Winning in Chaotic Times

Society of Petroleum Engineers

Houston/05.21.01

“In 25 years, you’ll probably be able to get the

sum total of all human knowledge on a personal

device.”Greg Blonder, VC [was Chief Technical

Adviser for Corporate Strategy @ AT&T] [Barron’s 11.13.2000]

<1000A.D.: paradigm shift: 1000s of years1000: 100 years for paradigm shift

1800s: > prior 900 years1900s: 1st 20 years > 1800s

2000: 10 years for paradigm shift 21st century: 1000X tech change than 20th

century (“the ‘Singularity,’ a merger between humans and computers that is so rapid and profound it represents a rupture

in the fabric of human history”)

Ray Kurzweil, talk april2001

Part I: Brand InsidePart II: Brand Outside

Part III: Brand Leadership

Forces @ Work I

The Destruction Imperative!

Forget>“Learn”

“The problem is never how to get new, innovative

thoughts into your mind,

but how to get the old ones out.”

Dee Hock

“It used to be that the big

ate the small. Now the fast eat the slow.”Geoff Yang, IVP/ (Institutional

Venture Partners)

Read It Closely: “We don’t sell insurance

anymore. We sell speed.”

Peter Lewis, Progressive

“Assetless Company”

John Bryan, CEO, on selling all Sara Lee’s manufacturing

“Don’t own nothin’ if you can help it. If you can, rent your

shoes.”F.G.

The [New] Ge Way

DYB.com

The Gales of Creative Destruction

+29M = -44M + 73M

+4M = +4M - 0M

Forbes100 from 1917 to 1987: 39 members of the Class of ’17 were alive in ’87; 18 are in ’87 F100; the 18 F100 “survivors” underperformed the market by

20%; just 2 (2%), GE & Kodak, outperformed the market from 1917 to 1987.

S&P 500 from 1957 to 1997: 74 members of the

Class of ’57 were alive in ’97; 12 (2.4%) of 500 outperformed the market from 1957 to 1997.

Source: Dick Foster & Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the

Market

Brand Inside

Brand Org: Lean, Linked,

Electronic & Malleable

White Collar

Revolution!

108 X 5vs.

8 X 1** 540 vs. 8 (-98.5%)

The Pincer 5

“Destructive” entrepreneurs/ Global Competition

“White Collar Robots”

THE INTERNET! [E.g.: GM + Ford + DaimlerChrysler]

Global Outsourcing [E.g.: India, Mexico]

Speed!!

“A bureaucrat is an expensive

microchip.”Dan Sullivan, consultant and

executive coach

Automation+

75% of what we do: 40 “expert” decision rules!

80,000?

IBM’s Project Eliza!

Brand Inside

Brand Work: The Professional Service

Firm Model & The WOW Project

So what will be the Basic Building

Block of the New Org?

Answer: PSF![Professional Service Firm]

Department Head

to …

Managing Partner, HR [IS, etc.] Inc.

11 September 2000

09.11.2000: HP bids

$18,000,000,000for

PricewaterhouseCoopersConsulting business!

[“These days, building the best server isn’t enough. That’s the

price of entry.”

Ann Livermore, Hewlett-Packard]

% Rev From Service:

GE (80%) … IBM (80%) … HP … Sun????

Maybe one [or more] of your “PSFs”

becomes the tail that wags the dog????? [E.g.: engineering, IS-logistics-

customer service]

The Raw Material …

The WOW Project!

“Reward excellent failures. Punish

mediocre successes.”

Phil Daniels, Sydney exec

Brand Inside

Brand You: Distinct …

or Extinct

“New Economy changes how

firms treat layoffs”

Headline, USA Today (03.19.2001)

New World of Work

< 1 in 10 F500#1: Manpower Inc.

Freelancers/I.C.: 16M-25MTemps: 3M (incl. CEOs & lawyers)

Microbusinesses: 12M-27MTotal: 31M-55M

Source: Daniel Pink, Free Agent Nation

“If there is nothing very special about your work, no matter how hard you apply

yourself, you won’t get noticed, and that

increasingly means you won’t get paid much either.”

Michael Goldhaber, Wired

Brand Inside

Brand Talent: The Great War for Talent

“When land was the productive asset, nations

battled over it. The same is happening now for talented people.”

