Management Innovation

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Management Innovation

  1. 1. M an In ag no em th e va e M an ag em In tio nt en as t I soc n nn ia ov tio at n io wi n La th b
  2. 2. Special report 62 Organisational thunderbolts When a management innovator is set loose inside Management an organisation, watch out! Management innovation can have thunderous results. Innovation 66 From R&D to Connect + Develop at P&G Challenged by its CEO to source ideas from outside, Procter & Gamble decided to blaze a new path for its research and development function. In pursuit of inspiration, its R&D became turbocharged by using “insourcing” to expand P&G’s horizons. 70 Perfectly in balance Art Schneiderman pioneered what later became the concept of the balanced scorecard while a vice president of quality and productivity at Analog Devices. We talked with Schneiderman to find out more about the early evolution of a management innovation. 72 Making the firm flexible How companies operate has been established over two centuries. Is it possible for a firm to break the established rules of organisation? Eden McCallum did just that. 76 Death to budgeting It’s considered one of the basics of management. If you don’t have a budget, you aren’t really managing. But, UBS has made budgeting secondary to performance and customer satisfaction. 79 Designing the culture When the design firm, IDEO, opened for business, its three founders designed an organisation low on Special report hierarchy, big on communication, with a minimal amount of ego. Forty years on, it still works. 82 Employees first Innovation is often focused on products. Yet the leader of one Indian company is shifting the business model of a 30,000-employee company. HCL Technologies reveals how innovation can apply to organisational systems as well. Written by Julian Birkinshaw, Stuart Crainer and Michael Mol. © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 61
  3. 3. Organisational thunderbolts Management innovation – the implementation of new management practices, processes and structures that represent a significant departure from current norms – has transformed the way many functions and activities work in large organisations. When a management innovator is set loose inside an organisation, watch out, management innovation can have thunderous results. M ost people consider was. Everyone thought, that’s the As you probably surmise, Koz management a tool of the way it’s supposed to be. changed not only the company but status quo. They consider But, as Collard told John Kotter the rest of the industry. Collard the good manager as someone who and Dan Cohen, in Heart of Change completes her story by attesting that keeps things running smoothly; or, if (Harvard Business School Press, this one management innovation there’s a problem, as someone who 2002), everything changed when Koz “transformed the place, and, as a restores the status quo so that the rattled the status quo. “We are not result, quality has gone up and all of business can keep humming along. going to move an airplane,” she our aircraft have not only been on Consequently, when a manager remembers Koz saying, “until it is time, they’ve been early!” shakes up the status quo and actually complete in position. Quality is It’s rare for management to hurl improves the way things run, the number one, so that’s what we are an organisational thunderbolt, but its impact (especially in large going to focus on. Until the plane is impact can be enormous. organisations) can be thunderous. done and done right, no movement. Management innovation – the Boeing’s Debbie Collard shares the Period.” implementation of new management story of the manager who thought the Collard then relates how workers practices, processes and structures C-17 jumbo transport plane could be and managers alike responded to Koz that represent a significant departure built in a radically different way. and his revolutionary way of doing from current norms – has Collard tells of the revolution things: transformed the way many functions created by “Koz” (most likely, Don and activities work in large Kozlowski), the executive newly Everyone thought he was off his organisations. Ford’s introduction of charged with leading the production rocker. You didn’t do things this the moving assembly line in 1913 Special report of the C-17, a plane so gigantic that way. I think some of his direct and Western Electric’s invention of its tail is four stories high. Planes reports, in particular, thought he statistical quality control in 1924 that huge require hundreds of people was crazy. They were convinced changed businesses forever. Every to assemble them, and the tradition that we would never be able to managerial process we now take for is that such a plane is built in deliver on time if we did it this way. granted was created by inventive and stages, by moving it from one Never. Wouldn’t happen, anybody far-sighted individuals: double-entry position to another as the successive knows that. Something would book-keeping was invented by Luca work is completed. The norm in the always bring everything to a halt. Pacioli in 1494, and the limited industry was for movement from You’d have employees twiddling liability company was created in position to position to occur per the their thumbs at great expense to 1856. set timetable, whether every the company. You might as well But management innovation production detail was attended to or expect cars to be made by remains poorly managed and poorly not. At least in the case of the C-17, secretaries on the fifty-ninth floor understood. It is typically left to prior to Koz, that’s the way it always of the Sears building in Chicago. occur in an ad hoc fashion, and 62 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  4. 4. successful management innovators – Distant horizon The second point of Wealth Management has been like Boeing’s Koz – have to work very difference was the amount of growing rapidly ever since (and the hard to get others to understand uncertainty and ambiguity in the full story is explored on page 76). what they are doing, or why they are process. Most management doing it. While academic studies of innovations took several years to Inspiration from outside the diffusion of existing implement, and in some cases it was Management innovators need management innovations are impossible to say with any precision inspiration – examples of what has common, there is virtually no when the innovation actually took worked in other settings, analogies literature on its origins, that is, on place. To some degree this can also from different social systems or the generative processes through be the case with technological unproven but alluring new ideas. which management innovation first innovations, but the subtle nature of Managers with thunderbolts revealed takes shape. the process was particularly acute in a breadth of thinking that allowed the management innovations we them to strike out on their own path, In search of... a process? studied. rather than just adopt a proven Management innovation has some model applied by a competing firm. obvious commonalities with How it happens For example, Dee Hock founded Visa technological innovation as a Our research suggests management with a unique cooperative process: it involves key individuals innovations occur in five stages. organisational model that drew more pulling together ideas and resources from the principles of Jeffersonian in novel ways, championing their Dissatisfaction with status quo In Democracy than from traditional ideas inside their organisation, cases we studied, the internal hierarchical thinking. building coalitions of senior problem that management innovation More generally, we observed that executives to support them and addressed was always some level of many management innovators had using their political skills to dissatisfaction with the status quo. unusual backgrounds or they had It’s rare for management to hurl an organisational thunderbolt. Why so? overcome internal resistance. But We use the word dissatisfaction worked in a wide variety of different our research suggested there were because it covers a multitude of functional areas or countries. Art also two important points of situations, from a nagging operational Schneiderman, the manager at difference that made management problem through a strategic threat to Analog Devices who in 1987 innovation a distinct process. an impending crisis. developed the prototype for what One classic example: in 2003 UBS became known as the Balanced Change agents The first distinction Wealth Management, the