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					  EMBA @UNA
  Business Policy




Florence, Alabama
   July 13, 2002
                Globalization
Demographics                    Technology



 Geo             Intense
 Politics                             Competito
                Competition


                                 Deregulation
        Customers
                Innovation
Forbes100 from 1917 to 1987

39 members of the Class of ’17 were
alive in ’87

18 in ’87 F100

18 F100 “survivors” under-performed
the market by 20%

just 2 (2%), GE & Kodak,
outperformed the market
Layoff Scenario




  March
          54,321
  2002
          255,260
Number of Public and Private Chapter 11 Bankruptcies
  (in thousands)                          11
                              10.2
        9.2




        ‘00                  ‘01          „02
Source: Fortune, April 15, 2002
Fortune 500 Results
(April 15, 2002)


Deepest Dive In 47 years of Fortune 500

                         %           Billions
    Revenues        3.3            $7,420
    Profits         -53.5          $206

  In 2001, 97 FORTUNE 500 companies reported losses,
  for a total of $148.5 billion
   In 2000, 53 FORTUNE 500 companies reported losses, for a total of
   $18.1 billion
Characteristics of the “Also rans”*

     “Minimize risk”
  “Respect the chain of
       command”
   “Support the boss”
     “Make budget”
         *Fortune, article on
  “Most Admired Global Corporations”
               Dominant       Traditional       Strategic
Industry
               Competitor     Competitor        Innovator
 Airline       American       Delta, United,     Southwest
                              Northwest
Car Rental      Hertz       Avis, National Enterprise
Coffee     Maxwell House    Folgers, Nescafe Starbucks

 TV            NBC             CBS, ABC           CNN

  Steel                                  Nucor
              US Steel Bethlehem, National
Photocopier Xerox           IBM, Kodak, Ricoh     Canon


                                          Source: Markides, 200
GE Power’s Dramatic Change

„ 1/2 Worlds Market In
  Power Generation Equipment

„ Acquired Nuovo Pignone

„ Surround the Customer
        The 2 x 2 Matrix for GE
        Power Systems in 1995

        New
Needs




                               Large Power
               $20 Billion     Generation
                               Equipment
                   $10       GE
  Existing        Billion



              Existing          New
                      Customers
        Ac q u is it io n o f It a ly‟s Nu o vo Pig n o n e
        Br o a d e n e d p o n d t o $ 2 5 -$ 3 0 b illio n
        Als o $ 4 b illio n o f c o m p le m e n t a r y b u s in e s s

                                                 $5-10 Billion

           New       D                     C
Needs




                          $20 Billion
                     A                    B

        Existing

                         Existing                 New
                                   Customers
   Moved into Supplying Services
Moved into Supplying Services
   Moved into supplying equipment
Moved into supplying equipment
   Enlarged pond to $48 billion
Enlarged pond to $48 billion
                 $18 billion       $5-10 Billion

   New      D                  C


                 $20 Billion
            A                  B

 Existing

                Existing           New
                          Customers
GE Power Systems 1998 pond is $700 billion
37 times as big as the Market defined and served
three years previously


   New     D




           A              B

Existing

               Existing       New
                      Customers
“We want to be the
    air traffic
  controllers of
   electrons.”
  Bob Nardelli, GE Power Systems
   “Customer Satisfaction” to
     “Customer Success”
   “We’re getting better at [Six
 Sigma] every day. But we really
need to think about the customer’s
   profitability. Are customers’
bottom lines really benefiting from
     what we provide them?”
    Bob Nardelli, GE Power Systems
    The Creosote Bush
•    Drips poisonous oil, kills
     everything around it
•    Dominant microprocessor
     strategy was Intel’s
     creosote bush
•    No other businesses could
     sprout around it
                                Microprocessors
Intel at Crossroads, Again??
                                      Business Goes
      Inflection Point                To New Heights


                                   Valley of Death

                            Memory Chip Business


                  Business Declines
           1985
                             Internet appliances
Intel at Crossroads, Again??
                                      Business Goes
      Inflection Point                To New Heights


                                   Valley of Death


                                Microprocessors

                  Business Declines
           1999
Segment the Microprocessor Market
Celeron: Inexpensive PCs

Pentium III: Middle Tier of Market

Xeon: High-Powered Servers and Workstations
Results:
Celeron market share
Up from 30% to 62%

60% gross margins

Revenues from Xeon chips to double
          PC Components

   84% market in PC processors

   100% of profits

   90% of revenues

   Growth in Processor
    market slowing Down
   New Business Group

New rules for funding new projects

No more tight budgets

No more rigorous reviews of
 internal startups

Similar to venture-capital financing

Launched about 25 seed projects

Spent more than $50 million on these projects
 Information Appliances

“MoveIntel into the home, somehow”
    Screen phones
    E-mail terminals
    TV set-top boxes
Communication Products


 Home Networking
 Broadband Modems
 PC-based Telephony
 Server Appliances
 Ethernet Hubs
 Small Networking Switches
 Specialized Servers for Web Traffic
 and speeding up e-commerce
 Networking Chips

Fastest growing category among chips

Used in modems, network
interface cards, switches,
and routers

Acquired a lot of companies
   Level One Communications
   ($2.2 billion)
   NetBoost ($215 million)
   Softcom Microsystems ($149 million)
 New Business Group
Web-hosting for clients (Citigroup)