Stan Davis & Christopher Meyer, futureWEALTH

“We have transitioned from an asset-based strategy

to a talent-based strategy.”

Jeff Skilling, CEO, Enron

From “1, 2 or you’re out” [JW] to …

“Best Talent in each industry segment to build

best proprietary intangibles” [EM]

Source: Ed Michaels, War for Talent (05.17.00)

“We believe companies can increase their market cap 50 percent in 3 years. Steve

Macadam at Georgia-Pacific changed 20 of his 40 box plant managers to put

more talented, higher paid managers in charge. He increased

profitability from $25 million to $80 million in 2 years.”

Ed Michaels, War for Talent (05.17.00)

Message: Some people are better than other

people. Some people are a helluva lot better than other

people.

“Top performing companies are two to four times more likely

than the rest to pay what it takes to prevent losing

top performers.”

Ed Michaels, War for Talent (05.17.00)

What gets measured gets done. What gets

paid for gets done more. What gets paid

a lot for gets done a lot more.

“Talented people are less likely to wait their turn. We used to

view young people as trainees; now they are authorities. Arguably

this is the first time the older generation can – and must – leverage the younger generation very early in their careers.”

Ed Michaels, War for Talent (05.17.00)

The Cracked Ones Let in the Light

“Our business needs a massive transfusion of talent, and talent, I believe, is most likely to be found

among non-conformists, dissenters and rebels.”

David Ogilvy

“AS LEADERS, WOMEN RULE: New Studies find that female managers

outshine their male counterparts in almost

every measure”Title, Special Report, Business Week, 11.20.00

Message: Women are better at this

“virtual organization” stuff!

Brand Inside

Brand Action:Getting Started … a

Personal Perspective

Topic: Boss-free

Implementation of STM /Stuff That

MATTERS!

THE IDEA

“4Fs”: Find a

Fellow Freak

Faraway

World’s Biggest Waste …

Selling “Up”

Heart of the Matter

F2F!/K2K!/1@T/R.F.A.*

*Freak to Freak/Kook to Kook/One at a Time/ Ready.Fire!Aim.

“Lead” customers!

K2KK

BOTTOM LINE

The Enemy!

Joe J. Jones Joe J. Jones 1942 – 2001 1942 – 2001

HE WOULDA DONE SOME HE WOULDA DONE SOME

REALLY COOL STUFF REALLY COOL STUFF

BUT …BUT …

HIS BOSS WOULDN’T LET HIM! HIS BOSS WOULDN’T LET HIM!

The greatest dangerfor most of us

is not that our aim istoo high

and we miss it,but that it is

too lowand we reach it.

Michelangelo

Brand InsideReprise:

THINK WEIRD: The High Standard

Deviation Enterprise

Saviors-in-Waiting

Disgruntled CustomersFringe CompetitorsRogue Employees

Edge SuppliersWayne Burkan, Wide Angle Vision: Beat the

Competition by Focusing on Fringe Competitors, Lost Customers, and Rogue

Employees

Button-down Org H.S.D.E. .

• Acquire for market share• Suck up to biggest customers• Pursue “strategic vendors”• Bigger is better• Accept assignments as given• Hire 4.0s from “top schools”• Promote when they’ve “paid

their dues”• Appoint a “prestigious” board

• Hang out with my pals• R.A.F.• Be “professional” at all

times/Honor thine elders

• Acquire for innovation• Partner with cool customers• Seek out pioneering vendors• Break it up … to refresh• Reframe all tasks to innovate• Hire “intriguing,” wherever• Promote tomorrow if the work

product is weird and WOW• Appoint an interesting,

headstrong board• Take a freak to lunch today• F.F.F.• Stay loose, stay cool/The hell

with thine elders

“Too many companies rely on benchmarking against industry

leaders. The problem is that those companies are simply catching up to what’s already been done,

while the leaders are moving on to some new advantage.”