private Scorecard, was strongly influenced was a much more significant role for banking arm of the Swiss giant, was by Jay Forrester’s system dynamics external change agents. These looking to grow after several years of concepts during his MBA training at individuals were a mix of academics, painful cost cutting. The executives MIT’s Sloan School, then spent six consultants, gurus and ex- started looking into the blockers – years as a strategy consultant with employees. They often provided the the things that were standing in the Bain working on quality management initial source of inspiration, and they way of the growth agenda – and they projects in Japan before joining Special report frequently helped to shape and realised that the budgeting process Analog Devices. This background legitimize the management was a key problem area. As CFO Toni gave Schneiderman insight into innovation as it took hold. While Stadelmann notes, “Budgeting is continuous improvement techniques external agents rarely developed new highly defensive – it is cumbersome, that were being used in Japan plus a practices themselves, they offered and it is fundamentally against system-wide perspective on the important inputs at all steps along growth. It is about negotiating down functioning of the organisation. So the way. The process thus had a the targets that are proposed by the when asked by CEO Ray Stata to highly interactive quality. It typically centre. And it causes people to talk develop a quality improvement took place on the fringes of the about numbers, not about clients process for the company’s organisation rather than in the core and market opportunities.” This manufacturing, he quickly developed through the relations between realisation led to a complete re- a set of metrics that included both conceptually oriented managers and thinking of how individual client financial and non-financial managerially oriented external advisors worked and the elimination components. (Art Schneiderman is change agents. of the traditional budgeting process. interviewed on page 70.) → © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 63
  5. 5. → Invention It is customary to and your peers could give you resource allocation system built assume that every innovation has a rewards for participating on a web- around self-organised project teams “eureka” moment – when the based innovation model. and an entirely open-plan physical inventor makes the key conceptual Then in 2000 my boss said we layout. This new model helped breakthrough or proposal that want you to create the new Oticon to achieve dramatic increases everything else follows from. 3M’s business model of innovation. in profitability over the rest of the Art Fry famously came up with the Building on my earlier work I decade. Lars Kolind, the CEO of Post-it Note concept at his local started to create the conceptual Oticon and architect of these church as he sought to keep track of positioning for connect and changes, got his inspiration for this multiple pages in his book of hymns. develop. A lot of it starts with new model from his deep And people at Boeing still tell the experiments, making concepts and involvement in the scouting “Koz C-17” story because eureka storyboards and films, just like you movement: moments are legendary. However, our would do if you’re making a evidence suggests that such eureka product. People just think this The scouting movement has a moments are rare. Invention is a stuff falls to the ground: they don’t stronger volunteer aspect, and process in which the innovator brings realize that these big management whenever scouts come together, together the various elements of a systems are constructed, and you they cooperate effectively together problem (dissatisfaction with the have to be smart about it; it takes without hierarchy. There is no game status quo) with the various elements a lot of skill to do that. playing, no intrigue; we are one of a solution (which involves some family brought together through inspiration from outside plus a clear Internal validation In one important common goals. My experiences in understanding of the internal respect management innovation is scouting led me to focus on situation and context), but the just like every other form of defining a clear “meaning” for We found that there were also two important points of difference that made management innovation a distinct process. manner in which these elements are innovation: it involves change and Oticon employees, something brought together is typically iterative uncertainty, and as a result it beyond just making money, and to and gradual. encounters resistance from people build a system that encouraged Consider the case of Connect & who don’t understand or don’t value volunteerism and self-motivation. Develop, Procter & Gamble’s radical the proposed innovation. And it is approach to building an external impossible to accurately predict Kolind’s experiences at Oticon were network of scientists around the whether any innovation’s benefits will typical. His first challenge was to world as a means of “turbocharging” exceed its costs. A critical stage in persuade the owners of the company its internal R&D. This major the process, then, is for the (primarily a foundation) that a organisational innovation (analysed management innovators to generate radical change was necessary to in our article on page 66) took the validation for their new idea. We confront the challenge posed by best part of 10 years to put together. describe the process of validation to giant competitors like Siemens and Larry Huston, the key architect of the external parties below; but the more Philips. Once that had been model explains: important step, at least in terms of achieved, he embarked on a massive Special report the initial implementation, is for the internal selling programme to Back in the mid-1990s I was innovation to gain internal acceptance. explain the nature of his proposed interested in how to develop a new Management innovation is even changes to the employees. He used organisation form where people trickier to validate than technological radical slogans such as “think the would be fluid and could swarm to innovation because the innovation unthinkable” and visual symbols, the good projects, yet protect the itself is less easily codified, requires such as a large transparent chute in base business. We spent time the willing participation of many the middle of the building down actually thinking through the people for it to work and often which all shredded documents fell. detailed, entire organisation delivers its results only several years Inevitably there were some design and I actually made a after implementation. employees who chose to leave concept video. I then tried to get Consider Oticon, which in the early because they were not comfortable one company off the ground, 1990s developed a radical with his changes, but most were called Company Way, where you organisation model with no formal quick to see the benefits and would get rewards for participation hierarchical reporting relationships, a became involved in implementing 64 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  6. 6. the transition to what became known ● The industry association that different ways of operating is also as Oticon’s “spaghetti organisation”. seeks to develop improved invaluable as a means of opening up The management innovator may be a practices across its member their minds to new alternatives. brilliant inventor initially, but it is organisations. Remember that Total Quality Management came equally important for that inventor to Build a capacity for low-risk about when W.E. Deming and then build a support coalition to experimentation In one company we other quality experts gave a series carry the invention into the know, there is a sustained effort to of lectures before the Japanese organisation. Effective management Union of Scientists and Engineers. encourage individuals and teams to innovation requires determined Various member companies of that come up with management individuals as much as it does the Union then started taking up TQM innovations to tackle everyday creation of a fertile breeding ground and sharing their experiences. problems with the existing for their ideas. bureaucracy and processes. But Making thunderbolts each innovation must be tested with External validation One of the So what can you do to improve your a limited number of people and for a distinctive features of the company’s capacity for management limited period of time. This has management innovation process that innovation? A number of common