Norton Westinghouse or Norton Lacking innovation Lacking innovation Innovation is needed to create new products/services Innovation is needed to create new products/services Competitive Advantage Competitive Advantage

Innovative Companies

New Management Philosophy 3 “S”s give way to 3 “P”s “S”s “P”s “S”s “P”s StrategyPurpose StructureProcess SystemsPeople

Innovation: Which company invented the GUI that eventually became Microsoft windows? (100 pts) Innovation: Which company invented the GUI that eventually became Microsoft windows? (100 pts) Patents: As of October 9, 2007 what was the number of the most recently issued patent? (100 pts to closest team) Patents: As of October 9, 2007 what was the number of the most recently issued patent? (100 pts to closest team) The Quiz…

Answers Xerox Xerox 7,281,274 Electronic media distribution system 7,281,274 Electronic media distribution system 7,281,274Electronic media distribution system 7,281,274Electronic media distribution system

Job Security Job security in exchange for employee loyalty Job security in exchange for employee loyalty Specific employee skills that are unique to company Specific employee skills that are unique to company = productivity and efficiency to employer = limits employee value to other employers = limits employee value to other employers Both parties require employment security to make commitment Both parties require employment security to make commitment

Job Security Viable in stable world of sustained competitive advantage Viable in stable world of sustained competitive advantage This type of feudal loyalty is outdated in today’s business environment This type of feudal loyalty is outdated in today’s business environment hyper-competition hyper-competition displacement of workers in global economy displacement of workers in global economy

The New Moral Contract Free market – hire and fire poor alternative Free market – hire and fire poor alternative Hyper-competition and change create need for teamwork and trust Hyper-competition and change create need for teamwork and trust Teamwork and trust cannot be fostered in atmosphere of self-interest Teamwork and trust cannot be fostered in atmosphere of self-interest Value creation and innovation require confidence in collective gain Value creation and innovation require confidence in collective gain

The New Moral Contract New contract - mutually satisfying New contract - mutually satisfying Employer has best jobs for most competitive Employer has best jobs for most competitive Employees take responsibility to be competitive and compete for the company Employees take responsibility to be competitive and compete for the company In turn company invests in employee training which increases value to company and enhances employee value outside the company In turn company invests in employee training which increases value to company and enhances employee value outside the company Employees stay because their job is exciting Employees stay because their job is exciting

New Contract is Not Not a catchy slogan which releases managers from protecting employees jobs Not a catchy slogan which releases managers from protecting employees jobs Not an act of altruism Not an act of altruism Not a program installed by HR Department Not a program installed by HR Department

Employer Branding What is employer branding? What is employer branding? Does it matter? Does it matter? Gives employers a competitive advantage Gives employers a competitive advantage Attract hire and retain the right “fit” Attract hire and retain the right “fit” Employer branding impacts bottom line Employer branding impacts bottom line

What company instituted the “Individual Dignity Entitlement Program” or IDE? (100 pts) What is the name of this company’s much imitated total quality initiative? (100 pts) The Quiz…

Answers Motorola Six Sigma

Building Shared Destiny Relationships What is the shared destiny relationship? What is the shared destiny relationship? Company examples Company examples The result of the shared destiny relationship The result of the shared destiny relationship Lost legitimacy Lost legitimacy

A company that has a “value-creation” focus is _____________________. (100 pts) The text gives us three companies that create value for themselves and others. Name them. (100 pts) The Quiz…

Answers building shared relationships. Canon, Intel and Kao

Conclusion Key Themes Key Themes Value Appropriation vs. Value Creation Value Appropriation vs. Value Creation All About Innovation All About Innovation New Moral Contract New Moral Contract Teamwork & Innovation Exercise!!! Teamwork & Innovation Exercise!!!

And The Winner Is …