Vivonic: digital handheld health
 planner

PassEdge: technology for protecting
 digital content

Installing 3,000 information terminals on the back
 of seats of Madison Square Garden

Equip doctors with secure Ids to encourage
 online medicine
                        Sony In Troubled Waters

  3 of the Biggest Opportunities
Personal Computers


Cell Phones

                                   Where
Video Games                                IS
                                                SONY?
       DIGITAL ERA
       The Playstation Dream Begins



•bought a Nintendo game for his
daughter
•sound was awful
•games were stored on magnetic
cartridges
KUTARAGI’S BRIGHT IDEA

Confident that the system
could be vastly improved

Use storage system he
developed for the Mavica

Improve processor speed
                     WHAT ABOUT SONY?
„No one at Sony shared Kutaragi’s enthusiasm for the
videogame business
„Kutaragi met with Nintendo instead
„Nintendo liked Kutaragi’s suggestions
„Nintendo products a “toy”
„Threw a fit when news leaked out
„Failure to realize potential of the product
„Sony’s President protected the project
                              Project Update
             Kutaragi seen as a “traitor”
   Kutaragi isolated within the company
Project moved to a different location
                      What would Sony Do?

Sony had to convert to digital, information-based company

Transition bland business computers to a fun product

Kutaragi threatened to leave Sony

Kutaragi promised to create a platform for Sony’s
 future growth

Two years later Playstation released

Tremendous success

Kutaragi became Head of Engineering
     Is PS2 a platform for Sony’s future growth?


Kutaragi becomes CEO of Sony Computer
Entertainment

Sony releases PS2

Most profitable division within Sony

Possibility of the marriage between

TV, Film, Computers, Music, and the Internet
1982: Provided  online quote
         Provided trading services
Vision: Someday, everyone would own computers and invest
through them with unprecedented efficiency and control.
1992: Offered services through AOL & Compuserve

1996:   ww.etrade.com

 Meet complex investing, banking, lending, &
 planning needs of households across their
 entire financial cycle
                         Lending
                         Mortgage
                         Home Equity Loans
Investing                Auto Loans
Stocks, Bonds, Options   Credit Cards
Mutual Funds
Research
                         Plan & Advice
  Banking                 Retirement
                          College Savings
   Checking               Asset Allocation
   Savings                Estate Planning
   CD                     Insurance
   Money Market
Serves 45 million per day
29,000 McDonalds
121 countries
$40 Billion in 2000
Best known brands
Undisputed fast food leader

               Stock price is low
               Slow same store sales growth
               EuropE’s mad-cow scare
               Weak currencies
               New items disastrous
               Health-conscious customers
            Chi-chi coffees
            and desserts
             Cold Sandwiches
             FRESH ingredients

Reinvention!
               Diner Inside


It is about Survival!
               McTreat
  Virgin’s Business Definition

       Challenge existing rules
Give customers a better break
    Be more entertaining
Beat complacent incumbents


Culture is one of WHY NOT rather than WHY
World’s largest aircraft manufacturer

Live internet connections on passenger jets

Air Traffic Control Systems using satellite technology

Aircraft Service Business

Financing
SET UNREASONABLE EXPECTATIONS
     Chrysler’s Minivan
• Baby Boomers Getting Older (With
  Growing Families)
• Lifestyle changes (Soccer Moms)
• Space Problems
• Vans Were Too Large (Commercial)
• Station Wagon Sales Were Falling
• Morphed Pickup, Station Wagon,
  Passenger Car
• The Minivan was Born!!!
               CNN 24 Hour News
 Changes in lifestyle
    longer and unpredictable work hours

 Changes in Technology
    handicams and suitcase size satellite linkups

 Changes in Regulatory Environment
    growth of cable TV industry

 Changes in geopolitics
    interconnectedness of economies
STRETCH YOUR BUSINESS DEFINITION

You have to be either #1 or #2 to survive

From the wellhead to the consumer

What is our share of the stomach?

From cradle to grave
  Segmenting the Market
Continuously strive to break up a
market into smaller pieces
VW with its Beetle
Xerox and Ricoh
Apple and iMac
Daimler-Benz and the Automobile Industry
Saturn and the Automobile Industry
Leaders vs. Managers
THE LEADER          THE MANAGER
• innovates        • administers
•   is an original                 •   is a copy
•   develops                       •   maintains
•   focuses on people              •   focuses on systems and structure
•   inspires trust                 •   relies on control
•   has a long-range perspective   •   has a short-range view
•   asks what and why              •   asks how and when
•   has their eyes on              •   has their eyes always on the
    the horizon                        bottom line
•   originates                     •   imitates
•   challenges the status quo      •   accepts the status quo
•   is their own person            •   is the classic good soldier
•   does the right thing           •   does things right
Why Grow?

Imagination
Energy
Motivation
Creativity
Excitement
Commitment

Maintain Status Quo = Beginning of the End
Innovation
Venture Capitalist
Thousands of business plans


Drug Industry
5,000 to 10,000 compounds


Sea Turtles
   1,000 eggs
Human Procreation
    59,999,999 sperms
What should be done?

Institutionalize experimentation

Reward excellent failures

Punish mediocre success

Facilitate and encourage newer voic

Creative destruction

				
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posted:9/26/2011
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