ensured that every idea gets a shot emerged during the research was themes emerged from the research at implementation without crippling what we came to call “external that should serve as useful pointers the ability of the organisation as a validation” – essentially a stamp of for a company that would like to take whole. approval from an independent its management innovation efforts observer, such as an academic, a more seriously. Make use of external change-agents consultancy, or a media organisation. to explore your new ideas Outsiders Again, the reason why external Become a conscious management fulfil three primary roles. They validation proved to be so important innovator Every company today represent a source of new ideas and had to do with the uncertain and knows that it needs to continuously analogies from different settings, ambiguous nature of most create new products and services to they can act as a sounding board for management innovations. Because meet customers’ evolving demands. making sense of your emerging of a lack of hard data to prove that a And these firms have all set up some innovations, and they can help to particular innovation was working, sort of innovation function, whether validate what you have done. companies frequently sought it is in the form of a physical R&D external validation as a means of lab or a new venture division. If you Become a serial management increasing the level of internal want to become a management innovator The real success stories in acceptance. This process of innovator, selling the importance of management innovation are not the validation also typically increased management innovation to your companies who have innovated once the visibility of the innovation to organisation is a crucial first step. or twice. The serial management competitors or companies in other innovators (like GE, which has been industries, which tended to reinforce Create a questioning, problem- a pioneer in many new approaches, the innovation further. Four types of solving culture When you or your from strategic planning to executive external actors were identified during employees are faced with an unusual development to divisions observing the research: challenge in your company, look boundarylessness) are the ones to deeper into the problem: see the emulate. ● The business school academic problem in new ways and start to who typically acts as a thoughtful hypothesize about new ways of These six points are certainly not a observer of the emerging solving it. Only the latter path can recipe for management innovation. Special report innovation and who sees his/her take you towards management The process of developing radical role as codifying the practice in question for use in research and innovation, so you need to encourage new ways of working will always have classroom teaching. employees to explore the unexplored some dose of luck and randomness ● and to avoid the easy answers. to it. But you can certainly tilt the The consulting organisation that sees its role primarily in terms of odds in your favour by working on codifying and documenting the Seek out analogies and exemplars these points and by creating a innovation so that it can then be from different environments greater understanding in your used in other settings. Depending on the problem you are company of how management ● The media organisation that sees trying to solve, the types of solutions innovation happens. To be sure, its role as broadcasting the story you might want to consider will vary. thunderbolts seldom happen in of the innovation to as wide an Exposing your employees to many companies in which managers audience as possible. different types of environments and worship the status quo. ■ © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 65
  7. 7. From R&D to Connect + Develop at P&G Challenged by its CEO to source ideas from outside, Procter & Gamble decided to blaze a new path for its research and development function. In pursuit of inspiration, its R&D became turbocharged by using “insourcing” to expand P&G’s horizons. I n 2000 Procter & Gamble (P&G) weren’t consistently leading focused the company on four core was at a crucial point in its long innovation, and prices were too high. businesses (accounting for 54 per history. One of the world’s best- We had priced-up big established cent of sales and 60 per cent of known corporations and creator of brands to pay for new products and profits); its big, established leading some of the world’s most famous and aggressive geographic expansion. Our brands; and P&G’s top 10 countries successful brands was at a costs were also too high. We had (80 per cent of sales and 95 per crossroads. Its CEO, Dirk Jager, had frayed relations with important cent of profits). Costs, which had left after a mere 18 months in the customers who were frustrated with rocketed under Jager, were cut. job. In March, the company incompatible strategies, poor service Capital spending had leapt to eight announced it would not meet its levels, and P&G’s inability to create per cent of sales and was trimmed. projected first quarter earnings. The value for them. We were too Nearly 10,000 jobs were lost around stock price was spiralling downwards internally focused. Consumed with the world as underperforming – falling from $116 in January to the massive reorganisation, and with businesses were closed and the $60 per share by March. The massive so many people in new jobs, we were company left businesses now loss of $85 billion in market all spending too much time regarded as non-strategic. Some capitalization was matched by the managing internal transactions.” product lines were discontinued, loss of confidence within. It provoked In addition to this litany of internal investments were written off and a media frenzy. Perhaps most problems, P&G had the abiding brands, such as Comet, Crisco and poignantly, Ad Age headlined its front corporate challenge of achieving Jif, were sold off. page story: “Does P&G Still Matter?” growth. A mature company, such as And, perhaps most boldly of all, in It was one of many column inches P&G, is usually expected to deliver the midst of establishing the new devoted to the apparently impending organic growth rates of around four P&G order, Lafley announced an demise of the company. to six per cent every year. entirely new approach to innovation. P&G’s new CEO, A.G. Lafley, Historically, this growth had been P&G’s corporate innovation fund had provided an instant dose of reality: delivered by the company’s increased seven-fold in four years. Special report “We weren’t delivering on goals and formidable research and Two-thirds of these projects were commitments to analysts and development resources – thousands cut. Lafley announced that, in the investors. Major P&G businesses of researchers spread worldwide. But future, instead of relying on its were underperforming – only three of with the proliferation of new internal research and development, them accounted for 80 per cent of technologies and intensifying P&G expected that 50 per cent of its the total value created inthe 1990s. competition, P&G’s standard innovation would come from outside Competitors were swooping in and approach to R&D was under threat. the company. R&D numbers would gobbling up market share. We were Only 35 per cent of its new products remain the same, but the onus overinvested: we overbuilt capacity, met their financial objectives. R&D would be on maximizing ideas hired too many people, funded too productivity was stagnant. internally and externally. many aggressive introductions of new Lafley’s prescription for the ailing The logic was simple. For every products and expansions of existing corporate patient was wide-reaching. one of the company’s researchers, brands. P&G brands were not Estimating that it would take three P&G calculated there were 200 delivering good consumer value: we years to get P&G back on track, he people – scientists or engineers – 66 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  8. 