David Crane, on Michael Porter’s Canadian competitiveness study, which discovered an

Innovation Deficit (05.05)

John Roth’s “Rules” [Nortel]

1. Our strategies must be tied to leading-edge customers on the attack.

2. Time cannot be sacrificed for better quality, lower cost, or even better decisions.

3. It doesn’t matter whether you develop or acquire leading technology. Our job is to provide the technology

and products our customers need.4. Success is achieved by leading change,

not waiting for it.5. We are paranoid about our leadership – willing to cannibalize our own products to maintain our edge.

Source: Abridged from The Wall Street Journal (07.25.00)

“Our strategies must be tied to leading edge

customers on the attack. If we focus on the defensive

customers, we will also become defensive.”

John Roth, CEO, Nortel

Part I: Brand InsidePart II: Brand Outside

Part III: Brand Leadership

Forces @ Work II

The Commodity Trap

“The ‘surplus society’ has a surplus of

similar companies, employing

similar people, with similar educational backgrounds, working in

similar jobs, coming up with similar

ideas, producing similar things, with

similar prices and similar quality.”

Kjell Nordstrom and Jonas Ridderstrale, Funky Business

Brand Outside

Strategy 1:Use E-Commerce to

Re-invent Everything!

Tomorrow Today: Cisco!

90% of $20B (=$50M/day)75% mfg. outsourced; 50% of orders routed to supplier who ships direct

Gross margin: 65%; Net margin: 28%

Annual savings in service and support from customer

self-management: $550M

Enron eWorld: “Price a structured trade,” per John Arnold, 26: Early

1999: 30 times a day. Late 2000: 30 times per … minute.

Long-term gas contract. 1989: 9 months, 400+ deals. Late 90s:

2 weeks, 2 per week. Late 2000: 5 such deals per day

Source: www.ecompany.com (1/2001)

GM/Ford/DaimlerChrysler/Renault/Nissan/Oracle/CommerceOne

Covisint (02.2000)$240B (+$500B)90,000 Suppliers

$2-3,000/Car42 to 12-18 MonthsSource: Business2.0 (02.2001)

“This is the first meter of a 10-kilometer race.

Eventually, all markets will come to resemble today’s foreign exchange market.”

Hamid Biglari, Head of Corporate Strategy, Citigroup, in “GIGATRENDS”, Wired 04.01

COMMUNITY SERVICES!/ CUSTOMER CONTROL!

Tomorrow Today: Cisco!

90% of $20B; save $550M

C.Sat e >> C.Sat H

Customer Engineer Chat Rooms/Collaborative

Design ($1B “free” consulting) (45,000 customer problems a week solved via

customer collaboration)

RADICAL STRATEGIES

REQUIRED

“One cannot be tentative about this. Excuses like ‘channel

conflict’ or ‘marketing and sales aren’t ready’ cannot be allowed. Delay and you risk being cut out of your own market, perhaps not by traditional competitors but by companies you

never heard of 24 months ago.”

Jack Welch [07.00/Forbes.com]

GE & the Web

Purchasing: 2000: $6B; 2001: $15B

Sales: 1999: $1B; 2000: $7B; 2001: $20B+

Source: Business 2.0 (05.01)

“We’ve put the word out to all of our suppliers: by the end of the year [2000] we’ll only do purchasing

over the Internet.”John Paterson, C.P.O., IBM

[$50B from 18,000 suppliers]

Nasser’s Triad: The Internet Is the New Job 1

Brian Kelley, 40, head of global sales and service (GE appliances);

first non-“car guy” in the job

Karen Francis, 38, eBusiness czar (Olds brand boss)

Marv Adams, 43, CIO (Bank One’s IT infrastructure consolidator)

WebWorld = Everything

Web as a way to run your business’ innardsWeb as connector for your entire supply-demand chain Web as “spider’s web” which re-conceives the industry

Web/B2B as ultimate wake-up call to “commodity producers”

Web as the scourge of slack, inefficiency, sloth, bureaucracy, poor customer data

Web as an Encompassing Way of LifeWeb = Everything (P.D. to after-sales)

Web forces you to focus on what you do bestWeb as entrée, at any size, to World’s Best at Everything

as next door neighbor

Message: eCommerce is not a technology play! It is a

relationship, partnership, organizational and

communications play, made possible by new

technologies.

Message: There is no such thing as an effective B2B or

Internet-supply chain strategy in a low-trust,

bottlenecked-communication, six-layer

organization.

