clair015

I am sure many of you know some of the ludicrous examples of when companies expanded into a foreign market and failed to adapt to the local circumstances.* It can be because they didn’t adapt their product, their way of doing business, or even their name. For example, United Airlines famously handed out white flowers on flights from Hong Kong, where white flowers represent death and bad luck. India’s M.P. Been Products was used to printing a swastika on all their products (a symbol of good luck in many far eastern countries); it did not go down well when they launched “German Pilsner”, while also Japan’s “Kinki Nippon Tourist Company” noticed it attracted quite some unwelcome customers when they first expanded abroad. And it’s a problem of all time. Coca Cola, when entering the Chinese market in the 1920s with less than moderate success, translated the sound of its name into Chinese characters, only to find out later that it, fairly unappealingly, translated into “bite the wax tadpole”...

During World War II, American military personnel noticed that some parts of planes seemed to be hit more often than other parts. They analysed the bullet holes in the returning planes, and set out a programme to have these areas reinforced, so that they would be able to withstand enemy fire better. This may seem natural enough but it also contains a fundamental error. It’s called selection bias. Assume, for the sake of the argument, that planes got hit in all sorts of places. If the areas which formed vital parts of the machine were hit (call it part A), the aeroplane was unlikely to make it back to base; it would crash. If the bullets hit the plane in parts which were not so vital (part B), the plane was much more likely to at least make it back home. Then, military personnel would inspect the plane and conclude “darn, this plane also got hit in part B! We’d better strengthen those places…” Of course, the military personnel were wrong. Planes got hit in part A just as often as in part...

"Animals are divided into (a) those that belong to the Emperor, (b) embalmed ones, (c) those that are trained, (d) suckling pigs, (e) mermaids, (f) fabulous ones, (g) stray dogs, (h) those that are included in this classification, (i) those that tremble as if they were mad, (j) innumerable ones, (k) those drawn with a very fine camel's hair brush, (l) others, (m) those that have just broken a flower vase, and (n) those that from a long way off look like flies." This categorisation was quoted by Jorge Borges in his book Other Inquisitions, from an ancient Chinese encyclopaedia. Glad that in the world of business, when it comes to analyst recommendations whether to buy, sell or hold the shares of certain companies, we use rather more unambiguous classifications, don’t we! Or do we…? Analysts, as you likely know, often face a potential conflict of interest. In principle, they are expected to offer solid and impartial advice on whether they think it’s worth buying the shares ...

My good colleague at the London Business School, Professor Don Sull – master of the analogy – often shows his classroom a picture of a sailor looking through his binoculars, saying “this is our traditional view of how we regard making strategy”: someone who is able to look into the future, and make a detailed plan of how to proceed towards a chosen destination. However, the reality of strategy-making is quite different; it is more – according to Don – like you’re driving a car in heavy fog, peering through the window, trying to navigate around unexpected things that suddenly appear in your way. I like and agree with his analogy. In pretty much all businesses, although you may know where you’re headed, the route is fraught with uncertainties and unexpected events. Technological developments, market demand, competitor actions, entrants, changing consumer preferences, the macro economy, etc.; nobody can discern with any certainty what lies ahead of us. I’d like to extend Don’s analogy, o...

One of the most annoying terminologies in Strategic Management blabla I find the words “core activities”. They’re the most easiest and flimsiest of excuses to do or not do something, without having to provide any logical rationale why. “They are losing money because they are not focusing on their core activities”. Come on, cut the BS; why are you calling certain activities “non core” anyway? Yep, because they’re not making any money. That’s makes it a bit of tautology, doesn’t it? Had they been hugely profitable I am sure these activities would not be regarded so “non-core” after all. “We decided to divest businesses X and Y because they weren’t our core activities”. Get real; you’re probably divesting them because they’re not making you any money (and therefore you call them “non-core”). And even if you did have some other reason for wanting to get rid of them – whether the reason is any good or not – the hollow “explanation” (“because they are not core”) tells us as much as doodly-sq...

Heck yes. Have you ever heard that you can see the Great Wall of China from outer space? Well, it’s a myth. Have you ever heard of “Chinese Walls” inside professional organisations, such as management consultants or solicitors, who face a potential conflict of interest for instance because some of their employees are working on different clients that compete in the same line of business? They claim they have “Chinese Walls” inside their firms because their consultant or solicitors are not allowed to even talk to each other, let alone share information. Well, believe me, those are usually a myth as well. Take investment banks. Investment banks often have a research department which employs analysts who provide recommendations whether we should buy or sell the shares of a particular company. A “sell” recommendation by such an analyst is quite a pain (in all sorts of body parts) for a company because their influence can be substantial in the sense that the firm’s share price will likely f...

Remember the disaster with Union Carbide’s chemical plant in Bhopal, India, on the 3d of December 1984? One of the most dreadful industrial accidents in the history of mankind; thousands of people died terrible deaths on the horrid day itself; tens of thousands of people perished in the aftermath. Strangely enough, the faith of Union Carbide’s CEO at the time, Warren Anderson, always reminds me of Tolstoy’s War & Peace. In our world, CEOs often become celebrities, heroes and superstars. We place them on the cover of magazines such as Fortune and Business Week, we give them awards, honorary doctorates and multi-million salary packages, while they command dazzling fees for after-dinner speeches, at which they are drenched in the adoration of star-struck hopefuls, who quench their thirst for personal business success on the (expensive) words of the great leader. The manager starts to personify his company and its success: Steve Jobs and Apple, Carlos Ghosn and Nissan and, of course, ...

I'll admit it: I have a love-hate relationship with organisations. On the one hand, they’re fantastic, and they produce things that no individual could have produced by himself, such as airplanes, open-heart surgery and sky-scrapers. However, on the other hand, they can be incredibly stupid. British Gas who sends 28 letters and 3 bailiffs for a £100 bill despite having received evidence on multiple occasions that the meter is your neighbour’s (as you may gather, this is not a hypothetical example…), Firestone which continues to invest in bias tyres while the whole world (including their own employees) understands radial technology is the future, and Ahold which continues to make acquisitions although even the most junior HQ employee is starting to suspect things are getting out of hand. Yet, the thing that I probably dislike most about large firms, is that so many of my (very well-educated and intrinsically motivated) friends seriously dislike going to work on a Monday morning – be...

Some time ago, I gave a presentation to a group of executives from a variety of companies on the topic of acquisitions. Much of the talk was about how vastly different acquisitions can be, in terms of the purpose they are intended to serve. As often, I ended my talk urging the executives that, if they would ever come across a consultant who would tell them “this is how you should integrate acquisitions” (promoting one particular method), they should fire him. Because acquisitions can be so enormously different in purpose and nature that they really require quite fundamentally different approaches to integration, and if someone recommends a “one mould fits all” method, it is best to show that person the door. Little did I know that the speaker coming after me was a consultant, armed with an impressive array of powerpoints on “this is how you should integrate acquisitions…” He looked a bit apologetic. They were also the main sponsor of the event. Anyway, I sort of mean it. Because someti...