8. outside the company who had deliver high-performing results, yet create a new R&D model for the talents the company could utilise. be adaptive. He spoke, among company? Instead of 7,500 people in corporate others, to Dee Hock at Visa, who had “This was a moment in time that R&D, P&G recalculated that there instigated a unique organisational allowed us to really consider a whole were 1.5 million worldwide whose form labeled the “chaordic new operating method,” Huston knowledge they needed to tap into. organisation”. His attention then summarizes. “I had run six years of Research and development was developed to embrace chaos theory. experiments, and went out and reincarnated as Connect + Develop Huston sought to understand started studying real world with an organisation of 1,507,500 whether there was a way to attract innovation networks and how value people. the best people to projects with a could be created. Then we created greater chance of success and to the conceptual positioning for Green lights; new dawn allow bad projects to die because Connect + Develop, around the idea For Larry Huston, then 26 years into they would go unstaffed. “I wanted of turbocharging our already strong his P&G career, Lafley’s to create an organisation where base organisation. I had the announcement was a crucial people would be fluid and move rationale and some ideas about the moment, a green light for his work around and could swarm to the good tools and how to get it off the ground stretching back much of the past projects, yet protect the base and created a new role called decade. He told his team: “We’re in business.” technology entrepreneurs. Lafley business, things are going to start Huston made contact with Stuart announced that we were going to get happening.” Kauffman at the Bios Group and half of our innovation from the Huston’s state of readiness was spent time thinking through and outside. That was a major understandable. Tracing back the developing a detailed organisation intervention and so we were off and idea that became Connect + design. This was captured on the running.” Develop, he goes back to the mid- walls of a large conference room in Importantly, Lafley’s 1990s and draws parallels with Santa Fe, and Huston was then announcement was a very public artists. “It’s just like the way some filmed giving a guided tour to the one. He put the stake in the ground. artists will develop models and organisation design of the future – Reactions were decidedly mixed, sketches before they commit to with Kauffman following with his Larry Huston recalls: “Some people’s creating the final painting,” says own commentary. first reaction was, wow, P&G is The Connect and Develop model of innovation is nascent and likely to become the dominant innovation model of our times. Huston. “Thomas Hart Benton, for By way of further experimentation getting rid of its R&D. Should we example, a US-based social realist, Huston then worked with a start-up sell the stock? This is a science- would create clay models and then software company to launch a driven company, what are they more models of what he was company to facilitate a “flow to the doing, have they lost their minds? eventually going to paint and then best opportunity” model. This web- They didn’t realize that what we he would start working on the based investigation lasted a year were doing was substantially perspectives with all kinds of while Huston and his team studied a strengthening our R&D capability.” sketches. He would work on the handful of innovation projects that Special report concept for a long, long time before had been brought in from outside Reality and development he ever actually created a successful P&G. External connections created The positioning of Connect + painting. That’s the way most artists about twice as much value as Develop was important. First, it was work; look at all the study pieces internal initiatives when factors such made clear that Connect + Develop that everybody does. And, in the as success rates and time to market was not a matter of outsourcing case of this new innovation model, and after costs were fully P&G’s research and development we worked, probably, five or six years considered. Huston extrapolated that capability. Connect + Develop was on creating the studies that led to it a connections model of innovation about finding good ideas and coming together, ultimately, in the could create a breakthrough in bringing them in to enhance and year 2000.” driving P&G’s business and its capitalize on internal capabilities. In Huston, along with colleague productivity. essence, an insourcing strategy. Nabil Sakkab, was initially interested Gilbert Cloyd, P&G’s Chief The second point was that in how to develop a new organisation Technology Officer, approached Connect + Develop was not a form that combined the ability to Huston with a challenge: could he “transformation” programme. → © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 67
  9. 9. → “I think transformation is a dirty word,” says Huston. “If you go and say to a company, ‘I’m going to go transform you’, they’ll say, it’s going to be impossible and we’ll never finish. In the case of Connect + Develop we were careful not to position it as transformation – even though now it is. We said, we have a strong, powerful, global organisation, we’ve built outstanding capability all over the world, we have world class people, what we’re going to do is take this already strong capability and turbocharge it. And so the core idea is based upon how do we turbocharge? And then, what are the accepted beliefs that people have about this kind of thing? How do we create its credentials?” Connect + Develop focused on three areas: the needs of consumers (each business and the company as a whole identified the top 10 needs of consumers); adjacencies (products or services which could help P&G capitalize on existing brand equity); and, what the company labels Larry Huston: well connected “technology game boards” (a planning tool which enables P&G to said, ‘Of course I’m comfortable problems; and Yet2.com, an online evaluate how technologies in one talking. I consider your 2,500 R&D intellectual property marketplace. area impact elsewhere in the people to be my R&D lab.’ And this Once ideas emerge through the business). really blew his mind.” networks they are rigorously At the heart of Connect + Develop P&G also created a network of evaluated by P&G before deciding to is using networks to gain connections what it labels “technology proceed with further development. to new ideas. In the old invention entrepreneurs”. “They are senior model “know-how” was key and experienced people who have seen The innovation dividend really this is what was focused on the everything, done everything. They are P&G accomplished its goal. Over 50 most. In the new connections model focused on being the growth per cent of the company’s “know-who” would become critical. provocateurs for the organisation,” innovations now originate outside The networks P&G keys into are Huston explains. The technology the company. When Lafley first varied. Among the most notable are entrepreneurs number 70 worldwide. announced his bold target in 2000, proprietary networks developed They are effectively the eyes and the figure was under 15 per cent. specifically for Connect + Develop. ears of Connect + Develop making Connect + Develop has helped Special report For example, P&G’s leading 15 contacts within industry and turbocharge more than 250 products suppliers have around 50,000 education, with suppliers, and with into the marketplace, and has people employed in R&D. P&G built local markets. To date, the generated billions of sales. an IT platform to share technology technology entrepreneurs have Now Procter & Gamble’s vice briefs with suppliers. Closer working brought over 10,000 products, ideas president for innovation and relationships and the sharing of and technologies to the attention of knowledge, Huston believes that information have brought a 30 per P&G. Each is then evaluated. Connect + Develop offers broader cent increase in projects with staff Elsewhere, P&G taps into a lessons on how to develop from suppliers and P&G working number of open networks. It is management innovations. “The one together. involved with YourEncore, which thing that is really important is to Even competitors offer sources of connects companies with high get the concept right,” says Huston. inspiration. Huston recalls meeting a performing retirees from over 350 “P&G is a concept-driven company. competitor from Japan. “He said, companies; InnoCentive, which deals A concept for us is how the product’s ‘Are you comfortable with talking?’ I with more specific technical going to make the consumer’s life 68 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  10. 