“Ebusiness is about rebuilding the organization from the

ground up. Most companies today are not built to exploit the Internet.

Their business processes, their approvals, their hierarchies, the

number of people they employ … all of that is wrong for running an

ebusiness.”

Ray Lane, Kleiner Perkins

“There is no use trying,” said Alice. “One can’t believe impossible things.”

“I daresay you haven’t had much practice,” said the Queen. “When I was

your age, I always did it for half an hour a day. Why, sometimes I’ve

believed as many as six impossible things before breakfast.”

Lewis Carroll

I’net …

… allows you to dream dreams

you could never have dreamed

before!

“We want to be the air traffic

controllers of electrons.”

Bob Nardelli, GE Power Systems

Message 2001: Only idiots pull in their

[investment] horns during a downturn.

Brand Outside

Strategy 2A:

Women Rule!

?????????

Home Furnishings … 94%Vacations … 92%

Houses … 91%Consumer Electronics … 51%

Cars … 60% (90%)All consumer purchases … 83%

Bank Account … 89%Health Care … 80%

$4.8T > Japan

9M/27.5M/$3.6T > Germany

Brand Outside

Strategy 2B:

Welcome to “Old World”!

2000-2010 Stats

18-44: -1%

55+: +21%(55-64: +47%)

Aging/“Elderly”

$$$$$$$$$$$$“I’m in charge!”

Brand Outside

Strategy 2C:

Welcome to “Green World”!

And #3: GREEN?????: 50% to 36%: Protect Environment > Economic

Growth.

58% to 34%: Protect Plants & Animals > Preserve Private

Property Rights.

“Of all the ways the company will be judged over the next

decade, none will be greater than our

response to the issue of climate change.”

William Clay FORD Jr.

Brand Outside

Strategy 3:

It’s the Experience!

“Experiences are as distinct from services as services are from

goods.”Joseph Pine & James Gilmore, The

Experience Economy: Work Is Theatre & Every Business a Stage

“The [Starbucks] Fix” Is on …

“We have identified a ‘third place.’ And I really believe that sets us apart. The third place is

that place that’s not work or home. It’s the place our

customers come for refuge.”Nancy Orsolini, District Manager

Experience: “Rebel Lifestyle!”

“What we sell is the ability for a 43-year-old accountant to dress in black leather, ride

through small towns and have people be afraid of him.”Harley exec, quoted in Results-Based

Leadership

The “Experience Ladder”

Experiences Services

Goods Raw Materials

1940: Cake from flour, sugar (raw materials economy): $1.00

1955: Cake from Cake mix (goods economy): $2.00

1970: Bakery-made cake (service economy): $10.00

1990: Party @ Chuck E. Cheese (experience economy) $100.00

Message: “Experience” is the

“last 80%.” “Experience” applies to

all work!

Brand Outside

Strategy 4:

BRAND POWER!

“WHO ARE YOU [these days] ?”

TP to Client

“WHO ARE WE?”

WHAT’S OUR

STORY?

“EXACTLY HOW AM I/

ARE WE DIFFERENT?”

1st Law Mktg Physics: OVERT BENEFIT (Focus: 1 or 2 > 3 or 4/“One Great Thing.”

Source #1: Personal Passion)

2ND Law: REAL REASON TO BELIEVE (Stand & Deliver!)

3RD Law: DRAMATIC DIFFERENCE (Execs Don’t Get It: “intent to purchase” – 100%;

“unique” – 0% to 5%)

Source: Jump Start Your Business Brain, Doug Hall

“EXACTLY HOW DO I CONVEY

THAT DIFFERENCE TO

THE CLIENT ”

“Brand Promise” Exercise: (1) Who Are WE? (poem/novella/song, then 25

words.) (2) List three ways in which we are UNIQUE … to our Clients.

(3) Who are THEY (competitors)? (ID, 25 words.)

(4) List 3 distinct “us”/”them” differences. (5) Try “results” on your teammates. (6) Try ’em on a friendly Client. (7) Big Enchilada:

Try ’em on a skeptical Client!

Part I: Brand InsidePart II: Brand Outside

Part III: Brand Leadership

Brand Leadership

Passion Rules!

“Let’s make a dent in the universe.”

Steve Jobs