10. better and providing strong reasons this thing out. But, it is trite to say dominant innovation model of our to believe in it. So we practice that this is all about starting with the times. “It is like developing the concept development here every day, CEO and changing the rewards telephone system. If Procter & because we have to move hearts and system. For me, it starts with an Gamble developed the telephone minds. We have to win the battle at idea, one that is proven, one that system and only we had it in the the store shelf and getting the can be scalable. Then it moves to world, yes, it would benefit our concept right is enormously the top leadership for support. Then, operations. But, if the world has the important. In fact, most product on to making the necessary changes telephone, look how much more failure, 75 per cent of product in the culture, like rewards, to effective we are and what’s most failure, is not because the product enable adoption at scale. important with the telephone system doesn’t perform, but because it was “Second, it’s about building a lot is not the utility but the the wrong idea. It didn’t provide more muscle. Connect + Develop is conversations. So we’ve been telling desired consumer benefits at the about muscle, it’s about giving us our potential partners, here’s the offered price. Many organisation many more hearts, minds, hands and utility, here’s how you do Connect + failures are due to both a poor feet to do the work. And the third Develop, because fundamentally we concept and poor execution.” thing is, it is about equipping people believe that our competitive For a number of innovations that and mindsets. For the most part our advantage is knowing the Huston has been involved in, he people have good ideas. We don’t consumers, leveraging the strength went through the formal concept really have an idea problem. We have of our brands, and the quality of the development storyboarding process, people who are smart and motivated, conversations that we have. It’s not applying what P&G does for products, but mostly organisations are under- whether or not there are networks to management concepts and led around innovation. It’s the top out there or people know that we are businesses. One of the new business officers that have to really create a linking to scientists, it’s the quality ideas tested was called YourEncore growth culture based on innovation of the conversation.” (www.YourEncore.com). The concept rather than just acquisition.” Today, for many companies, “the was to take the experience and There are also cultural challenges innovation phone system, the expertise of people who have retired involved in moving any organisation innovation phone book, and the idea and to utilize it in organisations. from an emphasis on finding of innovation conversations barely Huston and his team created solutions internally to tapping into exists”. For Procter & Gamble, storyboards for the concept and then brilliant minds elsewhere. Most management innovation has been an took them to 21 prime prospect senior managers at P&G have been important driver of its enduring companies. They commented on and with the company for the vast success. It pioneered brand critiqued the idea, how it would work, majority of their careers. “You rely management in the 1920s, it was and the value proposition. Huston on people outside, to some extent, to one of the first companies to next ran financial models to see if help challenge you and put ideas in implement a transnational the desired concept was capable of your head about what might organisation in the late 1980s in making money. YourEncore now links happen,” Huston admits. “In R&D (also led by Larry Huston), and over 1,800 retired scientists and refining your ideas and ideas of it is now leading the world in its engineers drawn from 350 what’s possible, you have to expose approach to open innovation. And companies to organisations in need yourself outside. Whether it’s going the beauty of such innovations is of their experience and expertise. to see Dee Hock or Stu Kauffman or that they are sufficiently deep-seated “It’s all about bringing in new some little entrepreneurial company that competitors take a long time to innovation DNA to create new or studying the movie industry or the catch up. As Huston observes, sources of growth. That’s the core toy industry, or whatever it might be, Connect + Develop is a long-term Special report idea,” says Huston. you have to. The problem is people investment: “I think P&G will run on Clearly, Connect + Develop offers don’t know the right questions to this model for 20 years, and one-by- further lessons on how companies ask. And if you’re inside a company one many other companies will can utilize external expertise and the only questions you know to ask embrace it.” ■ maximize internal resources. The are those within your frame of Resources commitment of the company’s experience. It’s hard to ask a Larry Huston and Nabil Sakkab, leadership was important. Says question outside your frame of “Connect + Develop”, Harvard Huston: “This is all about experience so you have got to be Business Review, March 2006. leadership, number one, being clear moving to other frames of experience about where to play, how you’re to come up with good questions.” A.G. Lafley, “Getting Procter & going to win and where you want to Huston believes that the Connect Gamble Back on Track”, speech at grow. That’s the job of the CEO and + Develop model of innovation is the Rotman School, April 21, 2003. the top management to really figure nascent and likely to become the www.pg.com © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 69
  11. 11. Perfectly in balance Arthur M. (Art) Schneiderman pioneered what later became the concept of the balanced scorecard while a vice president of quality and productivity at Analog Devices. We talked with Schneiderman, now an independent consultant, to find out more about the early evolution of a management innovation. How did you come to a “scorecard” talked about TQM and it made for a yet, after a company has become point of view? great dialogue. It seemed to me right innovating – and if the industry does I was an aerospace research scientist away that Ray and Analog were not demand that you innovate for 15 years and decided that I blessed with an innovative culture. further – someone of a different wanted to change careers. So I quit temperament can lead the company, my job, attended B-school, and Did you say “culture”? with a much more status quo worked in a strategy consulting firm. After years of working with demeanour. Ultimately, I became aware of Total innovation, there is no question in Quality Management (TQM) on a trip my mind that the number one When you worked on being to Japan. And that’s when I became ingredient is to have an innovative innovative, what kind of time horizon so interested in it that I decided I environment. You can’t innovate in was in your mind? really wanted to focus attention on an environment that is not open to One of the first assignments that Ray TQM rather than strategy consulting. innovation, and that means from the gave me at Analog was to develop very top, from the CEO all the way five-year strategic plans. Were you also interested in down through the organisation. And Traditionally, once every five years, innovation at this point? it was clear that Ray was interested: they would develop a strategic plan. Yes. I wanted to make sure that I he recognized that TQM was an Curiously, they would not revisit that worked in companies that had a important thing, that it had an plan until the five years were up. So record of innovation and were impact on any and every industry, I started to think of innovation with particularly responsive to innovation at but that it would acutely affect the at least this kind of time horizon. the management level, because TQM semi-conductor industry, of which he is a kind of innovation. As I searched was a part. There’s no question that I But five years ...does that work in for American companies that would immediately liked and respected Ray today’s marketplace? meet the test of being both innovative Stata and so that ended up being the Obviously in today’s world that’s not Special report and receptive to TQM principles, I chemistry of my going to Analog. It a viable approach, and it did change increasingly focused on Analog was the right environment for me even while I was at Analog more Devices, and I wrote to Ray Stata. and it was the right time for him. toward a continuous strategic planning model. That’s what’s Why that company? Was everyone inside Analog as needed now. If the market demands Ray was and is one of the rare CEOs committed to TQM and innovation? constant innovation (and just about who is really curious and interested No. And, in time, Ray was succeeded every market does), you have to about management innovation. I by someone who has more of a focus on innovation constantly. remember when I first went to see traditional approach to management, What’s most relevant to note here is him, it turned out that it was quite the kind of executive who makes that innovation is not something that timely because he had just gotten off doable promises to Wall Street and is always defined by numerics. Even the phone with one of Analog’s major then tries to deliver on them. The at Analog, I came up with something customers who was irate because a lesson here is that the leader of a that was called the Corporate key shipment was late. And so I company is essential to innovation; Performance Audit, an annual audit 70 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  12. 12. that used what I called a “half-life originally created. Is there one right any time you come up with an method”. The plan we devised used scorecard? innovation in management that has an annual context and focused on Some of my colleagues over the numerical targets as its basis, it is seven or eight non-financial things years have concentrated on creating unlikely that it will ever be accepted that we needed to manage in order the “perfect” scorecard, but I’m not with enthusiasm throughout the to get to where we wanted to be in sure it’s helpful to insist on just one organisation. The lesson is that you five years, numerically and form of scorecard. The big problem should focus on rate of improvement otherwise. In fact, one of my tasks at that organisations have is in rather than specific end results. Analog was to manage the agenda implementing the scorecard; they Second, I believe the scorecard is for the monthly business meetings. don’t have tools in place for probably somewhat less important I can’t put my finger on where or when it happened, but I suddenly realized the best thing to do was to try and combine the two items in what became the overall scorecard for the business. There was always a battle with other achieving the goals. And so they fail. than the half-life method: you have senior managers whether we should They have a scorecard but they don’t to test everyone’s sense of making discuss, first, the non-financial achieve the results they desire, so it solid progress and thus you have to parameters of the business or the never makes any strategic establish sound improvement hard numbers. Many companies fight difference. In the end, they waste a processes in the organisation. And that same battle today. lot of effort and a lot of energy that then the third thing is to cultivate could be spent elsewhere. Some say the mental process for process How did you resolve this battle? the scorecard itself is the big thing; I management. On my website, I can’t put my finger on where or say the real power of the scorecard www.schneiderman.com, I list 7- when it happened, but I suddenly concept is in how you’re going to Steps of Process Management. I do realized the best thing to do was to implement the changes. That’s the this for a very important reason: it’s try and combine the two items in key thing. vitally important how you approach what became the overall scorecard innovation or the end results will be for the business. In trying to meet Along those lines, if it’s important far less than optimal. the demands of the hard number how you implement the scorecard, is execs, I agreed that we would have it also important to think about how Are your seven steps the same as no more than three financial you develop the scorecard? TQM? measures at the top of the scorecard Absolutely. The process by which My 7-step model for process and then non-financial measures for you develop the scorecard is of management encompasses TQM, but the rest. So that is how the Analog critical importance. Most of the it also tells you when, if necessary, Devices scorecard was born. The time, measures that people add to to redesign a process, to re-engineer general manager urged that we the scorecard are politically chosen it. It also has control built into it, abandon the fancy name of measures, not strategically chosen. which basically says that it doesn’t Corporate Performance Audit and So you have to have a well- do you any good to improve a call our performance tracking, documented, well-understood process if it has random applicability simply, the Corporate Scorecard. And process that you refine each cycle. or otherwise is out of control. In Special report guess what? Divisional Scorecards This means that you not only have to terms of the steps I recommend, I soon followed, which gave us a work on the scorecard, you also have don’t care where you start, but I do weighted average of each division’s to work on how you are going to care that you have an open process online performance. What would create it and how you’re going to that allows you to ask questions from change over time are the things that ensure that it is widely known and time to time, questions like: How are went on the scorecard, not the thoroughly understood, which leads we doing? Are we on course? If not, financials but the non-financials. At you to how you are going to achieve why not? A scorecard is an essential the time, as far as I know, no other the goals that you come up with. component to running a business, company was doing it this way. but only if you know how to play the So having worked with scorecards for game very well. In the end, the The balanced scorecard has evolved so long, do you have any favourite scorecard tells you whether the over time, and it seems that there lessons learned? structure and processes inherent in are variants of the concept you Let me offer three. First, I think that your business are helping or not. ■ © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 71
  13. 13. Making the firm flexible How companies operate has been established over two centuries. Is it possible for a firm to break the established rules of organisation? Eden McCallum did just that. T he origins of the modern firm In parallel, the 1990s saw was formerly an international vice can be traced to the 19th increasing interest in professional president and director of planning century. Yet the nature of service firms as a uniquely fertile and strategy for the publisher Condé business enterprises remains a area for discussions of organisational Nast – as well as being a former constant work in progress. Over the structures. For example, Tom Peters, McKinsey consultant. last decade, in particular, technology a former McKinsey consultant turned The inspiration for the firm began has opened up a wide range of management commentator, when McCallum was working at opportunities to change the celebrated the multi-functional Condé Nast and Eden was working at fundamental shape of the traditional global teams speedily assembled by McKinsey. McCallum realized that firm. This potential has been the consulting firm to tackle client her budget did not stretch to hiring enthusiastically charted by problems. Their speed and flexibility, one of the big-name strategy commentators and academics alike. coupled with their strongly defined consulting firms – McKinsey & Co., In 1998, Thomas W. Malone and culture and their ability to manage Boston Consulting Group, Bain or Robert J. Laubacher of the and maximise knowledge, convinced Booz Allen Hamilton – but she still Massachusetts Institute of Peters that it provided a partial needed that calibre of support. Eden Technology (MIT) looked at how a blueprint for how business firms observed that many strategy new kind of organisation could form could be constructed and behave in consultants, particularly in the dot- the basis of an economy in which the the global economy. com era, were reassessing what they old rules of business are overturned wanted from their work – and and big companies are rendered Inspirations flexibility and control were key. Soon obsolete. Drawing on their research The London-based consulting firm after, the former INSEAD MBA at MIT’s Initiative on Inventing the Eden McCallum provides an classmates came up with the idea of Organisations of the 21st Century, innovative take on the nature of the creating a pool of experienced, Malone and Laubacher heralded “the firm as well as potential future independent consultants. dawn of the e-lance economy” – a scenarios for the organisation of Six years later, turnover of the Special report world where freelance workers would consulting firms. company is over £10 million and it come together in temporary or virtual Launched in 2000 by Liann Eden has delivered more than 300 constellations rather than as and Dena McCallum, Eden projects. The firm has grown by more traditional employees. Malone and McCallum is a network-based than 80 per cent per year. It now has Laubacher were not alone in consulting firm. Rather than having a 24 full-time staff and around 200 predicting that technology would large headquarters and all the freelance consultants, making it the change the shape of organisational overheads associated with a second biggest strategy consulting life. There has been an array of conventional consulting firm, Eden company in London after McKinsey. variations on the theme of creating McCallum retains a minimal central and managing virtual and networked staff and utilises a network of Trends and opportunity organisations. Yet, despite freelance consultants. Eden is a As with many other businesses, continuing technological strides, the former McKinsey consultant who also Eden McCallum’s evolution was predictions of revolutionary change held international marketing roles at based on the benign convergence of remain largely unfulfilled. Unilever and Siemens. McCallum a number of factors. “In hindsight, a 72 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  14. 14. Liann Eden and Dena McCallum: flexible friends lot of things came together at once,” minds. With MBA graduates and wanted to be partners, then they all explains McCallum. “First and former strategy consultants now wanted to be entrepreneurs,” recalls foremost we wanted to create a commonplace among the senior Eden. “The dot-com thing created business. So, we looked at the echelons of multinational firms, demand for flexibility. People left marketplace in a business we knew: there is a resistance to formulaic their traditional careers and then management consulting. And we saw consulting products and neatly didn’t come back.” a couple of major trends – the packaged solutions. Instead, At an operational level, too, Eden maturing of the consulting market, companies want consulting advice McCallum recognized an and professional people wanting to that is genuinely tailored to their opportunity. Large consulting firms take more control of their careers. situations. “Companies are typically focused on high-level board These then led us into our unique sophisticated buyers. They can pick issues at FTSE 50 companies. For business model. And in creating this and choose and shape. Clients want their part, client companies often business, we also ended up coming the same flexibility as consultants,” wanted continued consulting support up with an entirely new organisation says Eden. on specific strategic issues or model. Business innovation begets The second trend Eden McCallum implementation but were put off by management innovation.” happily tapped was among continuing high costs. Eden The first change was the maturing consultants themselves. Many McCallum offered a market-breaking of the management consulting consultants were bitten by the new alternative: consultants with the Special report market, with clients seeking more economy bug and left consulting same high-level skills and rigorous control and value in their consulting firms in search of entrepreneurial approach at approximately half the spend. The dominance of the big excitement and the opportunity to cost. After the dot-com crash, this players in the business was – and is make a lot of money. When the new combination of quality at lower cost – largely unquestioned. It has economy fizzled from rocket to damp was particularly alluring as many spawned an entire generation of squib, many one-time consultants firms had scaled down their companies and senior executives had reassessed what they wanted out consulting budgets. who are comfortable with the notion of their careers and were loathe to and value of management re-enter the corporate world on the Innovative solutions consulting. They are aware of its same terms as before. At the time Eden McCallum’s proposition was potential value to the business. In when Eden McCallum began life, simple but scary: a consulting firm the past, companies hired top many experienced consultants were without any consultants on the consulting firms to tap into their contemplating their next career payroll and without any proprietary bright, business-school-educated, moves. “At one point everyone methodologies. Instead, they → © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 73
  15. 15. → would employ consultants on a built on relationships rather than a great deal of the value lies. contract basis as demanded by their transactions. Relationships are Indeed, in a business without its clients, and they would use whatever between clients and Eden McCallum, own consultants and without its own methodologies were appropriate to and the firm endeavours to retain intellectual property, this is the heart solving their clients’ problems. As control and oversight over the of Eden McCallum’s value-added. one former Bain consultant observed, relationship with the client. Says Consequently, about half of its this approach appeared to challenge Eden: “If we structure the project up full-time staff are fully employed everything consultancies held dear: it front and we have a long-term ensuring that its consultants are the was “like the sky falling in”. relationship with the client, then we right people in the right jobs. The To make this model work, Eden don’t have to own the delivery other half of the full-time staff are McCallum had to rethink many of the mechanism. The keys are trust-based totally dedicated to developing and standard precepts of management relationships, clear problem- nurturing client relationships. “Our thinking: structuring and careful selection of full-time employees are either consultants.” working on the supply side so they Tailor the offering Eden McCallum are consultant-facing or on the focuses on tailoring the consultants’ Involve the competition The standard demand side which is client-facing,” experience, skills and personalities organisational model is to start small explains McCallum. And it is the to the clients’ needs. The firm makes with the intention of emulating or skills of these individuals, and their it clear that it is not in the business overtaking an industry’s big players ability to match top-quality of creating its own distinctive over time. Not so in the case of Eden consultants with the right projects, intellectual capital and that it is McCallum. From the start, Eden and that define Eden McCallum. “Every agnostic when it comes to particular McCallum were clear that their consulting company works hard to methodologies, despite the fact that livelihoods, and the future of their match its consultants to the right novel ideas and tools are the business, depended on what was projects;” reflects Eden, “the lifeblood of most big consulting ostensibly the competition: big-name difference is we don’t have to worry companies. “We rely on what our consulting firms. “We exist because about capacity management, so we consultants bring to the table and let they exist,” says Eden. “Companies can always make a good match.” our clients choose their preferred like McKinsey, Bain and BCG create Initially, to build awareness among approach by interviewing and the market on both the client and potential consultants, Eden selecting the consultants,” reflects consultant side.” McCallum placed advertisements in McCallum. “Clients want to work Before the firm was launched, the Financial Times and The with a person they trust; they don’t Eden McCallum began a dialogue Economist – a statement of intent as necessarily want a particular with the big players in the market. much as anything. The ads methodology. They just want the This alerted them to the potential of emphasized that the company was project to succeed.” working with Eden McCallum rather looking for consultants who were than regarding the company as independently minded with Outsourcing the delivery channel another upstart strategy consulting experience in a top consulting firm Eden McCallum’s core delivery boutique with eyes on their own and who had an MBA from a leading mechanism is effectively outsourced markets. And this symbiotic business school. These basic Eden observed that many strategy consultants, particularly in the dot-com era, were reassessing what they wanted from their work Special report – and flexibility and control were key. to freelance consultants. On the approach has worked. Eden recruitment benchmarks remain in surface, at least, this appears to be a McCallum has referred business to place. In addition, Eden McCallum dangerous strategy. The company is big-name consulting firms, and they consultants are evaluated against clearly reliant on the quality of the have returned the compliment. five core competencies, their CVs are service offered by the consultants. To screened, all references are checked, make it successful, Eden McCallum Elevate the process behind the and they go through multiple rounds works hard to ensure the quality of network The idea of a networked of partner interviews. The people these people. Only one in 10 organisation is not new. Brokers and who recruit the consultants are, applicants makes it into the agents are commonplace. What themselves, former consultants who company’s talent pool. The second marks out Eden McCallum is that the understand the dynamics and safety element is that consulting is process behind the network is where demands of the business. 74 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School
  16. 16. When they actually go to work, letting their consultants choose their don’t anticipate using a lot. We tell Eden McCallum puts two to three own terms of employment, Eden them that we anticipate using them consultants from its talent pool in McCallum has a much more once a year. Our interviews actually front of a client. The client then dedicated and committed workforce provide great career coaching for evaluates with whom they think they than would have been possible with them and the network offers them a would work best. On the completion a traditional hierarchical lot of information. Often they will tell of projects there is an extensive organisation structure. us what their targets are in terms of feedback process focused on the working with us. Some will work for individual consultants and Eden Create transparency Eden McCallum six months and then go travelling or McCallum’s performance. “Big works very hard on creating do something else – others are consulting firms put forward a team transparency in its management working full-time on back-to-back Eden McCallum’s experiences help to shed light on the age-old question: What is the real raison d’ être of the firm? and the client generally doesn’t have model so that everyone knows where projects. There is no exclusivity in a say about who is on it,” says he or she stands. This ensures that the relationship.” McCallum. “Because our clients are there is a good relationship between involved in choosing the consultants network members and avoids the Reinventing the firm they work with, they have a vested sense that some people may be Eden McCallum’s experiences help interest in making it work with those getting favourable treatment ahead to shed light on the age-old people.” of others. question: What is the real raison d’ One complication lies in financial être of the firm? In an era of Redefine the employment arrangements. To avoid this, Eden outsourcing and virtual working, relationship Eden McCallum’s McCallum is very open about its fee what are the minimum few things network of consultants are not structure. For around 100 of its that the firm has to do to justify its employees in a traditional sense, nor consultants, the firm is their main existence? are they entirely freelance source of income. Another 100 work The answer is three things. First, contractors. They lie somewhere in on about one project a year. Initially, the Eden McCallum brand between: they have considerable fees were put forward by the represents a particular value loyalty to Eden McCallum, and they consultants. Then the company tried proposition to its clients and its get most of their work from the to allow clients to determine fees. consultants, and for the founders a company, but they define their own Now, how much consultants are paid key part of their job is to continue to terms of engagement. This includes depends on a banding system in nurture and sustain that value choosing which sectors they will which consultants are paid proposition. Second, Eden McCallum accept projects in, how many days according to their seniority and is a nexus of relationships: it gains per week and how many months per consulting skills. value from the social capital that year they work, the logistics around Another common concern in builds up over time in that set of travel and many other elements as network organisations is how the relationships. And third, it is a well. “We are constantly putting available work gets shared. So the mechanism for structuring the work together a new puzzle for each firm tries to be clear about the likely and managing projects. These are, in project,” explains Eden. To be sure, levels of demand for people with essence, the core competences of Special report this arrangement requires constant different skills sets. “It is about Eden McCallum and are the things balancing to keep everyone happy, calibrating expectations,” says Eden. the company has to sustain as it and it is not for everyone. But, by “We’re honest with consultants we grows and evolves. ■ © 2007 The Author | Journal compilation © 2007 London Business School Business Strategy Review Spring 2007 75
  17. 17. Death It’s considered one of the basics of management. If you don’t to budgeting have a budget, you aren’t really managing. Not true: UBS made budgeting secondary to performance and customer satisfaction. M ost large firms are victims more effective at identifying and the time of the merger, we were not of their own enthusiasm for jettisoning the old ways of working in the best shape. Morale was low, new ideas and new that had value only in the past. and our cost base was too high. We practices. Whatever the latest UBS Global Wealth Management & went through a long period of management idea – knowledge Business Banking (UBS Global rationalisation and cost cutting. And management, re-engineering, six- WM&BB), the private banking, retail during that time we had a very strict sigma, 360° feedback – it is quickly and corporate banking division of the budgeting process with very tight noticed. Soon, a working group is giant Swiss bank, offers a fascinating numbers and strict accountability.” formed to evaluate its potential; and, insight into how change can be By 2002, the cost-cutting straight away, the idea is being tested facilitated by getting rid of a measure had created huge savings, in a pilot project. redundant and value-destroying and the company had integrated But, once brought to life, projects process. But the bank did not focus itself around its single global brand. are hard to kill; new ideas, once on just any process; it picked one And with the financial services discussed openly, are hard to that is considered core to almost any market recovering from its post-dot- suppress. So “what’s new” is usually business: budgeting. One issue that com hangover, UBS was well piloted on top of an existing set of every big-company manager can positioned to move back into growth processes and alongside the vestiges agree on is that the annual mode. of several earlier projects, none of budgeting process is an enormous UBS Global WM&BB is the biggest which really succeeded or failed. waste of time and effort. The UBS and (together with UBS Investment Much like the sandwich made with executives didn’t just bemoan the Bank) the most profitable business dozens of bread slices stacked ever futility of budgeting, however; they group of UBS and the world leader Special report higher, the result is an organisation decided to abolish the whole in the private banking industry. With in which multiplied processes create process. In doing so they achieved only about four per cent of a highly staggering complexity, limiting the dramatic changes in the culture of fragmented market, the potential for ability of any one initiative to deliver the organisation and helped to reach growth is enormous. So the business on its potential. The end result is an record levels of growth. group executive team, led by Marcel enterprise choking on innovation Rohner, began in 2003 to shift the with widespread scepticism among Building a platform for growth emphasis away from cost control. As employees. UBS was the product of a mega Toni Stadelmann, CFO for the So the biggest challenge facing merger of two of Switzerland’s oldest business, comments, “Our strategic most large firms is not how to banks (Union Bank of Switzerland challenge at that point was to shift embrace the latest thinking; it is how and Swiss Bank Corporation) in the focus on costs to a focus on to cast off the old. We need to create 1998. As Dominik Ziegler, controller growth and efficiency. And that ways of working that are fit for the of the Wealth Management required a different culture, a future, but we also need to become International business recalls, “At different attitude.” 76 Business Strategy Review Spring 2007 © 2007 The Author | Journal compilation © 2007 London Business School

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